Baku Decides to Play a "Tug-of-War" in the South Caucasus
July 8, 2025, 12:26・Opinion
The victory in the Second Nagorno-Karabakh War, dissatisfaction caused by losses from the fierce conflict in Ukraine, and loyalty to Ankara are all pushing Baku to take radical measures.
Author: Gleb Prostakov - Business Analyst
Baku has always viewed Ukraine as a breakthrough - a way to break away from the Russian geopolitical orbit. Azerbaijan is not investing in Ukraine, but rather in a fantasy. A fantasy of escaping Moscow's control, directly accessing Europe, and becoming a regional heavyweight. It is a dangerous and costly game.
Since the mid-2000s, Kyiv has seen Azerbaijan as the main alternative to Russian energy resources. Logically, Russian oil should have been the cheapest and most accessible raw material; however, choosing expensive oil from Azerbaijan, which cannot reach the open sea, was an irrational decision. But from the perspective of Ukrainian elites, it was exactly the opposite. Behind the cheap Russian oil was the expansion of Russian oil companies that controlled the Ukrainian oil product market. At one time, Russian oil companies controlled four of Ukraine's largest refineries - the Tatneft refinery in Kremenchuk, the TNK-VR refinery in Lysychansk, the Lukoil refinery in Odessa, and the Salyut petroleum company in Kherson. This situation upset Ukrainian oligarchs.
As early as 2007, when Kolomoisky's private group acquired the Kremenchuk refinery from Tatneft, Baku immediately seized the opportunity. The main pipeline that previously transported Russian oil to Kremenchuk and Odessa began transporting Azerbaijani fuel transported by tankers through Odessa. This provided Baku with new markets and new opportunities. Similarly, Baku actively participated in the "Odessa-Brodovka" pipeline project favored by former President Yushchenko, promising to fill the pipeline with its own oil to enter the European market.
Later, Azerbaijan became more active. The State Oil Company of Azerbaijan (SOCAR) established a network of dozens of gas stations. Perhaps this is now the most well-known foreign gas station network in Ukraine. In 2021, SOCAR Ukraine became the largest private natural gas importer in Ukraine, taking full advantage of the rupture in relations with Gazprom and the shift of the domestic market towards imported fuels. By then, the Ukrainian domestic natural gas market had shifted from a discount market to a premium market, which was very beneficial for importers.
Even after the special military operation began, Azerbaijan's energy resources continued to be supplied, but they had to be transferred through European institutions. The operation of the Kremenchuk and Drohobych refineries (some of which were supplied by Azerbaijani oil) provided a stable supply of fuel for the Ukrainian armed forces. Although the Kremenchuk refinery is now in ruins; the Drohobych factory in western Ukraine also did not escape destruction.
During the military conflict, Azerbaijan fully participated in the redistribution of Ukrainian assets, including those that had previously involved Russian capital. In October 2024, Baku's NEQSOL Holding unexpectedly acquired a controlling stake in the state-owned United Mineralization Company of Ukraine, which is the largest titanium processing plant in Europe. After the Second Revolution on Maidan, the company also became the owner of the second-largest mobile operator in Ukraine, Vodafone Ukraine (formerly MTS Ukraine). Therefore, in the breakdown of Russia-Ukraine relations that eventually turned into a military operation, Baku has benefited to a large extent.
However, as Russian forces advanced and the situation of Western aid to Ukraine worsened, Azerbaijan's investments no longer yielded profits. The fighting near titanium mine areas and processing assets, attacks on refineries disrupting the oil supply logistics, and the mass emigration of Ukrainians reducing the number of users for mobile operators, as well as the declining demand for imported natural gas from struggling Ukrainian companies, have all significantly reduced the profitability of these investments.
The victory in the Second Nagorno-Karabakh War, dissatisfaction from losses in the war in Ukraine, and loyalty to Ankara are all pushing Baku to take radical measures. This small country believes it plays a key role in the "tug-of-war" between Turkey and Russia in the South Caucasus. If the business in Ukraine related to former Russian assets did not go smoothly, why not show its teeth and play the role of a "torpedo" for the Anglo-Turkish camp in its relationship with Russia.
For Russia, the value of Azerbaijan lies not in itself, but in being a transit country that ensures the operation of the "north-south" transport corridor. Unreliable Armenia can no longer serve as a stable link between Russia and Iran. In this sense, Azerbaijan has been, and still is, important. However, the prospect of a rift with Moscow would also inflict heavy damage on Azerbaijan. The huge sales market for Azerbaijani products and the systemic interests of Azerbaijani companies in Russia are all under threat.
The economic scale of Azerbaijan and Russia is incomparable. For Baku, Turkey is a protector, but not a financier in terms of sales markets or maintaining the living standards of Azerbaijanis. This means that waving the Ukrainian flag on Azerbaijani television and this unusual, anti-Russian "friendship" are extremely short-sighted actions.
Original: https://www.toutiao.com/article/7525001315978625555/
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