Baku and Moscow expand investment cooperation
Review of Caliber.Az

ANALYTICS  27 April 2022 - 16:47

Despite growing risks in the global economy and tense geopolitical situation in the Eastern European region, Azerbaijan and Russia continue increasing mutual trade and intend to expand cooperation in the transport and logistics sphere as well as consistently diversify economic ties. These processes are characterized both by the growth of investment component and steps to implement joint undertakings in the SME sector, industry, agriculture and a number of other directions. The new vectors of business cooperation between the two countries were discussed at the 20th meeting of the Azerbaijani-Russian Intergovernmental Commission on Economic Cooperation held the day before in Baku.

Over the past two decades, Moscow and Baku have managed to create a lasting economic foundation, based on mutually beneficial trade and dynamic investment partnerships. The success of these relations is also based on a reliable legal framework that includes more than 150 interstate and intergovernmental agreements. Azerbaijan is Russia's main trading partner in the South Caucasus, and in the last period, our country accounted for about 40-45% of the total Russian trade turnover with the countries of the region. In turn, Russia has for many years held first place among importers of Azerbaijani agricultural and other non-oil products. In 2021 mutual trade turnover between the neighboring countries increased by 20%, exceeded pre-pandemic levels and reached a record $3.4 billion. This positive trend has been successfully continued, and in the first quarter of this year bilateral trade increased by almost 7.9% year-on-year, exceeding $613.3 million.

Russia is Azerbaijan's third-largest trade partner, and the positive dynamics of trade turnover in the first quarter give grounds to expect even more substantial growth. "Mutual investments are growing and Azerbaijan has created all conditions for Russian companies to feel comfortable here", IGC co-chairman Deputy Prime Minister Shahin Mustafayev said at a meeting of the Azerbaijani-Russian Intergovernmental Commission on Economic Cooperation held the day before. He noted that Azerbaijani investors have invested over $1.2 billion in the Russian economy and Russian business directed over $6 billion to the Azerbaijani economy.

Judging by the projects discussed during the plenary session of the IGC and the prospects voiced, the mutually beneficial cooperation between Baku and Moscow will be continued and expanded. Currently, special attention is paid to investment cooperation and the creation of conditions for the expansion of the mutual presence of Russian and Azerbaijani companies in the markets of both countries. This work is carried out on the basis of the Action Plan for the development of key areas of Russian-Azerbaijani cooperation until 2024, which provides for the implementation of initiatives on eight road maps, including the development of trade, transport infrastructure, high-tech production, improvement of economic efficiency and promotion of tourism, cooperation in innovative development and digital technologies, creation of preferential mechanisms for bank lending, attracting investments, etc.

"This year Russia and Azerbaijan will hold a number of events that will affect various spheres of economic activity: active efforts will be continued to develop the North-South IGC, in the fourth quarter it is planned to complete reconstruction of the border crossing on the Russian side of the border with Azerbaijan, its throughput capacity will be expanded. The service enterprise of PJSC KAMAZ will be put into operation in the Karabakh region in the second quarter, the prospects for establishing in Azerbaijan the production of railway wagons, as well as joint shipbuilding, are discussed," Russian Deputy Prime Minister Alexey Overchuk said at the plenary session of the IGC. He said that Russian companies are ready to assist Azerbaijan in modernizing its energy infrastructure, and reminded that the feasibility study for the project of unification of power systems of Russia, Azerbaijan, and Iran is under development.

 Speaking of joint projects in the field of communications, it is necessary to note that Baku, Tehran and, in particular, Moscow, which is under sanctions, are deeply interested in increasing cargo transportation via the North-South corridor. The development of this route, the formation of its railway infrastructure, and the prospects for unblocking transport and communication lines with Armenia were discussed during a meeting held the day before between Azerbaijani President Ilham Aliyev and Russian Deputy Prime Minister Alexey Overchuk. In this regard, the head of state recalled that a 60-km part of the railroad has already been built in Azerbaijan, and this work will be completed next year. In turn, the construction of the highway is in full accordance with the schedule.

