AZERBAIJAN JOINS THE MIDDLE EAST

Azerbaijan’s massive hydrocarbon resources have begun to attract the attention of an increasing number of energy-poor nations in the Middle East, including Israel and Jordan. While the logistical problems involved in such deliveries would be daunting, as no direct pipelines currently exist, the diplomatic intricacies involved in such shipments would be even more formidable. Nevertheless, the diplomatic implications of such interest are both interesting and potentially significant.

Israel has recently attempted to increase its number of natural gas suppliers, according to National Infrastructure Minister Benjamin Ben Eliezer. On May 4 Ben Eliezer told a conference in Tel Aviv that his Ministry had discussed possible future supplies of natural gas to Israel with the energy companies BP and Gazprom as well as with Caspian producers Azerbaijan, Kazakhstan and Turkmenistan. Last week in Azerbaijan, National Infrastructure Ministry Director-General Hezi Kugler held talks with Azeri officials about possible future gas supplies, but no details of the negotiations have been released (Trend news agency, May 6).

Azerbaijan produces gas from its Caspian offshore Shah Deniz field, the country’s largest natural gas field, which is operated by BP. The 330 square-mile Shah Deniz gas and condensate field was discovered in 1999 and began production in December 2006. The field lies under 2,000 feet of water, 44 miles southeast of Bakubat.

BP owns 25.5 percent of the joint venture. The other Shah Deniz consortium partners are Statoil Azerbaijan (25.5 percent), State Oil Company of the Azerbaijan Republic (SOCAR) (10 percent), France’s Elf Petroleum Azerbaijan (10 percent), Russia’s LukAgip N.V. (10 percent), Iran’s Oil Industries Engineering & Construction (OIEC) (10 percent), and Turkiye Petrolleri Anonim Ortakligi (TPAO) (9 percent).

Shah Deniz holds an estimated 1.5 to 3 billion barrels of oil, and 50 to 100 billion cubic meters of gas. The United States is optimistic about Azerbaijan’s natural gas future. The US Energy Information Agency wrote, “With the addition of the Shah Deniz natural gas and condensate field and the South Caucasus Pipeline, Azerbaijan will become a large natural gas provider to Turkey and to Europe in the upcoming decade” (www.eia.doe.gov).

The 430-mile-long South Caucasus Pipeline, also known as the Baku-Tbilisi-Erzurum (BTE) Pipeline, became operational at the same time as the Shah Deniz field and transmits Azeri gas through Georgia to Erzurum in eastern Turkey. Shah Deniz oil is sent through the 1,092-mile-long, $3.6 billion Baku-Tbilisi-Ceyhan (BTC) pipeline, which terminates at Turkey’s eastern Mediterranean port of Ceyhan. The BTC shares the same corridor as the BTE. In 2007 the BTC pipeline exported roughly 650,000 barrels per day of crude and condensate.

The devil is in the details, in this case geography. While Israel might be interested in possible imports of Azeri natural gas, the fact remains that there are only two ways of transporting it, pipelines and liquefied natural gas (LNG) tankers. LNG ports and tankers are extremely expensive, while any pipeline extending from Erzurum to Israel would either have to extend from southeastern Turkey under the Mediterranean parallel to the Lebanese coast or traverse Syria, with which Israel has yet to sign a peace treaty.

There are, however, interesting signs that a deal may yet be in the works. According to recent newspaper reports, Israeli Prime Minister Ehud Olmert already has informed Syrian President Bashar al Assad that Israel is prepared to cede the Golan Heights to Syria in return for a comprehensive peace agreement (Ha’aretz, May 6).

Such considerations may be the diplomatic subtext of the state visit to Azerbaijan by Jordan’s King Abdullah, ostensibly in Baku to attend the opening of Azerbaijan’s Second Jordanian exhibition and the Azerbaijan-Jordan Business Forum. While in Baku, Abdullah held extensive discussions with Azeri President Ilham Aliyev and signed a number of bilateral documents (AzerTag, May 5).

In an interview with Azerbaijan’s State Telegraph Agency, Abdullah put the Arab-Israeli conflict in a broader regional context, observing, “It is common knowledge that the Palestinian problem is the core issue in the Middle East conflict, and it is our conviction that solving the interrelated issues in our region depends on our ability to find a just and permanent solution to the conflict in Palestine” (AzerTag, May 2). In comments that will undoubtedly resonate in Baku, Abdullah offered his services in resolving Azerbaijan’s Nagorno-Karabakh dispute with Armenia.

As Washington is prodding both Israel and the Palestinian Authority toward resolving their disputes over the Middle East’s “core issue,” Abdullah’s comments about “interrelated issues” would seem to indicate a possible “twin track” approach to solving the region’s other unresolved disputes. Syria, bracketed between Israel’s ally Turkey to the north and Israel itself, the Middle East’s leading military power, to the south, may now be ready to trade peace for territory, especially if the deal were sweetened with increased access to both natural gas and transit fees.

In such a situation, Turkey would win by further positioning itself as a regional transit hub, and Azerbaijan would gain valuable additional diplomatic support from Jordan for resolving its dispute with Armenia. If Azerbaijan developed energy ties with Israel, this too could have a diplomatic payoff over Nagorno-Karabakh, particularly if Israel used its good offices with Armenia, its fifth-largest trading partner. Finally, Syria and Israel would gain access to Caspian energy from a reliable Western ally. For Israel, there could be no greater 60th birthday present than a peace treaty fired by natural gas from Azerbaijan’s Caspian “King of the Sea” gas field.