Germany provides €1.2 billion loan for Southern Gas Corridor

Jens Spahn speaks with German Chancellor Angela Merkel during the 30th party convention of Christian Democratic Union (CDU) in Berlin, Germany, 26 February 2018. [Clemen Bilan/EPA/EFE]

The German Ministry of Finance will provide €1.2 billion to help Azerbaijan finance its part of the Southern Gas Corridor project, Deutsche Welle reported.

The German public broadcaster announced the news quoting a letter from Finance Secretary Jens Spahn (CDU) to the chairman of the budget committee of the Bundestag, Peter Boehringer (AfD).

The money is intended for the Closed Joint Stock company Southern Gas Corridor (SJCC).

CJSC was founded in 2014 by a decree signed by Ilham Aliyev, the President of Azerbaijan. Its purpose is to consolidate, manage, and finance the country’s interests in the development of the “Shah Deniz” offshore gas field in the Caspian Sea, the expansion of the South Caucasus Pipeline, the construction of the Trans Anatolian pipeline (TANAP) and  the Trans Adriatic Pipeline (TAP). CJSC has undertaken the project financing aspect while operational management is provided by SOCAR, the Azeri state energy company.

“These gas deliveries should make a significant contribution to securing the supply of gas to Europe and Germany,” says the letter.

The loan should be repaid from proceeds generated by the project, with backing from Azerbaijan in the form of a state guarantee, Spahn’s letter further says. Specifically, the money will be used to refinance CJSC’s stake in Shah Deniz and Turkey’s TANAP gas pipeline.

In addition, an application for an export credit guarantee for a further €500 million will be examined to finance German supplies and services intended for TAP transmission between the Turkish-Greek border and Italy.

‘In the special interest of Germany’

TANAP and TAP are respectively the Turkish and the European sections of the Southern Gas Corridor. The German government can secure so-called Unbound Financial Loans upon request. These are intended to finance projects abroad that are “in the special state interest of the Federal Republic of Germany”. This applies in particular to projects which “ensure the supply of oil and gas to the Federal Republic of Germany by guaranteeing long-term supply contracts for the benefit of German customers”.

Deutsche Welle reminds that even Chancellor Angela Merkel had welcomed the construction of the Southern Gas Corridor. The European Bank for Reconstruction and Development (EBRD) approved a loan of €500 million for TANAP in October 2017. Financial support also came from the World Bank. And in February, the European Investment Bank approved its largest ever single loan to an energy project: €1.5 billion for the the Trans-Adriatic Pipeline (TAP).

EU bank approves largest ever energy loan, for TAP pipeline

The European Investment Bank on Tuesday (6 February) approved its largest ever single loan to an energy project: the Trans-Adriatic Pipeline (TAP). The €1.5 billion grant will be used to bring gas from the Black Sea to the Mediterranean.

Rasul Jafarov, an Azeri opponent, has criticised the decision of the Federal Government.

“European governments should not support such projects unless human rights and democratic deficits are resolved in the country”, he told the German news agency dpa.

Jafarov, who is the winner of the Sakharov Prize for Freedom of Thought, accused the Baku leadership of dozens of politically motivated prison sentences against dissidents and of putting strong pressure on opposition and critical journalists.