DESPITE ALL PROBLEMS

Russia has always been regarded as one of Azerbaijan's trading and economic partners, although business relations sometimes falter and disagreements occur, as was the case with the rise in the price of Russian gas imported by Azerbaijan. But on the whole, the two states continue to cooperate, buying and selling goods, investing in various projects and opening new horizons for economic contacts.

For this reason, it has proved possible to fulfil the task to increase trade turnover to 2bn dollars, as set by the presidents, Ilham Aliyev and Vladimir Putin, two years ago. Although Russian gas supplies to Azerbaijan were terminated on 1 January 2007, foreign trade turnover between the two countries increased by 8.5 per cent in four months, even though "the gas issue" amounted to a loss of 450-500 million dollars in trade turnover. If we leave aside the volume of power and gas supplies, then trade turnover increased by 28.5 per cent. At the same time, exports from Azerbaijan increased by 71 per cent and imports by 14.5 per cent.

The target of 2bn dollars

According to the head of Russia's trade representative office in Azerbaijan, Yuriy Shchedrin, the increase in trade turnover was due to growing supplies of products from the machinery construction sector and other spheres with a high added value. Today 30 per cent of trade turnover is in machinery-technical equipment. At the same time, supplies of construction and food products from Russia are also increasing. In Shchedrin's opinion, there are no special changes in the structure of goods exported from Azerbaijan, except for the increasing export of metal pipes. 

"We are taking seriously the issue of making up for the losses from the termination of Russian gas supplies by increased trade in spheres with a high added value, in order to implement the task set by the two heads of state to increase trade turnover to 2bn dollars in the next few years," the trade representative said. In his opinion, there are the resources to reach this level and it is necessary to improve the structure of trade turnover, introduce hi-tech equipment and establish cooperation in the sphere of telecommunications, high technology and so on.

At the same time, regions of the Russian Federation, and individual Russian companies, are also interested in working in Azerbaijan. "The Orenburg and Kemerovo regions of Russia are interested in Azerbaijan. They are currently drawing up an agreement 'On trade-economic, scientific-technical and cultural cooperation with Azerbaijan'. What's more, Krasnodar Territory also has an interest in Azerbaijan. Thus, the number of Russian regions to establish direct relations with Azerbaijan might increase to 15," Shchedrin said. He said that an Azerbaijani delegation is expected to visit Sverdlov Region in August-September and Moscow Region in September. "These visits are directed towards expanding trade-economic relations," he pointed out, adding that relations with Tatarstan are also developing rapidly (Interfax-Azerbaijan).

Mutual benefit

As for companies, KamAZ is in ongoing negotiations with the Azerbaijani government at the moment. The negotiations focus on designing special equipment for the republic's construction sector and for the economy as a whole (Interfax-Azerbaijan). "The most fundamental issue is whether Azerbaijan will agree to create privileged conditions. First of all, we are talking about tax privileges and power tariffs," Shchedrin said. We have to observe that although no decision has been adopted on this issue yet, KamAZ is an active participant in the Azerbaijani market. A considerable number of vehicles imported from Russia into Azerbaijan are made by KamAZ. Moreover, there is an agreement on supplies of chassis for KamAZ vehicles and on the construction of special equipment based on the needs of the construction and other sectors of the Azerbaijani economy. 

It is quite possible that the Ural optical-mechanical factory will soon sign a significant contract on supplies to Azerbaijan. This might happen following a recent meeting at the Paris Le Bourget air show between representatives of this company and the Azerbaijani Emergencies Ministry. For the time being, there is a verbal agreement on the opening of a representation of the Ural optical-mechanical factory in Azerbaijan. "Representatives of this company have visited Azerbaijan and held several meetings. However, they are unaware of the specifics of the local market which require the permanent presence of a representative here. In the near future, they will appoint their representative in Azerbaijan, and the candidate has already been chosen," Shchedrin said.

At the same time, he pointed out that Russian companies are interested in producing and supplying to Azerbaijan tractors and other agricultural equipment, medical equipment, buses, railway tanks, locomotives and in updating the carriages on the Baku metro.

Shchedrin stressed that Russia is interested not only in investment in Azerbaijan, but also expects Azerbaijani investment in the Russian economy. "Azerbaijan's financial potential is increasing and there are opportunities for investments in major regional projects and in projects in Russia. There are a number of promising ideas that could be implemented in this direction," he pointed out. For example, Russia has proposed that Azerbaijan take part in the construction of the second line of the Volga-Don canal. As for the proposals of the Azersun Holding company to set up tea factories in the Tomsk Region and the Krasnodar Territory, the Russian side is examining them right now.

Problems must be solved

However, not everything is so clear in Azerbaijani-Russian trade-economic cooperation. It appears that Russian companies are experiencing certain difficulties here. They are related mainly to the lack of proper transparency, attempts to monopolize foreign economic activity, as well as to the weakness of the legal base. What's more, these problems are characteristic of both Azerbaijan and Russia, Shchedrin admitted.

In order to eliminate these problems, a decision has been made to set up a permanent coordinating-methodological centre. "In Azerbaijan, there are currently more than 400 companies with Russian capital. The monitoring we carried out showed that more than 300 of these companies are working stably, but at the same time, small and medium-sized businesses need certain support to identify directions of activity," he said, adding that it is pleasing that there are no "here today, gone tomorrow" Russian firms and companies involved in machinations in Azerbaijan. In his opinion, it is necessary to modernize the system of border and customs checkpoints and to improve the transport infrastructure, "without which we will not be successful".

At the same time, the head of the Baku centre for innovative technology, Farhad Mehdiyev, said that today Azerbaijani-Russian cooperation is not based on serious production and scientific-technical cooperation.

For this reason, experts suggest setting up a joint Azerbaijani-Russian centre to train specialists in innovation. This project was included in the programme on humanitarian cooperation between Azerbaijan and Russia, 2007-09, in December last year. It says that the ministries of economic development of Azerbaijan and Russia are responsible for the establishment of this centre. "We agreed that the education and training of specialists are an economic problem, not a humanitarian one. Russian institutions of higher education are already using the experience of distance learning today," Mehdiyev said. At present, discussions are continuing on the opening of branches of Moscow State University and Moscow State Institute for International Relations in Azerbaijan. What's more, there is a tremendous potential for distance learning which suggests possibilities for the use of telecommunication, Internet and video in the process of education on Azerbaijani territory (Novosti-Azerbaijan).

"We have agreed with the Agency to Promote Investment and Trade of the Russian Ministry of Economic Development, the Azerbaijani Foundation to Encourage Export and Investment (AZPROMO), the Union of Azerbaijani Journalists and the AzEuroTel telecommunications company to set up this centre. At the same time, we are working on a project that will allow our citizens to access the Russian electronic library, which contains about 200,000 books," Mehdiyev pointed out. If it works, the project for the establishment of the centre will be put up for debate by a session of the Azerbaijani-Russian intergovernmental agreement soon.