Dear colleagues,

Dear students,

Ladies and gentlemen,

It is a great pleasure for me to speak today in front of the audience of the 13^th Baku Summer Energy School. So, Ambassador Pashayev, thank you for inviting me. As the Minister of Foreign Affairs, it is my pleasure to speak and share my views, where Azerbaijan stands in terms of promoting its energy diplomacy in the region of the Caspian Sea and further beyond it.

I know that you have had a very rich program over the past two weeks. You had excellent speakers. There is probably very little for me to add about contracts, pipelines, or volumes of oil or natural gas. Yet, I would like to highlight few important points in my speech. So, the main question is – what does energy security mean for Azerbaijan? And how does it contribute or affect the act of balancing the regional politics?

For us, energy security is the ability to demonstrate resilience and withstand all risks in exploring, producing, and transporting hydrocarbon resources to the markets. Therefore, energy security depends on several factors:

• Energy security doesn’t happen only in the pipelines. In fact, it starts at the geology. If we cannot ensure balanced, sustainable, and bankable projects at the upstream, even before we lay pipelines, we cannot produce and sell. Risks are too high. Apart from geophysical or technological nature, they can be also of political nature. So, the task of our energy diplomacy is to offset the risks and create a favourable politico-diplomatic landscape for complex and multi-billion projects to succeed. Taking a diplomatic care of risks at the geology is important, because of a simple figure: between exploration and sales of energy resources, you have on average 10-15 years. Plus, transportation and lifespan of supply contracts of energy goods on average last in 30-40 years, or even for more. That all adds up to half a century. This is a minimum of a lifetime of a serious energy project. So, if you properly organize yourself in politics at upstream (in geology), you have got half of the success.
• Energy security is proportionate to security of demand – that is, how much the markets, the buyers of our energy resources need our crude oil or natural gas. That means the buyers need to create favourable political and regulatory environment for commercial supplies to take place. Therefore, politicians need to give incentives for us to supply and even stronger messages for us to supply more.
• However, success of energy security also depends directly on how you treat foreign companies. In this case, how you freeze fiscal, investment, and legal regime, so as to allow them to explore and produce for many years ahead in the environment which stimulates them and protects their rights of investors or partners. Azerbaijan has already done it and thus, proved its credibility as a predictable, politically stable partner. So, safeguarding a liberal investment and trade regime on energy projects is crucial for success. Here, I should emphasise that it was politically a bold decision and leadership quality of our then President Mr. Heydar Aliyev to open up to the world and foreign investments at the time of a regional turmoil and big uncertainty of what Azerbaijan should expect.
• Then comes the issue of pipelines. You heard about Southern Gas Corridor. The process around that set of strategic pipelines started back in 2011 with the signature of the Joint Declaration between Azerbaijan and the EU. That signature was a political, but it meant a lot for us and for our partners. That signature implies you take a commitment in front of your partner to do your best to bring natural gas to the border of the EU. The signature by the EU implies you create a favourable environment for pipelines or interconnectors to be built or to become available for energy supplies. However, before you construct, while you build, and after you start to supply, be it a molecule of crude oil or natural gas, at the end of the day it is a commodity. So, as a matter of fact, all we speak about energy (geology, security, pipelines, supplies) is the issue of trade. In order to protect its trade interest in the field of energy, Azerbaijan lays a web of pipelines and a set of agreements. So, it in terms of a strategic planning, partnership / coalition building, risk mitigation, that exercise demands a huge diplomatic support. It depends how you are able to use your political geography to minimize risks and increase a profit. Just like in business, when you invest and calculate a return on investment, so in diplomacy you invest with partners wisely and ensure a high return on political capital. It is not a zero-sum game. It actually must be a win-win formula. Pipelines are like living creatures. They get born and last in harmony in a trustful relationship with our partner countries. So, pipelines are a midstream, where transportation of goods happens. And we want to transport our energy volumes through the countries which are most friendly and supportive of Azerbaijan. Politically speaking. A pipeline is where a talk about energy security becomes most intensive. But this process must be creative and politically sound. No pipeline project can be successful commercially if it lacks a politically solid structure. And let’s not forget another pillar of our energy security architecture – that is, diversification of pipelines. The more extensive your network is, the less risks you have when facing energy flows disruptions. Future evolvement of regional energy architecture depends on development of reliable networks of interconnectors. However, bottlenecks still exist due to missing or underused infrastructure. There is under-investment in Europe in regional interconnectors. Therefore, we consider some interconnector infrastructures in Europe – like Interconnector Greece-Bulgaria, Ionian-Adriatic Pipeline and Interconnector Türkiye-Bulgaria - as potential projects in terms of expansion and promotion of Southern Gas Corridor to further markets and ensuring long-term stable and reliable gas supplies aimed to improve energy security and economic cooperation.
• Energy security is also about market access. It is not only how you produce and transport energy goods. It is also about how successful you are in reaching and entering the market. And Azerbaijan, in fact, is not a sole producer or transporter, but an active supplier who looks for markets, studies markets, and wants to use and even create market opportunities. That is difficult to achieve if you don’t know the market, a legislation or regulatory mechanism which govern it. Market access is also a trade matter. So, diplomatically whenever we can and should, we produce a politico-legislative support diplomatically. One of the tasks of our energy diplomacy is to read political processes in the markets, produce a political forecast, and advise on how to ensure a steady flow of energy goods or energy investments in the markets. So, Southern Gas Corridor for Azerbaijan is not just a pipeline. It is more than just that – it is our target of a market access to Europe.
• Last but not the least, and perhaps the most important. For Azerbaijan, energy security is a matter of national security. Our philosophy is based on the belief that energy resources should add a critically important value to our national security and also create an atmosphere of a stronger politico-economic cooperation for all interested participants, who share Azerbaijan’s vision of a regional stability and development. If you google things on sovereign rights, you can find a lot of literature on “permanent sovereignty of States over their natural resources”. That says much about the issue of sovereignty over exploration, production, and use of those resources. So, when and how you share your natural (energy) resource with who is a matter of national security. First things first: national security is a priority; business and markets come only after that.

So, as you see, there are some challenges in tackling energy diplomacy and balance out in terms of various interests in the region. Actually, diplomats should be able to turn those challenges into opportunities.

 The projects we initiated and promote will not only play a vital role to ensure the political independence and economic prosperity of Azerbaijan, but also will contribute to the overall development of the region and expansion of political and trade relations between Europe and Asia. They make Azerbaijan resilient. They make our partners resilient. Take Southern Gas Corridor for example. Under its umbrella, it brings together a producer country (Azerbaijan), transit countries which are associate partners and candidates to the membership of the EU, and consumer (Europe).

Thank you for your attention.