Azerbaijani Gas Eyes Ukrainian Transit as Europe Seeks Alternatives to Russian Supply

In a strategic move to diversify Europe's energy sources and reduce dependence on Russian gas, Ukraine has proposed a new transit scheme involving Azerbaijan as a gas exporter and Slovakia as a key buyer. According to RBC Ukraine, the initiative aims to reroute Azerbaijani gas through Ukrainian territory, offering a viable alternative to the existing Russian supply lines.

Azerbaijan has been steadily increasing its gas exports to Europe, with approximately 12 billion cubic meters (bcm) delivered in 2023. The country is on track to boost its exports to 13 bcm in 2024, positioning itself as a significant player in the European energy market. Azerbaijani President Ilham Aliyev expressed optimism in May, stating, "Azerbaijan currently exports gas to eight countries. I hope Slovakia will become the ninth."

Proposed Transit Mechanism

The proposed mechanism involves Slovakian buyers purchasing gas at entry points from Azerbaijan, either directly or via Russian intermediaries. The Azerbaijani gas would then traverse Russian territory before being pumped into Ukrainian underground storage facilities. From there, the gas can be utilized domestically or re-exported to other European nations. Crucially, Ukraine would function not merely as a transit country but as a re-exporter, potentially enhancing its role in the European energy market.

A pivotal condition of the proposal requires both Azerbaijan and Slovakia to independently negotiate with Russia to ensure the security of gas supplies. This arrangement aims to safeguard Ukraine's gas transportation infrastructure amid ongoing hostilities in the region. RBC Ukraine sources indicate that while the topic has been broached during bilateral meetings, the dialogue remains in preliminary stages, with no definitive commitments from Azerbaijan or Slovakia.

Internal discussions suggest a waning interest from Baku in routing gas through Ukraine. Sources report a significant decline in Azerbaijan's engagement over the past four months, potentially influenced by Russia's stance on the matter. An RBC Ukraine interlocutor noted, "The decrease in Baku's activity to almost zero is due to the position of Russia, which should somehow participate in this process."

European Perspectives and Alternative Routes

The existing gas transit contract between Moscow and Kiev, signed in 2019, is set to expire at the end of 2024. Ukrainian authorities have consistently declined to extend the agreement with Gazprom, Russia's state-controlled gas company. This stance aligns with the European Union's (EU) disinterest in renewing the contract, as the EU seeks to further disentangle its energy dependence from Russian supplies.

In June, Bloomberg reported that European companies are actively exploring Azerbaijani gas as a potential substitute, considering routes that involve pumping through Russian pipelines en route to Europe. However, this approach has met with resistance from EU officials wary of maintaining leverage over Russia.

European Commissioner for Energy, Kadri Simson, issued a stern warning in mid-October: "There are no excuses, the EU can do without this Russian gas. This is a political choice, and it is dangerous." Simson's statement underscores the EU's commitment to energy diversification and security, even if it means pursuing more complex or politically sensitive routes.

Future Prospects and Challenges

While the proposal presents a promising alternative for European gas supplies, several challenges remain. Negotiating security guarantees with Russia is inherently complex, given the geopolitical tensions in the region. Additionally, Azerbaijan and Slovakia must reach consensus on the operational aspects of the transit mechanism, including infrastructure investments and regulatory frameworks.

The expiration of the Moscow-Kiev transit contract adds urgency to these discussions, as European countries seek to finalize their energy strategies before the end of the year. The outcome of these negotiations will significantly influence the future dynamics of European energy security.

As the EU continues to navigate its energy transition, the role of alternative suppliers like Azerbaijan becomes increasingly critical. Success in establishing a reliable and secure transit route through Ukraine could not only bolster Azerbaijan's position in the European market but also enhance Ukraine's strategic importance amidst ongoing regional conflicts.