Energy policy of the Great Powers and Azerbaijan

Фейзиева Гюнай Махаддин – студент аспирантуры по международным отношениям, научный сотрудник Института Кавказоведения Национальной академии наук Азербайджана.

Аннотация: В ходе исследования была изучена энергетическая политика больших государств и место Азербайджанской Республики в ней.

Ключевые слова: Большие государства, США, ЕС, Азербайджан, энергетика, политика.

Abstract: In the study the energy policy of major states and the place of the Republic of Azerbaijan in their energy policy were researched.

Keywords: Major states, US, EU, Azerbaijan, energy, policy.

Major countries are implemented energy policy programs in terms of insurance from the energy crisis and ensuring energy security. Currently, the United States, China, the European Union member states, Japan and India are approaching the point of exhaustion in the production of hydrocarbon reserves. Britain, once a major oil and gas producer, is believed to be re-importer in the coming years. Britain, once a major oil and gas producer, is believed to become re-importer in the coming years. It is possible to say the same about the major states such as India and China. Because in these countries hydrocarbon reserves are exhausted. Not only oil and gas production, but also the import of oil and gas creates ruthless competition among many countries. It is no coincidence that leading states are pressuring China to apply energy-saving technologies.

The US, the world’s largest energy consumer, also takes into account the above mentioned factors. The country’s energy independence has been one of the most important political goals of the American presidents over the last 40 years. Important steps were taken to end the dependence of the United States on the Middle East oil and gas during Barack Obama’s presidency. Production of energy carriers in the country increased, as well as production of associated gas began. As is known, associated gas, which is a type of natural gas, is collected in small volumes in collectors. Production of this gas is relatively harder than traditional natural gas production and requires the use of complex technologies. The US is now the world’s largest oil and gas producer. Such processes affect the geopolitical view of the world. Some states have lost their importance as the United States energy provider. Some experts believe that by 2020, the United States will become the world’s largest gas exporter. New York City’s transition from mazut to associated gas consumption is one of the signs of this policy. All these trends indicate that it is time for the Middle East to seek other customers, as well as the OPEC, which supplies the United States with energy carriers.

Besides, the use of renewable and ecologically clean energy in the US is also rapidly expanding. If the first priority of America’s new energy policy was to restrict oil and gas imports, the second major basis was the leading role alternative energy sources played in the energy sector of the country. The United States is in the second place in the world in terms of the overall volume of environmental clean energy production from wind, solar, geothermal and other sources. The United States is aimed to invest $ 150 billion in alternative energy sources over the next five years. In 2012, Barack Obama Administration has spent $ 44.2 billion on renewable energy sources. American companies also operate extensively in this direction. For example, renewable energy now powers 100 percent of Apple’s worldwide facilities. Even the US troops serving in Afghanistan use solar backpacks. All these facts show that the United States is taking decisive steps to become an energy exporter.

Other major states in the world, preparing their own energy strategies, consider their energy security as an important component of national security. In this regard, China, the world leader in terms of economic growth over the past 20 years, draws particular attention. Understanding well that its economy is dependent on raw material supply, the question of energy security, which is considered as the “Achilles heel”, is of great importance for the Chinese leadership. The country, which chose to diversify its energy supply, prefers to cooperate with many countries around the world, including the Caspian basin states.1 If in the 90s the key states providing China with hydrocarbon reserves were Angola, Oman and Saudi Arabia, other oil and gas sources are sought based on the new energy strategy developed over the last decade. To achieve this goal, relations with the neighboring Central Asian states, Iran and Russia are established.

Such a trend has already been called the “energy expansion”. Considering the fact that China spent 19.1% of energy consumption in the world in 2012 and is approaching the United States for this indicator (21.2%), it is possible to understand the causes of such an expansion. Oil and gas pipelines are already being built across the country, and the atom, water and wind energy are being developed. The major source in China’s energy system is coal. The weight of coal in the country’s energy system is 70%, oil 20% and natural gas 3%. But the rapid increase in oil and gas consumption shows that in the future, China will increase oil and gas imports. China, increasing its focus on renewable energy sources, has adopted “XIII Five-Year Plan for Renewable Energy Development (2016-2020)” in 2016.2 Countries like Russia, Brazil, India, Japan, South Korea and Turkey, which play an important role in the global economy, also implement their energy strategies. Some of these states, for example, Russia is looking for new partners as energy exporter, and Turkey, for example, succeeded in the aim of becoming an energy hub. Others, for example, Japan and South Korea are trying to use alternative energy sources, to apply the most up-to-date innovations and technologies. Thus, it is clear that achieving safe energy security in the modern world has become one of the major goals for the states.

