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Conflict Between Armenia And Azerbaijan Threatens Europe’s Energy Security

11:01 - 08 / 09 / 2020
Conflict Between Armenia And Azerbaijan Threatens Europe’s Energy Security

By James Durso

On 12 July 2020, Armenia’s military shelled the village of Aghdam in Azerbaijan’s Tovuz district in the northwest of the country. The forces of Azerbaijan responded, attacking Armenian military structures, and by 14 July both sides stood down most of their forces.

Azerbaijan reported 16 dead and four wounded; Armenians claimed five dead and 36 wounded.  

What made this outbreak of violence in Tovuz different, the most serious since the Four Day War in 2016, was that it was distant – over 300 kilometers - from the longstanding arena of conflict along the Nagorno-Karabakh line of contact.

Azerbaijan’s Tovuz district hosts much of the country’s critical infrastructure, such as oil and natural gas pipelines that supply Europe, the Transit Europe-Asia terrestrial (fiber optic) cable, the Baku-Tbilisi-Kars railway that connects Azerbaijan to Turkey, the M2 motorway that connects Azerbaijan and Georgia, and the Lapis Lazuli corridor, a multi-modal trade route that runs from Afghanistan to Turkey.

Why did fighting break out now?

In January, the Organization for Security and Co-operation in Europe (OSCE) mediated talks between the foreign ministers of Armenia and Azerbaijan on the Nagorno-Karabakh conflict. The meeting raised hope for limited progress, coming after 2019 which saw an increase in tensions between the two countries that increased when Armenia’s Prime Minister Nikol Pashinyan declared “Artsakh [the Armenian word for Karabakh] is Armenia, and that’s it.” The year was described by Azeri President Ilham Aliyev as a “lost year for the conflict settlement.” 

2020 dawned with the worldwide spread of the Wuhan Coronavirus which damaged Armenia’s economy and increased pressure on the Pashinyan government. The economy was already sagging from the paucity of trade with Iran that was expected to jump after the Iran nuclear deal, the 2015 Joint Comprehensive Plan of Action (JCPOA). Instead, in 2018 the U.S. withdrew from the JCPOA and increased economic sanctions on Iran, damaging Armenia’s prospects.

So, the attack on Azerbaijan could have been an effort by the Pashinyan government to distract the people from their economic woes. It could have been meant to hurt Baku when oil prices were down and three months before the start of Azeri natural gas supplies from the Shah Deniz field to Europe via the Southern Gas Corridor (SGC). Or it could have been authored by Russia as leverage against Turkey, Azerbaijan’s ally, as Moscow and Ankara are competing for influence in Libya and Syria. Russia also has economic motivations as the SGC will compete with GazProm’s TurkStream gas line. 

The United Nations and the European Union urged both sides to cease fire and on the 22nd the respective foreign ministers spoke but diplomacy doesn’t have much to show for itself since 1994 cease fire between the belligerents.

Modern Azerbaijan, which borders Russia, Turkey, and Iran, was founded while defending its territory against Armenian secessionists in Nagorno-Karabakh. But the country had a history of early independence that predated the Soviet Union, where it was the Azerbaijan Soviet Socialist Republic (SSR).  

The Azerbaijan Democratic Republic, a parliamentary republic, was founded in 1918 at the fall of the Russian Empire, but lost its independence in 1920 to the Red Army. In 1923, at the order of Joseph Stalin, the Soviet Union’s commissar of nationalities, the Nagorno-Karabakh Autonomous Oblast (NKAO), was established within the borders of the Azerbaijan SSR.

In 1988, as nationalism increased across the Soviet Union, protestors in Yerevan, the Armenian capital, demanded that Nagorno-Karabakh be attached to the Armenian SSR. Fighting between Armenians and Azeris increased and in 1990 the leaders in the NKAO voted to join the territory to Armenia. Soviet troops cracked down to stop the violence and, after the collapse of the Soviet Union in 1991, Nagorno-Karabakh declared independence which kicked off fighting between Azerbaijan and Armenia. The conflict paused in 1994 with 20,000 dead and 1 million displaced persons.

Since 1994, negotiations between Armenia and Azerbaijan have been sponsored by the OSCE and fighting has flared sporadically, most recently in the 2016 Four Day War and the July 2020 attacks.  

A short history filled with instability and violence has led, naturally enough, to Azerbaijan’s National Security Concept which highlights concerns with sovereignty, territorial integrity, and separatism.

What should Azerbaijan do now?

First, don’t rely on the U.S. and Europe. They are distracted by crises in Iraq, Iran, Afghanistan, Libya, Syria, Belarus, Ukraine, and the South China Sea. And with presidential elections to attend to, the Americans will be otherwise occupied until January 2021

Azerbaijan’s foreign policy leaders were already there in the 2010s as they considered an erratic Turkey and a strengthening Iran, took the measure of the West when it failed to defend its interests in Ukraine and Syria, and “reached the conclusion that the West cannot guarantee its security.”

Azerbaijan’s alternative? Russia, which was “a tactical solution intended at helping maintain internal stability and to weather the unfavorable geopolitical, economic and social conditions.”

While Russia is the biggest source of arms for Azerbaijan, it is also Armenia’s patron, and in July shipped an emergency supply of weapons to Armenia, which it claimed was “construction materials.” After the start of hostilities Russia conducted military exercises in the southwest of the country and offered to act as a mediator between Baku and Yerevan.

