EU Energy Diplomacy: Searching for New Suppliers in Azerbaijan and Iran

ABSTRACT

Political and security developments taking place in Ukraine in the last years and its increasingly tense relation with Russia placed energy supply and particularly gas supply concerns higher on the European agenda. The paper argues that these developments triggered an increased attention to geopolitical considerations in European energy policy and in particular in ensuring the security of gas supply. The ongoing Russo-Ukrainian crisis has affected an important European Union (EU) gas supply route and has damaged the European trust in Russia as an energy supplier. In response to this, the EU has expanded its energy diplomacy work. The paper will analyse the EU work to develop its energy diplomatic relations with Azerbaijan and with Iran as part of its policy to diversify its energy sources and routes away from Russian gas. The Southern Gas Corridor is the pipeline central to this diversification strategy, as well as to the relations with new energy partners. The study will show that in the case of both Azerbaijan and Iran, the EU was able to mobilize energy diplomacy tools to improve its bilateral energy relations and its overall energy supply security. The paper draws on the analysis of official documents and press coverage as well as on 18 interviews with energy policy stakeholders based in the EU and in energy-supplying countries.

Notes

1. EU-28 energy import dependency in the field of natural gas was 67.4% in 2014 (European Commission, DG Energy 2016, 72).

2. EU gas consumption will remain constant until 2040 when it is estimated at 466 bcm/year (International Energy Agency 2015, 196).

3. ‘In both the last quarter of 2015 and the first quarter of 2016, import volumes were significantly higher than in the previous year, with the biggest increases coming from Russian and Algerian supplies. LNG imports increased in the last quarter of 2015, but decreased in the first quarter of 2016 on a year-on-year basis’. (European Commission 2016, 2)

4. To be more precise, the interviews included in this paper were conducted with:

European Commission official, DG Energy 1 (September 2013), the interview took place in Brussels, at DG Energy.

European Parliament official (September 2013), the interview took place in Brussels, at the European Parliament.

European Commission official, DG Energy 2 (October 2013), the interview took place in Brussels, at DG Energy.

Industry consultant (October 2013), the interview took place in Brussels, at the consultancy office.

Official in the European External Action Service, EEAS 1 (October 2013), the interview took place in Brussels, at the EEAS headquarters.

Official in the European External Action Service, EEAS, Network on Energy Diplomacy (November 2013), the interview took place in Brussels, at the EEAS headquarters.

Senior European Commission official, DG Energy (November 2013), the interview took place in Brussels, at DG Energy.

Adviser on international security to the President of Romania (December 2013), the interview took place in Romania.

Azeri official (December 2013), the interview took place in Brussels.

Energy executive (December 2013), the interview took place via Skype, Brussels/Ankara.

Official in the European External Action Service, EEAS 2 (December 2013), the interview took place via Skype.

Russian official based in Brussels (December 2013), the interview took place in Brussels.

Senior Turkish official (January 2014), the interview took place in Paris.

Very senior European Commission official (January 2014), the interview took place in Brussels, in the Berlaymont building.

Representative of SOCAR (February 2014), the interview took place in Brussels.

Austrian official (April 2014), the interview took place in Vienna.

Senior International Energy Agency official (April 2015), the interview took place in Paris, at the International Energy Agency headquarters.

Senior official in the delegation of the EU to the US (May 2016), the interview took place in Washington, in the delegation.

5. Gas can be stored in caverns, as well as depleted gas fields and aquifers. The commercial storage capacity is mainly concentrated in Europe in Germany, Italy and France (Honoré 2010, 205). These are the countries that are less prone to supply disruptions.

6. Energy dependence on imported oil and gas was mentioned as being a reason of concern also in the 2003 European Security Strategy (European Council 2003, 3), but benefited by far less attention than in the Global Strategy. The European Security Strategy of 2003 and the European Union Global Strategy of 2016 are documents that allowed the EU to reflect on its role in the world, to detect potential threats and challenges coming from the international environment and to articulate the broad lines of a response to those challenges.

7. An extension of Nord Stream, which is a pipeline bringing natural gas from Russia to Germany (and implicitly to the Western European market) under the Baltic Sea.

8. Twenty-seven Member States before the accession of Croatia on 1 July 2013.

9. Nagorno-Karabakh is a disputed region in the Southern Caucasus, formally recognized as being part of Azerbaijan. This legal reality is challenged by Armenia and the Armenian ethnic majority of this region.

10. The EU Third Energy Package (legislation package for the EU gas and electricity market), which was proposed in 2007 and entered into force in September 2009, introduced the principle of ownership unbundling, preventing simultaneous ownership of generation and transmission networks by the same entity (Buchan 2010).

11. After the Shah Deniz consortium chose TAP and signed the final investment decision on 21 December 2013, the EU became confident that the Corridor will be realized and gas will flow to Europe from Azerbaijan (interview with official in the EEAS 2, 2013). The deputy Vice-President of SOCAR, Vitaly Baylarbayov, in charge of the Corridor, stated that the Southern Gas Corridor is an irreversible project (Baylarbayov 2015).

12. Through Resolutions 1737 (2006); 1747 (2007); 1929 (2010).

13. Federica Mogherini, currently the EU's High Representative for Foreign Affairs and Security Policy, is also the coordinator of the Joint Commission of the JCPOA in charge with reviewing the implementation of the Agreement.

14. The Commission estimates the need for gas at around 400 bcm/year. The European Commission is anticipating a lower share of natural gas in the EU energy mix than the International Energy Agency does, for example.