[GGP] The Power of Small States: Azerbaijan and Pipeline Politics

Introduction

The failure of the long-awaited “Nabucco” gas pipeline project, aiming at transferring Azerbaijani natural gas to Europe, proves how a small state, considered weak in the traditional international relations discourse, can influence the geopolitics of energy in the region. In this context, Azerbaijan used its energy policy to achieve its strategic and foreign policy goals. Thus, the country played an important role in realization of regional energy projects. Although it is usually the big players who decide the fate of large transnational energy projects, as an independent oil and gas supplier in the South Caucasus, Azerbaijan had a crucial say on decision-making in terms of choosing the countries of route through which the natural gas would be transported to Europe. By taking into consideration regional geopolitics and its own national interest combined with the lack of real support from the European Union, Azerbaijan opted for giving its full support to the projects of Trans-Anatolian Gas Pipeline (TANAP) and the Trans-Adriatic Gas Pipeline (TAP). This article aims precisely to emphasize the Azerbaijan’s active role in the realization of these two natural gas projects which constitute important segments of the Southern Gas Corridor (SGC). The article starts with a short review of the literature on the role of small states in international relations, setting a scene for an analysis of Azerbaijan in decision-making for the regional projects such as “Nabucco”, “Nabucco-West”, “TANAP” and “TAP”. The author later on briefly discusses these projects, and explains how Azerbaijan influenced the realization of TAP and TANAP projects, but ruled out choosing the Nabucco/Nabucco West. 

Importance of Small States in the International Relations

Small states have been traditionally seen as weak in the international system, which is not based on an accurate evaluation of their potential. Small states can often play a disproportionate role leveraging several aspects of their power in the international system.[1] In fact, by carefully balancing its own interests and playing between differences Azerbaijan has been able to influence geopolitical strategy far more than it should have been able to.

However, there has not been much research on this subject.[2] This is a reflection of the fact that during the Cold War, the small states were seen as ineffectual players, and de-facto allied to one or the other superpower. However, contemporary scholars have called for a renewed scrutiny of the small states as their importance has been gradually increasing. One of the indicators of this tendency is that the international system that is governed through supranational institutions (such as the UN) contains also small states who can play a major role; as the world is no longer bi-polar and the policies of these institutions should not be regarded as an outcome of great-power bargains only, but also in terms of the inter-actors relations.[3] 

Multiple literatures that dates back to the pre-1914 world system have been reflecting the neglect of small states in the international system, following the “Great Game” theory that sought to explain conflicting Russian and British interests, especially in Asia, in the 19th century.[4] The original Great Game, whose primary aim was the control of territory, is significant because it introduced the term of “geo-politics” into the political discourse. The British geographer Halford Mackinder was trying to explain that Europe have no new places to conquer. He contended that sea and land powers would therefore clash, and the winner would dominate the world.[5]

Mackinder, however, wrote that in the world the war was accepted as a “mean of politics” before the carnage of the two world wars, and the nuclear power became a game changer. Today, the most of core concepts of geopolitics, including “relative gains” and the “balance of power” itself, that Mackinder considered important, are irrelevant for the states at the upper levels of the international system.[6]  However, one aspect of Mackinder’s understanding of world has remained constant. Although the “control over territory” is no longer the prime motivation, the competition over resources and resource-rich countries are still constant factors in the world politics.

This is where “small states,” that were regarded having little power in the international state system, demonstrate their advantages. Azerbaijan, a former Soviet Republic in the South Caucasus, perfectly fits into this definition. The description of states with words like 'weak', 'small', and 'insecure' are used interchangeably.[7] From the perspective of the oil and gas industry these terms are applicable to Azerbaijan too. This is particularly true in the international pipeline negotiations where Azerbaijan can use its geographical position to its advantage. 

Southern Gas Corridor as the EU’s Project of Common Interest

The regulation of the European Commission dated 18 November 2015, listed the Southern Gas Corridor (SGC), as well as its segments of Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline (TAP) as a priority projects under Project of Common Interest (PCI) of the union.[8] The reason for such an importance being ascribed to the SGC is mainly due to the gas transit crisis between Russia and Ukraine in 2006 and 2009.[9] As a result, in 2008, the EU Commission accepted the second strategic energy review “An EU Energy Security and Solidarity Action plan”[10] which envisaged the diversification of EU’s gas supplies through the Southern Gas Corridor from Caspian gas sources.

Thus, the proposed projects for the SGC encompassed the energy projects starting from the Caspian Basin and the Middle East; namely, Nabucco (later on reduced to the Western Nabucco) gas pipeline, TANAP, TAP, Interconnector Turkey-Greece-Italy (ITGI), and Azerbaijan-Georgia-Romania Interconnector (AGRI). 

