Azerbaijan has accused the EU of treating it like a “firefighter” by only granting it short-term gas contracts, despite calls for it to increase its fuel exports to the bloc.
Azerbaijan’s ambassador to the EU, Vaqif Sadiqov, told the Financial Times (FT) that Baku needed the certainty of long-term contracts to secure the financing needed to boost gas production in the Caspian Sea and meet additional EU demand.
Sadiqov said: ‘We cannot be a fireman who only sends gas for three to six months. We need contracts so that we can go to the banks for financing to drill deep into the Caspian Sea,” Sadiqov said.
In 2022, Brussels and Baku signed an agreement to increase Azerbaijan’s annual gas exports to the EU from 11.8 billion cubic metres last year to 20 billion cubic metres by 2027.
Despite “deep discussions” with the European Commission on how to meet the target, Sadiqov said EU operators were reluctant to sign long contracts because of the bloc’s drive to reduce fossil fuel consumption and achieve net zero greenhouse gas emissions by 2050.
EU officials say it is up to companies, not national governments, to strike trade deals. Finding new sources of natural gas has become critical for the EU since Russia, previously the bloc’s biggest supplier, began gradually cutting gas flows in retaliation for EU support for Ukraine.
Azerbaijan, which relies heavily on oil and gas revenues, will host the UN’s annual COP climate summit in November this year.
Some diplomats and negotiators have privately expressed concern that the country is reluctant to address the question of how to move away from fossil fuels.
Between January and June, Azerbaijan exported 6.4 billion cubic metres of gas to the EU, about a quarter of its total production, according to government figures. Over the past three years, Azerbaijan has increased its gas flows to the EU by 12 per cent.
Azerbaijani President Ilham Aliyev told a summit of European leaders last week that exports to the EU would reach 13 billion cubic metres this year.
Aliyev has previously described the country’s fossil fuel reserves as “a gift from the gods”. as the world’s most important gas pipeline.
To meet the 2027 target, pipelines in the Southern Gas Corridor (SGC) between Azerbaijan and Europe will also need to be expanded.
Brussels cannot finance the project because of rule changes in 2021 that prevent the EU budget from being spent on fossil fuel infrastructure.
The European Investment Bank has similar restrictions. We offer a very interesting market to Azerbaijan, but we cannot finance it,” said an EU official.
The Southern Gas Corridor company is working on an investment plan that could be supported by the European Bank for Reconstruction and Development (EBRD). However, the EBRD has said that in order to be financed, the project must be compatible with the goals of the 2015 Paris climate agreement.
Azerbaijan’s state-owned energy company, Socar, said it was in “multiple discussions” with Brussels and EU countries to increase gas supplies from 2025.
