“The Southern Gas Corridor is important for the entire Western Balkans as more routes and suppliers bring gas stability”

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Serbian Energy Minister Zorana Mihajlovic recently addressed a video message to participants in the eighth ministerial meeting of the Southern Gas Corridor Advisory Council in Baku. She then reminded that the construction of the Bulgaria-Serbia gas connection began on February 1, with the support of the EU and the EIB, claiming that the gas pipeline would be ready for work in 2023 and that Serbia would then connect with other gas suppliers.

“The Southern Gas Corridor is important for the entire Western Balkans, as more routes and suppliers bring gas stability,” said Zorana Mihajlovic.

What exactly is the Southern Gas Corridor?

It is obviously an American project with the goal of competing on the market for Russian gas exports, but also to reduce Russian geopolitical influence and large Russian earnings from exports in a situation of record energy prices. The issue of gas supply is not only economic, but also geopolitical, and the issue of energy security, but also the issue of suppressing Russian economic growth and budgetary stability based exclusively on energy exports.

For those countries that buy gas, competition is always desirable, but American natural gas is disproportionately more expensive than Russian and can hardly disrupt Russia’s current market position. Azerbaijani gas could compete with Russian gas if it were brought to the same customers through the gas pipeline and sold on the principle of competition and price discrimination under political circumstances. Those political circumstances would obviously be dictated to Azerbaijan by America.

Back in 2012, it was announced that as a result of the expansion, Azerbaijani gas could participate with more than 7% in the European market with a tendency to grow. It is estimated that by 2020, gas exploitation in Azerbaijan has reached 30 billion cubic meters, and by 2050 it could reach 50 billion cubic meters. This production capacity would be supported by the Southern Gas Corridor and would become a serious competitor to Russian gas exports.

Azerbaijan imported Russian gas until 2007, but the situation changed with the activation of the Shah Deniz field. The estimated reserves of this field are about 1.2 trillion cubic meters of gas, but Azerbaijan also has other rich fields: Umid, with reserves estimated at about 200 billion cubic meters, Babek, with about 400 billion and Absheron, with about 340 billion cubic meters of gas.

The Shah Deniz field has made Azerbaijan an exporter of gas, so in 2010 the country exported almost 7 billion cubic meters of gas to Turkey, Georgia, Iran, and part of about one billion cubic meters was bought by Gazprom, no doubt with the goal of reselling to its own export markets.

It should be borne in mind that the exploitation of Azerbaijani gas is cheaper than the exploitation of Russia, and that it can be sold at a lower price than Gazprom sells, while making a higher profit. Such an assessment was given by Russian experts ten years ago, warning of the possibility of Azerbaijani competition. While ten years ago Azerbaijan had a potential to conquer the European market of 6 to 7%, the Southern Gas Corridor project could achieve a much larger share and become a serious market competitor compared to Russia.

The question is: what is the position of Serbia in the situation of the formation of some new market circumstances?

If Serbia did not have to participate in part of the investment in the construction of the Southern Gas Corridor (which may be a foreign policy condition imposed by the West), it would be favorable for it for economic and energy security reasons to join the pipeline, because then it could choose the price purchased gas between the two bidders and would be safer than a possible interruption in the supply of Russian gas for both technical and geopolitical reasons. On the other hand, it is uncertain how the Russian side would react to such behavior of Serbia, since it is known that Russia uses gas not only as a market commodity, but also as a form of political role in its influence, and sometimes political pressure on certain countries. Russia has a habit of increasing gas prices for “disobedient” countries, and reducing the price of obedient, big buyers and good payers. With the emergence of Azerbaijani competition, such an attitude towards energy exports would seriously begin to lose importance. In the new circumstances, it would be up to individual countries to decide what to choose – political or market trade. Some of them may not even be able to make sovereign decisions, Pravda writes.