Azerbaijan's Place In The European Union: A Complex Question

Azerbaijan and the European Union have a long-standing relationship, with the two sides cooperating across various sectors. Azerbaijan is part of the European Neighbourhood Policy, the Eastern Partnership, and the Council of Europe. The EU is Azerbaijan's largest foreign investor and trading partner, with a focus on the country's oil and gas sector. While Azerbaijan has moved towards greater cooperation with the EU, it has also maintained a neutral stance, avoiding alignment with any political or military blocs. Negotiations between the two sides have led to discussions on a potential Association Agreement, with the EU aiming for regulatory alignment and Azerbaijan prioritising energy cooperation. The relationship is complex, influenced by factors such as Azerbaijan's domestic policies, human rights record, and geopolitical considerations, including the Nagorno-Karabakh conflict.

Azerbaijan's relationship with the EU

Azerbaijan, officially the Republic of Azerbaijan, is a transcontinental country at the boundary of Eastern Europe and West Asia. It is not a member of the European Union but has maintained a positive relationship with the EU through the years and has become more closely linked since 1991.

History of Azerbaijan's Relationship with the EU

Azerbaijan became independent from the Soviet Union in October 1991 and joined the United Nations in 1992. Formal relations with the European Union began in 1996 with the signature of the EU-Azerbaijan Partnership and Cooperation Agreement (PCA). This agreement entered into force in 1999.

Current Relationship with the EU

The EU is Azerbaijan's first trading partner, biggest export and import market, and largest foreign investor. The EU supports closer economic integration with Azerbaijan through the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative. Azerbaijan is receiving technical assistance from the EU to help it become a World Trade Organization member.

Azerbaijan is a strategic energy partner for the EU, currently supplying around 4.3% to 5% of the EU's oil and gas imports. The Southern Gas Corridor is a strategic initiative to bring gas from the Caspian Sea to European markets and is a key tool for enhancing the security of energy supplies in Europe.

The EU and Azerbaijan have worked together to conclude various political agreements. The most important is the EU-Azerbaijan Partnership and Cooperation Agreement (1999) which aims to enhance trade, investment, the economy, legislation, and culture within the framework of the EU-Azerbaijan Partnership and Cooperation.

Azerbaijan is also a member of the Organisation of the Black Sea Economic Cooperation (BSEC). Discussions on updating the legal basis for relations between the EU and Azerbaijan are ongoing.

EU Support for Azerbaijan

The EU provides support to Azerbaijan in the form of funding, training, and export support to new markets through the EU4Business initiative. The EU also assists the Azerbaijani government in improving the country's business and investment climate.

The EU supports Azerbaijan's economic diversification agenda, particularly through support for education and regional development. Azerbaijan actively cooperates with the EU via Twinning, with 26 ministries and public institutions in Azerbaijan having taken part in 46 Twinning projects and benefited from EU technical know-how and practical experience.

The EU continues to stress the importance of defending human rights and ensuring civil society and freedom of media, expression, and assembly in Azerbaijan, seeing this as an essential part of EU-Azerbaijan relations and the sustainable development of the country.

Cultural and Public Diplomacy

Cultural and public diplomacy is a key strand of the EU's foreign policy work. The EU Delegation has organized various festivals in Azerbaijan, including the European Film Festivals, the "Imagine" Euro Tolerance Festival, the "Fantazia" Cultural Heritage Festival, and the International Festival of Contemporary Art "MAIDEN TOWER. To Be a Woman".

Civil Society Dialogue

Civil society and NGOs are vital for democracy and human rights, the rule of law, good governance, the principles of the market economy, and sustainable development. The EU supports civil society in Azerbaijan through specific thematic instruments such as the European Instrument for Democracy and Human Rights (EIDHR) and the Non-State Actors Programme.

Recent Developments

In July 2022, the European Commission signed an agreement with Azerbaijan to increase natural gas imports.

In summary, while Azerbaijan is not a member of the European Union, it maintains a close and positive relationship with the EU, characterized by strong economic, political, and cultural ties. The EU supports Azerbaijan's development and integration into European structures, while Azerbaijan plays a pivotal role in bringing Caspian energy resources to the EU market.

