Italy, Azerbaijan unite for green energy, economic growth Bilateral cooperation takes center stage

The strategic dimension of Azerbaijani-Italian relations is most evident in the economic domain. Over the past two decades, Italy has consistently led among European nations in terms of trade turnover with Azerbaijan. This trend is largely driven by Azerbaijan’s oil and gas exports, which have surged following the commissioning of the Trans Adriatic Pipeline (TAP).

Concurrently, Baku and Rome are actively enhancing their trade and economic cooperation beyond the oil sector, extending into the fields of humanitarian and defense collaboration. The opportunity to further strengthen economic relations between these two allied nations was a focal point of the recent discussions in Rome, where Azerbaijani President Ilham Aliyev was hosted by Italian President Sergio Mattarella on a working visit.
 
Azerbaijani-Italian relations have traditionally been marked by a high degree of complementarity and a focus on effective collaboration. Among EU member states that have formalized a strategic partnership with Azerbaijan, Italy stands out as the leader in terms of the depth and multi-faceted nature of its engagement.

The scope of this partnership is extensive, encompassing sectors such as hydrocarbon energy and green technologies, industry and agriculture, transport and logistics, as well as culture, education, the restoration of cultural and historical monuments, and mine clearance. This list is by no means exhaustive.

The declaration of 2020 as the “Year of Azerbaijan” in Italy, coupled with the fruitful outcomes of President Ilham Aliyev's visit to Italy on September 1-2, 2022, which significantly advanced business relations and their diversification, exemplify the successful and amicable partnership between the two nations.

The current working visit of the Azerbaijani President to Rome is regarded as both highly effective and forward-looking. Italy has long served as a crucial energy hub for Azerbaijani oil exports. A significant portion of Azerbaijani oil that arrives at the Turkish Mediterranean port of Ceyhan is distributed through terminals in the Italian ports of Trieste and Augusta.

 Azerbaijan has consistently been the leading supplier of oil to Italy. In 2023, Azerbaijan exported approximately 11.3 million tons of oil to the Italian market, marking a 25 per cent increase from the previous year. From January to July 2024, Azerbaijan's oil and oil product exports to Italy surpassed 5.671 million tons, accounting for nearly 39 per cent of the country’s total liquid hydrocarbon exports.

For the fourth consecutive year, Azerbaijani natural gas from the Shah Deniz offshore gas condensate field has been supplied to Italy through the Southern Gas Corridor (SGC) project, with the TAP pipeline being a crucial component. In just the first half of this year, 5.17 billion cubic meters of gas were delivered to the Italian market, representing a 5.5 per cent increase. Italy now receives 8 out of the 10 billion cubic meters of gas transported via TAP to Europe. This supply has become a significant factor in bolstering Azerbaijani-Italian business relations and plays a key role in enhancing EU energy security.

It is clear that the energy sector, as the cornerstone of trade relations between the two countries, serves as a catalyst for bilateral economic ties, positioning Italy as one of Azerbaijan's principal trade partners within the European Union.

Last year, Italy accounted for just under a quarter of Azerbaijan's total foreign trade turnover. Conversely, Azerbaijan is Italy’s primary trade partner among the South Caucasus states, representing approximately 90 per cent of the region's total trade volume. Specifically, by the end of 2023, mutual trade between the two nations reached around $15.7 billion, with Azerbaijani exports comprising the majority of this turnover.

Notably, Italian core companies have been actively involved in the exploration and development of Caspian Sea fields under the “Contract of the Century,” and hold a 5 per cent stake in the Baku-Tbilisi-Ceyhan oil pipeline. Additionally, Italy’s Eni-Agip is engaged in the Shah Deniz gas condensate field project and the Kurdashi oil field. Overall, Italian businesses have invested approximately 800 million euros in Azerbaijan’s economy, while Azerbaijan’s direct investments in Italy amount to about 1.7 billion euros.

Among the notable projects is the construction of a polypropylene plant in Sumgayit, spearheaded by the State Oil Company of Azerbaijan Republic (SOCAR) with project and technical support from the major Italian holding Maire Tecnimont. Furthermore, the Sumgayit Chemical Industrial Park (SCIP), operated by Az-Tech-Import LLC, will utilize Italian technology to assemble low-medium-and-multi-tonnage trucks from the leading European manufacturer IVECO.