In this regard, the energy policy of European states and the Republic of Azerbaijan, its role in global energy security attract more attention. The high demand for the continent’s energy needs, as well as the relatively less supply of energy resources, especially with traditional mineral fuels, and the depletion of these fuel stocks during the industrial revolution, put the energy security issue of European countries at the forefront. The key ally of the United States, the European Union’s energy security is crucial in global energy security.3

Despite the fact that in Europe the alternative and renewable energy production is gaining momentum, nuclear energy production is increasing, various energy saving programs are implementing, oil and gas still dominate Europe’s energy supply. Research shows that in the near future, Europe’s reduction of oil and gas supply does not seem real. All this increases the weight of the Republic of Azerbaijan as a reliable partner in ensuring Europe’s energy security.4

Talking about the role of Europe’s energy policy as an integral part of global energy security, it should be noted that the continent’s energy policy has emerged as a response to energy security challenges. This issue has gained global importance because of independence of energy production, energy carriers and sustainable energy supply as the basis of Europe’s economic development and welfare of its citizens. At present the European Union’s energy policy is considered one of the leading directions of its domestic and foreign policy. This strategy focuses on the energy security of all members of the Union.

Using the 16% of the world’s energy production, the EU needs a large amount of foreign energy resources both in oil and natural gas. Domestic production is expected to slowly diminish from 2010 to 2030. The European Union’s local resources are quite limited. The investment in the production of local resources is not profitable, also greatly damages the EU economy.

The growing development of relations between the European Union and the Russian Federation in the field of natural gas (regardless of the crisis in Ukraine) is considered unfavorable from economic and geopolitical point of view, and the Council of the European Union often warns the leading states of the Union to reduce dependence and need.

It is possible to summarize the forecasts of the International Energy Agency in 2002, calculated by the world’s leading research institutes and the possible estimates of the research that evaluates developments in the world in the next 15-20-year period:

  1. The main focus of the world , oil and natural gas-rich Persian Gulf, at a crossroad of political and economic interests. According to analytics, this region, which will be considered as one of the world’s most important sources of energy in 2020, will increase its significance in Europe, Asia and on the other side of the ocean, but the main consumers will still be European countries.
  2. The Caspian Basin countries, one of the most important regions in the world and expansion of existing energy resources available in the region is expected. However, given the geostrategic position of the region, it is also known that the energy resources of the Caspian Sea can not meet the world’s energy needs in large quantities. The current 9% share of the oil production from the UN countries, including Russia, is projected to increase by 12% in 2020.
  3. In South America and Europe, especially in the North Sea, natural resources are expected to decline substantially.
  4. Energy from natural resources is expected to maintain its position in the global energy production by 2020. According to estimates, this figure will be approximately 88%.
  5. In particular, oil will maintain its primary position in the overall energy supply and delivery, and coal will maintain its leading role in the production of electricity.
  6. Europe’s dependence on Russian gas will gradually increase, and this will have certain strategic outcomes as an important element of dependence.
  7. In terms of regional demand, electricity production is likely to be the most growing factor in this sector. It is estimated that Asia and South America are the regions where they will be able to maximize their production capabilities.
  8. Increased demand for natural gas will lead to geopolitical changes in energy production and new dependencies and discoveries in the international arena.
  9. The world will be included in alternative energy searches by 2020. Developed world countries will seek ways to get rid of natural resources and will experience less energy-intensive energy-saving methods in their economies.

The United States, the only superpower of the modern world, is pursuing a power-driven policy to deal with Middle East resources and the Persian Gulf, which is the most important access point for these resources to world markets, especially after the 1973-1974 oil crisis. Yom Kippur or the Ramadan War in 1973 between Israel and Arab states under the leadership of Egypt and Syria, and subsequent oil embargo had a great impact on the European countries as well. At that time, the key members of the Organization of Arab Petroleum Exporting Countries (OAPEC) - Egypt, Syria and Tunisia were the major suppliers of crude oil to European countries. When OAPEC announced an oil embargo in October 1973, the economic crisis in the European Union deepened. The first impact of the crisis was the deficiency of oil that led to a number of measures to limit consumption. The price of crude oil, which is continuously rising from the 70s, has risen by 20 times compared to the pre-crisis years. Besides the economic consequences, the 1973 crisis created a sense of dissatisfaction among the European countries and in 1974, the International Energy Agency (IEA) was established in Paris to define the responsibilities of member countries, and coordinate energy markets. The second oil shock occurred in Europe after the Iran-Iraq war that started in 1980.

