15 December 2017

Friday, 12:16

CURRENCY

TEHRAN-2017

Azerbaijan, Russia, and Iran to connect India with Finland

Author:

15.11.2017

Tehran already discusses a plan to launch a new North-South international route through Azerbaijan while the first train from Kazakhstan is running towards the destination point under the Baku-Tbilisi-Kars railway, which is part of the transport corridor West-East.

One of the main topics of the second presidential summit held in Tehran on November 1 between the presidents of Azerbaijan, Russia and Iran was the implementation of the North-South route.

In general, not only the geographical neighborhood, but also the presence of large hydrocarbon resources in the Caspian Sea basin are the factors uniting Azerbaijan, Russia and Iran. In addition, Russian Federation and Iran play instrumental role in the Middle East, particularly in Syria. All these political and economic issues make urge for trilateral format of cooperation. In August 2016, Azerbaijan initiated the first presidential summit in Baku. "The summit demonstrates that this format is very important and has a great potential. Our trilateral cooperation is quite natural, because our peoples are united by common history and geography. Since ancient times, our peoples were in close connection with each other. Trilateral format of cooperation is of great importance for regional security," said Azerbaijani President Ilham Aliyev at the Tehran summit.

 

From Finland to India through Azerbaijan

Discussions were focused mainly on economic cooperation, and particularly, the full-fledged launch of the North-South railway project. Test shipments from India to Russia, including road and rail transport, have been successful since the first presidential summit. The construction of a small section of the railway on Azerbaijani territory, as well as a railway bridge on the border with Iran were also completed within this short period. It remains only to complete the line connecting Resht to Astara (both in Iran). At the summit in Tehran, Azerbaijan and Iran reached an agreement on the allocation of a $500 million loan for the completion of the Iranian part.

The North-South project will provide for a direct traffic link between Iran and Russia and cargo shipments from Northern Europe, including Finland, to India and back. The success of this route is obvious. North-South route will shorten the shipment period from Finland to Iran and India from 45-60 days to 15-20 days. Relevant authorities of the three countries agree on common cargo tariffs to make transportation more profitable.

Several states including Pakistan, Belarus, and the Baltic countries have already expressed their interest in the route by readiness to integrate the existing Viking railway route with the North-South route.

The combination of North-South route with the Baku-Tbilisi-Kars route (BTK) creates additional opportunities for the transit of goods from Iran, India and Middle East to Europe, as well as in opposite direction. BTK can provide access to the markets of the Black Sea region from Iran, India, Pakistan, as well as the supply of Ukrainian products to Middle East.

In addition to transit advantages, North-South will intensify trade operations between Azerbaijan, Russia and Iran.

In particular, the foreign trade turnover between Iran and Russia in 2016 reached only $2.1 billion, which apparently is not an indicator of the potential of both countries. This is due to objective reasons related to the long period of sanctions against Iran regarding its nuclear program. The lifting of majority of international sanctions against Iran opens new prospects for both Russia and Azerbaijan. For Baku, economic cooperation with both neighbors is particularly important given the development of Azerbaijan's non-oil sector. The results are already evident: during nine months of 2017, the foreign trade turnover with Iran increased by 30% (after growing by 60% in 2016), and with Russia by 60%.

"This shows that there are very sincere and friendly relations between the three countries. Obviously, the economic sector and business circles can enjoy these opportunities. At the same time, the growing trade turnover shows that our economy is developing successfully, and the sharp drop in international oil prices has not had a serious impact on our economy," said president Ilham Aliyev.

"We also want to create a green customs zone between the three countries and apply common customs standards," said Iranian president Hasan Rouhani, noting that this measure would expand trade operations even more.

In Tehran, the presidents also discussed the possibility of trade operations using national currencies between their countries. "We plan to expand cooperation in banking sector and discussed the issues related to using national currencies in trade operations. We discussed the possibilities of using national currencies between Iran and Azerbaijan, Iran and Russia, as well as in bilateral and trilateral trade exchanges of the three," said Iranian president.

Given the effective U.S. sanctions against Iran and their expansion in relation to Russia, Rouhani's proposal seems promising for the development of mutual trade.

