GERMAN CALCULATION

Azerbaijan is entering a new phase in its trade and economic relations with European countries today: Our country is not only opening up new investment opportunities for businesses from the Old World, but is itself demonstrating its interest in participation in different projects in these countries.  The stability of Azerbaijan's economic growth guarantees the security of investments and encourages European partners to come up with new proposals.  The recent strengthening of economic ties between Azerbaijan and Germany is one clear example.

During his recent visit to Baku, the German Federal Minister for Economics and Technology, Michael Glos, invited Azerbaijani companies to actively invest in Germany.  "There is a need for investment in Germany, and cooperation with Azerbaijan in this area is attractive from our perspective.  In addition, we are interested in deepening our cooperation with Azerbaijan in the energy sector and in the advancement of our partnership in the areas of environmental  protection and waste disposal, information technology, alternative sources of energy, food industries and other areas," M. Glos said.

However, despite the long presence of German companies in the Azerbaijani market, the turnover of sales between the two countries only amounted to $415 million last year and only $200 million in the first half of this year, according to the Azerbaijani State Statistics Committee.  Businesses hope that new projects will help improve the situation.

Proposal No 1:  Investment in waste

In the last 15 years, German business circles have invested a total of $165 million in the Azerbaijani economy.  However, our countries need to broaden the area of cooperation and shift the emphasis towards non-oil-related sectors of the economy.

Germany is today expressing its readiness to invest in different sectors of the Azerbaijani economy.  "There is a huge potential for cooperation between our countries.  In particular, German companies are interested in the electrical energy, light and food industries, water-borne transportation sectors and in projects to improve the environment and the social situation of the population.  There are also investment opportunities in the IT sector, alternative sources of energy, and so on.  We are interested in cooperation with a country that has its own raw materials base," M. Glos noted when he discussed this issue.

As to why German businessmen are cautious about investing in Azerbaijan, among the possible reasons for this, in the minister's opinion, is the legal framework in the economic sector:  "Aspects like legal security, the stability of the banking sector, transparency of financial transactions, elimination of corruption and the prompt adoption of administrative decisions are important for our businesses," the German minister noted.  It is no secret that there are problems with all of the above in Azerbaijan.  However - and this is extremely important - the government is taking strict measures to address these problems, and there is already some success in this regard, which is seen in the current trend towards the broadening of trade and economic relations.

The Azerbaijani Government awaits proposals for direct investment into the country's economy from German companies.  The project to build an industrial waste processing facility would be one of the best examples of this.  Azerbaijani Economic Development Minister, Heydar Babayev, said that the project for the first facility of this type is ready and that the estimated capacity of the facility is 500,000 tons of waste per year.  This is why there are plans to build two more facilities of the same size, and German companies are welcome to take part in these projects.  The facilities will be built near major waste dumps to lower processing costs.  "Processing 1 ton of waste at the first facility will cost 30 manat," H. Babayev said.

Representatives of German companies, for their part, proposed the use of technology to generate electrical energy from the byproducts of waste disposal.  This is precisely what is needed in the provinces of Azerbaijan.  In the opinion of Azerbaijani Minister of Ecology and Natural Resources, Huseynqulu Bagirov, for example, small-sized waste disposal facilities for small towns and villages with populations of up to 20,000 are precisely what is needed in Azerbaijan's provinces.  Electrical energy from such facilities might be supplied to these town and villages.

In addition, German companies can help Azerbaijan, not only with the proper disposal of waste, but also with drinking water purification to international standards.  The Azerbaijani Government intends to install highly effective modular purification facilities on the Kura and Araz rivers to purify water flowing into the country from Georgia and Armenia.

Proposal No 2.  Five billion cubic metres a year

Requests to purchase Azerbaijani energy resources are made at all bilateral, economic negotiations between the country's government and delegations from European countries these days.  The Old World is actively looking for alternative supplies of oil and natural gas, and the Azerbaijani sector of the Caspian Sea seems to be least problematic for this purpose.  "Azerbaijan is a country of great interest to us as a supplier of energy.  We imported 1.85 billion tons of oil from Azerbaijan in 2006.  As for natural gas, we cannot say that we are displeased with our current source of supply, but it always makes sense to negotiate additional sources.  The role of Azerbaijan as an exporter of energy resources to the world is growing.  In general, the Caspian region might become the central oil and gas supplier for Europe.  In this regard, we welcome the Nabucco project, which envisages exports of the Caspian natural gas to European countries," M. Glos said.

In his opinion, our republic can supply 5 billion cubic meters of natural gas a year to Germany, and the Germany company ENBW is willing to start negotiations with the Azerbaijani Government, although supplies depend in large part on the implementation of the Nabucco project.

It has to be said that, until recently, very few people in Europe believed in the feasibility of this large-scale project, but now a growing number of large companies from different countries are joining Nabucco.  As we know, a similar proposal was made by SOCAR, which started talks with other shareholders in the Nabucco project and which is studying the acceptability of the proposed terms and conditions.  "The new gas pipeline will make it possible to transport natural gas directly to Europe, without transit through Russia, from the countries of the Caspian region.  This will enable us to diversify energy supply to Germany too.  We hope that we will sign a contract on launching the project to build the Nabucco infrastructure within a month," M. Glos said.

It must be said here that the very fact of the invitation of an Azerbaijani company to participate in this large-scale project as a shareholder demonstrates that Europe has begun to regard Azerbaijan as an equal economic partner.