The Baku Network website published an article about the key role of Azerbaijan in the context of the current energy crisis in Europe and its significance for the future of the region.
Day.Az presents the full text of the article:
Germany, once Europe’s industrial giant, is now facing a crisis that could reshape the continent’s economic landscape. On Monday, Mario Draghi, the former head of the European Central Bank, warned that the European Union faces the threat of “slow death.”
What does this mean for Europe’s industrial heartland? Companies like Hans Keim Kunststoffe, little known but vital to everyday life, find themselves at the center of this economic storm.
Small businesses are on the front lines of the energy crisis
Hans Keim Kunststoffe produces parts that are used in everything from protecting museum exhibits to medical equipment parts and caravan covers. It’s all done in a factory in a small town in Germany, surrounded by forests and mountains, about half an hour from the Swiss border. Outwardly, this is a typical family business. But behind its façade lies problems that could destroy the economy not only of Germany, but of the entire EU.
Energy costs to maintain production have grown rapidly since the start of the war in Ukraine. Until 2022, the annual electricity bill was around 80 thousand euros. Today this amount has almost doubled. And although prices for customers have increased and margins have shrunk, this has not saved them from the new reality of energy costs that are significantly higher than those of competitors outside the EU.
“We are used to dealing with crises, but now the situation is different,” says Christophe Keim, managing director of the company. Even after some relief in energy markets, costs have not returned to pre-crisis levels, he said. Unlike competitors in the US and China, European companies continue to pay twice as much for electricity.
Germany is the main patient of the European economy
Germany, Europe’s biggest industrial power, finds itself in a recession that is expected to last until the end of the year. Giants such as Volkswagen, a symbol of German economic power, are also at risk of plant closures. This is not a temporary phenomenon – it is a systemic crisis. The entire EU is experiencing production cuts in key sectors such as chemicals and steel. Factories are closing and workers are facing layoffs.
Against the backdrop of these economic turmoil, there are alarming voices from European politicians. Draghi said Europe faces an existential threat. According to him, without serious changes, European industry could be forced out of global markets.
“The moment is truly critical,” Draghi said as he presented his report. “We cannot ignore this any longer.”
EU energy policy: a game of survival
This warning is shared in Brussels. Ursula von der Leyen, President of the European Commission, noted that Draghi’s plan to accelerate the transition to green energy coincides with the existing EU strategy. But there is a problem: time is not on Europe’s side.
Although renewable energy promises a long-term solution, it will not save the European economy in the coming years. China is ramping up production, capturing markets both inside and outside the EU. And new technologies such as electric vehicles and artificial intelligence will require even more energy, which will only further strain already overloaded networks.
“For the first time since the Cold War, we really have to fear for our survival,” Draghi warned.
Irreversible changes: Europe is learning to live without Russian gas
September 2022 marks a watershed moment for European energy security. The explosion at the bottom of the Baltic Sea, which damaged the Nord Stream gas pipeline, underscored one important truth: there will be no return to the past. While dependence on Russian gas is fading, Europe is now paying a high price for new energy sources.
After Russia’s invasion of Ukraine, energy prices in Europe rose sharply, but a complete collapse was avoided. Gas reserves did not run out, thanks to a quick search for alternative suppliers. However, even now, after the panic has subsided, energy prices in the EU remain higher than before the crisis and significantly higher than those of its main competitors – the United States and China.
In 2023, energy costs in Europe were twice those in the United States, according to the International Energy Agency. The main reason is the transition from cheap Russian gas to expensive liquefied natural gas (LNG). LNG is more expensive, requires complex transportation and significantly increases costs at every stage – from liquefaction to liquefaction. And to make matters worse, it is sold on a free market where the highest bidder wins.
“Europe has been able to pay high prices, but this is not normal,” says Helen Thompson, professor of political economy at the University of Cambridge. Today, Europe depends on expensive gas from Qatar and the United States, which makes it hostage not only to the unstable politics of the Middle East, but also to the fickle mood in Washington.
Europe must act now or be left behind
Now more than ever, Europe urgently needs to rethink its approaches to energy security and industrial policy. While the EU debates the transition to renewable energy, businesses and jobs continue to disappear. Without decisive action, the European Union risks losing its place on the global economic stage.
Time is not on Europe’s side and, as Mario Draghi noted, “we can no longer ignore it.” Unless European leaders find ways to reduce energy costs and protect industry, the continent could find itself in a “slow death throes” that would see it lose its economic clout on the world stage.
