Azerbaijan-Italy Relations: Strategic Partnership Continues Amidst Shifting Industrial Investments

Baku, Azerbaijan – Recent developments highlight the evolving dynamics of the strategic partnership between Azerbaijan and Italy. While bilateral relations remain strong, marked by high-level visits and cooperation across various sectors, Azerbaijan has formally withdrawn from its bid to acquire the prominent Ilva metallurgical plant in Taranto, Italy.

The Acciaierie d’Italia (ADI), formerly known as Ilva, has a complex history. From 2017 to 2020, the global steel giant ArcelorMittal was its main shareholder. However, due to disagreements with the Italian government, the enterprises in Genoa and Taranto were nationalized and subsequently put up for an investment tender.

Earlier this year, a consortium formed by Azerbaijan's Baku Steel Company and the Azerbaijan Investment Company entered negotiations to purchase the metallurgical complex. The Azerbaijani consortium quickly emerged as a frontrunner in the tender, with initial bids for the plant starting at one billion euros, later doubling. Their main competitor was the Indian company Jindal Steel International, which had previously acquired the Czech steel producer Vitkovice. Despite Jindal's February offer to pay over three billion euros and commit to ecological transformation, the decision on March 20 was made in favor of the Azerbaijani consortium.

However, this favorable position did not lead to an acquisition. On July 22, Azerbaijani President Ilham Aliyev, during a meeting with Italian Minister for Enterprises and Made in Italy Adolfo Urso in Baku, unequivocally stated that Azerbaijan's investment in the former Ilva steel plant is "not being considered and will not be considered in the future," according to a source present at the meeting, as reported by lettera43.it.

The decision, conveyed in a friendly and transparent tone, underscored the historical and strategic friendship between Azerbaijan and Italy, the close mutual understanding between their governments, and President Aliyev's high regard for Prime Minister Giorgia Meloni's leadership. Aliyev clarified that the Taranto metallurgical plant is not part of Baku Steel Company's current or future industrial plans.

Minister Urso reportedly received this statement with full understanding, acknowledging the significant industrial, environmental, and local complexities surrounding the Taranto plant. He recognized that even with Azerbaijani interest, legal processes and administrative barriers in the Apulia region, known for its sensitivity to environmental and health issues, would likely impede a foreign investor's ability to operate with confidence. The region's strict policy of immediate decarbonization further complicates industrial projects that do not align with these goals.

With the Azerbaijani consortium's withdrawal, the Indian company Jindal Steel now presents the sole comprehensive industrial proposal for the former Ilva territory. Jindal has submitted an official letter to the Italian government outlining a technical plan aligned with ecological transition goals and production revival.

Their proposal includes the phased decommissioning of remaining blast furnaces, the installation of electric arc furnaces capable of producing up to 6 million tons of low-emission steel annually by 2030, and the construction of a 2.5 million tons per year direct reduced iron (DRI) plant operating on natural gas. This project would not require new regasification facilities, as existing infrastructure can supply sufficient gas. Jindal has also expressed readiness to negotiate legal and operational terms with the Italian government and publicly thanked the Municipality of Taranto and Mayor Piero Bitetti for their constructive partnership.

Despite the shift in the Ilva acquisition, the broader strategic relationship between Azerbaijan and Italy remains robust. Just weeks prior to the Taranto announcement, on June 24, President Ilham Aliyev received Minister Adolfo Urso in Mingachevir, Azerbaijan. During this meeting, President Aliyev expressed gratitude for Urso's participation in the inauguration of the "8 November" Power Plant, highlighting Italy's involvement as a testament to the strong bilateral cooperation.

President Aliyev also praised Minister Urso for being among the first high-ranking European officials to visit Azerbaijan’s liberated territories (Ganja and Aghdam) in 2020, acknowledging the large-scale reconstruction efforts, including the inauguration of three international airports in these areas.

Both sides emphasized the strategic nature of their relations, praising the level of political ties and underlining the importance of high-level reciprocal visits. Discussions covered enhancing cooperation in diverse fields such as energy (including renewable energy), metallurgy, agriculture, pharmaceuticals, science, education, and culture. The active participation of Italian companies in the reconstruction and restoration works in Azerbaijan’s liberated territories was also highlighted, along with prospects for cooperation between "AzerEnergy" and "Ansaldo Energia."

The decision regarding the Ilva plant underscores the complexities of international industrial investments, particularly when intertwined with environmental and local regulatory challenges. However, it does not diminish the strong, multi-faceted strategic partnership between Azerbaijan and Italy, which continues to deepen across various sectors, from energy to reconstruction and cultural exchange. The two nations appear committed to fostering their relationship, even as specific industrial ventures may take different paths.