Azerbaijan suspends oil and gas trade with Iran on the eve of US sanctions

Baku/03.11.18/Turan: In October 2018 Azerbaijan stopped the purchase of gas through Iran on the eve of the US sanctions against Tehran concerning the oil and gas sector, Turan knew from informed sources. In October 2016, Azerbaijan, Iran and Turkmenistan agreed that Azerbaijan would receive gas from Turkmenistan as part of the swap operation from Iran.

Thanks to this contract, SOCAR (State Oil Company of Azerbaijan) in 2017 imported 1 billion 761 million cubic meters of gas from Iran, and for the three quarters of 2018 - more than 0.7 billion cubic meters.

On November 22, 2017, SOCAR also buys gas from the Russian Gazprom, and in 2018 it already purchased 0.8 billion cubic meters, and in 2017 it managed to buy 0.349 billion cubic meters. This contract with the Russian side expires in December 2018. SOCAR explained the reason for these purchases by saying that "gas purchased from third parties is mainly used for export (mainly to Georgia) and provides additional income for Azerbaijan." Part of the imported gas goes to the gas storage facilities of Azerbaijan. In connection with the anti-Iranian sanctions, SOCAR will lose half of the gas imports and has already hurried to contact Gazprom with a proposal to extend purchases of Russian gas until 2020.

SOCAR"s Vice President Elshad Nasirov told the "Reuter" , "if it is commercially beneficial for us to buy gas in the Russian Federation, then we will buy." "We suggested that Gazprom extend the contract until 2020. The volume of purchases will be determined on the basis of commercial interests - up to 1 billion cubic meters per year. We believe that pipelines should not remain empty. The contract with Gazprom is live," Nasirov noted.

Earlier this week, the Deputy Chairman of the Gazprom Board, Alexander Medvedev, noted that "Gazprom and Azerbaijan have excellent working relationships." Gas supplies from the Russian Federation to Azerbaijan are carried out within the framework of an existing contract, and as for the prospects for further cooperation, we always open to dialogue," said Medvedev.

Azerbaijan"s great achievement is to obtain guarantees from the United States that the presence of the Iranian company NICO (10%) in the Shah Deniz gas project will not affect its implementation or the export of gas from this Caspian field.

According to the e-notification of the US Treasury, published on November 2, 2018 in the US federal registry, "renewable (November 5) anti-Iranian restrictions are not applied to persons committing or facilitating transactions related to projects <...> aimed at developing [deposits] natural gas and the construction and operation of a pipeline to transport natural gas from Azerbaijan to Turkey and Europe."

The document also states that the United States has excluded from anti-Iran sanctions projects that ensure energy security and energy independence of countries such as Turkey and European countries. NICO is not included in the pipeline projects of Azerbaijan, and its revenues from the export of hydrocarbons from the Shah-Deniz project are sent to a separate special account in a European Bank.

As for operations with Iranian oil, the SOCAR trading house - SOCAR Trading - was weakly trading in it, because on Iranian oil there were restrictions on the directions of export, as well as on the form of payment (not in US dollars, which does not suit many).

It is noteworthy that the sale of gasoline from Azerbaijan to Iran has been frozen for 10 years.

Also, Baku has not been selling diesel to Tehran for several years due to previous international sanctions against Iran.

According to sources in SOCAR, a pause was also taken regarding the implementation of the memorandum on mutual understanding between the Azerbaijani Energy Ministry and the Iranian Oil Ministry on joint development of blocks in the Caspian Sea signed on March 28, 2018 in Baku. These units include the Araz-Alov-Sharg. In July 2001, Iran, with the help of military boats, blocked work on the Araz-Alov-Sharg oil and gas bloc, the rights to which Tehran challenged Azerbaijan.

Until July 2001, the Araz-Alov-Sharg group of fields, according to the 25-year contract, Azerbaijan intended to develop together with an international consortium led by BP. However, after Iran"s belligerent actions, a consortium led by BP abandoned the project.

