After the termination of the Soviet Union, post-soviet countries have launched rigorous integration towards European structures. At the same time, Europe also generously embraced post-soviet space through pragmatic programmes. Azerbaijan has been one of those countries that respectively attracted the European Union’s interests by its significant geo-political situation, rich carbo-hydrate resources as well as regionally increasing influence.
However, the relations between the Republic of Azerbaijan and the European Union have entered a new era with the adoption of the European Neighbourhood Policy Action Plan in November 2006. The direct relations between the two entities have been formed only following the dissolution of the Soviet Union in 1991; have been shaped – very naturally – around ‘energy supply and demand’ policies. It is, therefore, no surprise that energy cooperation has been reflected as the primary issue of both interest and concern for Azerbaijan and the EU in the Action Plan out of total 11 priority areas. Diversification of energy routes, getting rid of dependence on Russian monopoly and preserving energy security once more substantially increase decisive relations with Azerbaijan. Furthermore, the EU has been seeming to contribute crucially to development of Azerbaijan, in terms of democratic consolidation, institutional improvements through a transfer of its values and norms such as rule of law, democratic and an accountable governance, high respect to human rights and so forth. Apparently the relations prompt mutual benefits for both entities as well as two-fold strategy of the EU comes out. Therefore, this paper aims at investigating the major rationale and development of the relations between the EU and Azerbaijan. In this regard, I intend to analyse historical development of the relations through the analysis of the essential projects and programmes launched by the EU for the improvement of the mutual cooperation. The EU is not the only actor holding certain interests in the South Caucasus, Azerbaijan in particular. Thus it is worth analyzing power relations, interests of the major actors and uneasy competition among them, in order to find out considerably increasing role of the EU as global player in the South Caucasus region. Moreover, the paper seeks to figure out the EU’s rather unique objectives  focusing on transfer of values and norms through its foreign policy. However the EU faces with range of internal and external challenges that undermine effective cooperation. The paper concludes that although the core reason for good relations and implementation of the partnership projects run by the EU mostly seek to achieve energy-oriented goals, they also contribute to the development of collaborating countries.
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Historical development of the EU-Azerbaijan relations
After greeting its independence on 18 October 1991, Azerbaijan was pursuing the policy of reaching out to the international community and opening up its economy, particularly to Europe in order to attract Foreign Direct Investment to the country. Azerbaijan became member of the United Nations in 1992.  Formal relations between Azerbaijan and the EU started in 1996 when Azerbaijan signed the Partnership and Cooperation Agreement (PCA), which entered into force in 1999, with the EU.  In 2003, within the Wider Europe initiative, EU adopted its European Neighbourhood Policy (ENP) and Azerbaijan, along with Armenia and Georgia, was also included into this program.  In early 2008, Sweden and Poland launched new partnership programme, “Eastern partnership”, with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.  All these above mentioned EU programs comprise various cooperation and partnership areas, ranging from energy, investment, trade to democracy and human rights.
Technical Aid to the Commonwealth of Independent States (TACIS)
TACIS programme launched by the EU in 1991 to provide grant-financed technical assistance to countries of EEC (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan).  Main aim of the TACIS has been to help above listed FSU countries to deal with the problems of transition period.  More to the point, after the collapse of Soviet Union all those countries aimed at shifting to market economy from planned economy. In 1999 PCAs entered into force which brought TACIS under the legal framework of it and set up certain requirements or conditionality (respect for democratic principles, human rights and market economy) to get assistance within the programme. 
For Azerbaijan TACIS programme focused on large range of issues stretching from areas of institutional, legal and administrative reform to private sector development, know-how, assistance for economic development, transport and energy sectors, tax policy and rural development. Apart from that programme also concentrated on coping with the issues of environment, border management, anti-trafficking, institution building, tax policy, vocational education and training, and as well as accounting standards.  In 10 years from 1991 to 2001 the EU spent 370 million Euro (the largest share of aid among all the FSU countries of the Caucasus and Central Asia) on technical assistance to Azerbaijan.  TACIS programme focused on several multidimensional regional projects (interstate projects) the most important ones for the South Caucasus are TRACECA and INOGATE.  In 2007 TACIS programme was replaced by the Neighbourhood and Partnership Instrument (NPI). 
