Conflict In The Caucasus? Azeri-Armenian Relations To Turn Nasty?

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Oil & Gas Top 10s
01/01/2016

Few people know how to pronounce Nagorno-Karabakh, let alone where it is in the world. This may all change in 2016, as tensions in this 4,400 km²disputed area reach boiling point and spill over into bloodshed.

From 1988 to 1994, an ethnic war played out in the South Caucasus Mountains between ethnic Armenians in Nagorno-Karabakh supported by the Republic of Armenia, and the Republic of Azerbaijan. The conflict claimed the lives of some 36,000 combatants and displaced some 1.2 million citizens on both sides, culminating in an Armenian military victory and the de facto establishment of the extant - but largely unrecognised - Nagorno-Karabakh Republic. Sporadic clashes have flared up in the past two decades, but 2015 saw the first major artillery exchanges since the Nagorno-Karabakh breakaway.

Heightened hostilities in the region could bring Armenia and Azerbaijan’s regional "protector states" into play, two nations that are already at loggerheads: Russia and Turkey. As if the potential of a Russo-Turkish confrontation on two fronts weren’t enough to worry the world, this could have serious ramifications for energy in Europe. The Trans-Anatolian Natural Gas Pipeline, set for completion in 2018, will be a hydrocarbons artery running through Azerbaijan, Georgia and Turkey. It forms an integral part of the "Southern Gas Corridor" (SGC), a European Union initiative conceived to bring plentiful Azeri and Central Asian natural gas to continental European buyers.

The SGC project was imagined as "a new Silk Road", a transmission superhighway that would allow European states to lessen their dependency on Russian gas reserves. Should 2016 see the Armenians and Azeris facing off in a hot war, it is likely that this will play into the hands of Russian gas producers and hamstring another European attempt at energy
security independent of the Kremlin.

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