ISSUE 3-2013
Олександр Сушко Вероника Мовчан Сергей Саркисян Alili Ziya
Ольга Потемкина Агата Вежбовска-Мязга
Виктор Замятин Степан Григорян
Mykola Riabchuk
Богдан Олексюк

Disclaimer: The views and opinions expressed in the articles and/or discussions are those of the respective authors and do not necessarily reflect the official views or positions of the publisher.

By Alili Ziya | Economist-Researcher, the Center for Economic and Social Development, Azerbajdzhan | Issue 3, 2013

Overview of European Union – Azerbaijan bilateral relations
The European Union and Azerbaijan have cooperated very closely since the independence of Azerbaijan. In the early 1990s, the fall of communism, which was fostered by national movements, reached its flourishing conclusion: independence. The EU, as always, actively supported developing countries and assisted newly independent post-soviet countries, including Azerbaijan. Not surprisingly, the TACIS (Technical Aid to the Commonwealth of Independent States) program[1], was developed and implemented to help newly independent countries in their transition to market economies, foster democratic processes, and promote rule of law. Interestingly, Russia was also one of the countries covered by the program. (Ministry of Economic Development, 2013)

Establishing its very first links with the European Union via the TACIS programme, Azerbaijan strived for even more cooperation. The then on-going political issues in Azerbaijan prolonged this deepening of cooperation by the late 90s. The Partnership and Cooperation Agreement (PCA), which was signed in April 22, 1996, had not been ratified until July 1, 1999. This agreement was the first official agreement between the European Union and Azerbaijan, which established an appropriate framework for the political dialogue between the EU member countries and Azerbaijan by allowing the development of political relations and helping Azerbaijan transition to a market economy. The agreement also promoted trade, investment, and mutually beneficial economic relations between the EU and Azerbaijan. This, in turn, will foster sustainable economic development in Azerbaijan. Lastly, the agreement aimed to provide a basis for cooperation with Azerbaijan on financial, economic, social, legislative, scientific, technological and cultural affairs. The agreement has a predetermined termination date of 99/99/9999, signifying indefinite, continuous cooperation between the EU and Azerbaijan. 

EU-Azerbaijani cooperation was further fostered by the adoption of the EU’s Neighbourhood Policy in 2004. The main aim of the policy, although unofficial, was to tie the neighbouring countries to the EU but not accept them as member states. In other words, the EU adopted this program to address these countries’ interest in European Integration since they were not eligible to become full members of the EU. The program would help these countries adopt institutional and other necessary reforms to progress towards qualifying as member states in the EU. Azerbaijan joined the European Neighbourhood Policy on July 14, 2004. The Policy enlarged the pre-existing cooperation areas under the PCA with free movement of the factors of production, promotion of accession to the World Trade Organisation, mutual cooperation on criminal enforcement, and other areas. The main document under the ENP with Azerbaijan was the adoption of the Action Plan. Sensing slow progress on achieving ENP targets, the EU established a “concise version” of the Program under the name of the Eastern Partnership (EaP). The EaP extended and specified the targets of ENP for 6 eastern neighbours, namely Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine. The program is currently the main document shaping bilateral cooperation between Azerbaijan and the EU, thus after discussing general economic relations between the EU and Azerbaijan, we will address in a separate, dedicated section Azerbaijan’s progress in within the EaP program, which also encompasses economic relations.

The European Union and Azerbaijan were quite active in other partnerships as well. Both parties realised key transport routes would not only boost trade but also promote economic development generally. TRACECA and the Baku-Tbilisi-Kars railway are among these projects. The TRACECA (TRAnsport Corridor of Europe- Caucasus- Asia) was established in 1993 by execution of the multilateral agreement between the EU, Caucasus and Central Asian countries and facilitates the development of transport initiatives. The main office of the project was established in 2000 in Baku, the capital of Azerbaijan. The project was inaugurated on February 21, 2001 with the participation of key persons from the EU and Azerbaijan. Project participants adopted the “Baku Initiative” in 2004, which stressed Azerbaijan’s importance for EU countries and initially created four working groups, followed later by an additional working group. The initial working groups covered: (1) aviation, (2) security in all modes of transport, (3) road and rail transport, and (4) transport infrastructure. The subsequently established working group addressed maritime transport.

