Forbes: EU worries Russia will try thwarting lucrative gas deal with Azerbaijan

American Forbes magazine published an article by columnist Kenneth Rapoza on the Armenian-Azerbaijani conflict and EU energy security. Caliber.Az reprints this article.

Blaming Moscow, the EU and Azerbaijan think that Russian-backed separatists in Armenia are aching to start another war.

Azerbaijan and Armenia – located in the South Caucasus – fought a hot, smouldering war with one another between 1988-1994, and again in the fall of 2020 with a final ceasefire declared that year. Those days are not mere bygones to some, as Armenia has yet to sign an official peace treaty.

The main problem now is with a region in Azerbaijan known as Karabakh, patrolled by Russian peacekeepers, along with ethnic Armenians who live there and do not want to become Azerbaijani citizens. Karabakh is a mountainous area in between the two countries, once part of the USSR.

Armenia took the Karabakh region over in a war in the 1990s from Azerbaijan but lost it in the last cease-fire. The two neighbours are still at loggerheads, and tensions are rising at a time when Azerbaijan has a memorandum of understanding with the EU in a lucrative gas deal signed in July 2022. The agreement with Azerbaijan will supposedly double imports of natural gas to at least 20 billion cubic metres annually by 2027. The EU is seeking alternative suppliers to Russia.

"Azerbaijan's role as a reliable energy partner is important on the global landscape. By committing to increase natural gas supplies to 20 billion cubic meters by 2027, Azerbaijan is already significantly contributing to strengthening Europe's energy security," British Prime Minister Rishi Sunak said in his address to the participants of the Baku Energy Week conference, which ended in the capital city of Baku on June 6.

Before the war, in 2021, EU countries imported 155 billion cubic metres of Russian natural gas, or 45 per cent of total gas imports, according to the European Council on Foreign Relations.

In the past 12 months, the EU’s energy partnership with Azerbaijan has become one of Europe’s topmost essential strategic relationships. Several EU member states are already importing and using Caspian gas from the Caspian Sea, where Azerbaijan is located.

Deliveries began in 2020 using the Trans-Adriatic and Trans-Anatolian pipelines included in the Southern Gas Corridor. In increasing numbers, Azerbaijan gas has been heading to Italy, Croatia, the Czech Republic, Portugal, Spain, Germany, Romania, Greece, Austria and Bulgaria.

Recently, European Council President Charles Michel held calls with the leaders of Armenia and Azerbaijan to discuss the situation in Karabakh. He stressed the EU’s readiness “to help advance peace and stability in the region.”

Could the border problems in the Karabakh region, once part of the Soviet Union, upend the European gas deal?

“Major oil and natural gas export from Azerbaijan is not dependent on a peace accord between Armenia and Azerbaijan,” says Brenda Shaffer, a faculty member at the US Naval Postgraduate School in California. She is an expert on Caspian energy and a non-resident fellow at The Atlantic Council.

“The results of the 2020 Armenia-Azerbaijan War impacted the security of the energy export corridor,” she says. “Armenia is now deterred from attempting to attack that corridor, as it did in the past.”

From 2021, Russian soldiers patrol Karabakh, Azerbaijan. Some 2,000 Russian peacekeeper forces

Europe Gas Supply Okay, For Now

The EU sent a civilian mission to help police the Armenian side of the Karabakh region. Azerbaijan was reportedly not happy with the EU presence there, according to a report by Politico EU.

Azerbaijan’s President Ilham Aliyev criticised outside interference in his country’s standoff with Armenian separatists. He said those providing support for the separatists were not helping matters.

“We are warning certain countries that stand behind Armenia from here…to stop these dirty deeds,” he said in his March 18 statement. “The mediators involved in the Karabakh conflict [try] not to solve the issue but to freeze it,” he said, adding that ethnic Armenians living in the Karabakh region, now Azerbaijan, were not getting any special guarantees beyond what an Azerbaijani citizen would get.

Russia has historically been both a meddler and peace mediator there since Soviet times.

The entire region was a Russian imperial province and later became one of the Soviet states in a patchwork creation of made-up borders in the 1920s. Joseph Stalin personally drew the boundaries of the three South Caucasus republics: Georgia, Armenia, and Azerbaijan, to leave large groups of minorities in each republic to deliberately exacerbate tensions, some historians say, to maintain a military presence there.

At present, some two thousand Russian troops are there today as peacekeepers.

Russia held talks between the two sides in May, but some in the Baku natural gas business are getting angry with Moscow now. Gazprom lost market share for natural gas in Europe because of sanctions. On balance, they have been doing okay in selling to new markets.

However, Azerbaijanis are concerned that Russia could escalate in the South Caucasus by using Armenia separatists to thwart Europe’s interest in working with Azerbaijan – or, just to get back at Europe.

“This spring has been the deadliest along the border since the cease-fire in 2020,” Oleysa Vartanyan, a senior researcher at a Tbilisi, Georgia-based peace studies think tank The Crisis Group, told German news channel DW on May 25. She said at least four people have died in the shootings.

The Separatists & The Russians

The one name that always comes up in this story is a famous Armenian financier named Ruben Vardanyan. He is close to Vladimir Putin and has been seen at fundraisers with George Clooney.

