Azerbaijan is a nation built on the riches of its Caspian Sea resources, and gas and oil are a mainstay of an economy that is over-dependent on fossil fuels and not diversified enough to foster a competitive environment that benefits all – and not just the rent-seeking elite that controls the energy industry.
But Azerbaijan’s gas is especially important to the European Union member states who want to reduce dependency on Russian resources. The key to this is the Southern Gas Corridor, a $45 billion project that will transport gas from Shah Deniz 2, through three pipelines to Georgia (South Caucasus Pipeline), Turkey (Trans Anatolian Pipeline) and into Greece and Italy (Trans Adriatic Pipeline). The potential for Malta is that the Italian gas transmission network expands to the island itself, with further connection to gas networks into Western Europe.
While this project would provide Europe with up to 10% of its energy needs, at home Azerbaijan president Ilham Aliyev uses oil and gas to keep the country’s economy exclusively dependant on these resources and nothing else.
“Aliyev has been trying to present the SGC as his generous gift to the west so that governments will not talk about human rights and democracy in Azerbaijan,” wrote Ilgar Mammadov in a public January 2017 letter. Mammadow is an Azerbaijani leader of the opposition Republican Alternative (REAL) movement who has been arrested since March 2013 on trumped-up charges before the presidential elections. In his letter he called himself “an inmate of the Southern Gas Corridor.”
The European Court of Human Rights (ECHR) has already established that Mammadov’s arrest was the wish of the authorities “to silence him” for criticising the government; a European Parliament resolution has called for his immediate and unconditional release; and since December 2014, the Committee of Ministers of the Council of Europe adopted nine resolutions and decisions specifically on his case, insisting on his urgent release in line with the ECHR judgment.
When falling oil prices hit Azerbaijan hard, the Caspian nation found itself unable to fund its share in the TANAP and TAP pipelines without loans from the European Bank for Reconstruction and Development, European Investment Bank, World Bank and Asian Development Bank.
But in 2016, these institutions said their backing was subject to Azerbaijan’s compliance with the Extractive Industry Transparency Initiative (EITI) – a collection of 51 states that tie energy transparency to good governance.
In September 2016, Riccardo Puliti, director on energy and natural resources at the EBRD, cited the resumption of the suspended EITI membership of Azerbaijan as “the main factor” for the prospect of approval of funds for TANAP/TAP.
Amid Aliyev’s crackdown on civil society after the 2013 presidential elections, the EITI board lowered the status of Azerbaijan from “member” to “candidate” in 2015, further complicating funding for the Southern Gas Corridor.
In March, in assessing the validation of Azerbaijan, the EITI board said the country had not made “satisfactory progress” on civil society engagement, and corrective actions it had proposed had not been fully completed.
With the Caspian petrostate now quitting the EITI just as the groundwork for the gas corridor starts, it is clear that Aliyev prefers total political control in the face of a falling currency and rising prices. In February, he announced that his wife, Mehriban Aliyeva would become first vice president, “a move that eliminated any lingering illusions that the country was an electoral democracy rather than a family dynasty,” De Waal said in his analysis.
Azerbaijan seeks to consolidate relations with the EU. Mammadyarov probably hoping he can leverage his country’s relationship with Malta to support Azerbaijan’s aspirations during upcoming negotiations on the new EU-Azerbaijan Framework Agreement, which will be held in Baku next week.
According to the article, not even EU parliamentarians are immune to the effects of Azerbaijan’s ‘caviar diplomacy’.
It is recalled that an upcoming trial in Milan of Luca Volonte, an Italian member of the Parliamentary Assembly of the Council of Europe (PACE), will show how investigators uncovered €2.39 million in payments to Volonte through British and offshore companies. Most of the funding came through the British company Hilux Services LLP and its account in an Estonian bank from Baktelekom MMC, a limited liability corporation in Azerbaijan.
The payments, prosecutors allege, were made in exchange for Volonte’s efforts to mute the European body’s criticism of Azerbaijan’s human rights record: the Strässer Report was penned by German MP Christoph Strässer, who was however denied a visa to visit Azerbaijan three times. With the help of civil society activist Anar Mammadli, who provided information for the report, PACE endorsed the report 125-79 with 20 abstentions.
The journalist Khadija Ismayilova, imprisoned for her role in uncovering the interests of the kleptocratic Aliyev family, says that Baktelekom MMC – not to be confused with the state-owned telecoms company Baktelecom – is linked to Azerbaijani businessman Rasim Asadov, who has a business partnership in another venture with Mir Jalal Pashayev, a cousin of Azerbaijan’s First Lady Mehriban Aliyeva.
It is also said that high-profile arrests of activists and journalists have continued, and activists say that the authorities now hold 145 political prisoners.