Azerbaijan, UAE elevate their bilateral relations to a strategic level Review by Modern Diplomacy

In his recent article for Modern Diplomacy, pundit Javid Veliyev, head of a department at the AIR Centre, takes a look at the burgeoning partnership between Azerbaijan and UAE.

Caliber.Az reprints the piece.

UAE President Sheikh Mohammed bin Zayed Al Nahyan paid his first official visit to the South Caucasus to Azerbaijan on January 9. This visit took place following a decision to hold COP29 in Azerbaijan during the COP28 summit in the UAE in 2023. The UAE also supported the organization of COP29 in Azerbaijan, and Al Nahya stated that they were willing to share all of their experiences on this matter with Azerbaijan during their visit. Azerbaijan regards hosting international conferences as an opportunity to integrate globally and strengthen its position as a hub for discussing major global issues. In this context, collaboration with the UAE and the expertise accumulated before COP29 might contribute to a successful summit. For the UAE, it is desired to ensure the continuation of the decisions taken at COP28 and to include them on the COP29 agenda.

Several key meetings were held during the visit, and major agreements were reached by the parties. The parties, in particular, signed a Memorandum of Strategic Partnership between Azerbaijan and the UAE: Memorandum of Understanding between the Ministries of Finance of the two countries; protocol of intent between the Ministry of Environment of Azerbaijan and the Ministry of Climate Change of the UAE; Memorandum of Understanding between the Ministry of Energy of Azerbaijan and the Ministry of Investment of the UAE on investment cooperation in electricity projects; Framework Agreement on Strategic Partnership to strengthen Azerbaijan’s potential for renewable energy sources; Schedule of Activities for the Construction of 1 GW of solar and wind energy capacity in Azerbaijan; Agreement on Strategic Cooperation between ADNOC and SOCAR; Memorandum of Understanding between the ADA University and the Anwar Gargash Diplomatic Academy.

The UAE was one of the first countries to recognize Azerbaijan’s independence on December 26, 1991, and the two countries have collaborated in various spheres, including military partnership. Following the election of Ilham Aliyev as president in 2003, Azerbaijan pursued a diverse and active foreign policy, such as establishing relations with the Gulf states and the Arab League, of which the UAE is a member. This also had a positive impact on relations with the UAE. However, prior to the Second Karabakh War, competition in UAE-Turkey relations, as well as the following pandemic, led relations to stagnate.

It can be noted that, particularly after the Second Karabakh War, ties between both countries grew more active, and cooperation agreements in strategic areas were signed. This was also followed by Azerbaijan’s liberation of its lands from occupation and the beginning of the Armenia-Azerbaijan normalization process. This allowed the UAE to strengthen ties with both countries.  On the other side, the UAE attempted to expand economic, investment, and energy cooperation with both nations, but the agreements reached with Azerbaijan were more profitable, particularly in terms of the development of renewable energy resources. As a result, the win-win model benefited both countries.

The two countries’ relations were complicated for a variety of reasons. The present increase in activity in relations can be attributed to the restoration of relations between Azerbaijan’s ally Turkiye and the UAE. Prior to the normalization of Turkey-UAE relations in 2021, Azerbaijan-UAE relations were also affected by the competition between Ankara and Abu Dhabi in third regions. 

The normalization of UAE-Israel relations was another important factor that affected UAE-Azerbaijan relations positively. Following the Abraham Accord, Israel’s relations with Arab countries began to improve. Despite the ongoing conflict between Israel and Hamas, the UAE is determined to maintain relations with Israel. This resulted in the removal of an obstacle in the UAE’s relations with Azerbaijan.

Although the process of normalization between the UAE and Iran continues, the three islands issue and the growing influence of the Houthis in the Red Sea are elements that intensify the geopolitical competition between the parties. Iran’s attempts to continue to threaten and dominate regional relations are concerning for both countries.

Furthermore, the UAE is a Gulf country, and Azerbaijan wishes to strengthen ties with the Gulf Cooperation Council members. Azerbaijan is crucial in terms of relations between the Gulf and the Turkic World-Central Asia as the leading country of the South Caucasus and a country of the Turkic World.

Cooperation in Renewable Energy Field

Azerbaijan’s choice to invest in renewable energy resources has also benefited the two countries relations. It aims to generate this electrical energy for export mostly from renewable sources. Azerbaijan also intends to satisfy 30% of its energy demand from renewable sources by 2030. Although the UAE is wealthy in fossil fuels, it prioritizes alternative energy sources and expects to invest 54 billion dollars in this field. On the other hand, after liberating its territories from occupation, Azerbaijan increased its investment in this sector. Because Azerbaijan’s liberated areas and the rest of the country are both rich in electrical energy generated by wind, solar, and water resources. One of the key elements of the MoU agreed between Azerbaijan and the EU in the sector of energy in July 2022 was the development of renewable energy resources. Azerbaijan then signed agreements to export electricity to Turkiye, Georgia, Romania, and Hungary.

Currently, agreements were signed between Azerbaijan and the UAE during the most recent visit of the UAE President. A 230-megawatt solar power plant constructed by the UAE company Masdar was inaugurated in Azerbaijan in October of last year. In December, two additional key documents were signed in Baku. Investments between Azerbaijan and the UAE are expected to assist the production of 10 gigawatts of green energy in Azerbaijan, based on signed contracts and memorandums of understanding.

Trade and tourism

Citizens of both countries will be able to stay in Azerbaijan and the UAE without a visa for up to three months from July 8, 2023. This historic development not only represents the quick expansion of relations, but it also open the possibility for remarkable opportunities in a variety of fields and industries.  Azerbaijan has grown as a highly sought-after tourist destination for UAE tourists in recent years, due in part to its available direct flights and reputation as a thriving cultural and business hub. In 2022, about 42,000 UAE tourists travelled to Azerbaijan, more than double the number in 2021.

ADQ, situated in Abu Dhabi, established a $1 billion joint venture with Azerbaijan’s sovereign wealth fund to invest in major sectors during the COP28 meeting in December 2023. Agriculture, technology, pharmaceuticals, and energy infrastructure will be the emphasis of the joint venture with Azerbaijan Investment Holding. According to a release, investments will be based largely in Azerbaijan, the UAE, and Central Asia, with the possibility to grow to other countries. Both sides aim to expand bilateral trade, which was at AED 3.6 billion ($980 million) in 2022, a 46 per cent increase over the previous year.  The UAE Ministry of Investment and the Republic of Azerbaijan’s Ministry of Digital Development and Transport have signed a Memorandum of Understanding (MoU) to improve Azerbaijan’s digital infrastructure, especially through the building of data centres. In recent years, Azerbaijan has actively pursued the development of its digital economy, including the centralization of e-services and the digitalization of public services. The government’s social and economic policy includes a strong focus on digital transformation. The collaboration with the UAE, as outlined in the MoU, is expected to result in a substantial increase in the number of data centres in Azerbaijan.

Aside from geopolitics, Azerbaijan-UAE relations are improving in the economic and energy sectors. Azerbaijan especially benefits from the experience of the UAE in the field of renewable energy. The relations between the two countries will affect the power relations in the Gulf region as well as the South Caucasus and Central Asia. The signing of a strategic cooperation agreement between the parties during the UAE President’s previous visit to Azerbaijan shows that the UAE prioritizes Azerbaijan in the South Caucasus.