BILATERAL TRADE AND ENERGY RELATIONS BETWEEN THE EU AND THE COUNTRIES OF THE CASPIAN SEA REGION

Abstract

The European Union and the Caspian countries are important trade partners, although there is still potential for improvement of the cooperation considering the energy security and other issues. The paper analyses trends and structure of trade relations of the EU and Caspian countries. The trade between the regions is about 370 billion dollars. Exports of fuels to the EU are the main component of the trade between the regions. Therefore energy transportation projects are an important issue in the agenda for the international relations. A gravity model for the exports of fuels is presented. The model considers demand in the EU importing country, total fuel exports of an exporting Caspian country as an indicator of exporting supply capacities and in some cases energy self-sufficiency of an importing country. Distance turned out to make an insignificant effect on the energy trade. The analysis helps to determine undertraded and successfully exploited bilateral energy trade links between the individual EU and Caspian countries. The model showed that Greece is among the most relatively intensive importers of fuels from the Caspian region. JEL: F10, F13, F15, Q4.