BUSINESS DIVERSIFICATION

In recent years, Azerbaijan has actively expanded its economic ties with Southern and Eastern European countries through the Southern Gas Corridor (SGC) project and a new strategy focused on exporting green energy. Simultaneously, business relations with Bulgaria, Romania, Hungary, Croatia, Serbia, Slovakia, and other regional partners have strengthened in the non-oil sector, leading to increased trade ties and investment opportunities. The effectiveness of this approach was evident during the official visits of Slovak Prime Minister Robert Fitzo and Bulgarian President Rumen Radev to Azerbaijan in early May, where strategic cooperation agreements and new business projects were signed.

Gas Market

The partnership between Baku, Sofia, and Bratislava has been built on a solid foundation of mutual respect and active cooperation, including within international organizations. These countries share similar positions on the basic principles of international law and respect for sovereignty. Together with the aspirations of their peoples and business communities, this forms the bedrock for successful economic endeavours today. The Balkan region holds particular importance for Azerbaijan, serving as the basis for the long-term export strategy of the South Gas Company. In recent years, crucial agreements have been reached in the gas sector, including cooperation memoranda between the gas transmission network operators of Bulgaria, Romania, Hungary, Slovakia, and Azerbaijan's SOCAR.

The Azerbaijani-Bulgarian gas cluster has seen significant development. As early as September 2013, Bulgarian holding company Bulgargaz EAD signed a 25-year contract with the Shahdeniz consortium for the purchase of one billion cubic meters of natural gas. Subsequently, deliveries to Italy and Greece via the Southern Gas Corridor (SSC) began in December 2020, making Bulgaria the next recipient of this "blue fuel." Since October 2022, the Greece-Bulgaria Interconnector (GBI) has been in commercial operation, expanding the possibilities for delivering Azeri gas to the Bulgarian market and the wider Southern European region.

During Rumen Radev's recent visit, Azerbaijani-Bulgarian cooperation in the energy sector received a new impetus. Several important documents were signed, including a Joint Declaration on Strengthening Strategic Partnership. Azerbaijani President Ilham Aliyev emphasized the rapid and successful development of relations between Bulgaria and Azerbaijan since 2015, with trade turnover increasing significantly. Notably, Azerbaijani natural gas exports to Bulgaria have risen steadily, reaching 1.25 billion cubic meters last year—compared to just 600 million cubic meters in 2022. By year-end, the volume of Azerbaijani gas exports is projected to reach 1.5 billion cubic meters, approximately half of Bulgaria's annual consumption. Ilham Aliyev underscored Azerbaijan's commitment to supporting energy security and its expanding role as a pan-European gas supplier.

Bulgaria also plays a crucial role as a transit country for transporting Azerbaijani gas to Romania and Serbia. Rumen Radev emphasized that Azerbaijan plays a pivotal role in Bulgaria's energy sector, serving as a key partner in diversifying the country's gas supply. Since April 2023, SOCAR's representative office in Sofia has been operational, covering not only projects within Bulgaria but also the entire Balkan region. The energy collaboration will continue, with SOCAR participating in the development of distribution networks and the gasification of small towns in Bulgaria. On May 8th, a significant memorandum of understanding was signed in Baku between SOCAR and Bulgaria's largest holding, Asarel Investment.

The successful partnership with Bulgaria in the gas sector also holds promise for Azerbaijan-Slovak business ties. During Slovak Prime Minister Robert Fitzo's visit to Azerbaijan, it was stated that Azerbaijan currently exports natural gas to eight countries, with hopes that Slovakia will become the ninth. Last April, the Ring of Solidarity document was signed, creating favourable conditions for transporting Azerbaijani gas to the Slovakian market. This initiative is part of the modernized Solidarity Ring (STRING), which aims to supply additional gas volumes from Azerbaijan to Europe. Bulgaria initiated the STRING system, and all participating countries, including Slovakia, boast capacious underground gas storage facilities and extensive pipelines for receiving and storing Azerbaijani gas.

