In terms of geography, South Caucasus is the boundary between Europe and Asia, but in terms of energy politics, it is a much more complicated matter. In the region, there are three countries – Georgia, Armenia and Azerbaijan with full of energy and water resources, and with the involvement of a few more international actors – such as Russia, Turkey, EU and the US – the political, economic and energy sectors undergoing noticeable earthquakes.
If we use two words to describe the region then Energy Corridor with be the one. Energy flow from the Caspian Basin – Iran, Central Asian countries and Azerbaijan – is one of the few options for Europe to achieve energy independence from Russia. An unstable political environment in the Middle East prompts countries in energy need to find much more stable ways to maintain energy flow and in terms of diversification, South Caucasus is the only option. Any other land-based option has links to Russia, which uses energy as an international political tool to achieve its own international political objectives.
Georgia is an important energy hub. Petroleum and gas mainly come from Azerbaijan and through Georgia and Turkey, goes to Southern and Eastern Europe. Since 1999 Baku–Supsa Pipeline and 2006 Baku–Tbilisi–Ceyhan oil pipeline provide important energy flow from the Caspian Basin. Alongside the Baku–Tbilisi–Ceyhan oil pipeline runs the Baku-Tbilisi-Erzurum Gas Pipeline which transfers natural gas from the Shah Deniz gas field in Azerbaijan to Turkey and through the Trans-Anatolian Natural Gas Pipeline (TANAP) it will connect to Southern Europe.
For Russia maintain control of South Caucasus is crucial, to halt energy diversification. In 2008, during the Russian military aggression against Georgia, Russia unsuccessfully conduct a bombing operation against the South Caucasian pipelines. Georgia is not just a political adversary for Russia – in terms of democracy, pro-western aspirations and economic developments, which can become an example for any other former Soviet republics – but the threat for the Russian energy sector, which has strong ties to Russian political elite.
According to the Eurostat, energy products accounted for around 60% of the total EU’s import from Russia in 2017. Demand for energy is increasing, accordingly, Russia tries to increase benefits from it. Any other country, especially her neighbours, consider as a threat to Russia. But as energy dependency grows on Russia, so it grows threats of the regional stability in Europe and the Middle East.
Russia tries to tighten her control over Central Asia, especially Kazakhstan, Tajikistan and Uzbekistan, to block any energy flow from there, across the Caspian Sea to Azerbaijan and to Europe. Russia considers this region even her own backyard. Political destabilization and authoritarian regimes in the regional countries is an opportunity for Russia to maintain control over the region and foil any energy flow from it. All of that created Central Asian countries as less reliable partners for energy diversification. The only exception is Turkmenistan who has an authoritarian regime, but ready to conduct a business with the West.
Azerbaijan is a different story. Full of gas and oil resources Azerbaijan is an important asset for the energy diversification. In terms of natural gas, Azerbaijan has 2,832,000 million cubic meters proven reserves and ranked as the 14th country in the world. Beyond gas, Azerbaijan is one of the birthplaces of the oil industry and still has significant petroleum resources. The political environment in the country is stable but nondemocratic. Russia tried to maintain control over the country’s political elite but failed to do so.
Despite that Russia has one trump card which is a significant asset for her political game – it called Nagorno-Karabakh conflict between Azerbaijan and Armenia. Russia has a noticeable role to freeze and not to solve the conflict. Russian 102nd Military Base in Gyumri is a threat both Armenia – in terms of democracy and to independent international politics – and Azerbaijan – in terms of Russias’ military involvement in any conflict between Armenia and Azerbaijan. In spite that Azerbaijan strengthens her ties with Turkey, Georgia and Europe, but also stays flexible to Russia too. On the one hand, it transfers the energy from the Shah Deniz gas field to Georgia, Turkey and Europe and on the other hand, avoids further Russian economic, political or military threats.
In that case, Armenia is in the worst position. All, built or proposed energy pipeline bypasses Armenia. Both Azerbaijan and Turkey avoid or reject any economic ties with Armenia because of the conflict of Nagorno-Karabakh. despite Russias’ desire to stay single provider of energy to Europe, in accordance to Europe and the US Georgia and Azerbaijan are strengthening its economic and energy ties and maintain oil and gas transfer and gradually becoming a tangible alternative for the European energy market.