MAINTAIN AND MULTIPLY

Last year was extremely successful for trade and economic links between Russia and Azerbaijan, which developed dynamically. Bilateral trade turnover exceeded $2.4bn for the year, beating the 2bn forecast. At the start of this year the volume of bilateral trade dropped slightly as a result of the global crisis, but Moscow and Baku are intent on doing their utmost to prevent a fall in the intensity of mutual economic cooperation. The head of Russia's trade representation in Azerbaijan, Yuriy Shchedrin, talked about the problems and prospects for economic cooperation between the two countries:

- What is the level of Russian-Azerbaijani economic relations today?     

- Despite the global economic crisis, trade and economic relations between our countries are stable overall. According to figures from the Russian Federal Customs Service, bilateral trade turnover last year increased by 39.3% on the previous year. But the economies of the CIS states have to a greater or lesser extent felt the influence of the worldwide downturn. In the first five months of the year Azerbaijani-Russian trade turnover fell by 11.3% and stood at $580m. Russian exports to Azerbaijan fell by almost 8% while Azerbaijani exports to Russia fell by 17.3%. 

The main reason is the well-known problem that has arisen in several sectors of the Russian economy, but mainly in machine-building - a fall in demand on our market for traditional Azerbaijani exports. The picture is similar for other CIS countries: since the start of the year Russian trade turnover with CIS countries fell by 46.6% on average.

Despite the temporary problems, the prospects for the development of trade and economic cooperation between Russia and Azerbaijan are very bright. A distinguishing feature of Russian exports is the significant proportion of production with high added value, including engineering equipment. Russian exports of various types of energy equipment, cars, construction equipment and spare parts are expected to grow this year. 

It is entirely feasible to reach the trade forecast in 2009 - $2.5bn - but the main challenge this year is to maintain trade at last year's levels.

- Since the start of the year Azerbaijani exports in a range of non-oil sectors, including exports to Russia, have seen a marked fall. How can this negative trend be overcome?

- Foodstuffs dominate Azerbaijani exports to Russia (53% of the overall volume of exports to Russia). Azerbaijan also exports chemical products to the Russian market, oil well tubing, cotton, etc. These sectors are also living through hard times because of the crisis. But we know that the Azerbaijani government has worked on and is applying anti-crisis measures which envisage, inter alia, diversifying the country's export potential and state support for the non-oil sector. We think that in the very near future these measures will produce tangible results and we will witness a growth in Azerbaijani exports, including to Russia. This will, of course, also be helped by the recent agreements on supplies to our country of natural gas from Azerbaijan (agreements reached during Russian Federation President Dmitriy Medvedev's visit to Azerbaijan - Ed.) 

- What reserves are there to increase mutual investment between the two countries? 

- Unfortunately, the volumes of direct investment in the economies of our two countries do not yet meet the level of bilateral trade. One of the reasons for Russian companies' low investment in the Azerbaijani market is the fact that our countries have not yet reached an agreement on encouraging and protecting investments. The absence of an agreement creates some risks for investors, often forcing them to enter the market under other countries' flags. However, the governments of both countries have recently done a substantial amount of work to prepare an agreement and this crucial document may even be signed this year. 

Despite the lack of an interstate agreement, Russian investment into the Azerbaijani economy has been increasing in recent years. Today some 500 enterprises are working in Azerbaijan with the involvement of Russian capital, one-third of which have been founded with 100% Russian capital. A striking example is Russian brewing company Baltika's purchase of shares in Azerbaijan's Baku Castel: $20m have been invested in modernizing the brewery and a grand opening ceremony was held in May. Russian holding company Crocus International plans to invest around $1bn in creating an international-class resort complex on the Abseron Peninsula. Documents were recently signed on the creation of a joint venture by Russian company Synterra and the local Aztelekom. The new joint venture plans to lay a cross-border fibre-optic interconnection on the Derbent-Quba section, creating an international communications line with an initial capacity of 10 Gbit/second. 

A year ago one of Russia's major banks, Vneshtorgbank, opened in Azerbaijan and now a variety of other Russian insurance and leasing companies are studying Azerbaijan's financial market. Moving in the other direction, discussions are under way on the creation of Azerbaijani logistical centres in a number of Russian regions to systematize and facilitate exports, primarily of agricultural produce. One of the first centres may be set up in Tambov Region. The option of creating a joint Azerbaijani-Russian venture fund to support innovative projects and encourage cooperation between the countries' small and medium-sized enterprises may be considered in future. 

To sum up, the scope for cooperation is pretty broad. And the high level of political relations between Russia and Azerbaijan and the growing potential of the national economies form a good basis for the further development of bilateral trade and economic relations.