Baku moves to diversify business in the Persian Gulf Oman and Kuwait in focus

In recent years, Azerbaijan has identified the Persian Gulf as a strategic region for expanding trade and economic cooperation. The country has developed particularly active partnerships in trade, green energy, agriculture, tourism, and investment with Saudi Arabia, the UAE, and Qatar. Until recently, business ties with the Sultanate of Oman remained limited. However, the “Azerbaijan–Oman” roundtable, held during Minister of Economy Mikayil Jabbarov’s visit to the Gulf, signals a potential breakthrough in trade and investment relations with Oman. During his subsequent visit to Kuwait, Minister Jabbarov also outlined new priorities for strengthening business cooperation with the emirate.

Over the past decade, Azerbaijan has steadily expanded its business contacts with the monarchies of the Persian Gulf. Tourism ties with countries in the region have seen significant growth, supported by an increase in direct flights, the simplification and digitalisation of visa procedures, and, for some states, the introduction of visa-free regimes.

Meanwhile, through the Ministry of Economy of Azerbaijan and its structural units—the Export and Investment Promotion Agency (AZPROMO) and the Small and Medium Business Development Agency of Azerbaijan (KOBIA)—various measures have been taken to diversify the country’s agricultural and industrial exports, with a particular focus on the Arab states of the Gulf.

Thanks to targeted promotion and advertising, Azerbaijani food and other products under the unified brand Made in Azerbaijan are actively being introduced in the retail networks of the UAE, Saudi Arabia, Oman, Bahrain, Qatar, and other countries in the region. This includes environmentally friendly domestic honey and tea, dried fruits and sweets, narsharab (pomegranate sauce), lavender and olive oils, juices and canned fruits and vegetables, sturgeon caviar, polymer raw materials, textiles, carpets, silk products, and more.

All these efforts have had a very positive impact on the dynamics of Azerbaijan’s trade with the Gulf monarchies. For instance, in 2017, when the first Azerbaijan–GCC Economic Forum was held, trade with the Gulf countries (excluding oil) amounted to around $175 million. By 2023, this figure had already risen to $1.8 billion, reaching $2.24 billion over the first three quarters of last year. The growth is certainly impressive; however, it is worth noting that the lion’s share of this trade turnover was concentrated in the UAE and Saudi Arabia.

Although diplomatic relations between Azerbaijan and Oman were established on 13 July 1992, until recently bilateral trade remained limited, with little noticeable progress in investment cooperation or the creation of joint ventures.

Oman’s economy, which reached $106.9 billion last year, is largely based on the extraction and export of oil and gas, including processed products such as liquefied natural gas (LNG) and methanol for foreign markets. The Sultanate also has developed sectors in construction materials, metallurgy, pharmaceuticals, fishing, and seafood processing, with these products forming the basis of imports to Azerbaijan.

Conversely, Azerbaijani exports to Oman are predominantly limited to products from the petrochemical sector. Tourism links between the two countries are still emerging: in June 2022, direct flights were inaugurated between the capitals, Muscat and Baku.

However, this year, both countries have been making greater efforts to increase trade turnover and establish platforms for business cooperation. In particular, the Oman–Azerbaijan round table, held during the working visit of the Ministry of Economy delegation, marked a starting point for the development of qualitatively new business relations.

“Within the framework of our working visit to the Sultanate of Oman, together with Qais bin Mohammed Al Yousef, Minister of Commerce, Industry and Investment Promotion of Oman, and our colleagues, we participated in the Oman–Azerbaijan Business Roundtable, where we exchanged views on enhancing the effectiveness of bilateral economic cooperation. Strengthening business ties through prospective projects that serve mutual interests, support economic diversification, and foster regional partnerships was identified as one of the key priorities of joint engagement,” wrote Azerbaijan’s Minister of Economy Mikayil Jabbarov on his social media page X.

He also emphasised the importance of joint representation on high-potential investment platforms, the creation of an Azerbaijan–Oman investment working group, initiatives to accelerate the transition to “green” energy, experience exchange based on the SME House model, and support for joint digital transformation projects.

Specifically, Baku and Muscat agreed to expand investment cooperation, planning to involve representatives from the private sector of both countries in the activities of the Azerbaijan–Oman Investment Working Group.

A key outcome of the round table was the signing of a shareholders’ agreement between the Azerbaijan Investment Holding and Oman’s Investment Management to establish the Azerbaijan–Oman Direct Investment Fund with a capital of $200 million, formed on a parity basis. The fund will focus on implementing strategic investment projects in various sectors, including food processing, healthcare, renewable energy, consumer goods, transport, and logistics, with projects planned not only in Azerbaijan and Oman but also in Central Asian countries and beyond.

During the round table, AZPROMO Executive Director Yusif Abdullaev and Invest Oman representative Juhaina Al Balushi delivered presentations on the business and investment environments in both countries. In addition, KOBIA and the Oman Chamber of Commerce and Industry (OCCI) signed a memorandum of understanding.

Kuwait is another Persian Gulf country with which Azerbaijan plans to intensify business cooperation. In the 2000s, Kuwaiti investment funds actively financed several projects aimed at modernising Azerbaijan’s road and water infrastructure.

In 2009, a joint Azerbaijan–Kuwait intergovernmental commission on economic cooperation was established, and agreements were signed on mutual protection and promotion of investments as well as on eliminating double taxation on income and property.

However, in recent years, the dynamics of trade and investment cooperation have remained limited, falling short of the real economic potential of the two countries.

“As part of our working visit to the State of Kuwait, together with our colleagues, we held a roundtable discussion with the participation of #business representatives to explore ways to enhance the effectiveness of Azerbaijan–Kuwait economic cooperation,” wrote Jabbarov on his social media page X.

“We reviewed mechanisms for strengthening collaboration across key sectors, including energy, industry, agriculture, transport, logistics, and tourism. We also emphasized the importance of close coordination between business entities and active support for joint investment initiatives.”

During the meeting with Rabah Abdulrahman Al-Rabah, Director General of the Kuwait Chamber of Commerce and Industry, and Subaih Abdul Aziz Abdul Muhsen Al-Mukhaizeem, Chairman of the Board of Directors of Kuwait’s Investment Management, discussions focused on increasing mutual trade turnover and deepening cooperation in the fields of energy, industrial zones, and joint production initiatives.

New opportunities for collaboration were also explored in tourism, traditional and renewable energy, agriculture, transport, and transit.