The Caucasus is a post-Soviet region known for ethnic diversity, energy resources, and inter-state conflicts. These interesting dynamics and critical geopolitics of the region motivate other countries (regional powers, so to speak) to expand their sphere of influence. Russia, Turkey, and Iran are the most important actors in world politics, which are highly interested in Caucasian countries’ agenda because of economic relations/interdependence, energy security, the balance of power, and cultural/historical ties. Azerbaijan and Armenia are two countries that have experienced war during the 90s, and they have no diplomatic relations. The territory of Nagorno-Karabakh is still a contested issue between the two countries. In recent days, international society follows the military conflict between them bothersomely. In this text, the outlook on countries’ situation in the energy field will be provided, and the potential effects of war on energy markets concerning our experiences will be discussed.
Before analyzing the ongoing event and its relation with the energy sector, understanding both countries’ current situation matters. Firstly, Armenia is the side that remains in the background in terms of presence in the energy field. Although they have significant resources for producing domestic electricity, the absence of reserves (neither oil nor gas) is a problem that weakens Armenia’s hand in international relations as a country which is a low populated, small economy and trying to recover the impact of centrally-directed Soviet economic system. Regarding these conditions and import data, it can be said that Armenia is a Russia-dependent country in terms of energy. Russia-Georgia-Armenia and Iran-Armenia pipelines connect these countries and play an essential role in energy trade relations in the region. When we continue with Azerbaijan, it will seem that they are the side, which leads to some concerns in the energy field because of their position. The country is a significant producer of natural gas and crude oil. They are one of the few energy self-sufficient countries in the world.
According to International Energy Agency data, Azerbaijan’s oil production is 34 643.0 kt, and natural gas production is 958 013.0 TJ-gross by 2019. Azerbaijan hosts some pipeline, which is strategically important not only for its neighbors and region but beyond. Baku–Novorossiysk, Baku–Tbilisi–Ceyhan, Trans-Anatolian gas pipeline are some of them. Since Azerbaijan is a starting point for energy export, these pipelines concern countries, including Turkey, Georgia, Russia, and some European countries.
Nagorno-Karabakh is a long-standing and sensitive issue that blocks the diplomatic relations between the two countries. 2020 has been a year that witnessed an escalation in this conflict. In July 2020, we saw close combat, and there was a loss of lives. Finally, on the 27th of September, the war started. Although the overseas supplies are not so proximate to conflict zone Nagorno-Karabakh, and war has not affected the energy markets yet, analysts have concerns about the potential danger and preservation of energy security. Both Yerevan and Baku warned about security risks to the region as well. Although discussions are centered around Azerbaijan oil and gas reserves, Armenia’s Metsamor nuclear power station, which is already under the threat of an earthquake, is also an aspect of our topic and should be considered.
As explained above, the Azerbaijan-Armenia conflict is not a catastrophic event for the energy field yet. However, the 20th century provides us some examples that show the limits of destruction in the energy field and the Middle East, known for rich natural resources reserves and military conflicts. My first example is the Iran-Iraq War. The difference between this and the Azerbaijan-Armenia War is the Iran-Iraq War was between two countries, which have rich oil reserves and Iraq’s motivation for annex Iran’s Khuzestan Province, which is oil-rich. As a result of this situation, both sides’ natural resource reserves became the target of each other. Unsurprisingly, Iraq’s attacks on oil facilities impacted Iran’s economy, and oil demander countries suffered from high oil prices. This was a war which is ended by stalemate, and both sides declared their victory.
When we interpret this result, it can be said that the Iran Revolution, which caused the inefficient use of oil and prevented the fulfillment of the country’s potential due to unsuccessful governance, consolidated itself within the state. On the other hand, Saddam Hussein also sustained its regime, and Iran-Iraq War’s costs have been tried to compensate for the Invasion of Kuwait. The invasion of Kuwait was a military move which is ended by Kuwaiti oil fires. Because of this, over 700 oil well has been fired, and resources have been wasted. When we continue chronologically, the Invasion of Kuwait formed the Gulf War basis and the Invasion of Iraq and brought instability to the oil rich region. Building trust for energy markets became harder. Although the Azerbaijan-Armenia conflict is not energy-based, like examples from the Middle East, they are useful for comprehending the extent to which a war that reaches energy resources could have a heavy price.
In conclusion, war is a phenomenon that is incredibly harmful to countries’ economies and the well-being of their societies, as it can be observed from developments in the energy field. Authoritarian regimes that seek solutions about domestic political problems in aggressive foreign policy and ultranationalist, expansionist and revisionist approaches in foreign policymaking may lead to catastrophic results for people in the region and across the world. At this point, international law/organizations, diplomacy, and third actors should step in and should struggle for mediation and peace in favor of common interests.