Energy Security: Azerbaijan-Eu Cooperation Benefits

The European Union and Azerbaijan have enjoyed a positive relationship since Azerbaijan gained independence from the Soviet Union in 1991. The EU is Azerbaijan's largest trading partner, and the two have worked together on various political agreements, the most important of which is the EU-Azerbaijan Partnership and Cooperation Agreement of 1999. Azerbaijan is also the EU's largest trading partner in the region, and a strategic energy partner, currently supplying around 4.3% of the EU's oil imports. The EU-Azerbaijan relationship is particularly important in the context of the Russia-Ukraine war and its impact on global energy supplies. The EU's decision to shift its energy sources away from Russia has led to Azerbaijan becoming a key exporter of oil and natural gas to Europe, and the country aims to become a major green energy provider in the future. The EU and Azerbaijan have also collaborated on cultural diplomacy initiatives, such as the annual European Film Festival in Azerbaijan, which aims to strengthen cultural links and understanding between the EU and Azerbaijan.

Energy security and diversification

The EU has been working to diversify its energy sources and reduce its dependence on Russian energy imports, and Azerbaijan is a key part of this strategy. Azerbaijan is a strategic energy partner for the EU, currently supplying around 4.3% of the EU's oil imports.

Azerbaijan's energy strategy includes oil, natural gas, and renewables. The country has significant reserves of natural gas, and its exports to Europe have increased from 19 billion cubic meters in 2021 to 23.8 billion cubic meters in 2023. Azerbaijan also plans to supply Europe with green energy, in the form of electricity produced from renewable sources, and with hydrogen.

The Southern Gas Corridor is a key initiative to bring Caspian, Central Asian, and Middle Eastern gas resources to European markets. The infrastructure includes the expansion of the existing South Caucasus Pipeline from Azerbaijan to Georgia and Turkey, the Trans-Anatolian Pipeline, and the Trans-Adriatic Pipeline, which will transport gas to Italy, Greece, and Bulgaria. The Southern Gas Corridor will significantly impact Europe's energy landscape, providing an initial supply of nearly 10 billion cubic meters of gas per year, with plans to increase this over time.

In July 2022, the EU and Azerbaijan agreed to boost their energy cooperation with a Memorandum on Strategic Partnership in the field of Energy. This agreement will help the EU consolidate its energy security and mitigate gas shortages by increasing supplies from Azerbaijan. By 2027, Azerbaijan's gas supply to the EU is expected to double, reaching 20 billion cubic meters annually.

Azerbaijan's geostrategic location and rich energy resources make it a vital partner for the EU's energy diversification and security goals. The country's role in bringing Caspian energy resources to the EU market is pivotal, and it currently meets 5% of Europe's energy needs through the Southern Gas Corridor.

The EU's collaboration with Azerbaijan in the energy sector brings economic, political, and strategic advantages. It enables the EU to increase its geopolitical influence in the region, reduce its dependence on Russian energy, and ensure energy sustainability and security.

Trade and economic growth

The EU is Azerbaijan's first trading partner, with trade turnover exceeding $15 billion in 2021 and accounting for 44% of the country's foreign trade. The EU is also Azerbaijan's biggest export market (51%) and second-biggest import market (16%), with nearly €7 billion in direct investments. Azerbaijan is the EU's largest trading partner in the region, accounting for 76% of the EU's trade with the South Caucasus.

The EU and Azerbaijan have a history of positive relations, becoming more closely linked since Azerbaijan's independence in 1991. In 1996, formal relations began with the signature of the EU-Azerbaijan Partnership and Cooperation Agreement (PCA), which entered into force in 1999. The PCA established economic cooperation, strengthening business links and developing market-based rules and practices for trade in goods and services. The EU is a key foreign investor in Azerbaijan, with Foreign Direct Investment (FDI) of €4.7 billion in 2013.

Azerbaijan is a strategic energy partner for the EU, currently supplying around 4.3% of its oil imports. The Southern Gas Corridor is a key initiative to bring gas from the Caspian Sea to European markets, enhancing energy security. Azerbaijan also plays a significant role in bringing Caspian energy resources to the EU market, with plans to export gas from the Shah Deniz field to Europe through the Southern Gas Corridor.

In 2022, the EU and Azerbaijan agreed to boost their energy cooperation with a Memorandum on Strategic Partnership in the field of Energy. This will help mitigate European gas shortages by increasing supplies from Azerbaijan. By 2027, Azerbaijan's gas supply to the EU is expected to double, reaching 20 billion cubic meters annually.