Partnership and Cooperation Agreement (PCA)
At the end of 1990s the EU signed Partnership and Cooperation Agreements with Russian Federation and New Independent States (NIS) of Eastern Europe, the Southern Caucuses and Central Asia; namely with the Republic of Armenia, the Republic of Azerbaijan, Georgia, the Republic of Kazakhstan, the Kyrgyz Republic, the Republic of Moldova, Ukraine, and the Republic of Uzbekistan.  In fact, Belarus and Turkmenistan also signed PCAs with EU respectively in 1994 and 1998 but due to the political conditions in these countries PCAs have not entered into force. 
Azerbaijan signed PCA in April 1996 and it entered into force in 1999.  The core character of the PCA is that it does not aim at granting EU membership to the parties of the agreement, but rather it envisages building up closer relations with parties on the basis of mutual benefits.  The PCA between Azerbaijan and EU sets up below objectives as a driving force of the partnership:
to provide an appropriate framework for the political dialogue between the Parties allowing the development of political relations;
to support the Republic of Azerbaijan’s efforts to consolidate its democracy and to develop its economy and to complete the transition into a market economy;
to promote trade and investment and harmonious economic relations between the Parties and so to foster their sustainable economic development;
to provide a basis for legislative, economic, social, financial, civil scientific, technological and cultural cooperation. 
Most important cooperation on the issues of human rights was one of the key elements of the partnership agreement. One can see the some of the abovementioned objectives within the general scheme of the TACIS programme. However, conclusion of the PCA has put Azerbaijan-EU relations on more formal basis than ever before. EU has emphasized the importance of Azerbaijan as a crucial transport corridor between Europe and Central Asia within the framework of PCA as well. More to the point, in 2004 EU-Azerbaijan Cooperation Committee  held its fifth meeting where the development of Azerbaijan`s energy potential, its role in Europe`s energy security, resolution of the dispute over Caspian Sea status, cooperation in the field of energy transport were on the top of meetings agenda. 
Azerbaijan in the ENP: neighbour of our neighbours
The ENP was launched in 2004  following the Communication from the Commission on the idea of “Wider Europe” which was developed in 2003 and basically was targeting to create “a zone of prosperity and a friendly neighbourhood -a ring of friends-with whom the EU enjoys close, peaceful and co-operative relations.” 
The ENP aimed at to deepen the existing political and economic relationship with its neighbours,  however does not offer the prospect of future full membership; namely it is an alternative to the accession process.  To this end, the ENP uses the framework of existing Partnership and Association agreements with its neighbours.  The ENP takes its members in individual bases. That is to say, there is no common settled policy towards all neighbours. The ENP takes into account particular circumstances (geographic location, political and economic situation, relations with EU and neighbours, reforms, capacities and needs)  in every neighbouring country and forms its policy on these bases. Based on the differences in needs and capacities of the neighbours ENP forms individual Action Plan that agreed between EU and each partner. In 2006, implementation of ENP Action Plans agreed with Azerbaijan along with Armenia and Georgia.  In the European Security Strategy paper it is stated that South Caucasus is one of the regions that EU should take “stronger and more active interest”. 
One might argue that, so far, South Caucasus is not immediate neighbour of the EU. However, the EU conceives South Caucasus as an important region in terms of its capacity as an energy corridor between Central Asia and Europe. Furthermore, departing from this energy security perspective, the EU has developed the concept of ´´neighbours of our neighbours“ which targets Caucasus and Central Asia.  Differences are also clear in the case of South Caucasian states concerning their capacity and need. For example, Azerbaijan is the ´´passive“ partner whereas Georgia and Armenia are ´´willing“ partners in the ENP. Azerbaijan`s passiveness is explained with its oil richness and its authoritarian political inclination. 
