Azerbaijan as Energy Hub in the Caspian Sea

Azerbaijan as Energy Hub in the Caspian Sea

By Wajahat Abbas

The Caspian Sea is known as a geopolitically strategic body of the water with a long shoreline area of approximately 143,000 square miles in terms of resources and positioning falling in between Europe and Asia and historically well known as the transit trade and hub of water routes between western and eastern powers. The Caspian Sea holds approximately 40 to 45 percent of lacustrine water of the world surrounded by the coastlines of five countries including, Russia, Azerbaijan, Iran, Kazakhstan and Turkmenistan. The strategic importance of Caspian Sea lies within its profusion of unexploited energy resources. The littoral states of Caspian Sea are significant energy producers. According to estimates it contains almost 48 billion barrels of oil and around 8.7 trillion cubic meters of probably gas reserves in offshore and onshore fields in the region. Caspian Sea is considered as an important source of energy in the world after Persian Gulf and Siberia but due to the prolonged conflictual issue pertaining to legal status between the littoral states has restrained the proper exploitation and development of the natural resources. At first, the littoral states has passed their own individual laws pertaining to the authorization of the development of the Caspian bed.

Similarly, bilateral and multilateral treaties were concluded among different states but couldn’t reached to appropriate long term agreements for instance, from 1997 to 2001 Kazakhstan and Azerbaijan concluded agreements demarking their areas in the Caspian region. In 1998 Russia and Kazakhstan also concluded agreement dividing the northern parts of the Caspian bed. Simultaneously, in the years 2001 to 2002 Azerbaijan and Russia also entered into agreements of division of seabed and keeping the waters open to their allocated coastal zones in order to help in navigation by littoral states. Furthermore, in the year 2003 the trilateral agreement between Kazakhstan, Azerbaijan and Russia also concluded on the understanding of divisions for their respective sectors.
Legal Status of Caspian Sea

In the meantime almost after two decades long-stretched unresolved issue pertaining to the legal status of Caspian Sea has summed up by creating new era by signing the convention on ‘the legal status of Caspian Sea’ along with other agreements as well among the neighboring countries, Russia, Iran, Azerbaijan, Kazakhstan and Turkmenistan. The agreement on the legal status has opened up new doors for the mutual cooperation in terms of trade, transport, avenues of economic cooperation, ecology, biological resources, logistical prospects and developmental projects in the region. According to the statement of Russian President Vladimir Putin, “The settlement of the Caspian Sea’s legal status creates conditions for bringing cooperation between the countries to a qualitatively new level of partnership, for the development of close cooperation on different trajectories”.

The trademark of the convention on the legal status of Caspian Sea has brought an end to the long standing conflict and will enhance relations between the littoral states by bringing the opportunities for communally exploitation of the resources in the region. Moreover, this convention will not only beneficial for the surrounding states of the Caspian Sea but it will also have positive repercussions for other countries of the region as well.

Strategic Imperative

The Caspian Sea is playing the substantial role connecting and dividing the states by providing the frontier water reservoir with abundance of natural resources and challenges. Whereas, the defining feature of Azerbaijan in terms of geography is very valuable but lies in between two large powers Russia and Iran with abundance of oil and natural gas reserves. The proven potential reserves of Azerbaijan in the Caspian Sea are considered as more diversified, secure and stabilized in the world energy market which boons opportunities to increase the oil and gas production and exports by boosting the status of being key energy exporter with possible transit trade. However, Azerbaijan being landlocked state faces major challenges in stretching to European market in terms of exporting natural gas for instance, geopolitical and geographical situation, contending interests of key players, transportation limitations, therefore, the government of Azerbaijan are proactively engaged in establishing the guidelines to tackle the challenging scenario;

i. Being the major shareholder in exporting the energy infrastructure to transit states to minimize the transit risks
ii. Pursuing the market oriented policy by opting multiple export options to diversify the pipeline routes

Pipeline Projects

The Republic of Azerbaijan has a significant history in the oil production and also known as the source of origin of oil industry, historically it also played important role at the crossroads of various historical events and is considered as an alternative source of natural gas for many countries for instance, the development of Shah-Deniz gas and condensate field. Azerbaijan has proved to be the more reliable and stable partner by playing the key role in the wake of energy projects and energy security of Europe by the initiative of Southern Gas Corridor and the construction of the Trans-Anatolian Natural Gas Pipeline (TANAP) connecting Europe gas network into the Central and Eastern Europe has proven in securing the diversification of the region.

Azerbaijan is effectively pursuing the energy policy which aims for consolidating its role as a major exporter of hydrocarbon resources in the European direction and towards the expansion of cooperation between Turkey and Azerbaijan. The inauguration of historic project of ‘Trans Anatolian Natural Gas Pipeline’ (TANAP) worth of 8.5 billion U.S. dollars is another promising factor for extending the cooperation in the world energy market with fulfilling the natural gas needs of Europe and Turkey. According to the statement of President of Azerbaijan ‘IlhamAliyev’, “The cooperation will be remembered in the frame of historic stability, this is not the first project, prior to this in the year 2006 we had Baku-Tiblisi-Ceyhen oil pipeline and in the year 2007 we had Baku-Tiblisi-Kars railway project. Any project put forward on our initiative is executed because it is underpinned by our thoughtful policy, firm will and brotherhood”. Moreover, the project is important in terms of maintaining energy security, improving the welfare with enhancing people to people contact, promotion of energy security and contribution towards peace and stability in the region.


Energy security is one of the main economic and political pillar for any country, where government endeavors for developing their energy industry with clarified aim to increase the domestic production and decrease the dependence on foreign imports. The Republic of Azerbaijan is playing an important role in the Caucasian region by developing and linking chains with other regional countries due to strategic and geographical importance. However, the resource rich Azerbaijan is standing as a strategic partner to western countries for its crucial role in international energy security and tackling the geopolitical and as well as geographical challenges by attaining the role of political cooperation in the region.

The author is a Research Associate at the Center for Global & Strategic Studies (CGSS), a think tank based in Islamabad. He holds a Master’s Degree in Development Studies.
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