Azerbaijan is reluctant to actively participate in the EU’s Eastern Partnership Initiative.It is the only country in the South Caucasus region that still engages with the EU through the outdated Partnership and Cooperation Agreement signed in the late 1990s. Although the parties have been negotiating on a new treaty since 2017, there are still indifferences that hinder the progress. Until recently, the incumbents in Azerbaijan appeared confident about the overall process and chose not to rush to conclude the new agreement before they resolve all controversies.
In his last interview with the local journalists in December 2019, President Aliyev highlighted that the main reason for not signing the agreement is not the EU but Azerbaijan. There he commented on the unresolved issues and emphasized one more time that Azerbaijan is not asking for anything from the EU. On the contrary, Azerbaijan itself is a donor country. Thus,it expects equal partnership, not a unilateral instruction list from the EU. Going further, he criticized the EaP format, saying nothing is uniting EaP members except being post-soviet countries.His final remarks on EaP were more disappointing for the technocrats in Brussels when he said Azerbaijan is not leaving EaP, but it is not a necessary program for us.
When Aliyev gave the interview, he could not foresee that all hell might break loose soon. The indicators that made him confidently downgrade EaP and the EU might suddenly evaporate. Actually, the forecasts by the World Bank and other organizations about the growth of the Azerbaijan economy in 2020 were quite optimistic – around 3.3 %. According to the latest estimates, the number of tourists coming to the country would be at its peak in 2020 thanks to, at the same time, the major international events- Formula 1 and European Football Championship. To facilitate the arrivals of the fans and to attract more tourists, Azerbaijan activated the fifth and seventh freedoms of the air from January 2020. The price of the oil was around 60 dollars per barrel, and the completion of the Southern Gas corridors would bring additional revenues from the gas trade. Besides, after the structural reforms, Azerbaijan was ranked 25th in terms “Ease of Doing Business’ by the World Bank what made the officials optimistic about increased foreign direct investments in upcoming years in different sectors, especially transport and logistics.
And here comes COVID-19. The pandemic hits the entire world and slows down the global economic activities. The demand for oil goes down dramatically. In March,Russian and Saudi Arabian gambling amid OPEC+ talks slumps the oil price further. WTI crude oil futures collapse to negative prices for the first time in history.
Nowadays,the Azerbaijani oil brand – AzerLight is circa $ 20per barrel. According to Rovshan Agayev,if the average price fluctuates around $25 compared to 2019, Azerbaijan will receive 5 times less revenue from the sale of the oil in 2020. The earnings from tourism and agriculture also will significantly go down. The global recession and so-called de-globalization put Azerbaijan’s heavily invested connectivity projects under the risk.
Taken, the significant portion of Azerbaijan GDP comes from the export of the hydrocarbon resources,as soon as oil prices slumped, panic ensued. Traumatized by the devaluations of 2014 and 2015, people rushed to exchange their savings. As the banks were not able to meet unexpectedly grown demands for foreign currencies, big rows emerged in front of the banks. Although there were strict quarantine measures in Azerbaijan due to COVID-19, since mid-march, the banks are full of people. The recent closure of the four banks proves the panic is not ungrounded.
Currently, Azerbaijan uses its own resources and capacities to handle the situation. To do so, the government expends the reserves accumulated in the oil fund to keep the national currency – manat stable. Yet, in a worst-case scenario, Azerbaijan also will need assistance from its international partners. But the number of partners, capable of and ready to assist Azerbaijan is limited. Besides, the pandemic puts extra pressure on international financial institutions, as many countries require urgent assistance.
Unusually nowadays, with its flaws and deficiencies, the most active actor in the South Caucasus is the EU. It seems the EU tries to use the momentum to exert its global leadership. Conventionally it takes a lot of time for the EU to agree upon at various institutional levels before taking action. This time the EU’s response was relatively prompt. In late March, the EU pledged about 16-billion-euro assistance in the fight against the coronavirus pandemic and its consequences. Later the “Team Europe” package reached more than 20 billion euros.
The EU has the utmost interest in the resilience of the neighborhood countries, including Azerbaijan. The EU mentions this in all documents addressing neighborhood, such as revised ENP, Global Strategy, and many others. In the recent “Eastern Partnership policy beyond 2020” proposal, the EU confirms again that the resilience of EaP countries remains a priority for the EU. According to the proposal, the EU will continue to employ the incentive-based approach – more for more and less for less- to contribute to EaP’s resilience. Put it differently, the degree of the EU’s engagement with EaP countries will contingent on incentives coming from them.
The EU’s emergency support package for Eastern Partnership countries in early April shows the ‘more for more principle’ at work. The EaP countries having association and enhanced agreements with the EU receivegenerous aid while Azerbaijan gets the smallest portion- 14 million euros. This number is even four times less than the amount given to Belarus. It is a tribute paid to Azerbaijan leadership’s attitude towards the EU and EaP.
To mitigate the negative repercussions of the pandemic, Azerbaijan will need assistance from the EU. Practice shows the EU could mobilize investments and loans when required. In case of an emergency, Azerbaijan might also ask the EU to do so. Besides, in the long run, the EU’sinstruments and know-how might be helpful for Azerbaijan in its much-needed diversification endeavor and structural reforms.
Taken, the EU recently revised its neighborhood policy, and EaP is much more flexible and tailor-made nowadays, there is a great potential for cooperation, especially in fields of sustainable development, energy, transport, and logistics. Thus, rather than downgrading the EU and praising Azerbaijan’s strategic partnerships with nine EU members, Azerbaijan should use those countries to improve its collaboration with the EU.
To sum, although Azerbaijan is not happy about it, the technocrats in Brussels are not willing to devise an alternative framework to collaborate with Azerbaijan. Whether Azerbaijan likes it or not, for the EU, Azerbaijan is an Eastern Partnership country. It means the EU will continue to regulate its cooperation with Azerbaijan according to the policy documents designed for EaP and the principles defined in them.Thus, to secure future assistance from the EU to lessen the consequences of the pandemic, Azerbaijan should avoid employing unnecessary rhetoric and accommodate the current EaP framework rather than wasting time to alter it.
More meaningful and reciprocally beneficial cooperation is still possible in the margins of the current EaP. Resolving the indifference sand replacing the outdated PCA with a new agreement in a due time might be the right policy to achieve this.In its turn, the EU should also encourage Azerbaijan to -change its attitude towards EaP through real actions on the ground – by demonstrating objectives defined in EaP documents are not empty promises, and the EU genuinely stands with Azerbaijan.