It is generally known that the growth of world oil prices is accompanied with the increase of market price for oil and gas assets and the entire oil and gas infrastructure, while the occurring regional crises make these resources an invaluable guarantor of any international security (with or without UN).

Though it may sound loud, but the current ‘axis of evil’ lying somewhere near the Caspian Sea (between Iran and Syria), which has already split G20 into two campuses: for offensive (12 countries against the incumbent Syrian regime) and against it (8 countries), raise significance to the Caspian resources. For the first 12 this is, undoubtedly, the factor of curbing, commeasuring invasiveness of possible military action and clearly defining its borders, for the leading of 10 countries it is one component to guarantee their regional security.

Therefore, the "axis of good" (following the well-known terminology), responsible for the preservation of the world's energy security and geopolitical balance is increasingly moving from the  unstable Near East-Mediterranean region along the perimeter of the Caspian-Black Sea-Mediterranean region, where major oil and gas assets and export infrastructure are located. And this invaluable resource, which influential world powers are lacking at times, is focused in Azerbaijan today.

It is this implication that forms the basis of all the recent visits of member-states of both G8 and G20 to Azerbaijan; namely Italian Prime Minister, the President of Russia, Prime Minister of Turkey and many others.

Over $ 40bn of investments of BP alone were attracted by Azerbaijan to the development of the fields in its Caspian sector:  Azeri, Chirag and the Deepwater part of Gunashli since the signing of the international Contract of the Century by national leader Heydar Aliyev on 20 September 1994. This Day is also declared the Day of Oilmen in Azerbaijan.

More than $ 10bn will be invested in the project of Trans -Anatolian gas pipeline (TANAP), $ 3 bn in further development of the Southern Corridor, $ 25bn in Phase -2 of the large-scale development of Shah Deniz field.

By 2020, Azerbaijan will be producing more than 40 billion cubic of natural gas. In addition to the contracted fields ( Shah Deniz , Absheron , Babak , Ashrafi and others (see "Rating of Caspian fields”, Caspian Energy No4 (79), the Azerbaijani sector of the Caspian Sea, according to geologists, accounts for more than 160 promising unexplored areas requiring advanced western technology.

The largest declared reserves are located either on the borders ( Azerbaijan-Turkmenistan - Kapaz - Serdar ) or close to the Azerbaijani - Iranian border sector (Araz -Alov- Sharq , Lerik Deniz Savalan , Janub , Dalgha and other) of the Caspian Sea .

The unsettled issue of the status of the southern Caspian Sea prevents development of cross-border deposits and requires a speedy political solution. Russia as a leading member of the negotiating process related the Caspian Sea is interested in its resolution as it has never been before. And the fact that the keys to solving the problem of "the status of the Caspian Sea" are in the hands of the Kremlin was demonstrated in 2001 when, during Vladimir Putin’s visit to Baku, the Russian side designated a sectoral principle section of the Caspian Sea for the first time in the post-Soviet era. However, the process is not yet gone beyond the borders of the Russian sector. But everything can change.

An agreement on creating of a joint venture between Rosneft and the State Oil Company of Azerbaijan signed during Russian President Vladimir Putin’s visit to Baku on 13 August is a new page in cooperation between the two countries…

Russia and Azerbaijan are energy producing and exporting countries. Our interests in this area are the same and the active cooperation and coordination of our efforts will considerably influence regional energy issues, the President of Azerbaijan Ilham Aliyev said at a joint news conference after talks with Putin.

In turn, the President of the Russian Federation also emphasized the importance of the signed agreements: he said “they have the prospect of 15 years, probably  20, it means , a good foundation is laid for cooperation for many, many years to come.”

SOCAR-Rosneft

If we speak about Azerbaijan-Russia relations as part of cooperation between these two companies we cannot say much. But the further work as part of this joint venture will be the main defining factor of cooperation between the two countries for the near future.

It is assumed that the future joint venture, with equity participation of 50% to 50 %, will be engaged in joint exploration and development of fields in the territory of Russia and Azerbaijan. It is also expected that the joint venture will be engaged in marketing of oil products and the sharing of relevant infrastructure, including pipelines and terminals.

In fact, today, when the Russian companies’ relations with their European partners are not perfect, specific agreements with Azerbaijan, which has no problems so far with the third energy package of the European Commission, are valuable.

Speaking of Rosneft, at present  this is probably the only company in Russia, concentrating the control share of oil and gas resources of a large state, possessing 40% (nearly 200 million tons) of oil, with BP as one of the major shareholders in its structure (19.75%) and the prospects for production of more than 100 billion cubic meters per year by 2020 (using the assets of the absorbed independent gas company Itera). Late in January 2013  Rosneft received licenses for 12 sites in the Barents Sea, Kara Sea, Chuckchee Sea and the Laptev Sea, and in February it expanded the scope of strategic cooperation with Exxon, the largest U.S. majors, thereby denoting his ambition to obtain advanced technologies for the extraction from the Arctic shelf.

The Caspian Sea stands aloof in the Rosneft’s lists of marine holdings. And here, of course, things can also change.

The joint venture with SOCAR will likely contribute to this. The cooperation is expected to be comprehensive, as the Russian company plans not only to get the Azerbaijani oil and gas assets, but also to use Azerbaijani transnational infrastructure for subsequent export. Considering the already existing Rosneft (inherited from absorbed Itera) assets in the Turkmen sector of the Caspian Sea (Block 21 with 700 billion of recoverable gas reserves at the stage of appraisal drilling), we can talk about the upcoming expansion of Rosneft to the Caspian Sea, which will invariably be accompanied with the solution to all political problems. Flags on the Caspian always follow the economy.

Russia is seriously concerned about the actions of the European Union related to the implementation of the provisions of the third energy package of the EU, the article of Russian Foreign Minister Sergei Lavrov, published in Journal of Common Market Studies Annual Review, runs.

The third energy package approved by the European Union in 2009 is aimed at the liberalization of electricity and gas market. It provides restrictions for vertically integrated companies in the ownership and management of energy transport networks.

“We certainly do not dispute the right of the EU to regulate markets, but we expect that they will respect international legal obligations. In the case of TEP, which is retroactive and applies to investments by Russian companies in the European Union, made before the adoption of this document, our partners have violated Article 34 of the Agreement on Russia –EU partnership and cooperation and Russia’s bilateral agreements with EU Member-States on promotion and mutual protection of investments”, the document says.

According to the minister, the “third energy package” has led to the accumulation of problems in practical cooperation: investment attractiveness of specific EU countries is worsening for the Russian business in Europe while systemic risks are increasing.