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European Union's relations with Azerbaijan date back to 1991 and are based on the EU-Azerbaijan Partnership and Cooperation Agreement (PCA) (in force since 1999), which provides for wide-ranging cooperation in the areas of political dialogue trade, investment, economic matters, legislation and culture. Since then, the European Union has gradually expanded the scope of its cooperation with Azerbaijan. In July 2003 the EU appointed a Special Representative for the South Caucasus. Since 2004, Azerbaijan has been included (as a southern Caucasus country) in the European Neighbourhood Policy (ENP), and also in the Eastern Partnership initiative since its inception in 2009. A Protocol on Azerbaijan's participation in EU Programmes and Agencies was adopted in July 2016.
On 14 November 2016, the Council adopted a mandate for the European Commission and the High Representative for Foreign Affairs and Security Policy to negotiate, on behalf of the EU and its member states, a comprehensive agreement with the Republic of Azerbaijan. The new agreement should replace the Partnership and Cooperation Agreement and better take account of the shared objectives and challenges the EU and Azerbaijan face today. Negotiations on the new agreement were launched on 7 February 2017, following the visit of President Ilham Aliyev to Brussels on 6 February. The new agreement will follow the principles endorsed in the 2015 review of the European neighbourhood policy and offer a renewed basis for political dialogue and mutually beneficial cooperation between the EU and Azerbaijan.
EU-Azerbaijan trade relations are regulated by the Partnership and Cooperation Agreement. The European Union is Azerbaijan's first trading partner representing 48.6% of Azerbaijan's total trade. The EU is Azerbaijan’s biggest export and import market with a 60.7% and 31.8% share in Azerbaijan's total exports and imports respectively. The EU's exports to Azerbaijan, which were worth €1.8 billion in 2016, consist primarily of machinery and transport equipment whereas EU imports from Azerbaijan, worth €7.6 billion in 2016, cover mainly oil and gas (98% of total imports). Bilateral trade amounts to approximately €9.4 billion. Given that the Partnership and Cooperation Agreement is a non-preferential agreement, neither the European Union nor Azerbaijan is granted tariff preferences. The PCA does however establish economic cooperation aimed at strengthening business links and developing market-based rules and practices for trade in goods and services. Moreover, it envisages gradual approximation of Azerbaijan's legislation and procedures with the most important EU and international trade-related laws and standards.
The unresolved Nagorno-Karabakh conflict remains an obstacle to stability and prosperity in the region. The EU, including through its Special Representative for the South Caucasus and the crisis in Georgia, supports and complements the efforts of the Co-Chairs of the OSCE Minsk Group to facilitate the resolution of the conflict. The EU also promotes confidence- and peace-building activities across the conflict divide, notably through the implementation of the programme European Partnership for the peaceful settlement of the conflict over Nagorno-Karabakh (EPNK).
Azerbaijan is an important energy partner for the EU, currently supplying around 5% of the EU's oil demand and playing a pivotal role in bringing Caspian gas resources to the EU market through the Southern Gas Corridor. The EU is the biggest customer for Azerbaijani oil, and oil transited through Azerbaijan. Then President of the European Commission José Manuel Barroso and President Aliyev signed a Joint Declaration on the Southern Gas Corridor back in January 2011 in Baku. The Southern Gas Corridor is a strategic initiative to bring Caspian, Central Asian and Middle Eastern gas resources to the European markets and is the main diversification tool for the security of energy supply. The infrastructure that is to bring gas from the Caspian basin, notably from Shah Deniz II field, consists of the expansion of the existing South-Caucasus pipeline from Azerbaijan via Georgia to Turkey; the Trans-Anatolian pipeline, crossing Turkey and connecting Georgia with Europe; and the Trans-Adriatic pipeline, transporting gas from the Turkish border via Greece and Albania to Italy. A giant offshore gas field in the Azerbaijani sector of the Caspian Sea – Shah Deniz II will provide initial ten billion cubic metres of gas per year to the European markets as of 2020 and an additional six billion cubic metres per year to Turkey.
EU-Azerbaijan energy cooperation does, however, go beyond the Southern Gas Corridor. The basis for bilateral cooperation in the energy field is the Memorandum of Understanding on a Strategic Partnership between the Republic of Azerbaijan and the European Union in the Field of Energy signed in 2006. The MoU identified 4 priority areas of cooperation: harmonisation of legislation, enhancing security of supply and transit systems, development of RES and increased EE and technical cooperation. Regular MoU meetings take stock of the developments in energy relations between Azerbaijan and the EU. In 2016 the Commission launched a new regional programme "EU4Energy" that supports Eastern Partnership countries, including Azerbaijan in achieving their energy policy objectives. The EU is also assisting Azerbaijan in its efforts to improve energy efficiency.
