Interview with leading analyst of the National Energy Security Fund, expert of the Financial University under the Government of the Russian Federation Igor Yushkov.

- Will Trump's energy and tariff policy reduce oil and gas prices?

- Donald Trump has outlined key directions of his energy policy, stating his intention to strengthen the U.S. position through oil and gas. However, his statements appear contradictory. On the one hand, during his election campaign, he promised to lower oil prices, and after being elected, he spoke about negotiating with OPEC, particularly Saudi Arabia, to bring prices down to $30–$40 per barrel. However, these statements are mostly aimed at the domestic audience since fuel prices in the U.S. directly depend on global market prices. 

The United States remains an oil-importing country, and high oil prices lead to increased gasoline and diesel costs. In 2022, Republicans actively criticized Biden for the record fuel price surge that followed sanctions against Russia and the refusal to purchase Russian oil. At that time, stickers appeared in the U.S. featuring an image of Biden pointing at gas station price tags with the caption "I did that," as well as similar stickers with Kamala Harris saying, "I helped." 

However, a decline in oil prices would hurt the American oil industry, which heavily relies on shale production with high production costs. If prices fall below $50 per barrel, production volumes will drop sharply. This contradicts another of Trump’s promises—to increase oil and gas production and flood the global market with American resources. His campaign was supported by major oil companies interested in high oil prices. Therefore, Trump's real policy is more likely to focus on maintaining high prices.

- How could Trump's tightening of sanctions against Venezuela and Iran affect global oil prices?

- At the same time, Trump promises to tighten sanctions against Venezuela by revoking the licenses issued under Biden and increasing pressure on Iran. In 2016, when Trump first became president, he withdrew the U.S. from the six-party agreement on Iran’s nuclear program and imposed stricter sanctions, banning the purchase of Iranian oil. This led to a sharp decline in Iran’s oil production and exports. However, over time, Iran found alternative markets, with China becoming the main buyer, and gradually restored its production levels.

If Trump imposes new sanctions on Iran and strengthens enforcement, it will lead to a reduction in the country’s oil production and exports, which, in turn, will drive up global oil prices. The same effect would result from tightening sanctions against Venezuela. Thus, Trump's actual actions would be aimed more at increasing prices rather than lowering them.

Saudi Arabia is unlikely to agree with Trump on reducing oil prices. Its economy depends on oil revenues, and it is interested in high prices. Breaking the OPEC+ deal would harm its relations with Russia and destabilize the market. Moreover, if sanctions against Russia are eased, Russian companies would be able to attract foreign investment and increase production, creating competition for Saudi Arabia.

Therefore, despite populist statements about lowering oil prices, Trump's real policies are likely to drive them up—something that benefits the U.S. oil industry but could provoke a negative reaction from domestic consumers.

- What are the main limitations Donald Trump faces in attempting to increase U.S. oil production?

- The global energy industry is currently in a state of anticipation. Many countries are waiting to see what steps Donald Trump will take and which of his statements will actually be implemented. However, even if Trump intends to increase oil production in the U.S., his ability to do so is limited. The president cannot directly influence production levels, as oil companies are private entities that operate solely based on commercial viability. 

Trump can create more favorable conditions for oil companies by reducing their operating costs, simplifying licensing and regulatory processes. For example, the state of emergency in the energy sector that he introduced only allows for faster approval of new drilling applications but does not have a decisive impact on production volumes. 

Additionally, U.S. oil companies see little incentive to significantly increase production. Excess supply in the market could lead to lower prices, reducing their profitability. At the moment, companies are using their profits to repay debts and generate net income. If they increase production, they would need to reinvest in expansion, which could lead to lower revenues due to declining oil prices. 

In the long term, Trump could improve conditions for oil companies, for instance, by allowing the construction of deepwater ports to reduce oil transportation costs. However, there remains a risk that after his presidency, Democrats could return to power and reinstate green policies, reversing the benefits granted to oil companies.

- How do you assess the future prospects of Europe-Azerbaijan cooperation in energy security in the current situation?

