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Peace in South Caucasus critical to developing EU-China trade links



The signing of the EU-China Comprehensive Agreement on Investment last week opens up new trade possibilities between the two global economic leaders. Yet until only a month ago, the only viable overland trade route from China to Europe was through central Asia. Now, with the ending of the conflict in Nagorno-Karabakh in November, the opening of a new land transit route across the South Caucasus can dramatically cut freight times from weeks to days, writes Ilham Nagiyev.

But if the EU is to benefit, it must ensure the peace holds. Though diplomatically absent in November’s mediated ceasefire, it can help establish stability in a region critical not only for deepening its trade ties with East Asia, but also its energy security. New Year’s Eve saw the first commercial sale of gas from Azerbaijan through Southern Gas Corridor, seven years in the making, to Europe.

This is key for EU energy diversification, but also for supplying cleaner energy to Balkan pipeline-transit states still reliant on coal for much of its energy. The route to lasting peace is through the hand of economic co-operation. The task of rebuilding the region occupied by Armenian separatists for nearly 30 years is enormous. Infrastructure has crumbled, farmland lies fallow and some areas are now completely deserted. While Azerbaijan is a wealthy country, it needs partners in development to fully realize what these lands can offer economically to the world.

But with Azerbaijan’s control returning to lands international recognised as its own, a path has now been opened for the renormalization of relations between Azerbaijan and Armenia, as well as shared prosperity in Karabakh. It also opens the door to institutional investors such as the European Bank for Reconstruction and Development.

Whilst under control of Armenian separatists, institutional charters barred organizations from operating in the region, given the administration’s unrecognized status in international law. This, in turn, froze out private investment. With no other options available, the enclave instead became dependent on aid or investment from Armenia, itself reckoning with its own economic challenges. Indeed, if anything was to be exported from the then occupied region, it first had to go to Armenia to be illegally labelled “made in Armenia” before being moved on.

This in itself is obviously inefficient and unlawful. But to compound matters, Yerevan’s integration into the global economy was thin: the majority of its trade is with Russia and Iran; the borders to Azerbaijan and Turkey shut due to its support for the separatists and occupied lands. Freed from illegitimacy, this can now change. And an area ripe for investment and development – and where EU is well-placed to assist – is agriculture. When Azerbaijan and Armenia were part of the USSR, Karabakh was the breadbasket of the region. As a global leader for precision farming, the EU could provide technical expertise and investment to bring the area back to production and enhance food security once more for both nations, but particularly for Armenia, where food insecurity stands at 15%.

Produce can also be earmarked for export to a wider market, particularly Europe. Transportation routes in the region run in contorted lines due not to geography, but because of the conflict and its diplomatic ramifications. The return of territory and renormalization of relations holds the promise of correcting this. Not only Karabakh but Armenia can then be reintegrated into the Southern Caucasus regional economy and beyond. This chance at economic consolidation is critical for the region’s future.

Ultimately, lasting peace requires future reconciliation between the Armenia and Azerbaijan. But if there is opportunity to be shared around – not only in agriculture, but telecoms, renewables and mineral extraction – it removes a potential cause for friction. The sooner citizens start to feel the warmth of economic prosperity, the more inclined they will be to support the political settlement that can bring about a durable resolution.

Though the EU may feel side-lined when the ceasefire was negotiated largely in its absence, this should not deter it from now extending the hand of economic co-operation. Long term peace requires development. But in due course, the stability this will foster shall send prosperity back in Europe’s direction.

Ilham Nagiyev is the chairman of Odlar Yurdu Organization in the UK and chairman of leading agricultural company in Azerbaijan, Bine Agro.


For Azerbaijan, what comes after the military victory?



2020 will be remembered as a year of glorious victory in Azerbaijan. After nearly thirty years, the country liberated the territories that it lost to Armenia during the 1990s, known as Nagorno-Karabakh. Azerbaijan made seemingly light work of this impressive military victory. It took just 44 days for the country, with support from military ally Turkey, to bring an end to a conflict that some of the world’s most influential diplomatic powers had failed to effectively mediate for almost three decades.

This is clearly a source of great pride. After the victory, Azerbaijan put its military might on display through the streets of Baku. 3,000 military personnel and more than 100 pieces of military equipment paraded the streets of the capital city, witnessed by scores of Azerbaijanis, and overseen by Presidents Aliyev and Erdogan.

But the new year brings new challenges, and one big question – what comes after military victory?

