The state holding company Naftogaz of Ukraine reported on the conclusion of the first agreement for the import of Azerbaijani gas, which provides for a test supply via the Trans-Balkan Corridor gas pipeline through Bulgaria and Romania to the Ukrainian market. The counterparty was SOCAR Energy Ukraine, a division of SOCAR - the State Oil Company of the Republic of Azerbaijan.

Ukrainian Energy examined the political prerequisites for such cooperation between state-owned companies in the gas market, its prospects, and also assessed the EU's ability to increase gas imports from alternative sources in order to stop gas cooperation with Russia.

Strategic step

Since the beginning of this year, when Russian troops intensified attacks on Ukrainian gas production infrastructure, Ukraine has had a need to increase imports of blue fuel in order to accumulate sufficient reserves in underground storage facilities for the winter. Therefore, agreements with SOCAR should play an important role in preparing for the next heating season.

“This is a small but strategically important step that paves the way for long-term cooperation. And also another example of diversifying supply sources and strengthening Ukraine’s energy security,” said Serhiy Koretsky, Chairman of the Board of Naftogaz of Ukraine.

The Ministry of Energy added that the agreement was “the result of consistent efforts and negotiations” on economic cooperation at the intergovernmental level.

Energy Minister Svitlana Hrynchuk emphasized that the Trans-Balkan pipeline, which will supply Azerbaijani gas, is of utmost importance for Ukraine, as it provides access to new sources of gas: liquefied natural gas (LNG) coming from various countries to the Greek and Turkish LNG terminals; Azerbaijani gas transported by the TAP (Trans Adriatic Pipeline); as well as resources extracted on the Black Sea shelf of Romania and - in the future - Bulgaria.

The test import of Azerbaijani gas to Ukraine via the Trans-Balkan Corridor will allow us to test in practice how effectively this route is able to operate and what its economic feasibility is.

Serhiy Makogon, former head of the state-owned company "Gas Pipeline System Operator of Ukraine", positively assessed such a promising start. "Ukraine will need to import 4-6 billion cubic meters of gas annually for many years to come, so it should also think about long-term gas supply contracts, including from Azerbaijan, which is actively positioning itself as an alternative source of gas for Europe," the expert said.

At the same time, he drew attention to the fact that it should be “real Azerbaijani gas, and not the “repainted” Russian gas, which was actively offered to us in 2024” (this refers to negotiations on a possible gas agreement with SOCAR, which provided for the transportation of the resource through the territory of Russia and the replacement of Azerbaijani gas with Russian for continued transit through Ukrainian main gas pipelines towards Europe - Ed.)

Caspian prospects

Interest in purchasing Azerbaijani gas from European countries increased significantly after the EU decided to abandon the import of “blue fuel” from Russia in response to the full-scale war launched by the Putin regime in Ukraine.

This prompted Brussels and Baku to intensify energy relations in July 2022. At the same time, European Commission President Ursula von der Leyen, during a meeting with Azerbaijani President Ilham Aliyev, called this Caucasian country “a key partner in our efforts to abandon Russian fossil fuels”.

Since then, Azerbaijan has increased its supplies to the EU from 8.2 billion cubic meters in 2021 to almost 13 billion cubic meters in 2024. On the scale of the entire bloc, its share in total gas imports is quite modest - 4.3%. The situation is different in countries connected to Azerbaijan through the “Southern Gas Corridor”, which connects the Caspian region with Europe, bypassing Russia: Bulgaria receives about 40% of imported gas via this route, and Greece and Italy - over 15%.

There are conditions on the market for a significant increase in Azerbaijani gas imports to the EU by 2025. Last month, on June 10, SOCAR announced the conclusion of a long-term gas contract with the German state-owned company SEFE (Securing Energy for Europe), which until its nationalization in 2022 was known as Gazprom Germania and was part of the structure of the Russian monopoly Gazprom. The 10-year agreement provides for the first deliveries this year. Annual volumes, in accordance with the agreed terms, will gradually increase to 15 TWh, which is about 1.5 billion cubic meters of gas.

This gas will transit through Turkey via the TANAP (Trans-Anatolian Natural Gas Pipeline), which is a key segment of the Southern Gas Corridor, and then via TAP. The latter has a throughput capacity of 10 billion cubic meters per year, and from January 2026 its capacity is expected to increase by another 1.2 billion cubic meters of gas.

