| Shortly after Belarus demonstrated an interest in | | | | aspects compel the EU to strengthen the relations |
| the energy sector of Azerbaijan, the European | | | | with the alternatives. In this case, the eyes are |
| Union (EU) and Azerbaijan signed an Action Plan | | | | directed towards Caspian basin, especially |
| within the Neighborhood Policy and a Memorandum | | | | Azerbaijan and Kazakhstan. Generally the |
| directed towards further deepening the energy | | | | importance of Azerbaijan in the EU energy policy |
| partnership. The Memorandum of Understanding | | | | is linked very much with Kazakhstan (Middle Asia) |
| on the Energy Co-operation signed between | | | | factor. Because from the first view, the oil and |
| Azerbaijan and EU defines 4 priority directions: | | | | gas reserves of Azerbaijan are not seen very |
| 1. To gradually harmonize the Azerbaijani energy | | | | much before the annual demand of the EU. The |
| legislation with the EU legislation to conform the | | | | proved oil reserves of Azerbaijan had been |
| electric and gas markets; | | | | described at 1 bln tons and gas reserves at 1.37 |
| 2. To increase the security of energy supply and | | | | trln cu.m in the BP’s statistical summary |
| transit systems directed from Azerbaijan and | | | | over the world energy “Energy in |
| Caspian basin to the EU. | | | | Figures” published in June 2006. And the |
| 3. To develop the policy of managing complex | | | | annual oil production of Azerbaijan (22,4 mln tons |
| energy demands; | | | | in 2005) equals 1,4% of the EU gross domestic oil |
| 4. Technical co-operation and exchange of | | | | consumption. However, if we take into |
| specialists. | | | | consideration the following reasons, |
| The increasing EU interest towards Azerbaijan is | | | | above-mentioned factors do not decrease the |
| supported by both the significance of the oil and | | | | importance of Azerbaijan in the EU energy |
| gas reserves and the geo-strategic position of | | | | sphere: |
| Azerbaijan. | | | | 1. The real resource reserves of each country |
| The growing energy dependence of the EU on | | | | are usually more than disclosed or calculated |
| various external sources imposes special risks. In | | | | figures. Because the expert forecasts for such |
| 2005, 56,2% of the internal energy consumption | | | | issues take a minimized direction. With other |
| over the EU, which has exceeded 1,6 mln tons of | | | | words, irrespective of the global reliability of the |
| the oil equivalent, was covered at the expense of | | | | above-mentioned source, the probability is very |
| the external sources, and this fact indicates the | | | | high that the oil and gas reserves of Azerbaijan |
| energy dependence coefficient. This figure had | | | | are much more than the disclosed figures. |
| equaled 54% in 2004. Except Denmark, the | | | | 2. “Coefficient of providing reserves (R |
| energy import excels the energy export in all EU | | | | P)” of Azerbaijan is high (42.4 for oil |
| countries and there are no changes in the gross | | | | reserves; higher than 100 for gas reserves). |
| energy consumption as comprised to the previous | | | | 3. The EU assesses the alternative role of |
| year. In addition, a decrease of 4,2% has been | | | | Azerbaijan in exporting the hydrocarbon |
| observed over all kinds of the energy production. | | | | resources of Kazakhstan, a country possessing |
| Generally if fundamental changes do not take | | | | 5% of the oil and gas reserves of the world. |
| place, the EU energy dependence is planned to | | | | 4. In the case that the EU considers the |
| reach 70% by 2030. | | | | diversification of the sources as one of the key |
| As regards to the sources on which the EU | | | | principles in its energy policy and tries to decrease |
| depends, they are as following: | | | | the dependence on several large sources, the |
| - OPEC (especially Near Eastern countries and | | | | diversification will be ensured at the expense of |
| Algeria) | | | | exactly Azerbaijan, Kazakhstan and smaller |
| - Russia | | | | countries such as New Guinean Gulf countries. |
| - Norway | | | | Nevertheless, it is impossible to assess it as |
| Approximately 45% of the EU oil import is | | | | EU’s refusing the titanic hydrocarbon |
