Azerbaijan seeks long-term EU gas commitments to fund green transition, energy security Article by Euronews

Euronews has published an article by Sergio Cantone arguing Baku wants more EU investments and commitments to its natural gas potential as it looks for more fossil energy revenues to finance its ambitions to become the renewable energy leader of Eurasia. Caliber.Az presents  excerpts from the article.

To align on gas supplies to the EU, Baku and Brussels face divergent needs. Azerbaijan seeks increased EU investments and long-term commitments to its natural gas potential to secure revenues that will fund its ambition to become a leader in renewable energy across Eurasia. Meanwhile, the EU's current gas strategies are not sufficient for Azerbaijan's long-term goals.

Azerbaijan has been a key potential partner for the EU since the Soviet Union's collapse over 30 years ago. The country’s economy is heavily reliant on fossil fuels, with 90 per cent of its exports based on energy resources. The EU, aiming to replace Russian gas supplies, sees Azerbaijan as a critical partner, both now and in the future.

Despite the potential synergy, there have been setbacks in relations. President Ilham Aliyev, in his keynote speech at the summit, made clear his stance, stating, “Oil and gas are a gift from God, just like the sun, wind, and minerals," signaling that Azerbaijan wants to establish stable gas trade relations with Western countries.

In July 2022, von der Leyen signed a deal with Azerbaijan to increase natural gas supplies to the EU, a move to reduce dependence on Russian gas. The deal committed to doubling Azerbaijan’s gas flow to 20 billion cubic meters (bcm) by 2027. However, despite this deal, "Azerbaijan needs investments to upgrade the current interconnection systems for the main pipelines,” said Agha Bayramov, an Azerbaijani expert from the University of Groningen. These upgrades are necessary to expand pipeline capacity and meet EU demand.

Azerbaijan’s concerns revolve around securing long-term contracts and the necessary infrastructure investments. The EU’s increased imports of Azerbaijani gas have been significant, with a nearly 20 per cent increase from 2022 to 2023. In 2024 and 2025, the flow could rise further, especially if the Russian gas transit through Ukraine ends. Yet, Baku seeks a long-term partnership to ensure a stable financial return.

“Aliyev’s argument is that this is not enough to pay the credits back and also to earn money from [this deal],” Bayramov explained. Estimates suggest Azerbaijan will need to invest €2-4 billion in compressors to increase gas transport capacity, as the current system can handle only 10 bcm.

In the event that the transit of Russian gas through Ukraine ceases, Azerbaijan could be called upon to help supply Europe. However, the country does not have the capacity to replace the 15 bcm lost, as noted by Yana Zabanova, a research associate at the Helmholtz Centre Potsdam: "Azerbaijan could play a role in that, but of course, not in the way of replacing the amounts of gas because they don't have enough capacity to replace it, because they don't have the extra 15 bcm." 

Azerbaijan aims to reinvest fossil fuel revenues into its green transition to become the renewable energy leader in Eurasia. "Azerbaijan doesn’t deny that it is an oil and gas producing country, but we should not be treated just on oil and gas facts, we should be treated on how we are using our resources for the green transformation," said Hikmet Hajiyev, foreign policy advisor to Azerbaijan’s president.

Azerbaijan is committed to using its fossil fuel wealth to fund renewable energy projects. It plans to scale up projects such as large offshore wind farms in the Caspian Sea, aiming to lead in green energy in the region. This shift to renewables, while balancing its role as a gas exporter, is vital for Azerbaijan's long-term economic diversification and geopolitical influence.

Additionally, the reconstruction of Karabakh, a region heavily impacted by conflict, adds pressure to Azerbaijan's budget. The country plans to deploy large-scale renewable facilities in the region and aims to present it as a "net-zero emissions zone by 2050." This transition will also help enhance Azerbaijan's prestige on the international stage, as the nation commits to ambitious climate goals under the Paris Agreement.

In summary, for Baku and Brussels to reach a mutually beneficial agreement on gas supplies, Azerbaijan requires long-term commitments and substantial investments in infrastructure to ensure its energy security while progressing towards its renewable energy ambitions.