Day: September 27, 2023

By Uffe Merrild

Hans-Hermann Hoppe, in his book Democracy: The God That Failedand his 1995 article in the Journal of Libertarian Studies, set forth an interesting theory concerning the difference in time preference between a monarch and a democratic politician. The argument stresses the difference in the use of political power according to the degree to which the ruler is future oriented. Hoppe also says that using the power of the state is in itself an expression of high time preference because the ruler can confiscate wealth from the population instead of producing wealth on his own, but the type and rate of wealth confiscation can express a relatively higher or lower time preference.

We can juxtapose two examples to drive home the point: a democratically elected politician and an absolute monarch who got his power as a birthright. This comparison makes it easy for us to see the point due to the expected large difference in time preference between the two. The politician usually has four years to rule, while the monarch has his entire life. The politician is like a temporary caretaker, while the monarch is like a property owner who knows that his son will inherit his power.

However, this does not imply that monarchs are necessarily good rulers. There is a tendency for the state to also expand under monarchical rule. From history, we learn that not all kings made use of their power with much consideration for the future.

One particularly egregious example is Eric VI of Denmark, who was king from 1293 to 1319. The history of his reign is an extreme example of a monarch with an increasingly high time preference. Danish historians have had a tough time explaining why he took the drastic measures that he did, but if we apply Hoppe’s time-preference theory of power, we find much less difficulty in explaining the rather extreme actions of this particular king.

Eric’s Early Years 1287–1304

Eric’s coronation was in 1287, but the king did not come of age until 1293. During his years of minority, his kingdom was ruled by his advisers and his mother, who merely defended it from attacks from the Norwegian king and his collaborators—a group of powerful outlaw Danish magnates. The only aggressive policy enacted by the king himself at this time was a brief counterattack against the outlaws in 1294.

Early in his reign, King Eric VI chose—through dynastic relations—to ally with Holstein in northern Germany and with Sweden. These areas would be his main focus of foreign policy. Eric wanted to revive the former Danish Baltic empire. In 1301, he found some old documents from 1214 where Emperor Frederick II (1194–1250) had promised Valdemar the Victorious (1170–1241) and his heirs rule of all land north of the Elbe river. With this document in hand, Eric began planning his campaign in northern Germany to restore the Danish kingdom to the greatness of his forefather.

The plan began rolling on 13 March 1304 when the king summoned the magnates of the kingdom to discuss how to finance the expected campaign. At the summit, it was decided to re-form the old Danish military tax in order to be able to produce larger ships matching the navy of the powerful Hanseatic League of merchant cities along the Baltic coast. The agreement also systematized the collection of seigniorage and income from coin debasement using the European monetary system called renovatio monetae.

These methods for royal finance were not new. Eric V (1265–86) had a nickname to the effect of “coin clipper,” likely from the coin debasements in the years leading up to his financial ruin. A few generations back, King Eric IV (1241–50) also had a nickname from collecting taxes on privileged lands, the politically dangerous plough tax.

During this early period, King Eric seemed to follow more or less the time preference of what we colloquially could call a standard king who made agreements with his magnates and bishops to finance his policies. His military conflicts had, to this point, been defensive with only one exception.

Eric’s Middle Period 1305–15

In 1307, the king made his brother his feudal vassal over two territories close to Sweden on the promise that he would never conspire against the king or work to diminish the kingdom. The king’s brother Christopher had assisted him earlier in his successful fight against the archbishop, which ended in 1302, and the gift of territories could be seen as a token of gratitude. Eric also ventured to support his Swedish allies through several wars in this period. These wars became unpopular among the magnates and peasants. In 1309, the Danish magnates committed mutiny against the king while he was on campaign in Sweden.

King Eric then shifted his focus to a military campaign in northern Germany in 1311 that proved expensive but useless in the long run. He had a few short victories but gave up completely on his conquest of northern Germany in 1316, signing a peace treaty with the margrave of Brandenburg in 1317.

While Eric had been busy in northern Germany, the magnates and peasants of Jutland had formed an official alliance against the king and refused to pay taxes to him. The revolt in Jutland in 1313 lasted until the king put it down with his army of German knights in 1314. The king forced the peasants to build three castles and pay an additional tax, which was supposed to be paid eternally, as punishment for disobeying the king.

