Energy relations between Italy and Azerbaijan: a deep analysis

Translated by Alessandra Fumagalli 

Since last December, the oil’s price has been constantly growing. Following the Iranian attack against the State Of Israel, the price of raw materials, particularly the energy one, may increase. It wouldn’t be the first time indeed that a conflict, involving export countries, caused an increase in the prices. As far back as two years ago, with the Russian invasion of Ukraine, gas, oil and electric energy’s prices reached a peak, obliging consumers to face extra costs.

Why are Italy’s energy prices so influenced by such events? Italy’s energy mix is the answer. Analyzing figures related to Italy’s energy production, there is a strong dependence on the import of energy raw materials from other countries. According to IEA, an international agency that periodically runs an analysis about the national energy status, in 2022 Italy, with a 83,7% total supplier of imported materials, was ranked 3rd in Europe. Italian energy mostly came from non-renewable sources, like oil (35%) and natural gas (41%), whose deposits are indeed in Italy. IEA shows that, more than 90% of the total supplier total natural gas supplies made in Italy came from abroad. Italy is strongly dependent on other countries and as a consequence it is most exposed to instability in energy markets.

Imports from Azerbaijan

Italy and Azerbaijan have strong business relations in terms of energy products. Italy’s major crude oil supplier is indeed Azerbaijan. Italy imports each year more than 23% of its needs. Moreover, Baku is our second natural gas supplier after Algeria.

At a European level, much of gas’s imports comes thanks to the project Southern Gas Corridor (SGC), a complex pipeline infrastructure that joins natural gas fields with storage depots in Europe. In particular, natural gas comes in Italy through the Trans-Adriatic Pipeline (TAP), the much-disputed pipeline that runs through Greece and Albania and guarantees a stable energy supply for the entire country.

These infrastructures have shown their importance immediately after the Russian-Ukrainian conflict. Before the war, great part of energy raw materials were imported from Russia, whose GDP was strongly influenced by the sale of those resources in Europe. With the beginning of the conflict, Europe decided to reduce its dependence on Russian raw materials, limiting imports and interrupting several economic agreements. New business partners were needed, and they would have been able to meet European needs. Italy, strongly dependent on Russian oil and natural gas imports, chose to rise in other partnerships with other country, like Azerbaijan.

In a such situation, the importance of natural gas and oil from Baku has an higher value in terms of strategy, since it represents an affordable and diversified source of energy for Italy. At the same time, these agreements represent not only a safe and affordable source, but also a way to diversify raw materials and consequently decrease in the subjection of the domestic energy market to price fluctuations and volume changes, which cannot be controlled because they are due to external events, such as conflicts.

Energy cooperation between Italy and Azerbaijan is not only an advantage for Italy, but also a rise in the sources of income for Azerbaijan, because these agreements represent a source of economic growth and the development of new infrastructures. Moreover, Baku wants to diversify its domestic consumptions, aiming at an improvement in the already existing infrastructures and building new renewable energy installations.

Last month, at the ministries of the Southern Gas Corridor and Green Energy Advisory Councils, our Minister for Environment, Land and Sea Protection Pichetto Fratin said that «natural gas is and will be a transition source, that needs to be accelerated in the common goal of decarbonization and energy security».

In order to have a general European transition, an increase in the imports of natural gas is needed, in order to allow a progressive decrease in the dependence on other fossil fuels, like oil and coal. For this reason, the Minister announced «a process of increasing pipeline (TAP) capacity by 1.2 bcm from 2026 to 11.2 bcm/year, with the goal of a maximum capacity of 20 bcm/year».

Bilateral business agreements between Rome and Baku will increase. Although the dependence of Italy on the imports of energy products is still extremely high, in the previous years Italy has been working on an increase in the production of renewable energy. Since 2020, IEA (International Energy Agency) reported an increase of 18% in the production of renewable energy in our country. Even if the goal of coal neutrality is still far, the collective effort aiming at this objective is undeniable.

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