Ilham Aliyev

 Referring to disagreements over prices in talks with Turkey on the transit of Azerbaijan's gas to Europe, Ilham Aliyev said, "We have tried not to accentuate this over the past two years and to settle this within the framework of the talks. But our potential has been exhausted and these proposals can never be accepted," Ilham Aliyev told the cabinet sitting.

"We have to study alternative ways; there are countries around us that need energy sources," the president continued. "Today Azerbaijan is ready to export its gas to the EU. We have both the resources and the infrastructure for this. European countries are looking forward to receiving our gas. Our potential partners are Greece, Romania, Italy, Bulgaria, Hungary, Austria, Germany and Switzerland. All these countries are willing to buy our gas at world prices and we are willing to sell our gas. This is a mutually profitable project.

"Unfortunately, we haven't been able to do this for two years. This is because of our failure to settle the issue of gas transit with Turkey. We follow our national interests which rely on international practice with respect to both prices and tariffs. But everyone knows that Azerbaijan has been supplying Turkey with gas at prices that are three times as low as world prices. What country would agree to sell their resources at such prices? This is absolutely illogical."

The president said that the talks conducted since April last year have been ineffective, although Azerbaijan's gas reserves allow the country to be an irreplaceable energy supplier to Europe.

"The need for our gas is growing and will continue to grow and this is inevitable," the president said. "We are well aware of the potential of the European and world gas markets and that Azerbaijani gas will play a greater role as traditional sources of gas are being exhausted. Azerbaijan with its rich gas reserves is becoming an irreplaceable supplier for Europe."

We can sell our gas to Turkey if not at the price of Russian gas, then at least 8-10% lower, but a discount of 50% is unacceptable.

President Aliyev said that all markets are attractive to Azerbaijan but on condition that world prices and transit tariffs are proposed. "We build our work on world standards. When we make imports, we buy everything at world prices and do not ask for any privileges or discounts. Moreover, we have no debts to anyone and, thank God, we do not need any. But when we export our reserves, certainly, we want normal world prices and this is natural.

"We demand not even world prices but at least prices that would be closer to them. We can sell our gas to Turkey if not at the price of Russian gas, then at least 8-10% lower, but a discount of 50% is unacceptable. No country would agree to that."

He said that Turkey's stance on the tariffs is also hampering the second phase of the Shah Deniz field development which could at least double gas extraction up to 16 billion cubic metres per annum. "We are ready to start the second phase of the Shah Deniz field development. Investments in the country's economy as part this phase will hit 20 billion dollars. This is a good opportunity for us. But we have not been able to move on this for two years, as gas extraction is tied to the market. We need to agree on volumes, prices and gas markets before launching the development. The country's economy is losing a great deal, as an unattained source of income is a loss. Had we launched this two years ago, we would have already been producing gas and would have gained more. But we are losing time. What for?"

The president said that today the EU and individual countries are ready to buy Azerbaijani gas, while foreign companies that are partners on the Shah Deniz development are ready to start work. "They are ready to invest at least 20 billion dollars amidst the crisis. But these artificial obstacles are hindrances for us. The price is unacceptable and we won't sell our gas at this proposed price (by Turkey). We are also dissatisfied with the tariffs. The tariffs proposed for transit are 70% higher than similar rates in the region. Why should we accept that?" Ilham Aliyev said the issue was also a serious concern to "our European partners".

"The participants in the Shah Deniz consortium are also concerned, as the development contract expires in 2026. If we start development today, production will start by 2015 which will leave 11 years until the expiry of the contractual terms, while the field reserves are 1.2 thousand billion cubic metres. To produce this volume in 11 years means producing 100 billion cubic metres per year, which is impossible. The foreign companies are in a hurry - I understand them and share their opinion.

"The EU is also hurrying us. In these conditions, the unsettled transit issues and inadmissible terms offered to us might lead to a failure to implement this big, promising project. Therefore, we need to seek alternative routes and there are countries around us that need energy sources," Ilham Aliyev said.

In this respect, he cited the example of cooperation between the State Oil Company of Azerbaijan and Russia's Gazprom. "They have signed a contract on gas supplies to Russia beginning from 2010. The volumes are being coordinated between the two companies. We have started with smaller volumes, but we can raise them further. There are no transit countries between Russia and Azerbaijan, there is a gas pipeline; the price suggested to us is calculated according to the world formula and this is a good price. Is there a reason not to accept it? We maintain cooperation with Russia in other spheres, too. We buy and sell from one other at world prices."

"Iran is another option. We are also doing serious work on this issue. There are also no transit countries and there is a pipeline here, as well. Some work on infrastructure is required there; the gas pipeline needs to be repaired but this is just a technical issue. The Iranian market is quite large. They buy gas from Turkmenistan, so why not buy gas from us?"

Another option, he said, is to export gas via the Black Sea ports. "We are also discussing this. This is not our initiative, as in the case of gas sales to Russia and Iran. This project is still too immature. We have received a proposal and we need to study it. In fact, we agree to that. We had serious discussions during my visit to Romania and we are now in the process of discussions with Bulgaria."

"I have deliberately spoken in detail about this issue, as there has been some speculation about this. I want everyone to hear our position and take it into account," the president said.

News.Az