The main contours of the US policy were determined in the Carter Doctrine, which was adopted by President C.Carter on January 23, 1980 before the collapse of the bipolar system. According to this doctrine, which has paid special attention to the Indian Ocean region in the US foreign policy, the Indian Ocean and the Persian Gulf had been declared a zone of vital interests of the United States along with Western Europe and the Far East.5 The doctrine clearly states that control of the Gulf by an external force and the breakdown of oil flow is an aggression against the vital interests of the United States, and it will be prevented in any way, including military force. On January 1, 1983, CENTCOM (Central Command) was established in the United States during the presidency of R.Reagan to control the center of Europe and Asia.

According to the Europe 2020 strategy, the energy supply from renewable energy sources in continental countries is expected to increase to 20 percent by 2020. In 2030 this figure should be at least 27 percent.6

It is time to re-apply to the founding institutions to build Europe’s energy policy in line with the challenges of the twentieth century. If current trends persist, global energy demand may double by 2050. In this case, import dependence may reach 90% in Europe. Therefore, many European countries, such as France, begin to develop renewable energy.

Not only separate countries, but also the whole European continent intended to solve the problem of energy security together. From this point of view, France offered its partners a renewed, solid and ambitious form of European energy policy. That policy has the following objectives:

  • Environment, energy simplicity and quality in line with EU claims in this area.
  • Competition. Energy price management is key to Europe’s development and re- industrialization.
  • Industry. This is an important factor for renewable and non-carbon energy, the transition to new types of energy and is a powerful means of development.
  • Security and sovereignty. We need to take into account the intensification of the struggle for energy resources in the world.
  • Social purposes that guarantee high quality jobs and affordable rates for both companies and families.7

Speaking about Europe’s energy security and energy supplies, primarily natural gas supply is mentioned. As we know, natural gas is one of Europe’s main sources of import. This region’s natural gas needs are also large volume. Use of natural gas is expanding around the world and demand for it is growing. According to experts, the gas demand in Europe is expected to double in the next 10-15 years.8 This is an additional 240-260 billion cubic meters of natural gas. 200 billion cubic meters of gas that Europe needs is imported from Russia. A new gas pipeline Yamal-Europe to connect the European gas network via Belarus-Poland, which is avoiding Ukraine, has been built to ensure the supply. The Yamal-Europe transnational pipeline passes through four countries. The construction of the gas pipeline started in 1994. With the launch of the last compressor station in 2006, the Yamal-Europe gas pipeline was upgraded to 32.9 billion cubic meters of gas per year. The number of compressor stations in the pipeline is 14, the diameter of the pipe 1420 mm and the total length over 2000 km. The main pipeline takes its start from the Torzhok gas transmission hub located in the Tver Oblast.9 Gas is transported via the gas pipeline from the northern regions of Tyumen. The westernmost point of the gas pipeline is the Mallnow compressor station near Frankfurt an der Oder in the vicinity of the German-Polish border.10

In general, the geographical location of gas fields can be concluded that Russia will still provide gas to Western Europe for a long time. Taking into account this factor, the Russian Federation has rivals such as Norway and the Netherlands to deliver gas to Europe. Dynamics of gas production shows that in the near future the production rate in these countries will change. The geo-economic and geopolitical interests of the West will undoubtedly provide favorable conditions for Norwegian gas.

There are also other competitors. These are Algeria, Iran, Nigeria and Qatar. For the near future, Algeria is planning to deliver 100 billion cubic meters of gas to Europe every year.11 Iran is looking for alternatives to bring its gas to Europe via Armenia, Georgia, Azerbaijan, Turkey and Ukraine. At the same time, the issue of Turkmen gas supplies to Europe via Iran, Azerbaijan and Turkey in recent years is one of the topics discussed. For this purpose two parallel routes are necessary. It is expected that 5-15 billion cubic meters of gas will flow to France every year, passing through Italy via the Ankara-Yapracık route.

The scientific and technical progress has a strong impact on gas production and the gas industry. Underwater gas storage systems are being built in the North Sea, the Gulf of Mexico, Southeastern Asia. Currently, a deeper submarine network is projected in North Africa and Spain. The creation of a giant subsea gas transmission network to Australia through Korea, Singapore, Japan and other Southeast Asian countries is expecting its technical and technological solution.