The EU-Azerbaijan Partnership and Cooperation Agreement

Azerbaijan is not a member of the European Union. However, the country has been working closely with the EU since its independence from the Soviet Union in 1991. In 1996, formal relations with the European Union began with the signature of the EU-Azerbaijan Partnership and Cooperation Agreement (PCA), which entered into force in 1999.

The PCA is a comprehensive agreement that covers a wide range of issues, including:

Political Dialogue

The PCA establishes a framework for regular political dialogue between the EU and Azerbaijan, allowing for the development of political relations and the strengthening of links between the two parties. It also aims to support Azerbaijan's efforts to consolidate its democracy and develop its economy, particularly in the transition to a market economy.

Trade and Investment

The agreement promotes trade and investment between the EU and Azerbaijan, aiming for harmonious economic relations and sustainable economic development for both parties. It provides for the gradual approximation of Azerbaijan's legislation and procedures with EU and international trade-related laws and standards.

Economic Cooperation

The PCA establishes economic cooperation between the EU and Azerbaijan, contributing to the economic reform, recovery, and sustainable development of Azerbaijan. It includes policies and measures to bring about economic and social reforms, restructuring of economic and trading systems, and the development of various sectors such as agriculture, energy, transport, tourism, and environmental protection.

Business and Investment Conditions

The agreement aims to improve conditions for business and investment, addressing areas such as the establishment of companies, labour, provision of services, and capital movements. It ensures non-discriminatory treatment for Azerbaijani nationals legally employed in the EU and vice versa.

Financial Services

The PCA covers provisions related to financial services, including banking, insurance, and investment regulations. It also addresses current payments and capital movements between the EU and Azerbaijan.

Intellectual Property Rights

Azerbaijan agreed to improve the protection of intellectual, industrial, and commercial property rights, aiming to achieve a level of protection similar to that in the EU by the end of the fifth year after the entry into force of the agreement.

Legislative Cooperation

The PCA recognises the importance of legislative approximation between Azerbaijan and the EU, particularly in areas such as customs law, company law, banking law, intellectual property, protection of workers, financial services, competition rules, and environmental legislation. The EU provides technical assistance to support the implementation of these measures.

Industrial Cooperation

The agreement promotes the development of business links between economic operators, the improvement of management practices, the establishment of market-based commercial rules, and the transfer of know-how. It also covers specific sectors such as construction, mining, and raw materials.

Investment Promotion and Protection

The PCA aims to establish a favourable climate for private investment, domestic and foreign, through improved investment protection, capital transfer, and information exchange on investment opportunities. It encourages the conclusion of agreements for investment promotion and protection, as well as agreements to avoid double taxation.

Standards and Conformity Assessment

The agreement promotes alignment with internationally agreed criteria, principles, and guidelines in the field of quality. It aims to facilitate mutual recognition in conformity assessment and improve the quality of Azerbaijani products.

Science and Technology Cooperation

The PCA promotes cooperation in civil scientific research and technological development, including the exchange of scientific and technical information, joint research activities, and training and mobility programs for scientists and researchers.

Education and Training

The agreement aims to raise the level of general education and professional qualifications in Azerbaijan, covering areas such as higher education systems, training for public and private sector executives, cooperation between educational institutions, and the promotion of teaching European studies and Community languages.

Agriculture and Agro-Industrial Sector

The PCA covers cooperation in the pursuance of agrarian reform, modernisation, privatisation, and restructuring of agriculture, agro-industry, and service sectors in Azerbaijan. It also aims for the gradual approximation of Azerbaijani standards to EU technical regulations concerning industrial and agricultural food products.

Energy Cooperation

The agreement includes cooperation in the formulation and development of energy policy, improvement of energy supply and security, promotion of energy efficiency, modernisation of energy infrastructures, and management and technical training in the energy sector.

Environmental Cooperation

The EU and Azerbaijan agreed to cooperate in combating environmental deterioration, monitoring pollution levels, ecological restoration, sustainable energy production and use, ecological safety of industrial plants, waste reduction and recycling, and environmental education.

