Azerbaijan is a key link in the new regional architecture Analysis by Maurizio Geri

The Eurasia Review website published an article by Maurizio Geri on economic cooperation between the EU and Azerbaijan. Caliber.Az reprints the article.

Current events in Ukraine and MENA region show how Eurasian stability, at geopolitical level but also at energetic-resource-economic level, is on a delicate and fragile moment, with evident risks of increasing international instability with repercussion on global scale. Recent events in Azerbaijan also, with the military anti-terrorist offensive against Armenian secessionist group in Karabakh, and the end of the war with a peace negotiations with Armenia in process, are impacting geopolitics of Caucasus, with Russia losing the grip on Armenia but still desiring to impose its sphere of influence in the region, and the West, in particular the US, supporting Georgia and Armenia with a current strained relations with Azerbaijan. 

The relationship between the EU and Azerbaijan therefore, becomes very strategic not only as a partnership in itself (as Azerbaijan has the great potential to become the strategic leader of the South Caucasus future integration) but also as a bridge to the broader alliance between the EU with the Central Asia region, thorough Türkiye. This role of Azerbaijan, at the same time of pivot of Caucasus and bridge with Central Asia, becomes crucial and a potential game changer for Eurasia, helping Europe to curb the Iranian and Russian spheres of influence in the area and at the same time giving central role to this region for two reasons. 

First, with a stronger EU-Türkiye-Azerbaijan partnership, the West Eurasia would make sure that the ‘Heartland’ is not falling under the spheres of influence of the last two East Eurasian imperialistic states (Russia and China). The project of the Zangezur Corridor in particular, the last piece for the Middle Corridor project to connect Türkiye with Azerbaijan, is becoming crucial on this, for the energy, the trade of goods and the passage of people between Central Asia and Europe. A land corridor passing through Armenia’s southern territory, would represent also the first embryonic start of a South Caucasus integration, so the current peace negotiations can represent a real ‘Grand bargain’ among the three countries of the region. This would be in the interest first of all of Azerbaijan, that would become both the pivot of the regional integration and the bridge between East and West. But also in the interests of the West, opposing calls from Russia or Iran for the complete exclusion of external actors from regional affairs, given their interest in spheres of influence. 

Second a stronger partnership could be useful to help the EU, Türkiye and Azerbaijan to lead the green transition, globally and regionally, to adapt to climate change and transforming it in an opportunity besides a challenge. Currently, the economy of Azerbaijan remains dependent on oil and gas, which account for a third of GDP and 90% of exports but the country has a plan of green transition, to cut 35% emission by 2030 compared to 1990 and has great potentiality of renewable energy in wind, solar and rare earth material (and next COP 29 will actually be in Baku).  Central Asia also has a great potential for renewable energy, but Central Asian countries seems to take a divided path with everyone by its own, while partnership with the EU, through Azerbaijan, could help them to integrate also their renewable energy investments. 

In the last 30 years Azerbaijan was able to build a stable and prosperous state. For next 30 years this country is on the path to be both a pivotal state in the new regional architecture, and a regional power, as a bridge between West and East, also through the Organization of Turkic States, that could become somethings similar to the European Union in the future. 

Energy partnership

Energy security in the last years became an important part of national security of a state like military or economic security with weaponization of energy resources in new forms of hybrid warfare. Energy security means first of all diversifying sources and imports to avoid the dependency from some countries, but also reducing demand with more energy efficiency and speeding the renewable energy transition to gain energy independency. 

The EU energy strategy first of all is based on the green transition plan and the end of all Russian energy imports by 2030, according to the REPower EU Plan. The EU imported 380 bcm gas last year, projected to import 400 in 10 year, as until 2050 with the goal of ‘zero greenhouse gases’ and so ‘climate neutrality’ the EU will still use fossil fuels for its energy needs, a part the nuclear power plants already functioning and the ones that could be built. So the EU in the meantime needs two main strategies, one is to use less gas with more efficiency, meaning reduction of losses, better distribution etc. And the second is the diversification. The region of South Caucasus is very important for this goal, not only in itself but as a connector to the Caspian Sea and so Central Asia. And the pivot country in South Caucasus for this is Azerbaijan. 

