Azerbaijan: Baku Set to Quadruple Gas Exports to Russia by 2011

Having significantly lowered natural gas imports from Turkmenistan, Russia's state-controlled energy conglomerate Gazprom is turning to Azerbaijan to make up some of the difference.

Gazprom and its Azerbaijani counterpart SOCAR announced on January 21 that the Russian conglomerate would significantly increase gas purchases from Azerbaijan over the next two years. An agreement signed last year, indicated that Gazprom would buy 500 million cubic meters (mcm) of gas from SOCAR in 2010. But following a meeting in Moscow between Gazprom CEO Alexei Miller and his SOCAR counterpart Rovnag Abdullayev, the Russian firm announced that it would obtain 1 billion cubic meters (bcm) of SOCAR gas this year and 2 bcm in 2011.

Following the meeting with Abdullayev, Miller reiterated a pledge to purchase "as much gas as SOCAR can supply." Experts widely believe Gazprom's desire to lock up SOCAR's gas production is motivated by a desire to prevent the construction of new energy export routes that would circumvent Russia, and, therefore, break the Kremlin's stranglehold on the European market.

One such project, the proposed Nabucco pipeline, has long been stalled by questions about financing, profitability and reliable suppliers. [For background see the Eurasia Insight archive].

Azerbaijan has been a supporter of Nabucco, but Baku's willingness to ramp up exports to Russia could be a signal that Azerbaijani policymakers are losing faith that the project will ever surmount its existing obstacles. [For background see the Eurasia Insight archive].

SOCAR in recent months has significantly increased its volumes of gas exports. According to a company statement, it exported 146.58 mcm of gas in December, up from 41.83 mcm last June. Overall in 2009, SOCAR exported 1.03 bcm of gas.

Gazprom recently cut the amount of gas that it imports from its main Central Asian supplier, Turkmenistan, by almost half. [For background see the Eurasia Insight archive].

Purchases from Azerbaijan will not come close to covering the shortfall in Turkmen supplies, but they could nonetheless help Moscow maintain its strong position in the Caspian Basin energy market.