Concerns over Caspian pipelines grow as tensions surge along Karabakh frontline
The resurgence of violence between Azerbaijan and Armenians poses little immediate risk to the key pipelines that link European markets to the Caspian Sea, according to analysts from London to Washington, Artsakhpress reports citing Bloomberg. In a region where risk is the norm, “these sorts of localized difficulties tend to get shrugged off in the current environment,” according to Michael Hewson, a London-based analyst at CMC Markets Plc. Markets have not put any added risk premium on deliveries from the Caspian Sea to the Mediterranean, the focus instead remains on a global supply glut, he said. The fighting over the mountainous Nagorno-Karabakh enclave has killed and wounded dozens and raised concern that the conflict would spread in the region bordered by Russia, Turkey and Iran. A BP Plc-led underground oil pipeline, which carried 720,000 barrels a day from Baku to Turkey’s Mediterranean port of Ceyhan last year -- about the equivalent of Turkey’s total consumption in 2014 -- runs less than 30 miles from the conflict zone. The $45 billion Southern Gas Corridor, which will pump Azeri natural gas to Europe once completed, is at a similar distance. The battles threaten to reignite full-scale fighting in the Caucasus mountains, part of a new arc of instability along Russia’s border that stretches north and west from Nagorno-Karabakh through Georgia, Ukraine and further to Moldova. Fighting between Armenia, a Russian ally, and Azerbaijan, which has stronger ties to NATO member Turkey, would bring more turmoil to the region. Pipeline Threat The importance of the pipelines and the potential disruptions aren’t lost on the combatants. Levon Mnatsakanyan, defense chief of the unrecognized Nagorno-Karabakh republic, said that the oil pipeline would be one of the first targets of any new war. “This is a very serious financial resource for Azerbaijan and we need to deprive them of these means,” he said last year in an interview in the capital, Stepanakert. BP on Wednesday said the clashes haven’t affected operations at its pipeline. Brent crude prices have collapsed to almost a third of their levels previous to a 2014 decision by the Organization of Petroleum Exporting Countries to defend market share rather than cut supply. The full article is available here
