Azerbaijan–European Union relations
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The Republic of Azerbaijan and the European Union (EU) have maintained a positive relationship through the years and have become more closely linked since 1991. Azerbaijan is currently part of the European Neighborhood Policy, Eastern Partnership and the Council of Europe. The EU is the largest foreign grant donor and investor of Azerbaijan, both in the government sector and civil society making available over 600 million EURO of bilateral EU assistance since 1992.
Until the fall of the Soviet Union, Azerbaijan had little contact with non-Soviet Europe. During the Soviet years, Azerbaijan Democratic Republic (today's Republic of Azerbaijan) became the Azerbaijan SSR. It remained that until the Azerbaijani Supreme Court declared independence from the Soviet Union in September 1989, only to have this declaration made invalid in November 1989 by authorities in Moscow. The state finally gained independence in October 1991, and joined the United Nations in 1992. Through the UN and government policies, Azerbaijan has reached out to the international community, especially Europe, and has opened up its economy.
Formal relations with the EU began in 1996 when the EU-Azerbaijan Partnership and Cooperation Agreement (PCA) was signed. This agreement entered into force in 1999. This agreement marked the beginning of a mainly positive relationship between the Republic of Azerbaijan and the European Union, with both sides benefitting from the relationship.
Azerbaijan also strengthened its relations with Europe by becoming the 43rd state to join the Council of Europe on January 25, 2001. By doing so, Azerbaijan opened itself up even more to Europe and the West. Since joining, Azerbaijan has ratified 50 treaties and has been actively involved in the Council.
In July 2003 the EU appointed a Special Representative for the South Caucasus. Since 2004, Azerbaijan has been included (as a southern Caucasus country) in the European Neighbourhood Policy (ENP), and also in the Eastern Partnership initiative since its inception in 2009. A Protocol on Azerbaijan's participation in EU Programmes and Agencies was adopted in July 2016. Key items included on the plan are 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.
On 7 February 2017 EU and Azerbaijan launched negotiations on a new agreement that will replace the old one adopted in 1996.
The EU and Azerbaijan have worked together to conclude various political agreements, the EU-Azerbaijan Partnership and Cooperation Agreement (1999) being the most important one for the foundation of further strong relations. The agreement aims at enhancing trade, investment, the economy, legislation and culture within the framework of the EU-Azerbaijan Partnership and Cooperation. Azerbaijan is also the part of the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative, and 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.
Economic and financial relations
EU-Azerbaijani economic and trade relations are regulated by the Partnership and Cooperation Agreement (PCA). The European Union is Azerbaijan's first trading partner representing 48.6% of Azerbaijan's 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, which were worth €1.8 billion in 2016, consist primarily of machinery and transport equipment whereas EU imports from Azerbaijan, worth €7.6 billion in 2016, cover mainly oil and gas (98% of total imports). The EU is a key foreign investor in Azerbaijan. In 2013, its Foreign Direct Investment (FDI) in the country was €4.7 billion. The PCA does establish economic cooperation aimed at strengthening business links and developing market-based rules and practices for trade in goods and services. Closer economic integration with Azerbaijan is also followed through the European Neighbourhood Policy (ENP) and the Eastern Partnership initiative of the EU. Azerbaijan is receiving technical assistance from the EU to help it become a World Trade Organization member. EU support to Azerbaijan amounts to around €30 million each year. Non-Government Organisation (NGO) projects under Human Rights, Democratisation and Non-State Actor budget lines (EIDHR and NSA) also get funding.
EU assistance used to focus on humanitarian aid, food security and social protection. As economic and political conditions in the country have been improved dramatically, there is now more emphasis on:
- European Neighbourhood Policy Action Plan
- Non-oil economy
- Government capacity-building
EU assistance also comes through the programmes like INOGATE, TRACECA, TEMPUS, and ERASMUS MUNDUS.
Opinions about Azerbaijan's increased relationship with the European Union and the West are mostly positive, but there are concerns rising from the expanded relationship. Azerbaijan and the European Union share a common energy agenda, and both support the building of a pipeline to bring Azeri oil to Europe. The European Commissioner for Energy, Andris Piebalgs, said on November 7, 2008, that “recent events in the Caucasus have shown once again that this is a critical time for energy issues in the region and that EU-Azerbaijan energy cooperation should be strengthened now more than ever.” As more and more states are looking to Azeri oil, the Commissioner sees a strong relationship between the EU and Azerbaijan as crucial for securing future European energy supplies, as well as crucial for helping the Azerbaijani economy and infrastructure to develop.
Azerbaijan is committed to working with the European Union to strengthen its economy and political structure. Azerbaijan's President, Ilham Aliyev, stated on April 24, 2004 that “’[Azerbaijan’s] current strategic choice is integration in Europe, European family and institutions. We are strongly committed to this policy. We will do our utmost so that Azerbaijan meets all standards and criteria peculiar to Europe. Our policy is such and we have been pursuing it for a long time. Current events in Azerbaijan are the results of this continued policy.’” Aliyev's government sees the benefits to working with Europe, and is engaged in welcoming European business, investment, and aid.
At the same time, Azerbaijan still has strong ties to Russia, Iran (where the majority of the ethnic Azeri population lives), and its neighboring states on the Caspian Sea and in the Caucasus. The government is focused on developing Azerbaijan with a combination of European and more regional investments. These interests occasionally clash.
