After Crimea: Aliyev to the rescue?

For the next 18 years Malta’s gas supply will be dependent on the kleptocratic Azerbaijan.

It was a sure sign of closer relations between the two countries that saw Prime Minister Joseph Muscat send Azeri ruler Ilham Aliyev his personal congratulations on his birthday. But then again, Malta is not alone in turning a blind eye to a deteriorating human rights situation in the former Soviet republic by fostering strong energy ties.

In its desperate bid to diversify its gas supply and move away from Vladimir Putin’s Russia, the European Union is also moving in that direction. Human rights issues were completely sidelined in a meeting between EC president José Barroso and Azeri president Ilham Aliyev, which preceded an agreement envisioning a gas pipeline linking Europe and Azerbaijan in September.

It was the Southern Gas Corridor that was important in their 2013 meeting, rather than challenging Aliyev’s statements on Azerbaijan having no political prisoners – giving Aliyev “an easy ride on human rights” as EU Observer journalist Andrew Rettman noted.

How would Malta import gas directly via pipeline if the LNG tanker is to move out of Marsaxlokk within the next eight to 10 years? And who will own the pipeline’s infrastructure?

The EU has in the meantime suspended talks on the South Stream pipeline, meant to carry gas to central and southern Europe from Russia. In an attempt to break free from its dependence on Russian gas, the EU now risks a new dependence: unpredictable and autocratic dynasties, and transit countries like Turkey.

Azeri pipeline

In Brussels last week, Muscat hinted that recent political developments in Russia had strengthened Europe’s resolve to diversify energy sources and go for new interconnections. He said the EU’s position in favour of Azerbaijan would benefit Malta’s own position, given that state-owned company SOCAR forms part of the ElectroGas consortium supplying LNG to a new 215MW plant and the Delimara phase II turbines.

The dash for gas: Azeri gas passing straight to Italy and bypassing the troubled Ukraine and Russia

Now the EU is presently considering a gas pipeline starting from Azerbaijan, passing through Albania, and into Puglia in Italy. 

While Muscat says the government is in agreement with ElectroGas to remove an LNG tanker from Marsaxlokk once a pipeline is in place, what’s unclear is how this move would impact the 18-year gas agreement: Enemalta must purchase its gas from ElectroGas, which in turn must get its gas from SOCAR. But questions to energy minister Konrad Mizzi on the compatibility of a pipeline with the 18-year agreement have remained unanswered for the past three weeks.

How would Malta import gas directly via pipeline if the LNG tanker is to move out of Marsaxlokk within the next eight to 10 years? And who will own the pipeline’s infrastructure?

Muscat has hinted that an Italo-Malta or North African pipeline could happen within eight to ten years, when Malta is still bound to ElectroGas. If the latter company will own the pipeline, the island’s dependency on Azeri gas could be of a more permanent nature than the 18-year agreement.

The rise of the Aliyevs

The Azeri ruling family Aliyev (no relation to Kazakhstan’s Rakhat Aliyev) has held onto power in Azerbaijan for the past two decades through fraudulent elections. Over the past two decades they have arrested and beaten opposition candidates and curtailed basic media freedom.

Ilham’s father Heydar Aliyev, a former KGB officer who led Soviet Armenia between 1969 and 1982, became president in 1993, following a military coup. In 2003, he was forced to withdraw from the presidential elections due to ill health and his son stood and won instead. The elections were widely recognised as fraudulent.

But the Azeri government has deployed its resources in public relations in an attempt to project the country as a model democracy.

Elections held in December 2013 were deemed free and fair by Malta’s own Speaker of the House Anglu Farrugia, but condemned as fraudulent by OSCE (Organisation for Security and Cooperation in Europe). 

Seven MEPs have been investigated by the European Parliament for allegedly being paid by Azerbaijan to say its elections in October were “free and fair”, when OSCE’s report highlighted “heavy rigging” and “serious problems” over freedom of expression.

Whilst I look forward to stronger cooperation between our two countries, I extend to you Your Excellency the assurances of my highest consideration Joseph Muscat

Although the MEPs were found guilty of breaching guidelines on travel and expenses – because their trips were sponsored by the Society for the Promotion of German-Azerbaijani Relations (GEFDAB) – no further action was taken against them by European Parliament president Martin Schulz, who insisted that a warning was enough.

In contrast to widespread misinformation peddled by these MEPs, a Council of Europe parliamentary report co-signed by veteran Labour MP Joe Debono Grech, and Spanish MP Pedro Agramunt expressed concern at the announcement of a seven-year jail sentence of two opposition politicians: Ilgar Mammadov, the leader of the Republican Alternative Movement, and Tofiq Yagubli, the deputy head of the Musavat Party.

The report was issued just days after President George Abela, the Prime Minister’s wife Michelle Muscat and Education Minister Evarist Bartolo attended the official opening of a photographic exhibition by Aliyev’s daughter Leyla.