Currently there is one main corridor, the Southern Gas Corridor, made of the South Caucasus Pipeline/SCP, the Transanatolian pipeline/TANAP and the Transadriatic pipeline/TAP that bring Azerbaijan gas to Europe. While the Oil is exported through the Baku–Tbilisi–Ceyhan pipeline. But there is a also a proposed subsea pipeline in the Caspian sea, the Transcapian Pipeline, to bring gas from Turkmenistan through Azerbaijan. There are plentiful natural gas reserves in and around the Caspian (the ones located in the Shah Deniz offshore field for example are estimated in 60 Trillion cubic feet) that constitute an obvious medium- to longterm source of supply for Europe. And again, the necessary partner to reach the EU is Azerbaijan.

The EU partnership with Azerbaijan is based currently on two crucial programs: the EU and Azerbaijan Partnership and Cooperation Agreement since 1999 and the EU Strategy for the South Caucasus, inside Eastern Partnership Program since 2010. The EU is Azerbaijan’s main trading partner, accounting for around 52% of Azerbaijan’s total trade (with a positive trade balance of 29B Euro of trade surplus) and with nine members of the EU, Azerbaijan signed or adopted declarations on strategic partnership, as recently Azerbaijan president stated. 

Regarding the gas in particular, since July 2022 the EU and Azerbaijan have an MOU according to which they should double the Azeri gas exportation to EU by 2027, making it 20 bcm, and expand the Southern Gas Corridor with European Bank for Reconstruction and Development (EBRD). Recently at COP 28 Azerbaijan President said that they can meet the target of doubling natural gas exports to Europe, but his country has yet to secure the long-term sales deals it needs to invest billions to boost production. Actually at the COP 28 Azerbaijani Energy Minister and EU Energy Commissioner met to discuss the EU partnership with Azerbaijan, in particular for the Southern Gas Corridor expansion, the implementation of the “Solidarity Ring” plan, but also the “Caspian-Black Sea-Europe” green energy corridor. Azerbaijan therefore can become from a ‘paneuropean gas supplier’, as the EU Commissioner for energy had called its, to a ‘paneuropean energy supplier’, through the green energy transition.

Green Transition 

For the next few decades energy security will pass from a gigantic transition, as COPs meeting every year will set the pace of it, even if the ‘phase out’ of fossil fuel will not be done soon. The energy security will need diversification, resilience, transparency and integration, as it will advance not through more autonomy and self sufficiency but through more cooperation. It would not be possible to expand renewable energy at the scale and speed needed if each country try to produce and consume only inside its borders. Therefore, again Azerbaijan comes to play a fundamental role of connector between Europe and Central Asia, as its green transition could go hand in hand with the green transition in Central Asia. 

Azerbaijan has a tremendous potential in renewable energy, in particular offshore wind and low-carbon green hydrogen, but the path for its green transition is still long. In 2019 95% of Azerbaijan’s electric power came from natural gas, hydropower 4%, and only 1% renewable. Under the Paris Agreement on climate change the country has committed to a 35% emission reduction target by 2030 compared to the base year of 1990. At the recent COP 28 Azerbaijan committed to renewable energy sources target of reaching 30% by 2030, and aims for a significant reduction of greenhouse gas emissions by 40% by 2050. This includes the establishment of a green energy zone in the Karabakh and Easter Zangezur liberated regions. In particular Azerbaijan is planning projects for 25 GW in electricity capacity based on renewable energy with the expectation of exporting most of this electricity. 

The potential of renewable energy sources of Azerbaijan, which are economically viable and technically feasible, is estimated at 27 000 MW, including 3 000 MW of wind energy, 23 000 MW of solar energy, 380 MW of bioenergy potential, 520 MW of mountain rivers. But according to an analysis of the World Bank Group, the technical potential of offshore wind energy in the Azerbaijani part of the Caspian Sea is gigantic, as it is estimated at a total of 157 GW, including  35 GW in shallow water and 122 GW in deep water.

Regarding the cooperation with the EU, in December 2022, Azerbaijan, Georgia, Romania, Hungary made an agreement on strategic partnership for green energy, to build in 3-4 years 1000 km for 1000 MW electric cable from Azerbaijan to Romania, with 2 billion Euros from EU. This is the first of possibly many other projects that could be done with the EU. For example on green hydrogen Azerbaijan could export to the EU between 50-100 thousand tons (250-500 USM$ a year, according to Boston Consulting Group). 

Also the Caspian region and Central Asia has tremendous wind, solar, hydropower potential for regional and global energy needs. EU launched the Global Gateway Initiative on Water, Energy, and Climate in Central Asia, showing its commitment to supporting the green transition in this region. As some scholars argue, the EU could strengthen Central Asia’s resilience, prosperity, and regional cooperation in the green transition focusing on these key sectors. 