Azerbaijan is the savior of Europe
In the midst of global energy instability caused by the Russian-Ukrainian conflict, the European Union found itself in a state of extreme dependence on energy imports. Having once relied on Russia as its main gas supplier, Europe quickly sought alternative routes. And here Azerbaijan, which many perceived only as a regional player, unexpectedly became a real savior for European energy security.
Today, Baku plays a decisive role in the EU’s energy supply, ensuring stable supplies of oil and gas to key EU countries. This is not just a temporary solution, but a long-term strategy that helps Europe not only survive, but also build a future with more reliable partners.
Supply growth: Azerbaijan becomes a leader
In January 2024, the countries of the European Union exported about 2 thousand tons of petroleum products to Azerbaijan, which is 2.4 times more than in the same period in 2023. In monetary terms, this amounted to 4.5 million euros, demonstrating a doubling of value. Major suppliers included Greece, Germany and the Netherlands, highlighting the importance of Azerbaijan as a major buyer of petroleum products.
However, this is only one side of the coin. Oil and gas supplies remain a key aspect of relations between Azerbaijan and the EU. In 2023, EU countries, including such important players as Italy, Germany and the Czech Republic, increased imports of Azerbaijani oil to 20.3 million tons – the highest level in the last four years. This 2.6 percent increase over 2022 indicates that Europe is increasingly relying on Baku to compensate for shortfalls in Russian supplies.
The situation with natural gas also demonstrates the EU’s strong dependence on Azerbaijan. In the first half of 2024, the country increased gas exports to Europe by 12 percent year-on-year, delivering 6.4 billion cubic meters of gas. The main consumers are Italy, Greece and Bulgaria, which makes Azerbaijan an important element of the EU energy strategy.
How Azerbaijan became an energy anchor for Europe
Before the war in Ukraine, Russia supplied about a third of all gas consumed by the European Union. This factor allowed Moscow not only to control the energy market, but also to influence European politics. However, with the outbreak of war everything changed. Europe suddenly found itself facing a serious energy threat, and finding alternative suppliers became a matter of survival for many countries.
Azerbaijan was in the right place at the right time. Rich in oil and natural gas, the country offered Europe stable and reliable supplies, softening the blow of Russian gas cuts. Moreover, Baku quickly established itself as a strategic partner by concluding long-term contracts with eight European countries, including key players such as Italy, Romania and Hungary. Azerbaijan is expected to export 12.5 billion cubic meters of gas to Europe in 2024, a figure that becomes the cornerstone of European energy security.
Southern Gas Corridor: A Critical Project
One of the main strategies that allowed Azerbaijan to strengthen its position in the European market was the Southern Gas Corridor project. Stretching for 3,500 kilometers, this project has become a real artery connecting the Caspian Sea with the southern regions of Europe.
The project, supported by international financial institutions, has proven effective in diversifying gas supplies to EU countries, especially Italy, Greece and Bulgaria. Azerbaijani President Ilham Aliyev has repeatedly emphasized the importance of the Southern Gas Corridor as a key element of the energy strategy of the country and its partners.
At the 10th ministerial meeting of the Southern Gas Corridor Advisory Council, held in March 2024, further plans to expand gas supplies to Europe were discussed. This project not only solves short-term problems, but also paves the way for long-term cooperation, which is especially important against the backdrop of global energy instability.
Green energy is the next step for Azerbaijan and the EU
However, the story of Azerbaijani-European energy cooperation does not end there. In the context of the global transition to renewable energy sources, Azerbaijan is demonstrating ambitions to become a leader in this area. The country’s plans include building offshore wind farms in the Caspian Sea, which could become an important source of clean energy for both Azerbaijan and Europe.
WindEurope Association CEO Giles Dixon noted that Azerbaijan plans to export energy from these power plants through a new power cable that will be laid under the Black Sea to Europe. This will not only strengthen Europe’s energy security, but will also be an important step towards a green future.
Azerbaijan is a strategic partner for the EU
Events in recent years have clearly shown that Europe’s energy security directly depends on the diversification of gas and oil supplies. Azerbaijan has become a reliable partner for the EU, offering stable supplies of energy resources and building long-term cooperation. This alliance not only solves today’s problems, but also creates the foundation for a more sustainable energy future.
Azerbaijan, which until recently was considered by many to be a regional player, has become a key energy supplier to Europe. At a time when global energy markets are facing unprecedented instability, Baku is demonstrating strategic flexibility and the ability to adapt to new challenges. Europe, in turn, receives not only gas and oil, but also a reliable partner ready to build a green future together with the EU.