Baku and Belgrade power up: Expanding ties beyond energy Diversifying partnership across sectors

The partnership between Azerbaijan and Serbia has grown beyond its traditional energy focus, extending into various sectors including transportation, production, and investment. This evolving collaboration has been particularly notable in the Balkan region, where both nations are pursuing joint ventures in green energy and non-oil production. These initiatives complement the expansion of the Southern Gas Corridor (SGC) infrastructure and the increasing export of Azerbaijani gas.

The recent VIII Azerbaijan-Serbia Intergovernmental Commission (IGC) meeting in Baku highlighted new opportunities for deepening trade and economic ties. A key focus of the meeting was the ongoing development and expansion of the gas export infrastructure. This follows the July 2022 signing of the "Memorandum of Understanding on Strategic Energy Partnership between Azerbaijan and the EU," which aims to double Azerbaijani gas exports by 2028. In line with this, projects to enhance the South Gas Pipeline System and the Trans Adriatic Pipeline (TAP) have been initiated.

Significant progress has been made in modernizing compressor stations and gas distribution networks across Southern and Eastern Europe, and the construction of new interconnectors has been expedited. The completion of the 170-kilometer Nish-Dimitrovgrad interconnector (Bulgaria-Serbia Interconnector Gas Pipeline, IBS) in December last year is a notable development in this context, linking Bulgaria and Serbia's gas transportation systems.

At the recent IGC press conference, Sahil Babayev, Azerbaijan's Minister of Labor and Social Protection of Population and co-chair of the Commission, announced that over 26 million cubic meters of gas have been supplied through the IBS since the beginning of the year. He also indicated that export volumes are expected to increase soon, reflecting the growing strength of the Azerbaijan-Serbia energy partnership.

It is important to note that alongside natural gas, Azerbaijani crude oil is also being supplied to Serbia, with export volumes nearly doubling in the first half of this year. According to Vitaly Beglarbekov, Vice President of the State Oil Company of Azerbaijan (SOCAR), starting in 2024, Azerbaijani gas will flow into Serbia through the IBS interconnector based on an agreement signed in November 2023. This agreement allows for annual gas supplies of up to 400 million cubic meters until 2026. Beglarbekov highlighted that SOCAR and its Serbian partner, Serbia Gas, have agreed to enhance their cooperation in natural gas supply, with plans to increase the volumes. He noted that the negotiations with Serbia Gas were highly successful and that the two parties will also explore extending their collaboration to include gas transit through Serbia. Given that the IBS interconnector has a design capacity of approximately 1.8 billion cubic meters per year, there is potential to export Azerbaijani gas through Serbia to Hungary and other neighbouring countries in the future.

Stefan Srbljanovic, State Secretary of the Serbian Ministry of Mining and Energy, shared a similarly positive outlook on the future of gas cooperation between the two nations. He stated that the South Gas Complex project is enhancing Serbia's energy security by diversifying its supply routes and providing access to sources in the Caspian region. Srbljanovic also pointed out that Belgrade is actively monitoring regional energy security initiatives, including the agreement among Azerbaijan, Georgia, Romania, and Hungary to supply green energy to the EU. This includes the Black Sea Energy project, which aims to lay a 4 GW, 1,195 km electric cable under the Black Sea. The project will facilitate the transmission of green electricity generated in Azerbaijan to Europe. Bulgaria and Serbia have already shown interest in participating in this initiative by connecting their energy systems to the Romanian and Hungarian networks, ensuring sustainable electricity supplies in the future.

"Azerbaijan has extended an invitation to Serbia to participate in the Black Sea Energy project, which focuses on transporting green energy," Minister Sahil Babayev announced. He emphasized that including this issue in the agenda of bilateral negotiations and noting it in the Protocol signed in Baku after the IGC meeting underscores the importance of Serbia's involvement, which would benefit all parties involved.

In addition to advancing their energy partnership, Baku and Belgrade are working to expand cooperation across various sectors, including trade, economic development, transportation, logistics, agriculture, tourism, and humanitarian efforts.

To enhance their economic ties, Baku and Belgrade signed a declaration on strategic partnership in 2013 and began implementing an action plan to boost economic cooperation in 2018. These initiatives have yielded notable results. While trade turnover between the two countries has not yet reached substantial levels, it has shown encouraging growth. From 2021 onward, bilateral trade has consistently increased by an average of 15-20 per cent annually. Notably, in the first half of this year, trade between Azerbaijan and Serbia surged more than 5.24 times compared to the same period last year, reaching $30.9 million.

Investment cooperation between Azerbaijan and Serbia is still in its early stages. Currently, Serbian investments in Azerbaijan’s non-oil sector are valued at $3.6 million, with six Serbian companies operating in the country — four of which are involved in agriculture, infrastructure, and services. Conversely, Azerbaijani investments in Serbia are estimated at $2.8 million. Despite this, Azerbaijani Deputy Economy Minister Sahib Mammadov highlighted significant growth potential for investment between the two nations. Opportunities exist for Serbian companies to engage in business projects within free economic zones, industrial and agricultural parks, and to contribute to the reconstruction of areas in Azerbaijan previously under occupation. Serbian State Secretary of the Ministry of Economy Andrea Horvat added that Serbia offers several programs to support entrepreneurs with state assistance for equipment purchases and new business ventures, and Azerbaijani investors are encouraged to participate, especially in sectors like food production, industrial automation, innovation, hospitality, and technology.

Serbia is also keen on enhancing cooperation with Azerbaijan in transport and logistics. Serbian co-chair of the commission, Minister of Culture Nikola Selakovic, announced plans to organize a virtual conference with industry experts from both countries. He emphasized the need for a direct flight between Belgrade and Baku to bolster tourism and trade. Selakovic expressed optimism that this issue will be resolved soon and noted that while Azerbaijani citizens can already visit Serbia without a visa, direct flights would further stimulate tourism. Air Serbia is anticipated to initiate test direct flights from Belgrade to Baku by the end of this year.

Additionally, Serbia is interested in expanding its partnership with Baku in international transport corridors, which would enhance cargo turnover with European countries. Selakovic also underscored the promising nature of the ongoing collaboration with Azerbaijani construction firms, which have been involved in road infrastructure projects in Serbia for over 11 years.