The Armenia-Azerbaijan Conflict and the Pipelines That Run Through It

Officials in Washington are doubling down on their efforts to create a new energy corridor that runs through the Caucasus, a major transit route for trade and energy that connects Europe and Asia.

Focusing on Armenia and Azerbaijan, two countries at odds over land and history, officials in Washington hope to link the two countries with energy pipelines, despite Azerbaijan’s recent incursion into Nagorno-Karabakh, which resulted in more than 100,000 ethnic Armenians fleeing the territory in September.

“A transit corridor built with the involvement and consent of Armenia can be a tremendous boon to states across the region and to global markets,” State Department official James O’Brien told Congress in November.

U.S. Objectives

For decades, U.S. officials have pursued geopolitical objectives in the Caucasus. Viewing the region as a strategically important area that connects Europe and Asia, they have sought to integrate the region with Europe while pulling it away from Iran and Russia, both of which maintain close ties to the region.

“The Caucasus is tremendously important as a crossroads between Europe, Asia, and the Middle East,” Senator James Risch (R-ID) said in a statement last year. “Trade agreements, energy deals, infrastructure, and investment all have the potential to better integrate the region within the transatlantic community.”

At the heart of U.S. planning is Azerbaijan. Given the country’s extensive energy resources, especially its oil and natural gas, U.S. officials have seen Azerbaijan as the key to creating a U.S.-led Caucasus that will help Europe transition away from its dependence on Russian energy.

“We have been hard at work, along with our European colleagues, over the course of the last decade, trying to help Europe slowly wean itself off of dependence on Russian gas and oil,” Senator Christopher Murphy (D-CT) explained at a hearing in September. “Part of that strategy has been to deliver more Azerbaijani gas and oil to Europe.”

Another reason for the U.S. focus on Azerbaijan is its location. With Russia to the north, the Caspian Sea to the east, and Iran to the south, U.S. officials have seen the country as “the epicenter of Eurasia energy policy,” as U.S. diplomats once described it. The United States has worked to position Azerbaijan as the starting point for an east-west energy corridor that benefits the West and deters a north-south corridor that would work to the advantage of Iran and Russia.

For the United States and its European allies, the Baku-Tbilisi-Ceyhan (BTC) pipeline demonstrates the possibilities. Since 2006, the BTC pipeline has carried oil from Azerbaijan to the Mediterranean Sea, where it has been shipped to global energy markets. The pipeline is controlled by a consortium of energy companies headed by BP, the British oil giant.

“We need that to keep functioning,” State Department official Yuri Kim told Congress in September.

From the U.S. perspective, another major geopolitical achievement has been the Southern Gas Corridor. The corridor, which combines three separate pipelines, runs from Azerbaijan all the way to Europe. Since its initial deliveries of natural gas to Europe in 2020, the corridor has been critically important to keeping Europe supplied with energy during the war in Ukraine.

“That Southern Gas Corridor is extremely important for ensuring that there is energy diversity for Turkey, Greece, Bulgaria, potentially Albania, and definitely Italy, and possibly into the Western Balkans,” Kim said. “We cannot underestimate how important that is.”

A New Route?

As pipelines carry oil and natural gas from Azerbaijan to the West, U.S. officials have sought to reinforce the east-west corridor by creating additional pipelines that run through Armenia. Not only would a pipeline through Armenia add another route to the corridor, but it would pull Armenia away from Russia, which maintains a military presence in the country and provides Armenia with most of its energy.

For decades, one of the major challenges to U.S. plans has been the Nagorno-Karabakh Conflict. As long as Armenia and Azerbaijan have remained at odds over the region, U.S. officials have seen few options for integrating Armenia into a broader east-west energy corridor.

“If not for the frozen Nagorno-Karabakh conflict,” U.S. diplomats reported in 2009, “the Baku-Tbilisi-Ceyhan pipeline could have been routed through Armenia, reducing the distance and construction cost, and providing Armenia both an alternative source of gas as well as much-needed transit fees.”

In recent years, regional dynamics have rapidly shifted, however. As Azerbaijan grew flush with cash from its operations as an energy hub for the West, it began spending more money on weapons. With Israel and Turkey selling Azerbaijan increasingly sophisticated weapons, Azerbaijan built a large arsenal and acquired the upper hand over Armenia.