In addition to importing blue fuel, the partnership between SOCAR and SEFE also includes investments in production and infrastructure, which will allow for increased transportation of pipeline gas from the Caspian region to Europe.

“This long-term contract is a testament to the strong relationship between Germany and Azerbaijan. Thanks to this partnership, we are creating a new route for significant volumes of gas to reach Europe, thereby diversifying our portfolio and increasing the security of supply for our customers,” said Egbert Laege, CEO of SEFE.

In December 2024, SPP, the largest energy supplier in Slovakia, announced the conclusion of a test short-term gas import agreement with SOCAR. “After a successful evaluation of this cooperation, we will consider the possibility of concluding a contract for a longer period to guarantee reliable gas supplies to our customers - from large industrial enterprises to households - under any circumstances,” said SPP Chairman and CEO Vojtech Ferenc.

As in the case of Ukraine, the Trans-Balkan Gas Pipeline was used for the trial import of Azerbaijani gas to Slovakia.

Anti-Russian measures

The development of energy cooperation with Baku is part of the European Union’s broad strategy aimed at completely phasing out purchases of Russian gas by the end of 2027 - both that transported by pipelines and that transported by sea tankers in a liquefied state. As reported by Ukrainian Energy, the relevant legislative innovations are to be approved by the EU countries this year.

The firmness of intentions to stop gas cooperation with Moscow is also indicated by the fact that the European Union is considering the possibility of banning imports of pipeline gas of mixed origin - it includes Russian gas entering the EU via Turkey.

In the extreme case, as the Montel agency reports, citing a source in diplomatic circles, Brussels intends to provide for a "partial restriction" with permission for a certain "non-Russian share" in gas imports. Such a partial restriction will be possible if "the origin of the gas is clearly and reliably documented." "The goal is to prevent circumvention of the ban on Russian gas imports, in particular through mixing or replacing contracted volumes, and at the same time ensure unhindered gas supplies from alternative sources not related to Russia," explains Montel's interlocutor.

The proposal was made during “technical discussions” last week in the EU Council on measures to stop Moscow from financing the war in Ukraine through revenues from Russian energy exports. The meeting participants also called for a clear and unambiguous definition of the term “transit imports,” which refers to the supply of Russian gas to non-EU countries, such as Serbia.

EU countries have until August 22 to submit their amendments to the phasing-out plan for Russian gas to the European Commission (EC). The final text of the document is expected to be voted on in the European Parliament on October 20. And those countries that want to “request extensions or exceptions to the rules” must submit national plans to the EC with measures to permanently stop Russian purchases. “The phasing-out plan may not become legally binding until the end of January 2026,” Montel’s interlocutor warned.

The EU still imports around 100 million cubic meters of Russian pipeline gas and LNG per day. Of this, 40 million cubic meters per day are delivered to Southeastern Europe via the TurkStream pipeline, where the volumes are described as “mixed gas” due to their different geographical origins (this mix consists mainly of Russian resources mixed with Azerbaijani and Iranian gas).

“However, the lack of tracking mechanisms after Russian gas enters the Turkish network makes its complete withdrawal unrealistic and also creates ample opportunities to circumvent the conditions set out in the European Commission’s plan for a phase-out of gas cooperation with Moscow,” said market analysts surveyed by Montel in late May.

The American Alternative

At the same time, the European Commission has taken additional measures to help achieve its goal of phasing out Russian gas. On July 27, Ursula von der Leyen and US President Donald Trump signed a trade agreement that commits the EU to importing US$750 billion in US energy. “Our agreement will accelerate the phase-out of Russian gas purchases,” the EU president said. According to her, this amount will be spread over three years.

“We still get too much Russian LNG that comes to the EU through the back door… We want to get rid of it completely, like other Russian fossil fuels, so we very much welcome the expansion of access to high-quality LNG from the US,” Ursula von der Leyen concluded.

According to Axios, European energy companies have already signed agreements for future LNG supplies from US export projects that are planned or already under construction and at the implementation stage. However, it is still unknown how successful such a significant increase in imports will be in practice.

Svitlana Dolinchuk, specially for Ukrainian Energy