France Sees Escape From Russian Energy Dependence in Azerbaijan

The village Buduq in Azerbaijan (region Quba)  via Wikipedia - CC BY-SA 3.0

The village Buduq in Azerbaijan (region Quba) via Wikipedia – CC BY-SA 3.0

[All links lead to French-language pages unless otherwise noted.]

Observers of French President François Hollande's recent visit to Azerbaijan have been trying to assess its significance. Much has been said about France's anxiety to reduce its energy dependence on Russia; less, however, about France's energy policy strengths, desirable to an Azerbaijan eager to diversify its economy and develop the renewable energy sector.

Russia is currently the largest provider of hydrocarbons to the European Union, with France relying on the country for a quarter of its gas, a situation not expected to change in future. Even so, France is not the most dependent country on the Russian supply. The European Commission estimates that within 20 or 30 years, 70 percent of the energy needs of the European Union will have to be met by imports compared to the current share of 50 percent.

Experts are more concerned about Russia's ability to honor its European Union oil supply commitments, as its domestic consumption increases and other countries strive to exploit new deposits in the sector, than about the potential for energy blackmail.

This is the context behind Hollande's Azerbaijan visit on the 11 and 12 May 2014. Azerbaijan plays a leading role in transportation of energy resources to European and global markets from the Caspian Sea basin. The country has considerable gas and oil reserves – enough for a century, according to President Ilham Aliyev – and constitutes an alternative source of supply to Russia.

 capture d'écran de la vidéo du président François Hollande reçu par le président Ilham Aliyev via AzerTac English sur YouTube

Video screen capture of President Hollande being received by President Aliyev via ‘AzerTac’ on YouTube

One of the first subjects tabled by Hollande was energy. The president has highlighted the ‘strategic role’ of Azerbaijan in the supply of Europe and its ‘energy security’. From a win-win perspective he offered the Azerbaijani authorities French expertise in the field of civil nuclear power and renewable energies. The president recently stated:

Je ferai en sorte avec nos principaux partenaires européens de mener à bien dans les années qui viennent cette sécurité énergétique et cette diversification des sources d’énergie 

I will ensure, with our main European partners, that in the years to come we will carry through this energy security and diversification of energy sources

While Europe is dependent on the oil and gas of countries rich in these resources, Azerbaijan is dependent on the price and volume variations of hydrocarbons as petroleum products comprise over 90 percent of its exports. Since gaining independence in 1991, the GDP of Azerbaijan has continued to grow, with an average growth rate between 1996 and 2011 rising to 11.8 percent and reaching a peak of 34.5 percent in 2006. However, the 2011 crash (0.1 percent growth) highlighted the fragility of the single-sector economic model as that year's reduction in oil production was not offset by the growth in other sectors.

Thierry Mariani, a French member of parliament, stated the following during a 2013 speech:

Afin d'être moins tributaire de ces variations de volumes et de prix des hydrocarbures, l'Azerbaïdjan a engagé un processus ambitieux de diversification de son économie vers des secteurs non pétroliers, comme l'agro-alimentaire, le développement durable, les infrastructures et les hautes technologies. Dans tous ces secteurs, la France dispose d'atouts considérables, qu'elle pourrait utilement développer si elle pariait sur l'essor économique de l'Azerbaïdjan 

In order to be less dependent on these variations of hydrocarbon volume and price, Azerbaijan has engaged in an ambitious process of diversifying its economy in other sectors, such as food agriculture, sustainable development, infrastructure and high technologies. France has considerable strengths in all these sectors which could be usefully developed if it gambled on the economic development of Azerbaijan

Among sectors that Azerbaijan is keen to develop are energy technologies. The Department of Energy is set to invest $7 billion in the renewable energy, it stated in 2013. Tax exemptions will be given to encourage business start-ups.

French expertise, particularly in wind and solar energy, could help Azerbaijan, whose 2012-2020 national strategy for alternative and renewable energy development is two-phase: the first phase focusing on solar energy development, the second on wind energy.

Both France and Azerbaijan need to reduce their energy dependency – France is dependent on Russia, Azerbaijan on its 90 percent hydrocarbon-based economic model.

French-based utility company Suez Environnement recently announced the signing of a 22.5 million euros ($30.7 million US Dollars)  contract with the Azerbaijan National Water Company. The group hopes to go further and extend the cooperation ‘to other priority subjects such as soil decontamination, in particular that of land contaminated by hydrocarbons’, ecological problems being taken seriously in Azerbaijan. French multinational Alstom has also won a 300 million euro ($409 million US dollars) contract to supply 50 freight locomotives to the Azerbaijan Railways company.

Similar agreements are possible in the renewable energy sector in view of the willingness of the country's authorities to engage with the topic of energy.

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