WINDOW ON EUROPE

"Mаmlаkаt bashchysy" - is precisely how Azerbaijanis and Kazakhs call the head of state. These two Turkic nations are connected by common historical and cultural roots and perhaps it is this factor that is fundamental to relations currently prevailing between Baku and Astana. However, a recent official visit by Azerbaijani President Ilham Aliyev to Kazakhstan showed that in addition to historical, ethnic and cultural roots, the two countries have common political and economic interests too.

Let us start with the fact that this was President Ilham Aliyev's second official visit to Kazakhstan in three years. This fact in itself speaks of the high importance that Baku and Astana attach to bilateral relations. After all, official visits by heads of state are not as frequent means of diplomacy as, say, working visits. Secondly, at issue is a meeting between presidents - leaders in their regions (Azerbaijan in the South Caucasus and Kazakhstan in Central Asia).

On the other hand, the results of the visit, which both sides were pleased with, point to its significance. Thus, a joint declaration signed as a result of the meeting stresses determination in their aspiration to develop multi-faceted cooperation, both bilaterally and within international organizations. At the same time, Kazakhstan's fundamental support for the UN Security Council resolutions and the principles of the OSCE Lisbon summit on the Armenian-Azerbaijani conflict was especially important to Azerbaijan. "The sides note the importance of a peaceful resolution of the Armenian-Azerbaijani Nagornyy Karabakh conflict on the basis of generally recognized principles and norms of international law, principles of sovereignty, territorial integrity and inviolability of states' borders," the joint declaration says.

The Azerbaijani and Kazakh presidents also stated their adherence to bilateral and multilateral agreements on the delimitation of the Caspian seabed signed by Baku, Astana and Moscow. In their opinion, these documents should be viewed as a fundamental contribution to the process of identification of the legal status of the Caspian.

In addition, the declaration notes "the importance of cooperation in the successful operation of the East-West transport corridor, the implementation of joint transport and energy projects via the Caspian Sea, ensuring uninterrupted transit of Kazakh goods via Azerbaijan's territory and of Azerbaijani goods via Kazakhstan's territory, and the formation of a favourable investment climate". The sides consider "the development of transport-communications ties and expansion of cargo transportation between Europe and Asia to be a priority task of regional cooperation".

Also signed as a result of talks held were: a protocol on making amendments to an agreement between Azerbaijan and Kazakhstan on the extradition of convicts for the serving of the remainder of their prison terms, an intergovernmental agreement on cooperation in the area of production and scientific-technical cooperation between defence industry companies, a memorandum of mutual understanding between the state committee for securities under the Azerbaijani president and the agency for regulating and supervising the financial market and financial organizations of Kazakhstan, as well as an agreement between the closed-type joint-stock company Azerbaijani TV and Radio Broadcasting and the joint-stock company Republican TV and Radio Corporation Kazakhstan.

In the meantime, as expected, a key topic in the talks was cooperation in the oil and gas area, to be exact, in the area of the transportation of Kazakh energy resources via Azerbaijan. During the visit, an agreement on strategic cooperation in the oil and gas industry and a memorandum on the joint implementation of a trans-Caspian project were signed between the State Oil Company of the Azerbaijani Republic (SOCAR) and the Kazakh national company KazMunayGaz.

Under the agreement, SOCAR and KazMunayGaz will set up a joint venture to carry out work to build facilities for the transportation of Kazakh oil via the Baku-Tbilisi-Ceyhan pipeline, SOCAR President Rovnaq Abdullayev said in Kazakhstan. He said that the facilities include a port in Kuryk, tankers, a transport system, terminals in Baku and their connection to Baku-Tbilisi-Ceyhan. The two sides also consider the possibility of joint use of the terminals in Kulevi and Batumi on Georgia's Black Sea coast. One of the terminals is owned by the Kazakh company and the other by Azerbaijan's SOCAR.

As Uzakbay Karabalin, head of KazMunayGaz, noted, Azerbaijan and Kazakhstan can also implement a joint project for the construction of a terminal in Turkey's Ceyhan. "As you know, we plan to build an oil refinery in Turkey. This issue has long been discussed at top level between both Kazakhstan and Turkey, and between Azerbaijan and Turkey. We intend to continue discussing this project and assessing it and if we see that this project is expedient, then joint cooperation is possible," he noted.

