The latest clashes between Azerbaijan and Armenia in the Tovuz region on July 12 rather than drawing attention to the historic hostilities between the two nations underlined the area's geopolitical importance. The strategic location of this region as a crucial energy trade hub constitutes the main reason for such attention.
Indeed, the Southern Gas Corridor, which forms a route beginning in Azerbaijan and passing through the Tovuz region, has three highly significant, interconnected natural gas pipelines: the South Caucasus Pipeline (SCP), the Trans Anatolian Natural Gas Pipeline (TANAP) and the Trans Adriatic Pipeline (TAP). This corridor is not only important for Turkey’s energy supply security but also for Europe’s. Considering the amount of natural gas transferred via the SCP and TANAP to Turkey and through the Southern Gas Corridor to Europe, Azerbaijan stands out as an important alternative energy supplier for Turkey and the continent.
Despite the unwavering dependence on Russian energy supported by new Russian natural gas projects, transfer routes such as TurkStream, SCP and TANAP provide diversification for Turkey’s energy umbrella. The further declines in demand brought on by the pandemic and the diversification opportunties that have been provided by Caspian natural gas have boosted market concerns in Moscow. Hence, the answer to why the Tovuz region comes into focus crystallizes.
From the outset, Turkey is a foreign-resource dependent country in terms of energy resources. This dependency has emerged due to the lack of sufficient natural reserves, specifically fossil fuels, within its territory. Since hydrocarbon resources, mainly natural gas, oil and coal, compose the majority of the primary energy supply and electricity production in the country, Turkey must import them to be able to cover the demand.
To be more precise, in the past year, the natural gas consumption of Turkey has come to 45.2 billion cubic meters. Approximately 99.8% of this consumption was met by imports. While almost 34% of these imports have come from Russia, about 21% has been supplied by Azerbaijan. In addition, Turkey has consumed around 45 million tons of oil, approximately 90% of which was met by imports, with Iraq and Russia its biggest import partners.
When we look at the total energy bill in our country, it came to around $41 billion last year. Turkey therefore must not only shoulder a heavy financial burden but also becomes dependent on certain countries in terms of energy resources. Given the circumstances, the diversification of the route and source of oil and natural gas imports is seen as a must. This necessity has been specifically indicated in Turkey’s energy profile and strategy by the Ministry of Foreign Affairs.
Azerbaijan plays a pivotal role in Turkey's diversification strategy. The difference in Turkey's natural gas import partners in 2018 and 2019 upholds the previous proposition. Statistically, Russia’s share in Turkey’s natural gas imports declined from 47% to 34%. On the other hand, Azerbaijan climbed to second place by overtaking Iran, and its share rose from 14% to 21%.
This shift has been realized by the SCP, also known as the Baku-Tbilisi-Erzurum natural gas pipeline. In addition to natural gas, Azerbaijan also exports oil to Turkey via another crucial corridor, the Baku-Tbilisi-Ceyhan pipeline. Despite the smaller share compared to natural gas, oil imports from Baku also contribute to diversification.
The increasing influence of Azerbaijan in Turkish energy markets negatively affects the Russian dominance in Turkey’s energy supply. Baku-Ankara rapprochement brings without a doubt diversification of energy routes.
Furthermore, the overall picture of Turkey’s energy supply umbrella will change this year as the brand new TANAP project has been completed. It will provide 6 billion cubic meters (bcm) of natural gas yearly, out of a total of 16 bcm. The remaining 10 bcm will be exported to Europe.
Noting that Azerbaijan had a 21% share last year with 9.5 bcm, while Turkey’s total demand is 45 bcm, and hypothetically accepting that these figures will remain the same while adding the 6 bcm from TANAP to the equation, Azerbaijan has the potential to supply 33%, or 15 bcm, of Turkey’s total natural gas demand.
Regardless of the total demand or total imports from Azerbaijan, this is in every case of importance and in the best interest of Turkey’s energy supply security.
The combined capacity of TANAP and SCP, circa 15 bcm of natural gas or one-third of Turkey’s total energy consumption, has the potential to be transferred through the Tovuz region. Moreover, as has been mentioned above, after having completed the connection between TANAP and TAP, Baku would be able to export 10 bcm of natural gas to the European energy markets.
This is also threatening for Moscow’s influence and financial interests as a significant amount of Caspian gas will be entering the market. Also, the delivery capacity of the route is projected to climb to 31 bcm from 16 bcm over time. This is also very promising both for Turkey and European countries. In this context, Azerbaijan together with its pipeline hub in the Tovuz region is not only pivotal for Turkey’s but also for Europe’s energy security supply.
After the conflict arose, the geopolitical importance of the region was reconsidered. The magnitude of energy resources transferred through this region makes such reconsideration a necessity.
To sum up, around 15 billion cubic meters of natural gas is to be transferred to Turkey via the Tovuz region. In the following years, with the inception of gas delivery from TAP, the amount passing through this region will at first rise up to 25 bcm and possibly up to 40 bcm with capacity improvement.
Azerbaijan as the provider of Caspian gas seems to be one of the most prominent contestants against Russian gas and its market dominance, specifically in Turkey. With respect to the diversification of Turkey’s energy import routes, Moscow will start to lose one of its most important foreign policy tools. Additionally, its increasing influence over the European market will be greatly affected if the Southern Gas Corridor reaches its full potential.
Due to the Tovuz region’s strategic role in energy supply, the recent clashes that broke out between Azerbaijan and Armenia merit a different perspective than the historic conflict going on in Nagorno-Karabakh. In the case of instability, cutting off the gas flow, forcing an interruption of the gas transfer or an insecure environment in the region caused by Armenia would negatively affect both Turkey and Europe’s energy supply security while causing considerable harm to Azerbaijan’s transfer and demand security.
On the other side of the coin, demand and dependency on Russian energy resources could be fortified even without direct interference in the conflict. Eventually, the receiver countries may end up importing more energy resources from Moscow instead of Baku. It is like killing two birds with one stone: not taking on any of the costs of armed conflict but still creating an opportunity to maximize its gains.
*Research assistant at the Foundation for Political, Economic and Social Research (SETA)