“Today Azerbaijan and the European Union (EU) have become closer to each other more than ever,” Peter Michalko, the EU ambassador in Azerbaijan, stated in an event dedicated to Europe Day on May 12, in Baku. According to Lithuanian ambassador Egidijus Navikas, the relations between Azerbaijan and the EU intensified following the 2020 Second Karabakh War, as European companies are actively involved in reconstruction work in the territories liberated from the Armenian occupation and the EU is playing an influential mediating role in establishing peaceful relations between Azerbaijan and Armenia. The consequences of Russia’s invasion of Ukraine—in particular, the regional political tensions; security threats and challenges, disruption of the traditional connectivity routes, and the energy crisis in Europe—have created further incentives and necessities for closer bonds between the EU and Azerbaijan.
The basis for these relations is multilayered and propitious. Azerbaijan has signed strategic partnership agreements with nine members of the EU and developed strong ties with many of them.
With a $15 billion annual trade turnover, the EU is Azerbaijan’s main trading partner, accounting for around 45 percent of the country’s total trade and amounting to two-thirds of the EU’s trade with the whole South Caucasus region. The EU is the major investor in the Azerbaijani economy, having invested up to $20 billion in different projects in Azerbaijan.
The South Caucasian republic supplies around 5 percent of the EU’s oil demand and exports gas to the European market since 2020. In December 2020, Azerbaijan began exporting gas to Europe through the Southern Gas Corridor (SGC), a project worth $33 billion. Although the share of the Azerbaijani gas is less than 2 percent in the overall gas imports of the EU, this maintains strategic importance for some importers in Eastern Europe.
Amidst the European efforts to reduce gas dependency on Russia, Azerbaijan’s gas exports are seen as an alternative. For example, a ten-point plan to reduce Europe’s dependence on Russian gas proposed by the International Energy Agency includes Azerbaijan as an alternative source in this context. The intensifying visits to Baku by European officials to explore the opportunities to increase Azerbaijani gas exports in recent weeks promise to deliver positive outcomes in the near future. Both sides are strongly interested in this cooperation.
Azerbaijan is also an important actor in Europe-Asia connectivity. Due to disruptions along the trans-Russia northern route following the Ukraine war, the Trans-Caspian International Transportation Route, also known as Middle Corridor, has gained momentum. Over the last few months, numerous international logistics companies have decided to expand their Europe-Asia operations through the Middle Corridor.
Azerbaijan, Kazakhstan, and Georgia are interested in developing this transportation route, whose potential is estimated at 10 million tones or 200,000 containers per year. The three countries plan to establish uniform tariffs for domestic shippers and improve and simplify the work of carriers in the corridor of the track. This will boost the transit role of the South Caucasus for Europe-Asia connectivity and serve as another encouraging factor for closer engagement of the EU with this region.