25 June 2017

Sunday, 05:47

CURRENCY

THE STABILIZING FACTOR

Relations between Baku and Tehran define economic and political stability in the region

Author:

15.03.2017

Political and economic ties between Azerbaijan and Iran have been growing rapidly. Over the past three years, presidents of both countries have had eight meetings while the number of meetings among high-ranking officials of Azerbaijan and Iran reaches more than a hundred. Both countries have been able to develop a reliable legal basis for cooperation in the form of bilateral agreements concluded in recent years.

Another impetus for the development of political and economic ties was the meeting of leaders of both countries held on March 5 in Tehran.

According to press-releases of the presidents of Iran and Azerbaijan, it is possible to clearly trace main directions and dynamism of economic relations between the countries at the current stage.

 

From North to South and back

Despite 765 km of border length between Azerbaijan and Iran, the railway communication between our countries was interrupted after the occupation of Azerbaijani lands by Armenian army.

Therefore, in order to intensify economic cooperation, it was important to restore the railway communication in the shortest possible time. This is of strategic importance not only for Azerbaijan and Iran. Russia also demonstrates great interest in this issue. Under the trilateral meetings between Iran, Azerbaijan and Russia, one of the central issues was the development of the North-South Transport Corridor for the transit of commodities from the Northern Europe, Russia through Azerbaijan and Iran to the countries of the Persian Gulf and South Asia. Of course, the key issue for the accelerated and cheapest cargo shipment is the restoration of the railway communication between Iran and Azerbaijan.

The leadership of Azerbaijan has fully fulfilled its tasks on the construction of the railway section, as well as the railway bridge over the Astarachai River, which connects Azerbaijan's Astara with Astara in Iran. But this is only the first step to restore railway communication between Azerbaijan and Iran, as the construction of the railway section of Astara-Rasht is required on the territory of the southern neighbor, which, according to preliminary calculations, requires an investment of $1.5 billion.

However, the leadership of Azerbaijan is not willing to stop the works halfway down the road in order to make Iran to carry the entire burden of financial and construction problems. As noted by President Aliyev, Azerbaijan has mobilized large financial resources for the construction of the railway between Resht and Astara, since the jointly implemented North-South Transport Corridor contributes significantly to regional cooperation.

 

Unclaimed potential

The recent visit of the Azerbaijani president to Iran has demonstrated huge and untapped potential of cooperation in the energy sector between our countries.

As noted by Hasan Rouhani, Iran is interested in the supply of Azerbaijni oil and oil products to the ports of the Persian Gulf and further to the countries of Asia. The parties are also considering the possibility of continuing cooperation on the use of the hydrocarbon resources of the Caspian Sea, and this issue will be a focus of cooperation of oil ministers of both countries.

The main obstacle on this path is the objective reason related to the definition of the status of the Caspian Sea, or rather the coordinates for sectoral division of the sea. The north of the Caspian Sea is completely delineated based on the sectoral principle defined in bilateral and trilateral agreements between Azerbaijan, Russia, and Kazakhstan, while the central and southern parts of the sea are still not defined due to the position of the Iranian leadership.

However, given that Iran is a member of the consortium for the development of the Azerbaijani Shah Deniz field, then it will be possible to ensure joint development of promising hydrocarbon structures located on bordering sectors of the Caspian seabed some time in future.

 

A basis for increasing trade

2016 was one of the most difficult years for the national economy with GDP falling by almost 4% for the first time in Azerbaijan’s history. The increase in the foreign trade turnover between Azerbaijan and Iran last year (by 70%) indicates the effectiveness of measures taken to expand cooperation. This resulted in, for example, the start of construction of joint pharmaceutical and automobile plants.

The expansion of economic cooperation between Azerbaijan and Iran is based on a reliable legal framework, which was manifested on March 5 through two new agreements.

This is a Memorandum of Understanding on cooperation between the Financial Markets Supervision Board of the Republic of Azerbaijan and the Financial Monitoring Department under the Ministry of Economic Affairs and Finance of the Islamic Republic of Iran in the field of combating the legalization of money and other property acquired through criminal and financing terrorism and the Memorandum of Understanding between the Azerbaijan Railways JSC and the railway company of IRI on the joining of railway communication".

The new agreements will promote further development of economic ties between the two countries, including the financial sector. The latter agreement on combatting money laundering and terrorism financing is important for opening banks in Iran and Azerbaijan.

 

Optimum format

Currently, regional political and economic problems are being solved under the leadership of international organizations such as the United Nations, OSCE, European Union, Eurasian Economic Union and other structures.

However, in recent years, the effectiveness of these organizations in solving specific regional problems is increasingly doubtful. The most vivid example is the Nagorno-Karabakh conflict, the continuing occupation of Azerbaijani lands by Armenia contrary to the relevant UN resolutions on the withdrawal of the Armenian armed forces from these territories.

One of the significant mechanisms for solving political and economic problems is regional trilateral formats with the participation of interested countries. That is why the Iranian President, Hasan Rouhani, focused on the effectiveness of trilateral meetings on the Syrian issue with the participation of Russia, Turkey, and Iran.

A similar trilateral mechanism has been successfully used in recent years in the following formats: Iran - Azerbaijan - Russia, Iran - Azerbaijan - Turkey, Iran - Azerbaijan - Georgia, Turkey - Azerbaijan - Georgia. Azerbaijan has played a central role in all these projects acting as a linking partner. As the President of Iran noted, Azerbaijan’s role as a regional partner is growing annually.

 

Enhancing cooperation

Undoubtedly, there are many obstacles to the development of bilateral relations between Azerbaijan and Iran. The first and most important barrier for regional cooperation is the occupation of Azerbaijani territories by neighboring Armenia. For Baku it is important to know the position of the Iranian leadership on this issue, which manifested itself in the implementation of joint projects. Thanks to the joint project on the construction of hydro power facilities Khudaferin and Giz Galasy on the Araz River, Tehran actually confirms the recognition of Azerbaijan’s territorial integrity. According to the agreement, the construction of hydrosystems and hydro plants, as well as the protection of water and energy resources around these facilities until the restoration of Azerbaijan’s territorial integrity will be taken care of by Iran.

President Ilham Aliyev's official visit to Tehran reaffirmed the importance of economic relations between the two countries, as well as the ensuring regional development and stability.



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