One of the reasons why Azerbaijan didn’t sign Association Agreement with the European Union, apart from that according to our impression it was not an agreement it was a unilateral instruction list to us, but the main reason was not that. The main reason was that they did not want to have a very precise wording about resolution of the conflict between Armenia and Azerbaijan based on territorial integrity of Azerbaijan. They have these provisions in the agreement with Georgia, with Moldova, at that time Ukraine didn’t have this problem. But when it comes to Azerbaijan it is a double standard. Russia was sanctioned for what happened in Ukraine. Armenia was not sanctioned for what happened in Nagorno-Karabakh. This double standard approach must be eliminated.
Azerbaijan and the European Union have similar beliefs on most policies and are presently working together to forward their combined interests. The European Community has developed a three-year aid plan for Azerbaijan, called the National Indicative Program (NIP), for which the EU has allocated a budget of €92 million over three years (2007–2010). The main goals of this program are to develop government agencies, run them more efficiently, and help Azerbaijan to develop its internal infrastructure to promote foreign investment and business growth. The EU has also set up a European Instrument for Democracy and Human Rights (EIDHR) office in Baku to give advice to Azerbaijan's new democratic government and to make sure that human rights are protected.
The European Union and Azerbaijan are strong partners on energy policy, and are working together on a number of projects. The main project is the building of a pipeline to connect the Caspian oil supply to Europe, providing a viable route for oil and gas to reach consumers. Europe is also supporting Azerbaijan's state sponsored program for the increased use of alternative and renewable energy sources. Azerbaijan is a partner country of the EU INOGATE energy programme, which has four key topics: enhancing energy security, convergence of member state energy markets on the basis of EU internal energy market principles, supporting sustainable energy development, and attracting investment for energy projects of common and regional interest. Negotiations are ongoing between the EU and Azerbaijan to replace their existing PCA with an Association Agreement (AA). Roland Kobia, the EU's ambassador to Azerbaijan, said in April 2013 that they could be completed prior to the Eastern Partnership meeting in November 2013. However, the Deputy Chief of Azerbaijan's Presidential administration has stated that "we aim to draft a partnership agreement – a document more adequately reflecting the level of our relations and cooperation with the European Union" rather than an AA. An EU official from the delegation to Azerbaijan stressed that "it has not been said that Azerbaijan will never sign it, just it is not right time to sign it now. So we are working with Azerbaijan on possible other formats but the final objective is to sign an association agreement." No AA was initialled at the summit, though a Joint Declaration praised the progress in negotiations and stated that the EU was willing to negotiate a Deep and Comprehensive Free Trade Agreement with Azerbaijan once they join the World Trade Organization. In December 2013, EU Commissioner for Enlargement Štefan Füle said that negotiations on the AA were continuing. In November 2016 the European Council authorized the launch of negotiations on a framework agreement, which "allows Azerbaijan to decide the extent in which it will participate in the EU's offer of political association and economic integration".
On 29 November 2013, the agreement on the facilitation of visa issuance was signed between Azerbaijan and the European Union in Vilnius, Lithuania. The document came into force on 1 September 2014. On this agreement, travel to EU countries became easier and cheaper for Azerbaijani nationals and they are able to acquire short-stay visas which enables to travel freely within the EU. The agreement isn't in effect in the UK, Ireland and Denmark. According to the agreement, visa handling is fee-free for particular groups of citizens such as official delegates, pensioners, children under 12, students and researchers.
Azerbaijan is an important energy partner for the EU, currently supplying around 5% of the EU's oil demand and playing a pivotal role in bringing Caspian gas resources to the EU market through the Southern Gas Corridor. The EU is the biggest customer for Azerbaijani oil, and oil transited through Azerbaijan. EU-Azerbaijan energy cooperation goes far beyond the Southern Gas Corridor. The basis for bilateral cooperation in the energy field is the Memorandum of Understanding on a Strategic Partnership between the Republic of Azerbaijan and the European Union in the Field of Energy signed in 2006. The MoU identified 4 priority areas of cooperation: harmonization of legislation, enhancing security of supply and transit systems, development of RES and increased technical cooperation. Regular MoU meetings take stock of the developments in energy relations between Azerbaijan and the EU. In 2016 the Commission launched a new regional programme "EU4Energy" that supports Eastern Partnership countries, including Azerbaijan in achieving their energy policy objectives. The EU is also assisting Azerbaijan in its efforts to improve energy efficiency.
“Southern Gas Corridor”
President of the European Commission José Manuel Barroso and President Aliyev signed a Joint Declaration on the Southern Gas Corridor back in January 2011 in Baku. The Southern Gas Corridor is a strategic initiative to bring Caspian, Central Asian and Middle Eastern gas resources to the European markets and is the main diversification tool for the security of energy supply. The infrastructure that is to bring gas from the Caspian basin, notably from Shah Deniz II field, consists of the expansion of the existing South-Caucasus pipeline from Azerbaijan via Georgia to Turkey; the Trans-Anatolian pipeline, crossing Turkey and connecting Georgia with Europe; and the Trans-Adriatic pipeline, transporting gas from the Turkish border via Greece and Albania to Italy. A giant offshore gas field in the Azerbaijani sector of the Caspian Sea – Shah Deniz II will provide initial ten billion cubic metres of gas per year to the European markets as of 2020 and an additional six billion cubic metres per year to Turkey. The Southern Gas Corridor is the most significant and ambitious undertaking of international hydrocarbon industry as numerous stakeholders including 7 governments and 11 companies have been involved in it. Southern Gas Corridor will alter the energy map of whole Europe by providing gas supplies of the Caspian Sea throughout European markets. Initially, nearly 10 billion cubic meters (bcm) of gas will flow across this network in 2019-2020.”
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