Fuel and Energy Complex Expert Gromov: “Azerbaijan is Gazprom’s Bridge to South Asia and the Middle East”

The conflict between Azerbaijan and Russia is too painful a blow to Gazprom. While our giant felt comfortable on the European market and received super profits there, there was no need to rush to negotiate a strategic partnership with Baku. But today the reality is that a neighbor with access to the Caspian Sea has suddenly become the last hope for the Russian Federation to return to its former export volumes.

Novye Izvestia discussed with Alexey Gromov, Chief Director for Energy at the Institute of Energy and Finance, the importance of Azerbaijan for the Russian fuel and energy complex and why mutually beneficial cooperation for both parties turned out to be more important for our country.

— Just yesterday, fuel and energy experts discussed the importance of Russian gas export projects, where Azerbaijan was assigned a key role. This includes the possibility of transporting Azerbaijani gas to Southern Europe — TANAP, and gas supplies to Iran through the Caspian Sea, bypassing Turkmenistan.

— Yes, indeed, Russia was betting on partnership with such a difficult ally as Azerbaijan. Why? Because geographically, it is the optimal way to interact with the countries of Southern Europe.

If we consider the same swap gas supplies through Turkey in the context of, for example, the cessation of direct supplies of Russian pipeline gas through the Balkan Stream (and the Europeans threaten to refuse our gas after 2027) and taking into account the already effectively completed cessation of Ukrainian gas transit, then, of course, Azerbaijan looks attractive to us.

Let me remind you what this swap consisted of: it was planned that Azerbaijan would buy gas from us for domestic needs, and redirect its own gas volumes under Gazprom contracts to European countries. This is not prohibited by law or European sanctions. And it would be possible to build cooperation on economically mutually beneficial terms for both parties.

— But Azerbaijan, as an exporter, is also connected to the European Union, to which it undertakes to supply Russian gas.

— Yes, in 2022, the EU and Baku signed a memorandum on doubling natural gas supplies from the territory of Azerbaijan to the European Union.

Currently, almost 13 billion cubic meters of Azerbaijani gas out of a total export volume of 24-25 billion cubic meters, or about half, are supplied to Europe.

— That is, without Gazprom’s participation, Baku will not be able to fulfill its obligations to Europe?

— By definition, it cannot. The rate of production growth in Azerbaijan does not correspond to the declared promises for export growth, including to the European Union. Therefore, here it was an obvious mutually beneficial, could have been, so to speak, a mutually beneficial partnership.

In addition, Azerbaijan was also considered as a potentially significant source of swap gas supplies not only to EU countries, but also to Serbia. We have a long-term gas contract with them, which expires in September of this year. And it was planned to renew this contract this year, but Serbia is under very serious pressure from its neighbors in the European Union. In addition, the authorities there, as they say, live in constant threat of Maidan.

And now, as I understand it, the question of extending the contract by the Serbian side has been put on hold. And we could again offer, if there had not been this unnecessary aggravation with Azerbaijan, swap gas supplies. And Azerbaijan would have been the mediator.

Of course, this entire structure is now under tension due to the conflict. Pay attention to the reaction of the Russian Foreign Ministry. We are trying to show maximum restraint in relation to this escalation.

Despite the fact that Azerbaijan is openly provoking us with its actions, we are now trying to calm Baku down in order to preserve these economic instruments. They are mutually beneficial for both sides, but for us first and foremost.

— In January, the presidents of Russia and Iran personally discussed an agreement on Russian gas supplies to Iran. Iran's latest recent war with Israel is a separate topic. But here too, Azerbaijan was supposed to pave the way for Russian gas.

— During this year, the Russian Federation has carried out a fairly lengthy procedure of ratifying the agreement on comprehensive partnership and cooperation with Iran and has finally completed it. And at the same time, Moscow and Tehran have agreed on a long-term gas partnership.

Its essence is in the supply of Russian gas to the northern part of Iran, which traditionally suffers from its deficit, despite the fact that Iran itself is a very large gas producer.

We have agreed on gas supplies via a land corridor through the territory of Azerbaijan, where there is free capacity in the gas transportation system. This is at the first stage.

And in the future, there is an even more ambitious goal. We do not yet consider it as a task for the next few years, but nevertheless, we have outlined the potential of our gas cooperation with Iran.

These are deliveries to the territory of the Islamic Republic of up to 150 billion cubic meters of Russian gas via the Caspian Sea, that is, volumes comparable to the exploded Nord Stream.

— Through waters controlled by Azerbaijan, and not Turkmenistan?

- Exactly, because we traditionally have difficult relations with Turkmenistan. It was planned that the waters of Azerbaijan would be used to lay the necessary pipes to the territory of Iran.

And then Iran would be considered as a hub for the redistribution of Russian gas supplies to South Asia and the Middle East. That is, the project is also very ambitious, it is impossible to implement without cooperation with Azerbaijan.

— Simply put, after losing the European gas market, our pool of partners now only includes China with Power of Siberia and Azerbaijan?

— If we talk about our energy sector, then, of course, Azerbaijan is our bridge to South Asia and the Middle East, because it opens the door to our closer cooperation with Iran.

And, again, through Azerbaijan we access Turkey, where there is the TANAP gas pipeline system, which would allow us to be indirectly present on the European gas market even if Europe really does refuse Russian gas after 2027.

Therefore, truly understanding all these strategic advantages of our partnership with Azerbaijan, you begin to wonder in whose interests the aggravation that is happening now is. It seems to me that this sharply flared conflict is clearly not in the interests of our countries, and I would like to see some acceptable solution found that would not cause any damage to strategic relations.

But at the same time, as they say, neither side should feel humiliated in this conflict. The task, probably, is to come up with some kind of scheme to get out of this situation.

— How Israel and Iran fought for a short time, but still saved face. Everyone defeated everyone so that no one would be offended.

— If we nevertheless decide to break or lower the level of diplomatic relations with Azerbaijan with a ban on selling tomatoes and so on, then we must weigh the immediate benefits against the long-term losses.

In general, we must understand that Azerbaijan is a very important element of our economic influence not only in Transcaucasia. We must look at it more broadly, this is really an outlet to the Middle East and South Asia, an outlet to Turkey, and so on and so forth, so here, of course, we must be very careful about this, so as not to screw things up.

— You rightly noted that the Russian Foreign Ministry chooses its words very carefully. With all the many points of interaction between our countries, the energy point is one of the most key for Russia?

— For Russia as a whole, it is the energy and oil and gas sectors that are the most sensitive. Because right now the oil and gas sector is the target of Western sanctions. And if before 2022 we could afford much tougher rhetoric towards Azerbaijan, because it was not a significant territory for the strategic development of our exports abroad, now we cannot afford it.

And therefore, for the Russian Federation, the oil and gas aspect, primarily gas, is of course significant.

— Your words: Azerbaijan makes good money from purchasing Russian Urals oil (1.53 million tons in 2024), which is used for domestic consumption, freeing up additional volumes for exporting premium Azeri Light oil produced in Azerbaijan. Is this an argument for Baku to tone down its rhetoric?

- Yes, there are many advantages that Azerbaijan receives from cooperation with us.

But at the same time, we are again now establishing deliveries of oil products to Iran, again via the Caspian Sea. And there are signed agreements on the construction of additional tankers to transport the required volume of oil products.

And again, this requires Azerbaijani territorial waters. And it is clear that if diplomatic relations worsen, then we will have certain difficulties in this too, which we would not like either.

And in general, given that we already have serious diplomatic problems with Armenia, we would not like to lose Azerbaijan again.

It seems to me that we really need to cool down here and try not to look for new reasons to quarrel.