Peace on Land, Peace at Sea. Azerbaijan's Message to Neighbors

Back on January 6, holding a meeting on the results of 2020, Azerbaijani President Ilham Aliyev announced the upcoming announcement "on a new energy project that will strengthen the country's potential, bring economic and political dividends and is important for the development and prosperity of the region."

This was the signing on January 21 in Ashgabat between the Government of the Republic of Azerbaijan and the Government of Turkmenistan of the Memorandum of Understanding on joint research, development and development of hydrocarbon resources of the Dostlug (Friendship) field in the Caspian Sea.

10 days before that, Aliyev met with the Presidents of the Russian Federation and Armenia in Moscow and confirmed his firm intentions to develop mutually beneficial regional cooperation through infrastructure projects.

Thus, Azerbaijan purposefully demonstrates to its neighbors examples of good neighborliness, responsibility and consideration of the interests of the parties, and this strategy has a positive response.

According to analysts, this behavior of Azerbaijan is also its message to Iran in resolving existing unresolved issues, in particular, in the Caspian Sea.

"The agreement on the joint development of the disputed Caspian field (in Azerbaijan it was called Kapaz, in Turkmenistan - Serdar), called Dostlug (in both related languages ​​means Friendship), was the result of the signing in August 2018 by five Caspian states of the Convention on the Legal Status of the Caspian. The Convention reflected that neighboring states on a bilateral basis agree on the delimitation of the seabed and the development of its resources. Azerbaijan and Turkmenistan have come to this. Iran has not yet achieved this and has not yet withdrawn its territorial claims in the Caspian Sea to Azerbaijan and Turkmenistan. So on January 21, Azerbaijan and Turkmenistan actually sent a message to Iran on how to resolve controversial issues,” said Ilham Shaban, head of the Azerbaijan Oil Research Center, in an interview with ASTNA.

It should be reminded that 20 years ago Iran did not allow an Azerbaijani geological vessel to conduct research in the Araz-Alov-Sharg area, which was included in the contract under the BP operator, and this PSA was frozen.

At one time, Iran did not give Turkmenistan an opportunity to implement the PSA-contract signed by Turkmenistan with Zarubezh-Neft and Itera in the Caspian Sea.

“Iran did not approach the settlement of these disputed situations from an economic point of view, but pursued political goals, and in bargaining with the West, with which it still has difficult relations. Iran still does not make attempts to solve the issues of developing the Caspian Sea with Azerbaijan and Turkmenistan,” Shaban said.

As for Dostlug, it is worth recalling that the field discovered in 1986 was included in the SOCAR contract with LUKoil and Rosneft on July 1, 1997, but after Ashgabat's protest, the Russian Federation canceled this agreement on August 6. Turkmenistan tried on September 1 of the same year to start developing this field with ExxonMobil, but the American investor did not start this project, the dispute over which was not resolved at that time.

In 2012, the Azerbaijani Foreign Ministry also thwarted an attempt by Turkmenistan to reintroduce this field into an international contract. After that, the parties actually began a constructive dialogue.

Oil expert Emin Akhundzadeh noted that the Dostlug field with reserves of 50-60 million tons of oil and 30 billion cubic meters of gas is located in the middle of the sea border between Azerbaijan and Turkmenistan, and without the legal status of the Caspian, it could not be exploited, but after determining the status of the Caspian in 2018, the solution to this issue began to approach.

“Azerbaijan and Turkmenistan have been negotiating for many years in a legal context, in the context of using oil and gas resources, bringing them to world markets and generating income. The document signed on January 21 between these parties is of historical importance, as the dialogue and the desire for friendship won,” Akhundzadeh said.

Both oil experts believe that oil from Dostlug can go to the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, since technically, it is easy to do this due to the possible 30-kilometer connection with the Azeri-Chirag-Gunashli infrastructure and access to the BTC.

According to Akhundzadeh, the Memorandum may open the way for the inclusion of Turkmenistan into the Southern Gas Corridor, all segments of which started working at the end of 2020.

“Turkmenistan ranks 4^th in the world in terms of natural gas reserves. Having convinced of the stability and security of the transit of hydrocarbons through Azerbaijan, Turkmenistan could think about transporting its gas through our country,” the analyst said.

However, this requires significant capital investments and support from foreign investors.

During the teleconference with Ashgabat, Azerbaijani President Ilham Aliyev said that "The Dostlug project will help strengthen the energy security of our countries, as well as our neighbors, and open up great export opportunities."

