The European Union and Azerbaijan are rebuilding relations after years of strain, with negotiations over a new bilateral agreement accelerating amid shifting energy flows, regional conflicts and competing strategic visions, according to a Carnegie Politika analysis titled “Brussels and Baku Are Talking Again: What Next?”.

In recent months, senior EU and Azerbaijani officials have restarted high-level engagement, including a March visit by European Council President António Costa to Baku, where both sides signed what the analysis described as a fifteen-point joint statement covering “energy, defence, digital cooperation and transport”.

A follow-up round of talks was held in Brussels in April with a large Azerbaijani delegation, and another meeting is scheduled for June in Baku as both sides seek to finalise a replacement for their existing framework, the Partnership and Cooperation Agreement signed in 1996.

The Carnegie analysis, by independent researcher Shujaat Ahmadzada, said the new agreement under negotiation “would replace the Partnership and Cooperation Agreement signed in 1996 and ratified in 1999,” adding that discussions resumed after years of stagnation. According to the report, “both sides maintain that 90% of the text is agreed,” with remaining disagreements centred largely on trade provisions.

Alongside the core treaty, the EU and Azerbaijan are also discussing broader partnership priorities and investment packages aimed at strengthening connectivity, energy cooperation and regional stability in the South Caucasus.

Energy has become a central driver of renewed engagement. EU imports of Russian pipeline gas have fallen sharply in recent years, while Azerbaijani exports to Europe have risen, with Baku now supplying multiple EU member states. As Costa said during his visit, “Our energy partnership is more important than ever.”

Azerbaijan exported more than 25bn cubic metres (bcm) of gas in 2025, with over half going to Europe, according to the analysis, making it an increasingly important supplier for countries including Bulgaria, Greece and Italy. New supply contracts with Germany and Austria have also recently taken effect.

Beyond energy, the report highlights the growing strategic importance of transport routes across the South Caucasus. The EU is seeking to reduce dependence on Russian and Iranian corridors by supporting the development of the Trans-Caspian route linking Central Asia to Europe via Azerbaijan, Georgia and Türkiye.

The analysis said Azerbaijan has expressed interest in joining the Common Transit Convention, which would integrate it into a broader EU-aligned customs system spanning Europe and parts of its neighbourhood.

Regional geopolitics are also reshaping the agenda. A tentative normalisation between Armenia and Azerbaijan, including a U.S.-backed connectivity arrangement known as TRIPP, has raised hopes of new transit links through the region. However, the Carnegie paper warned that implementation risks remain, including financing gaps and political uncertainty in Armenia ahead of upcoming elections.

Despite renewed momentum, the analysis stresses that fundamental differences persist in how both sides view their relationship. The EU typically embeds “normative conditionality” in its external agreements, while Azerbaijan increasingly prefers a more transactional approach and sees itself as a “Eurasian actor” rather than part of a European integration framework.

The report said this divergence risks complicating negotiations, warning that a deal that is too demanding for Baku or too diluted for Brussels could prove difficult to finalise. It also pointed to internal EU tensions over foreign policy coherence, noting that differing national positions and public statements by EU leaders sometimes create uncertainty for partners in the region.

Still, the analysis concludes that both sides appear motivated to proceed, given the strategic importance of energy security, regional connectivity and stabilisation in the South Caucasus.