STEM interview with Mr. Alkis Drakinos, Regional Director for the South Caucasus at the European Bank for Reconstruction and Development (EBRD)

- Mr. Drakinos, what are the EBRD’s priorities in the Caucasus? What key areas of EBRD cooperation with the South Caucasus countries do you consider the most promising in the medium term?

- My first working encounter with Caucasus as a young Associate Banker for the EBRD dates back over 25 years ago. The Caucasus has long been a region of strategic importance for the EBRD and our commitment here has remained very strong over the years.

Stemming from its Establishing Agreement, the overarching EBRD priority across all regions and countries of operations, Caucasus too, is to foster private sector growth. We see a strong private sector as the engine of long-term prosperity and our goal is to help create the right environment for businesses to grow, compete, and innovate.

Further, capitalising on Caucasus unique geographic location we also focus on boosting regional connectivity. The Middle Corridor, or Trans-Caspian International Transport Route, is an increasingly important trade and transit artery linking Asia and Europe. Azerbaijan, thanks to its strategic location, sits at the heart of this route. Further to moving goods, this corridor might also hold promise for energy flows, including renewables.

At this stage, we’re supporting infrastructure improvements, but also investing in the digital systems and policy coordination needed to make this corridor efficient, resilient, and future proof.

At the country level, the EBRD aligns its priorities with national strategies. In Azerbaijan, for example, we are supporting both economic diversification and the green energy transition. With the country’s excellent renewable potential and its strategic location, we see great prospects in scaling up clean energy while enhancing Azerbaijan’s role as a regional logistics hub.

- How do you assess the EBRD’s role in promoting sustainable development and the "green transition" in the region?

- We are proud to be the leading institutional investor in the Caucasus and a recognised leader in climate finance. The EBRD has made green investments a top institutional priority and our role in the region’s energy transition reflects that commitment.

In Azerbaijan, in particular, we are the only international financial institution to have supported all utility-scale renewable energy projects to date. We’ve already financed over 1.2 gigawatts of renewable capacity, including landmark projects like the Garadagh Solar Plant, the Absheron-Khizi Wind Power Plant and most recently, the Bilasuvar and Neftchala Solar projects. These two solar projects are the largest such investments ever undertaken in the Caucasus and will provide clean electricity to over 300,000 households while reducing CO₂ emissions by more than 600,000 tonnes annually.

But our work doesn’t stop at financing. We’ve supported the introduction of competitive renewable energy auctions, the first of which concluded with success at COP29 in Baku. This represents a major step forward in building a transparent, competitive market for clean energy investments.

Our policy dialogue has also included developing a framework for small-scale renewable projects, assessing grid integration capacity and helping establish the Azerbaijan Energy Regulator Authority (AERA). We're also proud to have co-authored the National Hydrogen Strategic Outlook, another milestone presented at COP29.

- The EBRD has been operating in Azerbaijan since the 1990s. What successes and achievements would you highlight during this time? In which sectors do you see the greatest potential for expanding cooperation with Azerbaijan?

- Over more than three decades, we’ve built a deep and trusted partnership with Azerbaijan. We’ve invested €4 billion in nearly 200 projects, touching almost every part of the economy.

One major milestone was our €500 million investment in TANAP back in 2017 — a critical piece of the Southern Gas Corridor. As a Greek national, I can attest to the importance of this project which helped connect Azerbaijan to European energy markets, including my own country. It was a defining moment for energy security in the wider region.

The overwhelming share of our investment portfolio in Azerbaijan is with Sustainable Infrastructure sector with renewables attracting our biggest ticket investments in the past three years supporting Azerbaijan’s plans to diversify its energy resources mix.

In addition to renewables, more recently, we’ve seen significant breakthroughs in our work with local financial institutions. Just this year, we signed several agreements including the inaugural loan to International Bank of Azerbaijan for trade finance and the relaunch of our partnership with Unibank, a relationship that began over two decades ago, with a new SME on-lending framework. These complement our ongoing partnerships with AccesBank Respublika and Bank Respublika, where we’ve introduced the Risk Sharing Framework and green lending facilities.

Looking ahead, we shall be keeping our demand-driven working approach and include more sectors. We’re open and ready to finance a wide variety of projects, from agribusiness and retail to manufacturing and transport. Azerbaijani businesses have the vision and we have the tools to support it.

- Support for the private sector is one of the key objectives of the EBRD. How actively does the bank engage with Azerbaijani SMEs (small and medium-sized enterprises)? What instruments are used?

- SMEs are the backbone of any economy, and we’re deeply committed to supporting them in Azerbaijan. One of our key tools is working through local partner banks. By providing credit lines, trade finance and green lending facilities, we help ensure that smaller businesses have access to the funding they need to grow.

We’ve also recently launched our Risk Sharing Framework with AccessBank, which allows us to share risk on individual loans. This gives our partner banks more confidence to lend to SMEs that might otherwise find it difficult to secure financing.

In addition, we offer direct financing solutions to larger SMEs and mid-sized corporates, especially those investing in innovation, energy efficiency, or export development.

And it’s not just about funding. Through our Advice for Small Businesses programme, we connect local companies with expert consultants to help them improve competitiveness, digitise operations, or explore new markets. We want to see Azerbaijani SMEs not just operate, but scale, thrive and become tomorrow’s champions.

- How do you assess the business climate in Azerbaijan and its attractiveness for foreign investors?

- We’ve seen very encouraging signs in recent years with business climate improving. Azerbaijan’s economic performance has been solid and the country has shown real ambition in leveraging its geostrategic position including in climate finance, trade and international cooperation.

The organisation of COP29 in Baku last November was an excellent example. It demonstrated Azerbaijan’s ability to convene major global players and its willingness to lead on climate issues, not just regionally, but globally. This wasn’t Azerbaijan’s first time hosting a major international event and it showed.

We also see positive developments around the Middle Corridor, increasing conversations about the Green Corridor and broader initiatives that strengthen connectivity and energy security. Azerbaijan has positioned itself as a reliable partner and a strong performer in the region.

At the same time, continued reforms are essential. We look forward to further progress on state-owned enterprise governance, an area where greater transparency and improved oversight can unlock even more investment opportunities. We are already supporting these efforts and stand ready to do even more.

- To what extent does geopolitical instability in the region influence the EBRD’s investment decisions?

- The EBRD was built to operate in challenging environments. Whether it’s the Covid pandemic, Russia’s war on Ukraine, or other sources of regional volatility, we’ve always remained steadfast in our support.

In Azerbaijan, we’ve been a consistent partner, during times of high economic growth and during more turbulent periods. What matters to us is the long-term development path. Our investments are designed to build resilience, strengthen institutions and support sustainable growth over time.

We understand risk, but we also understand potential. And in Azerbaijan, the potential is enormous.

- How are the EBRD’s relations with other international financial institutions and donors in the South Caucasus region built?

- Cooperation with fellow multilateral development banks is essential. And it is going well for us.

At the global level, the EBRD has formalised its collaboration through mutual reliance agreements, including one signed with the European Investment Bank (EIB), and more recently, with the International Finance Corporation (IFC) in Washington during the World Bank and IMF Spring Meetings. These agreements allow us to co-finance projects more efficiently, pool expertise and align on key development goals.

Locally, our resident offices in Baku maintain excellent relationships with the IFI and donor community. We co-finance big projects, coordinate on project pipelines and consult on the reform agenda. This ensures we complement each other’s efforts and maximise impact for Azerbaijan.

Development is a team effort and we’re proud to be a key partner in our peer IFIs group.