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South Caucasus

South Caucasus

The EU started negotiations with Georgia for a Deep and Comprehensive Free Trade Area (DCFTA) in February 2012. This negotiations have been concluded in July 2013. On 29 November 2013 the EU initialled the Association Agreement with Georgia, which includes provisions establishing the DCFTA.

Trade picture

South Caucasus:

The EU is the main trade partner of each country (in 2012 trade with the EU represented 27,3% of overall trade for Armenia, 45.6% for Azerbaijan and 26.6% for Georgia). Armenia's and Georgia's share of overall EU trade remains very low, at around 0.1% . Azerbaijan's share in total EU trade is higher due to imports of energy products, at 0.8%.

The South Caucasus region plays an important role both in supplying energy to the EU and as a transit route for it.

Azerbaijan is a major supplier of oil and gas to the EU, as recognised in the EU-Azerbaijan memorandum of understanding on energy concluded in 2006.

Oil and gas from the Caspian Sea is shipped to the EU through pipelines crossing Georgia and Turkey (Baku-Tbilisi-Ceyhan, Baku-Supsa and Baku-Tbilisi-Erzurum).

Caspian oil is also transported from Azerbaijan to the Georgian port of Poti and Batumi by rail.

In the future, energy supplies should be shipped via the 'southern corridor' that should include, inter alia, the Nabucco gas pipeline.

All three countries participate in the Baku Energy Initiative.

EU-South Caucasus (3) "trade in goods" statistics

Trade in goods 2010-2012, € billions
Year EU imports EU exports Balance
2010 10.5 4.1 -6.5
2011 15.8 5.1 -10.7
2012 14.7 5.7 -9.0

More statistics on South Caucasus

EU and South Caucasus

In December 2011 (Georgia) and in February 2012 (Armenia), the Commission concluded following a lengthy preparatory process that trade negotiations could start as an integral part of currently negotiated Association Agreements. Both countries embarked on talks for a Deep and Comprehensive Free Trade Area with the EU in early 2012.

Current relationship between the EU and South Caucasus countries is governed by the Partnership and Cooperation Agreements which entered into force with each of the three partners in 1999 and do not provide any trade preference for goods and a limited preference for trade in services.

Closer economic ties are dependent on the partner countries' membership in the World Trade Organisation. Georgia and Armenia have been WTO members since 2000 and 2003 respectively.

Azerbaijan applied for membership to the World Trade Organisation in 1997 and the process is ongoing. Azerbaijan first needs to accomplish its accession before a Deep and Comprehensive Free Trade Agreement can be considered.

With a view to supporting Azerbaijan's future WTO membership and subsequent eventual bilateral Deep and Comprehensive FTA, negotiations on upgrading the existing trade related provisions of the Partnership and Cooperation Agreement (non-preferential trade and investment agreement) were launched on 16 July 2010.

Azerbaijan is receiving technical assistance from the EU to help it to prepare for WTO membership.

All three South Caucasus countries benefit from the EU's Generalised Scheme of Preferences (GSP). Under the current GSP Regulation, applying from 1 January 2009, all qualify for the special incentive arrangement for sustainable development and good governance (GSP+), offering advantageous access to the EU market.

Under the reformed GSP scheme, as of 22 February 2014 preferences for Azerbaijan will be deferred  and Azerbaijan will revert to the standard "Most Favoured Nation" treatment.
The new regime focuses preferences on poorer countries. Countries which are classified as “upper-middle income” economies by the World Bank for at least 3 years in a row, like Azerbaijan, have their preferences deferred.

The EU supports closer trade and economic integration with the EU through the European Neighbourhood Policy and its Easter Partnership dimension. Armenia, Azerbaijan and Georgia each have an Action Plan.

  • The Action Plans are a long-term reform agenda in various policy areas, including trade and trade-related matters. Both countries were required to speed up their efforts and demonstrate tangible results before negotiations on a trade area could be launched.
  • The reform process, in line with the Action Plans, continues for Armenia and Georgia in parallel to ongoing trade negotiations.  
  • The Commission / EEAS prepare annual reports where the progress made is assessed. For more information, see ENP progress reports.

Trading with South Caucasus