Azerbaijan expands cooperation with SCO putting transport projects at the centre of priorities Review by Caliber.Az

In the last two years, Azerbaijan and its partners in Central Asian countries increased interest in transport and investment projects involving China. This interest is mutual, given the growing trade and transit freight traffic within the framework of China's Belt and Road initiative, as well as the Trans-Caspian International Transport Route (TITR), etc. Recently, the Shanghai Cooperation Organisation (SCO) has also made proposals for the development of Middle Corridor logistics. Another step in this direction was taken the day before in Tashkent, where the first transport forum of the SCO member states was launched. Azerbaijani companies are also taking part in its work, and Baku intends to strengthen cooperation within the framework of the organisation's initiatives.

The Shanghai Cooperation Organisation (SCO) is a permanent intergovernmental international organisation founded in 2001 on the initiative of the heads of six states - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Subsequently, India, Pakistan and Iran joined the SCO, while Afghanistan, Belarus and Mongolia are observer states. Another nine countries, including Azerbaijan, are dialogue partners with the SCO.

It is noteworthy that for many years the SCO has mostly served as a consultative and advisory body, its decisions have been recommendatory, and the organisation has not initiated any notable interstate projects. These inertial trends have begun to change in recent years amidst geopolitical, energy, logistical and other crises in the vast Eurasian space.

"It should be recognised that for more than 20 years it has not been possible to implement a single major economic project directly under the auspices of the SCO: the obvious reason is related to the lack of mechanisms for financial support of project activities," said Kazakh President Kassym-Jomart Tokayev at a meeting of the SCO Council of Heads of State in July this year. In particular, the head of Kazakhstan initiated the creation of a joint investment fund of the organisation, as well as the formation of a partnership network of major strategic ports and logistics centres under the auspices of the SCO.

Astana's initiatives fit in well with the new course of the leading SCO states (China, India, the Russian Federation, etc.) supporting the expansion of the organisation's institutional capacities: first of all, it is about strengthening the business integration of the member states, including the creation of favourable conditions for increasing mutual trade turnover, removing existing trade barriers, launching joint ventures, and, most importantly, developing the region's transit and transport capacities.

The first transport forum of the Shanghai Cooperation Organisation member states, which is taking place in the capital of Uzbekistan, also testifies to the genuine interest in this agenda. Organized on the initiative of Uzbek President Shavkat Mirziyoyev, the SCO forum is timed to coincide with the 19th international exhibition TransLogistica Uzbekistan 2023 and Aviation & Logistics 2023 (UALF-2023), as well as the 12th meeting of transport ministers of the Economic Cooperation Organization (ECO) being held on November 1-3 at Tashkent's Uzexpocentre. More than 60 companies from 15 countries, including such major Azerbaijani transport companies as ADY Express and Azlogista, are taking part in the exhibitions and forum.

The business programme of the SCO forums and the ECO ministerial meeting promises to be intense: panel sessions and negotiations of government agencies are planned, including those devoted to the organisation of alternative transport lines, harmonisation of transport standards, application of flexible tariff policy, construction of large multimodal logistics centres along the transport arteries of the Middle Corridor, simplification of cross-border procedures and visa issuance. It is also planned to agree on measures for the widespread introduction of digital technologies and intelligent systems, and the exchange of best practices in logistics, including in the segment of multimodal container transport.

It should be noted here that trends have emerged in Azerbaijan, indicating our country's growing interest in participating in initiatives and projects with SCO members. This interest is mutual, as the organisation's member states act as our country's largest business partners.

"Azerbaijan's trade turnover with the SCO member states in 2022 increased by 45.8%, exceeding $9 billion, accounting for 17% of our country's total trade turnover last year. The SCO states have invested over $12 billion in Azerbaijan's economy, while Azerbaijani investments in the economy of these countries amounted to $3.2 billion," Azerbaijani Energy Minister Perviz Shahbazov said, speaking online at the first SCO Energy Forum held in Kazakhstan in early October. According to the minister, investment cooperation with such a leader of the SCO as China is developing very successfully: in the future, the two countries plan to implement projects in the field of "green" energy with a total capacity of 2 GW. The project of liquefied natural gas supply to Pakistan was launched with the participation of SOCAR Trading, and bilateral Azerbaijan-Uzbekistan cooperation in the field of energy has also expanded - not long ago SOCAR and Uzbekneftegaz signed several agreements on joint participation in oil and gas projects.

At the same time, it is the transport sector that is recognised as the dominant area for Azerbaijan's cooperation with the SCO member states and, above all, with China. Since the first China Railway Express container train was launched in 2019, China's containerised multimodal transit has now markedly expanded in terms of the nomenclature of cargo and the geography of Chinese shipper cities where block trains are formed. Such trains are in transit for approximately 20-25 days, which is noticeably shorter than the transhipment of cargoes from China and South-East Asia by sea through the Suez Canal, which takes on average about 40 days.

Further expansion of the volume of transit cargo traffic between China and Europe via the TITR and other Middle Corridor routes through the territory of Azerbaijan has been identified as a long-term strategic direction of Azerbaijan-China cooperation. This message was reaffirmed at the 22nd meeting of the SCO Heads of State Council in Samarkand in September 2022, which was attended by Azerbaijani President Ilham Aliyev.

The visit to Azerbaijan in April 2023 of a delegation from Shandong Port Group, the largest Chinese port operator, was a major milestone in expanding transport and logistics ties with China and other SCO countries: following talks with the management of Baku International Sea Trade Port CJSC (BISTP), the parties agreed to increase the volume of Chinese cargo transit through Azerbaijan within the Middle Corridor. The latter is extremely important given the plans of Kazakhstan and China to increase the volume of cargo traffic through TMTM up to 500 thousand containers per year by 2030.

In early September this year, during the visit of the delegation of the Ministry of Economy of Azerbaijan to China, the prospect of deepening trade ties and optimising transport routes, including the TMTM, was also discussed. During the talks, the Chinese partners were presented with proposals on the use of the transport and logistics potential of the Alat port and the Free Economic Zone (FEZ) located here at the intersection of international corridors. And, to all appearances, Azerbaijan's growing transport and logistics ties with China and Central Asian countries will act as a driver in expanding joint projects already within the SCO.