A NEIGHBOURLY COOPERATION

The political relations between the Azerbaijan and Russia are developing incrementally. The character of good neighborly relations are confirmed in almost any format and at any level. This process is further supported by the level of trust between the presidents of Azerbaijan and Russia, Ilham Aliyev and Vladimir Putin.

As President Aliyev stated in his recent interview to RIA Novosti, “ I would say, our personal relations are very good and based on companionship and trust. During the past three years, the Russian President has visited Azerbaijan three times. This means something.” said the President of Azerbaijan.

But despite such a favorable environment, the economic cooperation between the two countries over the past two years seems to be in limbo. There are objective and subjective reasons. The existing problems and the search for paths of economic growth have been the subject of discussions at the 7^th Azerbaijani-Russian inter-regional forum attended by 600 delegates, 250 of whom were from nine entities of the Russian Federation.

Road map for business circles

High potential between Azerbaijan and Russia can be seen in a one of the objective indicators of the development of economic cooperation, namely the foreign trade turnover between the two countries.

According to Deputy Minister of Economic Development of Russia, Alexander Tsybulsky, there is a considerable unrealized economic potential of the relations between Azerbaijan and Russia.

According to him, there are some 600 Russian companies operating in Azerbaijan today. One third of them are operating on 100% Russian capital. Meanwhile, the success of bilateral cooperation will depend on the level of interaction of entrepreneurs of both countries and the conditions created for the business in Azerbaijan and Russia.

According to the Minister of Economy of Azerbaijan, Shahin Mustafayev, in recent years, the Russian investments in Azerbaijan have reached $3 billion, while direct investments of Azerbaijan in the Russian Federation amounted to $1 billion.

The decline in oil prices on world markets played a negative role not only in the dynamics of development of the Azerbaijani and Russian economies, but also in the trade turnover between the two countries. According to the State Customs Committee of Azerbaijan, at the end of 2015, the trade turnover between Azerbaijan and Russia was $1.854 billion. With its 8.98% share in Azerbaijan's foreign trade balance, Russia ranks the third. At the same time, by the volume of imports in Azerbaijan, Russia ranks the first ($1.437 billion, or 15.59% of total imports).

According to Mr. Tsybulsky, the trade turnover between Azerbaijan and Russia reached $4 billion in 2014, and we should return to this minimum level within the next few years. Overall, the turnover   of $10 billion and more is an absolutely achievable level for the economies of Azerbaijan and Russia.

This confidence is based on intensive contacts between citizens of the two countries, as reported by the Russian official statistics. During this year, about 600 thousand Russian citizens and about 900 thousand citizens of Azerbaijan have entered the territories of Azerbaijan and Russia, respectively. This is a considerable number, although it can be extended and shows that the connections between people, friends, family do create the economic potential, which should be developed, believes the Deputy Minister.

Meanwhile, the support for active cooperation between the both countries is provided at the state level. In particular, the Russian Export Centre (REC), which provides a comprehensive targeted support to export-oriented and leading Russian companies engaged in foreign trade operations, has contributed more than $410 million for the implementation of 11 joint projects with Azerbaijan. Today, REC has 20 more joint projects under review.

Mr. Tsybulsky also noted that the establishment of the Azerbaijani-Russian specialized fund for financing joint projects might further improve economic ties between the both countries. The feasibility and the review of this initiative is subject to discussions.

A close neighbor is better than a distant relative

One of the central figures of the Russian delegation represented at the last forum was the President of the Republic of Dagestan, Ramazan Abdulatipov.

In his speech, he has jokingly demonstrated an example of close relations between Dagestan and Azerbaijan: if Dagestanis were going to eat, they would go to Azerbaijan and a chef of the best Dagestani restaurant was Azerbaijani.

“The independent policy pursued by the presidents Aliyev and Putin has eventually made Azerbaijan an important regional country, and Russia – a big country. This is the major factor, which makes us feel comfortable in Azerbaijan”, said President Abdulatipov.

According to Mr. Abdullatipov, a remarkable work was done during his tenure to establish relations with official Baku. As a result, Dagestan became one of the top five entities of the Russian Federation by the level of cooperation with Azerbaijan.

