A CONVENIENT MOMENT

The lifting of international sanctions on Iran and the implementation of Azerbai-jan's new economic policy aimed at reducing the negative impact of the global crisis have created fundamentally new conditions for developing cooperation between the two countries. A rather favourable situation has taken shape for forging Azerbaijani-Iranian ties on a qualitatively new level. It is primarily in this context that the Azerbaijani president's official visit to Iran on 23 February needs to be regarded.

Within the framework of the visit, Azerbaijani President Ilham Aliyev had meetings with the Supreme Leader of the Islamic Republic of Iran Sayyid Ali Khamenei, President Hassan Rouhani and members of the Iranian government. The sides discussed bilateral and multilateral cooperation in different spheres, as well as the regional and world agenda. At the end of the talks, 11 documents were signed on the development of ties in transport, joint use of the Caspian's energy resources, finance, healthcare, customs regulation and cooperation in tackling emergency situations.

Baku and Tehran are pursuing a new path

Judging by the statements that the president made to the press, the parties were satisfied with the outcome of the meetings. "This is our fifth meeting in the last two and a half years. It is very encouraging that each of our meetings serves the further development of relations between the two countries," Hassan Rouhani stressed. "Our relations are built on a firm foundation, and today Iranian-Azerbaijani ties have risen to the level of strategic cooperation," Ilham Aliyev stated in his turn.

So, it is no accident that among the wide range of issues discussed and documents signed, the heads of state paid particular attention to issues relating to the implementation of the international "North-South" transport project. Tehran and Baku have actually brought this project into the finishing stages, having signed a framework project "On amalgamating the railways of Azerbaijan and Iran" and a contract on building a railway bridge over the river Astara on the Azerbaijani-Iranian state frontier". In keeping with the plans of both parties, the building of the bridge across the Astara, which means connecting up the railways, is scheduled to be completed this year. Freight transit from Iran to Russia and then on to Europe is due to start from the beginning of 2017.

The Iranian accords fit in pretty well with the plans of official Baku, which has started to pursue its own post-oil economic policy earlier than planned owing to the sharp drop in oil prices. In this context, Azerbaijan is primarily interested in taking advantage of its own transit potential, both within the framework of the historic Silk Road as well as on the North-South route. In this connection, back in December 2015, President Ilham Aliyev issued instructions to speed up the construction work on the Azerbaijani section of the corridor to Iran.

For Iran, which has just had sanctions on it lifted, this is also a fresh and big opportunity to enter the European and Russian markets. Tehran should make a fairly substantial profit from the transit tariffs. It is sufficient to recall that the annual flow of freight between Europe and India that the North-South route is called upon to combine amounts to 25m tonnes, currently transported by sea. True, it is only planned to transport six million tonnes per year along the new route initially, but these volumes will subsequently be raised to 25-20 million tonnes.

The new corridor will allow the transportation time to be cut several-fold, and correspondingly the costs to the freight's owner. A month before the signing of the Azerbaijani-Iranian accords, the Indian ambassador to Azerbaijan Sanjay Rana stated to the Report agency in an interview that his country was interested in transporting freight along the North-South route. "At the present time, it takes 40 days to send cargoes to Azerbaijan by sea. Azerbaijan has an important place in the international North-South transport corridor. Therefore, we would be able to transport freight to Russia and Europe via Azerbaijan," the ambassador said.

Armenian route loses its value

The implementation of the "North-South" project which unites continents will have political consequences for our region as well. It is common knowledge that the occupation of 20 per cent of Azerbaijan's territory by neighbouring Armenia is by no means the last factor that official Baku takes into account when adopting decisions. Azerbaijan makes no secret of the fact that it will block Armenia's participation in regional projects until the occupation has been ended.

From this point of view, the concern of the Armenian media and the community of experts regarding the Azerbaijani-Iranian accords is indicative. In particular, the Iragir website has focused on the statement made by President Hassan Rouhani that Iran and Azerbaijan are to join up their railways by the end of 2016. "Rouhani's statement may make the Armenian-Iranian railway less valuable. If Azerbaijan amalgamates its railways with Iran's, then, once the Kars-Akhalkalaki-Baku railway is commissioned, trains from Iran will be able to reach the Black Sea. Then, if this were to happen, it might be pointless for Tehran to use the Armenian-Iranian railway, the cost of which is estimated at 3.2bn dollars," it says in the article. 

Ara Papian, the president of the "ModusVivendi" Centre for Social Science, is of a similar opinion. He says that, in view of the war in Syria and the unstable situation in Turkey, Armenia and Azerbaijan are the best preferred land routes for Iran to access Europe. But, in the case of Armenia, according to Papian, it is a question of the high cost and the loan involved in building the railway via the Zangezur region, which makes Armenia a far less attractive route. "Although everyone understands that this is not realistic, they are talking about the construction of a 100-km-long tunnel, more than 20 kilometres of bridges and an officially declared cost of 3.2bn dollars, which will actually be doubled, and a construction period of seven years. But the construction of the Iran-Azerbaijan railway has almost been completed. According to official data in January, it is 84 per cent finished. So, the railway's construction will rapidly be completed and once an Iran-Azerbaijan-Georgia rail link has been put into operation, Armenia will be isolated," the analyst stresses.

At the same time, Armenia's [former] minister of energy and natural resources, Yervand Zakharyan, actually justified these concerns on the part of his fellow countrymen. In the course of the government hour in parliament, the minister could not answer questions put by the deputies regarding the fate of the project to build an Iran-Armenia railway.

