I have elsewhere written about the reasons why Iran seeks to undermine and subvert the government in Azerbaijan. There I explained the « three motives that drive Iran’s anti-Azerbaijan policy »:
First, Azerbaijan’s independence attracts the attention of the ethnic Azeri minority in Iran. Second, Iran cannot stomach Azerbaijan’s relations with the West in matters of security and energy. Third, the secularism of the Azerbaijani model gives the lie to the millenarian pretensions of the Tehran regime. Let me address these matters in sequence.
With the accord having been reached over Iran’s nuclear development program, there is now more active interest in the development and export of Iranian energy resources. Both Iranian and Azerbaijani reports suggest that the two countries are discussing possibilities for cooperation.
However, it is unlikely that these moves will lead Iran to decrease its strong and important support for Armenia in the latter’s conflict with Azerbaijan over Nagorno-Karabakh.
In particular, Azerbaijan and Iran are already cooperating on gas swaps so that Baku can supply its exclave Nakhichevan. They are circumspectly discussing possibilities for increasing these swaps and for joint investments in gas export.
There are also longer-term discussions about chances for Iranian gas to enter the South Caucasus Pipeline for natural gas (SCP, running from Azerbaijan into Turkey via Baku-Tbilisi-Erzurum) in Azerbaijan, but Iran is prioritizing exports to closer markets. The SCP connects directly up with Trans-Anatolian Gas Pipeline (known as TANAP from its Turkish initials) from Erzurum to western Turkey. Since the State Oil Company of the Azerbaijani Republic (SOCAR) is the majority share-holder and operator of TANAP, Turkey would have no choice but to transit Iranian gas through TANAP as received.
The question is how much Azerbaijan would allow, since it has its own gas to send. Perhaps it would agree to send enough to indicate a willingness to cooperate and to cause some pain if permission is ever revoked, but not enough to put a significant dent in what Azerbaijan itself projects to supply to Europe into the future. In the same manner, Azerbaijan supplies relatively small quantities of natural gas to Russia, mainly for local consumption, in order to maintain friendly business-like ties and to keep channels of communication for industrial cooperation and other pertinent discussions.
That said, it appears that Azerbaijan is more interested in the shorter run in the possibility that Iran contributes oil to the Baku-Tbilisi-Ceyhan (BTC) pipeline. That is because the output of the Azeri-Chirag-Guneshli offshore oilfield is set to decline. Azerbaijan is putting Kazakhstani and Turkmenistani oil into the BTC pipeline in order to fill it, and probably just wants to have back-up volumes from Iran ready in case of need.