Azerbaijan’s energy policy among Southeastern countries has become one of the priorities in its energy policy agenda. Recently Azerbaijan’s state energy company State Oil Company of Azerbaijan Republic (SOCAR) has been investing in Turkey, Georgia and Greece as a great economic actor. When the energy policy of Azerbaijan is analyzed, it can be easily seen that the investments of SOCAR has been tried to be enriched in the South Europe and Caucasus region.


Azerbaijan has a rich energy source which directs the foreign policy of the state. After the re-establishment of Azerbaijan Republic in the beginning of 90’s, energy has occurred a determining factor in both developing the infrastructure of the country domestically and in its relations with its neighbor countries. Concerning Azeri, Çırak and Güneşli fields, many agreements were signed with the companies including BP, McDermott, PENZOIL, UNOCAL, RAMCO and STATOIL on October 18, 1991. SOCAR, which was founded in September 31, 1992 and has about 70.000 workers worldwide, is the key institution for the oil and natural gas production in Azerbaijan. The state company has representatives in many countries and runs oil and gas pipelines especially in South Caucasus. Joint ventures (including ventures in Georgia and Turkey), consortia, and operating companies established with SOCAR's participation, are doing business in different parts of the petroleum industry. SOCAR has representative offices in Georgia, Turkey, Romania, Austria, Switzerland, Kazakhstan, Great Britain, Iran, Germany and Ukraine and trading companies in Switzerland, Singapore, Vietnam, Nigeria, and other countries.[1] Beyond these countries, Turkey plays a vital role in Azerbaijan’s energy policy as a reliable partner in its region.


Turkey: A Reliable Partner


In the recent years, SOCAR is remarkably seen as a foreign trader in Southeastern Europe. The most important country that Azerbaijan collaborates in its region is Turkey. Turkey, geo-strategically important as a transit country in energy corridors has also many similarities with Azerbaijan in terms of history, language, political aims in the region and social structure. Baku-Tiflis-Ceyhan (BTC) Oil Pipeline, Baku-Tiflis-Erzurum (BTE) Natural Gas Pipeline are the most critical projects between two countries. On the other hand, Baku-Tiflis-Kars (BTK) railway project will be finished in a very short time period and will contribute to the economic relations between two countries. Trans-Anatolia Pipeline Project (TANAP) was started in March 2015 with the participation of the presidents of three countries; Turkish President Recep Tayyip Erdoğan, Azerbaijani President Ilham Aliyev and Georgian President Giorgi Margvelashvili. In addition to these pipelines, bilateral relations regarding energy sector gained ground when SOCAR bought a controlling share of PETKİM in 2008. Since SOCAR's initial PETKİM investment, Turkey has also been connected to Azerbaijan's new energy strategy, under which it is moving from the export of crude oil to the export of petrochemical products.[2] It should be underlined that SOCAR invested about 5 billion dollars to the only petrochemical complex of Turkey. With the initiative on STAR Refinery in İzmir Aliaga, which is expected to be completed in 2018, SOCAR Turkey became one of the biggest investors in Turkey. Furthermore, it is expected that total consolidated turnover of the complex will reach to USD 30 billion and provide direct jobs for 10,000 persons by 2023.[3]


Azerbaijan can be delineated as a “source” and Turkey can be shown as a “bridge” in the context of energy relations between two countries. Moreover, Turkey stands with Azerbaijan in Nagorno – Karabakh conflict. Armenia’s invasion to Karabakh region of Azerbaijan is counted an unlawful, concerning the four resolutions of United Nations Security Council. Armenian aggression also caused a regional instability because 20% of Azerbaijan’s territories are under Armenian invasion. As a result of it, Armenia was isolated by both Turkey and Azerbaijan and this country which is economically weak is excluded of all these pipelines and energy projects.


Azerbaijan supplies 10% of Turkey’s natural gas. When collaboration between Turkey and Azerbaijan is examined, Baku – Tbilisi – Ceyhan can be counted as a first serious international step not just for the bilateral relations, but also for the beginning of the interaction between South Caucasus energy sources and European region. BTC also encouraged the improvement of Azerbaijan and Turkey’s relations with Georgia. In addition to that, Russian dominance over the region was decreased by BTC. The Azerbaijani political leadership has treated BTC more as a geopolitical asset as opposed to a mere economic benefit. The fact that Azerbaijan’s leadership has preferred this western route over Russian or Iranian routes shows the limited nature of Baku’s trust in its northern and southern neighbors and its desire to secure the country’s independence and sovereignty with the help of Turkey and the West.[4] With BTC, trilateral relationship has taken steps and “East – West” connection was created.