One of the main reasons that the EU has shown an enormous interest in realization of these projects was its goals to diversify its energy supply sources and routes. However, different EU members have shown varying degree of support for the implementation of these projects in accordance with their own level of dependence on external energy sources. For example, countries like Bulgaria, Romania, Hungary and Austria on the one hand supported the former Nabucco pipeline, and on the other hand, also expressed their interest in realization of the rival South Stream project[12], which was supposed to transfer Russian gas through the Black Sea to Bulgaria. This, in return, played an important role in the realization of TANAP/TAP and dismissal of the Nabucco project from the agenda. However, overlooking the role of energy supplier countries in the decision-making process of energy projects would be a rather narrow-sighted approach.

The “Nabucco” project

The Nabucco gas pipeline project was considered a main route that was politically supported by the EU and the U.S. It was first discussed in 2002 and aimed at transferring natural gas from the Caspian basin, mainly Azerbaijan and Turkmenistan, and, under changed conditions, also from Iran and Iraq to Europe.[13] The 3,800-km pipeline, from Central Asia to Europe passing through Azerbaijan, Turkey and South Europe was estimated to cost around $8 billion. The Nabucco consortium included six companies – BOTAS (Turkey), Bulgarian Energy Holding (Bulgaria), Transgaz (Romania), MOL (Hungary), OMV (Austria) and RWE (Germany) – with equal stakes.[14]

The prolonged negotiations over the realization of the project, its direct competition with the South Stream and lack of political coordination finally led to the abandonment of the Nabucco project in 2013. The 3,800-km project was first reduced to 1,300-km, as the part of the project which was supposed to start in Azerbaijan end in the Turkish-Bulgarian border was taken over by the TANAP project. The remaining part of the project was titled “Western Nabucco” (or Nabucco-West) and was supposed to transfer natural gas from Turkey to Austria. This shortened segment was also abandoned in June 2013 as Azerbaijan decided to opt for the TAP option to transfer the gas via Greece and Albania and under the Adriatic Sea to Italy.[15] The decisiveness of Azerbaijani and Turkish governments and their financial commitment to the TANAP and TAP projects were a crucial factor in the dismissal of the Nabucco project. 

At the Southern Gas Corridor forum held in Baku in May 2013, vice-President of the State Oil Company of Azerbaijan Republic (SOCAR), Mr. Elshad Nasirov complained that “Europeans and Americans could easily have financed the Nabucco project a few years ago, at a cost equivalent to that of a few weeks of military operations in Iraq for example.”[16] In an interview in February 2013, Mr. Nasirov said that “if the EU has not found the means to implement this project, we would not argue with the opinion of the EU on how the interests of European countries are protected. We will not argue with the EU, but we can confirm the fact of inability of the EU and member countries to find ways to build a pipeline.”[17] That shows that the Azerbaijani government, mainly represented by SOCAR for energy projects, was already dissatisfied with the Nabucco project and took an indifferent stance towards its realization. Instead it supported the alternative projects that had been already announced; such as TANAP and TAP.  

TANAP and TAP projects 

Amidst the negotiations on Production Support Agreements (PSAs) on the Nabucco project, Azerbaijan and Turkey announced their plans to launch the 1850-km long Trans-Anatolian Gas Pipeline (TANAP) project to transfer gas from the Caspian Sea through Turkey to Greece. SOCAR fully endorsed TANAP mainly on the basis that it costs far less - 5 billion EUR compared to Nabucco.[18] With Nabucco’s dismissal announced, Azerbaijan and Turkey showed their full commitment towards quick implementation of the TANAP project. Construction began in early 2015, and the project is planned to be completed by 2020. Initially, 16 bcm (6 bcm will be pumped into Turkish gas network) natural gas is going to be transported, and in the later stages the project’s throughout capacity is expected to be extended to 24 bcm and then to 31 bcm.[19]  TANAP will be the main and longest part of the Southern Gas Corridor running from Turkish-Georgian border to the Turkish-Greek border. The TAP with a length of 878-km, which was favored over the “Nabucco-West” project in 2013 as a European part of the SGC, had an advantage over Nabucco-West as it was 500-km shorter; and the TAP was favored also by the Shah-Deniz II consortium[20] in Azerbaijan.

