Azerbaijan, Russia lifting economic partnership to new heights
Over two decades of successful synergy

ANALYTICS  10 April 2024 - 15:26

For more than two decades, productive economic cooperation with the Russian Federation has been one of the priorities of Azerbaijan's foreign policy. Over the past few years, the two neighbouring countries have managed to multiply mutual trade, are gradually developing investment and implementing joint transport and logistics projects. This week's visit to Moscow by Azerbaijan's Minister of Economy, Mikail Jabbarov, to discuss prospects for bilateral trade and economic cooperation and some aspects of the financial agenda, was further confirmation of these continuing trends.

Moscow and Baku have managed to weather the economic crises and geopolitical tensions of recent years relatively safely, having built a solid economic foundation based on mutually beneficial trade and a dynamically developing investment partnership. Despite these global force majeure events, the two neighbours have continued to increase two-way trade and are making joint efforts in transport and logistics cooperation and economic diversification. The success of these relations is underpinned by a strong legal and contractual framework of over 200 intergovernmental, interstate, interdepartmental and interregional agreements.

"Relations between the two countries are based on the principles of equality and good neighbourliness, age-old traditions of friendship and mutual respect, and this interaction contributes to strengthening stability and security in the South Caucasus and the Caspian region. Against this background, trade and economic cooperation between the countries is successfully developing, with bilateral trade turnover increasing by 17.5% in 2023," the Russian Embassy said in a statement issued in early April on the occasion of the 32nd anniversary of the establishment of diplomatic relations between Azerbaijan and Russia.

Indeed, our country is Russia's most important trading partner in the South Caucasus, accounting for about forty per cent of Russia's total trade turnover with the countries of the region. Interregional ties are a priority component of business relations: more than 70 Russian entities cooperate with Azerbaijan, with Moscow, St Petersburg, Astrakhan, Dagestan and Tatarstan being particularly active in this area.

At the same time, Russia has for many years been the leading importer of Azerbaijani agricultural and other non-oil products. For example, Azerbaijan is the leading exporter of tomatoes, apples, cherries and cherries, and seasonal young potatoes to the Russian market, and has recently significantly increased exports of peaches, hazelnuts, strawberries and strawberries, and since the end of last year has been the leading supplier of eggs and chicken meat.

In turn, Russian companies are the leading suppliers to the domestic market of cereals (food wheat), as well as flour, confectionery, sausages, dairy products, vegetables and butter, and fresh and canned fish. In addition, against the background of the weakening of the Russian ruble, Russian food supplies grew dynamically in 2023, and this trend is expected to continue in the current year. In general, the trade turnover between the countries reached $4.1 billion at the end of 2023, with the physical volume increasing by almost a third. At the same time, more than half of Russian-Azerbaijani trade (54.2%) is conducted in national currencies - rubles and manats.

"Both countries implement industrial cooperation projects. This is a relatively new area of our cooperation, Russian companies are setting up new production facilities and service centres in Azerbaijan, and all this is also a contribution to more comprehensive cooperation in the industrial sphere," Azerbaijani President Ilham Aliyev said recently.

It is worth recalling that the Russian Federation is one of the five largest investors in the Azerbaijani economy, and last year alone it invested about $274 million. Currently, various investment projects with the participation of Russian capital are being implemented in Azerbaijan with a total volume of almost $624 million, covering various sectors - from IT and aircraft construction to medical and light industry. In general, more than 760 companies with Russian capital are operating in Azerbaijan, and Russian companies are participating as contractors in projects implemented in Azerbaijan. In the first twenty years of the new century, Russian investment in Azerbaijan's economy reached $4.2 billion, of which over $2.8 billion was invested in the oil sector of the economy.

In turn, entrepreneurs from Azerbaijan have invested more than $1.5 billion in the Russian economy. Azerbaijani investments include sanatoriums and resorts in the North Caucasus, greenhouse farms and other agricultural enterprises in Dagestan. Azerbaijani food companies are investing in food enterprises in the Krasnodar Territory, a domestic producer of construction materials has set up in the Rostov region, joint projects are being implemented in the field of wine production using Azerbaijani raw materials, etc. In general, the business circles of the two countries see broad prospects for further expansion of cooperation in the investment sphere.

In particular, during the visits of the Russian Prime Minister Mikhail Mishustin and the Head of the Ministry of Economy Maxim Reshetnikov to Azerbaijan in March this year, the two countries agreed to expand the investment component in industry, agriculture, the financial sector, tourism and several other areas. It should be recalled that during the visits in March, the two countries signed an agreement on the order of operation and maintenance of the road bridge over the Samur River in the area of the Yarag-Kazmalyar-Samur checkpoints and approaches to them, as well as the two countries approved "road maps" on the development of tourism and cooperation in the field of culture for 2024-2026.

Baku and Moscow are especially keen on developing tourism cooperation, which comes as no surprise given that Russian visitors made up about 30% of all visitors to Azerbaijan last year. According to the Russian side, the roadmap aims at the joint development of tourism programmes that will help increase the mutual tourist flow by 40% and reach 1 million trips per year by 2027.

The expansion of trade and economic cooperation, especially its investment component, was the leitmotif of talks during the visit of Azerbaijan's Minister of Economy Mikail Jabbarov to Moscow the previous day, where he met with Deputy Prime Minister and Minister of Industry and Trade of the Russian Federation Denis Manturov and Chairman of the Central Bank of the Russian Federation Elvira Nabiullina.

According to the press service of the Central Bank of the Russian Federation and the Russian Cabinet of Ministers, the meetings discussed the economic situation in both countries, reviewed bilateral trade and economic relations, and touched upon some aspects of the Russian-Azerbaijani financial agenda. In particular, they discussed the possibilities of expanding interaction between the two countries' banking systems and linking Azerbaijani banks to the Bank of Russia's financial messaging system.

"Russian-Azerbaijani trade is showing good dynamics, our industrial interaction is developing positively overall with large cooperation projects being implemented in key economic sectors. Major joint projects are underway in the automotive industry, railways, aircraft construction and pharmacy, and online trade has great potential for development," said Deputy Prime Minister Denis Manturov at the meeting. He also invited Mikayil Jabbarov to visit the international industrial exhibition Innoprom, which will be held in Ekaterinburg on July 8-11, 2024.

Caliber.Az