Beyond energy, there is potential for growth in other sectors. The EU supports Azerbaijan's economic diversification and accession to the World Trade Organization (WTO), providing technical assistance and policy dialogue. Sustainable tourism is a crucial economic driver for Azerbaijan, with 10% of tourists arriving in the first quarter of 2022 being Europeans. The EU also intends to support the development of entrepreneurship in Azerbaijan through grants and investments in various projects.

Overall, the EU-Azerbaijan relationship offers significant opportunities for trade and economic growth, with the potential to further enhance their cooperation in multiple sectors.

Political cooperation and dialogue

Azerbaijan is a key strategic energy partner for the EU, and the two have collaborated on several energy projects, including the Southern Gas Corridor, a strategic initiative to bring Caspian energy resources to the EU market. Azerbaijan is also part of the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative, which further guide their political dialogue and cooperation.

In 2017, the EU and Azerbaijan began negotiations on a new comprehensive framework agreement, which aimed to increase political dialogue, trade, and mutually beneficial cooperation. This led to the adoption of joint Partnership Priorities in 2018, reflecting the shared values and principles of the ENP. These priorities include strengthening institutions and good governance, economic development, market opportunities, connectivity, energy efficiency, environmental protection, and climate action.

The EU has also actively supported peace efforts in the region, including through the involvement of the President of the European Council and the High Representative, as well as the EU Special Representative for the South Caucasus and the crisis in Georgia. In 2022, the EU deployed monitoring experts along the Armenian-Azerbaijani border to facilitate peace, build confidence, and fix international border boundaries.

The EU and Azerbaijan continue to work closely together to enhance their political cooperation and dialogue, with a focus on energy security, economic development, and regional stability.

Civil society and cultural diplomacy

The EU also supports civil society in Azerbaijan through specific thematic instruments: the European Instrument for Democracy and Human Rights (EIDHR) and the Non-State Actors Programme.

Cultural diplomacy is a key strand of the EU's foreign policy work. The EU Delegation has organized various festivals in Azerbaijan, including the annual European Film Festival, which aims to develop cultural links and promote European values through film. Other festivals include the "Imagine" Euro Tolerance Festival, promoting intercultural dialogue, diversity, and tolerance; the "Fantazia" Cultural Heritage Festival, raising awareness of the need to showcase and preserve cultural heritage; and the International Festival of Contemporary Art "MAIDEN TOWER. To Be a Woman", emphasizing the role of women in Azerbaijani society and worldwide.

The EU Delegation has also organized outdoor events like "EuroVillage" and "EU4You" in Baku and other regions of Azerbaijan to increase awareness of the EU and its activities in the country.

The EU-Azerbaijan Partnership and Cooperation Agreement (1999) is the most important political agreement between the two, aiming to enhance trade, investment, the economy, legislation, and culture within the framework of the partnership.

Azerbaijan is part of the European Neighbourhood Policy (ENP), the Eastern Partnership, and the Council of Europe. The EU is the largest foreign grant donor to and investor in Azerbaijan, providing over 600 million euros of bilateral assistance since 1992. The EU is also Azerbaijan's first trading partner, with trade turnover exceeding 15 billion dollars in 2021, and the biggest investor, with nearly 7 billion euros in direct investments.

The EU and Azerbaijan have a positive and mutually beneficial relationship, with the EU supporting Azerbaijan's economic modernization and development, and Azerbaijan being a strategic energy partner for the EU, currently supplying around 4.3% of its oil imports.

Regional stability and conflict resolution

In October 2022, the EU deployed monitoring experts along the Armenian-Azerbaijani border to facilitate peace and security, build confidence between the two states, and fix international border boundaries. This was followed by the establishment of a civilian mission in Armenia in January 2023, aiming to contribute to stability in the border areas and build confidence on the ground.

The EU and Azerbaijan have also worked together to address the conflict in and around Nagorno-Karabakh. In 2020, the EU called for a halt to fighting and a return to negotiations between Armenia and Azerbaijan. Additionally, the EU has supported Azerbaijan's territorial integrity and advocated for a resolution to the Armenia-Azerbaijan conflict based on this principle.

The EU's cooperation with Azerbaijan in the energy sector also contributes to regional stability. Azerbaijan is a strategic energy partner for the EU, supplying oil and natural gas to Europe. The Southern Gas Corridor, a strategic initiative to bring Caspian energy resources to Europe, enhances energy security and reduces the EU's dependence on Russian energy sources. This cooperation provides economic benefits to Azerbaijan and contributes to its recognition as a regional power.

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