 Here it should be noted that under the agreement signed in March it is envisaged to build a 55-km highway and a parallel railway line Imishli (Azerbaijan) - Parsabad (Iran), four border bridges across the river Araz, including two roads with a crosswalk and two railway bridges, as well as the construction of communication infrastructure and power lines across the territory of Iran. It is also planned to build customs and border checkpoints with a daily capacity of about 1,000 trucks. Once all these facilities are put into operation, Azerbaijan and its partners in the North-South project will be able to multiply the volume of freight traffic without the need for transshipment at the border terminal in Astara, since there will be a transit railway traffic between the three countries.

Improving the capacity of railway and road infrastructure, as well as increasing the capacity of customs and border crossing points is extremely important today, given the plans to multiply the supply of mineral fertilizers and wheat from Russia to Azerbaijan and further to Iran. In turn, it also stimulates the development of the "Agroexpress" project, which will make a certain contribution to ensuring the food safety of the two countries. At the end of last year, the first test train within the framework of the "Agroexpress" project was launched from Azerbaijan to Russia for the transshipment of agricultural products with the subsequent loading of cars with Russian products in the reverse direction. In the future it is planned to organize the monthly movement of two mixed trains: the new logistics mechanism significantly simplifies the mutual supply of domestic fresh fruit and vegetable products to the Russian market and return supplies of cereals, flour, vegetable oils, confectionery products, etc. from Russia. According to the Russian Export Center (REC), the volume of supplies of Russian agricultural products to Azerbaijan in the framework of the logistics project "Agroexpress" may reach 100 thousand tons by 2025.

The above-mentioned initiatives are only a part of the variety of joint projects that the two countries are implementing or plan to implement in the transport, industrial, agricultural and technological spheres. In particular, according to Deputy Prime Minister Shahin Mustafayev, already in the third quarter of 2022 it is possible to launch a center for the repair and maintenance of helicopters, built with the support of Russian Helicopters JSC. It is noteworthy that Russian companies are also interested in energy projects in the liberated territories of Azerbaijan. "The Russian side provided information on two such projects: one of them involves the construction of a wind power plant with a capacity of 100 MW, as well as the project of several small hydropower plants with a total capacity of up to 20 MW," Mustafayev said. Russian businessmen plan to take part in industrial projects in industrial parks being created in the Karabakh and East-Zangazur economic regions. The first step in this direction was the creation of a joint venture between PA Ganja Automobile Plant and Russian PA KAMAZ in the "Economic zone of the Araz Valley" (Jabrayil district): the capacity of a modern service center will allow servicing and repairing trucks and agricultural machinery for the entire vast region.

It is possible that other attractive projects, work on which was temporarily frozen during the pandemic and subsequent crises, will be implemented in the near future: for example, Rostselmash LLC was planning to establish the assembly of NOVA-340 combine harvesters in Neftchala industrial quarter. In turn, the Russian business community also aimed to expand cooperation in the field of IT infrastructure, renewable energy sources (RES), creation of new mechanisms for financing SMEs, etc. In particular, prospects for joint work on the preparation of the concept of "smart" cities and villages, and the digitalization of urban infrastructure were outlined.

Governor of the Astrakhan region Igor Babushkin, who took part in the IGC work, said that in the near future negotiations on joint projects in shipbuilding with Azerbaijan were planned. "One of the important topics is prospects of fulfilling orders for Azerbaijan by Astrakhan shipbuilders on the terms of industrial cooperation. Our specialists conducted a series of negotiations with colleagues from the Caspian Shipping Company, and the possibility of implementation of joint projects on the construction of small dry-cargo ships, chemical carriers, ferries and tankers is being considered. In the nearest future, we are waiting for the Azerbaijani delegation in Astrakhan in order to discuss all details of joint work," he noted.

 At the end of the IGC meeting, a memorandum of cooperation in the field of pensions was signed, as well as a memorandum of intent between the Azerbaijani Agency for Small and Medium Business Development and the Federal Corporation for Development of Small and Medium Entrepreneurship of Russia.

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