Economic relations of the European Union and Azerbaijan
Economic relations between the EU and Azerbaijan are largely dominated by bilateral trade. As of the end of 2012, the EU remained the largest importing block for Azerbaijan’s exports. The EU constituted more than 45 per cent of Azerbaijan’s total exports and originated 32 per cent of Azerbaijan’s total imports. Four European Union member countries occupied positions in Azerbaijan’s top ten export destinations. Italy, France, Germany and Greece ranked as the 1st, 3rd, 7th and 9th top destinations in 2012, respectively. These four countries combined composed 38 per cent of Azerbaijan’s total exports. Of this 38 per cent share, Italy had the most weight with 23 per cent. France, Germany and Greece added to this 23 per cent by seven, four and three percentage points, respectively. Asian countries like India and Indonesia ranked as the 2nd and 4th destinations with eight per cent and seven per cent shares of exports.

Azerbaijan exported only oil and oil preparations to Italy. 98.5 per cent of total export is crude oil and 1.5 per cent is oil preparations. Hazelnuts and juice are also among exported goods, but they have virtually no impact in light of oil’s dominating portion. On the other hand, Azerbaijan imports from Italy mainly taps, cocks, valves (9.60 per cent of total Italian imports), shovels and excavators (3.40 per cent), vapour generating boilers (3.00 per cent), medicaments (2.60 per cent), and motor vehicles (2.30 per cent). The shares of the top 5 imports from Italy indicate a highly diversified structure.

The same trend is true with exports to France: 99.87 per cent is oil. The rest is shared between hazelnuts and oil preparations. Other exported goods include optical media for sound recordings, valves, spirits, machinery, fruit and vegetable juices. Azerbaijan imports from France: gas meters (29 per cent of total imports), drill pipe used in gas supply (4 per cent), smart cards (4 per cent), medicaments (4 per cent), and heat exchange units (3 per cent). Compared to exports, Azerbaijan’s imports from France are relatively diversified.

Not surprisingly, oil is the dominant export to Germany as well. Azerbaijan exports to Germany petroleum oils and oils obtained from minerals[2] (98.03 per cent), hazelnuts (0.76 per cent), and oil preparations (0.61 per cent). Although relatively small in comparison with oil exports, Azerbaijan does also export nuts and seeds, machinery parts, optical media for sound recordings, and fruit or vegetables juices. Azerbaijan’s top five imports from Germany are cigarettes and tobacco (8.39 of total imports from Germany), polyethylene (6.54 per cent) automobiles (6.37 per cent), diesel powered trucks (3.23 per cent), and instruments and appliances used in medicine (3.10 per cent).

The EU is by far Azerbaijan’s largest trading partner. Within the EU, Italy, France, Germany and Greece are Azerbaijan’s most important partners, with the main commodity traded to these countries, unsurprisingly, being petroleum. As for imports, Azerbaijan receives a diverse set of goods from its EU partners with leading imports including everything from ‘Machinery, Electrical,’ and ‘Transportation’ to ‘Food Stuffs’ and ‘Textiles.’

These trade links have been fostered by the EU’s unilateral reduction of tariff rates for Azerbaijani imports under the Generalized Scheme of Preferences (“GSP”), which is a tariff reduction scheme that helps diversify the exports of developing countries. The scheme encompasses three tiers of tariff reduction for different developing countries: The General GSP scheme offers tariff reductions by 3.5-20 percentage points depending on the product type. This applies only to select goods. The second tier of reduction, the GSP+ scheme, where Azerbaijan belongs, offers full tariff elimination for selected goods[3]. The third tier, the Everything-But-Arms or “EBA” scheme, offers full tariff reduction for all exports from certain under-developed countries. According to calculations, Azerbaijan’s exports to the EU has largely benefited from this unilateral reduction of tariff rates, which had the potential to decrease tariff duties by 73 per cent in 2008[4].