Leyla Aliyeva hosted by Malta's President George Abela

Despite the participation of high-level government members, the opening was not announced to the press.

Muscat’s letter to Aliyev

Despite international condemnation of the fraudulent election, Joseph Muscat finds time to congratulate Aliyev on the occasion of his birthday, congratulating him on the start of his third term as President of Azerbaijan. “I am confident that we will continue building on efforts that will strengthen the ties between our two countries both bilaterally as well as through regionally and multilaterally, particularly with the EU.”

Muscat also assured Aliyev of Malta’s commitment to support Azerbaijan`s progress under the Eastern Partnership and the European Neighborhood Policy. “Whilst I look forward to stronger cooperation between our two countries, I extend to you Your Excellency the assurances of my highest consideration,” Muscat wrote in a letter accompanying others from Putin, deposed Ukrainian president Viktor Yanukovich, Latvia’s Andris Berzins, Bulgaria’s Rosen Plevneliev and a number of US congressmen and senators.

What effectively cemented the Aliyev dynaty’s grip was 1994’s ‘contract of the century’. 11 corporations, including BP, Amoco, Lukoil of Russia and SOCAR, formed a consortium to extract oil from the Caspian Sea.

The power of gas

What effectively cemented the Aliyev dynaty’s grip was 1994’s ‘contract of the century’. 11 corporations, including BP, Amoco, Lukoil of Russia and SOCAR, formed a consortium to extract oil from the Caspian Sea.

The money from that oil not only made these corporations huge profits, but also gave the Aliyev family vast wealth and important allies overseas. The oil revenue means the regime is not dependent on taxes, so there is little incentive to pay attention to citizens’ voices or interests.

The money from the oil industry is supposed to be controlled by the State Oil Fund for Azerbaijan (SOFAZ), which was intended to finance the transition of the Azeri economy away from oil and to ensure the wealth was kept for future generations.

Instead much of it has been pumped into construction. As Ibrahim Ibrahimov, mastermind of a number of these mega projects, told the New York Times: “We will create this big building, and then it will, by itself, by the very mere fact of its existence, bring cash.”

The Dubai-inspired sea city known as the Khazar islands is currently under construction. A series of artificial islands in the shape of a lobster will host hotels, a yacht club, an airport and the world’s tallest building. Plans are also underway for a Formula One racetrack and a new Disneyland, perhaps evoking another sinister parallel between the Aliyev regime and Malta’s obsession with construction and land reclamation projects.

Repression and blackmail

Azeri journalist Khadija Ismayilova has linked many of the construction projects with the president and his family. These include the building of Crystal Hall, which played host to the Eurovision Song Contest in 2012, and the nearby State Flag Square, which cost $38 million. Two-thirds of the cost of the square in Baku came from the reserve fund of the head of state and the other third from the 2011 state budget, yet it was companies connected with Aliyev that profited.

Ismayilova’s part in exposing the personal profits made by the Aliyev family has led to her being blackmailed. A tape of her and her boyfriend having sex filmed from a camera hidden in her flat was published on the Internet and followed by a smear campaign and harassment by government officials at public events.

The dash for gas

Europe’s dash for gas has seen the UK support the drilling of 26 new gas wells in the BP-operated Shah Deniz field off the coast of Azerbaijan.

A proposed pipeline from the BP terminal at Sangachal will see the gas move across Azerbaijan and Georgia into the Trans-Anatolian pipeline, across the entire length of Turkey, to the border with Greece, Albania and finally end in Italy.

The winners? With Russian gas cut out, oil dictator Ilham Aliyev would cement his rule while Turkish president Reccep Erdogan can strengthen his authoritarian grip as his country becomes an indispensable transit route for Azeri gas to Europe.

Buyers of Azeri gas from the Shah Deniz II project include Shell, Bulgargas, Gas Natural Fenosa, Greek DEPA, Germany’s E.ON, French GDF Suez, Italian regional utility Hera Trading, Swiss AXPO and Italian Enel.

European buyers have struggled to find alternatives to Russia’s Gazprom, whose contracts link prices to oil, making it expensive compared to the spot market.

Gazprom covers a quarter of Europe’s gas needs with over 150 billion cubic metres (bcm) in exports, annually. In response to Europe’s quest for a Caspian supply, Gazprom proposed its $39 billion South Stream project, to pipe gas to northeast Italy by 2015.

By 2019, Shah Deniz will feed 16bcm to Europe, of which six bcm will go for Turkey alone. Eight billion cubic metres will go to Italy, and then fed off to European buyers.

Azerbaijan is wary of cutting its Russian ties, but voted in favour of a UN resolution condemning the annexation of Crimea. So far, it has resisted from signing an EU association agreement so as not to further antagonize Russia.