Wednesday, 24 June 2015

Azerbaijan and the EU

Published in Analytical Articles

By Natalia Konarzewska (06/24/2015 issue of the CACI Analyst)

Azerbaijan’s president Ilham Aliyev made a last-minute decision not to attend the European Union’s May 21–22 Eastern Partnership (EaP) summit in Riga, citing the need to focus on the upcoming European Olympic Games, which were about to start in Baku. However, high-ranking officials quoted in the media asserted that president Aliyev did not attend the summit due to Western criticism towards Azerbaijan. Baku also expressed dissatisfaction with the summit’s results as Azerbaijan hoped to receive more vocal Western support for the resolution of the Nagorno-Karabakh conflict. Instead, attention was focused on human rights violations in Azerbaijan. Azerbaijan’s relationship with the EU is becoming increasingly strained and displays growing disappointment from both sides.

BACKGROUND: In 2014, rapidly building political and military pressure in Eurasia, caused by the conflict in Ukraine, has presented Azerbaijan with the problem of continuing its multidimensional and balanced foreign policy while simultaneously securing the longevity of its ruling regime. In a tactic policy shift, Baku started developing more positive relations with Russia, reflected in strengthened cooperation in the political and military spheres. It appears that Azerbaijani authorities, concerned over the conflict in Ukraine, feel a need to pacify Russia. These concerns are exacerbated by the prolonged conflict in Nagorno-Karabakh, which dangerously flared up in August 2014, and the existence of ethnic minorities (especially Lezgins and Talysh), which make Azerbaijan vulnerable to external pressure.

Following Russia’s annexation of Crimea and Azerbaijan’s assumption of the chairmanship of the Council of Europe in 2014, Azerbaijan took a more confrontational stance vis-à-vis with the West, embarking on a sustained crackdown on the political opposition and civil society. Authorities mostly targeted political leaders, independent journalists, human rights activists and media outlets, which were known for their pro-democratic and pro-Western stance. The unprecedented crackdown drew harsh criticism from the U.S. and EU, and Azerbaijani authorities responded with uncharacteristic anti-Western propaganda, similar to the Kremlin’s. 

There are several reasons for Azerbaijan’s changing attitude towards the EU. First, Baku is growing dissatisfied with the lack of progress in resolving the Nagorno-Karabakh conflict and expects the same strong vocal support for Azerbaijan’s territorial integrity as the West is giving Ukraine. Azerbaijan strongly objected to wording in the Riga Summit Final Declaration on the settlement of territorial conflicts in the EaP area. Baku insisted that the declaration should contain four UN resolutions on the conflict. This wording was rejected by European partners as too detailed and finally Azerbaijan was allowed to prepare an additional statement including the UN resolutions.

Problems exist also in bilateral energy cooperation. Despite promoting the Southern Gas Corridor (SCG) as the EU’s flagship gas diversification project, Brussels has done little to determine its route and securing funding, leaving this issue for Azerbaijan and Turkey to settle. Azerbaijan also expected more political support from Brussels in deciding the shape of the SGC. In 2013, Baku opted for the Trans-Adriatic pipeline in favor of the more commercially viable and geopolitically significant Nabucco West pipeline. Azerbaijan feared retaliation from Russia, because Moscow was at that time promoting its own South Stream project, which was targeting roughly the same markets as Nabucco West. Moreover, in November 2014, the European Commission launched an investigation to determine whether Azerbaijan’s oil company SOCAR’s proposed acquisition of the Greek gas transmission system operator DESFA is in line with the EU Merger Regulation. The investigation is considerably slowing down the realization of the Trans-Adriatic pipeline, a vital part of the SGC.

IMPLICATIONS: The EU’s rather meek reaction towards previous cases of human rights violations and the West’s ineffectual reaction to Russia’s aggression in Ukraine has induced Baku to become more assertive in demonstrating that it can resist external pressure to democratize and respect human rights. Nevertheless, aligning with Moscow and jeopardizing relations with the West could have several costly external and internal implications for Azerbaijan. 

A strategy aimed at placating Russia in order to mitigate possible aggressive moves from Moscow’s side may prove ineffectual in the long run. Internationally isolated Russia is searching for allies and will likely continue to pressure Azerbaijan to join the Eurasian Economic Union (EEU). Baku is unlikely to succumb to this idea because it prefers to retain an independent foreign policy and rely on bilateral political and economic ties. Moreover, closer relations with Azerbaijan will not prevent Russia from exploiting its southern neighbor’s internal vulnerabilities such as the unresolved dispute over Nagorno-Karabakh and the country’s ethnic minorities.

