Summary on EU- Azerbaijan Relations

I) Partnership and Cooperation Agreement

The respect for democracy, principles of international law, human rights, and the principles of the market economy are the essential elements on which the EU-Azerbaijan partnership is based. These elements are outlined in the Partnership and Cooperation Agreement (PCA), which was signed in April 1996 and entered into force at the beginning of July 1999. Since then the PCA has provided the legal framework for EU-Azerbaijan bilateral relations in the areas of political dialogue, trade, investment, economic, legislative, and cultural cooperation. The various joint institutions set up under the PCA (Cooperation Council, Cooperation Committee, Subcommittee on Trade, Economic and Related Legal Affairs, as well as the Parliamentary Cooperation committee) have functioned efficiently and have ensured a regular dialogue at the political and technical level.

II) European Neighbourhood Policy (ENP)

The decision taken by the European Council on 14th June 2004 to incorporate the countries of the Southern Caucasus into the framework of the European Neighbourhood Policy (ENP) is indicative of the EU’s willingness to extend its cooperation with Azerbaijan beyond what is provided for under the existing framework of the Partnership and Cooperation Agreement (PCA). As a first step in this direction, a Country Report assessing the progress in Azerbaijan towards political and economic reform was published on March 2, 2005. The Country Report highlighted areas in which bilateral cooperation could be feasibly and valuably strengthened.

In the context of the European Neighbourhood Policy, the EU developed an Action Plan in consultation with Azerbaijan which both reflects the specificity of the country and contains concrete goals and actions to be achieved in the short and medium term. Thefive-yearENP Action Plan (ENP AP) for Azerbaijan was adopted in Brussels at the EU-Azerbaijan Cooperation Council on November 14 2006. It focuses especially on democratisation, human rights, socio-economic reform, poverty alleviation, energy, conflicts and sectoral issues. The Action Plan is currently in its implementation phase.

In the context of the ENP Action Plan, EU and Azerbaijan signed on 7 November 2006 a Memorandum of Understanding aimed at establishing a partnership in the field on energy. The MoU represents a crucial step to strengthen EU’s energy relations with Baku, assisting at the same time the country to modernise, make more efficient and reform its domestic energy sector.

III) Developments in Azerbaijan

The increased exploitation of oil and gas resources has allowed Azerbaijan to achieve an impressive macro-economic growth in the last years: its GDP grew by 26.4% in 2005 and 36.6% in 2006 (world’s highest). Further efforts to reduce the poverty level of the country, to develop the non-oil sector of the economy and to reduce the socio-economic disparities between Baku and the rest of the country remain however essential.

The main challenges for the government during the next couple of years are to further strengthen democratic structures and improve the respect of human rights, the rule of law and fundamental freedoms, including in the media sector. All these challenges were taken up in the ENP Action Plan for the country. The Presidential elections to be held in 2008 will be a litmus test for the country’s democratic evolution.

IV) EC Assistance

In the case of Azerbaijan Technical Assistance to the Commonwealth of Independent States (TACIS) in the period 2002-2006 focused on continued support for institutional, legal and administrative reform as well as on support in addressing the social consequences of transition. TACIS also provided essential assistance to the implementation of Azerbaijan’s Poverty Reduction Strategy launched in 2003.

The new Country Strategy Paper (CSP) 2007-2013 covers EC financial assistance to Azerbaijan under the new European Neighbourhood and Partnership Instrument (ENPI). It is accompanied by a new ENPI National Indicative Programme (NIP) for 2007-2010 whose main priorities are: (1) Democratisation, rule of law and fundamental freedoms; (2) Socio-economic reforms and legal approximation to the EU; (3) Energy and transport.

Azerbaijan also participates in different regional and thematic programmes under the ENPI, such as the European Instrument for Democracy and Human Rights (EIDHR).

V) Conflict Resolution

The EU has a strong interest in developing a politically stable and economically prosperous Southern Caucasus. In this respect, the conflict with Armenia over Nagorno-Karabakh (NK) remains the major impediment to development and contributes to the overall regional instability. In July 2003 the creation of the post of the EU Special Representative for the Southern Caucasus became a way to facilitate the dialogue between the EU and the countries of the region. The mandate of the EU Special Representative for the Southern Caucasus (position currently held by Swedish diplomat Ambassador Peter Semneby) includes assisting the EU in developing a comprehensive policy towards the region, and to support the conflict-prevention and peace-settlement mechanisms in operation. For conflict settlement on Nagorno-Karabakh the EU Special Representative works closely with the co-chairs of the OSCE Minsk Group (currently The US, France and the Russian Federation).