Middle Corridor

Central Asia is on a path of regional integration, through the Organization of Turkic States, the Central Asia Regional Economic Cooperation (in which also Azerbaijan and Georgia are present) and other regional organizations, in order to avoid spheres of influence from Russia and China. With this aim, to connect to the European continent through the Middle Corridor, would be an important asset, not only for trade but also to develop the renewable energy great Central Asian potential. 

Europe has a Global Gateway project, as alternative to Chinese Belt and Road Initiative, to encourage links, not dependencies, with countries in the Eurasian continent, with a budget of €300 billion between 2021-2027 for connectivity projects, notably in the digital, climate and energy, transport, health, education and research sectors. This could represent a door for the increased role of Azerbaijan as a bridge between Europe and Central Asia. 

According to the EBRD ‘Sustainable transport connections between Europe and Central Asia’, Final Report of June 2023, the transit container traffic can increase by something like 4705% by 2040, with spillover effects on education, tech-hubs, business and middle class development. The estimated infrastructure investments needed to improve Central Asia’s transport connectivity is almost 20 billion euros, in both hard infrastructure and soft connectivity, like digitalisation of customs, border management, inter-institutionalisation etc. This report is very important as it sets the pace for the future development of the Middle Corridor. 

In this plan there is crucial area that has to be solved, the connection between Turkiye and Azerbaijan though the Zangezur corridor. Recently the countries of Armenia and Azerbaijan declared that they are getting close to peace deal through confidence building measures, so the resolution of the Zangezur corridor would be an important element for this. 

Conclusions

We are at a turning point in the South Caucasus and Caspian region, as we are at a turning point in the relationship between Europe and the rest of Eurasia. 

A stronger integration among the three Southern Caucasus countries, through the current peace process between Azerbaijan and Armenia, a stronger cooperation between EU with Azerbaijan, through Türkiye, and a stronger connection between Europe and Central Asia, again through Azerbaijan, would give more stability to international system, helping at the same time the support to the South Caucasus regional integration and the European connection with Central Asia, to avoid in this way Russian-Chinese future hybrid warfare, in particular in the energy-resources security nexus. To increase cooperation with Azerbaijan the EU can consider different strategies. Here are some potential final recommendations for them:

1. Expansion of the Southern Gas Corridor: as some scholars argued there are still some issues to solve, like long-term gas sale/purchase agreements will have to be signed, various agreements required to increase the capacity of the TAP and TANAP gas pipelines, and sufficient gas reserves will also have to be developed in Azerbaijan.
2. Renewable Energy Investments: efforts should focus on investments in renewable energy projects, technology transfer, and knowledge sharing. This can be facilitated through joint research initiatives, investment funds, and policy dialogues.
3. Infrastructure Investment: support and invest in critical energy infrastructure projects that enhance connectivity between Central Asia, Azerbaijan and Europe. This could include interconnectors and transit routes that improve the flow of energy and goods from Central Asia, Caspian region and Azerbaijan to European markets.
4. EU could create a new ‘whole of government approach’ platforms (similar to the one of US, C5+1 Diplomatic Platform) between Central Asia, South Caucasus, and EU, for better coordination to facilitate future dialogue and energy cooperation across the wider Black Sea and Caspian Basin. This is a crucial point as new agreements can lead to increased integration and development in the region. 
5. Capacity Building and Education: EU could provide training programs, scholarships, and workshops to enhance the skills of Azerbaijani professionals in areas such as energy management, renewable energy technologies, and sustainable development.
6. Investment Promotion: both sides can work together to identify investment opportunities, investment promotion initiatives, address regulatory barriers, and create a favorable environment for foreign investments, exploring new oil and gas fields, as well as investigating alternative sources such as hydrogen production and storage
7. Political and Diplomatic Engagement: regular dialogues, high-level meetings, and diplomatic efforts can help build trust, address concerns, and ensure the commitment of both parties to a long-term energy partnership.

Overall, by adopting a comprehensive approach that includes infrastructure development, regulatory alignment, security cooperation, and diplomatic engagement, the EU can increase its resilience against potential hybrid warfare threats in the energy-resources security nexus and strengthen ties with Azerbaijan and Central Asian countries.

Dr. Maurizio Geri is a former senior NATO analyst, an Italian Navy Lieutenant reservist and EU Marie Curie postdoctoral fellow on "NATO-EU cooperation on emerging and disruptive technologies in the Energy-Resources-Climate Security nexus".