The Southern Gas Corridor and the Recent Escalation in Karabakh

Europe’s longest running conflict was reactivated in Karabakh on February 25, with cease-fire violations along the line of contact. The skirmishes lasted a few days and left several soldiers dead without yielding any other result. Azerbaijan’s Ministry of Defense stated its forces had “suffered losses” while repelling the large-scale Armenian assault (Report.az, February 25). By a suspicious coincidence, the fighting erupted on the eve of the 25th anniversary of the tragic and deadly events in Khojaly (considered a “genocide” by Azerbaijan), which was being commemorated in Baku with a 40,000-person march (APA, February 26).

Azerbaijani diplomats believe the recent Armenian provocation was aimed at disrupting the negotiation process over the conflict’s peaceful settlement (Azernews, February 26). However, such an interpretation may fail to acknowledge the echoes of a deeper geopolitical struggle in the region and beyond.

In recent years, Baku has perceived what appears to be Armenian preparations for a new assault. Thus, of particular note was news of the supply of MiG-29 fighters and other sophisticated aircraft from Russia to Armenia in February 2016. The Kremlin also extended to the Armenian authorities a $200 million loan for arms purchases (RIA Novosti, June 29, 2016). And in the autumn of last year, media reported the transfer of Iskander ballistic missiles to Armenia (Vedomosti, September 19, 2016). Bilateral military cooperation was further deepened when, in October 2016, Russian President Vladimir Putin submitted for approval in the State Duma a project to create the Russian-Armenian Unified Caucasus Air Defense System; and in November, he approved the formation of a joint Russian-Armenian military unit (Russia-Briefing, November 16, 2016).

A few days prior to the February violence around Karabakh, Baku hosted the Third Ministerial Meeting of the Southern Gas Corridor (SGC) Advisory Council. The Azerbaijani authorities attached great importance to the event; President Ilham Aliyev himself delivered an address to the meeting (Azertag, February 23). It was attended not only by high-ranking officials of the countries involved in the SGC, but also senior representatives from the European Union and United Kingdom.

The Southern Gas Corridor project encroaches on Russian interests as a near-monopoly supplier to Southeastern Europe. Thus, Moscow has and will continue to try to prevent the completion of the SGC using both “carrots” (by proposing allegedly more efficient alternative projects, such as “South Stream” and later “Turkish Stream”) and “sticks” (efforts to sabotage projects viewed in Moscow as hostile). The Trans-Adriatic Pipeline (TAP) project—the SGC’s final link—has been under constant threat from environmentalist groups in Italy, a country where Russian interests are well represented (Natural Gas World, September 10, 2014).

It is worth mentioning that even in the 1990s, the Kremlin tried hard to prevent the conclusion of the 1994 oil contract and later initiatives that directed major energy flows from Azerbaijan toward the West. The occupation of Karabakh and surrounding Azerbaijani regions by Armenia, several coup attempts in Baku—one of them occurring just two weeks after the Baku–Tbilisi–Ceyhan (BTC) oil pipeline “Contract of the Century” was signed (Khazar, 2008)—and terrorist attacks in Azerbaijan in the early and mid-1990s coincided with the period when Azerbaijani officials and foreign companies were actively negotiating oil agreements. Russia’s ambassador to Azerbaijan at the time, Valter Shonia, could not have been more frank when he was quoted as saying, “Any politician denying the reality of Russian power is not going to remain long in office. Russia is interested in cooperation with the West over Azerbaijan, but if there is some attempt to unseat Russia, there will be unpleasant consequences” (Azerbaijan International, Winter 1994). In the end, Russian businesses secured a considerable share of the contracts (Visions, September–October 2010). Moreover, Azerbaijan agreed to continue selling oil via the outdated and lengthy Baku–Novorossiysk pipeline. Since then, Moscow has not shown any more substantial tolerance for independent regional energy projects. On the contrary, the Ukrainian conflict and the occupation of Crimea demonstrate that Moscow has become more aggressive toward any attempts to diminish the influence of Russia in the post-Soviet space.

Oil production in Azerbaijan is already gradually declining, and annual volumes are unlikely to reach 40 million barrels per day in the foreseeable future. Thus, if Baku wishes to make the most of its limited oil wealth, it has to commit to a wider engagement in Westward transportation networks, of which the SGC is a key part. At the same time, the European Union’s interest in diversifying its energy sources means that Europe has a real stake in the latest energy contest for Caspian energy resources (Europa.eu, September 19, 2016; Eurasia Daily, November 16, 2016). Thus, the Kremlin’s attempts to undermine the feasibility of the SGC project is a strategic policy, since a weak Europe is key to Russia’s “divide-and-rule” strategy in Eurasia. Moreover, Moscow’s support for separatist movements across post-Soviet countries is well known. Indeed, it has been actively using this weapon in its standoff with the West, as in the 2008 war with Georgia, when Russia ultimately recognized the “independence” of Abkhazia and South Ossetia, and during the conflict in Ukraine, which started in 2014. In fact, Moscow has recently resorted to supporting separatist movements in Western countries as well (Imrussia.org, November 12, 2015).

All that said, the Kremlin has some reason to worry that the negative status-quo it helped to build up in the region might be undermined in favor of a more cooperative approach. Such strategic initiatives as the SGC, as well as the Baku-Tbilisi-Kars railway, have the potential to deepen the participation of the South Caucasus countries in global supply chains. In Armenia, there is a growing realization that the protracted conflict with Azerbaijan and its quasi-colonial dependence on the “Russian bear” are the only factors keeping the country from seizing these opportunities. A significant development in recent months has been the formation of the “Armenia-Azerbaijan Peace Platform,” the first-ever attempt at independent people’s diplomacy, whereby a number of Armenian public figures openly voiced their support for a peaceful resolution of the conflict and a normalization process (Arm-azpeace.com, March 10). Some of them even visited Baku while intergovernmental contacts were at perhaps a historic low (Azvision, December 31, 2016). The discourse coming from the Platform emphasized the benefits “third forces” (usually a euphemism for Moscow) have gained from the unrelenting conflict and alienation between the two neighboring nations. The latest escalation, therefore, might have been specifically designed to maintain the confrontational mood, and thus again raise concerns among foreign investors about the regional security situation.