Despite the importance of trade in its economic relation, Azerbaijan and the EU are also active in other areas of economic cooperation. The State Statistics Committee of Azerbaijan calculates that a single European country, the United Kingdom, accounts for 51.7 per cent of foreign investments in Azerbaijan as of December 2012. Although the two next countries are non-EU countries (USA and Japan with 14 and 9.5 per cent shares in foreign investments), the top five list concludes with European countries: Norway and Czech Republic with 5.2 and 3.9 per cent shares, respectively. Furthermore, Italy and Germany originate 1.6 and 0.3 per cents of total investments . This structure of investments was almost the same for 2011 and 2010, with a jump in the UK’s and a drop in the Czech Republic’s shares in total investments. These investments made the EU to a leading group in foreign direct investment with AZN 2,042.4 mln (approximately 2 billion euros) as of 2012, or 62.7 per cent of total investments[5].

Eastern Partnership
As noted, to foster the integration of its eastern partners, the European Union adopted the Eastern Partnership (EaP) program with the initiatives of Poland and Sweden in December 2009. As the name implies, the program encompasses Eastern Europe and the South Caucasus, namely Belarus, Moldova, Ukraine, Armenia, Azerbaijan, and Georgia (EaP Community, 2013). The program is intended to hasten achievement of ENP goals by deepening and specifying the cooperative framework. It specifically aims to provide a sound dialogue between EaP and EU countries on issues as visa liberalization, free trade zones, market economy, good governance and energy security (European External Action Services, 2013). These aims are achieved via 4 platforms:

  • Platform 1: The democracy, good governance, and stability platform aims to provide EaP countries with best practices on important issues such as electoral standards, media regulation, and tackling corruption. The platform also covers integrated border management, migration policy and visa liberalization. Furthermore, the program covers prevention of natural and man-made disasters and non-proliferation.
  • Platform 2: The platform of economic integration and convergence with EU policies has special panels on Small and Medium Enterprises, which promotes SME development in partner countries. To facilitate convergence with EU trade policies, the platform has a dedicated panel on Trade and Trade Related Regulatory Approximation. The platform also addresses environment and climate change issues.
  • Platform 3: The platform of energy security enhances the framework and solidarity in mutual energy support and joint energy security actions. This platform covers the development of energy infrastructure and thus diversification of energy supply, along with use of renewable energy.
  • The fourth and final platform on contacts between people deals with education, training and awareness raising on both of sides, cultural dialogue and enhancement of research and capacity building (European Commission, 2013).

To implement these four platforms, the EU allocated 600 million euros for the six EaP countries between 2010-2013 in following areas:

  • Support for partner country reforms through the implementation of Comprehensive Institution Building programmes (approximately € 175 million). Visa liberalization and the free trade zone will require substantial reform efforts by the partner countries’ institutions. The Comprehensive Institution-Building programmes of the Eastern Partnership aim to promote successful completion of this process.
  • Pilot regional development programmes to address regional economic and social disparities within partner countries. This component will cost approximately € 75 million. Not all EaP countries are perfectly diversified and suffer from economic and social disparities between various regions and population groups. To tackle these challenges, 75 million euros were distributed to support regional development programmes and address local needs for infrastructure, human capital, and SMEs.
  • EUR 350 million was dedicated to implementing the the EaP’s multilateral multilateral co-operation framework, which aims to achieve the objectives of the four thematic platforms, discussed above; the framework also establishes a Civil Society Forum in each EaP partner country.

Moreover, the EU’s financial commitment via the European Neighbourhood Policy Instrument, adopted in May 2010, is EUR 122.5 million (European Commission European External Action Service, 2011).
Eastern Partnership and Azerbaijan

Within the framework of the Eastern Partnership, the European Union and Azerbaijan cooperate mainly on visa facilitation, energy security, integrated border management and sectorial policy convergence. Each area is addressed below.