The next stage for the Nagorno-Karabakh region has been neatly coined as the ‘three Rs’: re-construction, re-integration, and re-population. The slogan might sound simple, but the reality will be far from it. Victory in this arena will take much longer than 44 days, but Azerbaijan has started outlining a promising vision.

Following the liberation of Nagorno-Karabakh, senior Azerbaijani figures accused the Armenian government of ‘urbicide’, shocked to see the level of destruction that had befallen their homes, cultural monuments, and even the natural environment. This is most visible in Aghdam, a majority Azerbaijani city nicknamed the Hiroshima of the Caucasus because Armenian forces methodically destroyed every single one of its buildings in the 1990s, except the mosque.

Although reconstruction from this position will not be easy, if Azerbaijan can harness the potential of the land, it will most certainly be worth it.

Nagorno-Karabakh has already been touted as the next hotspot for the Azerbaijani agricultural and manufacturing industries – but what is perhaps more interesting are the government’s proposals to drive tourists to the region.

Plans have begun for the construction of an airport in the re-captured Fizuli disctrict, work to develop a motorway between Fizuli and Shusha is underway, and the government intends to build several tourist centres throughout Nagorno-Karabakh.

The goal is to attract tourists from across Azerbaijan, and abroad, by shining a light on the many cultural sites of significance in the region, including Shusha, the Azykh cave and parts of the city of Hadrut.

Alongside existing sites, there are further plans to develop cultural life with literary festivals, museums, and concert venues.

Of course, in the long term, this has the potential to bring significant income to the region, but first, reconstruction requires funding. Already, the 2021 Azerbaijani state budget has allocated $1.3 billion for restoration and reconstruction work in the Karabakh region, but the government aims to draw international investment to bolster their funds.

It is hoped that regional partners, such as Turkey and Russia, will be enticed by the prospects of regional development.

A well-connected Nagorno-Karabakh can be used to form trade routes that could bring significant investments into the Caucasus region. Ironically, one of the countries that could benefit from this most is Armenia.

In the immediate aftermath of the conflict, the potential for economic co-operation between the two countries seems unlikely, but in time it could go some way to assist with the realisation of the second ‘R’, re-integration.

Ethnic re-conciliation is one of the greatest challenges in any post conflict situation. The Azerbaijani authorities have committed to ensuring that Armenian citizens are protected in line with their constitutional rights and have promised to offer any Armenian’s who wish to remain in Nagorno-Karabakh Azerbaijani passports, and the rights that come along with them.

But this alone will not be enough to build the confidence that is needed for Azerbaijanis and Armenians to live in peace, side by side.  Wounds are still fresh. Azerbaijanis know that building the trust that will enable re-integration will take time. But there is reason to be optimistic.

Officials and analysts often point to Azerbaijan’s proven track record of multicultural co-existence as promise for the prospects of re-integration. Recently, the Chief Ashkenazi Rabbi of Azerbaijan wrote in the Times of London about his experience taking up post in a Muslim majority country where the Jewish community is “thriving”.

What is likely to be a much easier task for the Azerbaijani authorities is the final ‘R’, repopulation.

Azerbaijan has amongst the highest number of Internally Displaced People (IDPs) in the world. More than 600,000 Azerbaijanis were forced to leave their homes, either in Nagorno-Karabakh or in Armenia, after the first Karabakh War.

For almost all of them, the region remains home, and they are desperate to return home, but they rely on reconstruction before they can do so. That is precisely why the 3 Rs constitute a virtuous cycle that Azerbaijani leaders are setting in motion.

Azerbaijan stunned many with their military victory, and they intend to surprise the world again with their ability to deliver the conditions of lasting peace in the region.


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Azerbaijan starts shipping Shah Deniz Gas to Europe



At the very end of 2020, Azerbaijan started shipping commercial natural gas from the Shah Deniz field to European countries through the Trans-Adriatic Gas Pipeline (TAP), media outlets reported, quoting SOCAR.

Azerbaijani gas reached Europe through pipelines for the first time ever. Having been integrated into the Italian network back in November, TAP, the last segment of the Southern Gas Corridor (SGC), delivered the first gas from Melendugno to Italy via SNAM Rete Gas (SRG) and from Nea Mesimvria to Greece and Bulgaria via DESFA on December 31.

The direct pipeline connection to Europe, the world’s largest importer of natural gas, created the opportunity for Azerbaijan to diversify its energy exports. This will benefit the country, helping it move towards greater economic autonomy.