Discussions on energy cooperation also played a crucial role in the current negotiations. During a meeting between President Ilham Aliyev and Claudio Descalzi, the CEO of the Italian company Eni S.p.A., the importance of recent agreements signed in Rome between the State Oil Company of Azerbaijan (SOCAR) and Eni S.p.A. was emphasized. The talks focused on expanding and diversifying cooperation, particularly through the application of new technologies in the oil and gas industry, renewable energy, and other economic sectors. Eni S.p.A. is set to develop a work plan and strategy to expedite project implementation in Azerbaijan.

On the same day, in the presence of the Presidents of Italy and Azerbaijan, three memoranda were signed between Eni S.p.A. and several Azerbaijani state entities. These included a memorandum of understanding on biofuels and bio raw materials with the Ministry of Agriculture and SOCAR.

Additionally, two more memoranda were signed with SOCAR: one concerning upstream and midstream oil and gas projects to ensure energy supply security, and the other focusing on energy transition and the reduction of greenhouse gas emissions.

Renewable energy sources (RES) are increasingly becoming a focal point in the growing business ties between Azerbaijan and Italy. For instance, the Italian company CESI is collaborating with Azerbaijan's Ministry of Energy on a feasibility study for a “green” energy corridor that would transport energy from the Caspian Sea through Azerbaijan, Georgia, and the Black Sea to Romania and Hungary.

Since July, another Italian firm, Saipem, has been engaged in negotiations regarding onshore wind power projects and the development of wind energy in the Caspian Sea, as well as other areas within the RES sector. Additionally, Italy’s Ansaldo Energia is working with Azerbaijan to develop a modern electricity infrastructure in the Karabakh region.

During a joint working lunch, Italian President Sergio Mattarella highlighted that the relationship between Italy and Azerbaijan is characterized by a strategic partnership. He described Italy as Azerbaijan's primary trade partner in Europe and that their business ties are focused on multifaceted cooperation. In this context, President Mattarella underscored the significance of collaboration in the energy sector, particularly within the framework of the TAP project, which is crucial for both Italy’s energy security and the energy supplies to ten European countries.

Aspects of energy sector cooperation between the two countries were also discussed during a one-on-one meeting between President Ilham Aliyev and Italy’s Prime Minister Giorgia Meloni, and later in a session involving delegations from both nations. The discussions included plans to increase the throughput capacity of the TAP gas pipeline and explored new avenues for collaboration between Italy’s Eni S.p.A. and Azerbaijan’s SOCAR, including their involvement in joint projects in third countries.
 
The talks addressed the current state of Italian-Azerbaijani bilateral relations and identified new areas for cooperation. The significance of the Middle Corridor was emphasized, along with the potential for Italian companies to leverage this corridor. Both Baku and Rome expressed their commitment to expanding and diversifying their bilateral trade and economic ties, particularly in the industrial, energy, humanitarian, and cultural sectors.
 
Special emphasis was placed on the significance of the Italian-Azerbaijani University project, which is a collaborative effort between ADA University and five Italian universities. This initiative is vital for enhancing cultural and humanitarian ties between the two countries. Prime Minister Meloni also expressed Italy's commitment to supporting Azerbaijan's success at COP29. She highlighted the close cooperation between Italy’s climate change representative and the Azerbaijani delegation, as well as the participation of COP29 President in a G20 environmental ministers' meeting held in Italy.

The friendly relations between Baku and Rome are further demonstrated by their defence sector cooperation. Several of the planned 31 military activities for 2024-2025 have already been carried out, including the acquisition of a C-27J Spartan military transport aircraft from the Italian company Leonardo. Italy is also one of a handful of European countries actively assisting Azerbaijan with demining efforts in the recently liberated territories.

Notably, Italian contractors are actively engaged in revitalizing areas in Azerbaijan that were liberated from occupation. For instance, Italian companies have supplied equipment for power stations in the liberated districts of Aghdam, Fuzuli, Gubadli, and Kalbajar. Additionally, Italian architects and builders have been enlisted to restore historical monuments and mosques in Shusha and to construct the Victory Museum in Baku.