But after the Tovuz attack, “erratic” Turkey gave its full-throated support to Azerbaijan. One of its considerations, aside from its self-regard as the “big brother” of another Turkic country, was concern about the surety of the Caucasus transport lines as they are the only overland routes from Turkey (and Europe) to the Caucasus, Central Asia, and China not controlled by Russia or Iran. Another was to get ahead of Washington’s threatened sanctions on companies involved in Russian pipelines to Europe and Turkey which twins with Turkey’s policy of reducing its reliance Russian natural gas, which has seen a 70% fall in takings since 2019.

And, since military exercises are now a thing, Turkey and Azerbaijan held military exercises in August and, in early September, Russia and Armenia conducted drills.

Next, don’t rely too much on Russia. Turkey can be overbearing but at least it came to the party, while Russia expected Baku to believe it suddenly needed to ship bricks and lumber to Armenia by air. Or, more likely, it knew it wouldn’t be believed and didn’t care. And there are those military drills with Armenia…

And Western interest in deep engagement may wane now that the signing of the “Contract of the Century” is almost 30 years past and the gas and oil pipelines to Europe are near completion. In the future, the U.S. and EU may now engage Baku with a normative focus to deal with what they perceive as “governance issues” and to pursue “democracy promotion.”

The region has problems, the U.S. isn’t interested in lengthy engagements, Europe won’t jump in the deep end if the U.S. is absent, so the solutions may be in the hands of the local governments.  

One place to start may be the OSCE Minsk process. Should there be a different format? One solution may be a reboot of the Astana Process as Iran, Russia, and Turkey have more at stake in regional peace than most OSCE members. But Armenia will probably refuse any format that includes Turkey but may favor the role of friendly Iran.

In 2018, Azerbaijan suspended the oil and gas trade with Iran to comply with U.S. sanctions. Relations between the two further were hurt when Azerbaijan voiced support for Israel’s position on Jerusalem (and Israel is a weapons supplier to Azerbaijan). That said, the two countries have had a lengthy relationship and, despite the recent policy splits, Iran has no interest on a conflict on its northern border to go along with all its other problems. And if Azerbaijan has to deal with Iran, it may have a slight edge when Iran is weakened from sanctions, economic mismanagement, and COVID-19. 

Azerbaijan will have to balance among the three powers, but the recent conclusion of the Caspian Sea treaty of 2018 among Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan highlights the potential for more regional solutions.

And Azerbaijan may want to define “regional” to include participation by Central Asian states which have seen energetic diplomacy since the 2016 accession to power of Uzbekistan’s president Shavkat Mirziyoyev. The Central Asian states will be keenly interested as secure overland transport routes north through the Caucasus are a necessary complement to southern routes controlled by Iran or Pakistan.   

Baku’s “to-do” list includes:  

- Diversify sources of military equipment. Meaningful defense trade with the U.S. is hobbled by Section 907 of the Freedom Support Act which makes long-term cooperation subject to a stop-and-go waiver process. Most of Azerbaijan’s military equipment is Russian, but in 2019 Baku and Ankara inked a defense industry cooperation agreement which may increase Turkey’s role as a supplier to Azerbaijan. Baku should also explore more opportunities with Israel; Japan, Ukraine, and South Korea can also supply high quality equipment.

- Seek regional solutions to regional problems. Russia, Turkey, and Iran (and China) will prefer to deal with the states of the Caucasus and Central Asia piecemeal so the small states should miss no opportunity to deal with the local powers as a group.

- Pursue partnerships with Israel and the United Arab Emirates (UAE). All three are small states with abundant energy supplies that live in bad neighborhoods. They should consider joint technology projects or energy exploration, or “bundling” foreign aid funds for priority efforts.  

- Keep reminding Europe the name of the game is energy security and a peaceful Caucasus is key to ensuring Europe enjoys secure energy options. In fact, the Continent would benefit from an explainer about how the attack on Tovuz is an attack on Europe’s energy security. Azerbaijan can team with Georgia and the Central Asian neighbors to highlight the risk the region can become an oil and gas chokepoint if one player can secure a veto on free transit or participation by others, or exclusive control of vital infrastructure. A template may be Baku’s attitude to Chinese investment: welcome but within limits.

- Don’t completely give up on the U.S. and Europe. The Trump administration recently successfully brokered deals between Israel and the UAE. The U.S. isn’t interested in a decades-long process with indefinite troop deployments, but the White House can offer a convening space if both sides need a push to close a deal. And Trump won’t have any appetite to reorder the politics and society of the parties after seeing the results of U.S. efforts in Iraq, Afghanistan, and Libya.

And while Germany always seems exasperated with others’ behavior, German Chancellor Angela Merkel is a status quo politician who probably won’t spurn a project if it’s important to German business. For example, she is refusing to link the status of the Nord Stream 2 pipeline and the German response to the alleged poisoning of Russian political activist Alexey Navalny. And in 2019, the German government announced a ban on the export of weapons to Turkey in response to the offensive against Syrian Kurds in northern Syria. Later it was realized the ban was only on new export licenses and that existing agreements would stay in effect.

The attack on Tovuz is an opportunity for Azerbaijan to avoid adding more to the OSCE’s Minsk process backlog and to consider a new negotiation process, to prosecute local problems with the local powers and the newly-active Central Asian neighbors, and to highlight the region’s importance for Europe’s energy security.  

James Durso

James D. Durso is the Managing Director of Corsair LLC, a supply chain consultancy. In 2013 to 2015, he was the Chief Executive Officer of AKM Consulting, a provider of business development and international project management services in Central and Southwest Asia to U.S. clients in a variety of industries including telecommunications, homeland security, and defense.

Since 2013, he has mentored graduate students at The George Washington University, Elliot School of International Affairs on the roles of members of the Country Team at an American embassy, security assistance, and the functions of military advisors attached to an embassy.



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