USA MAKES EXCLUSIONS

The US is constantly pointing to various threats from Iran, especially with regard to the nuclear program. This is what Trump calls the main reason for the sanctions imposed in 2018.

The first part of such sanctions was introduced in the summer and concerns the automotive industry and metallurgy.

On Monday, November 5, the United States imposes sanctions on oil and gas cooperation with Iran.

The agency Bloomberg reported that the US agreed to allow eight countries, including Japan, India and South Korea, to continue purchasing Iranian oil after the second part of the sanctions against Iran came into force. China is in this group, but negotiations are still ongoing.

Exemption from sanctions was granted to eight countries so as not to contribute to the growth of prices for raw materials, the American official said. In exchange, eight countries pledged to reduce oil imports from Iran.

In response to this message, Russian Energy Minister Alexander Novak said on November 2 that "Russia does not recognize sanctions imposed unilaterally without a resolution of the UN Security Council, and considers these methods, in fact, illegal."

"We believe that we should look for mechanisms that would allow us to continue developing cooperation with our partners, with Iran. The oil-for-goods mechanism, created to increase trade between Russia and Iran, allows Tehran to use part of its oil revenues to pay for Russian goods. We have historical trade with Iran. Iran needs our technology and services," Novak said.

Another close trade partner of Iran - Turkey also stated that it is acquiring energy resources from Iran legally and is not going to freeze ties with this country. It should be noted that Turkey annually purchases 9.5 billion cubic meters of gas from Iran (the second after the Russian gas supplier to Turkey, and Azerbaijan - the third in terms of supply). Gas supplies from Iran to Turkey are carried out on the basis of a contract, which expires in 2026. Turkey believes that economic ties with Iran directly affect the subject of Turkey"s energy security.

In 2017 Azerbaijan increased gas supplies to Turkey by 0.8% to 6 billion 300.1 million cubic meters, and in 2018 the volume may exceed 7 billion cubic meters due to the commissioning of the TANAP gas pipeline. In the first half of October, Western media reported that the Russian Federation, in violation of US sanctions, could receive Iranian oil through its Caspian Sea for its refineries. It is possible that other Caspian countries may be involved in these operations. However, the official structures of the Caspian states have refuted this information.

The EU Head of EU Diplomacy Federica Mogherini, French and German Foreign Ministers Jean-Yves Le Drian and Heiko Maas, as well as British Foreign Minister Jeremy Hunt on November 2 expressed regret over the US decision to restore sanctions against Iran on November 5.

"As parties to the Joint Comprehensive Action Plan (FAP), we are committed to working on preserving and maintaining effective financial channels with Iran and continuing Iranian oil and gas exports," says their joint statement issued by the EU press service.

The administration of the President of the United States on Monday will restore all the sanctions lifted from Iran in the 2015 nuclear deal. The world oil market may react to this by raising the price of oil to $ 100 a barrel, since oil-producing countries may not be able to compensate for the loss from the ban on Iranian oil exports, despite the efforts of the largest producers - Saudi Arabia and the Russian Federation.

Answering the question of ASTNA (Turan analytical agency) how Azerbaijan will react to the imposition of US sanctions against Iran, Azerbaijan"s Energy Minister Perviz Shahbazov said: "Unfortunately, there are many political processes in the world that have an impact on the oil industry and international oil policy. new situations with which we have to reckon and take appropriate measures. If sanctions against Iran come into force, they will be taken into account by oil-producing countries in the OPEC + format (Azerbaijan enters into from format) ".

It is noteworthy that within the framework of OPEC + last months Azerbaijan has been increasing oil production, and for 2019 it predicts its growth by 2% compared to 2018 - up to 38 million 496.4 thousand tons.

Gas production in 2018 is projected at 30 billion 205 million cubic meters, in 2019 - 36 billion 909.2 million cubic meters.

In 2017, oil production in Azerbaijan amounted to 38 million 756 thousand tons, gas - 28 billion 362.6 million cubic meters. -0-