While transporting oil with BTC, BTE was used for the transportation of natural from Caucasus to Turkey. 980 km long pipeline started to pump gas in March, 2007. The pipeline has a capacity to transfer 8.8 billion cubic metres gas per year. Azerbaijan South Caucasus Pipeline Ltd. (AzSCP) is the representative company of SOCAR’s 10% share in this project. The other shareholders are: BP,operator (28.8 per cent), TPAO (19 per cent), Petronas (15.5 per cent), Lukoil (10 per cent), NICO (10 per cent) and SGC Midstream (6.7 per cent). The pipeline follows the same route with BTC. Besides this energy projects, BTK Railway will also has a positive impact on Azerbaijan’s trade opportunities to its neighborhood. Moreover, TANAP occurred as another important project.


TANAP: Extension of Partnership


After the frustration of NABUCCO, TANAP became a main goal for both Turkey and Azerbaijan in order to extend the areas of energy partnership between two countries. SOCAR with its 58% is the biggest shareholder of the project, pursued by BOTAS’s 38% and BP’s 10%. It is noticeable that SOCAR has more than 50% of the shares in a great project like TANAP. Project is about 1850 km long from Shah Deniz – II resources to Europe covering 20 cities in Turkey. TANAP will transfer 16 billion cubic meters natural gas and in the future it can be 30 bcm. South Caucasus Pipeline and Trans-Adriatic Pipeline can be linked to TANAP and that means a new gas corridor will be constructed from Turkmenistan to Italy. The project includes, 7 compressor stations, 4 measuring stations, 11 pigging stations, 49 block valve stations and 2 off-take stations to supply Turkey’s national natural gas network.[5] While, Russia still holds about the 60% of Turkey’s natural gas export. TANAP gives a chance to decrease Turkey’s dependence to Russian sources like BTC but the extent of the project is more comprehensive.


Georgia – Azerbaijan: Regional Partners


Georgia and Azerbaijan has also ties with each other especially in energy sector. The pipelines come from Azerbaijan to Turkey via Georgia so, the country benefits very much of these projects. Like in Turkey, Azerbaijan’s assessments in Georgia grab attention too. SOCAR Georgia Petroleum remains to be the largest business-company in Georgia in 2015 like the previous year according to the Ilia State University rating. On Azerbaijan’s connection to Europe, Georgia is the only way. The rival with Iran in energy areas and the dispute with Armenia are the main factors of it. SOCAR Georgia Petroleum has 114 stations in the country and has about 1500 employees. SOCAR operates two more different companies in Georgia called SOCAR Georgia Gas and SOCAR Georgia Security.


Baku–Supsa Pipeline which was owned by Azerbaijan International Oil Consortium and operated by BP is other important point regarding the bilateral energy relations between two countries but the pipeline was bombed by Russia during Russia – Georgia War in August, 2008. For the connection between the Caspian Sea to Black Sea, this pipeline seems essential to the region. It includes six pump stations (three in Azerbaijan, three in Georgia), two pressure reduction stations located in Georgia, 59 block valves with check valves along the pipeline, one intermediate pigging station in Azerbaijan and one at each station.[6] Regarding Georgia and Azerbaijan, Azerbaijan Georgia Romania Interconnector (AGRI) is the other project that can be seen as TANAP’s competitor but till now it seems more regional.


Effects of TAP on Greece and Albania and SOCAR’s Purchase of DEFSA


Greece plays a vital role while transferring Caucasus oil and gas sources to Europe. As it is very well-known the financial crisis in the country also affected the domestic policy and international relations of the country. As a European Union (EU) member state, Greece has serious problems especially with Germany about financial topics. The new leftist ruling party SYRIZA started to pay visits to Russia which caused annoyance in EU. So that Trans Adriatic Project (TAP) in cooperation with TANAP took priority in the eyes of EU. TAP’s shareholders are SOCAR (20%), BP (20%), Statoil (20%), Fluxys (19%), Enagas (16%) and Axpo (5%). TAP is planned to be started in the next year and in this context, the first volume of gas from the Shah Deniz-II is expected to reach three years after the construction of TAP.