At this point in time, it seemed like the king was still caring for the future of the coming ruler of the kingdom, strengthening it with additional castles and thereby securing taxes from the nearby region. On the other hand, the expensive policies of the king caused rebellions and led to loss of life, which impeded production. Furthermore, the forced labor to build the castles were another burden on the peasants. In this regard, the king began acting out of the ordinary, and we see signs of increased time preference.

King Eric’s Later Years 1315–19

If the relationship between the king and his brother had been good at the start of Eric VI’s reign, it took a sharp turn for the worse in 1315 when a series of letters were found that documented a conspiracy between his brother Christopher, Swedish dukes, and the Norwegian king to overthrow Eric and give the throne to Christopher.

From 1315, Eric began intensifying tax collection by adding new taxes each year, and after signing the peace treaty with the margrave of Brandenburg in 1317, the indebted king began mortgaging crown land as well. This is a clear example of a shift in time preference of the king, as he would no longer wait for the ordinary taxes to be collected but impaired his long-term power in order to immediately fund his war against his brother. Eric’s power became much weaker as his creditor vassals gained control of the royal castles on the mortgaged lands, which served as the tax collecting and military centers of power. At the same time, his new taxes increased the risk of another rebellion.

The drastic measures taken by Eric VI after 1317 has been explained by historians as the king’s inability to build a solid power base because it cracked when it met resistance, or simply that the king was a victim of circumstances beyond his control. Using Hoppe’s time-preference theory of power, we can explain the unprecedented decisions regarding the changes of time preference on account of two facts, both relating to the royal dynasty.

The king had four sons, but like all of his fourteen children, they died shortly after birth. At some point in time, having lost every child so far, the king may have expected all of his children to share the same cruel fate and no longer believed he would leave an heir to the throne. The heir apparent to the throne then became his brother Christopher, whom he had hated since 1315. On his deathbed in 1319, the king’s dying words were cautions against giving the throne to his unreliable brother. In his last years, Eric VI demonstrated the time preference of a politician for the same reasons politicians have high time preference. They both did not have an incentive to care much for the situation of the next ruler; they both did not really care for the long-term “capital value” of their power.

About the author: Uffe Merrild has a master of science in electronics engineering from Aalborg University in Denmark. He has also written articles for the Danish newspaper Borsen. You can read more of his work at his austro-libertarian blog www.liberaletanker.dk

Source: This article was published by the Mises Institute

By Joshua Krasna

(FPRI) — In the past month, there has been a flurry of diplomatic activity between countries that, typically, don’t get along: Cyprus, Egypt, Israel, Lebanon, and Turkey. Turkish President Recep Tayyip Erdoğan met in New York with Israeli Prime Minister Benjamin Netanyahu for the first time on September 19. Additionally, Netanyahu met with the president of Cyprus and the prime minister of Greece in Nicosia on September 3. Acting Lebanese Prime Minister Najib Mikati and Speaker of the Parliament Nabih Berri flew a helicopter miles out to sea on August 22. Italy’s energy giant ENI announced plans to invest close to $8 billion in Egypt.  

What has helped bring some of these countries closer together? Simply put, natural gas. 

The fortuitous discovery of economically viable natural gas deposits in the exclusive economic zones (EEZ) of Israel, Egypt, and Cyprus over the past decade and a half has transformed the political economy and geopolitics of the Eastern Mediterranean. Israel was formerly an “energy island,” whose foreign policy in its first seventy years was largely dictated by the need to discreetly procure fossil fuels (oil, which it still imports, and coal), from Iran, South Africa, Iraqi Kurdistan, Russia, and Azerbaijan. It now produces 75 percent of its electricity with domestic natural gas and is a gas exporter. Egypt produces gas for most of its domestic needs and for export. Cyprus is poised to join the gas bonanza, with several promising finds. Exploitation, however, is constrained by its continued strategic conflict with Turkey, which claims part of its potential reserves for itself and its Turkish Cypriot satellite. 

