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The Case of Energy-Rich, Security- Poor Azerbaijan.

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1 The Case of Energy-Rich, Security- Poor Azerbaijan

2  Problem Definition and Significance of the Topic  Research Objectives and Questions  Brief Literature Review  Definitions of key words: Security, Foreign Policy, Energy  Theoretical Framework  Energy as a Foreign Policy Tool: Energy and Provision of National Security  Energy as a Foreign Policy Issue: cause of political leverage and interdependence  Bibliography

3 This research explores how energy shapes the foreign policy of an energy-exporting country - Azerbaijan. Interrelation among energy – security – foreign policy is to be addressed in an example of Azerbaijan in this presentation. What makes the topic compelling?  Fundamental factors such as growing importance of energy resources, insecurity stemming from dwindling of conventional resources and incremental demand, threats of various kinds to energy infrastructure  Concentration of production in a few, mainly unstable regions  An unprecedented intense competition for energy resources among consumers  More frequent and efficient use of energy as a foreign policy tool The situation urges us to research not only foreign energy policies of great powers who are predominantly high energy importers and consumers, as well as to understand the role of energy in foreign policy of energy producing countries.

4 Why Azerbaijan?  It sits on vast energy – oil and gas resources  It is both an energy producing country and an alternative transit route for energy flows from the landlocked Central Asia circumventing Russia and Iran  It is a key country in the Southern Corridor gas project and hence important for EU’s energy security  It was a drive for Westernization of the region  It has significant place in the development of world oil industry – its cradle  Energy openly manifests itself in the foreign policy of Azerbaijan  Energy plays an exclusive role in shaping the country’s and region’s future  I believe that understanding the role of energy in this part of the world will help us to present some generalisations about other regions where energy predominantly plays an important role  Being from Azerbaijan has explicitly affected my choice of research topic

5 Objectives  Understand how the ownership of oil and gas reserves affects foreign policy challenges that the country faces  Explain how developed energy relations with the regional/international powers and increased geostrategic significance, high revenues from exports and following political-economic stability contribute to the security of Azerbaijan, if do contribute at all  Contribute to filling the gap in the existing literature both by exploring the role of energy from a producer country’s perspective and by focusing on Azerbaijan as an understudied country in the Western literature.

6 Has energy brought security to Azerbaijan and how has it impacted on the country’s key foreign policy problems?

7  Has energy brought security to Azerbaijan: has energy developments contributed to the mitigations of foreign policy disputes and facilitated cooperation, or has it added to the complexity of the problems and instigated competition with the neighbours?  How are the concepts of energy, security and foreign policy interrelated in the case of Azerbaijan?  In what ways is energy being used as a foreign policy tool for national security purposes? Have energy developments strengthened national security of Azerbaijan?  To what extent have Baku’s energy connections affected its affairs with regional and international powers? What is the role of energy as a foreign policy issue in the country’s international relations?

8 In order to provide thorough answers to these research questions a wide range of secondary literature has been drawn on. Though the existing literature on energy security and integration of energy into foreign policy does not highlight the case of Azerbaijan in particular, it helps draw a general picture which elucidates interregional and inter-state energy relations from trade to political ties. The researchers warn about the negative consequences of an increasing concentration of fossil fuels’ production in the world, growing demand of consumers alone with the producers themselves, skyrocketing prices and market volatilities. This leads us to the key debates among in the literature

9  Disagreement on the unequivocally accepted definition of energy security: the economic approach to the notion (Noel), political understanding (IEA, EU documents, Klare, Yergin, and others), or an integrated definition (Checci et al)?  Energy security from the perspective of consumers (mainstream) or producers (limited attention)?  Peak oil debate  Disagreement whether the future energy relations will be dominated by competition for the remaining resources (Klare, Kalicki, Goldwyn, Deese, Giordano, Wolf) or cooperation for possible collective gains (Thomson et al, Godement et al)?

