Azerbaijan-SCO: Charting visionary path forward Fostering dialogue and cooperation

Azerbaijan and its partners in Central Asia, China, Iran, and Pakistan are ready to speed up integration initiatives in transport, energy and investment.

This interest is mutual, taking into account the growing trade and transit cargo transportation within the Chinese Belt and Road Initiative, as well as the Trans-Caspian International Transport Route (TITR) or Middle Corridor, etc.

Moreover, the number of business proposals through the Shanghai Cooperation Organisation (SCO) has been dynamically growing recently, partnership with which is one of Baku’s policy priorities. Another step in this sphere was taken in Astana, where a two-day summit of SCO member states in the “SCO+” format, started on July 3. President of Azerbaijan Ilham Aliyev took part in the forum.

The Shanghai Cooperation Organisation (SCO) is a permanent intergovernmental international organisation founded in 2001 on the initiative of the heads of six countries, namely, China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Later, India, Pakistan and Iran joined the SCO. In turn, Afghanistan, Belarus, and Mongolia have the status of observer countries today. Fourteen more countries, including Azerbaijan, are today SCO dialogue partners.

A decision was made at a meeting of the Council of Heads of SCO member states in 2015 to grant Azerbaijan the status of an SCO dialogue partner. The corresponding memorandum was signed in Beijing in 2016. President Aliyev already took part as a guest of honour at the SCO summit held in Samarkand in September 2022, and these days he is again participating in the SCO summit, arriving in Astana at the invitation of President of Kazakhstan Kassym-Jomart Tokayev.

By successfully developing cooperation with this influential organisation, Azerbaijan expects to receive observer status in the SCO. President Aliyev made such a statement at a meeting with the heads of the Russian media outlets at the TASS Editors-in-Chief Club in 2022.

Of course, this success is based on several important factors. Azerbaijan has established itself as an internationally recognized centre of tolerance and multiculturalism. This allowed Azerbaijan to become an important platform for discussing global issues, including establishing active cooperation with SCO member states in the humanitarian field and in regional security.

In turn, President Aliyev’s participation in the Astana summit is significant from the point of view of Azerbaijan’s conveying its messages on the UN climate agenda within the COP29 conference scheduled for November 2024 in Baku. The meetings were held between President Aliyev and President of the People's Republic of China Xi Jinping, President of Kazakhstan Kassym-Jomart Tokayev, as well as Russian President Vladimir Putin as part of the SCO summit in Astana.

During the conversation with President Putin, President Aliyev noted the successful economic cooperation between the two countries. The Azerbaijani leader emphasised that the Russian-Azerbaijani trade turnover has been growing dynamically in the past and current years.

“It is pleasant that mutual settlements in national currencies between Azerbaijan and Russia are growing. In particular,  Azerbaijani exports to the Russian Federation account for about 70 per cent while for Russian imports to Azerbaijan - about 50 per cent,” President Aliyev said.

During a conversation with his Russian counterpart, the Azerbaijani leader also noted progress in the development of the International North-South Transport Corridor (INSTC), the plans to modernise the infrastructure of the INSTC on the Azerbaijani territory, as well as the intention to implement new joint initiatives in the energy sector.

The heads of state and government of the SCO member states, as well as partners who are not members of the organisation and participating in the “SCO+” forum, intend to discuss a wide range of relevant issues relating to political, trade, economic, cultural and humanitarian cooperation during the Astana summit, dedicated to such a theme as “Strengthening Multilateral Dialogue - the Pursuit of Sustainable Peace and Development”.

The Astana Declaration, which is the main political document of the summit, will outline the SCO's position on several relevant issues and promising directions for the organisation's development.

The SCO has mainly performed the functions of an advisory and consultation body for many years, however, amid geopolitical, energy, logistics and other crises in the vast Eurasian space, this organisation is gradually transforming into a generator of important regional initiatives at the interstate level.

These initiatives cover regional security and economic development, and first of all, the matter rests in supporting regional projects such as East-West and North-South corridors. It is extremely important for the SCO member states to expand cooperation with Azerbaijan, a key transit hub in the vast Eurasian space. Azerbaijan is investing billions of dollars in modern highways, expansion of port infrastructure, modernisation of railway lines, including the Baku-Tbilisi-Kars route, and is also independently creating the promising Zangezur route - a new vector of the Middle Corridor.

Today it is also difficult to overestimate the importance of the Trans-Caspian container transshipment along the TITR for Central Asia, China and other SCO member states. Azerbaijan’s role is very significant in its development. The matter rests in the transit of container block trains being created in China, which takes approximately 20-25 days, which is less than the transshipment of goods from China and Southeast Asia by sea through the Suez Canal, which takes on average about 40 days.

Today, the importance of the Middle Corridor has increased many times for the SCO member states amid the ongoing attacks by the Ansar Allah (Houthi) rebel movement in Yemen since last autumn. Houthi drone and missile attacks have greatly reduced the movement of bulk carriers, container ships and tankers in the Red Sea and the Bab el-Mandeb Strait, and global carriers and forwarders are considering the short and safe Trans-Caspian transit.

In particular, the issues of organising the alternative transport routes, coordination of standards in transport, application of a flexible tariff policy, construction of big multimodal logistics centres along the transport routes of the Middle Corridor, simplification and digitalisation of cross-border procedures and the visa issuance process are discussed at the SCO forums.

The key SCO member state - China agreed with Kazakhstan to increase the cargo traffic volume through the TITR to 500,000 containers per year by 2030. Most of goods will be transited through Azerbaijan. In this regard, the delegation of the biggest Chinese port operator Shandong Port Group, which visited Azerbaijan in April 2023, agreed with the management of Baku International Sea Trade Port to increase the transit volume of Chinese cargo, as well as the multimodal container transportation through Azerbaijan.

The cooperation with the SCO member states is also important for Azerbaijan to participate in investment projects, create joint production projects in the non-oil sector, develop renewable energy sources, etc. This interest is mutual as the SCO member states act as the biggest business partners of Azerbaijan.

Azerbaijan's trade turnover with SCO member states in 2022 increased by 45.8 per cent, exceeding $9 billion, reaching 17 per cent of Azerbaijan's total trade turnover in the previous year. In turn, the SCO member states have invested over $12 billion in the Azerbaijani economy while the Azerbaijani investments in the economies of these countries amounted to $3.2 billion.

Thus, investment cooperation is developing successfully with such an SCO leader as China, which currently ranks fourth among Azerbaijan’s foreign trade partners and second among importing countries. For example, it was possible to increase the Azerbaijani-Chinese trade by 44 per cent in 2023 up to record level - $3.1 billion. In the future, Baku and Beijing plan to implement green energy projects with a total capacity of two GW. The Chinese companies intend to invest in localising the assembly of electric buses and batteries in Azerbaijan.

A project for the supply of liquefied natural gas to another leading SCO member state - Pakistan was launched through the Azerbaijani SOCAR Trading company. The bilateral Azerbaijani-Uzbek cooperation in the field of energy has also expanded. The State Oil Company of the Azerbaijan Republic (SOCAR) and Uzbekistan’s Uzbekneftgaz company signed several agreements on joint participation in oil and gas projects. The partnership with another SCO member state - Kazakhstan in the oil transit and an increase in the transshipment of non-oil cargo has greatly increased since last year.