Transport Cooperation

The PCA covers cooperation in the modernisation and restructuring of transport systems and networks in Azerbaijan, including road transport, railways, ports, and airports. It also promotes multimodal transport, joint research and development programs, and the privatisation of the transport sector.

Postal Services and Telecommunications

The agreement includes cooperation in the development of policies and guidelines for telecommunications and postal services, improvement of tariff policies and marketing, technology transfer, enhancement of efficiency and quality of services, and the establishment of an appropriate regulatory framework.

Financial Cooperation in Technical Assistance

The EU provides temporary financial assistance to Azerbaijan in the form of grants to support the country's economic transformation and achieve the objectives of the agreement.

Institutional and Final Provisions

The PCA establishes a Cooperation Council and a Cooperation Committee to supervise the implementation of the agreement and make recommendations. It also includes provisions for dispute settlement and consultation between the parties.

Azerbaijan's energy cooperation with the EU

Azerbaijan and the European Union have a long history of cooperation in the energy sector. The EU is Azerbaijan's largest foreign investor, with the country receiving over 600 million euros of bilateral EU assistance since 1992. In 1999, the EU-Azerbaijan Partnership and Cooperation Agreement (PCA) entered into force, aiming to enhance trade, investment, and economic development between the two parties. The EU is Azerbaijan's primary trading partner, with a 60.7% share in total exports and a 31.8% share in total imports. Notably, the EU's imports from Azerbaijan are predominantly oil and gas, accounting for 98% of total imports.

Azerbaijan is a strategic energy partner for the EU, currently supplying around 4.3% to 5% of the EU's oil and gas imports, respectively. The Southern Gas Corridor is a significant initiative to bring Caspian gas resources to European markets and enhance energy supply security. The corridor consists of the expansion of existing pipelines from Azerbaijan to Turkey, the construction of the Trans-Anatolian Pipeline, and the Trans-Adriatic Pipeline, which will transport gas to Italy, Greece, and Bulgaria. The Shah Deniz II gas field in the Azerbaijani sector of the Caspian Sea is expected to provide an initial ten billion cubic meters of gas per year to Europe, with an additional six billion cubic meters per year supplied to Turkey.

In recent years, the EU and Azerbaijan have taken steps to strengthen their cooperation in renewable energy. The EU-Azerbaijan Green Energy Advisory Council has held several meetings, with the EU facilitating a Memorandum of Understanding (MoU) on wind energy cooperation between the Azeri Renewable Energy Agency and the European industry association WindEurope. This MoU is expected to unlock Azerbaijan's wind power potential, advance the clean energy transition in the region, and potentially generate new renewable energy supplies for Europe.

The EU supports Azerbaijan's economic diversification agenda, particularly through investments in education and regional development. The EU also assists Azerbaijani companies in expanding their businesses and accessing new markets through the EU4Business initiative. Additionally, the EU provides funding, training, and technical know-how to various ministries and public institutions in Azerbaijan through Twinning projects, contributing to the development and improvement of legislation in line with EU standards.

The EU and Azerbaijan's energy cooperation extends beyond economic interests. The EU continues to emphasize the importance of defending human rights, ensuring civil society freedoms, and promoting cultural exchange between the two regions. The EU supports civil society in Azerbaijan through specific instruments like the European Instrument for Democracy and Human Rights (EIDHR) and the Non-State Actors Programme. Furthermore, the EU has organized cultural festivals, such as the "Imagine" Euro Tolerance Festival and the "Fantazia" Cultural Heritage Festival, to foster intercultural dialogue, promote diversity and tolerance, and enhance mutual understanding between the EU and Azerbaijan.

The EU's support for Azerbaijan

Azerbaijan is not a member of the European Union. However, the country has been working to strengthen its relationship with the EU since it gained independence from the Soviet Union in 1991.

The EU has been the largest foreign grant donor to and investor in Azerbaijan, providing over 600 million euros of bilateral assistance since 1992. The EU is Azerbaijan's first trading partner, representing 48.6% of its total trade. The EU is Azerbaijan's biggest export and import market, with a 60.7% and 31.8% share in Azerbaijan's total exports and imports, respectively. The EU's exports to Azerbaijan consist primarily of machinery and transport equipment, while imports from Azerbaijan are made up of mostly oil and gas.

