Promising cooperation: Azerbaijan, Italy expand business ties Review by Caliber.Az

During the last more than two decades, Azerbaijani-Italian interstate relations have become strategic. The basis of this positive is a dynamically developing trade and economic cooperation. The bilateral economic potential has further expanded with the joint construction of the Trans-Adriatic Pipeline (TAP) and today Rome ranks first in the EU in terms of trade turnover and business relations with Baku. It is no coincidence that energy projects were the main topic of discussion during the two-day working visit of Azerbaijani President Ilham Aliyev to Italy, timed to coincide with the 30th anniversary of diplomatic relations between the two countries.

For many years now, Italy has been a key energy hub for Azerbaijani oil exports. A significant part of the Azerbaijani oil delivered to the Mediterranean port of Ceyhan is sold through terminals in the Italian ports of Trieste and Augusta. At the same time, for the second year now Azerbaijani natural gas from the Shah Deniz offshore gas condensate field has been delivered to Italy via TAP, a component of the 'Southern Gas Corridor', which has become an important factor in strengthening Azerbaijani-Italian business cooperation as well as a key element of EU energy security. TAP currently supplies around 10% of Italy's blue fuel needs. Overall, Azerbaijan is the largest oil supplier to Italy and the third largest supplier of natural gas.

These factors play the role of a catalyst in bilateral economic relations, making Italy one of our country's main foreign trade partners in the European Union. Not surprisingly, it is the country that currently accounts for over 36% of our country's total foreign trade turnover. In general, Azerbaijan is Italy's key trading partner among the South Caucasus states: our country accounts for over 90% of the total trade turnover in this region.

It is noteworthy that in the last decade there has been a significant increase in Azerbaijani exports to the Italian market: while in 2011 it did not reach even 200 million euros, in 2014 it tripled, exceeding 600 million euros, and in 2021 Italy accounted for 41.62% of total exports (over $22.2 billion) of our country. In general, last year the volume of trade between the two countries reached the pre-pandemic level of $9 billion, and this positive trend has only intensified in 2022, exceeding $11 billion in January-August. The dynamics of Azerbaijani-Italian trade are impressive, and apparently, this is not the limit, given the plans to expand cooperation in the economy, including the energy sector. The basic guidelines for the expansion of Azerbaijani-Italian cooperation were formulated during the seventh state visit of President Ilham Aliyev to Italy on February 19-21, 2020. At that time, 28 documents were signed, including a "Joint Declaration on Strengthening Multidimensional Strategic Partnership between Azerbaijan and Italy", and this document is today a key roadmap for the development of relations between the two countries.

"By diversifying energy supplies to the world market, we managed to change the energy map of Europe. This year, Azerbaijan plans to increase the volume of gas transported through the Ionian-Adriatic Pipeline to three Balkan countries. We are also planning to export about 10 bcm of gas to Italy," Azerbaijani President Ilham Aliyev said on September 2 while making a presentation on "The role of Azerbaijan in energy security" at the plenary session of the 48th International Forum in Cernobbio in Italy. As the head of state noted, the current visit was very successful, and meetings were held with the President and Prime Minister of Italy, during which many issues related to expanding business ties and strengthening the strategic partnership between our countries were discussed.

According to Ilham Aliyev, in order to meet growing energy demand in Europe, it is necessary to strengthen cooperation and coordination of all energy-related issues, and Azerbaijan has already initiated an official dialogue with the EU to this end. The President reminded that a "Memorandum of Understanding on Strategic Energy Partnership between the EU and Azerbaijan" was signed in July 2022 to serve as a road map for future cooperation in the energy sector. Moreover, the relationship with the EU covers not only natural gas supplies but also other segments of the energy market, including the export of electricity, hydrogen, joint development of "green" energy, etc. In particular, the memorandum noted the need to double the export of Azerbaijani natural gas to Europe, tentatively up to 20 bcm by 2027. "I am confident that through joint efforts we will be able to achieve the set goals", Ilham Aliyev said.

Successful energy partnership is certainly a foundation of economic relations between the two countries, but Baku and Rome are making equal efforts to diversify business relations, expand investment cooperation, attract Italian companies to joint projects on the development of industrial zones, as well as their participation in contractual works on revival of the liberated Karabakh region.