10 Problems with literature  Despite the recent increase in a number of works on energy security, the concept still remains underdeveloped and problematic  Interrelation between energy and foreign policy and energy and security have not been necessarily addressed which can be explained with energy’s being a new addition to FPA and in a lesser degree to security studies (though its presented as a traditional security concern in majority of the works)  There has been little interest in researching producer countries’ energy policies other than OPEC key members and Russia  Although Central Asian countries have recently drawn attention of the scholars, the Caspian Basin, particularly Azerbaijan still remains an under-studied country and there is very limited number of works available in the Western literature on the country

11 Literature on Azerbaijan The available literature on Azerbaijan can be classified into several branches:  The group of works that are exclusively on energy resources and infrastructure development in the region. A chapter on the Caspian basin and its energy resources is included to almost all the works examining energy security. The authors draw attention to the “New Great Game” in the new world order between the Russian Federation and the West  Research of the US policies towards the region and its support to the development of the first energy projects in Azerbaijan in early 1990s is of particular importance. Yet, recently policies of the EU have come to the centre of attention with the discovery of vast natural gas reserves in Azerbaijani waters in addition to the massive resources of Turkmenistan. Chinese and Indian policies towards the Caspian region, though mainly towards Central Asia, have drawn increased attention recently  The next group of works are reports of the key energy companies on energy figures of Azerbaijan and Caspian basin, such as BP Statistical Review of World Energy and reports of SOCAR  Academic works on the history and geopolitical implications of energy developments for the region

12 However, most of these works have been written from the Western viewpoint with the leading idea of how the West can benefit from the oil and gas resources that are not controlled by the Kremlin and that do not have to be transported through the insecure Persian Gulf. Understanding of energy security of the owner country, its concerns and expectations derived from the active Western involvement to the regional affairs have not been comprehensively and properly addressed in these publications. Another shortage is a general regional character ruled in these works. They have researched the whole region, not specifically Azerbaijan, which prevent them from being comprehensive and detailed investigation of individual countries of the region.

13 Security  There is not a unilaterally agreed definition and generally accepted as an essentially contested concept (Buzan 1991; 2009)  Disagreements on referent objects – who/what should be secured; threats and risks to security – external or internal; factors affecting security and means to be employed to be secure have led to the development of various definitions  Though a state has been approached as a key object to be secured in most of the history, recent concepts, on security of citizens within states, security of society or the planet of Earth for example, challenge this view  Traditional understanding of security is further contested with widening- deepening approaches to the range of threats and dangers to security: not only inter-state military threats can bring about insecurity; economic and societal threats including environmental challenges; domestic conflicts within states; weapons of mass destruction; terrorism; transnational organized crime can be listed (Report of the UN High-level Panel on Threats, Challenges and Change, 2004:2)

14 Most stated definitions  ‘Security in any objective sense, measures the absent of threats to acquired values, in a subjective sense, the absence of fear that such values will be attacked’ (Wolfers 1952:485)  ‘Security is “a relative freedom from war, coupled with a relatively high expectation that defeat will not be a consequence of any war that should occur” (Bellany 1981:102)  ‘Security involves gaining a degree of confidence about our relationships that comes through sharing certain commitments with other actors, which, in turn, provides a degree of reassurance and predictability’ (Williams 2012:7).  ‘Security encompasses both coercive means and acts of persuasion, “bolstered by the prospect of mutually shared benefits, to transform hostility into cooperation” (Kolodziej in Collins 2010:3).  ‘Security is a condition, like health or status, which defies easy definition and analysis’ (Morgan 1999:2).  Buzan five major sectors of factors that affect security of human collectivities: military security; political security; economic security; societal security; environmental security (Buzan 1991). In his later work with Hansen he distinguishes three epistemologically differing – subjective, objective and discursive conceptions of security (Buzan 2009).

15 This work itself employs predominantly traditional understanding of security. Security of the traditional referent object – state remains to be the research focus in this work. Additionally, security is mainly perceived in terms of external military threats in relation to territorial boundaries. However, in contrary to the traditional interpretations, economic security will be emphasized in its own right as well. The author argues that security is achievable through cooperative policies, confidence and trust-building actions rather than use of coercion and military power exercise.

