The Gulf Crisis Brings the Southern Gas Corridor Back to the Center of the Energy Agenda

The Southern Gas Corridor regained strategic prominence on Tuesday as ministers gathered in Baku against the backdrop of escalating tensions in the Persian Gulf, highlighting Europe’s renewed focus on pipeline supplies as an alternative to liquefied natural gas (LNG) vulnerable to geopolitical risks.

The 3rd Advisory Council meeting of the Southern Gas Corridor (SGC) took place amid intensifying military activity in the Gulf, which pushed European benchmark gas prices close to $600 per 1,000 cubic meters, reflecting a risk premium linked to potential disruptions in the Strait of Hormuz, a key artery for global LNG trade.

While Azerbaijan may benefit from higher prices, analysts caution that the impact could be tempered by the structure of its export contracts.

“Most of Azerbaijan’s gas is sold under long-term agreements indexed to oil or hybrid pricing formulas rather than pure spot contracts,” one regional energy analyst said. “That means Baku benefits from higher prices, but not in direct correlation with sharp spot price spikes.”

Last year, Azerbaijan exported about 25.2 billion cubic meters (bcm) of gas, roughly 51% of which was delivered to Europe. The country currently supplies gas to 10 European Union member states through the Southern Gas Corridor.

Opening the meeting, President Ilham Aliyev said Azerbaijan was ready to expand gas supplies to Europe.

“We have already started gas deliveries to two more European countries — Germany and Austria. Thus, today Azerbaijani gas is supplied to 10 member states of the European Union,” Aliyev said. “In the coming years, with new gas production from our fields, we have the opportunity to increase output volumes.”

Aliyev stressed that the Southern Gas Corridor had proven its reliability in complex geopolitical conditions.

“The Southern Gas Corridor is a success story. It is a project of strategic importance for energy security, and Azerbaijan has always been a reliable partner,” he said.

Expansion Questions

The Trans Adriatic Pipeline (TAP), the European leg of the corridor, currently has a capacity of 10 bcm per year, with the potential to expand to 20 bcm. The Trans Anatolian Pipeline (TANAP), which carries gas across Turkey, has a capacity of 16 bcm and could potentially reach 31 bcm.

Earlier this year, TAP’s capacity was increased by about 12%, equivalent to roughly 1.2 bcm per year. However, a full-scale expansion would require multi-billion-dollar investments and long-term demand guarantees.

According to analysts, the key question is whether the European Union is prepared to support new gas infrastructure while simultaneously pursuing decarbonization goals.

Brussels has stepped up cooperation with Azerbaijan in an effort to reduce dependence on Russian energy supplies. However, EU climate policy — including the commitment to achieve net-zero emissions by 2050 — complicates financing for large fossil fuel-related projects.

Potential funding channels could include the EU’s Global Gateway initiative or loans from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), although no official announcements have been made.

Strategic Recalibration

The crisis in the Persian Gulf has exposed vulnerabilities in LNG supply chains, particularly those reliant on Qatari exports transiting the Strait of Hormuz. As risks to tanker routes increase, pipeline infrastructure is regaining strategic significance.

“Perceptions in Europe are shifting again,” another energy market observer said. “Security of supply is not only about diversifying sources, but also about diversifying routes.”

Compared with alternatives, Azerbaijan offers a politically stable supplier and an established pipeline route. Norwegian production is near plateau levels, Algeria faces infrastructure constraints, and LNG imports from Qatar and the United States remain exposed to shipping risks and price volatility.

Nevertheless, volumes delivered through the Southern Gas Corridor remain modest compared with Russian pipeline supplies to Europe prior to 2022.

Geopolitical Dimension

The corridor’s growing importance also carries geopolitical implications. Tehran may view closer energy ties between Baku and Western capitals with caution, given Azerbaijan’s geographic proximity and its expanding strategic role along the Caucasus–Turkey–Europe axis.

At the same time, analysts say deeper engagement with the West could strengthen Azerbaijan’s standing as a reliable partner in Europe’s energy architecture.

Energy infrastructure in the region is increasingly seen not only as an economic asset but also as a component of broader security policy.

Beyond Gas

Azerbaijan is also positioning itself as a future exporter of renewable electricity. Plans include the development of up to 8 gigawatts of renewable capacity and projects linking the Caspian region with Europe through submarine and trans-Caspian interconnectors.

Baku views the gas sector as a medium-term pillar of cooperation with Europe, while renewables represent a long-term strategic trajectory.

A Window of Opportunity

The meeting in Baku underscored that the Southern Gas Corridor has regained geopolitical relevance amid instability in the Persian Gulf. Whether this will translate into structural expansion of the project will depend on Brussels’ financing decisions, long-term demand prospects, and regional security dynamics.

For Europe, energy security is increasingly intertwined with national security considerations. For Azerbaijan, the current crisis presents an opportunity to consolidate its role as a regional energy hub — but turning short-term shocks into a long-term strategy will require sustained political and financial commitment.

“Today’s turbulence is not only a challenge, but a test of strategic maturity. If Europe is ready to treat energy security as part of national security, then the Southern Gas Corridor could move from being an alternative to becoming a systemic solution. For Azerbaijan, this is a window of opportunity — but realizing it will require long-term commitments rather than situational reactions,” commentator Togrul Juvarli said.