4 The EU’s Role and Perspective The European Union has a critical role to play in support­ing energy integration in the South Caucasus and aligning it with broader European decarbonisation, energy security, and diversification goals. Through its cooperation frame­works, such as the Eastern Partnership and the Energy Community, the EU provides institutional and financial support that is vital for regulatory harmonisation, capaci­ty-building, infrastructure modernisation, and market de­velopment in the region. Georgia, as a member of the Energy Community, has ben­efited from EU-backed technical assistance to align its en­ergy legislation with the EU acquis, advance market liber­alisation, and improve environmental standards. This co­operation strengthens Georgia’s attractiveness to green investors and supports the development of renewable en­ergy auctions, long-term planning tools, and better grid infrastructure. These actions align Georgia more closely with the EU’s internal energy market and long-term cli­mate objectives. Armenia, while not a full member of the Energy Communi­ty, is undertaking energy sector reforms under the EU–Ar­menia Comprehensive and Enhanced Partnership Agree­ment. Following recent budget cuts to United States Agen­cy for International Development(USAID’s) support programs in Armenia, the EU is well-positioned to step in and expand its assistance, particularly through support for electricity market liberalisation and energy security frame­works. This includes helping Armenia harmonise its poli­cies and institutions with EU energy directives to facilitate future cross-border electricity trade. EU’s involvement in Armenia’s energy sector has been growing over the past years, including co-financing the largest solar power plant to date – 55 MW Masrik-1, 40 loans and grants for energy ef­ficiency improvements, 41 as well as a range of activities in the area of energy security and decarbonisation. 42 Research cooperation in the energy field is likewise deepening, a re­cent example being the EU Horizon-funded STREACS pro­jects(Strengthening Research in Armenia for Energy Tran­sition toward Climate Solutions), which is being carried out in cooperation with Armenian and EU universities to devel­op early-career researchers‘ skills in Armenia. 43 The EU can also offer direct investment and co-financing opportunities through mechanisms like the European In­vestment Bank(EIB), European Bank for Reconstruction and Development(EBRD), and the Eastern Partnership In­vestment Platform. These financial instruments are essen­tial to de-risking capital-intensive infrastructure projects and enabling private sector involvement in energy invest­ments across the region. Further support through EU Hori­zon grants could enhance research capacity and encourage joint innovation projects between EU and South Caucasus stakeholders. Digitalisation and the integration of smart grid technologies offer additional areas for EU-South Caucasus cooperation. By supporting the modernisation of grid operations and the adoption of digital solutions, the EU can help improve the operational efficiency and reliability of regional power sys­tems. Joint investments in smart infrastructure, data plat­forms, and demand-side management can create a more re­silient and future-ready regional energy system. This likewise includes joint training and cooperation in the field of cyber­security, protecting the energy systems against external at­tacks and malwares, particularly in light of digitization. The EU‘s strategic interest in projects like the Georgia-Ro­mania Black Sea Submarine Electricity Cable underscores its broader vision for integrating neighboring regions into its internal market. This cable not only enhances energy security by diversifying sources and routes – it also sup­ports the European Green Deal and REPowerEU by facili­tating the import of renewable electricity from outside the EU. The cable would also create a channel for excess Ar­menian solar and nuclear electricity(depending on the size of the new nuclear power plant) or excess Georgian hydro­power and wind power to reach the EU market, provided sufficient harmonisation and market coupling is achieved. Beyond infrastructure, the EU‘s engagement fosters politi­cal stability and peace-building through economic coopera­tion. Energy integration can serve as a vehicle for building trust and interdependence in the South Caucasus, offering a rare platform for positive regional interaction. In this sense, the EU’s energy diplomacy is not only about achiev­40  Armenia’s largest photovoltaic plant opens with EU support – EU NEIGHBOURS east 41  Armenia: EIB provides€25 million to support energy efficiency renovations in Yerevan, A resilience and growth plan for Armenia 42  https://eu4armenia.eu/projects/?search=&filter=ongoing&country%5B%5D=1&country%5B%5D=5&topic%5B%5D=13 43  EU-Funded Energy Transition Research Capacity Project Publicly Launched at AUA The EU’s Role and Perspective 15