“Where other Western nations are reluctant to sell ground combat systems to the Azerbaijanis for fear of encouraging Azerbaijan to resort to war to regain [Nagorno-Karabakh] and the occupied territories, Israel is free to make substantial arms sales and benefits greatly from deals with its well-heeled client,” U.S. diplomats reported in 2009.

Emboldened by its growing power and influence, Azerbaijan made its move. As fighting broke out between Armenia and Azerbaijan in late September 2020, Azerbaijan’s military forces took advantage of their advanced weaponry from Israel and Turkey to capture the territories surrounding Nagorno-Karabakh.

Before Azerbaijan’s military forces could seize control of Nagorno-Karabakh, however, Russia intervened, brokering a ceasefire and deploying about 2,000 peacekeepers to the region. Although various observers portrayed the outcome as a victory for Russia, the deal did not last long.

This past September, Azerbaijan moved to take the rest of Nagorno-Karabakh, armed by additional supplies of Israeli weapons. Following Azerbaijan’s incursion, more than 100,000 ethnic Armenians fled the territory for Armenia, where they remain today.

Now that Azerbaijan has taken control of Nagorno-Karabakh, U.S. officials are renewing their efforts to persuade Armenia and Azerbaijan to forge a peace deal that could be the basis for a new energy corridor.

“There is business to be done in this region,” State Department official James O’Brien told Congress in November.

At the Start Department, officials have been reviewing U.S.-funded plans for building the new energy corridor. As O’Brien noted, “the feasibility studies on this transit corridor [have] actually been done, funded by [the Agency for International Development (AID)], so we’re in the middle of seeing what kind of economic future there may be.”

Obstacles

Several obstacles stand in the way of U.S. plans. One possibility is that an increasingly emboldened Azerbaijan will invade Armenia and take the territory it wants for new pipelines. If Azerbaijan continues to acquire weapons from Turkey and Israel, it could take Armenian land by force, something that U.S. officials believe could happen.

“I think, from what I hear, the Armenians are concerned and feel threatened by that corridor and what it might imply for another grabbing of land by Azerbaijan,” Representative James Costa (D-CA) said at the hearing in November.

A related possibility is that Azerbaijan could work more closely with Russia. As Russia maintains military forces in Azerbaijan, it could facilitate a move by Azerbaijan to take Armenian land for a north-south energy corridor that benefits Russia.

Although Russia maintains a security pact with Armenia, relations have soured over Azerbaijan’s seizure of Nagorno-Karabakh, making it possible that Russia will side with Azerbaijan.

Another challenge is the Azerbaijani government. For years, critics have charged Azerbaijani President Ilham Aliyev with leading a corrupt and repressive regime that has hoarded the country’s wealth while leaving the population to suffer.

In internal reports, U.S. diplomats have been highly critical of Aliyev. Not only have they compared him to mobsters, but they have suggested that the country “is run in a manner similar to the feudalism found in Europe during the Middle Ages.”

As critics have called on Washington to reconsider the U.S. relationship with Azerbaijan, some members of Congress have begun questioning U.S. strategy, particularly as it concerns the U.S. partnership with Aliyev.

The United States may have made “the wrong bet by moving more Azerbaijani resources into Europe,” Senator Murphy said in September. “This strategy of being dependent on a system and series of dictatorships… may not necessarily bear the strategic game that we think it does.”

Other members of Congress have questioned the State Department’s claims that a new energy corridor can bring peace to the region.

“I don’t see the peace process as going nearly as well as some of the description I’ve just heard,” Representative Costa said at the hearing in November. “It was ethnic cleansing that happened with the removal of these Armenians from their historic homeland in Nagorno-Karabakh.”

Regardless, officials at the State Department remain confident in their plans. Pushing forward with efforts to forge a deal between Armenia and Azerbaijan, they remain hopeful that they can create a new energy corridor that runs through Armenia, even if means that the ethnic Armenians who fled Nagorno-Karabakh will never be able to return to their homes.

“As we go from the medium to the longer term, there’s going to have to be some effort made to help integrate these folks into Armenian life,” AID official Alexander Sokolowski told Congress in November. “Many of them dream of going back to Nagorno-Karabakh, but for right now, they’re oriented towards making a life in Armenia.”