Institute for War and Peace Reporting | Giving Voice, Driving Change

Azeris Hit by Gas Shortfall

A wrangle between Russian suppliers leaves Azerbaijani consumers cold.
By Nurlana Gulieva

For all its ambitions to be a gas-exporting country, Azerbaijan has not had enough gas to heat its own citizens this winter.

"At the beginning of February the gas was switched off in my house for 10 days, although we don't owe anything to the gas company," complained Sanubar Allahverdieva, a Baku resident. "Let's suppose we manage to use electric heaters to keep the home warm - but what will we cook with? God only knows what our government is thinking about."

The last few months have been very cold in Azerbaijan, and due to inadequate heating, many pupils have not been coming to school. Hospitals have operated in freezing temperatures.

"The doctors' hands start to freeze during operations," said the nurse in one Baku hospital. "There was one case when one of our patients was giving birth and her hand was trembling from cold."

The cuts in supply are the result of problems with Russian gas deliveries which Azerbaijan has contracted to fill the gap between its own production and the amount it needs.

Azerbaijan needs roughly 12 billion cubic metres a year to keep homes warm and industry running. Although it is a producer, it extracts less than half this amount - 5.2 billion cu m last year.

In 2006 gas from the major Shah Deniz field will start running down the new Baku-Tbilisi-Erzerum pipeline, but it is not yet clear how much of the Shah Deniz gas will go to local needs and how much will be used to earn export revenues.

Right now, the city authorities in Baku and the gas supply company Bakgaz admit that they simply do not have enough fuel. "We need 100 million cubic metres of gas a day, but now we are releasing only 80 million cubic metres," Nusrat Gasymov, the head of gas supplier Bakgaz, told journalists. "So naturally we cannot supply gas to homes in sufficient amounts."

Outside Baku the situation has reached critical levels, with very little gas reaching the population and widespread reports that people have stopped paying their gas bills in protest.

"There is no gas in the villages around the capital," a Bakgaz official said. "The gas we send there is 'snatched' by greenhouse owners [growing flowers for export] and used illegally for their businesses, even though they pay absolutely nothing for it."

Last year, the Russian firm Itera was the country's sole outside supplier of gas, providing four billion cubic metres. Even that was not enough, as Azerbaijan estimates it needs six billion cubic metres to meet the shortfall, most of it to fire power stations.

At the end of last year, Itera and the giant Russian producer Gazprom both signed agreements promising to supply Azerbaijan with gas at the relatively cheap rate of 52 dollars for 1,000 cubic metres. They promised to sort out delivery arrangements between themselves so as to ensure the agreed amount was supplied.

However, so far this year Itera has not delivered any gas to Azerbaijan at all. The company blames the lack of transport infrastructure to take the gas from Central Asia to the North Caucasus and across to Azerbaijan. The pipeline system is managed by Gazprom.

Meanwhile, Gazprom itself - to be more precise its filial company Gazeksport - is fulfilling its obligations and delivering 15 million cubic metres of gas a day to Azerbaijan.

President Ilham Aliev met top Gazprom officials at the end of January and discussed whether Gazprom could increase its supply to relieve the shortage. But so far there has been no substantial increase in supply.

"As for increasing imports to six billion cubic metres, that depends on whether we can increase the gas-transporting capacity of the Uzbek section, as we are planning to do," Alexander Medvedev, general director of Gazeksport told IWPR in Moscow. "If that happens, Itera can join in the supplies."

This means in practice that the shortfall of gas will not be covered until this summer at the earliest.

Baku residents are not impressed, saying their government should have anticipated the problem. "Our officials don't understand that ordinary people are not interested in the intrigues of Itera and Gazprom," said economist Zaid Mamedov. "The state guarantees their security and normal life, and it has become the victim of competition between two Russian companies."

Mamedov says that the crisis proves that Azerbaijan needs to find alternative sources of natural gas, because dependence on Russia is proving costly in both political and economic terms. The country should also give up plans to export its Shah Deniz gas, he said, and should discuss buying gas from Iran to supply its southern regions and the exclave of Nakhichevan.

"By having these levers of influence over us, Russia can demand payback," said Mamedov. "That is unacceptable. We mustn't turn into Belarus, which completely depends on Russian gas."

The main advantage of Russian gas is its low price. But it is unreliable, and another factor - the risks of transport via Chechnya - are making it even more so.

On February 25, Gazprom's subsidiary in Chechnya, Chechengazprom, publicly warned that it was about to cut off gas supplies across the Caucasus mountains to Georgia and Azerbaijan because of a disagreement over terms for a transit contract.

Gazprom officials say such warnings have been made in the past, and the threat is not to be taken seriously. "Everyone knows that this is difficult territory [Chechnya], but last year the whole quantity of gas - four billion cubic metres - passed through it without any problems and I hope that all the problems will be sorted out this year," said Gazprom's Medvedev.

Spring is not promising any rapid improvements. An official with Azerbaijan's meteorological service said the cold weather was set to continue at least until the middle of March.

Nurlana Gulieva is a correspondent with Ekho newspaper. Rufat Abbasov works for Reuters in Baku.