The earliest peace process partners, Israel, Egypt, and Jordan, have since 2020 added a crucial, long-term economic infrastructure component to their relations: Some 70 percent of Jordan’s and a significant part of Egypt’s electricity comes from Israeli gas. These supplies are anchored in multi-decade contracts based on the previous decade’s low gas prices, which in the current gas market provides windfall savings for the two Arab partners. The European Union’s efforts since the Russian invasion of Ukraine to replace Russian piped gas in their energy mix and diversify their sources of gas and oil for the coming decades provide an opportunity, and the Mediterranean is a readily accessible source of gas for Europe.

Gas has become a major force for interstate cooperation, as well as competition, in the sub-region. These dynamics are still unfolding, with numerous significant diplomatic and economic developments affecting the littoral states unfolding in the past few months and weeks. For instance, gas geoeconomics has strengthened the already emerging geopolitical alignment between Greece, Cyprus, Israel, Egypt, and the Gulf States. They have also enabled negotiations and agreements between ostensibly warring parties in Lebanon and Gaza.

Map 1: Eastern Mediterranean Gasfields

Geoeconomics of Eastern Mediterranean Gas

The gas export possibilities of Eastern Mediterranean producers are limited by geography. There is no existing land-based or undersea pipeline to potential customers in Europe. The much-touted EastMed pipeline, connecting Israel’s gas fields to Cyprus and then to Greece and Italy, seems to be dead in the water. Its construction would have significant security and technical challenges, as it would be the longest and deepest pipeline in the world. It may well also, at an estimated cost of over 6 billion euros, not be economically viable if gas prices return to pre-2021 levels (see Figure 2). This is especially true as Europe will continue, alongside its short-term and medium-term efforts to find alternative gas sources, to reduce dependence on fossil fuels (including gas) over the next decades. Policymakers will seek to avoid being locked into major projects like pipelines that, to be viable, need to possess long-term supply contracts. 

Figure 2: Global Price of Natural Gas, European Union

Liquified natural gas (LNG) is more flexible—it can be exported anywhere by ship and is not tied to pipelines. It does, however, require liquefaction plants on the exporter side, and regasification plants on the importer side. The only liquefaction plants operating in the Eastern Mediterranean are those in Idku and Damietta, on the Egyptian coast, with a maximum production of approximately 17 bcm (billion cubic meters) a year (LNG exports from Egypt were 10 bcm in 2022). 

For the foreseeable future, all gas pumped in Israeli waters and not earmarked for domestic use must be exported by pipeline either to end-users in Jordan—which is an economically and strategically important, but not a large, market—or to Egypt for local use or liquefaction. This forms a bottleneck for Israeli and future Cypriot exports, and makes Egypt the current hub of Eastern Mediterranean gas infrastructure. Any major expansion of Israeli (or, in the future, Cypriot) exports to customers outside the sub-region requires the expansion of Egyptian liquefaction capacity, the development of liquefaction plants in Israel or Cyprus, and/or the laying of a pipeline to Europe or Turkey. 

Egyptian domestic demand for gas has surpassed production in 2023, leading to power cuts, as well as extended periods with no gas exports. Egypt has been saved from an even more serious gas shortage by record imports from Israel, with much of the piped Israeli gas being used domestically and relatively small amounts being liquefied and shipped on. Egypt’s petroleum minister predicted in July that this year’s income from LNG exports will be half of 2022’s record $8 billion, due both to lower volumes and lower gas prices. Part of the deficit is due to technical problems at the Zohr gas field (operated by Italy’s ENI, which holds 50 percent of the shares), the largest in the sub-region, which has led to production that is consistently below nominal capacity. 

The companies working in Israeli and Cypriot waters would like to have an LNG export channel not dependent on Egypt. This is for several reasons, including redundancy; worry about Egypt diverting gas for domestic needs; and the option of exporting directly to European and other consumers without going through Egyptian state-backed monopoly entities, which pay low fixed prices. The companies also have significant problems regarding the timely payment of debts and receivables by Egypt. Chevron and its partners, the licensees and operators of Leviathan, the largest Israeli field, are examining the possibility of positioning a floating natural gas liquefaction plant (FLNG) above it. Such a plant, with a 3–6 bcm/year liquefaction and export capability, could also serve the partners’ Aphrodite field on Cyprus’ maritime border with Israel. There is also an alternative idea, of building a land-based liquefaction facility in Cyprus, or a FLNG off Cyprus, linked to the Israeli fields.