New possibilities

Naturally, the revival of the "North-South" project is not the only joint intention of Iran and Azerbaijan as can be seen from the structure of the documents signed; the countries are planning to boost cooperation in a wide range of economic spheres.

It is noteworthy that Baku and Tehran, which had been competing for some of the hydrocarbon deposits in the Caspian until recently, have agreed to develop the under-sea oil and gas deposits together. Naturally, Iran has been making investments in Azerbaijani oil and gas fields before this. Indicative of this is, for example, Iran's NIOC [National Iranian Oil Company] stake in the project to develop the "Shah Deniz" gas field almost right from the start. But, judging by the presidents' statements to the press, this cooperation is now being boosted to a new level. "The joint development of the oil and gas deposits in the Caspian Sea was also discussed and good results are expected," President Ilham Aliyev noted in this connection.

Within the framework of the visit, two memoranda of mutual understanding have already been signed between SOCAR [State Oil Company of the Azerbaijan Republic] on the one hand and the National Oil Company of Iran and the "Ghadir Investment Company on the other, which are called upon to specify definite directions and projects for further cooperation.

Baku and Tehran recognise that the current volumes of trade turnover far from correspond to what they could be. According to Azerbaijan's State Customs Committee, the foreign trade turnover with Iran last year was no more than 120m dollars, 80 per cent of which was accounted for by imports from the Islamic Republic. But, to all appearances, the parties plan to take advantage of the opportunities opening up to correct this situation.

"Broad-scale economic reforms are still continuing apace in Azerbaijan to reduce the impact of the negative trends being observed in the global economy and to keep the dynamic development trends going. At the present time, work is going ahead under the programmes for wide-scale investments and privatisation and improving the business environment for both local and foreign businessmen. We believe that this will create new opportunities for Iranian businessmen in Azerbaijan," President Ilham Aliyev stated in an interview with the "Irana" Iranian State Television Company on the eve of his visit to Tehran.

In a statement to the press in Tehran, the Azerbaijani head of state drew attention to the serious possibilities for mutual investment which are opening up to the countries in the light of their ongoing big economic reforms and the improvement of the business environment.

We would like to note that Iran's investments in Azerbaijan's economy are estimated to be 760m dollars, 145m of which have been channelled into the non-oil sector. At the tenth sitting of the Azerbaijani-Iranian intergovernmental commission at the end of last year, a decision was adopted on encouraging Iranian investors to set up a chemical industrial park in Sumqayit.

During the visit to Tehran, President I. Aliyev also pointed out "the splendid opportunities for future activity in the financial, banking, insurance, tourist and pharmaceutical sectors as well."

In his turn, Hassan Rouhani drew attention to the opportunities for joint operations in the Araz, Enzeli and Maku free trade and economic zones. Naturally, the unsettled relations between Azerbaijan and Armenia may hamper swift cooperation between the parties in this direction. For Armenia can also benefit from operating in these zones on the territory of Iran, which would not be in Azerbaijan's interests. But there is no hurry to rule this issue out of Baku's and Tehran's bilateral agenda either.

The sides consider the development of tourism between Azerbaijan and Iran as quite important too. It is symbolic that Ilham Aliyev's visit to Tehran coincided with the Novruz [spring] public holiday, when a considerable number of tourists from the neighbouring country come to Baku. Every year something like 200-250 thousand tourists from Iran visit Azerbaijan, not to mention the fact that approximately one million Azerbaijani citizens visit Iran annually. The sides are convinced that this is far from the limit and nowhere near all the possibilities for greatly boosting the exchange of tourists.

"Within the framework of the exchange of opinions on making it easier for our citizens to enjoy mutual trips, we have had an in-depth conversation about increasing sea crossings," the Iranian president added to all that had been said.

A stabilising factor

Activation of bilateral Azerbaijani-Iranian contacts will be of great significance for multilateral cooperation formats in the region as well. Besides the "North-South" project which will allow the transport arteries of Iran, Azerbaijan, Russia and Georgia to be brought together, the Azerbaijani-Iranian accords in the field of energy, for example, should develop into the setting up of a unified Azerbaijan, Iran and Russia power grid, on the one hand, and an Azerbaijan, Iran and Georgia power grid on the other. 

"Remarkable work is being done in the power-engineering sphere and the prospects for it are splendid. Cooperation in this sphere is not restricted solely to Iranian-Azerbaijani cooperation. The neighbouring countries can join this project, and then this would become a fantastic transnational regional project," the Azerbaijani president stressed in this connection.

On the whole, the parties considered the development of trilateral cooperation with other countries in the region to be important. President Rouhani explained that this was a matter of formats: Iran-Turkmenistan-Azerbaijan, Iran-Azerbaijan-Russia, Iran-Azerbaijan-Georgia and Iran-Azerbaijan-Turkey. Moreover, President Ilham Aliyev added that the parties intended to expand the geography of these formats.

Thus, Baku and Tehran are demonstrating their resoluteness to put into effect all the available potential for developing bilateral and multilateral cooperation. The sides intend to take advantage of the favourable situation obtaining to find new formulas for further cooperation and to reinforce their stabilising role in the region.

The visit also demonstrated Baku's adherence to its own multi-vector foreign policy doctrine. The signing of documents with Iran on speeding up the "North-South" project, without caring about the West, has become a manifestation of this policy, just like Baku's unambiguous refusal to join the anti-Iranian campaign in its time, and moreover its refusal to allow its territory to be used for applying possible military pressure on Tehran.