Azerbaijan’s Pipeline To Iran

Courtesy of STRATFOR (subscription required), details on the plans by Azerbaijan’s state-owned energy firm, SOCAR, to construct a new pipeline to export natural gas to Iran.  As the article notes:

“…The report quoted the deputy head of Azerigaz, SOCAR’s natural gas subsidiary, as saying that work was in progress to construct the 200-kilometer-long (124-mile-long) Sangachal-Azadkend-Astara pipeline, which will have a capacity of 6.57 billion cubic meters per year.

Azerbaijan already exports around 1.3 billion cubic meters of natural gas to Iran. This new pipeline, which is expected to be ready in 2 years, will allow Baku to increase exports to its southern neighbor. Even more important is the fact that it will be built by SOCAR using its own funds. The move to build this pipeline represents a significant increase in Azerbaijan’s confidence as an energy state. Since its independence in the early 1990s, Baku has relied on Western assistance to develop its energy sector; before that, it looked to the Kremlin. Azerbaijan has come a long way in terms of being able to develop the expertise and financial muscle to engage in such a strategic initiative. Just as important, it is no longer waiting for other states to decide who will get Azerbaijani natural gas — it now is making at least some of those decisions itself.

From an economic standpoint, the new pipeline will allow Azerbaijan to both increase and diversify its export options. Baku is caught between Turkey and Russia seeking to be the main route for Azerbaijani energy exports — with Russia the more aggressive suitor. Azerbaijanis have more leverage in terms of price negotiation by being able to export to a third country.

The new pipeline also will help Azerbaijan on the geopolitical front. Baku is in the process of trying to put some distance between itself and Turkey. At the same time, it does not want to be too close to Russia. Iran is a third option Baku can use to better manage its regional relationships.

Conversely, Iran may also get some geopolitical mileage out of an enhanced energy relationship. But more significant is the trend that despite having the world’s second-largest natural gas reserves, Tehran increasingly is having to rely on imports. Iran does not have the financial or technical means to produce and export natural gas, and because of sanctions, countries that do have such expertise will not provide assistance. It already imports 12 billion cubic meters per year from Turkmenistan, and now will have to rely on increased imports from Azerbaijan.

Iran’s increasing reliance on natural gas imports limits the extent to which it can afford to defy international pressure seeking to rein in its radical behavior. And Azerbaijan is beginning to feel confident and is trying to emerge as a geopolitical player in the Caucasus.”

This entry was posted on Friday, February 12th, 2010 at 11:32 am and is filed under Azerbaijan, Iran, State Oil Company of Azerbaijan (SOCAR).  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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