Cooperation in the energy security sector: a case study of the prospective EU-Azerbaijan natural gas trade

Abstract

European Union’s growing natural gas import dependence, high dependency on Russia’s gas and depletion of own intra-EU gas reserves has made EU look towards diversification of suppliers like Azerbaijan. Considering that nowadays energy ground involves various topics, neoliberalism with the help of international political economy liberal approach is used to explain EU energy security. For the analyse, considering the fuzziness of energy security concept, three energy security components reliability, affordability and sustainability are used, with applied indicators, to evaluate Azerbaijan’s fit. This thesis tries to analyse potential fit to EU energy ground, at the same time considering, that there is no gas trade between Azerbaijan and Baku. The thesis finds, that Azerbaijan fits good enough to EU energy security framework, but other factors are involved. The reliability of supply dimension gives Azerbaijan a positive outlook for being a supplier, yet while gas trade will improve cooperation and mutual benefit, the potential risk on transit is high due to Russia’s influence and interests in the region. Affordability dimension finds, that Azerbaijan’s gas is affordable for the EU market and has been less volatile in price fluctuation, but is still highly dependent on oil prices. But the prices are expected to rise and will rise Azerbaijan’s motivation towards EU market. Sustainability dimension finds that EU will benefit from Caspian import and by 2040 EU gas production has fallen almost three times, whereas Azerbaijan’s production has increased by almost three times. Due to potential increase in future gas flows, it serves EU’s aims to increase environmentally friendlier gas share in energy mix, which is seen as a bridge towards renewable energies. The thesis finds that through Azerbaijan’s gas export, EU’s energy security ground will benefit from supplies and diversification, while opening up new markets in the Caspian region and Middle East through Southern Gas Corridor.