| achieved at the expense of OPEC. The issue that | | | | reserves of Russia. Simply these steps have been |
| OPEC gives a reaction to any fall tendency in the | | | | directed towards ensuring the permanency of the |
| oil prices in the world market by immediately | | | | supply and common efficiency. |
| decreasing the production by proceeding from its | | | | The EU energy import from Azerbaijan in 2005 |
| own interests and outside pressures is not an | | | | has made up $2,86 bln, against $1,58 bln in 2003. |
| advantageous approach for the EU. Therefore, in | | | | The EU is the biggest trade partner of Azerbaijan |
| addition to the issues of reserves and supply, the | | | | and 93% of Azerbaijan’s energy export is |
| oil prices are also one of the key topics of the | | | | directed to the EU. Presently the energy relations |
| discussions in the negotiations that EU has | | | | between the EU and Azerbaijan are at high level. |
| intensified with OPEC since 9 June 2005. Even at | | | | However, the EU was forced to sign the |
| this time, an agreement had been reached on | | | | above-mentioned Memorandum due to the issue |
| selling the oil to the EU in the interval of $35-55. | | | | that Azerbaijan has entered into the growth |
| The existence of the stability and security | | | | phase in the oil and gas production, is away from |
| problems in many of the Near Eastern OPEC | | | | the risks of the long-term relations and its transit |
| member-countries that are rich in the | | | | importance has increased. It is enough to once |
| hydrocarbon resources is considered in EU as high | | | | again see the first priority of the Memorandum. It |
| risk factor. | | | | needs to add the followings here: |
| Russia tries to take under the control mainly the | | | | - The issue that manat (national currency unit) has |
| gas market of the EU. 40% of the EU gas import | | | | raised in parallel with the increase of the oil |
| is reported at the expense of Russia. The main | | | | revenues, the inflation rate is not stable and the |
| fact causing anxiety in the EU with regards to | | | | artificial monopolization imposes threats for |
| Russia is that the economical expansion of this | | | | macro-economical equilibrium; |
| country is always guided by the geopolitical ideas | | | | - The issue that the country faces serious |
| and political interests. At the same time, the | | | | accusations due to the violation of the human |
| monopolist position of Gazprom controlling nearly | | | | rights and liberties and existence of the corruption; |
| 70% of the Russian gas production testifies the | | | | - The issue that 20% of the country territory is |
| continuation of the manipulation with the prices. In | | | | outside the legal control and the conflict may |
| its turn, the EU calls on Russia to accelerate the | | | | become active at any times; |
| internal reforms and supports it with various | | | | From the point of view of its geo-strategic |
| exclusions in the negotiations with the World | | | | importance, the issue that Azerbaijan transforms |
| Trade Organization. | | | | from oil and gas producer into a transit country |
| Norway covers 25% of the EU gas import and | | | | can keep Azerbaijan’s actuality for the EU |
| presently is the 3rd biggest gas exporter of the | | | | (not only EU) in the next decade when the |
| world. The priorities in the EU energy negotiations | | | | production will gradually decrease and the |
| with Norway are the use of the reserves in | | | | resources will begin to exhaust in country, and at |
| Arctic field and transition to renewing energy | | | | that time, Azerbaijan can get into the present |
| sources. The main risk regarding Norway is that | | | | situation of Georgia. But in the present stage, the |
| the oil and gas in this country are produced with | | | | EU intends to normalize the conceptual bases of |
| very high rates and in this way, the resources | | | | the long-term complex co-operation with |
| may finish sooner. | | | | Azerbaijan, including the energy co-operation, and |
| As seen, the EU’s dependence on several | | | | maximally use the country to increase the |
| energy centers and their possessing the risky | | | | efficiency of its energy policy. |