Gas and border issues for Medvedev in Baku

Russian energy giant Gazprom beat out European rivals to clinch a deal securing gas supplies from Azerbaijan. The agreement was signed in the presence of Presidents Dmitry Medvedev and Ilkham Aliev.

It has not been disclosed what the actual sum of the deal is, but both sides emphasized the agreement’s significance.

This is something Moscow had been attempting to achieve for years, and numerous talks between state officials from both sides and between the respective energy companies preceded the deal.

Therefore, the deal that was signed today is a very significant step in the development of bilateral relations, and is equally important for the international energy market.

President Medvedev and his Azerbaijani counterpart, Aliev, have stressed that this deal is not political, saying that it could perhaps set a benchmark for how future deals in the energy sector will be made, with the main focus on their commercial value.

“These agreements give us hope for the future, because two countries which view energy carriers as one of their basic national assets are not only able to reach an agreement in a civilized way, they even consider the future,” President Medvedev stated.

“Furthermore, they do this not due to some political motive, but because it is mutually profitable,” he added.

“Mutually profitable” was the catch-phrase of the talks between the Russian and Azeri presidents, and of a subsequent press conference.

“The agreement is purely commercial, which is crucial, because recently there’s been a far-fetched and unfounded tendency to politicize gas issues,” said President Aliev, echoing his Russian counterpart.

Both presidents have also stressed the fact that this deal is something very important not only to Russia and Azerbaijan, but also to the European energy market.

Strategically located between Europe and Asia, Azerbaijan wanted to make the best use of its location, and for a while played off of both Russia and various European states, which wanted access to the country’s vast natural reserves of oil and gas.

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For a long time, Baku was interested in the European Nabucco gas pipeline project, which was a rival to Russia’s South and North Stream pipelines. Nabucco would diversify the routes of gas supplied to Europe and therefore lessen the continent’s dependency on Russian gas. It was planned to go through the Bosporus and Dardanelles Straits, bypassing Russia.

However, the Nabucco project has yet to be confirmed, and Baku seems to be interested in stepping away from it by broadening and intensifying its relations with Russia.

Both Moscow and Baku seem to be convinced that this deal will help Russia boost the attractiveness of its South Stream project, because Azerbaijan is incredibly rich with gas. And with Gazprom ready to start buying as soon as January 1, 2010, the country will be able to offer a lot more to its European customers, and therefore increase the potential of the South Stream pipeline.

According to Gazprom CEO Aleksey Miller, Azerbaijan has received “a very good and commercially profitable price.” It was, perhaps, the trump card that he had spoken of previously.

The EU, Iran and Israel had also expressed interest in gas from the offshore Shah Deniz field, but Gazprom plans to buy all of the gas produced there.

After their talks, the two presidents also signed joint statements on the Caspian Sea, the main principles for completing delineation of the countries’ shared border and the distribution of water resources from the Samur River.