- Amid uncertainty, OPEC+ countries, including Azerbaijan, are also taking a wait-and-see approach. In June 2022, OPEC+ decided to increase production, but due to falling oil prices by October of the same year, this decision was deemed impractical. As a result, production quotas remain unchanged. 

Regarding Europe-Azerbaijan cooperation in the energy sector, the oil market remains stable as it is well-established and globalized. However, the main discussions revolve around the gas industry. Since 2022, European leaders have actively approached Azerbaijan with requests to increase gas supplies. However, the existing infrastructure is already operating at full capacity, and its expansion requires significant investments. 

Azerbaijan exports gas via the TAP-TANAP system to Georgia, Turkey, and Europe, including Italy, Greece, and Bulgaria. A substantial increase in supply would require not only infrastructure expansion but also investments in new gas fields. However, while European countries demand higher supplies, they are unwilling to sign long-term contracts that would guarantee a return on investment. Azerbaijani President Ilham Aliyev has already addressed this issue, pointing out the mismatch between EU demands and their refusal to commit to long-term agreements. 

The challenge is that Europe’s decarbonization strategy aims to phase out fossil fuels by 2050. This creates a risk of declining demand and falling gas prices in the future. Under such conditions, it is not beneficial for Azerbaijan to invest billions of dollars without guarantees of returns. As a result, the country continues to sell gas at current volumes, capitalizing on high prices driven by Europe's fuel shortage.

- The acquisition of SOCAR's stake in the Tamar gas field is a strategically important step for Azerbaijan. How significant is this acquisition for increasing Azerbaijan's presence in the energy market of Southeastern Europe?

- SOCAR's acquisition of a stake in the Tamar gas field is a strategically important move. This is SOCAR's first project in the Mediterranean region, marking its entry into a new market and expanding its presence. This step aligns with SOCAR’s strategy, as the company has already been actively acquiring assets in Southeastern Europe, as well as in Georgia and other regions. Expanding into more distant markets fits within the company’s overall development trajectory. 

SOCAR is evolving into a full-fledged transnational corporation rather than just an oil and gas operator. However, at present, the company is taking a cautious approach to large investments. Acquiring a 10% stake in the Tamar field allows SOCAR to assess the project’s prospects, establish cooperation with leading global players such as Chevron, and integrate more deeply into the international market. 

The risks for SOCAR in this project remain relatively low. An important factor in assessing the viability of participating in gas projects in the region is European decarbonization policy. The EU has declared its goal of completely phasing out hydrocarbons by 2050 and is actively developing renewable energy sources, including energy storage technologies. In this context, before investing in a new project, it is crucial to carefully calculate its profitability and long-term viability. 

A key question arises: why has SOCAR not focused on investing in Azerbaijani projects? A significant increase in hydrocarbon production in Azerbaijan would require substantial investments. Given the current uncertainty in energy markets and the lack of stable sales markets, particularly in the gas sector, the company is not yet ready to undertake such large-scale investments. 

Gas from Israel’s offshore fields, including Tamar and Leviathan, is consumed domestically and exported to Egypt for further liquefaction. The resulting LNG can be delivered to distant markets, including South Asia and China’s Far East. Additionally, LNG exports to Europe offer greater flexibility compared to pipeline supplies. This is why SOCAR views international projects as an important avenue for business development and diversification.

- How could this acquisition impact the global natural gas market and the positions of competing suppliers?

- The entry into Tamar will not affect the positions of Russia, Algeria, the United States, or other suppliers, as it is a relatively small gas field. Currently, its production is around 10 billion cubic meters of gas per year. The majority of this volume is consumed in Israel’s domestic market, while the surplus is exported to Egypt, where it is liquefied along with domestic gas and then shipped for export. 

However, gas production in Egypt is unstable—it fluctuates, sometimes increasing and sometimes decreasing. As a result, the country periodically suspends LNG exports and then resumes them. Nevertheless, the volumes from Tamar are relatively small compared to the export supplies of major producers, so its impact on the market is minimal. 

