Azerbaijan-Pakistan: Trade under preferential conditions Following President Aliyev's visit

Based on years of political cooperation and defence ties, the strong relations between Baku and Islamabad have gained significant momentum in recent years, particularly in the realm of trade and economics. The two fraternal countries are integrating within a common trade framework, with cooperation emerging in transport and logistics. Business circles are also poised to expand investment cooperation. The commitment of both nations to developing economic ties was reaffirmed once again during the state visit of Azerbaijani President Ilham Aliyev to the Islamic Republic of Pakistan this week.

Over the past few years, there have been significant changes in Azerbaijani-Pakistani trade, which had long remained at a critically insignificant level. Since Azerbaijan regained its independence, Islamabad has consistently supported the country's just position on the liberation of Karabakh from Armenian occupation, and this cooperation has intensified significantly in the political and defence spheres. Following the victory in the 44-day war, Baku and Islamabad aimed at manifold expansion of trade and economic relations, achieving substantial growth within a relatively short period.

For instance, while Azerbaijani-Pakistani trade turnover was $13.283 million in 2020, three years later, it approached the landmark figure of $100 million. Government-to-government agreements reached in June last year played a significant role in this progress: notably, Azerbaijan's state oil company's structural unit, SOCAR Trading, established deliveries of liquefied natural gas (LNG) purchased from third parties and sold to Pakistan LNG Ltd (PLL) at preferential prices (with a 30% discount).

Successes in the energy sector are crucial and require continuation; however, non-oil trade volumes and the parameters of investment cooperation between Azerbaijan and Pakistan currently do not fully correspond to the high level of interstate relations and economic potential of both countries. To overcome inertia in commercial relations and expand Azerbaijani-Pakistani trade turnover, relevant agencies of both countries have been working since last year on agreements for Transit Trade Agreements (TTA) and Preferential Trade Agreements (PTA).

In July last year, a Memorandum of Understanding was signed on deepening trade relations between Azerbaijan and Pakistan: under this document, the parties began compiling a list of goods to be included in the preferential trade list. The preparation of the regulatory framework for these crucial agreements for the development of trade and transport links has recently been completed, and during the state visit of the President of Azerbaijan to Pakistan, corresponding agreements were concluded. Specifically, these include intergovernmental agreements on preferential trade and transit trade, signed on July 11 between Azerbaijan and Pakistan.

"We will increase definitely the level of mutual trade. One of them I'd like to especially mention. It's a document on preferential trade. We identified as the initial stage nine positions where we have preferential trade format but this is only the beginning," said President Ilham Aliyev. The head of state emphasized that several projects in energy, infrastructure, telecommunications, and many other areas, including defence industry, where the two countries have long been and very successfully cooperating, were considered during the negotiations.

In particular, along with the long-demanded agreements on Transit Trade (TTA) and Preferential Trade (PTA), several other important economic agreements were signed in Islamabad. These include interagency and intergovernmental memoranda on cooperation in privatization of state property, mineral resources and geology, information and communication technologies, tourism and air communications, as well as in the development of small and medium-sized businesses.

"We had very productive one-on-one meeting and then meetings with our teams. And I'm very satisfied that these discussions are based on mutual trust and mutual confidence. And this urge and this unwavering commitment in both countries have to move forward and touch higher levels of achievement in the field of trade, which is less than 100 million dollars and does not reflect the strength of our friendship and brotherhood, the field of joint investments, joint collaboration, in areas which are mutually beneficial" said Pakistani Prime Minister Muhammad Shehbaz Sharif, speaking on July 11 in Islamabad alongside President Ilham Aliyev of Azerbaijan.

During the negotiations with the President of Azerbaijan and at the delegation level, preliminary agreements were reached to invest $2 billion in mutually beneficial Azerbaijan-Pakistan investment projects in the initial phase. Reaffirming plans to visit Azerbaijan in November of this year, Muhammad Shehbaz Sharif highlighted that both sides are prepared to finalize corresponding agreements in this amount, emphasizing that both countries have significant potential to increase these figures to billions of dollars in the coming years.

Specifically, within the investment portfolio, several Pakistani companies have projects aimed at localizing light industry enterprises in Pakistan, such as sewing, textiles, and pharmaceuticals, with plans to export joint products to neighbouring markets. The two friendly countries also plan to promote cooperation in high technologies. For instance, Azerbaijan has been advancing a joint project with the Pakistan Commission on Science and Technology for Sustainable Development in the South (COMSATS) since last year, which involves establishing an educational centre in Azerbaijan to train professional IT specialists.