Visa liberalization, being a substantial step toward EU integration, would strengthen economic ties, enhance Azerbaijan’s access to the EU market, and explore trade and investment opportunities for domestic income. Furthermore, it would strengthen cultural ties via person-to-person contact. The visa talks are one of the stalled areas of discussion, as no substantial progress has been achieved since 2009. A glance at visa facilitation talks reveals that on June 15, 2010, the Foreign Ministries of 27 the EU member states agreed to further develop relations with South Caucasus countries by allowing visa-free travel between the EU and three Caucasus countries. The meeting agreed on developing a plan on visa facilitation by the end of 2010. By the first half of 2013, the second round of visa talks had been finalized, leaving strong hopes for signing a visa liberalization agreement by the end of 2013. Although the first two rounds of visa talks have been unsuccessful, the EU made a substantial progress on this issue with Armenia and Georgia. Despite the fact that Azerbaijan was the one that tightened its visa rules, the EU’s progress with Armenia and Georgia gave Azerbaijani officials the impression of differentiated, but not favorable, treatment from the EU’s side. However, it is understandable that subject to strong and secure border management, the EU pursues small but ambitious steps toward full visa elimination as its long-term goal, as there has been progress on this agenda with other five EaP countries.

As mentioned, although the EU expressed its readiness to launch talks on the simplification of the visa regime in 2007, no concrete results have been achieved: two rounds of talks concluded with nothing but a promise. Unfortunately, there is no action plan on the visa facilitation programme. The main precondition for visa talks is to have a European Neighborhood Program Action Plan, which is in force in Azerbaijan, so the country is qualified to proceed; however, there is no development in the talks. The latest, second round of visa talks in March 2013 left huge expectations for the third round of talks. EU official Stephan Fule paid a visit to Baku, capital of Azerbaijan, where he expressed strong hopes for achieving mutually shared goals in the third round of talks, which will be “in the near future” (The Europen Azerbaijan Society, 2013). The statement was made on May 3, 2013, after which Mr. Mahmoud Mammadguliyev, Deputy of Minister of Foreign Affairs of Azerbaijan Republic, in late August 2013 stated that the parties expect to sign a contract on simplification of visa rules at the Vilnus summit of EaP countries, scheduled for November 28-29, 2013 (, 2013) (Orujova, 2013). This is a remarkable development after two rounds of unsuccessful talks. On other hand, as part of the visa facilitation programme Azerbaijan was committed to the implementation of biometric passports. No progress on this has been made since February 13, 2007, when ‘the State Program on Creation of biometric identification system in the Azerbaijan Republic in 2007-2012’ was approved by the President of Azerbaijan, which allocated AZN 23 million for this purpose. On September 2, 2013 news agencies released welcoming news: The first biometric passport is ready and presented to the President (Trend Information Agency, 2013). This news is another auspicious indicator that the visa simplification agreement between Baku and Brussels will be signed in November. The purpose of this program is to modernize the national security system and fight effectively against terrorism, human trafficking, and unregulated migration (, 2012).

The policy convergence area is also a progressive area in Azerbaijan’s bilateral relations of with the EU. The second EaP platform requires institutional and policy convergence in Azerbaijan’s legislation, especially trade legislation. To this end, Azerbaijan’s State Commission on Integration of the Republic of Azerbaijan to Europe (SCIRAE) adopted an Action Plan with the support of lawyers from the EU. This action plan was prepared based on the “Legal Approximation of the Legislation of the Republic of Azerbaijan with the EU Acquis 2010-2012,” which was approved on October 23, 2009, during the meeting of the SCIRAE. The Action Plan requires amendments to 126 different laws in 15 different fields. These fields include, but are not limited to: security of food manufacturing, phytosanitary measures, customs regulation, employee protection, and state procurement. A workshop dedicated to this EaP goal was held by the Ministry of Economic Development in December 2010. The main outcomes of the workshop were following-up on the legal reforms directed to the Milli Majlis (National Parliament) and increasing public awareness. Later on, in November 2012, the State Committee of Securities (like the US Securities Exchange Committee), within the framework of the EU Twinning project, announced that it expected convergence of related laws according to EU legislative standards. Other government bodies also either applied to the Milli Majlis or conducted workshops on convergence in their fields. Despite this, there is room for development in this area as the existing legislation is not fully compliant with international and European legislation (European Commission, 2013).