According to the President of Turkmenistan, "The signing of the memorandum marks a fundamentally new stage in the energy cooperation between Turkmenistan and Azerbaijan in the Caspian and creates additional serious incentives for the inflow of large foreign investments into our region."

Leading analyst of the Agency for Political and Economic Communications of the Russian Federation Mikhail Neyzhmakov, in an interview with ASTNA, made the following commentary on the Azerbaijani-Turkmen talks on January 21: “Let us recall that the contacts between Baku and Ashgabat in 2020 set quite positive expectations regarding bilateral cooperation. The benchmark point was the official visit of the President of Turkmenistan Gurbanguly Berdimuhamedov to Azerbaijan in March 2020. Although in the Joint Statement of Ilham Aliyev and Gurbanguly Berdimuhamedov signed following the talks, a more explicit emphasis was placed on cooperation in the transport and communication sphere (as, for example, during telephone conversations between the heads of the Foreign Ministries of the two states at the end of July 2020), it also spoke of the intention "to further jointly develop and implement energy projects."

According to the Russian expert, an example of the close intertwining of transit issues and the fuel and energy sector is the strengthening of Azerbaijan's role in the supply of resources extracted in Turkmenistan to foreign markets.

“One can recall, in particular, the victory of Azerbaijani SOCAR Trading at the end of 2020 in tenders for the purchase of oil produced in Turkmenistan by Malaysian Petronas and a subsidiary of Italian Eni - in total for 2.5 million tons per year,” Neyzhmakov said.

Recognition of profitable logistics

In the opinion of this Russian expert, the readiness of the two countries to develop cooperation in the transport and communication sphere has become a positive background and drivers for the development of dialogue on other issues.

“This is, in principle, one of the significant trends of 2020: contrary to a number of popular forecasts discussed last spring, even against the backdrop of the spread of coronavirus infection, international players continued to probe the ground regarding interaction in the development of transport corridors,” Neyzhmakov stressed.

In confirmation of these words, we quote from the speech of the President of Azerbaijan on January 21: “Today we note the high level of transport and logistics infrastructure, which indicates the purposeful activities of Turkmenistan and Azerbaijan in this area. This creates tremendous opportunities for all countries located in our region and even far from the region, in the Eurasian space. "

In his opinion, cooperation in the transport sector "opens up great prospects for both our countries and our neighbors."

“I am sure that in the future, transport and logistics cooperation will reach an even higher level, taking into account the current new situation in our region and the possibility of opening new transport routes. I think that this will represent additional opportunities for all our partners and neighbors, ”the head of Azerbaijan said during a video conference with President of Turkmenistan Gurbanguly Berdimuhamedov on Thursday.

By the new situation, Aliyev means agreements with the Russian Federation and Armenia on the opening of transport corridors as part of the implementation of the Peace Plan for resolving the situation in the Karabakh region, for example, through the creation of rail and road links through the Armenian Meghri to the Nakhchivan autonomy of Azerbaijan with access to Turkey. This will become an attractive new route for the countries of the region, reducing travel time and thus offering profitable logistics.

Azerbaijan, Turkmenistan, Turkey, Georgia and Kazakhstan have been building up their cooperation within the framework of the Trans-Caspian International Transport Route (TCITR) for several years now, and even despite the COVID-19 pandemic, transshipment along this route in 2020 exceeded 2019 by 20%, reaching more than 4.8 million tons, of which 87% fell on transit cargo.

So, in 2020, the number of large-sized vehicles (TIR) ​​in the direction of Baku-Turkmenbashi-Baku amounted to 27.934 against 24.970 units in 2019.

From April 1, 2020, preferential tariffs are in effect at the TCITR on the Azerbaijan-Georgia railway section.

A significant increase in 2020 was also recorded in the volume of transportation of oil and oil products through the Azeri oil loading terminal Dubendi (mainly due to Turkmenistan) - 498,577 tons, which is 1.5 times more than in 2019.

Turkmenistan also resumed sending a number of oil products to the Baku refinery for enrichment and subsequent export.

In 2021, Turkmenistan will provide over 3 million tons of oil for the BTC pipeline against about 950 thousand tons in 2020, which can also be considered a success in Azerbaijan's advancement of its transport and logistics capabilities.

We are talking about oil from the East Cheleken fields (operator - Austrian Mitro International Ltd), Block 1 - the Malaysian company Petronas (Garagel-Deniz Deryabekir and Magtymguly fields) and Okarem - the Italian operator Eni.

Azerbaijan and Turkmenistan are constantly working on the implementation of the Lapis Lazuli international transport project in the direction of Afghanistan.

Thus, effective interaction of these countries can become an example for other regional players and result in new promising and attractive projects.