Ursula goes to Baku...

The European Commission’s decision to sign a new energy memorandum of understanding with Azerbaijan, in a bid to move Europe away from Russian fossil fuels, has inevitably stirred a hornet’s nest locally. Unsurprisingly, former premier Joseph Muscat relished the moment, depicting the EU agreement as vindication of his own energy policy, recalling how “we were hauled over the coals for our cooperation with Azerbaijan, years before other countries did.” 

But while Muscat is justified in saying that this agreement shows that he was no pariah in seeking energy cooperation with an autocratic regime, he is also conflating two very different issues. 

For in reality, the cornerstone of Muscat’s energy policy was not securing gas from Azerbaijan, as the EU is doing; but that of purchasing LNG through fixed-price agreements with Electrogas, a company partly owned by Azeri company SOCAR trading.  

In reality SOCAR Trading does not procure LNG from Azerbaijan, but buys it from the international market in the same way as other energy companies like Shell do. In this set-up, SOCAR Trading acts as a middleman selling LNG procured from the international market to Electrogas, which in turn sells electricity produced in its power station to the national grid; and LNG to Enemalta, to operate the older BWSC power station. 

This raises the question: why doesn’t Malta procure its LNG directly from the international energy market? And what will SOCAR’s role be once a hydrogen/gas pipeline is developed?  

While Labour is right in in saying that the fixed-price agreement has cushioned the impact of the current global hike in energy prices, the situation was different before 2017 when oil and gas prices were in free-fall. 

Nor can one ignore the trail linking Azeri nationals to 17 Black, a secret company owned by Electrogas boss Yorgen Fenech. The truth is that the problem, in this case, was not that of ‘buying energy from Aliyev’ (for Malta never did); but that of sourcing the country’s energy supply to a company whose owners have left fingerprints on a trail leading to secret companies, in activities which suggest corruption and money laundering.

This has nothing to do with procuring gas from Azerbaijan. But it has a lot to do with opening the floodgates for Azeri money through dubious channels like Pilatus Bank, and actors like Keith Schembri and Yorgen Fenech, who were too close to Muscat for comfort. 

Still, there is a grain of truth in Muscat’s assertion that he was singled out simply for securing agreements with the Aliyev regime. For local criticism of Muscat’s energy deal had focused too much on associating him with a corrupt dictatorship, in an attempt to shame him. And while Muscat’s visit to Azerbaijan in 2014 was shrouded in secrecy, in contrast to the EU’s more transparent dealings, reality shows that democratically-elected governments inevitably end up cosying up to autocrats in their bid to secure their country’s energy supply. Biden’s recent visit to ‘pariah state’ Saudi Arabia – in which he paid homage to a crown prince who, according to the CIA, had approved the brutal murder of the journalist Jamal Khashoggi – is a case in point. 

The EU’s deal with Azerbaijan is another example of realpolitik, and it is not a new phenomenon, either. Former EC President José Manuel Barroso had already signed a Joint Declaration with President Aliyev, on the Southern Gas Corridor, in Baku in January 2011.    

So the question facing the West is: is it substituting one powerful demon (Putin) with a host of minor demons? This dependency on unpredictable autocrats is in itself dangerous, as it makes Europe dependent on dictators who inevitably use energy deals as leverage to whitewash their reputation, and to play the big powers against each other to their benefit.  

Of course it is naive to divide the world into a law-abiding west, and a corrupt east: western companies, especially energy companies, have been chief beneficiaries of corruption exported elsewhere, and as the Maltese example shows, the network of offshore companies linking the corrupt includes politicians and businessmen on both sides of the divide.

The sad reality however is that while Europe is literally burning in record temperatures, it still has not found a way out from a dependence on fossil fuels. The risk is that the construction of new pipelines and fossil fuel infrastructure will not only bolster dictators, but will further delay the transition to home-grown renewables, which offer the only sustainable way to mitigate the climate crisis.

At the same time, one has to recognize that with no end in sight to the war in Ukraine, governments cannot afford to condemn their populations to the freezing cold once winter sets in.

And while this is a reminder that when it comes to energy realpolitik, one cannot simply look at the world in black or white terms; we should not forget that what led us into this dark spot in the first place was closing an eye at the Putin regime and the oligarchy which backs him. 

As Maltese, while we cannot afford to be holier than the Pope, we should by now also be aware of the danger of playing with fire.