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Building Connections for Development in
Azerbaijan and the South Caucasus

Regional Digest July 18-22, 2022

Welcome to the #RestartConnects weekly digest on the main developments in the South Caucasus during the period July 18-22, 2022.

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Azerbaijan and European Union Sign Memorandum on Energy

On July 18, 2022, Azerbaijan struck a deal to double its natural gas exports to the European Union under a memorandum of understanding signed in Baku by Azerbaijani President Ilham Aliyev and European Commission President Ursula von der Leyen. The agreement seeks to partially offset the Russian reduction of Gazprom deliveries to Europe and a looming energy crisis in the European Union this winter, both a consequence of Russia’s invasion of Ukraine.

“Today, with this new memorandum of understanding, we are opening a new chapter in our energy cooperation with Azerbaijan, a key partner in our efforts to move away from Russian fossil fuels,” von der Leyen said.

According to the memorandum of understanding, Azerbaijan and the European Union plan to increase the capacity of the Southern Gas Corridor to at least 20 billion cubic meters annually by 2027. Its current capacity will be increased from 8 to 12 billion cubic meters in 2022 and it was also agreed to develop and benefit from Azerbaijan’s offshore wind and other green energy potential.

However, analysts warn, that the European Union will find it difficult to fully replace its dependency on Russian gas. “It is categorically not enough to just rely on gas from non-Russian sources – these supplies are simply not available in the volumes required to substitute for missing deliveries from Russia,” warned International Energy Agency Director Fatih Birol the same day. In 2021, Russian gas supplies to the European Union stood at 155 billion cubic meters – almost 40 per cent of its total demand.

Foreign Minister Bayramov Meets High-Level EU and NATO Officials The following day, on July 19th, 2022, European Union Special Representative for Foreign Affairs and Security Policy, Joseph Borrell, also welcomed the energy agreement as he participated in the 18th meeting of the EU-Azerbaijan Cooperation Council in Brussels, also attended by Foreign Minister Jeyhun Bayramov. “We are supporting all efforts to make the South Caucasus a secure, stable and prosperous space for all its people,” said Borrell, thanking Bayramov for his briefing on the July 16, 2022, meeting of the Armenian and Azerbaijani Foreign Ministers in Tbilisi, Georgia.

Bayramov stressed the need for border delimitation, the opening of communication links, and the implementation of confidence-building measures. “The European Union is ready to support these efforts, and is actively working on helping to bridge the differences and to bring solutions,” said Borrell. Foreign Minister Bayramov also met with NATO Secretary General Jens Stoltenberg to discuss mutual cooperation and the Armenia-Azerbaijan normalization process.

First IDP Families Return To Zangilan

On July 19, the first of the families displaced during the first Karabakh war returned to the village of Aghali in the Zangilan district of Azerbaijan.

In the first phase of the resettlement program, 10 families consisting of 58 people returned to the hi-tech and ecologically-friendly 'smart village,’ the first of its type to be nearing completion with 200 homes already constructed. A further 31 families were expected to follow the same week. More will return at a later date.

The reconstruction of Aghali started in April 2021 with those benefiting from this current phase of resettlement chosen by lottery from among the most socioeconomically disadvantaged of over 600,000 Azerbaijani IDPs that fled in the early 1990s.

Employment has been offered and social services will be made available online. A new airport in Zangilan is also expected to be fully operational by the end of August.

Azerbaijan Announces Strategy For Socio-Economic Development 2022-2026

On July 22, 2022, Azerbaijani President Ilham Aliyev announced the approval of the Strategy for the Socio-Economic Development of Azerbaijan 2022-26. Special attention is afforded to the reintegration of the seven regions previously under the control of Armenian forces. Attracting investment, creating employment, and developing agriculture are mentioned.

Environmentally friendly and cost-effective Renewable Energy Sources (RES) also feature as part of developing a green energy zone with trade, service, and logistical centers. Tax and customs incentives as well as beneficial financing mechanisms for entrepreneurs will also be made available.

The Republic of Armenia To Fully Withdraw Forces From Karabakh In September

Armen Grigoryan, Secretary of the National Security Council of the Republic of Armenia, stated in an interview on July 19, 2022, that Armenia will complete the withdrawal of its armed forces from Karabakh in September. This is part of its obligations under the trilateral ceasefire statement signed by Armenia, Azerbaijan, and Russia in November 2020. The remarks came after the issue was raised by Azerbaijani President Ilham Aliyev last week and discussed during the recent meeting of the Armenian and Azerbaijani Foreign Ministers, Ararat Mirzoyan and Jeyhun Bayramov, in Tbilisi, Georgia, on July 16, 2022. The following day US Assistant Secretary of State for European and Eurasian Affairs Karen Donfried rang both to discuss the outcome of the talks.

Russian Foreign Intelligence Chief Visits Yerevan and Baku

On July 18, 2022, Sergei Naryshkin, the head of the Russian Foreign Intelligence Service (SVR) visited Yerevan to discuss international and regional security as well as the processes taking place in the South Caucasus. Naryshkin and Armenian Prime Minister Nikol Pashinyan also spoke about the external threats faced by Armenia and Russia and agreed to exchange intelligence. The following day, on July 19, 2022, Naryshkin also visited Baku where he signed a foreign intelligence cooperation agreement based on the mutual protection of national sovereignty and territorial integrity. Both visits came after the July 15, 2022, arrival of William Burns, Director of the Central Intelligence Agency (CIA), in Yerevan. Burns met with Pashinyan and other high-ranking officials.

Little is known about the visit that lasted six hours, but the CIA chief did discuss international and regional security including attempts by Armenia, Azerbaijan, and Turkey to normalize relations. However, many analysts speculate that this was not the actual or sole reason for his visit.

The European Commission Extends Georgian Deadline for European Union Candidate Status Reform On June 23, 2022, Ukraine and Moldova were granted candidate status for European Union membership while Georgia was given a roadmap of 12 points that it would have to fulfil by the end of 2022. Last week, however, on July 13, 2022, this deadline was extended until the autumn of 2023. “This will give the Georgian political system sufficient time to thoroughly work on these priorities,” the European Commission’s Michael Rupp said. “We have communicated to the government and will communicate to all levels that we are ready to assist with all of our instruments to help them address these priorities.”

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