On July 16, 2010, Azerbaijan and the European Union (EU) started to negotiate for the signature of an Association Agreement. In the framework of the Eastern Partnership, launched in May 2009, it will provide a new basis for the relationship between Baku and Brussels. These negotiations will help updating the latter, highlighting both the changes of perceptions of Azerbaijan in Brussels and the new regional role Baku intends to play in the South Caucasus.

BACKGROUND:  The EU started to cooperate with Azerbaijan right after the fall of the Soviet Union in 1991. It implemented the TACIS (Technical Assistance to the Community of Independent States) program to maintain economic and political links among the post-Soviet states. This cooperation was essentially based on energy and transportation. Azerbaijan, as the other South Caucasian countries, was part of the TRACECA (Transportation Corridor Europe-Caucasus-Asia) program as well as of the INOGATE (Interstate Oil and Gas Transport to Europe) one. The idea then was not so much to develop cooperation between the South Caucasus and the EU but rather to increase it among these three states.

Bilateral cooperation between the EU and Azerbaijan was concretely implemented after the signing of a Partnership and Cooperation Agreement (PCA) in June 1999. This agreement paved the way for further links between the two institutions. A climax was reached in June 2004 when the European Neighborhood Policy (ENP) was created. While the South Caucasian countries were not considered until then as “European neighbors”, they were incorporated at the last minute in this EU initiative. The aim was then to foster cooperation between Azerbaijan and the EU in almost all the sectors, with a focus on democratization. Brussels also tried to get involved in the resolution of the Nagorno-Karabakh conflict but its proposal to Europeanize the Minsk Group was rejected by the French co-presidency, eager to retain its position.

If energy was among the EU priorities, it did not produce concrete results in the first years of implementation of the ENP. This field was then perceived as too geopolitical and sensitive, following the competition between the United States and Russia around the construction of the Baku-Tbilisi-Ceyhan oil pipeline. This slightly changed when Brussels decided to breathe new life into the INOGATE program under a new name: the Baku Initiative. Then, the Russian-Ukrainian gas crisis of January 2006 convinced the EU of its need to diversify its oil and gas imports. It then turned towards the Caspian producers to supply its desperate need for hydrocarbons. Following the signing of a memorandum of understanding in the field of energy in November 2006, Azerbaijan clearly appeared as a key energy partner for the EU.

IMPLICATIONS: Since the mid-1990s, the position of Azerbaijan in the EU agenda has progressively increased and Baku now lies at the core of the European energy external policy. The evolution of the organization of the EU reinforces such a trend. The institutional evolutions within the EU have led to a change in the actors Azerbaijan deals with. One of the main aims of the Lisbon Treaty, which entered into force in December 2009, is to help the EU developing a coherent and consistent foreign policy. For this purpose, it has been decided to implement a European External Action Service that would lay the basis for a real EU diplomacy. But, for the moment, this process has only undermined the foreign policy-making institutions. The civil servants of Directorate General (DG) External Relations (RELEX) from the European Commission are waiting for their successive appointments, the new office of the High Representative for Foreign Affairs and Security Policy does not know what its new prerogatives are, and the future of the EU Special Representative for the South Caucasus is in question.

Taking advantage of this institutional turmoil, DG Energy has decided to take the lead in policy-making towards Azerbaijan. It knows that this country is the only one, in the short run, that can provide gas to the European-backed Southern Corridor project and is thus willing to build a special partnership between Baku and Brussels. In this perspective, Roland Kobia, who previously worked with former Energy Commissioner Andris Piebalgs, was appointed as the new head of the EU delegation in Baku in October 2009. Then, DG Energy became the key counterpart of Azerbaijan in every issue that slightly deals with energy. For instance, it succeeded in May 2010 in handling the EU mediation between Azerbaijan and Turkmenistan on the delimitation of borders in the Caspian Sea, a diplomatic issue that in Brussels should normally have been managed by DG RELEX or Catherine Ashton’s office. Finally, as a result, energy has become central in the relationship between the EU and Azerbaijan and DG Energy has been able to influence the policy the EU implements towards Azerbaijan’s neighbors. It has notably successfully lobbied Brussels to be less outspoken on the Turkish-Armenian rapprochement in order to help finalizing the gas negotiations between Azerbaijan and Turkey.

The Azerbaijan the EU used to deal with in the mid-1990s is very different from the Azerbaijan it negotiates with today. In the late 1990s, it was a post-Soviet state among others, struggling to promote its interests abroad. Now, it is a wealthy country that uses the huge oil revenues flowing from 2003 to build a coherent and consistent foreign policy in the Caspian and the South Caucasus. First, it has proved its ability to sustain external pressures from great powers. For instance, despite promises to meet with Hillary Clinton and President Obama, Ilham Aliyev refused to come to the Alliance of Civilizations summit in April 2009 to protest against the Turkish-Armenian rapprochement (see Turkey Analyst, 10 April 2009 issue). Such a move was totally unexpected in Washington, where diplomats still thought that the promise to meet with the U.S. President was the solution to any deadlock. Rejecting this offer, Ilham Aliyev proved the ability of his country not to compromise on issues that put the Azerbaijani interests at stake.

Secondly, the EU must take into account that Azerbaijan is turning into a regional economic leader in the South Caucasus. The Azerbaijani oil company SOCAR is now the largest taxpayer in Georgia, where it controls all the gas distribution system. Azerbaijan also funds the Georgian section of the construction of the Baku-Tbilisi-Kars railroad, which may be an important axis of transportation across the South Caucasus in the next decade. The role of Baku in the energy field in Turkey is also becoming increasingly important. Following the Azerbaijani-Turkish gas agreements of early June 2010, Baku is poised to emerge favorably from these tough negotiations. A company that is co-owned by SOCAR, PETKIM, may be allowed to sell Azerbaijani gas directly to the Turkish domestic market. Baku may also earn the right to sell up to 4 billion cubic meters of its gas directly to its European customers from Turkey’s Western border. At least in the economic sphere, Azerbaijan is becoming a major player in the South Caucasus and this will need to be considered in the future Association Agreement with the EU.

CONCLUSIONS: The start of the negotiations between the EU and Azerbaijan for an Association Agreement should coincide with an update of the relationship between the two. One of the first outcomes to draw may be the inability of Brussels to impose its will over Baku. Due to its increasing gas dependency, the former has to compromise to maintain its privileged partnership with the latter. This may lead, at least in the short term, to the failure of the EU to act as a normative power in Azerbaijan, especially in the field of democratization, which was a EU priority in the early 2000s.

This also reflects the success of the Azerbaijani leadership, which was willing to focus EU activism in Azerbaijan on energy. Baku has taken advantage of its key role within the South Corridor to focus EU policies towards itself but also, to some extent, towards the South Caucasus more broadly. The next step for Baku is now to get the EU to play a larger role in the resolution of the Nagorno-Karabakh conflict. So far, Brussels has been unwilling and unable to get involved in this issue. But, due to the inertia of the Minsk Group in the last couple of years, there is definitely room for a stronger EU involvement. But to play a more active and coherent role in the South Caucasus, Brussels first needs to finalize its inner institutional changes.

AUTHOR’S BIO: Samuel Lussac is a Ph.D. candidate in International Relations at the Institute of Political Science of Bordeaux.