The geopolitics of energy

Something is amiss in the recent flare up between Armenia and Azerbaijan. The two have, of course tangled before but the skirmishes which began on July 12 and have continued off and on since mark a departure from the usual tensions over the Nagorno-Karabakh region. Our chief political scientist suggests an answer to what is happening might be found in a closer look at the geopolitics of energy exports, and Russia’s goal to maintain its regional domination in the energy sector.

Adnan R. Khan: So how is the current situation different from what’s happened in the past?

Ilter Turan: First of all, the location of the skirmishes is surprising – it is quite far from the Nagorno-Karabakh region where military exchanges have occurred in the past. And secondly, the appearance of the attack is unusual because although there are always tensions along the Azerbaijan-Armenia border, there has been sensitivity to avoiding that could escalate into war which seemed to be less in this instance. On top of that, we should also add that Armenian military capabilities are to a considerable extent determined by Russian support. This leads one to suspect that the Armenian attacks may have been initiated not exclusively by accident or by a decision of the Armenian government.

Adnan R, Khan: I trust you are implying possible Russian involvement. What would prompt Russia to encourage such action?

Ilter Turan: At this point, we can only speculate. But let’s game this out: What interest would Russia have in sparking a limited conflict specifically in this region? We must begin by noting that the particular area where the incidents took place are where three transport systems go through a rather narrow Azeri territory, then crossing into Georgia and finally into Turkey. There is the Baku-Tbilisi-Ceyhan pipeline transporting Azeri oil to the Mediterranean. Next to it, there is the TANAP pipeline transporting Azeri gas into Turkey and on from Turkey to southern European markets. Lastly, there is the Kars-Tbilisi-Baku railroad that leaving Turkey crosses Georgia and Azerbaijan. The wagons are then ferried across the Caspian to Turkmenbashi in Turkmenistan, continuing afterwards all the way to China.

Two of these systems carry products that are in direct competition with two major Russian exports: Gas and oil. Both the Russians and Azeris are trying to sell these resources and there has been growing consumption of Azeri gas in Turkey alongside a decline in the amount of gas imported from Russia. The railroad, meanwhile, is an important link and also in competition with other shipment systems that go through Russian territory into Western Europe.

Adnan R. Khan: So could Russia’s future in energy be under threat here?

Ilter Turan: Russia is a major producer of both oil and gas with markets for these commodities in various parts of Europe. In fact, one has to remember that the Russians have built other pipelines that traverse the Black Sea – most recently the TurkStream that will not only provide Turkey with more gas, but will also bring more Russian gas to southern Europe.

The question is how dependent should one be on Russia. For example, in addition to buying Iranian and Azeri gas, Turkey has tried to reduce its gas dependency by importing LNG from Algeria and also, interestingly, from the U.S. This is a strategic decision. The Russians tend to treat economic and political links as part of the same package. In fact, the Russians are often more willing to use economic measures to influence political outcomes than other countries. So I think it’s imperative on the part of consumers of Russian gas and oil to have access to other sources. That hurts Russia in two ways: One, it limits the oil and gas Russia can sell; and second, it increases oil and gas flows from other sources which brings the price down. Russia has already been feeling the pain of lower energy prices and it doesn’t want these prices to go down even more.

Adnan R, Khan: So can we read this incident between Armenia and Azerbaijan in terms of a larger Russian strategy or just as a local event?

Ilter Turan: Obviously, one should be cautious about reading too much into what’s happened here. But efforts to interpret these developments within a bigger framework in which the Russians and the Americans are engaged in a highly competitive game in which the U.S. is trying to affect a reduction of Russian oil and gas sales to Western Europe, as well as to Turkey should not be neglected. Reducing reliance on Russian energy also means reducing the means available to Russia for conducting its assertive foreign policy. I’m inclined to think the Russians are well aware of the threats the American policy poses for them. I would not be surprised if they are willing to engage in actions that will remind others that they are very much in the energy game, and they will protect their position in that game.

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