Studies show that the Earth is still rich in unexplored gas deposits. In the depths of the earth, especially in the 10-12 km, there are large quantities of gas reserves.12 But drilling difficulties, investment problems are a barrier to the process.

In the modern era, European Union countries are trying to implement the “Smart Energy for Europe” program. After the oil crises of 1973 and 1979, European countries, which depend on foreign energy resources, faced serious problems. European countries have begun to look for different ways to prevent such crises that may occur in the future. The first step was the EU’s 10-items new energy policy strategy, adopted on September 14, 1974. It was the first document that clearly clarified the European Union’s commitment to having a common energy policy.13 After the adoption of this document, a new stage in energy policy has begun. In the Common European Act (1986), it was underlined that the European Union’s energy policy had given a special place the protection of the environment, and it was noted that environmental protection in all EU legislation should be considered as a principal issue.14

European countries intend to meet most of their energy needs at the expense of the natural resources of the Caspian and Black Sea basin. The situation in Ukraine, the civil war in Libya showed that the diversity of resources is required to meet EU energy needs. It is no coincidence that the European Union countries elect the Republic of Azerbaijan as the energy source. Azerbaijan, the most powerful state in the South Caucasus, fully meets its energy needs at the expense of domestic opportunities. It is important to accept the importance of the Republic of Azerbaijan as an energy supplier. Azerbaijan is the only country that supplies the European Union with natural gas, using the South Caucasus Pipeline. The construction of the Southern Gas Corridor will further enhance the importance of Azerbaijan.15

Diversification of energy sources is the most important place in the energy security of Europe the. Although this problem has long been on the agenda, Russia’s use of energy as a means of pressure has prompted European states to think seriously about it. In particular, the the Ukrainian-Russian conflict, the occupation and annexation of the Crimea caused serious consequences for gas supply to European countries. Russia also tries to create tension in the European-Ukrainian relations and increase international pressure on Ukraine. The essence of the European Union’s diversification policy is to ensure its energy security and secure energy supply. From this point of view, the importance of the Republic of Azerbaijan as a reliable partner is growing. The geostrategic position of Azerbaijan, located at the intersection of Europe and Asia, has further increased the interest of EU member states to develop political and economic relations.

The Republic of Azerbaijan, rich with hydrocarbon reserves, by effectively using these resources after restoring its independence, is interested in energy cooperation with world states at the regional and international levels. The “Contract of the Century”, signed on September 20, 1994, laid the foundation for a new era in the development of the oil industry of Azerbaijan. The signing of the contract and development of the projects (Baku-Tbilisi-Ceyhan main oil and Baku-Tbilisi-Erzurum gas export pipelines) have significantly increased Azerbaijan’s reputation in the international arena.16

Azerbaijan, as a strategic partner in the EU’s energy sector, currently meets 5% of the EU’s oil demand. Azerbaijan also plays a crucial role in delivering the Caspian gas resources to the EU market through the Southern Gas Corridor. Strategic Partnership Memorandum of Understanding on Energy, signed in 2006, laid the foundation for bilateral cooperation in the relevant field. The main objectives of this memorandum are diversification and security of the EU energy supply, as well as the development and modernization of Azerbaijan’s energy infrastructure, the efficient use of energy, energy saving and the use of renewable energy sources.

Azerbaijan-EU energy cooperation is not limited to the Memorandum of Understanding. n 2011, former European Commission President José Manuel Barroso and President of Azerbaijan Ilham Aliyev signed a Joint Declaration on the Southern Gas Corridor in Baku.17

The infrastructure of the Southern Gas Corridor, which is intended to supply natural gas from the Shah Deniz-2 field, encompasses the expansion of the South Caucasus Pipeline, Trans-Anatolia and the Trans-Adriatic Pipeline. As a result, Azerbaijani gas will be delivered to Bulgaria, Greece and Italy via Georgia and Turkey.

Meeting with President of Azerbaijan Ilham Aliyev on June 13, Johannes Hahn, Commissioner for European Neighborhood Policy and Enlargement of the European Union, said: “Azerbaijan is a key strategic partner for the EU in the field of energy and I am confident that the Southern Gas Corridor will soon be completed.”18 Commissioner Hahn also noted that Azerbaijan is an important transport corridor that connects Europe with a vast Eurasia, and supports the signing and implementation of agreements and projects in this area.

Thus, the projects, which were established in the XX century with the “Contract of the Century”, continued in the XXI century, have transformed Azerbaijan into one of the key actors in Europe’s energy security, promoting its reputation and importance in the world.


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