In the ENP Action Plans the EU sets up conditionalities towards its ENP partners to commit to the European ´´common values“ of democracy, human rights, rule of law, good governance, market economy and sustainable development.  Nevertheless, since the ENP Action Plans are not binding documents, its implementation begs question particularly in the semi-Authoritarian states like Azerbaijan. Main objectives of the ENP read as below:
ENP is a policy limiting future membership of the EU
Establishing an EU-centred economic zone
Encouraging political reforms and improving regional security
Enforcing EU policies on immigration
Extending the EU`s political influence
Strengthening links with energy suppliers 
In order to improve regional security EU tries to become more active in the resolution of so called “frozen” conflicts in its neighbourhood.  Azerbaijan`s capacity as an independent energy supplier makes it more attractive to the EU though its poor commitment to the European “common values”.
Till the beginning of 2007 EU decided to finance the ENP through existing TACIS (for eastern neighbours and Russia) and MEDA (for southern Mediterranean neighbours) programmes.  On 1 January 2007 the European Neighbourhood and Partnership Instrument (ENPI) was launched and replaced TACIS and other similar programmes.  For each ENP partner National Indicative Programme (NIP) is formed to monitor the financial support and as well as monitoring of the ENP implementation in neighbouring countries. NIP 2007-2010  set up three priority areas for Azerbaijan which are:
Support for Democratic Development and Good Governance
Support for socio-economic reform, fight against poverty and administrative capacity building
Support for legislative and economic reforms in the transport, energy and environment sectors. 
The NIP 2011-2013 plans to add one more priority area to the NIP 2007-2010 which is “support for PCA and ENP Action Plan implementation; Comprehensive institution building, including in the area of mobility and security.”  The ENPI`s main focus is the cross-border cooperation which is supposed to close the dividing lines between EU and its neighbours. 
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In early 2008 Sweden and Poland proposed to launch a new partnership called “Eastern Initiative” as a counterbalance to the Franco-German proposal of “Union for the Mediterranean”.  At the beginning other EU members were hesitant on giving their support for the Eastern Initiative, however after the Russia`s 2008 August invasion of Georgia other member states as well began to express their support for this new partnership proposal.  Eastern Initiative is proposed towards six FSU countries: Belarus, Ukraine, Moldova, Armenia, Georgia and Azerbaijan.  Eastern Initiative proposal aims at contributing to the existing ENP programme. But however, there is a core difference between the ENP and the Eastern Initiative. As it is already noted above, the ENP works on the country to country basis whereas Eastern Initiative pursues to develop regional approach rather than country-specific.  To my mind, it would be too naÃ¯ve to argue that regional approach of the Eastern Initiative can work, unless the ´´frozen“ conflicts in South Caucasus find its resolution. Russia has conceived Eastern Initiative as a threat to its sphere of influence. On March 2008 Russian Foreign Minister Sergei Lavrov stated that by launching Eastern Initiative EU envisages entering into the Russia’s sphere of influence in FSU countries. 
The EU High Representative for the Common Foreign and Security Policy Javier Solana responded to Lavrov by stating:”we have a group of countries with which we have a special relationship because of neighbourhood, because of trade, because of so many things. We want to establish a mechanism of relationship which is more stable, more institutional, and that has nothing to do with our relationship with Russia.”  Eastern Initiative will be financed by the ENP policy budget since it is regarded as a part of neighbourhood initiative.  Eastern Initiative plans to increase cooperation in the field of energy security, to create trade networks and as well as to conclude free economic zone  agreement. 