Apart from policy convergence and visa liberalization, another important field for cooperation is energy security. Interestingly, the energy security topic is not the central topic only for the EaP. It has been the main decision-making point for the EU in policy towards Azerbaijan. Thus, it is unsurprising that there is a special platform for energy policy in the EaP. Negotiations in this area started long before the EaP. For example, the strategic partnership in energy security was strengthened by signing a “Memorandum of Understanding” in 2006. However, the talks have been intensified under the Eastern Partnership. The EU’s desire to diversify its energy supply away from Russia has necessitated cooperation between Azerbaijan and the EU. Considering that the EU expects an increase in its demand for gas around 80% by 2030, and it may cost an additional 700 euros annually, per capita (European Commission, 2013). Considering this, Azerbaijan has taken decisive steps in recent years to supply natural gas to the EU. Although not under the framework of the EaP, it should be noted that the Baku-Tbilisi-Jeyhan pipeline was a milestone action taken by Azerbaijan that diversified the EU’s energy supply and enhanced energy security. On July 28, 2013, the Trans Adriatic Pipeline (TAP project) was selected by the Shah-Deniz Consortium to ensure a sustainable gas supply to the European Union. The project will allow transport of natural gas from the Shahdeniz II field of Azerbaijan via Greece, Albania and Italy. It will pass across the Adriatic Sea to Southern Italy, and continue further to France, Germany and other western European countries. Profit from the transport of natural gas will be distributed among Switzerland’s Axpo (42.5%), Norway’s Statoil (42.5%) and Germany’s E.ON (15%). Shah Deniz Consortium members, namely BP, SOCAR and Total, have options to purchase shares in TAP whose full exercise would allow them to own 50% of TAP (TRANS ADRIATIC PIPELINE, 2013).

Within the framework of the EaP, Azerbaijan is also expected to join the World Trade Organisation (WTO) as it is a precondition for joining the free trade zone of the EU. Azerbaijan’s accession to the WTO will reinforce cooperation at the international level. If joined, Azerbaijan will ensure the highest security possible for the EU’s trade and investment with Azerbaijan, which definitely would benefit the economy beyond just the energy sector. It should be noted that accession to the WTO would make Azerbaijan adopt the Technical Barriers to Trade Agreement that would mean simultaneous compliance with trading requirements set by the EU. This means more and free trade, in other words, development of the economy via tools of a free market economy. Apart from this, the WTO will attract foreign direct investment to the economy and achieve development via increased competition created in the business environment (World Trade Organisation, 2013). Despite these benefits of accession, Azerbaijan is very reluctant to join the WTO. In September 2012 the President of Azerbaijan directly stated that Azerbaijan is not interested WTO membership unless some special cases are considered. Although not specified by the President of Azerbaijan, these special cases were:

  • Azerbaijan strives for accession with higher membership status
  • Nagorno-Karabakh conflict prevents Azerbaijan from engaging in free trade with Armenia.
  • Subsidies to the agriculture sector, which is currently largely distributed, would be decreased after accession to the WTO.

EU-Azerbaijan: Growth perspectives
Up to this point we have discussed the past developments in EU-Azerbaijan relations. We have stated that the EU is a very important market for Azerbaijan. Integration into the European Union plays a key role in Azerbaijan’s foreign policy. European integration, in turn, means democratic development, prosperity, and security for Azerbaijan, which is located in a very sensitive and politically fragile region of the world. The EU is also a market with 500 million consumers, the largest in the developed world, which makes it especially attractive. The EU is also the largest trading partner of Azerbaijan and final destination of Azerbaijan’s energy resources, which is the current locomotive of Azerbaijan’s economy. Thus, Azerbaijan’s interest in European integration and convergence of its policies with EU laws is reasonable.

