The European Bank for Reconstruction and Development (EBRD) is quite optimistic about future cooperation with Azerbaijan, be it in green finance, economic inclusion, sustainable infrastructure, or digitalization, Managing Director, Eastern Europe and the Caucasus (EEC) at the EBRD, Matteo Patrone told Trend in an exclusive interview.

“As you might already know, our current strategy focuses on helping diversify Azerbaijan’s economy; further expanding access to finance for local businesses, and supporting the country’s green economy. Our strategy is set for review in 2024, and throughout our continuous engagement with authorities, clients and partners, we acquire important elements that will be helpful for the preparation of the new strategy,” he said.

According to the managing director, the cooperation with Azerbaijan in 2022 provides a very strong steppingstone for the future partnership. It was a year of green projects in sustainable infrastructure, renewable energy, but also in the corporate sector.

“We signed two green city agreements in Ganja, to support the city in solid waste management, but also to make it more energy efficient through our street lighting project. We thank the EU for the strong partnership in this and other projects. We co-financed the first large scale solar power plant in Garadagh to support Azerbaijan’s decarbonization agenda. In the corporate sector, we financed a construction of an energy efficient cold storage in Alat Bay and the green expansion of an agricultural producer in Salyan city. We carried this momentum through to 2023, and on Thursday, we financed our first circular economy project in Azerbaijan – the expansion of a battery recycling company in Sumgayit,” he said.

Recently, the EBRD has also launched IT Hubs in Azrbaijan, where the Bank is supporting the training of students in the regions for with future employment opportunities with international ICT companies, boosting the regional development and supporting the youth there. For Azerbaijan, this is the first project to be funded through a bilateral donor agreement between the EBRD and the Government.

Further speaking, the managing director noted the successful partnership between the EBRD, Aztelecom and Azerbaijani government on financing the development of digital infrastructure in the regions of Azerbaijan.

According to Patrone, this was done together with the partners from the European Union who supported the loan of up to US$50 million by a guarantee through the European Fund for Sustainable Development (EFSD).

“At the EBRD, we believe that investing in digitalization means investing in the future. Reliable access to broadband services will bring tangible benefits to more than 280,000 households in the regions of Azerbaijan,” he said, noting that, “by bridging the digital divide between the capital and rural areas, the project will also benefit local businesses by making them, and their existing or potential workforce, more competitive, boosting Azerbaijan’s broader economy in a more inclusive way”.

“I am also happy that the EU is set to provide a grant of 1 million euros to the Ministry of Digital Development and Transport to improve competition and regulation in Azerbaijan’s telecommunications sectors, as well as to strengthen the borrowers’ corporate governance,” he said.

The managing director also highlighted the support the Bank provides for Azerbaijan’s decarbonization agenda at both investment and policy levels. In this regard, last year has been a historic one for the EBRD-Azerbaijan cooperation.

“Notably, we invested in the construction of the first privately owned, utility-scale solar power plant in Garadagh. We are also interested in financing the construction of a wind power plant in the Absheron peninsula. All this, of course builds on a multiyear technical assistance work provided to the Ministry of Energy. Among other things, we have supported the introduction of a the legislative framework for renewable energy, the setting up of the energy regulator, and helped the ministry conduct a grid strengthening study, which we hope will be conducive to invest in grid improvements across Azerbaijan,” he said.

More recently, the EBRD signed a MoU with the Ministry of Energy. Once the current engagements will be brought to fruition, the Bank will continue supporting the development of low carbon and climate resilient power sector in Azerbaijan, in line with the country’s commitments under the Paris Agreement.

“This may include further development of renewable energy, development of sectoral low carbon pathway for the power sector, grid enhancement, improved energy efficiency, methane emissions reduction and gradual introduction of innovative technologies, including hydrogen,” Patrone explained.

The EBRD also stands ready to support Azerbaijan in the expansion, upgrade and digitalization of Azerbaijan’s energy grid to assist the country in transporting green energy to Europe.

“We very much support bringing the Caucasus closer to the European Union, be it in renewable energy, transport infrastructure, or policy reform. As I mentioned earlier, Azerbaijan has a great potential when it comes to the development of renewables. As for different routes for transportation, we will have to look at them on project-by-project basis. This can only be done in case there is a relevant proposal to our Bank. Recently we saw that President Ilham Aliyev, together with leaders of Romania, Georgia, Hungary, and the President of the European Commission von der Leyen signed a memorandum of understanding for the development of the Black Sea Energy submarine cable,” he said.

The EBRD appreciates that stronger electricity interconnection between the region and the EU will help reinforce European energy security, while transforming the Caucasus into a well-integrated electricity hub within in the EU internal market, he pointed out.

“Such projects hold many promises, and in case of the Black Sea Energy submarine cable, we are very much looking forward to the results of the currently ongoing feasibility study. In case of Azerbaijan-Türkiye-Europe cable, we still need to hear more details from the parties involved,” the managing director explained.

At the same time, the EBRD welcomes Azerbaijan’s recent gas agreement with the EU, which aims to increase gas exports to Europe.

“In the past, the EBRD supported the construction of the TANAP and TAP pipelines, so we have a great record of accomplishment with your government and the Southern Gas Corridor. Currently the market study for this project is in progress, and shall the decision to expand be made, we will be glad to engage with Azerbaijan and international partners to consider financing in line with our requirements for gas projects. For the Bank, the project would have to be in line with the goals of the Paris Agreement and the Bank’s Fossil Fuel approach,” he said.

Meanwhile, the EBRD has started formal discussions with the Azerbaijan Caspian Shipping Company (ASCO) on expanding the marine fleet in the Caspian.

“We are conducting the due diligence, and negotiations are progressing. While it is still a bit premature to state the exact figure for this project, we aim to sign the relevant agreements before summer. ASCO, as Aztelecom, is a state owned company. EBRD is very well placed to support commercialization efforts by state owned companies, and we look forward to expanding this agenda in Azerbaijan,” he noted.

At the same time, the EBRD is conducting an active and fruitful on-going dialogue with the Central Bank to further strengthen the resilience of Azerbaijan’s banking sector and looks forward to continuing the partnership.

“This week, we met with the Governor of the Central Bank and discussed current trends in the economy and the banking sector. Among other things, we also touched upon the financing of small and medium-sized enterprises (SME) in the sector and we plan to cooperate with the Central Bank in assessing several practical tools to improve access to finance in the country. We also discussed our cooperation on the Environmental, Social, and Governance (ESG) front and are ready to assist the Central Bank by providing advice and training,” he said.

Further speaking, the managing director noted that the EBRD remains committed to financing the Azerbaijan banks, particularly mid-sized private ones in need of support.

“As we speak, we are working on several facilities in line with our main strategic topics such as promotion of international trade, support to MSMEs, and green and inclusive financing. Our engagement does not stop at the financing alone and includes other important areas such as strengthening internal capacity of our partners,” he noted.

“So we are quite optimistic about our future cooperation with Azerbaijan, be it in green finance, economic inclusion, sustainable infrastructure, or digitalization. We will take all the above milestones into consideration while preparing our next country strategy for 2024-2029,” Patrone concluded.