As for new investment opportunities arising from this acquisition and the likelihood of attracting European financial institutions, it is difficult to provide a definitive answer. In principle, SOCAR does not face difficulties with external financing. If it decides to raise funds, it has the option to do so in both the European and American markets.

- How likely is it that the EastMed project will see new development under the Trump administration?

 - Trump openly states that Europeans should increase their purchases of American hydrocarbons—oil and gas. However, this appeal does not concern current supply volumes, as European countries are already actively buying American energy resources. In reality, U.S. oil and gas exports are fully allocated, and there are no issues with sales. 

The main focus is on future projects that are either in the planning stages or have received construction approval, such as new LNG plants. For these to be realized, a guaranteed market is needed, which is ensured through long-term contracts. Only after these contracts are signed are companies willing to invest in building the plants. This is precisely what Trump refers to when urging European countries to sign contracts for American LNG supplies.  In this context, the EastMed project is unlikely to receive U.S. approval. Any gas suppliers to global and European markets now become competitors to America. 

Previously, the U.S. supported projects that provided alternatives to Russian gas, such as Nabucco (a pipeline from Turkmenistan through Azerbaijan and the Southern Gas Corridor to Europe). The State Department even had a special envoy for Caspian energy projects. At that time, the U.S. was not exporting gas and therefore strongly supported initiatives that reduced Europe’s dependence on Russia. 

The situation has changed. The U.S. now has its own LNG, which it actively promotes, pushing competitors out of the market. In 2019, agreements on EastMed were supported by official Washington, with Mike Pompeo present at the signing. However, in the new reality, Trump openly opposes any energy projects except American ones. He pressures countries to buy American hydrocarbons and imposes import tariffs on nations that, in his view, do not purchase enough American products. 

As a result, the prospects for EastMed appear uncertain: 

- The U.S. does not support the project due to competition. 

- Europe is actively promoting decarbonization, reducing gas consumption. 

- High construction costs ($10–20 billion) make it a risky endeavor, especially in an unstable gas market. 

Thus, there is a high likelihood that the project will not be implemented at all.

- How do you assess Azerbaijan's role in ensuring Europe's energy security?

 - At present, Azerbaijan has already secured its niche in the European energy market by supplying gas through the Southern Gas Corridor. These projects were costly: the total expenses, including the development of the Shah Deniz field, amounted to around $50 billion—significantly more than initially planned. 

Azerbaijan steadily supplies gas to the European market, where demand remains high. Currently, there are no issues with sales—even surplus gas finds buyers. However, in the long term, the primary risk for Azerbaijani gas exports lies in changes in global market conditions. 

One key factor that could impact the situation is the entry of new volumes of liquefied natural gas from countries such as the U.S., Qatar, and Australia. In the coming years, these nations plan to significantly increase gas production and exports, which could shift the balance of supply and demand in the global market. Particularly notable are the U.S. plans to double LNG export volumes by 2028, maintaining its status as a global leader in this sector. If these plans materialize, the market will face a sharp increase in supply. 

The growth of LNG supplies, combined with a potential slowdown in demand growth, could lead to a gas surplus in the market. As a result, competition among suppliers will intensify, inevitably affecting prices. A decline in gas prices will impact the profitability of export projects, including Azerbaijani supplies, which remain attractive to Europe in the current high-price environment. Thus, despite the stable present situation, Azerbaijan should take potential changes in the global gas market into account and adapt its strategy to new conditions. 

Such market conditions pose risks to all suppliers, including Azerbaijan and even U.S. LNG plants, which could also struggle to remain profitable. However, in the long run, gas will remain in demand, and Azerbaijan’s projects are likely to pay off and generate profit. 

As for oil, Azerbaijan benefits from more flexible logistics. Oil is transported to ports (Baku, Batumi, Ceyhan) and then loaded onto tankers. This allows shipments to be directed to any market, not just Europe. The most logical export destinations remain Southern Europe—countries such as Italy and France actively purchase Azerbaijani oil. Unlike gas, regional risks for oil are significantly lower.