Another advantage of TAP is that, in the future its capacity can be expanded from 10 bcm to 20 bcm with additional compressor stations installed and it can be connected to other existing and planned pipelines in Greece, Albania and Italy to transport gas to the South-Eastern, Central as well as Western Europe.[21] At the same time, the Nabucco-West project had its own advantages that were articulated by then Minister for Industry and Energy of Azerbaijan Mr. Natiq Aliyev who pointed out that the project was the best option from all perspectives, notably due to its big capacity, big diameter, and its opportunities to deliver gas to Eastern and Central Europe, which was considered a more reliable market for Azerbaijani gas.[22] Nevertheless, in 2013 the TAP project was chosen to complete the European leg of the Southern Gas Corridor, and the Nabucco project officially was shelved. 

From Nabucco to TANAP and TAP: Azerbaijani national interest versus EU indecisiveness? 

Although Azerbaijan had been constantly endorsing the realization of the Nabucco project for transportation of its natural gas resources to Europe, it ultimately decided to advance with the realization of the TANAP and the TAP projects. While, the Nabucco project was a joint EU endeavor, TANAP and TAP were mainly driven by Azerbaijan (a small state) and Turkey (a regional power).

The currently implemented energy projects in the region are closely associated with geopolitics. In this respect, Azerbaijan did not passionately support the Nabucco project by calculating its long-term political and economic benefits, as it was also in direct competition with the Russian South Stream Project. By pursuing a multi-vector foreign policy – including a principle of good relations with all powerful neighbors, the US and the EU – Azerbaijan also took into consideration Russia’s possible reactions in this context. However, TANAP and TAP are not the projects that are in the same league as Nabucco, so as to challenge the natural gas market that was mainly targeted by the now-defunct South Stream project. In 2010, referring to Nabucco, Azerbaijan’s President Ilham Aliyev said that the project is “too politicized” and also complained about the lack of leadership on behalf of the EU.[23] 

Moreover, TANAP and TAP are sufficient to transport Azerbaijani gas to South-East Europe; that is the minimal national interest of Azerbaijan in terms of its energy policy. Yet, Azerbaijan can transport more than its own gas given the fact that capacity of both projects is planned to be expanded gradually. Furthermore, from the very beginning, Azerbaijan kept its options open by ensuring that TANAP and TAP projects were still on the table even when the negotiations over Nabucco were ongoing. That provided the Azerbaijani government with a golden opportunity to assess the costs and benefits of each energy project. Azerbaijan’s position for the choice of pipelines for the Southern Gas Corridor is summed up by President Ilham Aliyev during the meeting with Bulgarian Prime Minister Boyko Boryssov in March 2015: “We think that we can unite TAP and Nabucco. It is not important how you call this route. Our main goal is that the volumes of Azerbaijani gas enter Europe [and] the more EU countries receive our gas.”[24] President Aliyev had later said that “Gas from Azerbaijani gas fields will be the only new source of natural gas to Europe and will definitely change to a large degree the energy map of the European continent. This is a policy of energy security and policy of energy diversification,”[25]

However, the commercial interests cannot be overlooked, either. For instance, TAP prevailed over Nabucco West in terms of being less costly; and, TAP mainly targets Italian market which is exempt from tense market competition in comparison to the market which was targeted by Nabucco-West, namely Austria where energy infrastructure and networks are better developed which could have drawn the prices down.[26] In the end, that was not fulfilling the EU’s best interest in terms of energy security as TAP is not targeting the countries, which are mostly depended on Gazprom’s gas, as Nabucco West would have done.

Pursuing its own policy of diversification of energy transportation, Azerbaijan has accomplished much with gaining ownership over the transport routes like in the case of TANAP. In other words, Azerbaijan is not an ordinary participant of the project, rather a leading one with a solid commitment both financially and politically. Being a small state, with its limited capacity, Azerbaijan preferred to take a leading role in a relatively smaller project, rather than being a small partner in a big one. To put it differently, instead of being a pawn in a great game, Azerbaijan uses its energy resources and geo-strategic location to attain more power and to support the projects that serve its national interests better.

To sum up, for Azerbaijan, dismissal of the Nabucco project is not a failure per se. Taking into consideration the problematic geopolitics of the region, Azerbaijan has secured the best option it could have. Azerbaijan secured better market promising the smooth transportation of its natural gas resources, avoided a possible hassle with Russia, and captured a leading role in the Southern Gas Corridor. However, that is not to argue that, Nabucco could have not brought greater benefits to the country; it could have granted Azerbaijan more geopolitical importance. At the same time, Azerbaijan could take such an offer only with the strong backing and commitment from the EU and US, as it was the case with Baku-Tbilisi-Ceyhan oil pipeline project.  

Israfil Abdullayev

The author received his BA degree in International Relations and Politics from Keele University in UK and also has MA degree in Politics, Security and Integration from the University College London.

He currently works as senior foreign policy specialist in Azerbaijan.

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