MORE THAN PARTNERS

Over the past years, relations between Uzbekistan and Azerbaijan have reached a new stage of development, with more strategic depth and new prospects for mutually beneficial cooperation. A large pool of various treaties and legal frameworks, with more than 130 interstate, intergovernmental and interdepartmental agreements, serves as the basis for this cooperation.

President Ilham Aliyev's recent official visit to Uzbekistan at the invitation of his Uzbek counterpart Shavkat Mirziyoyev took place in the atmosphere of friendship and mutual understanding. It will undoubtedly boost the enhancing Uzbek-Azerbaijani relations and further strengthen them based on the principles of mutual trust, respect and support.

Foundation laid by Heydar Aliyev

Admittedly, such warm and truly fraternal relations between Uzbekistan and Azerbaijan rest on a solid foundation laid by the national leader of Azerbaijan Heydar Aliyev, who ensured that these relations follow a trajectory of progressive development. His tenure saw the development of extensive legal and institutional framework for cooperation, as well as the confidence and friendly relations between the two nations. Thus, in the focus of Ilham Aliyev's visit to Uzbekistan was the opening ceremony of a street, a public garden, and a memorial in honour of Heydar Aliyev, which is a manifestation of high respect and recognition of the important contribution of this outstanding statesman to the establishment of bilateral relations between the two countries.

Undoubtedly, close cultural and historical ties between the peoples of Uzbekistan and Azerbaijan also contribute to the development of comprehensive and close relations between them. We have centuries-old ties based on the commonality of national traditions and customs, language, culture and religion. Therefore, it is no coincidence that the leaders of Uzbekistan and Azerbaijan visited Khiva, one of the cultural capitals of the Turkic world, as a symbol of commitment to the common Turkic cultural and historical heritage.

The common political will and joint efforts of Shavkat Mirziyoyev and Ilham Aliyev continue to fill in our relations with valuable content, becoming even more strategic and allied in nature. Thus, the parties signed a solid package of 18 documents to further promote the development of Uzbek-Azerbaijani cooperation in various areas, including industry, tourism, transport and logistics, migration, and military.

However, the signing of the Declaration on Deepening Strategic Partnership and Enhancing Comprehensive Cooperation between the Republic of Uzbekistan and the Republic of Azerbaijan became a landmark and historic event that defined the main vector of development of bilateral relations. This comprehensive document covers 40 areas of cooperation between the two states to improve the existing cooperation in trade and economy, including in production, as well as the effective use of transport and transit potential of the two nations. The parties have expressed a common strong political will to establish a strategic dialogue at the highest level in order to identify relevant and promising areas of strategic partnership between the two states, as well as to coordinate positions on issues of mutual interest.

Important economic component

The outcome of a business forum held in Tashkent before Ilham Aliyev's visit, which was attended by more than 100 representatives of government agencies and businesses of Uzbekistan and Azerbaijan, demonstrates the high interest in cooperation. In total, the forum participants signed many investment agreements and trade contracts worth over half a billion dollars, as well as ten agreements on cooperation between the ministries of respective countries. They reached agreements on the joint development of promising projects in oil and gas, petrochemicals, energy, pharmaceuticals, production of construction materials, wine, food, textile and jewellery.

Particularly important for the implementation of the outlined plans was a proposal by the Uzbek President Mirziyoyev to create a joint investment fund to promote promising cooperation projects, and to hold the first Regions Forum in Tashkent to establish partnerships between major cities of the two countries.

The current nature of political and economic cooperation between Uzbekistan and Azerbaijan heavily depends on close and trusting dialogue between their leaders, which contributes to the significant expansion of bilateral ties in a short period. The drivers of cooperation are the developing institutional framework including the joint inter-governmental commission on cooperation, inter-parliamentary friendship group, a business council, as well as new forms of cooperation, such as the holding of the international industrial exhibition Made in Uzbekistan in Baku, interregional links between the regions of Azerbaijan and the Ferghana Valley and Bukhara in Uzbekistan and the development of industrial cooperation.

At the same time, Uzbekistan and Azerbaijan provide active mutual support at various international platforms, including the UN, SCO, CIS, ECO and OSCE. Uzbekistan highly appreciated Azerbaijan’s co-authorship in all four resolutions adopted by the UN General Assembly at the initiative of Uzbekistan.

