The EU-Azerbaijan fuel deal is a repeat mistake

Gligor Radečić is a fuel marketing campaign chief at CEE Bankwatch Network.

As a part of the European Union’s mission to rid itself of Russian fossil fuel, in mid-July, European Commission President Ursula von der Leyen and Azerbaijan’s President Ilham Aliyev signed a memorandum to double Azerbaijani fuel exports to the bloc.  

According to the doc, by 2027, the Caspian petrostate will provide Europe with at the least 20 billion cubic meters of fossil fuel yearly through the Southern Gas Corridor (SGC)— a 3,000-kilometer chain of pipelines delivering fuel to the EU.  

But this settlement stands in defiance of the EU’s personal local weather targets and its human rights requirements too.  

As civil society teams have already argued, supporting the growth of fuel extraction will solely enrich the autocratic regime in Azerbaijan, infamous for rampant corruption and the repression of all opposition within the nation. 

What’s little mentioned, nonetheless, is that vital infrastructure wanted to extract and transport the fuel from the Caspian Sea to Europe is co-owned by Lukoil — a Russian oil and fuel big carefully linked to Russian President Vladimir Putin’s regime.  

One of the most important oil and fuel corporations on the planet, Lukoil itself claims it’s one of many three largest taxpayers in Russia, having paid greater than $200 billion in taxes in 2019 alone. Lukoil can also be among the many corporations on the United States sanctions list.  

Vagit Alekperov, Lukoil’s former CEO and a onetime deputy oil and fuel minister of the Soviet Union, had even beforehand made statements overtly suggesting he thought-about the corporate’s targets to be carefully aligned with these of the Russian authorities. He later stepped down, nonetheless, after the United Kingdom and Australia imposed sanctions on a gaggle of Russian elites and oligarchs who, within the phrases of Australia’s overseas minister, are “close to Putin;[and] facilitate and support his actions.” 

Lukoil has been working within the Azerbaijani oil and fuel sector since 1994. In the early 2000s, it targeted its efforts in Azerbaijan on the event of Shah Deniz fossil fuel fields, that are among the many largest on the planet. 

In truth, a number of days earlier than Russia’s invasion of Ukraine, Lukoil accomplished the acquisition of Malaysian Petronas’ stake in Shah Deniz for $1.45 billion, upping its share within the challenge from 10 p.c to 19.99 p.c, and changing into the second largest shareholder after British Petroleum (BP).  

Besides Shah Deniz, which would be the principal area for exports within the upcoming many years, Lukoil is pursuing different potential developments in Azerbaijan as properly. In 2021, the corporate bought a 25 p.c stake within the Shallow Water Absheron Peninsula (SWAP) exploration challenge from BP. 

And after 30 years of dispute, in January of the identical yr, when Azerbaijan and Turkmenistan agreed to the joint improvement of the Dostluk area — situated on the border of their respective sectors of the Caspian Sea —Alekperov was discussing funding choices for Lukoil with Turkmen President Gurbanguly Berdymukhamedov only one month later, as a way to take part in Azerbaijan and Turkmenistan’s joint endeavor.  

In addition to the Azerbaijani supply of EU-bound fossil fuel, Lukoil can also be a shareholder within the South Caucasus Pipeline, the easternmost part of the SGC. And it has a 15.992 p.c share in the Azerbaijan Gas Supply Company, a shipper and vendor of the Azerbaijani fossil fuel destined for Europe through the SGC. 

Meanwhile, promoted by the Commission beneath the guise of mitigating Europe’s dependence on Russian fossil fuel, the SGC itself has confronted main opposition from civil society for breaching a variety of EU insurance policies. And, as Bankwatch already warned in 2015, Moscow has been involved from an early stage. 

The SGC is the one route linking Caspian Sea fuel fields with the EU, and Azerbaijan began exporting fuel to Europe by it in 2020. The hall passes by Georgia, Turkey, Greece, Albania and Italy to different EU markets, and it consists of the South Caucasus Pipeline, the Trans-Anatolian Pipeline, the Trans-Adriatic Pipeline and different department strains, whereas its principal energetic fuel area is presently the Shah Deniz fuel area within the Caspian Sea.  

With an estimated price of $45 billion, the SGC was, amongst others, backed by public cash through the EU’s Connecting Europe Facility, the European Investment Bank and the European Bank for Reconstruction and Development.  

According to von der Leyen, Azerbaijan is “a crucial and reliable partner for our security of supply.” Yet, Russian involvement in key components of the Azeri fuel provide chain en path to Europe casts doubt over any vitality safety claims. 

Not solely is Lukoil a significant taxpayer in Russia, which is ready to use its fuel earnings from Azerbaijan to fund Putin’s struggle machine, however its place in so many Azeri tasks provides the corporate entry to data that may very well be used to help Russia’s continued weaponization of its personal fossil fuels exports. 

This deal merely can’t assist the EU handle potential fuel shortages now. Scaling up fuel manufacturing and transportation capability is technically impossible to implement in less than five years, and the EU already wants to start out slicing its fuel demand considerably as a way to attain its personal local weather targets.  

It’s excessive time the Commission begins studying from its previous errors regarding vitality diversification and vitality safety primarily based on the offers it’s made with autocratic regimes. They solely serve to perpetuate Europe’s fossil fuels fixation, precisely when it most desperately wants to finish.