Azerbaijan Challenges Iran with a Stake in Israel’s Mediterranean Oil and Gas

Months of acrimonious exchanges between Islamist Iran and its neighbor, the pro-Western secular Azerbaijan, came to a head this week over an apparently trivial event: Baku’s hosting of the Eurovision Song Contest to boost the image of this oil-rich state by its exposure to 125 million people world wide.
This event suddenly shot up in diplomatic importance when Iran’s radical mullahs pronounced it immoral.
And, indeed, Monday, May 21, Ambassador Mohammad Bagher Bahrami was recalled home from Baku.
DEBKA-Net-Weekly's sources report that the song contest was only the last straw in the major falling-out between the two governments over three issues of major strategic relevance, both on the security score and with regard to the Caspian and Mediterranean energy industries.
1. Creeping separatism: On May 14, Azerbaijani Turks living in Iran announced the establishment of the “International South Azerbaijani Turks National Council," which ultimately aimed to achieve independence from Iran
Dr. Yasemen Karakoyunlu, head of the new council's Strategic Research Unit, claimed that 35 million Iranians, nearly half the population, are of Turkish ethnic origin and therefore the largest ethnic group in the country. In his view, the United States should rightly discuss any political or military plans it may have for Iran’s future not only with Turkey and Iran, but also with Iran’s Azeri Turks.

Iran worried by Azeri separatism and Azerbaijan’s Mediterranean leap

The sources of the group’s backing and funding are unknown, but its unveiling was enough to make Tehran extremely nervous. The name conjures up images of a movement suspiciously like the Libyan National Transitional Council-NTC which toppled Muammar Qaddafi last year or the Free Syrian Army which is fighting to send Bashar Assad the same way.
The Iranians suspect the US of undercover meddling in support of the group. They also take it for granted that an Azeri organization on a nationwide scale could not have sprung up without the knowledge and probable connivance of Azeri President Ilham Aliyev.
2. Internationalizing its oil industry: The State Oil Company of Azerbaijan aspires to turn itself into an international energy producer. And in its first move outside the Caspian Basin, SOCAR has linked up with Israel.
Last autumn, a SOCAR subsidiary, the Caspian Drilling Company (CDC), quietly acquired a 5-percent stake in Med Ashdod, Israel’s only economically viable oil field which is located 16 kilometers off the Mediterranean coast. The Azeri firm will also be its main drilling contractor.

Azerbaijan-Israeli trade boosted to $4 billion

This is SOCAR’s first oil-production or drilling operation outside of Azerbaijan. News of the agreement had more or less escaped international notice until Israeli Foreign Minister Avigdor Lieberman spoke during a two-day visit to Baku on April 23-24.
The Caspian Drilling Company will be working with Israel’s Shemen Oil & Gas Resources consortium and start work soon. “The work is at a very advanced stage and delivery of a drilling rig to the field is now expected,” Israeli Ambassador to Baku Michael Lotem told the Russian-language, Israel-based IzRus news portal on April 23.
Med Ashdod’s has estimated oil reserves of about 280 million barrels, a medium-sized field compared with SOCAR operations in the Caspian Sea. But the project will give SOCAR valuable experience in international oil production operations.
By expanding its energy distribution network into foreign markets in recent years, SOCAR has acquired the ownership of extensive assets in Georgia, Turkey, Romania, Switzerland, and the United Arab Emirates, among others.
In 2011, Azerbaijan and Israel contracted business worth $4 billion. Ranking as Israel’s top trading partner in the former Soviet Union, Baku covers one-third of Israel’s oil requirements with the sale in the same year of some 2.5 million tons (about 18.5 million barrels) of oil worth about $2.1 billion.
Outside of energy, their trade focuses on military equipment, agriculture, medi-care and water conservation. In February, Azerbaijan purchased $1.6-billion worth of Israeli military hardware, a shopping spree that not only raised hackles in Tehran but the dust in Moscow and Western capitals as well.

Baku buys Israeli arms, enlarges its Mediterranean oil stake

3. Intelligence partnership with Israel: While the military relations woven between Jerusalem and Baku are an untold story, DEBKA-Net-Weekly’s sources disclose they have attained dimensions never imagined in Washington, Moscow or Tehran.
It is thought that the five-percent stake the SOCAR subsidiary, the Caspian Drilling Company, has acquired in the Israeli Med-Ashdod firm is the core element of a massive arms transaction designed to roll out and expand exponentially in the coming years, on the following formula: The more weapons and security systems Azerbaijan buys in Israel, the faster its stake will grow in Israel’s offshore oil and gas fields.
Well-connected European energy experts told our sources that Azerbaijan is ready and eager to invest in more Israeli projects, such as the pipelines Israel and its US partners plan for linking the Mediterranean and European outlets.
President Aliyev wants to carve out for his country a substantial share in the Middle East energy field – not just versus Turkey but also to forestall Russian President Vladimir Putin’s plans to gain the Russian oil and gas giant Gazprom a solid foothold in these fast developing markets.(See DEBKA-Net-Weekly 536 of April 5)
In the view of military experts, the weaving together of Azerbaijan’s oil and gas industries with Israel’s military and security capabilities opens a pathway for strategic Israeli influence in the Caspian Sea region – under Iran’s nose. It also offers fine revenues for years to come.