Germany is Eyeing Azerbaijan's Gas

After U.S. criticism regarding Germany's excessive dependence on Russian gas, Chancellor Angela Merkel is set to visit Azerbaijan to discuss the export of Caspian Sea gas to Europe. Merkel is scheduled to travel to Baku on Saturday, September 3rd, and will also visit other Caucasian countries including Georgia and Armenia. Reuters reported on Wednesday, August 31st, citing a source, that during Merkel's visit to Baku, she will meet with Ilham Aliyev, the President of Azerbaijan, and one of the topics of discussion will be the transfer of Caspian Sea gas to Europe. Simultaneously, the Russian news agency TASS published a similar report. Recently, U.S. President Donald Trump described the construction of the 'Nord Stream 2' gas pipeline, which aims to transport 55 billion cubic meters of Russian gas annually from the Baltic Sea to Germany and other European countries, as 'horrible'. The U.S. has also threatened to impose sanctions on this project. Last year, Russia increased its gas sales to Europe (including Turkey) by more than eight percent, reaching a historic record of 194 billion cubic meters, which accounts for 36 percent of total gas consumption in Europe. Germany sources nearly 40 percent of its gas from Russia, with about half of this gas exported to Europe via Ukraine. The country benefits $3 billion annually from the transit of Russian gas, but Russia plans to stop or minimize gas sales to Europe via Ukraine within two years with the construction of the new 'Nord Stream 2' pipeline, raising widespread concerns in the West. Reuters notes that despite the commitment to construct the 'Nord Stream 2', Merkel's negotiations with other gas suppliers indicate that she is keeping the door open for alternative routes for gas imports. One of the alternative sources is Caspian Sea gas. Azerbaijan, along with ten foreign companies, has invested $40 billion in the construction of the 'Southern Corridor' pipeline, which is approximately completed and stretches 3,500 kilometers. This pipeline is set to initially export six billion cubic meters of gas to Turkey and ten billion cubic meters of gas to Europe (Greece, Albania, and Italy) in 2020, with plans to double the capacity for gas transfer to Europe by 2025. Ilham Shaban, director of the Caspian Oil Studies Center, stated in an interview with Radio Farda that according to European anti-monopoly energy laws, in the second phase, gas from another country must be added to Azerbaijan's gas. 'It is said that Merkel will negotiate the transfer of Turkmen gas or other options in Azerbaijan, but the problem is that Azerbaijan's gas itself cannot compete with Russian gas prices.' Reuters also reported, citing an unnamed German official, that Germany has a strong interest in the 'Southern Corridor' pipeline as it diversifies Europe's energy supply sources. However, this official did not specify whether Germany is willing to receive gas from this pipeline. Mr. Shaban mentioned that adding the Turkmen gas pipeline and extending the 'Southern Corridor' to Germany would add several thousand kilometers to the project, making the price of Caspian gas for Germany very high and economically unfeasible. Reuters also mentioned Iranian and northern Iraqi gas as other potential options for increasing gas exports through the Southern Corridor. The report also referenced the legal convention of the Caspian Sea recently signed among the five Caspian coastal countries. Clause 14 of this convention allows Turkmenistan to construct a pipeline for gas export to Azerbaijan through the Caspian Sea, but it stipulates that this pipeline must meet 'necessary standards and address the environmental concerns of other coastal countries.' Mr. Shaban stated that this issue leaves Russia and Iran free to oppose the construction of this project at any time under various pretexts. A few days ago, Merkel also discussed the construction of the 'Nord Stream 2' pipeline with Russian President Vladimir Putin and requested guarantees for the continued transit of Russian gas through Ukraine. Russia has refused to provide such guarantees but has stated that it is ready to negotiate with Ukraine.