Power Relations: the interests of major actors
The United States
The Caspian Basin, holding the world’s third largest oil deposits after the Persian Gulf and Siberia,  supposedly will be a strategic cooperation and competition arena simultaneously for regional powers and other industrialized states. The main regional actors that are defined by competition and cooperation are Russia, Iran and Turkey. In addition to these regional powers, the USA and the EU as well as China are also immensely involved in the intricate interactions that are shaping the region’s growing role in the oil industry. The main objective of the USA in this engagement is to preclude Iranian and Russian dominance over the oil industry in Central Asia and Caucasian region. The USA has accomplished this policy systematically with its extra-territorial sanctions against Iran, most of which can be traced back to the Clinton administration in mid 1990s. Moreover, the USA and USA-backed Transnational Oil Companies (TNOCs) are increasingly being involved in most of the projects that have been undertaken in the region whereas Russian interests are only slightly represented. In a parallel development, the US support has proven to be very crucial to Azerbaijan in terms of enabling the Baku government to effectively break free from Russian dependency and manipulations of energy transportation routes. In more general terms, we can also easily perceive Turkey’s cooperation and alliance with western powers, Georgia and Azerbaijan. The EU involves in this alliance as well and benefits from this competition, but its involvement differs from that of the USA by its purely commercial and economic interests of securing its energy supply from the reliable sources. The EU members follow individual paths to find secure energy supplies and this is considered as not contradictory to the EU’s CFSP. In this regard, we can see different approaches of member states concerning energy security. More specifically, some members perceive Russia as an unreliable energy source, whereas others, like Germany, pursue a close cooperation with it in order to meet its energy demands. Different approaches to energy security are reflected also in the regional pipeline projects.
Russia’s main policy objective in the region has been to maintain its economic dominance over the former Soviet countries. Up until the beginning of President Putin’s reign of 2000, this policy had been followed overtly, particularly in 1993-94. As Mozaffari points out:
“Russia prevented Baku`s Government from signing another contract with a US company for the construction of oil pipelines for oil transport through northern Nagorno-Karabakh to Georgia and on to the Mediterranean via Turkey. In 1994 Russia interfered again-this time to stop oil transport through Iran. Russia supported Armenia’s invasion of the Fizuli region near the Iranian border. After these incidents, the Americans, who are trying to diversify their oil supply sources, started to feel that their right to trade with any independent state -in this case Azerbaijan- was threatened.” 
Russia utilizes various mechanisms to pressure the post-soviet countries to remain within its influence area. Despite its unrelenting effort, Russian influence is significantly dwindling due to the fact that the countries are searching for and finding new alternatives. A case in example is the Georgia-Russia gas controversy of the winter of 2006 in which Azerbaijan helped Georgia. At the time, Russia increased gas prices blatantly in a multiplied scale towards Georgia.  In the event of such blackmail, Azerbaijan offered gas supply to Georgia, the country which acts in a cooperation with Azerbaijan in the regional projects and also important corridor between Central Asia and Europe.
Iran is another major regional power in the Caspian region. Iran has well-structured pipeline connections, and its long tradition of oil exploration and production could have contributed significantly to more cooperation in the region. However, as mentioned above, USA`s extra-territorial sanctions which prevents any country or company to engage in economic cooperation with Iran has successfully precluded the possibility of benefiting from Iran’s well-developed oil infrastructures and its expertise within the framework of regional cooperation in the area. There was a great hope for cooperation between Iran and USA when the more liberal M. Khatami was elected as president in 1997 and called for a ´´dialogue of civilizations“. Nevertheless, this hope soon disappeared, since the conservative faction under the leadership of Supreme Leader Ayatollah Khomeini prevailed to preserve the anti-western policy within the country. 
Cooperation between Russia and Iran?
Socio-economic and political cooperation and interactions among the regional powers in the region is highly complicated. We can observe these uneasy complications, for instance, in the policies of Russia towards Iran. On the one hand Russia prefers cooperation with Iran to reduce influence of the USA in the region and this cooperation is evident in the supply of weapons to Iran by Russia.  On the other hand, Russia perceives Iran as one of its core rivals since Iran’s strategic geo-political position provides Central Asian countries a viable alternative to counter the Russian pressure. The oil swap arrangement between Iran and Kazakhstan concluded in 1996, namely is one example of the role of Iran as an alternative to Russian dominance in the region. As part of this arrangement, “Kazakhstan supplies oil to the Northern part of Iran and in turn Iran exports the same amount of oil to the world market on behalf of Kazakhstan from its own production in the south of the country.” 