However, the President of Dagestan is not going to stop there. In particular, it is proposed to both Azerbaijan and Russia to create a special fund to finance joint projects. The proposal of Mr. Abdulatipov to lease land to Azerbaijani entrepreneurs in Derbent for the cultivation of agricultural products sounds very interesting. This proposal was made in response to the request for simplification of export customs procedures between the countries.

He also noted that it was important to shift interstate relations to interregional level.

In this regard, there is an interesting proposal to launch a tourist train between Baku, Makhachkala, and Derbent.

A search for markets

The Russian delegation to Baku also had the Governor of Arkhangelsk Oblast, Igor Orlov. This was his first visit to Azerbaijan for establishing mutually beneficial relationships. Being the head of one of the northern regions in Russia, Mr. Orlov has schematically indicated common interests of the Russian and Azerbaijani businessmen.

Arkhangelsk Oblast is interested in the Azerbaijani market in terms of good opportunities for selling wood products, ship building and agriculture specialized in the production of meat and milk products. Fruit and vegetable products from Azerbaijan, as well as the opportunities for the recreation Arkhangelsk’s residents on the warm beaches of the Caspian Sea in Azerbaijan are also interesting.

According to Mr. Orlov, the implementation of the international transport corridor (ITC) North-South will serve the benefit of both Azerbaijan and Russia. Therefore, Mr. Orlov suggested the use of the port of Arkhangelsk for the implementation of new infrastructure projects. Arkhangelsk can be used   for the shipment of goods through the North-South, and then through the Northern Sea Route. That is, the goods from India and Iran via Azerbaijan and Russia may go through the Northern Sea Route to Europe, China, America, etc. Currently, the port of Arkhangelsk is capable of through-putting 8 million tons of goods per year. Only half of this potential is used, but it is ready to accept new loads, said Mr. Orlov.

According to the Governor, it is the first visit of the business community of Arkhangelsk to Azerbaijan, but even now, it is clear that there is a large untapped potential.

The Governor of Tumen Oblast, Vladimir Yakushev, believes in the expansion of cooperation with Azerbaijan. “The main topic of discussions with SOCAR was the potential to cooperate in machine-building industry available in Tumen Oblast”, said V. Yakushev at the business forum organized by the Caspian European Club. “The oil companies use high quality equipment, so our goal is to expand a share of Azerbaijan in the market”, added V. Yakushev.

The basis for development

The parties have signed twelve documents during the 7^th Azerbaijani-Russian interregional forum, covering cooperation in humanitarian and economic spheres.

In particular, the Executive Power of Gabala Region of Azerbaijan and the Administration of the resort city of Kislovodsk in Stavropol Krai of Russia signed an agreement on becoming sister cities.

Also, the signed documents included the Protocol of Intent between the Executive Power of the Narimanov District of Baku and Astrakhan Oblast of Russia, a cooperation agreement between Azerbaijan Export and Investments Promotion Foundation (Azpromo), the Chamber of Commerce of Stavropol Krai, and the Association of Participants of Foreign Trade Activities in the Caspian Region, Caspian Way.

In humanitarian area, a cooperation agreement between the Azerbaijan Medical University and   the Stavropol State Medical University was signed.

The tourist centre “Derbent 2000” signed an agreement with Guba and Khachmaz tourist and information centres on establishing joint ventures in tourism development.

Yet another document was signed as part of the ground-breaking ceremony for construction of a joint Azerbaijani-Russian pharmaceutical plant at the Pirallahy Industrial Park.

The representatives of the Russian firm “R-Pharm” and the Azerbaijan Investment Company, and company “Vita-A” also signed an agreement to create a joint pharmaceutical plant Hayat Pharm. The newly built plant has the following shared capital map: 10% by AIC, 45% by Russian “R-Pharm”, and   45% by “Vita-A”. $74 million will be invested in the construction of the plant.

Summing up the results of the 7^th Azerbaijani-Russian forum, one can say that one more step on the way of establishing contacts between business circles of Azerbaijan and Russia was taken. However, the results have also demonstrated that there was still quite outstanding issues that would allow real increase trade between the two countries up to five times. The compliance of economic connections with political interaction of the two countries will largely depend on how quickly the state and regional authorities of Azerbaijan and Russia are able to implement the proposals made at the forum.