The EU supports Azerbaijan's integration into the World Trade Organization (WTO) and provides technical assistance to help the country align with WTO rules and norms. The EU also provides financial support to Azerbaijan through its annual commitment of around €30 million in assistance. This support has helped Azerbaijan develop its internal infrastructure to promote foreign investment and business.

The EU and Azerbaijan have worked together to conclude various political agreements, the most important being the EU-Azerbaijan Partnership and Cooperation Agreement (1999). This agreement aims to enhance trade, investment, the economy, legislation, and culture within the framework of the EU-Azerbaijan Partnership.

Azerbaijan is also part of the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative, which further strengthen the country's relationship with the EU. The EU has also set up a European Instrument for Democracy and Human Rights (EIDHR) office in Baku to advise the Azerbaijani government and ensure the protection of human rights.

In addition to economic and political support, the EU has contributed to cultural and public diplomacy initiatives in Azerbaijan. The EU Delegation organizes annual European Film Festivals to promote cultural links and understanding between the EU and Azerbaijan. Other festivals organized by the EU Delegation include the "Imagine" Euro Tolerance Festival, the "Fantazia" Cultural Heritage Festival, and the International Festival of Contemporary Art "MAIDEN TOWER. To Be a Woman", which emphasizes the role of women in Azerbaijani society and globally.

The EU has also supported Azerbaijan in the energy sector, particularly through the Southern Gas Corridor initiative. This strategic initiative brings gas from the Caspian Sea to European markets, enhancing Europe's energy security. The EU and Azerbaijan have a shared interest in energy projects, with Europe supporting Azerbaijan's state-sponsored program for the increased use of alternative and renewable energy sources.

In summary, the EU has provided significant support to Azerbaijan through economic integration, political cooperation, cultural initiatives, and energy partnerships. These efforts have contributed to the development of Azerbaijan's infrastructure, promoted foreign investment, and strengthened the country's relationship with the EU.

Azerbaijan's membership of European institutions

Azerbaijan has been a member of the Council of Europe since 25 January 2001. It is also a member of the Organisation of the Black Sea Economic Cooperation (BSEC).

Since 1991, the EU has gradually become closer to Azerbaijan, and the two have worked together to conclude various political agreements. The most notable of these is the EU-Azerbaijan Partnership and Cooperation Agreement (1999), which aims to enhance trade, investment, the economy, legislation, and culture within the framework of the EU-Azerbaijan Partnership and Cooperation.

Azerbaijan is also part of the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative. The EU supports closer economic integration with Azerbaijan through these policies and initiatives. Azerbaijan is receiving technical assistance from the EU to help it become a World Trade Organization member.

In 2016, a Protocol on Azerbaijan's participation in EU Programmes and Agencies was adopted. This included investment in Azerbaijan's infrastructure, partial integration of the Azerbaijani economy into Europe's, and partnerships with Azerbaijan on extracting oil from the Azerbaijani-controlled part of the Caspian Sea.

In February 2017, the EU and Azerbaijan began negotiations on a new framework agreement designed to give new impetus to political dialogue and mutually beneficial cooperation. As of 2018, discussions on updating the legal basis for relations between the two were ongoing.

The EU is Azerbaijan's first trading partner, the biggest export and import market, and the biggest investor for the country (with nearly €7 billion of direct investment). The EU-Azerbaijan Partnership and Cooperation Agreement enable the gradual approximation of Azerbaijan's legislation and procedures with EU and international trade-related laws and standards.

The EU also assists companies in Azerbaijan with funding, training, and export support to new markets through the EU4Business initiative. The EU supports the Azerbaijani government in improving the country's business and investment climate. Azerbaijan actively cooperates with the EU via Twinning. Over the past 10 years, 26 ministries and public institutions in Azerbaijan have taken part in 46 Twinning projects, benefiting from EU technical know-how and the practical experience of EU civil servants.

The EU continues to stress the importance of defending human rights and ensuring civil society and freedom of media, expression, and assembly in Azerbaijan. It sees this as an essential part of EU-Azerbaijan relations and the sustainable development of the country.

Frequently asked questions