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On May 14, Azerbaijan and Türkiye fortified their alliance in the energy sector by signing a new agreement to enhance natural gas cooperation, marking a significant step in their collaborative efforts to expand the existing infrastructure for increased Azerbaijani gas flows to Europe via Turkish territory. This agreement, fundamentally a transit agreement, also lays the groundwork for transporting Turkmen natural gas through Azerbaijan and Georgia, broadening the regional energy dynamics.
The document underscores an ambitious plan to increase the capacity of the TANAP gas pipeline from the current 16 billion cubic meters per year to 31 billion by 2030, aiming to deliver at least 20 billion cubic meters annually to the EU through the TAP pipeline. This expansion is envisioned to meet growing European demand while solidifying Türkiye’s role as a critical energy hub between East and West.
However, this strategy is not without its complications. The expansion efforts are planned to be economically efficient, primarily through the construction of several compressor stations along the TANAP route, rather than laying new pipeline segments. Financing these projects is anticipated to be a hurdle, given the current reluctance of international banks to fund fossil fuel-related projects. This financial challenge highlights a broader tension within the EU’s energy strategy, which is increasingly focused on a transition to renewable sources, complicating commitments to long-term gas infrastructure projects.
Moreover, the agreement involves Türkiye and Azerbaijan assisting in bringing Turkmen gas to Turkish and subsequently European markets. This moves positions Türkiye to potentially influence regional gas prices and secure a more diversified energy supply. However, it also introduces a layer of complexity in negotiating with Turkmenistan, known for its reluctance to shoulder financial burdens in such projects, expecting the EU to bear the costs.
The EU’s dual interest in securing more Azerbaijani and Turkmen gas faces its own set of challenges. While Brussels is keen on diversifying its energy sources to reduce dependency on Russian gas, it is concurrently committed to reducing fossil fuel consumption—a policy contradiction that complicates substantial long-term investments in gas infrastructure.
Azerbaijan’s role as a willing transit country for Turkmen gas enhances its strategic importance but also necessitates significant infrastructural investments, which Baku is hesitant to undertake without clear financial benefits or commitments from the EU. The potential construction of LNG stations in Turkmenistan and Azerbaijan as an alternative means to transport gas highlights innovative but complex solutions to these geopolitical and financial challenges.
The direct gas volumes required by Türkiye and the broader strategic goals to supply 30 billion cubic meters to the EU underscore Azerbaijan’s pivotal role in European energy security. However, the negotiations over price with Türkiye, which aims to secure lower rates, reflect underlying tensions that could affect the profitability and sustainability of Azerbaijan’s export strategy.
Looking forward, the EU’s engagement with Azerbaijan involves resolving significant policy and financial contradictions. The EU’s need for Azerbaijani gas does not align neatly with its financial policies against fossil fuels, posing a dilemma for funding essential infrastructure that supports long-term gas contracts. As Azerbaijan navigates these complex dynamics, the nation finds itself at a crossroads of opportunity and challenge. Its ability to manage these relationships and leverage its geographic and resource advantages will be crucial in shaping the regional energy landscape and its own economic future.