In particular, more than 100 companies with Italian capital are currently operating in Azerbaijan in areas such as construction, design, trade, agriculture, the processing industry, infrastructure, transport, and logistics. Italian specialised companies have been involved in the exploration and sharing of hydrocarbon fields in the Caspian Sea, with a 5% stake in the Baku-Tbilisi-Ceyhan oil pipeline. Italian businesses invested just under 800 million euros in Azerbaijan's economy. At the same time, Italian contractors, and suppliers of equipment involved in various industrial and construction projects in Azerbaijan have received tender orders worth 10 billion euros - half of them account for the energy sector. In turn, Azerbaijan's direct investment in the Italian economy is estimated at 1.7 billion euros.

In recent years, Italian entrepreneurs have been increasingly interested in industrial ventures in Azerbaijan, in addition to the expansion of trade and participation in contracting projects. For example, the largest joint industrial venture is the construction of a polypropylene plant in Sumgayit, which was carried out by SOCAR under the design and technical support of Maire Tecnimont, a major Italian company. And Italian holding Maire Tecnimont plans to participate in the construction of a plant in Azerbaijan to recycle plastics and produce new products and energy. Resident of the Sumgayit Chemical Industrial Park (SCIP) Az-Tech-Import Ltd has recently laid the foundation of the future plant, where low, medium, and multi-tonnage trucks and special purpose vehicles of IVECO brand will be produced with the application of Italian technologies. The next stage of the project will involve the production of Italian trucks IVECO Daily in the industrial park "Araz Valley Economic Zone", located in the Jabrayil district.

At the same time, as part of the project to create an international digital hub Digital Silk Way in Azerbaijan, the Italian company NEQSOL Holding is preparing to become one of AzerTelecom's partners, which will participate in the creation and management of a new end-to-end network corridor between Central Asia and Europe, using the existing Sparkle backbone infrastructure stretching from Türkiye to Italy. Back in pre-crisis 2019, with the support of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), talks began with Planet Industry srls, a major Italian company, planning to set up a joint venture in our country to produce and process leather. According to some reports, a number of Italian agro-industrial companies have plans to establish livestock complexes in the territories of Azerbaijan liberated from the occupation, as well as to create facilities for processing leather and production of finished products.

Overall, Italian business interest in participating in projects in the Karabakh and East Zangazur economic regions is very high. During the Armenian occupation of Azerbaijani territories, Italy consistently demonstrated a principled position supporting Azerbaijan's territorial integrity, and was among the first to congratulate our country on the Great Victory and the return of occupied lands. This principled position has been highly appreciated by the Azerbaijani leadership, and therefore, Italy, a friendly country, is one of the first to be involved in contracting and other works in the Karabakh region. A number of Italian companies have been engaged in restoration and construction work in the territories liberated from occupation since last year. For example, Ansaldo Energia is working on the revival of the region's energy infrastructure by equipping four 110-kilovolt substations in the districts of Aghdam, Fuzuli, Kalbajar, and Gubadli.

Apparently, along with contractors, Italian investors will soon appear in Karabakh and other agrarian regions of Azerbaijan: in particular, one Italian company has come forward as an investor in agricultural production. The Ministry of Economy of Azerbaijan and AZPROMO are also holding talks with other interested Italian firms.

"During our current meetings we not only discussed energy issues and economic cooperation, we also added new and very important issues to our bilateral agenda. One of them is the field of education," President Ilham Aliyev stressed during his visit to Italy.

The most significant achievement between the two countries in the area of education was a memorandum signed two years ago on establishing the Italian-Azerbaijani University in Baku on the basis of cooperation between Azerbaijani ADA University and Luiss University in Italy. Over the past period, conceptual and strategic documents have been prepared for the joint university, and Bologna University, Polytechnic University of Turin, Polytechnic University of Milan, and the La Sapienza University of Rome have been identified as its partners. Last Thursday, the exchange ceremony of signed agreements on academic cooperation between ADA University and five leading Italian higher education institutions was timed to coincide with the visit of President Ilham Aliyev to Italy.