European officials have pitched Azerbaijan on a scheme to run its gas through a pipeline that currently brings Russian fuel to the EU via Ukraine, a senior Azerbaijani official told POLITICO.
The proposal is a way to keep natural gas flowing to Europe — while cutting out Russia — when a transit deal between Kyiv and Moscow expires at the year’s end. The EU has previously said it was willing to let the deal expire, as it was confident that enough energy supplies were coming from elsewhere.
“Azerbaijan has been reached out [to] by the European Union and the transit countries [that] we are talking about on the issue,” Hikmet Hajiyev, a senior adviser to Azerbaijani President Ilham Aliyev, said in an interview with POLITICO.
“Currently we are considering different options as to how we can contribute to that process,” he added. “I would refrain from putting in a time frame, but again, there was … an appeal and we have taken it seriously because it’s a matter of European energy security.”
The Azerbaijan scheme is being chalked up to growing anxiety in several EU countries, including Slovakia and Hungary, that have long relied on the pipeline to power industry and heat homes.
“We see some security of supply risks when it comes to the end of transit through Ukraine, due to existing infrastructure bottlenecks in [the] European gas system,” one diplomat from a Central European country, granted anonymity to discuss the sensitive talks, said.
“There is something happening on the issue,” the diplomat confirmed.
Responding to a request for comment, the European Commission’s spokesperson for energy policy, Tim McPhie, told POLITICO that “the Commission is working very closely with the impacted member states to find alternative supplies and routes.”
A pre-war pact
The deal dates back to 2019, when Russia and Ukraine signed an agreement to let Moscow’s state energy firm Gazprom export supplies to the EU via pipelines running through the country, despite political tensions between the two countries.
That gas has continued to flow since Russia’s full-scale invasion of its neighbor in 2022, but the transit agreement is set to expire at the end of the year.
The pipeline has been a significant source of energy for Europe. In 2023, it carried roughly 15 billion of the 25 billion cubic meters of Russian gas that went to Europe. The system links up Poland, Slovakia, Hungary, Romania and Moldova.
Last year, Ukrainian Energy Minister German Galushchenko told POLITICO that Kyiv would not directly agree to an extension of the arrangement, saying that “bilateral negotiations are impossible.” EU Energy Commissioner Kadri Simson also said the bloc had “no interest” in renewing the agreement.
However, several alternative solutions have been proposed. Bloomberg last week reported that Central European countries were considering one option that would see Azerbaijani-owned gas injected into the pipelines.
“Currently, eight countries from the European Union are receiving gas,” Hajiyev said. “Hopefully, in a very smooth time, we are looking forward to enlarging the geography of [Azerbaijani] gas importers from the wider European family.”
A sudden end to gas supplies would affect Slovakia the most, which historically relied on Moscow for all its gas imports. Slovakian Prime Minister Robert Fico last month visited Azerbaijan and said he would do “everything politically necessary” to receive gas from the country.
It is unclear whether the plan would involve exports of Azerbaijani gas via Russia, or if the volumes would be “swapped” between the two countries before they were shipped.
Either way, according to Aura Sabadus, a gas markets expert with commodities intelligence firm ICIS, any deal would likely allow Moscow to collect at least some revenue and let gas extraction sites continue operating in Russia.
“Ultimately Russia would still gain and right now Gazprom is in a difficult position financially. Production is at an all-time low and they need to sell gas,” Sabadus said. Last month, Moscow’s gas export giant recorded its first annual loss since 1999.
On top of that, Sabadus added, while a total end to gas supplies flowing via Ukraine could raise prices for consumers in Central Europe, “all the affected countries, Slovakia, Hungary and so on, have alternatives.”
Despite efforts to cut its reliance on Russia, a new analysis of ICIS data shows that, for the first time in almost two years, Moscow in May supplied Europe with more piped natural gas and liquified natural gas than the United States.
Azerbaijan steps up
Since Russia launched its war in Ukraine, the EU has been strengthening its energy ties with Azerbaijan.
During a high-profile visit to the country in 2022, European Commission President Ursula von der Leyen signed a memorandum of understanding with Azerbaijan President Ilham Aliyev to effectively double Europe’s gas supply from Azerbaijan, hailing it as a “crucial energy partner” in divesting from Moscow.
European Parliament lawmakers have called for the deal to be revisited amid growing political tensions with Azerbaijan over its offensive in the breakaway region of Nagorno-Karabakh.
Azerbaijan will host this year’s COP 29 U.N. climate talks and is seeking to use the event to bolster investments in both renewable energy and its fossil fuel industry.
“We largely are investing in increasing our gas production because Europe needs more gas from new sources,” Aliyev said earlier this year. “Our oil and gas will be needed for many more years, including [in] European markets.”