The FLNG option is technically challenging, expensive, and subject to geopolitical risk, due to terrorism threats. In any case, the potential for Israel’s gas exports to increase over current levels is some additional 10 bcm/year, absent the discovery of further resources. If dependence solely on the Egyptian route is deemed undesirable or unworkable due to long-term capacity limitations, there does not seem to be enough exportable gas for more than one solution. A Cyprus-based liquefaction plant, an Israeli FLNG, and a Turkish pipeline, all of which are currently being discussed, are largely competing, not complementary, solutions.

In the past few years, major international fossil fuel companies have entered the region. In the absence of major national oil and gas production companies, these companies comprise the operators of the fields and in many cases, the major shareholders. While national governments have interests and desires, their fulfillment is—to the displeasure of the public and some policymakers in the relevant countries—predominantly dependent on the business considerations of these foreign companies.

As another sign of the greater regional significance of Eastern Mediterranean gas, major players in the Gulf are penetrating the market. Several Gulf companies are involved in the Egyptian gas and oil market. Abu Dhabi’s national oil company, ADNOC, and BP are in negotiations since March to buy 50 percent of Israel’s NewMed gas company, which holds 45 percent of the Leviathan gas field and 30 percent of Aphrodite. Abu Dhabi’s Mubadala owns 11 percent of Israel’s Tamar. QatarEnergy holds 30 percent of the Qana concession being explored in the Lebanese EEZ.

Israeli Natural Gas Outlook

Israel has more than 940 bcm of proven gas resources: 600 bcm in Leviathan, operated by Chevron, which owns 40 percent; 300 bcm in Tamar, also operated by Chevron, which owns 25 percent; and 10 percent or so in Karish—whose output is dedicated to the domestic market—and other northern fields, held and operated by Energean (Greece). Over half of this has been earmarked, by law, for domestic use. Total Israeli production in 2022 was 22 bcm/year, of which 12.7 went to the domestic market, and 9.2 bcm to export.

Israel’s Energy Minister Yisrael Katz in July 2023 called Israel’s ability to export gas “an enormous diplomatic weapon, which strengthens Israel’s status in the region and in the whole world.” Israel is required by contract to export 3 bcm a year to Jordan through 2035, and it exports 6–7 bcm/year to Egypt, of which 1.5 bcm is liquefied and exported onward. This leaves some 400 bcm total for export until the reserve is exhausted, unless new reserves are discovered. In August 2023, Katz approved increased export levels to Egypt, which needs more, both for domestic use and for liquefication and export. The Tamar field will be allowed to export a total of 68.7 bcm, rather than 30 bcm, over the next eleven years. The Leviathan partners have requested that their export ceiling also be raised (more than doubled) to 280 bcm total. Increasing exports to and through Egypt requires the laying of additional pipelines in and from Israel, including directly from the platforms to Idku and Damietta, as the current pipelines are close to capacity. 

The Israeli Finance Ministry opposed Katz’s decision. It leaked its assessments that increasing exports could reduce gas availability for the domestic market, potentially increasing prices for local users and even necessitating gas imports in future decades. This has stoked a longstanding public debate on gas issues. There has been public and media pushback against the intent to expand exports. Accusations are heard regarding oligopolistic Israeli and foreign entities enriching themselves with “sovereign national assets;” the threat of foreign (Chevron, Mubadala, ADNOC) control of “sovereign gas;” governments’ “handing over sovereign national territory” to foreign governments (Lebanon and Cyprus); and government “feebleness” facing tycoons and multinationals.

Supporters of export expansion reject these criticisms. The Israeli Energy Ministry estimates that even with rises in domestic demand and a possible doubling of allowable yearly exports to approximately 20 bcm/year, Israel’s current gas reserves will suffice until 2048. Supporters of export expansion note restricting them might deter international firms from further developing Israel’s resources, to the detriment of the local market (including loss of substantial tax revenues), and would harm relations with Egypt. They also note that the global energy transition may well leave Israel with stranded gas assets in future decades. On the background of the public and inter-ministry debates, Netanyahu chaired a meeting on gas export policy on August 27. Netanyahu ordered the formation of an interagency team to formulate a plan that would “give horizons to the companies, and assurances for the local economy.” However, he reiterated that the minister of energy is the authority that grants export permits.