Sustaining Azerbaijan’s authoritarian stability may also prove problematic in the long run. Plummeting oil prices and economic turmoil in the Russian market negatively impact Azerbaijan’s economy. The drop in oil prices has resulted in a severe decline of export revenues, which has in turn put pressure on the national currency, manat. Simultaneously, the precarious economic situation in Russia has drastically reduced the remittances from Azerbaijani labor migrants and as a result the income of many Azerbaijani families. So far, Azerbaijan has been able to mitigate the negative effects of falling oil prices on the country’s economy, however, the measures taken, such as a devaluation of the manat, have increased the economic hardship of ordinary people. While Baku is surely prepared to withstand the protracted fall of global oil prices, the uncertain economic situation, inflating prices, possible lay-offs in the hydrocarbon sector and downscaling of large infrastructural projects could cause an upsurge of public discontent, especially since in the past hydrocarbon revenues were used to build societal support for the government.

Islamic movements, which increasingly engage in socio-political activism, could become a powerful channel for public discontent. Even though Azerbaijani authorities keep Islamic movements under tight control, the marginalization of secular opposition can result in a growth in the popularity of Islamic movements and Islamic radicalism.

At this point, Azerbaijan’s authoritarian system in is highly stable. Nevertheless, long-term economic and political trends can negatively affect its longevity. A first risk is associated with the country’s economic over-reliance on hydrocarbon revenues. Azerbaijan is seeking to mitigate the negative impact of this phenomenon by implementing measures focused on non-oil sector growth and has established an oil fund to minimize the negative effect of the volatility in oil prices on the economy. Nevertheless, diversifying the economy will take a long time and further economic shocks caused by oil price volatility will affect citizens’ livelihood and trigger public discontent. This issue is related to a second, political, risk as eradicating secular channels of discontent may fuel the growth of Islamic movements and in the future Islamic radicalism. It cannot be excluded that in a long term perspective, Baku will face domestic pressure to loosen its authoritarian control and reconsider the democratization agenda promoted by the EU and U.S.

Azerbaijan’s confrontational policy towards the West does not aim to jeopardize relations with the EU and U.S. but to demonstrate that Azerbaijan will not succumb to Western pressure for democratization. Azerbaijan is disappointed with the EU’s role in resolving the Nagorno-Karabakh dispute and Brussels’ ineffectual engagement in settling the conflict in Ukraine is seen in Baku as a further indication of its inability and unwillingness to assist Azerbaijan on this issue. Nonetheless, Western engagement in monitoring the ceasefire agreement and diplomatic and confidence-building efforts should not be underestimated and Azerbaijan might need the EU’s mediation and diplomatic assistance if the conflict seriously heats up.

CONCLUSIONS: A failure to meet each other’s expectations has strained relations between Azerbaijan and the EU. Azerbaijan is willing to cooperate with EU only on its own terms, emphasizing security and energy issues while eschewing democratization. While Baku expects political support from the EU in realizing the SGC and settling the Nagorno-Karabakh conflict, the EU has been unable to coordinate its energy, foreign and security policy to substantially engage in these areas. On the other hand, Brussels criticizes Azerbaijan for human rights violations and expects Baku to conduct democratic reforms, pressures that Baku will at present hardly succumb to. Instead, Baku is primarily interested in a liberalization of the visa regime, which is by far the most likely area of political cooperation with EU. Relations will likely be limited to energy issues without a deeper political and economic partnership.

However, despite the recent problems in Azerbaijan–EU relations, they are unlikely to develop into a more serious crisis. From an economic standpoint, Azerbaijan needs the EU as a main trade partner and a market for its hydrocarbons. Likewise, the EU remains interested in diversifying its gas suppliers and supply routes and will hardly adopt harsher measures against Azerbaijan, such as sanctions in response to human rights violations.

AUTHOR’S BIO: Natalia Konarzewska holds a Doctorate degree from the University of Warsaw and is a freelance expert and analyst with a focus on political and economic developments in the post-Soviet space.

Image Attribution: Wikimedia Commons & Boris Ajeganov

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