Though, Russia and Iran have a common national interest of blocking the interference of the West into the Caspian Basin, time to time Russia does not support the Iranian position in the region. Given such flexible Russian policy, Iran sees Russia as unreliable ally to certain extent and therefore looks for another regional actor to balance the powers of other players in the region.  In this sense Armenia is the only partner where can Iran strengthen its cooperation in order to have influence in the Caucasus.
China as a newcomer
Like Russia, China holds the same political stance against the US unilateral hegemony. Both China and Russia are worried about the increasing influence of the US in the Eurasian continent. Apart from that China and Russia, to some extent India as well, strive to build a poly-centric international order where they have equal voices as US has.  Post-cold war period Russian-Chinese relations can be drawn back to the creation of the Shangai Cooperation Organization (which previously known as Shangai Five) that came out with the affords of China, Russia, Kazakhstan, Kyrgystan and Tajikistan to strengthen confidence-building and disarmament in the border regions.  Cooperation within the framework of the Shangai Organization spilled over to many other spheres such as trade and joint military exercises. Russia and China agreed to build oil pipeline from Siberia to China which can be extended to Japan as well. 
Similar to warming Russia-China relations, Iran has also improved its cooperation with China. In March 2004, China’s state-owned oil trading company, Zhuhai Zhenrong Corporation, signed a 25-year deal to import 110 million tons of liquefied natural gas (LNG) from Iran. There is increasing Chinese investment in Iranian energy exploration and production.  Like Russia, China is also contributing to the militarization of Iran.  Heightening cooperation among Russia, Iran, and China poses great threat to the Western interests in the Caspian basin and Middle East alike.
Involvement of China in Central Asian energy politics can deteriorate the relations between Russia and China. Apart from that, it can also decrease the chances for the EU to pipe sufficient gas resources from Central Asia to Europe. Russia wants to control the energy transportation routes of the Caspian Basin in order to influence both supplier and customer countries, respectively Caspian Basin energy exporters and Western energy importers. Russia is pursuing the policy to become only power to control energy supply and transportation networks from Europe to East Asia.  On the other hand, West (US and EU) wants to free Caspian Basin energy supplier countries from the political leverage of the Russia. Consequently, this might lead to the militarization of the energy security since states are using their energy sources and transportation routes as a political weapon.
Something apart from energy and risking factors
By analyzing the power relations and interests of the major actors, obviously turns out that the very rationale of setting up relations with Azerbaijan mostly stems out from the interests in energy resources. From the realistic point of view, the only international actor – state, constantly strives to persuade its national-interests and maximization of power  . Here the question comes up concerning whether the EU can follow any certain national-interest in this regard. It is hard to define, though the EU can appropriately be considered as a global power. Taking the EU’s role and influence in an entire region concerning an uneasy competition as well as “politico-strategic cooperation” among the other actors, the EU as a global player substantially contributes to institutional development and improvement of the regional states. Therefore, unlikely, the policy and programmes run by the EU do not only seek for energy/economic based wills, but also considerably involves cultural, political influences. If we carefully scrutinize the main aims and objectives of abovementioned direct or indirect partnership projects, the EU’s explicit endeavours seeking to spread norms and values. Indeed, the EU would prefer to have a solid collaboration with the country that shares common values and principles with. Moreover, with the purpose of maintaining the sustainability of beneficial and transparent partnership as well as neighbourhood, the EU is eager to have deals with democratic, uncorrupted countries respecting human right, meeting the standards of free market economy. Thus, for the post-soviet country such as Azerb
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