Winter is coming: Europe's quest to stay warm pins hopes on Azerbaijan
Khazar Akhundov's review

ANALYTICS  26 September 2022 - 11:13

For many years Azerbaijan and European states have been consistently cooperating in the field of energy supply and transport cooperation, implementing mutually beneficial joint projects. Amid the protracted global energy crisis and war in Ukraine, traditional ties with the EU have significantly strengthened. At the same time, new vectors of cooperation are surfacing in freight transit and green energy.

Business partnerships with Old World countries will continue to diversify and qualitatively expand in the future. This message was the keynote of the roundtable on "Azerbaijan 2022: a source of energy and logistics hub for Europe and Asia", held recently in Geneva.

Over the past two decades, Baku has consistently built business relations with the European Union on the basis of equal partnership. Being financially self-sufficient, our country has never experienced critical dependence on EU donor assistance; moreover, compared to many other Eastern Partnership countries, Azerbaijan's energy and transport potential has always been particularly enticing to the EU. The current critical situation in Europe, both in energy and transport communications with the east, is an additional incentive for European countries to expand cooperation with Azerbaijan, and this interest is reciprocal.

The round table on Azerbaijan's role as a source of energy supplies and logistics services for Europe and Asia demonstrates the sustainability of these aspirations. The forum was initiated by the Geneva Chamber of Commerce, Industry and Services (CCIG), Swiss-Eastern Europe, Central Asia and South Caucasus Chamber of Commerce (JCC) as well as the Agency for the Development of SMEs of Azerbaijan (KOBIA) and SOCAR Trading, a subsidiary of the State Oil Company. During the forum, KOBIA, the Export & Investment Promotion Agency (AZPROMO), and Swiss M&M Company made presentations on various aspects of support and services provided to SMEs in Azerbaijan, as well as investment potential, logistics, and energy opportunities in the country. At the end of the forum, the heads of KOBIA, JCC, and Swiss Alternative Financing signed a Memorandum of Understanding and Cooperation.

On the eve of signing the memorandum the founding conference of the Swiss-Azerbaijani Chamber of Commerce and Industry (SACCI) was held in Geneva, where its new structure was approved, the board and new members of the chamber were elected and plans for the future were discussed. The Swiss and Azerbaijani businesses have for many years been showing mutual interest in cooperation, and every year the countries are expanding the potential of trade and economic relations. Oil-trading companies SOCAR operates in Switzerland, one of the top five trading partners of our country, and a network of petrol stations with the same name is established, and precious metals produced in Azerbaijan as well as petrochemical products, hazelnuts, etc. will be sent here for refining. The trade dynamics are growing rapidly, and in only seven months of 2022, the trade turnover between the countries more than doubled. More ambitious investment plans are possible in the future: SOCAR's Swiss subsidiary Energy Switzerland is considering participating in a consortium to build a 10 MW electrolysis plant in Switzerland, where hydrogen fuel production and its retail distribution will be set up through a SOCAR-owned petrol station network.

It is noteworthy that the successful Azerbaijan-Switzerland cooperation is implemented in unison with the expanding business contacts with other European countries - Italy, Greece, Romania, Bulgaria, Hungary, etc. This interest has increased markedly in recent times. For example, between September 2021 and September 2022 alone, EU countries, which are under the yoke of inflation as a result of the energy crisis, have allocated 450 billion euros in subsidies and other support measures for people and businesses, according to a study by the Bruegel Institute in Brussels. These circumstances have made Azerbaijani energy resources - oil and, to an even greater extent, natural gas - even more important for the diversification of blue fuel supplies as well as for electricity in southern Europe, and the EU is now keen to increase such exports.

"The Trans Adriatic Pipeline (TAP) will deliver more than 9.5 billion cubic metres of Azerbaijani gas to Italy this year, which is 2.5 billion more than in 2021. We're talking about meeting more than 13 per cent of the country's demand for gas," TAP managing director Luca Schieppati said speaking at the Young Hope Forum in Italy last Friday. According to the Managing Director, TAP has a significant potential to transport hydrogen produced in Azerbaijan as well, and the expansion of the pipeline can contribute to the climate ambitions of Europe, including Italy.

The key positions of Azerbaijan in the mitigation of the gas crisis were also discussed at the 5th Romania International Gas Conference. "At the moment, gas supplied by Azerbaijan through TAP covers almost 20 per cent of gas consumption in Greece," said Minister of Environment and Energy of Greece Kostas Skrekas. In turn, his colleague - Bulgarian Energy Minister Rosen Hristov stressed at the gas forum in Romania that Azerbaijan's gas supplies to Bulgaria in 2022 will make 600 million cubic meters and enable Sofia to meet 19 per cent of its needs in "blue fuel".

Azerbaijani Energy Minister Parviz Shahbazov, who attended the Romanian gas conference, also informed about the plans to increase Azerbaijani gas deliveries to Southern Europe in 2022. In particular, this year it is expected to increase Azerbaijani gas supplies to Europe by 40 per cent, approximately up to 11.5 billion cubic metres.

Another vector of cooperation is seen in the expansion of supplies of Azerbaijani electricity to Europe. Since May 2019, Azerenerji has managed to organise swap supplies of electricity to a number of southern European countries, but these operations were interrupted during the pandemic. However, Azerenerji's subsidiary GlobalPower, which operates in Türkiye, resumed electricity swaps last year, and over time this trend may become a key one, and already in 2024 Azerbaijan, in partnership with Türkiye, plans to significantly expand exports to EU countries.

"Azerbaijan can sell electricity to the Eastern European market at a reasonable price, including by uniting with the energy systems of Georgia, Romania, and other Southern European countries," said Parviz Shahbazov, head of the country's Energy Ministry in a conversation with his Romanian counterpart Virgil Daniel Popescu. Among other things, the project of laying a cable through Azerbaijan, Georgia, and further on the bottom of the Black Sea to Romania and Hungary, as well as the export of electricity generated by wind turbines in the Azerbaijani sector of the Caspian Sea to the EU is possible in the long term.

It is noteworthy that during negotiations with EU countries, including the recent forum in Geneva, the transport and logistics potential of Azerbaijan was also discussed and the transit capacity of the country, in particular through the West-East corridor, was voiced. This issue is just as critical for Europe today as the gas agreements: the sanctions pressure on transport corridors through Russia is pushing the states of the Old World to reorient cargo routes towards the Middle Corridor. And the position of Azerbaijan, which is a key participant in the Transport Corridor Europe-Caucasus-Asia (TRACECA) and its components - the Trans-Caspian International Transport Route (TTIM) and Lapis Lazuli - has increased manifold in this regard. In particular, Baku, together with Ankara and Astana, is involved in the extension of the Trans-Caspian route, and with Bucharest, Tbilisi, and Ashgabat in the formation of the prospective Black Sea-Caspian Sea route. All these initiatives are supported by the European Union and are included in the portfolio of projects with Eastern Partnership countries. In the future, given the geopolitical consequences of the war in Ukraine, these trends will only expand: the EU plans to bolster transport cooperation between Eastern and Southern European states and the South Caucasus and Central Asian regions participating in TRACECA through the gradual integration of the Middle Corridor into the Trans-European Transport Network (TENs).

Given the involvement of Baku and Bucharest in almost all major transit routes in the Black Sea-Caspian Sea region, the partnership of our friendly countries today is unique and invaluable, especially integration with TENs, the creation of a South-Eastern axis, and the multiplication of multimodal transport.

Caliber.Az