The flurry of recent Israeli moves stems from two internal political drivers. First, the current Israeli government strives for high-profile foreign policy successes, in order to deflect criticism that its policies are causing international and regional isolation. Second, Katz and Foreign Minister Eli Cohen are to rotate jobs in January 2024. Each of these officials—perhaps looking to the post-Netanyahu leadership struggle in Likud—is trying to chalk up as many successes as he can before leaving, as well as close as many open issues as possible before handing over to his colleague.

Israel (and Egypt) closed bidding rounds for new offshore exploration blocs on July 16, 2023. Four consortia, which include five companies new to the market (the names of BP and of the Azeri national oil company SOCAR have been leaked), reportedly submitted six bids for licenses from Israel. The Israeli Energy Ministry has noted that it wants to bring new companies into the sector, to prevent overconcentration of market control in the hands of the existing producers (Chevron, the Israeli NewMed, and Energean). 

The View from Cyprus

As Peter Stevenson of the Middle East Economic Survey notes, Cyprus’ position as the only EU state with untapped gas reserves has swung into focus in the past year. Cyprus understands the need to begin translating its gas potential to reality, and the opportunity the current situation—relatively high gas prices combined with heightened EU interest—offers. In addition, absent major new discoveries in Lebanon, Israel, or Egypt, the beginning of production by Cyprus is the most significant hope for increasing the supply of gas from the sub-region.

Talks between Israeli officials and their peers in the newly minted Christodoulides government have in recent months concentrated on a 300 km pipeline connecting Israel’s marine platforms to gas liquefaction facilities to be built in Cyprus. Cypriot Energy Minister George Papanastasiou—who bruited the idea during his June 2023 visit to Israel—noted this is a much more realist option than the 2,000 km EastMed pipeline. It would also help reduce electricity costs in Cyprus, which are much higher than the EU average. Netanyahu and the Cypriot energy minister announced in May 2023 that Israeli gas would be sent to Cyprus for liquefaction at a land-based or floating gas liquefaction plant. The international majors operating in Cyprus’ EEZ prefer piping the gas to existing infrastructure in Egypt.

Another recent development has been the Cypriot government’s rejection of Chevron’s recently submitted Aphrodite Development Plan, modified from the 2019 plan agreed between Cyprus and the previous licensee, Noble Energy (which also operated Leviathan, and was acquired by Chevron in 2020). Chevron and Shell each hold 35 percent of the license, with 30 percent held by the Israeli NewMed. Chevron’s current plan reduces the number of wells from five to three, and abandons plans for a floating production unit over the field in favor of piping the gas to existing Shell infrastructures off Egypt. The Cypriot government claims these changes favor the companies (significantly lowering costs and speeding up timetables), but reduce volumes of gas extracted long-term and thus, potential revenue for Cyprus. The Aphrodite partners are expected to return with an updated plan in the coming weeks. The US government is said to back Chevron’s plans since it will get gas to market faster and with a lower carbon footprint, as it does not involve building large infrastructure.

Cyprus has to be careful its demands do not continue to leave its gas on the bottom of the sea. Aphrodite, its most mature field, was discovered in 2011 and has not been utilized until now (partially due to claims by Israeli companies that some of it crosses the maritime border into Israel’s Yishai field). Chevron and its partners have other options in the sub-region. Given the current European thirst for gas, but the long-range dampening of opportunities for gas, it may be now or never for Cyprus. Even if the decision-making occurs soon, and is positive, first gas is not expected before 2027–2028.

Turkey Still Outside Looking In

Turkey has been largely excluded from the gas “gold rush,” because of its intractable conflict with Cyprus, its tense relationship with Israel between 2010 and 2022, and the fact that despite its efforts, it has not discovered any gas deposits in its Mediterranean waters. This is not for lack of trying: Starting in 2017, Turkish seismic and drilling ships operated aggressively in Cyprus’ EEZ in search of reserves. In the early stages of Israeli gas exploration and development, Turkey was considered a leading candidate for energy cooperation, including the construction of a pipeline. Then began the decade of tension, in which Turkey pursued a vocal anti-Israel policy, and Israel began defining Turkey as a national security threat. Israel’s relationship with Greece and Cyprus, as well as with Egypt, became closer and more multi-faceted, and Israel’s gas infrastructure and industry looked south and west for development, rather than northeast. This was illustrated by the establishment in 2018 of the Eastern Mediterranean Gas Forum, of which Turkey is not a member.