16 Foreign Policy  Classical definition by Walter Carlsnaes: foreign policy is a sum of ‘those actions which, expressed in the form of explicitly stated goals, commitments and/or directives, and pursued by governmental representatives acting on behalf of their sovereign communities, are directed towards objectives, conditions and actors—both governmental and non-governmental—which they want to affect and which lie beyond their territorial legitimacy’ (Carlsnaes 2002: 335).  Broader definition by Christopher Hill: foreign policy is ‘the sum of official external relations conducted by an independent actor (usually a state) in international relations’ (Hill 2003:3).  By Hudson: Foreign policy is ‘the strategy or approach chosen by the national government to achieve its goals in its relations with external entities’ (Hudson 2008:12).

17 Energy  This thesis means conventional energy resources – oil and gas resources that Azerbaijan holds when refers to energy. In terms of energy security concept, there is not an unequivocally accepted definition of energy security which challenges the perspectives for international dialogue and cooperation for a more secure energy order.  Various interpretations of energy security can be slightly split into two branches: economic (more liberal approach stressing the market) and political understanding (emphasizing state’s role and national interest).

18 The most assented explanations of both approaches:  “ Energy security is assurance of the ability to access energy resources required for the continued development of national power”, more specifically “it is the provision of affordable, reliable, diverse, and ample supplies of oil and gas (and their future equivalents) and adequate infrastructure to deliver these supplies to market” (Kalicki and Goldwyn et al 2005:9)  Energy security is “the uninterrupted physical availability [of energy supplies] at a price which is affordable, while respecting environmental concerns” (IEA)  “The EU’s long-term strategy for energy supply security must be geared to ensuring, for the well-being of its citizens and the proper functioning of the economy, the uninterrupted physical availability of energy products on the market, at a price which is affordable for all consumers (private and industrial), while respecting environmental concerns and looking towards sustainable development” (Seliverstov 2009:3)  “[Energy security] is described as the assured delivery of adequate supplies of affordable energy to meet a state’s vital requirements, even in times of international crisis or conflict” (Klare 2008:484)

19 I define energy security for a producer country – Azerbaijan as:  security of supplies for domestic market  security of demand and markets for the resources abroad  provision of prices high enough to promote economic development at home, low enough not to suspend growth in the key consuming economies  availability of export infrastructure and safety of transit routes  minimal reliance on a single customer (or a group of customers) and on a single transit route/country  development of a image of a reliable supplier in the eyes of customers  efficient usage of high energy revenues  diminishing dependence on the energy sector through development of non-energy domains of domestic economy

20 The thesis will utilize two mainstream theories – realism and liberalism since they are key for understanding motives and prospective of competition or cooperation for energy resources. As to the case of Azerbaijan, as I argue that the incumbent government is more keen to the realist policies, mainly in its attempts to change the regional balance of power through the use of energy as a foreign policy tool, however, it also attaches to the liberal stance in facilitating regional cooperation among friends, developing relations with the EU, and avoiding open disputes with the powerful neighbours – Russia and Iran. This can be partly explained with the country’s economic and military weaknesses, and domestic challenges such as weak record of democratic reforms, state-level corruption, non-transparent use of energy revenues, and so forth. Despite inclination to the realism in the governing circles and relevance of realist picture of the political relations, it is more beneficial to pursue liberal policies and facilitate cooperation for the reaching solutions in a number of regional problems.