The EU is also interested in Azerbaijan. The country owns the energy transportation routes bypassing Russia and Iran. Oil shocks and Russia's instigation of gas disputes with Ukraine and Belarus between 2009-2011 allowed EU to realize the reliable partner, Azerbaijan, on energy supply. Thus, the EU considers Azerbaijan as an important partner in its energy security and supply diversification.

However, there are challenges remaining for future development. These are: (1) the EU’s “pressure strategy” toward EU countries, (2) political reluctance of the European Union to support EaP countries, especially Caucasus countries, in light of Russia’s pressures and (3) “selfish” politics of the European Union.

Generally speaking, the Eastern Partnership of the European Union is on the verge of failure. Consider the recent developments around the six EaP countries. Moldova and Georgia are the most successful countries in talks with the European Union. In the belief of very prominent experts, during the forthcoming Vilnius summit of Eastern Partnership countries, these two countries will sign Association Agreements with the European Union, which will ensure broader political cooperation and be a step closer to joining the European Union as a member.

However, the EaP countries other than Moldova and Georgia experience totally different fates. In early September of 2013 the President of Armenia, Serzh Sarksyan declared his country’s intentions to join the Russia-led Customs Union. Not surprisingly, this statement was made right after meeting with Russian president Vladimir Putin (Reuters, 2013). Four days after Sarksyan’s statement, Štefan Füle, the Commissioner for Enlargement and European Neighbourhood Policy, clearly stated the impossibility of Armenia’s further development talks with the European Union:

“We continue our assessment of the new situation, including in on-going consultations with our partners, and are in the process of informing our member states and consulting with them. In light of Armenia's declared choice to join the Customs Union it is however difficult to imagine the initialing at Vilnius summit in November of the Association Agreement with Armenia as it had been negotiated. Based on the information we presently have, the compatibility of obligations to theCustoms Union with those under an Association Agreement/DCFTA[6] with the EU looks problematic” (Fule, 2013)

This statement by Fule was made after the meeting with Armenia’s minister of Foreign Affairs, where the minister expressed Armenia’s intention for future cooperation with the European Union. Apart from Armenia, Ukraine has also intensified relations with the Customs Union of Russia, Belarus and Kazakhstan. On May 22, 2013, the country announced its ratification of a memorandum on becoming an observer of the Customs Union (, 2013). By May 27, 2013 this had been denied and no memoranda were ratified (, 2013). By the end of August 2013 Ukraine expressed its intention to join the Customs Union with special status, under model of 3+1 (Russia, Belarus, Kazakhstan Plus Ukraine) (, 2013). The special status of Ukraine will allow disregarding certain requirements of the Customs Union that contradict WTO regulations. The Russian Information Agency (RIA), a prominent Russian news agency, published an article on September 4, 2013 about Ukraine’s interest in ratifying one of the rules of the Customs Union: the rule on elimination of technical barriers (, 2013). In light of these changes, European commissioners expressed their true belief in signing an Association Agreement with Ukraine (Fule, 2013) (Fule & Ashton, 2013). If the EU continues to act reluctantly, Ukraine will officially follow the Armenian way and join the Customs Union.

Azerbaijan and Belarus are another two EaP countries sharing a similar EaP fate: Both of them have reached dead-end talks with the European Union. The EU wants Azerbaijan to join the WTO for further development of relations and pushes Belarus on human rights and democracy issues by freezing talks with them. Both Azerbaijan and Belarus act stubbornly against these requirements of the European Union.

