ACROSS ALL SECTORS

Over the past two decades, Moscow and Baku have established a robust economic foundation characterized by mutually advantageous trade and a dynamic investment partnership. This success is underpinned by a comprehensive legal framework comprising over 260 interstate, intergovernmental, and interdepartmental agreements. The nations are further deepening their investment in industry, agriculture, among other sectors, while tourism continues to flourish. A recent visit to Baku by Russian Prime Minister Mikhail Mishustin and Russian Economic Development Minister Maxim Reshetnikov sparked an in-depth dialogue on trade and economic relations, exploring avenues for their further enhancement.

Key Agricultural Partners

Azerbaijan stands as Russia's principal trading ally in the South Caucasus, recently representing approximately 40% of Russia's aggregate trade with the region's nations. Conversely, Russia has consistently been the foremost importer of Azerbaijani agricultural and other non-oil commodities for numerous years.

"Azerbaijani-Russian cooperation in the trade and economic domain is quite satisfactory, with a growth exceeding 17%—a positive sign as we near the $4.5 billion threshold," stated Azerbaijani President Ilham Aliyev during a reception for a Russian delegation led by Russian Prime Minister Mikhail Mishustin in Baku. "I am confident that the agreements forged during this visit will catalyse an even more substantial increase in our mutual trade in the upcoming year and by the close of this year." The President also highlighted the complementary nature of the two nations in agriculture: "We procure what is necessary from you, and there has been a notable increase in the influx of Azerbaijani agricultural produce into the Russian market."

Russia maintains its leading position in the import of fresh fruits and vegetables from Azerbaijan, accounting for over two-thirds of all agricultural imports. This includes tomatoes, apples, cherries, seasonal young potatoes, peaches, hazelnuts, and more. Additionally, since the previous year's end, Azerbaijan has emerged as a top supplier of eggs and chicken meat. In exchange, it imports from Russian enterprises cereals (food wheat), flour, confectionery, sausages, vegetable and butter oil, fresh and canned fish, among others. Furthermore, in light of the Russian ruble's depreciation, the volume of food products procured has surged dynamically in 2023, and this trend seems poised to persist into the current year.

Industrial Cooperation

"The bilateral industrial cooperation projects signify a relatively novel aspect of our partnership, with Russian firms establishing new production and service centres in Azerbaijan, thereby fostering more comprehensive industrial collaboration," remarked President Ilham Aliyev.

Significant strides have been made in this domain. The advancement of joint industrial ventures was a focal point of discussion during Mishustin's meeting with Prime Minister Ali Asadov, with particular emphasis on executing collaborative initiatives in energy, industry, and transportation. The vigorous dynamics of industrial cooperation were underscored, including the successful execution of joint ventures in Azerbaijan for the production and assembly of lorries, commercial vehicles, pharmaceuticals, and more.

In this context, it is noteworthy to mention the assembly projects for various models of Russian heavy trucks KAMAZ and Ural at the Ganja Automobile Plant, as well as medium-tonnage trucks from the Russian company Gorkovsky Automobile Plant, in collaboration with the Azerbaijani company AzerMash in the Hajigabul Industrial Quarter. The recent completion of the "Auto Leasing Azerbaijan" LLC's project marks a significant milestone, establishing the largest service centre in the South Caucasus region within the industrial zone of Jabrayil district's "Araz Valley Economic Zone." This centre is poised to offer an extensive array of technical and maintenance services for trucks and agricultural machinery. Additionally, a collaborative effort with the Russian company R-Pharm has resulted in the construction of a pharmaceutical enterprise in the Pirallahi Industrial Park. Gazprombank, a leading Russian bank, has notably become the primary investor in the SOCAR Polymer petrochemical plant in Sumgayit, extending a loan of $489 million over a decade.

Presently, Azerbaijan hosts over 760 companies with Russian capital, which also contribute as contractors to various projects within the nation. Throughout the initial two decades of this century, Russian investments in Azerbaijan's economy have amounted to $4.2b, with the oil sector receiving over $2.8b. Conversely, Azerbaijani entrepreneurs have invested approximately $1.5b in the Russian economy, predominantly in sanatoriums, resorts in the North Caucasus, greenhouse farms, and other agricultural enterprises in Dagestan, among others.