As can be seen, Kazakhstan considers Azerbaijan a guarantor of its transport independence, and statements that in the manoeuvring between Russia and the USA, Astana will not join alliances for transportation of energy resources backed by the West come to nothing. At the same time, one should also not forget about the fact that the trans-Caspian system, which SOCAR and KazMunayGaz agreed to implement jointly, is part of the Kazakh Caspian transport system (KCTS) which has long been designed by Astana.

Increased oil extraction and challenges by importing countries compel Kazakhstan to conduct an increasingly more independent and flexible policy. For the time being, Astana is exporting oil via the port of Novorossiysk, primarily using the Caspian Pipeline Consortium (CPC) which is loaded to the maximum. However, with the commissioning of the largest field, Kashagan, an increase in extraction up to 84m and 150m t is expected by 2010 and 2015 respectively. In such conditions, Kazakhstan is interested in increasing its existing transport opportunities. But in return for expanding the capacities of the CPC, Russia demands an increase in transit tariffs, which foreign oil companies operating in Kazakhstan do not agree to.

True, Astana stresses that in comparison with the Atyrau-Samara and the Caspian Pipeline Consortium, the transportation of oil via the Baku-Tbilisi-Ceyhan will cost them more. But in any case, according to Kazakh Energy and Mineral Resources Minister Baktykozha Izmukhambetov, Kazakhstan needs the Caucasus route, as oil production will dramatically increase while the possibilities of the CPC are limited.

On the other hand, this issue is far from being a technical one. Pinning its hopes on Azerbaijan, Kazakhstan deprives Russia of an opportunity to talk from a position of strength; at least concerning the delivery of energy resources to world markets.

What is more, Kazakhstan is already now demonstrating a tendency to decrease its dependence on Russian routes. If up to 90 per cent of Kazakh oil was exported via Russia before, the figure is already down to 72 per cent today. And, to all appearances, it will decrease by the year.

The only "but" is a possible lack in the throughput capacity of the Baku-Tbilisi-Ceyhan oil pipeline. The thing is that this oil pipeline was originally designed for 50m t and many people's foreboding was that Azerbaijan would not be able to fill the pipeline, even with Kazakhstan's help. But already today it is clear that the designed possibilities of the main export pipeline are inadequate for the growth in oil volumes.

However, in this regard, too, Azerbaijan does have something to offer. As SOCAR President Rovnaq Abdullayev noted, if need be the sides can build a new pipeline from Baku to the Black Sea to transport Kazakh oil. "If there is more Kazakh oil, then we can jointly build a pipeline from Baku to the Black Sea," he said.

Azerbaijan's other advantage is that it is a more convenient a partner for Kazakhstan than Russia. The Azerbaijani option is politically less risky and there are fewer tariff-related problems with Baku.

Considering all these realities, Astana is demonstrating quite a pragmatic position in the issue of ensuring its gateway to international markets. And in this sense Kazakhstan cannot but notice Azerbaijan's key role as a connecting junction between Asia and Europe. Official Baku is quite effectively implementing its transit state strategy, maximally using its beneficial geopolitical location at the crossroads of the East-West and North-South transport corridors. 

What is more, the talk is not only of the transportation of hydrocarbon resources. "Kazakhstan's interest is to use the Caspian and Caucasus corridor to access the Black Sea and Europe, not only with oil and gas, but with dry cargo too," President Nursultan Nazarbayev said at a joint news conference with President Ilham Aliyev. 

In turn, the Azerbaijani president said that the sides had also held talks on Kazakhstan's joining the Baku-Tbilisi-Kars railway project. "This, in essence, is a new Silk Road which will make it possible to transport Kazakh and then Chinese goods in a more economical way to sales markets," the Azerbaijani head of state stressed in an interview with the Kazakh newspaper Ekspress K.

Kazakhstan's joining this project will also allow Azerbaijan to transport its cargos to China and other Asian countries. During the visit, agreement was also reached on the supply of fruit and vegetables from Azerbaijan to Kazakhstan's regions and on the joint construction of a mill complex. 

Nursultan Nazarbayev recalled that Kazakhstan had already taken the opportunity to export grain to world markets via Azerbaijan's territory and a large grain terminal is operating in Baku to this end. 

All this, the heads of state believe, should facilitate the formation of new trends in cooperation and an increase in trade between Kazakhstan and Azerbaijan from the current 300m to 1bn dollars.

It only remains to add that today trade between Azerbaijan and Kazakhstan is formed primarily by imports of gas, grain and olives. But considering the economic potential and the needs of the two countries, the target of 1bn dollars is not a limit either.