These observations support our conclusion that EaP strategy is very close to failure: Out of six members, only two are in successful talks. Two are on their way to joining the Customs Union and the remaining two are in stalled negotiations. If the EU fails to take adequate measures, the EaP may reach its end very soon. I believe this could be prevented via the following methods:

The European Union treats all of the Eastern Partnership countries on an equal basis. This would be a much appreciated and, indeed, valuable strategy. However, not all of the EaP members contribute to the EU’s interests equally. Azerbaijan, Georgia, and Ukraine are important to the EU for their energy resources and transit potential whereas Armenia, Moldova and Belarus are important for different political reasons. Considering this, although equal treatment is logical and desirable, it is not relevant at the current stage of relations. Put differently, Belarus has taken very brave steps against Russia. The EU should consider this and “reward” Belarus by giving some exemptions. Seeing the EU irresponsive toward its anti-Russia strategy, Belarus may hesitate in taking similar steps in future, or even get closer with Russia by joining the Customs Union. Another example: Azerbaijan plays an important role in energy strategy for the EU. Nevertheless, the country faces pressures on WTO membership. Although both the EU and Azerbaijan are interested in Azerbaijan’s WTO membership, neither is willing to step down on preconditions.

These points allow us to argue that the EU uses “the Pressure principle” towards EaP countries. Under this principle, you put the same requirements and rules (i.e. same pressure) on all countries and do not make any necessary adjustments to your policy (pressure)[7]. The negative consequence of this principle is the “pressure” that the EU uses can have devastating effects on the country, which may then turn to Russia, as I believe Belarus at risk of doing. On top this, relevant policy in one country can be irrelevant in another. I.e., Azerbaijan’s socio-economic problems are different than those of, say, Moldova’s. In this respect, customised pressures to countries can be more effective.

Apart from these, the third obstacle for development is the EU’s selfish strategy. Azerbaijan’s political experts believe that the EU closes its eyes to Azerbaijan’s failure to meet all obligations in exchange for an EU-favourable energy policy (Kobzova & Alieva, 2012). In other words, Azerbaijan maintains a Eurocentric energy strategy in exchange for the EU’s soft position in the social and political situation in Azerbaijan. This very unpleasant situation gives credence to negative perceptions of the EU.

The European Union and Azerbaijan have had long-lasting, mutually beneficial bilateral relations since early 1991 following the collapse of the Soviet Union. These relations have been formalised with the Partnership and Cooperation Agreement signed in 1996 and ratified in 1999. Bilateral cooperation has been quite successful in its past developments in energy security, democracy, and other areas. Other areas of active cooperation include transportation, economic development and free trade. The EU is the major destination for Azerbaijan’s oil and gas exports, which account for more than 94% of Azerbaijan’s total exports. Germany, Italy, France and the United Kingdom play an important role in Azerbaijan’s economy in terms of trade and investment relations. Azerbaijan, in turn, plays an important role in diversifying the EU’s energy supplies. Azerbaijan’s role in delivering natural resources from Central Asian countries, which bypass Russia and Iran, is relevant. These relations were intensified with Azerbaijan’s inclusion in the European Neighbourhood Policy and further deepened with the Eastern Partnership in 2009. Within the Eastern Partnership, Azerbaijan has had a successful history of cooperation. Recently, Azerbaijan issued its very first biometric passport. To date, numerous workshops on policy convergence have been organised and draft legislation addressed to the national parliament (Milli Majlis). Energy security has been the most successful area of cooperation, as exemplified by the recent greenlight for the TAP project.

Unfortunately, a continuation of this past success is not expected unless necessary measures are taken by the parties. The EU’s Eastern Partnership is very close to failure as just two of six members have been successful in their talks. Two are approaching the Customs Union, Russia’s economic integrative project, and two effectively face frozen talks with the European Union despite minor progress. This worst-case scenario can be averted via customised strategies towards each EaP member.  


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[1] Which is substituted with EuropAid program later on.

[2] Crude oil, in other words. 

[3] Of course selected goods are goods other than oil and oil products..
[4] Unfortunately there is no recent study available. 

[5] Although not mentioned, Turkey is also an important investor of Azerbaijani economy with 4.1% of share in total investments as of 2012.
[6] Deep and Comprehensive Free Trade Agreement

[7] This is also generated by the equal treatment strategy of the European Union. 



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