In addition to natural gas, green energy exports are strategically important for cooperation with Southern and Eastern Europe. An agreement signed in Bucharest on December 17, 2022, outlines the laying of an electric cable under the Black Sea, connecting Georgia, Romania, Bulgaria, Hungary, and the rest of Central Europe. This ambitious project, known as Black Sea Energy, is estimated to take 3-4 years for implementation. The European Commission is expected to sponsor the laying of the high-voltage submarine cable, which will be one of the world's longest. Azerbaijan actively collaborates with partner countries, including Bulgaria, in this endeavour. The feasibility study for the project is expected to be ready in the coming months, solidifying Azerbaijan's position as a supplier of both oil, gas, and "green" energy to Europe.

Another crucial aspect of cooperation lies in utilizing transit opportunities along the Middle Corridor. Initiatives such as the Europe-Caucasus-Asia transport corridor, the Trans-Caspian international transport route, and the Black Sea-Caspian Sea project (developed by Bucharest, Baku, Tbilisi, and Ashgabat) facilitate joint transit efforts. President Ilham Aliyev informed his Bulgarian counterpart about the recent modernization of the Baku-Tbilisi-Kars railway, significantly increasing its capacity. This enhancement will enable the transportation of larger cargo volumes through the Middle Corridor, further strengthening trade relations with Black Sea countries.

During the Bulgarian president's visit, a round table was organised by the Foundation for the Promotion of Exports and Investments in Azerbaijan, with support from the Ministry of Economy. "The development of Azerbaijani-Bulgarian economic ties is underpinned by 65 documents, positioning Bulgaria among Azerbaijan's top 10 export markets," stated Deputy Economy Minister Sahib Mammadov. Notably, bilateral trade turnover has surged significantly compared to 2023. In the first quarter of 2024 alone, mutual trade expanded nearly fourfold, reaching $153 million, with Azerbaijani exports soaring to $146 million, driven by robust positions in the energy sector. Simultaneously, the scope of Azerbaijani-Bulgarian business collaboration is set to broaden through joint ventures in the non-oil sector.

Dimitar Bratanov, Head of the Board of Directors of the Bulgarian-Azerbaijani Chamber of Commerce and Industry, emphasized the existing 15 Bulgarian companies operating in Azerbaijan, highlighting abundant opportunities for further cooperation. Specifically, Bulgarian company DRONAMICS proposed a partnership with Azerbaijan's SILK Way to establish a regional airline using unmanned aerial vehicles (UAVs) for cargo transportation. An agreement was also signed between AZAL and Bulgarian Airlines to restore regular flights between Sofia and Baku. Discussions encompassed potential joint projects in digitalization, renewable energy sources (RES), waste oil processing, and tourism. Bulgarian firms were invited to participate in projects within Azerbaijan's economic zones and the recently liberated territories.

Turning to Azerbaijan-Slovak economic ties, the bilateral legal framework has expanded with 11 signed documents. Economy Minister Mikayil Jabbarov highlighted the recent agreement on double taxation cancellation, expected to take effect on January 1, 2025, further enhancing the business environment between the two countries. This regulatory foundation provides a solid basis for economic partnership.

Bratislava views Baku as a key partner in the South Caucasus across trade, economic, transport, transit, investment, and innovation spheres. However, the current annual export of goods from Slovakia to Azerbaijan stands at a modest €8 million, with reciprocal supplies at €1 million. Recognizing the untapped economic potential, representatives from 37 Slovak companies and structures participated in a joint business forum in Baku. They expressed readiness to share expertise in energy, ICT, electronics production, automotive industry, and space technology. In return, Slovak companies are keen to engage as contractors in construction and reconstruction projects within Azerbaijan's liberated territories. Notably, Slovaks will contribute to the reconstruction of Garvand village in the Aghdam district, leveraging concepts like "smart city" and "smart village."

The official visit of Slovak Prime Minister Robert Fitzo to Azerbaijan yielded significant outcomes, including the signing of several new Azerbaijan-Slovak documents. These include a Memorandum of Understanding between the Azerbaijan Investment Company and Slovak Eximbank, as well as a Memorandum of Cooperation between Slovak company SEAK Energetics and Azerbaijani ITECH GROUP Ltd. The meeting in Baku resulted in significant agreements between Azerbaijan and Slovakia, including a Joint Declaration establishing strategic partnership, a Memorandum of Understanding on military-technical cooperation, and an agreement for collaboration in the defense sector. Notably, these agreements also pave the way for joint production of military equipment. Meanwhile, economic relations between Azerbaijan, Bulgaria, and Slovakia are poised for an active phase, promising increased mutual trade turnover and exciting new projects.