Thanks to joint efforts, the trade turnover between Uzbekistan and Azerbaijan has grown almost sevenfold in the last five years alone—from $17.1m in 2016 to $118.8m in 2021. This positive trend will certainly continue in 2022. The accelerated growth of mutual trade in the five months of 2022 reached 49.1%, which made it possible to raise the trade turnover volume to $66.4m. Azerbaijani investors show an interest in Uzbekistan as well. In 2021, Azerbaijan invested $64.1m into Uzbekistan. In 2022, this indicator is expected to reach $82.4m.

The number of joint ventures has quadrupled in recent years. There are 238 companies with Azerbaijani capital operating in Uzbekistan, primarily in trade, machine-building and metal-working, finance and insurance, real estate operations, energy, services, jewellery production and repairs, food industry, light industry and pharmaceuticals. In turn, 53 Uzbek companies are implementing numerous projects in Azerbaijan. At the same time, Tashkent and Baku are exploring new areas of cooperation, including the expansion of cooperation on areas that have not been covered previously, including in energy, transport, communications, mechanical engineering, electrical engineering, construction materials, textile and food industries.  A successful example is the launch of joint production of Uzbek cars and buses in Azerbaijan. There are plans to produce up to 5,000 cars a year and up to 1,000 buses.

There is also cooperation in agriculture, in particular on seed production. Azerbaijan is testing a number of varieties of the Uzbek cotton. Uzbekistan is planning to receive Azerbaijani seedlings of high-yielding varieties of hazelnut. At the same time, Uzbekistan plans to build a cotton processing plant in Azerbaijan, which will be fully equipped with the latest technological line of Pahtamash, a leading Uzbek producer of cotton ginning systems.

Given that Uzbekistan is the third-largest producer of raw silk in the world (c. 2% of global production), it is not surprising to see a new silk production facility to be opened in Barda, Azerbaijan. By the way, we already have positive experience of cooperation in this area. For example, specialists from the Uzbekipaksanoat Association helped Azerbaijan to restore and re-launch the Sheki-Ipak company, which is now capable of producing around 150-200 tonnes of raw silk annually.

However, the high dynamic of existing bilateral economic cooperation does not fully correspond to the existing potential. We have all the conditions for the full-fledged use of available reserves. In particular, our countries have a large mineral resource base, industrial advantages, infrastructure that allow us to work successfully with foreign partners, as well as sustainable diversified economies.

Despite the protracted turbulence in the global economy, Uzbekistan and Azerbaijan have maintained positive growth trends. For example, last year Uzbekistan's GDP grew by 7.4% and Azerbaijan's by 5.6%. According to the World Bank's estimates, the growth rates of our economies will remain high this year as well, with Uzbekistan's GDP projected to grow by 4.3% in 2022 and Azerbaijan's by 2.7%.

Priority areas

In addition to sustainable economic growth, common development strategies also contribute to mutual cooperation. For example, Uzbekistan has developed the Development Strategy for New Uzbekistan, while Azerbaijan is implementing a similar strategy, Azerbaijan 2030. The analysis of both strategic documents shows that the vision of the future of our nations is largely the same, especially in such areas as ensuring sustainable economic growth, creating a fair social policy, and modernising state and public administration.

Similar national priorities provide a solid foundation for building long-term sustainable cooperation in strategic directions. Thus, Uzbekistan and Azerbaijan, which play an important role as leaders of their respective regions, can and should become drivers of interregional cooperation. Azerbaijan demonstrates this through its efforts in the establishment of long-term peace, security and stability in the region. The restoration of infrastructure, transport communications, cultural and historical heritage sites in Garabagh, including with the contribution of the Uzbek side, will turn the region into an area of mutually beneficial cooperation and open new prospects for strengthening interregional ties.

In doing so, we should move towards transforming our leading economic sectors and the sub-regions as a whole into crucial links in the production and logistics chain of trans-regional interconnectedness between Europe and Asia. The cornerstone of this process should, first and foremost, be the development of industrial cooperation by exploiting the competitive advantages and complementarities of our economies.

It is the accelerated development of industrial sectors in Uzbekistan and Azerbaijan that contribute to the increasing interest of both parties in expanding close ties in this sphere.

Thanks to institutional reforms and measures taken in recent years to upgrade and stimulate the development of the real sector, Uzbekistan has managed to increase the share of the industry in the national economy from 20.6% in 2016 to 28.5% in 2021. At the same time, the share of industrial production in Azerbaijan's GDP structure has reached around 50%.