Since the renewal of full Israel-Turkish diplomatic relations in 2022, Turkey—including Erdoğan—has been talking up gas cooperation with Israel. Turkey has in the past year raised, on multiple levels, the idea of a pipeline from Israel’s gas fields to Turkey. This would both enable Turkey to import Israeli gas for its needs and to promote Turkey’s desired role as the major transit hub of oil and gas from the Eastern Mediterranean, the Caucasus, and Central Asia to Europe. From Ankara’s perspective, such a project would also help “rebalance” what it perceives as Israel’s over-tilt towards the Hellenic states. 

A pipeline from Israeli production facilities to Turkey would, however, be problematic. As can be seen on Map 2, a pipeline would have to transit the EEZ of Cyprus. This would be a problem because of longstanding tension with Turkey, including Turkish claims to much of the Cypriot EEZ and therefore, to a share of any gas found. In addition, the pipeline would intersect the EEZ of Lebanon and Syria, which is formally in a state of war with Israel.

Map 2: Eastern Mediterranean Exclusive Economic Zone Conflicts

There seems to be a duality in recent Israeli policy, with senior Israeli officials discussing competing concepts with Cypriot and Greek officials, on the one side, and Turkish ones, on the other. Netanyahu met with his Cypriot and Greek counterparts on September 3–4, and said a decision will be made in the next three to six months regarding the option chosen for future Israeli gas exports, referring positively to Cyprus-based alternatives. Conversely, he is reported to have in late August instructed the inter-ministerial team on gas exports to consider, inter alia, the construction of an underwater pipeline from Leviathan to Turkey. This connects to phone conversations Katz had with his Turkish and Egyptian counterparts, as well as the US envoy on regional normalization efforts, Dan Shapiro, parallel to Netanyahu’s Cyprus summit, regarding gas exports in the Eastern Mediterranean. In the wake of these discussions, the Turkish minister said he would visit Israel to continue discussions of the issue. These statements seem to be aimed at improving the bilateral atmosphere in preparation for Netanyahu’s meeting with Erdogan in New York on September 19, and a planned visit to Turkey in the coming weeks (postponed after a health scare in July).

The Lebanon Precedent Applied to Gaza

Exploration activity began in late August 2023 in Lebanon’s Block 9 (“Qana Prospect”), which straddles the de facto maritime border between Israel and Lebanon. The exploration of the lease, held by Total, ENI, and QatarEnergy, was made possible by the maritime border deal signed by both states in November 2022, under American auspices (and attacked vigorously at the time by Netanyahu, then opposition leader). The production of gas, if discovered, would take place on the Lebanese side, but Israel would be compensated for gas extracted from its side of the line by Total, under a side deal signed by the company and Israel. 

Israel announced in June 2023 that it had begun cooperation with Egypt and the Palestinian Authority to develop the Gaza Marine field, discovered 30 km off Gaza in 2000. The field will be developed by state-owned Egyptian Natural Gas Holding Company which will hold a 45 percent stake in it; some 2 bcm/year will be piped into the Egyptian gas network for domestic consumption and export, including to Palestine. The Palestinian Authority will share in the profits; it is not clear how these will be shared with Hamas, which has controlled the Gaza Strip since 2007, and whose agreement will be required to implement the project. Israel (and likely Egypt, too) would oppose Hamas directly securing a slice of any gas revenues. 

As Elai Rettig notes, this deal could not have happened without the precedent of the Lebanon maritime delimitation agreement. Both deals involve indirect, third-party negotiations between Israel and a hostile non-state militant organization that is acting behind the scenes and approving the deal (Hezbollah in Lebanon and Hamas in Gaza). This allows both sides to achieve not necessarily identical, but complementary interests, in a way that may stabilize their relations, without diplomatic relations or even direct contact.

