New deals, new horizons: Baku and Moscow's fresh business endeavours Putin's Baku trip cements multi-year ties

In spite of global uncertainties, including last year's economic downturn, ongoing inflation concerns, and other negative trends, Azerbaijani-Russian economic relations remain a beacon of stability and growth. Both nations are deepening their trade relations, enhancing cooperation in transport, logistics, and energy sectors, while also diversifying their engagements in the non-oil industries and boosting investment. Amidst this backdrop of progress, Russian President Vladimir Putin recently completed a two-day state visit to Azerbaijan, where he and Azerbaijani officials discussed an array of topics, with a particular focus on advancing business collaboration.

"The Declaration on Allied Interaction signed by us in February 2022 is being successfully implemented, both in political and economic spheres we see very positive dynamics and good figures. And, of course, we cooperate in energy, transport and many other spheres," President Ilham Aliyev said during a meeting with Russian President Vladimir Putin. During the talks, the leaders of Azerbaijan and Russia expressed satisfaction with the level of interaction between the two states.

Over the past twenty years, Moscow and Baku have built a robust economic relationship grounded in mutual benefit and expanding investment and technological collaboration. This enduring partnership is underpinned by a comprehensive legal framework, comprising over 170 interstate, intergovernmental, and interdepartmental agreements, covering key economic sectors.

Regional connections play a crucial role in these business relations, with more than 70 Russian entities working with Azerbaijan. Key players include Moscow, St. Petersburg, Astrakhan, Dagestan, and Tatarstan. Azerbaijan stands out as Russia’s primary trade partner in the South Caucasus, representing approximately 40% of Russia's trade turnover with the region.

Notably, Russia continues to lead as the top importer of Azerbaijani agricultural and industrial products. Last year, out of $3.3 billion in non-oil exports from Azerbaijan, Russia accounted for $1.2 billion, marking an 18.5% increase from 2022. This highlights the real economic potential driving Baku’s trade with Moscow, contrasting with the dubious re-export practices seen in neighbouring Armenia. Azerbaijan's trade with Russia has consistently demonstrated steady growth, fueled by substantial domestic resources.

As of the end of last year, Russia emerged as Azerbaijan's third-largest trading partner, following Italy and Türkiye. Azerbaijani-Russian trade turnover surpassed $4.3 billion, marking a substantial 17.5% increase from the previous year. This upward trend has continued into 2024, with the State Customs Committee of Azerbaijan reporting a bilateral trade turnover of $2.573 billion from January to July. This represents a 5.2% rise compared to the same period in 2023. The strengthening of trade relations underscores the robust economic partnership between the two nations.

At the XXII meeting of the Azerbaijani-Russian Intergovernmental Commission (IGC) on August 9, Alexey Overchuk, Deputy Prime Minister of Russia and co-chairman of the IGC, emphasized the deepening partnership between Azerbaijan and Russia. “We are committed to constructive dialogue and comprehensive development of joint projects across all areas of mutual interest,” Overchuk stated. He highlighted the significant progress in trade, energy, industry, agribusiness, logistics, and transport. Additionally, he noted the growth in investment cooperation, supported by effective state backing from both countries.

He emphasized that mutual trade is developing based on national currencies, with more than 73% of transactions conducted this way by January-May of this year. In recent years, recreational companies from both countries have been implementing joint initiatives across all areas, including the digitalization of the industry, localization of production equipment for tourism, and the development of ski resorts, sea resorts, and natural routes.

Azerbaijani-Russian investment cooperation is developing very successfully: about 1.3 thousand companies with Russian capital are registered in Azerbaijan, and the total volume of Russian investments in the Azerbaijani economy has exceeded $8.7 billion, while our country has invested about $1.2 billion in the Russian economy. Russian investors are actively developing such areas of the domestic economy as the banking sector, petrochemicals, truck production, winemaking, and food industry.

"Russian companies feel quite comfortable in the Azerbaijani market: they are LUKoil, KAMAZ, which has organised assembly production, SOLLERS, and UAZ. They work successfully and there is a prospect of development. 'Transmashholding' signed another contract in February to produce a large batch of Russian cars for the Baku metro," President Vladimir Putin said in a joint press statement following the talks.

In turn, Azersun Holding has established a fruit and vegetable canning plant and a tea factory in Krasnodar, while domestic construction material production has been localized in Russia. Trade and intermediary companies are highly active, and Azerbaijani investors are modernizing sanatoriums in the North Caucasus and Stavropol Territory, among other projects.

Both Baku and Moscow are optimistic about enhancing mutual business cooperation. They are focused on expanding trade, diversifying investment opportunities, and developing new projects in transport, energy, and industry, recognizing that the existing potential in many areas remains underutilized.

"Trade and economic ties are developing successfully, the annual trade turnover of $4bn and a bit is a good figure, but it does not correspond to the potential of our opportunities. And indeed, we can talk here not only about energy, industrial cooperation, transport, logistics, light industry. We have many areas for joint work. More than four billion dollars of direct investment in the Azerbaijani economy is also a good indicator. More than 1,270 enterprises with Russian capital are operating in Azerbaijan, and this is certainly not the limit," Russian President Vladimir Putin said.

In the press statement, President Ilham Aliyev highlighted the critical role of the North-South International Transport Corridor (ITC) in enhancing bilateral relations between Baku and Moscow. He noted, “We discussed in detail the North-South project and its significance for regional transport corridors. Both the railway and road segments of the North-South corridor have been fully implemented and are operating successfully in Azerbaijan. Currently, we are focused on modernizing the railway segment to boost its capacity, aiming to transport 15 million tonnes of cargo per year and beyond.”

The President of Azerbaijan also said that this year funds of about $120 million were provided for modernisation of this railway section in order to reach the required capacity.

Following the state visit of the Russian President to Azerbaijan, several documents were adopted. These include the Joint Declaration of the Presidents and a Memorandum of Understanding between the Export and Investment Promotion Agency of Azerbaijan (AZPROMO) and the Joint Stock Company "Management Company of the Russian Direct Investment Fund." Additionally, memorandums and agreements were signed in areas such as ecology, food safety, and quarantine measures.