Baku, Riyadh catch up on renewable energy, agriculture, ecotourism cooperation Analysis by Caliber.Az

In recent years, Azerbaijan has identified the Persian Gulf region as a key geographical area for expanding trade and economic cooperation. The development of business relations between Azerbaijan and the Kingdom of Saudi Arabia is one of the most promising vectors for non-oil trade, as well as the implementation of joint ventures in the field of renewable energy, agriculture, ecotourism, infrastructure and innovation spheres. Another step in this direction was the VII Meeting of the Joint Intergovernmental Commission held recently in Baku, as well as a business forum, which resulted in the signing of a number of business agreements and memorandums between Baku and Riyadh.

In 2022, Azerbaijan and Saudi Arabia celebrated the 30th anniversary of the establishment of diplomatic relations, and over this period the two countries have traditionally built friendly relations, adhering to close approaches to the core issues on the world and regional political agenda. Riyadh has in particular consistently supported Azerbaijan’s fair position on the Karabakh conflict in the United Nations, the Organization of Islamic Cooperation (OIC) and all other international forums, as well as categorically refused to establish diplomatic relations with the occupying state of Armenia.

Saudi Arabia was one of the partners of Azerbaijan in the oil consortium within the framework of the “Contract of the Century” signed in 1994, and today our countries successfully cooperate within the OPEC+ program to stabilize oil production and reduce the volatility of energy market prices.

More than 15 years ago, the two friendly countries significantly expanded their mutually beneficial business relations on infrastructure projects, under which Saudi Arabia financed road construtions, water systems and other capital-intensive undertakings in our republic. An example of this is the $18 million concessional loan granted in 2006 by the Saudi Development Fund (SDF) for the construction of the Velvelechay-Takhtakorpu section of the Samur-Absheron water canal.

Two dozen intergovernmental and interstate agreements had been signed between Azerbaijan and Saudi Arabia to further develop economic ties and implement humanitarian, cultural and social projects. Since 2016, Azerbaijan has simplified the procedure for obtaining visas for Saudi Arabia, which has made this country to become one of the leaders in terms of the tourist volume arriving in Azerbaijan from the Persian Gulf. Only in recent times the number of Saudi tourists visiting Azerbaijan increased by 30%, with the increase in tourist flights between Baku and Jeddah planned for the future.

In the past few years, the two countries have consistently increased mutual trade, mainly in the field of non-oil trade, as well as developed investment undertakings. In total, over the past years, Saudi companies have invested $370 million in Azerbaijan, and 26 companies of the Kingdom carry out trade and financial transactions with our country.

Moreover, in the last few years, the structure of commercial operations has changed and the trade balance has stabilized: in 2017-2019, as part of the trade diversification policy, Azerbaijan began to consistently increase the volume of non-oil exports to the Saudi market. In particular, with the support of the Azerbaijan Export and Investment Promotion Fund (AZPROMO), the Azerbaijan Small and Medium Business Development Agency (KOBIA), the participation of domestic companies and small-to-medium enterprises (SMEs) in exhibitions in Saudi Arabia has increased, with all these steps aimed at promoting and advertising goods under the “Made in Azerbaijan” brand. Another step in this direction was the participation of more than 200 Azerbaijani companies in the International Agricultural and Food Exhibition which was held in early December in Jeddah, with pavilions where a wide range of Azerbaijani products were presented: confectionery, dried fruits, chocolate, tea, honey, agricultural consulting services and others.

Such events contribute to the popularization of the products of Azerbaijani enterprises, and recently the supply of domestic food to leading Saudi Arabian trading facilities has increased, with goods such as textiles, carpets, silk products and others also being gradually promoted.

Thanks to the steps taken, the share of Azerbaijani exports now almost accounts for half of the total trade turnover, helping to reduce the trade deficit. Despite a significant decline in Azerbaijan-Saudi trade during the coronavirus pandemic in 2020, its volume more than doubled a year later, exceeding $27 million and is likely to rise even more this year.

“In 2022, trade between Azerbaijan and Saudi Arabia increased by more than 68% compared to last year. There is even greater potential for the diversification and growth of trade between our countries”, the Minister of Investment of the Kingdom of Saudi Arabia, Khalid bin Abdul-Aziz Al-Falih, noted while speaking at the Azerbaijan-Arabian Investment Forum held recently in Baku. According to the data provided by the Saudi minister, bilateral trade turnover for the eleven months of the current year has approached $45 million.

It is quite obvious that the talks held in Baku between Azerbaijani President Ilham Aliyev and the Head of the Delegation, Saudi Arabian Investment Minister Khalid bin Abdulaziz Al-Aziz Al-Falih, as well as the subsequent holding of the XII Meeting of the Joint Intergovernmental Commission and the Azerbaijan-Saudi Business Forum, will not only contribute to the growth of trade, but will also be a landmark event for expanding investment and other areas of business cooperation.

The leading trend in the dynamically developing business relations between Baku and Riyadh is the increased interest in Saudi capital in the energy, industrial, agricultural, tourist and transport potential of our country. In particular, since January 2022 the Saudi “ACWA Power” company has started to implement an investment project for $ 300 million in the renewable energy sector (RES) in Azerbaijan: the construction of a wind power plant with a capacity of 240 MW, 1 billion kilowatt hours of electricity per year. As reported earlier, “ACWA Power” is also interested in the construction of a 500 MW offshore wind farm in Azerbaijan.

Highly appreciating the joint ventures in the field of renewable energy, President Ilham Aliyev said Azerbaijan has great potential for the development of alternative energy, especially wind energy. This subject was also discussed during the meeting of the intergovernmental commission and business forum with Saudi companies showing interest in the projects of generation of renewable energy in our country and further export of electricity from Azerbaijan to Europe. Thus, Saudi Minister Khalid bin Abdulaziz Al-Falih expressed his country’s business interest to participate in export energy undertakings, provided for in the framework of the agreement signed on December 17 on the strategic partnership in the field of development and transfer of “green” energy between the governments of Azerbaijan, Georgia, Romania and Hungary.

Saudi companies are also ready to participate in other strategic investment projects in the sphere of “smart” agriculture, ecotourism, infrastructure and industrial projects. In this regard, the head of state highly valued the visit of the Saudi delegation to Azerbaijan’s territories, liberated from occupation. He welcomed the business interest from the friendly country in investment and contracted projects for the reconstruction and revival of the Karabakh region and other districts of the republic.

As a result of the negotiations and meetings held in Baku, business representatives signed seven documents on cooperation in the spheres of tourism, construction, infrastructure projects, consulting and legal services, employment. In particular, a memorandum of understanding was signed between the Saudi "ARCO" company for human resources and the employment agency of Azerbaijan, entailing the involvement of about 20,000 workers from our republic in the domestic work and business sector of the Kingdom. As recorded, the monthly salary of the hired workers will start from $850 per month, and employment contracts will be concluded for a period of 24 months or more.

Another outcome of the forum was the establishment of the Joint Azerbaijan-Saudi Business Council, whose responsibilities include determining the future directions of bilateral trade and economic cooperation between the countries, supporting the initiatives of the business community of the two countries and problem-solving. The new structure will also facilitate the establishment of direct partnerships between companies of the two countries help to organize visits, meetings, seminars, round tables, participation of enterprises in exhibitions and fairs, as well as to facilitate the exchange and dissemination of information on commercial, trade, economic, scientific, technological, advertising and other spheres. The establishment of the Business Council was initiated by Azerbaijan's KOBIA and the Council of Saudi Chambers.