The Eastern Mediterranean came late to the fossil fuel rentier economy. Public and elite opinion regarding the need for decarbonization, as well as high fossil fuel prices and the supply shocks associated with the Russo-Ukrainian War and OPEC+ production cuts, are pushing most advanced economies to invest more in renewable sources of energy and to talk of phasing out fossil fuels by mid-century. This has impacted the willingness of international investors to enter new major projects in fossil fuels, such as pipelines, as does the fact that pipelines lock countries into long-term dependence on specific suppliers. The new producers thus run the risk of having stranded assets—gas still in the ground when there is no longer demand. The Eastern Mediterranean countries are therefore very interested in getting their gas to market as quickly as possible: This trend is only strengthened by the jump in gas prices over the past two years. 

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The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities. 

About the author: Joshua Krasna is a 2023 Templeton Fellow and Senior Fellow in the Foreign Policy Research Institute’s Middle East Program. He is an analyst specializing in Middle East political and regional developments and forecasting, as well as in international strategic issues.

Source: This article was published by FPRI

By Giorgi Lomsadze

With thousands fleeing Nagorny Karabakh after Azerbaijan’s lightning victory ended 30 years of de facto sovereignty by a breakaway Armenian community, its population faces an uncertain future.    

As Azerbaijanis celebrate a future homecoming to the long-estranged region, scores of buses and cars carrying Karabakh residents headed to neighbouring Armenia. The authorities said they were prepared to accommodate 40,000 people, a third of Karabakh’s estimated population.  

“My family, like most of other families, is planning to leave,” said a teacher from Stepanakert, the de-facto capital that Azerbaijan calls Khankendi. Speaking to IWPR over Telegram, she asked not to be identified by name as she feared for her and her family’s safety. 

“Some people, especially the elderly, won’t be able to leave, because they lived here their entire lives and also being a refugee is a hard thing,” she wrote, adding that unless locals get safe passage to the Armenia, “we will all end up dead or become victims of violence”. 

To pacify fears of imminent ethnic cleansing, Azerbaijan vowed to protect the Armenians of Karabakh and integrate them in the Azerbaijani state as equal citizens. 

“Karabakh Armenians must understand that by becoming part of the Azerbaijani society, they will receive security guarantees and will enjoy all the rights, including rights to religion, education and culture,” said Azerbaijan’s President Ilham Aliyev. “They will live a normal life.”

But Karabakh Armenians are not taking their chances. The moment Azerbaijan opened the Lachin corridor, the route connecting Karabakh to Armenia, residents began flooding out. Nearly 3,000 people had arrived in Armenia by Monday.   

The fear of revenge is strong after decades of conflict and mistrust. 

“There are whole generations on both sides that hate each other,” said Jenny Paturyan, associate professor of social and political sciences at the Yerevan-based American University of Armenia. “There will be constant tension. What is the guarantee that some crazy dude won’t try to become another national hero like Ramil Safarov?” she continued, in a reference to an Azerbaijani officer who murdered an Armenian serviceman in Budapest in 2004 and subsequently received a hero’s welcome in Azerbaijan.

Others argue that Aliyev was sincere meant about guaranteeing safety to Karabakh Armenians, not least because of reputational reasons. 

“The mass exodus of ethnic Armenians to Armenian – whether voluntary or not – will be perceived by some international community as ethnic cleansing. There is a consensus in Baku against such a scenario,” said Zaur Shiriyev, Baku-based South Caucasus analyst with the International Crisis Group. 

He noted Azerbaijani steps toward reassuring the Armenians, such as offering amnesty to those who laid down their arms and allowing international aid into Karabakh alongside some of its own. 

Shiriyev argued that reconciliation and coexistence between Azerbaijanis and Karabakh Armenians could be achieved as long as Baku established its authority over the region in a measured and delicate manner. 

“If Baku demonstrates goodwill and treats it a structured process, complemented by a transitional phase, integration and preservation of rights can be achievable,” he said. “The key is ensuring that local Armenians feel safe and free to consider their options.” 

He added that rights to return and rights to their property must be guaranteed to those choosing to leave. 

The view from Yerevan and Stepanakert was far more sceptical. Paturyan suggested that Baku’s security assurances were only superficial. 

“There is a hope that they won’t be hugely mistreated for the time being because all eyes are on them,” she continued. “But they will be constantly harassed in small and seemingly unsystematic ways. […] You don’t have to openly mistreat people to make them feel unsafe. You can keep stealing their livestock or painting graffiti on their walls at night, and then blame it on some hooligans.” 

