Azerbaijan has been expanding its international energy aspirations further afield over the past several years, gaining assets in Switzerland, the United Arab Emirates, Turkey and Georgia, and offering to build installations in Libya, but it wasn’t until it entered the Israeli market that anyone took much interest in these developments, with Iran particularly on edge.
Last fall, a subsidiary of Azerbaijan’s state-owned oil company SOCAR bought a 5 percent stake in Israel’s main oil field Med Ashdod, working alongside Israel’s Shemen Oil & Gas Resources (SMOG) consortium.
It wasn’t until late April this year that this became an issue, when Israeli Foreign Minister Avigdor Lieberman visited Baku and lent publicity to the matter with an announcement that joint drilling would soon begin.
A 5 percent stake in Med Ashdod is a small acquisition in the wider scheme of Azerbaijan’s Caspian Sea holdings, but in terms of expanding its international energy production efforts and wider geopolitics, it is a much more serious endeavor.
Israel is fast becoming one of Azerbaijan’s biggest trading partners. Baku currently provides Israel with over one-third of its oil supply and the two racked up some $4 billion in overall trade in 2011 alone. While Azerbaijan exports oil to Israel, Israel exports military hardware to Azerbaijan, and there are unofficial reports that the deal with SOCAR was accompanied by pledges of discounted weapons and military technology.
Iran is necessarily irked by this development and the implications of an increasingly close relationship between Azerbaijan, on its border, and Israel.
In recent months, Iran has increasingly targeted Azerbaijan for public criticism, though relations have been souring for decades, since an independent Azerbaijan set out to carve itself a major role in world energy markets through its Caspian Sea holdings.
But there is much more at stake than energy, and Iran has ongoing concerns about its own sizable Azeri minority, which may be eyeing Azerbaijan’s secular independence and increasing oil and gas prowess.
Over the years, Azerbaijan’s growing role in international energy has prompted Iran to raise the stakes by courting Armenia – a relationship that Yerevan has reciprocated willingly in terms of both energy and arms. By doing this, Tehran hopes to send Baku a clear message that it is willing to ensure that Armenia has the capacity to fight for disputed Nagorno Karabakh if need be.
There has been much media speculation over whether Azerbaijani territory could be used in a potential attack against Iran. This speculation has included reports about Azerbaijan’s alleged promise that Israel could use an Azeri military airfield to that end. These reports have been denied by Baku and Tel Aviv.
While Tehran is sending its message, Russia is keen to send its own, as are Israel and the West – all of whom are using Azerbaijan to stake their positions.
The Russian media is interested in fomenting discord between Azerbaijan and Iran, largely because Iran and Russia would support Armenia in a renewed conflict over disputed Nagorno Karabakh, however indirectly. In fact, the Nagorno Karabakh conflict could in the end come down to a showdown featuring Israeli and Iranian weaponry.
The implications of Israel’s $1.6 billion deal to provide Azerbaijan with military equipment is lost neither on Iran nor Russia.
Israel has also played a role in fomenting Azeri-Iranian discord by purposefully making its burgeoning relations with Azerbaijan a matter of public interest. While Baku may not be so quick to underscore its relations with Israel on the public platform, Lieberman’s visit to Baku makes this an unavoidable reality. While Israel continues to deny reports that it would have access to Azerbaijani military airfields if needed for a strike against Iran, it is nonetheless interested in letting Iran know just how far it can project its power in a region surrounded by enemies.
It is also in the West’s interest to foment discord between Iran and Azerbaijan, and particularly to see this spill over into the ethnic Azeri minority inside Iran and to boost separatist sentiments.
In the meantime, Azerbaijan remains a popular destination for espionage from all sides. Earlier this year, Tehran took the Azerbaijan ambassador to task for allegedly allowing Israeli Mossad agents to spy on the Azeri-Iranian border. In February, Azeri forces arrested alleged Iranian Revolutionary Guards and Lebanese Hezbollah militants suspected of collecting intelligence for an eventual attack inside Azerbaijan. Specifically, those arrested (both Azeris and Iranians) were suspected of spying for Iran, plotting to attack Western targets and smuggling weapons from Azerbaijan into Iran. There is also speculation that Israel is planning to use Azeri airfields to launch drone spy missions over Iran.
Azeri-Iranian relations are indeed on a downward spiral. Most recently, over the weekend, hundreds of Azerbaijanis demonstrated outside the Iranian embassy in Baku to protest Iran’s support for Armenia over Nagorno Karabakh and increasing anti-Azeri rhetoric emanating from Tehran.
If Baku wishes to continue along its pragmatic course of international energy ambition, it should take care not to allow itself to become a staging ground for a battle between Iran and Russia on one hand and Israel and the West on the other.
By. Charles Kennedy for Oilprice.com