Transport and Energy Exchange

President Ilham Aliyev has emphasized the transport and logistics sector as a pivotal area of bilateral cooperation, bolstered by the signing of pertinent agreements: "We are witnessing an increase in both transit and bilateral freight traffic. The North-South International Transport Corridor (ITC) is a project that binds our nations together. The existing infrastructure across Azerbaijani and Russian territories requires modernization to enhance its cargo handling capabilities."

Moscow endorses Baku's initiatives in this domain, including the development of new road and railway infrastructures in the southern and western directions. This encompasses the Zangazur Corridor project and the railway line from Baku to Astara as part of the North-South ITC. Notably, on May 17 of the previous year, transport department leaders from Russia and Iran inked an accord for joint financing, design, and construction of the 170-kilometre Resht-Astara section. Russia has pledged to cover 85% of the interstate loan for this venture and is prepared to allocate around $1.5 billion for the expansion and modernization of the ITC infrastructure across its own and Iranian territories. Azerbaijan, as a crucial component of this project, is gearing up to finalize its segment in tandem with the anticipated operational launch of the Resht-Astara line by the end of 2027.

Concurrently, the volume of cargo transshipment, inclusive of transit between Azerbaijan and Russia, has seen a dynamic surge. "It's noteworthy that our border checkpoints' throughput capacity has quintupled. This achievement is the result of systematic efforts by our Ministry of Transport, in collaboration with esteemed Azerbaijani colleagues. We remain committed to advancing all collaborative logistics projects, including the North-South corridor, which has already handled 30 million tonnes—a substantial figure. Naturally, we aim to eliminate any bottlenecks along the route," stated Russian Prime Minister Mikhail Mishustin during his Baku visit.

The fortification of the Azerbaijani-Russian-Iranian energy bridge has also witnessed commendable progress. Since the Soviet era, the energy grids of Azerbaijan and Russia have been interconnected via two lines—Derbend (330 kV) and Yalama (110 kV). Furthermore, the nations have concurred on the installation of a third parallel high-voltage line. The 330-kilovolt transmission line Absheron-Yashma-Derbend is set to enhance energy exchange with Russia and bolster transit opportunities through Azerbaijan. System substations and transmission lines have been upgraded along the route from the Russian border in recent years. On February 8, 2022, President Ilham Aliyev inaugurated the revamped 330/220/110/10-kilovolt Yashma junction substation, now equipped with a shunt reactor. The modernization ensures the substation's capability to handle increasing transit electricity flows. Moscow and Baku are jointly working to augment the capacity of the border transmission system and further develop the energy bridge.

Tourism as a Priority

"The discussions in Baku present an excellent chance to align our efforts in advancing bilateral cooperation, pinpoint new collaborative ventures, and enhance interactions between the entrepreneurial and private sectors of both countries," stated Azerbaijani Economy Minister Mikayil Jabbarov on social network X after his meeting with Russian Economy Minister Maxim Reshetnikov.

"Trade turnover between our nations is on an upward trajectory, with over half—54.2%—of Russian-Azerbaijani trade conducted in national currencies. Russia ranks among the top five investors in Azerbaijan's economy, having invested approximately $274 million last year. Currently, various projects involving Russian participation are underway within the republic, spanning sectors from IT and aircraft manufacturing to healthcare and light industry, amounting to nearly $624 million," Reshetnikov remarked during the Baku talks.

Tourism has been earmarked as a key area for collaboration between the neighbouring countries. Notably, Russian visitors accounted for about 30% of the total inbound tourism to Azerbaijan last year. Reshetnikov, during his meeting with Fuad Naghiyev, chairman of the State Agency for Tourism, acknowledged that while pre-pandemic levels have not been fully regained, statistics from 2023 show Azerbaijan as the leading destination for Russian tourists. A legislative proposal is in the works to invigorate Russian tour operators' activities in CIS countries, which will fortify the tourism partnership with Azerbaijan. The Road Map for Tourism Development between Azerbaijan and Russia for 2024-2026, signed on March 5, 2024, in Baku, aims to create new avenues for expanding the recreational ties between the two nations. Russian estimates suggest that the Road Map could lead to the development of joint tourism programs by 2027, a 40% increase in mutual tourist traffic, and a milestone of 1 million trips annually. The meeting also covered topics such as increasing regular direct flights with Russia, establishing an Azerbaijani tourist office in Moscow, and exploring the potential for cruise tourism in the Caspian Sea.

In essence, the multifaceted economic strategy between Azerbaijan and Russia indicates a commitment to fully harness the potential for escalating trade turnover and mutual investment volumes in a brief timeframe.