The teacher from Stepanakert made a similar point, fearing that the moment international attention was diverted away from Karabakh, Azerbaijani forces would start tormenting and harassing Armenians, forcing them to leave, she said. 

“They won’t stop until there are no Armenians left here,” she concluded. 

However, the most unexpected source of reassurance came from Yerevan and Prime Minister Nikol Pashinyan. After months of warning the world of imminent ethnic cleansing in Karabakh, he announced via Facebook live on September 21 that “there is no direct threat to the civilian population of Nagorny Karabakh” and told Karabakh Armenians to stay put.   

“Those promises ring hollow after 30 years of conflict and lack of any confidence-building measures or talks between the Nagorny Karabakh Armenians and Azerbaijani authorities,” Giorgi Gogia, associate director for Europe and Central Asia at Human Rights Watch, told IWPR. 

Gogia pointed to Azerbaijan’s ten-month effective blockade of Karabakh, which caused dire food and fuel shortages – followed by the attack launched on September 19  – as contradictory evidence to Baku’s avowed peaceful intentions. 

He also noted that Aliyev, Azerbaijan’s unchanged leader for 20 years, had brutally supressed all homegrown challenges including the few domestic voice who have criticised the use of force to resolve the Karabakh conflict.  

“As Baku makes promises of respecting fundamental rights of the Armenian population, it arrested five people in Azerbaijan for what appears to be anti-war post in the social media,” Gogia said. “All of the above feeds the deep-rooted mistrust and fear among the local residents, making it hard to take to Azerbaijani promises at face value.”  

Newly independent Azerbaijan and Armenia, both of whom view Karabakh as being of significant cultural and historic importance fought a full-blown war over the region following the fall of the Soviet Union. The first conflict, which ended in 1994, resulted in the expulsion of the Azerbaijani population from Karabakh and surrounding areas under Armenian control.  

Karabakh, which called itself the Republic of Artsakh, maintained de-facto independence but effectively operated as Armenia’s dependency. The international community has consistently treated the region as legally part of Azerbaijan. 

By the time of the second war in 2020, oil and gas wealth had allowed Baku to build up significant military superiority.  Azerbaijan routed Armenian forces, reclaimed Armenian-occupied lands and encircled Karabakh. Yerevan rolled back its military support for Karabakh and recognised the territorial integrity of Azerbaijan. 

Nonetheless, Baku accused Yerevan of continuing to provide military support to Karabakh and cut the region’s connection to Armenia. The military onslaught of September 19 forced the separatist government to agree to capitulation talks. 

“The clear lessons learned from both the war for Karabakh in 2020 and the recent attack are the same: the temptation to rely on force over diplomacy,” said Richard Giragosian, director of the Yerevan-based Regional Studies Centre think-tank. “This was revealed by the absence of deterrence, whereby Azerbaijan faced little challenge and even less cost to its military aggression.”

In Azerbaijan, the mood has been celebratory since September 19, with many arguing that Karabakh’s Armenians should simply take Azerbaijani citizenship or leave. 

Shiriyev warned against such a simplistic attitude. 

“Stay or go is not a sustainable policy,” he said, adding that such approach might perpetuate the cycle of conflict and obstruct efforts to achieve lasting peace.       

In the meantime, Armenians are angry with the world for doing little to contain Azerbaijan, with particular frustration directed at the region’s main powerbroker, Russia, which failed Armenia as an ally, protector and peacekeeper. 

The West also gets its share of Armenian criticism. Some believe that the EU’s reaction was limited because it ultimately prioritised continental energy security. 

Paturyan concluded, “Next time my European friends turn on gas in their European homes, they should think whose blood was spilled and whose dreams of freedom were crushed as a payment for that gas.”

About the author: Giorgi Lomsadzeis a Tbilisi-based freelance journalist focusing on politics in the South Caucasus. He has been covering the region for two decades and his work has been published in international outlets including Wall Street Journal, NPR, The Guardian and Eurasianet. 

Source: This publication was published by IWPR and prepared under the “Amplify, Verify, Engage (AVE) Project” implemented with the financial support of the Ministry of Foreign Affairs, Norway.