The EU, a number of EU Member States, and Azerbaijan signed a Mobility Partnership in December 2013. It establishes a set of political objectives and identifies a number of areas in which further dialogue and cooperation between the EU and Azerbaijan will continue in order to ensure that the movement of persons is managed in a secure and safe environment and as effectively as possible. A first Mobility Partnership High-Level Meeting took place in February 2017 in Brussels. The two other cooperation instruments in the field of migration are the Visa Facilitation Agreement and the Readmission Agreement, which both entered into force on 1 September 2014. The Visa Facilitation Agreement makes it easier and cheaper for citizens of Azerbaijan, in particular those who travel most, to acquire short-stay visas allowing them to travel throughout most EU countries.
The European Neighbourhood Instrument (ENI) is currently the key EU financial instrument for the period 2014-2020. EU assistance to Azerbaijan takes mainly the form of country Action Programmes funded every year under the ENI. The priority sectors for 2014-2017 are: 1) regional and rural development, supporting the Government's efforts in the diversification of the economy and promotion of more balanced and sustainable and inclusive growth, while reducing disparities between regions; 2) justice sector reform, supporting alternative dispute resolution, provision of legal aid and enhanced access to justice and anti-corruption; and 3) education and skills development, through the enhancement of the quality and relevance of the vocational and higher education system in line with EU standards and best practice. Complementary support to the modernisation of public institutions and to civil society is provided within and outside the priority sectors, in particular through twinning with EU national administrations. Engagement with civil society is a prominent feature of EU cooperation in Azerbaijan, reflected by the fact that the EU is the largest foreign donor to civil society in Azerbaijan.
The strategic framework, objectives and indicative financial allocations for the EU’s bilateral cooperation with Azerbaijan in 2014-2017 are set out in the Single Support Framework. Azerbaijan is also eligible to participate in regional programmes funded under the ENPI/ENI (mainly in energy, transport, and border management), in the Eastern Partnership Flagship Initiatives, in cross-border cooperation and in initiatives open to all Neighbour countries: Erasmus+, TAIEX, SIGMA, and the Neighbourhood Investment Facility (NIF). In addition to the ENI, funding is available under the EU thematic programmes: the European Instrument for Democracy and Human Rights, Instrument contributing to Stability and Peace, Civil Society Organisations and Local Authorities, Human Development and Migration & Asylum.
As a member of the Eastern Partnership and the Council of Europe, Azerbaijan has signed up to legally binding commitments regarding respect of human rights and democratic developments. The EU continues to stress the importance of issues relating to defence of human rights, space for civil society and freedom of media, expression and assembly in Azerbaijan as an essential part of EU-Azerbaijan relations. Developments including the release of political activists and journalists and changes to legislation regulating civil society occurred following visits to Baku by EU Special Representative for Human Rights Stavros Lambrinidis in February 2015, Commissioner for Enlargement and Neighbourhood Policy Johannes Hahn in April 2015, European Council President Donald Tusk in July 2015 and by High Representative of the Union for Foreign Affairs and Security Policy/Vice-President of the Commission Federica Mogherini in February 2016. Other priorities include the strengthening of the rule of law and democratic institutions; supporting the development of social and economic inclusion and ensuring equal opportunities for all. The EU continues to engage with Azerbaijan on these issues. The sixth EU-Azerbaijan Subcommittee on Justice, Freedom, Security and Human Rights and Democracy was held in Brussels on 16-17 October 2016.
The EU's Erasmus+ programme supports higher education institutions, staff, and students in partner countries such as Azerbaijan. Erasmus+ funds the academic mobility of Azerbaijani students for between 3 and 12 months in a host institution in Europe or short-term mobility of academic staff. In 2015-2017, the EU funded nearly 880 students and staff member mobility from Azerbaijan to Europe and 450 European students and staff mobility to Azerbaijan.
In addition, Erasmus+ funds capacity building for the modernisation and development of higher education, including seven projects involving Azerbaijan. Azerbaijani institutions also have access to funding from the Jean Monnet programme, which aims at promoting excellence in teaching and research in the field of EU studies. The EU provides high-level scholarships to excellent students and staff worldwide, as well as joint master and doctoral degrees, which may include Azerbaijan. 13 Erasmus Mundus scholarships have been awarded to Azerbaijani students. Finally, Erasmus+ youth activities (exchanges, volunteering, and capacity building) are open to neighbouring countries. So far, 1,800 participants from Azerbaijan have taken part in these activities.
In December 2016 an International Conference on "Inter-religious tolerance and the role of media" was held in Baku, while a visit to Brussels of leaders from the various religious communities in Azerbaijan was organised in September 2017. This was followed by a first "Imagine Euro Tolerance Festival" in Baku 12-20 October 2017.