Azerbaijan, the shy beauty by the sea...

The Caspian sea has been the place where oil was first discovered and studied, the first derricks built, the first fortunes ammassed. Robert and Ludvig Nobel made their huge profits, a small percentage of which was later to become the Nobel prize fund, after Azeri olifields were nationalised by the Soviets.

It is now a landlocked area which hosts 10.2% of world oil reserves but 40.5% of non-OPEC reserves. The resources of the area stem from basins that is right under the south chunk of the sea, from which every shoreline country profit. The Post-Soviet countries that do most of the extraction are therefore Turkmenistan and Azerbaijan, significantly the only two oddballs in the otherwise organized Central-Asia scenario, allegiance-wise speaking.

Sitting on consistent oil and gas deposits, they are sole players that pursue the best bid. Nowadays Azerbaijan is courted by EU as the source of the Nabucco gas pipeline, and by America for the Baku-Tbilisi-Ceyhan pipeline. Fact is Baku is also in qualified talks with Russia state-owned gas giant, Gazprom, and is supposedly engaging indifferent talks to be able to obtain higher bids from the interested EU, Turkish, American and Israeli companies that have respectively stakes in Nabucco and Baku-Tbilibi-Ceyhan pipeline. This technique of exploiting Gazprom as a Bogeyman is already used by Nigeria (please see the following Analysis). The object of discussions is the Shah deniz gasfield, whose output is 20 billion cubic meters and is forecasted to raise to 50 bcm by 2020. The site is estimated to contain up to 1,300 bcm.

[...] Gazprom's previous greed may come back to haunt it. The company offered the European price for Azeri natural gas less the "costs of transportation" to the consumer. Azeri officials, who remember Transneft's "carrying charges" on the Baku-Novorossiisk pipeline, no doubt feel Western offers have additional appeal because of their transparency and the fact that engagement with Western companies produced the country's current prosperity.

On June 4 U.S. Deputy Assistant Secretary of State for European and Eurasian Affairs Mathew Bryza, speaking at the Caspian Oil and Gas-2008 conference in Baku, could not resist floating the idea that perhaps Gazprom did not have enough gas to fulfill its European contractual obligations, drawing an immediate aggrieved riposte from Gazprom spokesman Sergei Kuprianov, who sniffed, "Gazprom has always performed its contractual obligations, and there is no doubt that it will do so in the future," adding, "Gazprom's gas production in Russia has increased considerably over the past five years, unlike that of many other producers, including in the U.S."

(excerpt from Analysis: Gazprom wants Azeri gas By John C.K.Daly, UPI International Correspondent)