SOCAR President, Rovnag Abdullayev, praised December 31 as a historic day, expressing his appreciation and thanks to the partner countries, companies, experts and colleagues who had been involved in the TAP, Shah Deniz-2, and Southern Gas Corridor projects and contributed to the unprecedented delivery of Azerbaijani gas to the European market. “I would like to thank financial institutions for propping up the project and the residents of the communities where the pipelines pass”, he said.

In addition, Abdullayev congratulated both the people of the European Union and the people of Azerbaijan “on behalf of SOCAR, a shareholder in all Southern Gas Corridor segments, and Azerbaijani oil workers who have accomplished this historic mission”. “I warmly congratulate Azerbaijan on behalf of President Ilham Aliyev, the architect and driving force of the great project,” he said.

As the SOCAR president stated: “The final investment decision was taken seven years ago. It was followed by the signing of 25-year gas agreements with Europe’s gas transport companies Although some felt doubtful of success, we have finalized the construction of three 3,500-kilometer interconnected gas pipelines, enabling Europe to receive Azerbaijani gas for the first time in history.”

“Natural gas extracted from the new source and transported via the alternative route will bolster Europe’s energy security,” he added by highlighting the fact that “the EU gas production has declined, which creates a need for more gas in the market. In this context, Azerbaijani gas will satisfy this demand, thus making the country more strategically important to the Old Continent.”

Speaking about the newly commissioned pipeline, Luca Schieppati, TAP’s Managing Director, touted the day as historic for “our project, the host countries and Europe’s energy landscape”. He stressed the fundamental role of TAP in the continent’s gas network, adding that “it contributes to the energy transition road map and offers a reliable, direct, and cost-effective transportation route to south-east Europe and beyond”.

In the summer of 2021, Azerbaijan will enter the second stage in market research to further expand TAP and increase its capacity to 20 billion cubic metres.

TAP is a 878-km cross-border pipeline which allows natural gas from the giant Shah Deniz gas field in Azerbaijan’s sector of the Caspian Sea to flow into Turkey, Bulgaria, Greece and finally Italy. The route runs from the Greek-Turkish border (near Kipoi) to the southern coast of Italy after crossing Greece, Albania and the Adriatic Sea.

Installing extra interconnectors may translate into more gas shipments to Southeast Europe via the newly commissioned pipeline. Take, for example, Bulgaria which is supposed to bolster energy security by importing 33% of its natural gas needs from Azerbaijan. Thanks to TAP, the country will see higher natural gas penetration on the ground. In addition, the fact that the SCG segment stretches through Greece, Albania and Italy can help Azerbaijan to transport gas to other European countries.

TAP, the strategically vital leg of the SCG mega-project, seeks to provide Europe with reliable access to the new natural gas source, diversify its supplies and achieve greater decarbonization.

TAP’s shareholding is divided among SOCAR, BP and SNAM, with a 20% stake each, Fluxys with a 19% holding, Enagas with 16% and Axpo with 5%.

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Nagorno-Karabakh conflict flares despite ceasefire




Four soldiers from Azerbaijan have been killed in clashes in the disputed Nagorno-Karabakh region, Azerbaijan's defence ministry says.

The reports come only weeks after a six-week war over the territory which ended when Azerbaijan and Armenia signed a ceasefire.

Armenia meanwhile said six of its own troops were wounded in what it called an Azerbaijani military offensive.

Nagorno-Karabakh has long been a trigger for violence between the two.

The region is recognised as part of Azerbaijan but has been run by ethnic Armenians since 1994 after the two countries fought a war over the territory which left thousands dead.

A Russian-brokered truce failed to bring about lasting peace and the area, claimed by both sides, has been prone to intermittent clashes.

What does the peace deal say?

  • Signed on 9 November, it locked in the territorial gains Azerbaijan made during the war, including the region's second-largest city Shusha
  • Armenia promised to withdraw troops from three areas
  • 2,000 Russian peacekeepers deployed to the region
  • Azerbaijan also gained a overland route to Turkey, its ally, by gaining access to a road link to an Azeri conflict on the Iran-Turkey border called Nakhchivan
  • The BBC's Orla Guerin said that, overall, the deal was regarded as a victory for Azerbaijan and a defeat for Armenia.

The latest conflict began at the end of September, killing around 5,000 soldiers on both sides.

At least 143 civilians died and thousands were displaced when their homes were damaged or soldiers entered their communities.

Both countries have accused the other of violating the terms of the November peace deal and the latest hostilities flout the ceasefire.

The agreement was described by Armenian Prime Minister Nikol Pashinyan as "incredibly painful both for me and both for our people".

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