The Washington Times in January published an op-ed written by Janusz Bugajski, a Senior Fellow at the Jamestown Foundation and one of the leading Caucasus and former Soviet Union experts who enumerated a long list of allegations against him – from money laundering to helping provide logistical support for Russia’s war in Ukraine.

Because of the last part, Vardanyan is considered "a person subject to immediate detention and transfer to law enforcement agencies of Ukraine or NATO countries,” by Kyiv, which included him in the Mirotvoretz (Peacemaker) database – this is a list of people deemed by Kyiv as enemies of Ukraine.

A bill last year, H.R. 6422 called the Putin Accountability Act, led by Republican Congressman Jim Banks of Indiana, had Vardanyan targeted for sanctions. It is still in committee and has not been voted on yet.

The wealthy tycoon (and founder of one of Russia’s first investment banks – Troika Dialog) is seen as a leader in blocking a lasting peace between Armenia and Azerbaijan.

On May 28, Vardanyan said separatists should not sign onto any agreements with Azerbaijan on his Russian language Telegram channel. He brought up the awful spectre of the Armenian genocide to win them over.

He wrote: (Azerbaijan president) “Aliyev has one strategy — the expulsion and genocide of the people of Artsakh.” Artsakh is what Armenians call the Nagorno-Karabakh region of Azerbaijan. “The last line has been passed. You either stand up for Artsakh, or against the entire Armenian people.”

Vardanyan has been entwined in the separatist government for some time. On his Twitter page, Vardanyan writes about human rights issues related to the Karabakh region and has been especially vocal about the alleged blockade of a road connecting the region to Armenia.

I reached out three times to his personal foundation and twice to his Twitter account to ask him to push back against these Azerbaijani claims that he has been stirring the pot to serve Russian interests. He has not responded to requests for comment.

As a Forbes-listed billionaire, he surely has the cash to play to his passions.

Shaffer said Russia is a huge player in the region and Vardanyan has Moscow’s blessing.

“The Russian peacekeepers had the de facto control of security. Moscow was allowing arms, Armenian soldiers, mines and more to flow to the Armenian community in Karabakh,” she said.

In September 2022, they dispatched Vardanyan to the areas controlled by Russian peacekeepers, she said.

“Vardanyan quickly established himself as de facto leader of the Armenian population there and began to undermine the peace talks. Given the Russian control over the territory and the ties of the Karabakh Armenians to Moscow…it is unthinkable that Vardanyan would have been offered the leadership post without Moscow’s urging,” Shaffer says.

Azerbaijan’s blockade, or checkpoints as they call them, have allegedly been designed to stop any threats of arms flow into Karabakh. Moreover, Armenia is one of Russia’s ways to get around sanctions. Armenia has been a source for banned products to get into Russia – namely computer electronics, such as microchips used for military weapons, The New York Times NYT -0.1% reported in April.

Still, for Armenian separatists, the checkpoint is a blockade as it seals off the only road to Armenia. Some say the road is completely closed, and that there is no checkpoint except for maybe official government vehicles.

On June 21, separatists called for an international intervention, saying humanitarian aid could not get to the region because of the situation.

Armenian Prime Minister Nikol Pashinyan during his electoral victory in 2018.

Please, Not Another War

Another war between Armenia and Azerbaijan is unlikely to stop gas flows, but that depends on whether Europe picks sides. If they come out as anti-Azerbaijan, sanctions could undermine EU energy policy yet again. This is the worst-case scenario.

As it is, the US is looking anti-Azerbaijan.

The Tom Lantos Human Rights Commission in Washington held a hearing on June 21 spotlighting Azerbaijan’s checkpoints in Karabakh. At least one member of the Commission, Hollywood, California Congressman Adam Schiff, called for sanctions in his written statement. He even referred to Karabakh by Vardanyan’s preferred term, “Artsakh”. Maybe Clooney got to him.

Would Washington again sanction a country important to European energy security? It’s done so before.

Politico EU says efforts by Brussels to calm tensions are falling short.

Armenian Prime Minister Nikol Pashinyan is under pressure to protect the rights of the ethnic Armenians in Karabakh, but Baku naturally wants the separatist government and military structures to be dissolved. They want the Armenians there to become full Azerbaijani citizens, Reuters reported.

Azerbaijan denies Vardanyan’s take that they are putting the Armenians through another genocide or that the road checkpoints are designed to make life miserable.

It looks like Vardanyan has “retired” from his post in Karabakh and is now working to get his message out about his new human rights campaign on social media. He stepped down from the separatist government in February, Reuters reported, despite Vardanyan arguing he was not, nor that was he appointed to any role by Moscow.

Vardanyan may have stepped down to avoid the risk of individual sanctions. Some in the Azerbaijan government are pleased to see him go, even going so far as asking Brussels and Washington to add him to an Interpol list of wanted criminals.

Russia’s and Europe’s goals in the Caucasus are diametrically opposed. Armenia and Azerbaijan do not need another war. Peace in Karabakh also secures Armenia’s economic development after decades of isolation and poverty. Millions of Armenians have left their homeland over the years, spreading out into Armenian communities in the US, Europe and Russia.

A calm Caucasus is imperative to ensure Europe’s energy security.