The most important document in this regard is the recently signed intergovernmental agreement on industrial cooperation, in which the oil and gas, metallurgy, chemical, pharmaceutical and jewellery sectors have been identified as priority areas for cooperation.

The implementation of these goals will be greatly facilitated by Uzbekistan's GSP+ preferential trade status with the EU, which provides for duty-free supplies of 6,200 types of goods produced in Uzbekistan to the EU and UK markets. Uzbekistan has already increased the export of Uzbek producers to the European market by 30%. At the same time, the use of Azerbaijan's transport logistics to deliver these goods to the EU will significantly reduce transport costs and, consequently, increase the competitiveness of exported products.

It is also worth mentioning the bilateral agreement on military-technical cooperation, which provides for the use of production facilities of the military-industrial complex for manufacturing dual-use products. This will help provide to the common consumer markets the demanded goods, hence making an important contribution to the industrial development of our economies.

Transport communications

The increasing volume of joint production activities necessitates the direct access to third-country markets and closer cooperation in the transport and logistics sector. Thanks to the Trans-Caspian Railway Corridor, both Uzbekistan and Azerbaijan now act as links between the countries of Central Asia and the Caucasus, as well as the European and Asian countries. Therefore, both countries pay closer attention to the development of transregional transport corridors, which will increase the volume of mutual cargo traffic and the transit potential of our countries and the two regions in general.

Reduced transit costs for all types of cargo from Uzbekistan through Azerbaijan has increased the volume of cargo traffic along the Uzbekistan-Turkmenistan-Azerbaijan-Turkey route to 44,000 tonnes in 2021.

The use of the transit potential of the Baku-Tbilisi-Kars railway, which ensures the access of Uzbek commodities to the world market, is of great importance for Uzbekistan. Azerbaijan is interested in extending the planned China-Kyrgyzstan-Uzbekistan railway to the Caspian Sea, which would strengthen the transit potential of the Trans-Caspian corridor.

The parties also express mutual interest in promoting a multimodal transport corridor Asia-Pacific-China-Kyrgyzstan-Uzbekistan-Turkmenistan-Azerbaijan-Georgia-Turkey-Europe, which would significantly increase the trade potential of our countries.

The Trans-Afghan corridor, the China-Kyrgyzstan-Uzbekistan route and the restoration of the Zangezur corridor, which could provide the shortest land route from Asia to Europe, look quite promising. They will create a single transport network between our countries and expand trade opportunities with both China and the EU.

In particular, the successful implementation of the China-Kyrgyzstan-Uzbekistan corridor will turn the Central Asian countries into a land bridge capable of connecting Azerbaijan with China and the South Asian region in general. The corridor will allow for deeper integration of all Central Asian and Caucasian countries into global supply chains and active participation in international transit of goods.

Acting as hubs in their respective regions, Uzbekistan and Azerbaijan should not limit themselves to functioning as "transit points", instead forming economic corridors by establishing production, logistics and distribution centres along the existing transport routes. This will make it possible to produce and supply high value-added products to foreign markets.

For the transformation of regions into production and logistics hubs, cooperation in the energy sector, the basis of all sectors of the economy, is a key factor. In this context, cooperation in deep refining of oil and oil products, chemical industry and geological exploration, where Azerbaijan has achieved high results, look promising. Today we are developing mutually beneficial cooperation with SOCAR, Azerbaijan’s leading petrochemical company. At the same time, setting up joint production of oil and gas equipment also meets the interests of our countries.

Given the increasing energy consumption required for production growth and the increasing electrification of transport and logistics links, cooperation in the renewable energy sector is becoming particularly important.

A very promising area for cooperation between Uzbekistan and Azerbaijan is the development of digital products and the transfer of the economies of both countries to an innovative digital platform.

In conclusion, the results of President Ilham Aliyev's visit to Uzbekistan have largely contributed to the improvement of friendly ties between the two nations and will have even greater practical content. The current global economic, cultural and humanitarian ties between the two brotherly peoples increasingly become a standard of contemporary multifaceted interregional cooperation.

Certainly, the agreements reached by the presidents will spur the development of both bilateral and inter-regional cooperation, which will serve the interests of both nations.

IN BRIEF

“Political declaration takes our relations to a completely new level. It is quite natural that the mutual support in international organisations, and in all issues concerning the security of our countries and nations requires constant attention. We will do that because there is a political will”.

“We share the same religion, language, culture, and root. We all see this solidarity today and must make it eternal”.

Ilham Aliyev, President of Azerbaijan