TAP will cross almost 545 km in Greece starting from Kipoi to Ieropigi which is on Albania-Greece border. TAP gives chance to Greece to diversify in alternatives while the necessity of natural gas is foreseen to be raised.  TAP’s potential to enhance the employment of the local workers can also positively affect the bad economic atmosphere of Greece. SOCAR has signed a deal with Greek National Gas System Operator’s (DESFA) and bought the 66% of its shares. This also gives us the clues on that SOCAR’s intention to increase its efficiency in Southeastern Europe like Gazprom’s deals with state natural gas companies in Central Asia. In this point it has to be mentioned that the newly elected SYRIZA can change the current situation in terms of regional energy balance. SYRIZA’s 40-point party manifesto highlighted the “nationalization of ex-public companies” and committed to “increase inspections of requirements for companies making bids for public contracts”.[7]


In comparison to other Southeastern Europe countries, Greece finds more opportunity in diversifying its supply options. While Russia has the highest share in natural gas imports, Greece has been enjoying Revithoussa LNG facility since 2000.[8] Now, European Comission took the initiative for the sale of DEFSA and investigations are still continuing.


Not to Greece, TAP has positive effects on other Southeastern countries like Albania. The direct impact of the construction of the pipeline is expected to peak in 2017, making an estimated value-added contribution to GDP of €57 million and creating 4,200 jobs (part-time and full-time). In total, direct activities are forecast to contribute €157 million to Albanian GDP and support 2,900 jobs (part-time and full-time) per year on average.[9]




Azerbaijan holds 0.6% of the natural gas and 0.7% oil reserves in the world. As a Post-Soviet country, Azerbaijan attached a great importance to energy policy in its agenda of international relations and has tried to increase its effect in Southeastern Europe via pipelines and investments. SOCAR aims to create the probable infrastructure to increase Azerbaijan’s gas supply to Europe and try to support these pipelines by buying the local companies. Like Gazprom, SOCAR also wants to invest in neighborhood and tries to be effective in the region with its assets. Especially after the tension in Ukraine, EU will hesitate Russia more in the region and it can open a door to Azerbaijan. But the problem is Russia’s energy potential is far higher than all countries in South Caucasus and Europe. Iran’s relations with Western countries are not so stable and it is also another point that Azerbaijan can benefit from.  Regarding that, Azerbaijan’s energy investments in Southern Europe has gained a great ground in recent years. PETKIM in Turkey, the actions of SOCAR Georgia in its other neighbor, Azerbaijan extended its energy investments. DEFSA example in Greece showed that Azerbaijan started to be a regional energy power.


Azerbaijan uses energy as an efficient foreign policy card for isolating Armenia in the region and improving its domestic capacities. While becoming one of the most powerful state in the Caucasus, Azerbaijan’s energy resources makes its region more important in world politics and rises the geo-strategic importance of this field. On the other hand, about Azerbaijan economy, many experts insist on that Azerbaijan economy is face to face with “Dutch Disease” which means that the apparent relationship between the increase in the economic development of natural resources and a decline in the manufacturing sector. In this framework, Azerbaijan tries to vary its economic activities like PETKİM example and create regional focuses that itself owns not only in energy. Because of the logical use of its energy resources, Azerbaijan developed more than the other Post-Soviet countries despite trying to solve Nagorno Karabkh conflict. Comparing with about 20 years before, it is so attention-grabbing that country has gained enough power to shape regional policies.


[1] The State Oil Company OfThe Azerbaijan Republic,, Accession Date: 12.05.2015.

[2] Clare Nutall, Azerbaijan, Georgia And Turkey Build A Golden Triangle Of Mutual Investment,, Accession Date: 12.05.2015.

[3] Mübariz Hasanov, Importance of the STAR Refinery for the Turkish Energy Sector, Accession Date: 12.05.2015.

[4] Svante E Cornell, Fariz Ismailzade, The Baku-Tbilisi-Ceyhan Pipeline, The Baku-Tbilisi-Ceyhan Pipeline: Implications for Azerbaijan,  Central Asia-Caucasus Institute & Silk Road Studies Program, 2005, p. 61.

[5] Why TANAP?,, Accession Date: 13.05.2015.

[6] Western Route Export Pipeline,, Accession Date: 14.05.2015.

[7] Ilgar Gurbanov, The New Greek Government: Implications For Azerbaıjan's Desfa Purchase,, Accession Date: 11.05.2015.

[8] Ayhan Gücüener, What Could Trans Adriatic Pipeline Offer to Greece: Economic and Strategic Benefits,, Accession Date: 11.05.2015.

[9] Oxford Economics, A Report for TAP AG: The Economic Impact of the Trans Adriatic Pipeline on Albania, p., Accession Date: 11.05.2015.