The Energy Implications Of A Renewed Armenia-Azerbaijan Conflict

A fierce resumption of the Armenia-Azerbaijan war over Nagorno-Karabakh is a direct reflection of a breakdown of Russian foreign policy and Russian domestic political uncertainty stemming from the ongoing war in Ukraine. And there is an energy angle—there always is, in war. Either energy is weaponized as a means of gaining territory, or energy is the gain itself.

This week, the conflict intensified significantly, with Azerbaijan reclaiming control, tens of thousands of Armenians fleeing the disputed territory, and Azeri forces arresting billionaire and former Armenian leader of Nagorno-Karabakh, Ruben Vardanyan, who was caught attempting to cross the border into Armenia. The week concluded with the current (until this week) leader of the self-declared republic, Samvel Shahramanyan, announcing the signing of an order to dissolve the state and all of its institutions, whereby the Republic of Nagorno-Karabakh will cease to exist as of January.

The region is recognized internationally as part of Azerbaijan but Armenia took control in the 1990s following the collapse of the Soviet Union. Moscow has always used Nagorno-Karabakh as leverage for control over its regions since Soviet times. The ongoing and very bloody conflict over Nagorno-Karabakh dates back to the collapse of the Soviet Union. While the Soviets had considered Nagorno-Karabakh to be an autonomous region belonging to Azerbaijan, which in turn was a part of the Soviet Union, it is majority ethnic Armenian.  After the collapse of the Soviet Union, Armenia captured Nagorno-Karabakh and forced out non-Armenians (along with capturing several other Azerbaijani territories). Moscow has continued to use this conflict against both Armenia and Azerbaijan. And now, Moscow is busy in Ukraine, giving Azerbaijan apparently free rein to re-occupy Nagorno-Karabakh. Besides, Russia’s relations with Armenia (where it has military bases) are at a low point over a dispute with the country’s pro-Western prime minister.

Looking back to the eruption of this frozen conflict in 2020, energy was both a weapon and a reason for armed hostilities. At that time, Azerbaijan was preparing to bring the Southern Gas Corridor online, bringing natural gas from the Caspian Sea to Europe. That corridor is important to Europe as a means of receiving energy supplies independently of Russia. Prior to the start of operations, Azerbaijan perceived a threat to this energy infrastructure. Its actions to prevent those threats led to an outbreak of violence, and turned out to be a self-fulfilling prophecy: Armenia indeed turned this into a target. 

Thus, this conflict is ultimately about energy as much as it is about territorial sovereignty and the rights of the majority ethnic group to determine where they belong. We need look no further than talks this week held between Azerbaijani President Ilham Aliyev and Turkey’s Erdogan about the creation of a land corridor between the two countries. That land corridor would run through southern Armenia. (Armenia is opposing the corridor), and Azerbaijan’s recent moves in Nagorno-Karabakh are designed as leverage.

Nor is Nagorno-Karabakh the only issue here … the Azerbaijani exclave of Nakhchican is separated from Azerbaijan by Armenia. The 2020 war between Armenia and Azerbaijan ended with Azerbaijan seeing its transport links restored to this area. That means Iran, which could provide the only other access for Azerbaijan to this territory, lost its leverage over Baku on this.

While ongoing for decades, this conflict is now developing far wider geopolitical consequences, with Russia playing both sides (bases in Armenia and arms for Azerbaijan), Turkey solidly backing Azerbaijan (naturally), Iran now leaning toward Armenia (because the proposed corridor will remove Armenia’s border with it), and Israel having armed Azerbaijan to the hilt. It’s another Libya, and energy is a key factor, particularly as Brussels has a gas deal with Baku, though that idea is fraught with problems: This is a huge new infrastructure gamble amid an alleged clean energy transition.