Azerbaijan offers to sell gas to Europe
By Stefan Wagstyl, East Europe Editor, in Baku

FT
May 27 2006 03:00

Azerbaijan has offered to help Europe meet its long-term energy needs
and reduce its dependence on Russia by putting itself forward as a
potential source of natural gas.

Ilham Aliyev, president of the energy-rich Caspian nation, told the FT
Azerbaijan was ready to focus on mainland Europe as a potential future
market when planning new gas projects.

“Until last year we considered Turkey and Georgia as the only markets
for Azerbaijan’s gas,” said Mr Aliyev. “The situation has changed
now. We see that demand from Europe for additional gas becomes more
viable and we need to evaluate that.

“For us this is a new situation . . . But if there’s demand from
Europe we will consider it. To do that we need to review our
production and investment programme.”

Mr Aliyev’s offer comes amid widespread concern in the European Union
about energy security and calls for diversification. The search for
alternative gas sources has intensified since the contract dispute
between Russia and Ukraine last winter prompted a brief break in
supplies to some EU states.

Mr Aliyev said new gas developments would take time. Oil industry
executives in Baku agree, saying the country’s first big new gas
project was just nearing completion – the Shah Deniz offshore field
and the associated South Caucasus Pipeline (SCP) to Georgia and
Turkey.

Big potential new gas sources – if proved viable – would probably not
come on stream before 2015 – following the planned development of a
second stage of Shah Deniz.

Other potential sources – notably pipelines under the Caspian bringing
gas from Kazakhstan and Turkmenistan – could take similarly long to
develop.

Mr Aliyev said Azerbaijan was ready to play a transit role for both
gas and oil. His confidence stems from the near completion of two big
pipelines – the SCP, which will start transporting gas in the autumn,
and the Baku-Tbilisi-Ceyhan (BTC) oil pipeline from Azerbaijan to
Turkey’s Mediterranean coast, which is due to ship its first oil
soon. Mr Aliyev says proudly: “The pipelines are the biggest energy
projects in the world . . . This unique infrastructure integrates the
Caspian and the Mediterranean.”

Mr Aliyev ran Socar, the Azerbaijan state oil company, before
succeeding his late father, Heydar, as president. Heydar Aliyev, a KGB
boss and Communist party official in Soviet times, established an
authoritarian government that he controlled until his death in
2003. Ilham Aliyev took power in presidential elections that
international observers condemned as flawed.

The government ran into more criticism last year when the ruling party
won parliamentary elections by a landslide amid complaints of fraud
and harassment from opposition parties.

Mr Aliyev rejects suggestions his country is undemocratic and accuses
the foreign media of painting a false picture.

“I don’t say we have a perfect society,” he said. “Of course not. It
is not possible for a country to have the same level of democracy as
you have in western Europe. It’s not possible in 15 years . . . But
we have many achievements.”

Mr Aliyev argues rapid economic development – fuelled by energy export
revenues – will lead to a strong democracy.

Opposition politicians and human rights activists say this may not
happen if the wealthy business people around the president monopolise
money and power, as has happened in other energy-rich states. They
want the US and the EU to increase pressure on Mr Aliyev for
democratic reforms.

But Mr Aliyev thinks western leaders worried about oil and gas
supplies will be unwilling to destabilise Azerbaijan at a time of
rising tensions between the west and neighbouring Iran, which is home
to more than 20m ethnic Azeris.

There is also concern about Azerbaijan’s long-running dispute with
Armenia over the territory of Nagorno-Karabakh.