RUSSIA, AZERBAIJAN LEADERS SEE PROGRESS TOWARDS GAS DEAL

Agence France Presse
April 17 2009

Russian President Dmitry Medvedev met his Azerbaijani counterpart
Ilham Aliyev on Friday to discuss a deal on natural gas sales which
could undermine the EU-backed Nabucco pipeline.

"In my opinion we have a very high chance of entering a full-blown
agreement," Medvedev told reporters after meeting Aliyev at the
Russian leader’s residence outside Moscow.

The meeting came after Russia and Azerbaijan’s state-run energy
companies last month signed a preliminary deal on natural gas sales
from 2010, which could remove a potential source of gas for Nabucco.

Aliyev said that Azerbaijan — a former Soviet republic in the
energy-rich Caspian Sea region — hoped to diversify its gas
exports. The country currently exports gas westwards through Turkey.

"For us… diversification of deliveries and the opportunity to enter
new markets is of significant interest… because today Azerbaijani
gas is transported in the Western direction," Aliyev said.

He said Russia was a natural partner for Azerbaijan because the
countries were neighbours and gas export infrastracture was already
in place.

"There are no transit countries between our countries. There is no
need for additional investment to build a gas pipeline," Aliyev said.

But both presidents stressed that it would be up to the two state
companies involved, Russian gas giant Gazprom and Azerbaijani national
energy firm Socar, to make the final agreement.

"I am hoping that the talks being conducted between our companies will
be successfully completed," Aliyev said. "There are no, and cannot be,
any limits to cooperation in the gas sphere on our part."

If the Gazprom-Socar deal is finalized, that would cast doubt on
Nabucco, a project that the European Union has supported in a bid to
lessen its dependency on Russian gas.

Nabucco would pipe gas from the energy-rich Caspian Sea region via
Turkey and Austria to western Europe, bypassing Russia.

The Kremlin has regularly criticized Nabucco and instead backed the
rival South Stream pipeline.

Azerbaijan, along with Turkmenistan, would be a possible supplier of
gas for Nabucco.

Aliyev and Medvedev also touted progress in Russian-mediated talks
on the longstanding conflict over Nagorny Karabakh, an enclave at
the centre of a fierce war between Azerbaijan and Armenia in the
early 1990s.

"It is this progress that keeps alive our hope that the conflict will
be settled rather soon," Aliyev said.

"The positions of the sides recently became closer to a certain
degree. Some questions that previously seemed hard to solve have
been agreed," Aliyev said, though he added that the lack of results
so far was "disappointing."

Moscow in recent months has stepped up its efforts to reconcile Armenia
and Azerbaijan in what analysts say is a bid to increase its influence
in the Caucasus region.

Last November, Russia hosted rare peace talks between the two bitter
ex-Soviet foes.

The Kommersant daily reported Friday that Russia had convinced
Armenian President Serzh Sarkisian to take part in another summit
with Azerbaijan’s Aliyev mediated by Medvedev in the Russian city of
Saint Petersburg in June.

The newspaper, not citing any sources, said that Russia was offering
hefty financial support to Armenia and weapons sales to Azerbaijan
as rewards for taking part in the Russian-led peace talks.

Nagorny Karabakh, an enclave of Azerbaijan with a largely ethnic
Armenian population, broke free of Baku’s control in the early 1990s
in a war that killed nearly 30,000 people and forced two million to
flee their homes.

Shootings between Armenian and Azerbaijani forces in the region remain
common despite a 1994 ceasefire.