21  security is freedom from military threats and coercion by other states in international system  States the most important, rational, unitary actors  Due to lack of international authority over the states to impose rules and monitor compliance with agreements states- anarchy states feel insecure in an self-help system characterized by competition and war  Energy demand growth in consumer economies among which are the major powers and decline in their domestic production; finiteness of conventional energy resources and their diminishing supplies; decrease in a number of new discoveries and warnings on ‘peak oil’ increase tensions among states  Energy politics is power politics and energy is a source of power  There are serious restraints on cooperation among states and conflicts for energy will be inescapable reality

22 Waltz: ‘The possibility that [control over energy] may be used by some states to weaken or destroy others does, however, make it difficult for them to break out of the competitive system’ (Waltz quoted in Glaser, C. L., “Realism” in Contemporary Security Studies, 2010:20)

23  the current form of Azerbaijan’s energy relations is more a result of realpolitic understanding of international relations by the states involved in the region  Energy being a material capability and a source of power is the only available tool for the security-seeking Azerbaijan to survive in a slef-help environment  Energy is used to draw attention of the Western powers to the region and balance Russian and Iranian presence with their engagement  the main-transport pipeline for Azerbaijani oil was built through Georgia and Turkey to Mediterranean port bypassing Russia (depriving Moscow from one of its most applied tools – control over flow of energy out of the Caspian) and Iran (isolating Iran from realisation of regional energy projects and preventing increase in oil volumes transported through the unstable Persian Gulf and congested Hormuz strait)  Armenia has been isolated from all energy projects in the region with the participation of Azerbaijan (depriving Armenia of perspective revenues and undermining its regional role)  Azerbaijan pursued balancing policy against the “greedy states” in the region: internal and external balancing

24  although there is anarchy international politics does not have to a realistic system full of conflicts, war and violence  growing economic interdependence among nations in the energy field accelerated by globalisation  Consumers are dependent on imported supplies, while producers are interested in ensuring demand, markets and flow of high revenues  Consumers are champions of technology and financial resources, while exporters are in need of investments and innovative technology for development of hydrocarbon resources  major powers are interested in safeguarding the normal operation of the world energy market and preventing volatility; providing political and economic stability in key producer regions and preventing supply interruptions, attacks to energy infrastructure; securing vital energy transit routes

25 Cooperation and security are feasible and achievable in the following areas:  R&D technologies  information exchange  developing precise statistical data  diminishing loss of energy in domestic use  decreasing the side-effects of high energy consumption on environment  advancement of the role of renewable sources of energy Interaction in these areas leads to advanced mutual understanding and common interests in eschewing conflicts and sustaining peace. Since violence brings about high costs, volatile markets, risks and insecurity for all parties.

26  Although Azerbaijan’s regional relations have been realistic, it does not have to continue to be so  “room” for cooperation is being broadened with the development of energy projects in the region  The regional affairs have been realistically governed for last twenty years, but this has not brought any progress to the solution of Azerbaijan’s key foreign policy challenges  Competition and renewed violent crashes war will destroy everything accomplished with hard efforts in last two decades  The self-interested rational ‘Westerners’ cannot afford risking massive investments in Azerbaijan’s oil sector  Military clashes cause market volatilities, impede access to markets and capital, thus the war may well alienate foreign investors and their advocators from Baku  Energy trade relations has brought about interdependence  Interdependence leads to mutual understanding and common interests with the Western powers that serve to facilitate cooperative actions between Azerbaijan and the EU/US in particular, and increase absolute gains of all parties involved Hence, energy can promote peace and cooperation both at home and abroad with growing interdependence, vital economic, political and social changes, increased attention of world powers and international institutions

27 What role does energy play in providing national security of Azerbaijan? Points to consider:  Drawing the West into the regional game with Russia and Iran - energy as a tool to draw wider attention to the regional conflicts  Providing foreign aid particularly in the defence sector  Military build-up due to high energy incomes  Growing regional power and stronger stance against Armenia  Prompting more active and deeper engagement of the US and the EU in the conflict solution in the region

28  Energy as a cause of a foreign policy problem: the legal status of the Caspian Sea. How has energy affected/mitigated a dispute over energy fields with Turkmenistan and facilitated cooperation of five littoral states?  Energy as a cause of political leverage: Azerbaijan – Georgia relations?  Energy as a cause of interdependence: Azerbaijan –EU energy relations? Trasn-Caspian pipeline as a catalyst of competition or of dispute solution in the Caspian?

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