 

The Caspian Sea unites

Evidently, the presidents of the three Caspian countries could not ignore the issue of the legal status of the Caspian. "We really want to cooperate in environmental field in the Caspian Sea. As the three littoral countries around the Caspian Sea, we must expand cooperation. We also need to complete the definition of the legal status of the Caspian Sea as soon as possible to use its potential," said Rouhani at the summit.

Since the collapse of the USSR more than twenty-five years ago, the five littoral states have not yet managed to resolve the issue of the division of the Caspian. Many issues relating to the environmental protection and security have been resolved though. The combat ships of the Caspian flotillas of Russia and Iran have made numerous friendly visits to the Baku Bay. The Caspian countries often hold exercises to ensure security, prevent terrorist attacks, and closely cooperate for environmental protection. Cooperation on individual components has made it possible to bring the positions of all parties closer to reach the main agreement, which is the legal status of the Caspian. Thus, the agreements on delimitation of the Caspian seabed between Azerbaijan, Russia and Kazakhstan can be considered an advantage.

The newly appointed special representative of the Russian president on humanitarian and economic cooperation with the Caspian states, Ramazan Abdulatipov, said in Tehran that the agreement on the legal status of the Caspian Sea could be signed in 2018 at the summit of the heads of Caspian states In Astana.

 

The actors of the oil market

The presence of large hydrocarbon reserves in all three countries is an important factor of relations between Azerbaijan, Iran and Russia. It was intensely used in bi-, tri- and multilateral formats.

The uncontrolled decline in oil prices, observed since the end of 2014, (from $100 to $30 per barrel) negatively affected all oil-producing countries. Russia, Iran and Azerbaijan were no exception. For Moscow, the situation was aggravated by sanctions in connection with the conflict in Ukraine and the annexation of Crimea. Tehran is still exposed to a strong impact of sanctions due to its missile and nuclear programs.

The sharp decline in oil prices forced the oil-producing countries to join efforts to reduce production and subsequent price increases. For the first time, not only the OPEC countries, but also a number of non-cartel countries, including Russia and Azerbaijan, took on the obligation to reduce oil production. "It is well known that Russia, Iran and Azerbaijan are major producers of hydrocarbons, but this does not mean that we have to compete. This means that we must coordinate our efforts. By the way, coordination under OPEC has already yielded positive results, but this would be impossible if non-member countries did not join the efforts. The same thing happens within the Organization of Gas Producers. We cooperate in this organization and we will continue cooperating," said Russian President Vladimir Putin at the Tehran Summit.

The Russian company Rosneft and the Iranian NIOC approved a road-map for the implementation of joint strategic projects for oil and gas production in Iran. The total amount of mutual investments can reach $30 billion.

The cooperation of the three countries in gas and power supplies is also interesting. In particular, Russia and Iran reached an agreement in Tehran on the supply of Russian gas to Iran. "I would like to draw your attention to the fact that, despite the large production of hydrocarbons in each of our countries, we have a mutual interest in the supply of minerals to each other, bearing in mind the associated internal logistics issues. For example, we reaffirm our readiness to supply natural gas through the pipeline transport systems of Azerbaijan to Northern Iran, which may be economically feasible for our partners," said Mr. Putin.

In fact, the main oil and gas reserves of Iran are in the south of the country. The poor development of Iran's gas infrastructure makes the issue of alternative sources from the north relevant. Deliveries of Russian gas through Azerbaijan can fill this gap, and Baku will receive additional dividends from transit.

It is also important that the economic potential of cooperation between the three countries is built on a strong political foundation based on the interaction of presidents.

Considering the existing situation in Middle East, particularly in Syria and Iraq, the presidents of Russia, Iran and Azerbaijan also discussed in Tehran the fight against terrorism. Thanks to the efforts of Russia and Iran, it was possible defeat the terrorist organization Islamic State in Syria. The fight against terrorism in Syria and Iraq is of no small importance for Azerbaijan, as several hundred citizens of the country have joined terrorist organizations, and their timely identification and neutralization contribute to stability in the country.

Thus, the role of all three countries in the security of the region, particularly in the fight against terrorism and radicalism, is very important.

The trilateral format of cooperation between Baku, Moscow and Tehran is promising both economically and politically. The historical proximity of our peoples contributes to the deepening of cooperation between our countries. This factor, as well close political interaction and wide economic cooperation, urges a need to deepen the trilateral format of cooperation.



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