Azerbaijan won't wait much longer for Europe to build a planned gas pipeline to the Caspian Sea aimed at cutting the continent's deep dependence on supplies from Russia, Ilham Aliyev, president of the energy-rich Caucasus nation, said Friday.
"It's a good question, how long are we going to wait," Mr. Aliyev said in an interview at the World Economic Forum, "We have not a very big margin, not a very big amount of time to figure out what to do."
Mr. Aliyev said a Russian proposal made in July to buy Azeri gas at the border was "attractive," and is being evaluated. He complained that Azerbaijan already has been forced to delay the second phase of developing its Shah Deniz gas field by at least a year, due to uncertainty over whether the 2,000-mile Nabucco gas pipeline will be built.
Severe gas-supply disruptions triggered by a dispute between Ukraine and Russia this month seem to have hardened Europe's resolve to build Nabucco, said Mr. Aliyev, who attended a summit of the countries and companies involved in a project before he arrived in Davos on Wednesday.
A consortium of European energy companies including Turkey's Botas AS, Bulgarian Energy Holding EAD, MOL PLC of Hungary, Austria's OMV Gas & Power GmbH, RWE AG of Germany and Transgaz SA of Romania has been planning for Nabucco's construction since 2002. The pipeline would bring gas from the Caspian Sea region, and perhaps from Iran and Iraq, to the European Union via Turkey, skirting Russia. Strongly backed by the U.S., the pipeline is projected to cost 7.9 billion euros ($10.24 billion) and to carry 31 billion cubic meters of gas per year. On paper, it should be operational by 2014.
In a significant move on Wednesday, the European Union allocated 250 million euros to help launch the construction of the pipeline's first stage, which would bring eight billion cubic meters of gas to the EU from Turkey. Mr. Aliyev said significant additional financing would be needed, as the consortium partners wouldn't be able to shoulder it themselves.
Azerbaijan, however, doesn't have enough gas to fill the pipe on its own. Buying gas from nearby Iran is politically complicated and proposals to build a pipeline under the Caspian to connect big Central Asian producers are much less advanced than Nabucco. Those issues have made financing the project difficult.
Most of Azerbaijan's oil and gas export routes pass through neighboring Georgia, and were disrupted during Georgia's war with Russia over the summer. That conflict appears to have revived efforts to resolve Azerbaijan's own territorial dispute with neighboring Armenia, which took control of an area of Azerbaijan called Nagorno-Karabakh in a war in the early 1990s.
Mr. Aliyev arrived in Davos on Wednesday directly from talks with his Armenian counterpart, but said they had made no progress, merely clarifying their positions. Both Azerbaijan and Turkey have closed their borders to Armenia since the fighting over Nagorno-Karabakh, cutting a potential alternative route through the Caucasus to Georgia. Mr. Aliyev, however, said that was no incentive to get the Nagorno-Karabakh dispute resolved. "A route through Armenia leads to nowhere," he said.
Unlike many leaders in Davos, Mr. Aliyev expressed confidence that Azerbaijan will be lightly hit by the global economic downturn this year. The ex-Soviet country has grown at rates upward of 30% in recent years, and by around 11% in 2008. Mr. Aliyev said he expects growth of 10% to 12% this year.
An International Monetary Fund report issued in December forecast that nonoil sector growth would more than halve to 6%. The European Bank for Reconstruction and Development this week cut its forecast for Azerbaijan gross domestic product growth in 2009 to 8% from 15%.
Most of Azerbaijan's export income comes from oil. Those exports have been hit by falling prices and future oil-sector projects could be slowed by rising finance costs. Mr. Aliyev, however, was sanguine on this too. "Even if they do not happen, what we have now is enough for us," he said, noting that if necessary the Baku-Tbilisi-Ceyhan oil pipeline to Turkey could be expanded from a daily capacity of one million barrels to 1.5 million barrels a day.