Azerbaijan Runs Out of Oil- Then What?

BY GAREN YEGPARIAN

War. With the Republics of Mountainous Karabakh and Armenia. That’s what!

Here’s how and why.

By all accounts, Azerbaijan’s oil will run out, practically speaking, in a little more than a decade (most comprehensively explained in Alec Rasizadeh’s “Azerbaijan’s Chances in the Karabakh Conflict.” This doesn’t mean there won’t be any oil left underground. It means that given how much oil remains, where it is, the equipment installed to extract it, the expense of upgrading that equipment to be able to retrieve more of it, it will not be cost effective get what remains. Of course new finds might be made, possibly some that are retrievable through fracking. Newer, better technology might come on line. The price of oil could go up making it economical to invest more and go for hard to reach deposits. Regardless, the end of Azerbaijani oil is near. And the decline in production (which peaked in 2010) has begun. Take a look at the accompanying graph and table, which is not comprehensive, but shows various indicators of reduced oil production.

Azerbaijan also has natural gas reserves. Baku is now negotiating with the big, international, companies to determine which one(s) will get the contracts. As part of these upcoming deals, the Azeris will also try to wangle improvements to the oil infrastructure they now have in place so more of the remaining oil can be extracted. In all this Aliyev might overplay his hand (explained in an October 12, 2012 Forbes article titled “Is BP On Borrowed Time In Azerbaijan? Yes, But So Is Baku.” This will buy the thieving leaders of the country a few more years.

Eventually, the fossil fuels will run out. The billions of dollars pouring into the country will stop. Along with that, so will the crooked leadership’s ability to pacify the populace through money. Then what will they do? Of course, like all petty tyrants, forceful repression will ensue. Riots, beatings, civilian deaths will ratchet up the tension. What do leaders anywhere do in such cases? They will find or create a distraction. War with an external enemy tends to mute internal dissent. So Aliyev will attack Armenian positions, or try to provoke an Armenian assault so he has an excuse to “retaliate” and start the war he desperately needs.

There’s also another reason that Azerbaijan would start a war at such a point in its oil/gas history. Already, Azerbaijan’s budget deficit is set to increase from $880 million in 2012 to $2140 million in 2013. With the flood of money drying up, its ability to continue its weaponry-purchasing binge will end. Arms and munitions get old, replaced by better technology. So, Azerbaijan would have an incentive to use what it already has before obsolescence takes its toll.

The trick for Armenians will be to prevent that war from starting for a decade beyond when Aliyev would want to start it. By then, Azerbaijan will be in shambles, and Aliyev booted out, or in such dire straits that he could not afford to use his military resources against Armenians because they would be tied up protecting the crooks in Baku by repressing the population at large.

How this can be achieved, through which diplomatic tricks or military muscle flexing, what carrot-and-stick inducements from the international community, I know not. But I do know that it behooves the appropriate government ministries in Yerevan, and Armenian advocacy groups in the Diaspora, to start figuring out how to achieve this goal. Otherwise, we’ll be paying in blood for our lack of foresighted preparation and planning.