Azerbaijan-Armenia conflict: energy implications of a potential escalation

The risk of the ongoing Azerbaijan-Armenia conflict spilling over to affect Azeri oil and gas exports  seems low.  But in the event of any supply disruptions, the impact on international oil and gas markets looks manageable.  Oil markets are well supplied and can readily adapt to make up 700 thousand barrels per day of Azeri exports.  European gas markets have become more flexible in the last 3 years thanks to LNG and responsive pipeline management.  Main Azeri gas volumes go into Turkey, which has demonstrated considerable ability in the last 2 years to use it enviable supply portfolio and bring in large volumes of LNG.  Deliveries from TAP in to SE Europe and Italy are not affected as TAP is yet to be commissioned.  The only market which would be disrupted is Georgia.  Overall, problems might be greater for Azerbaijan due to is extremely high dependence on oil export revenues.  Purpose of this Comment is to lay out the market and economic issues from any extension of the conflict.

By: Julian Bowden