Azerbaijan - a new hub of connectivity

By Syeda Dhanak Fatima Hashmi

In international politics, economic ties and trade relations among states are considered to be the litmus test for predicting and analyzing the nature and dynamics of engagement among the countries. Azerbaijan already have significant achievements in increasing trade and energy links, such as Baku-Tbilisi-Kars. Transit is certainly the basic business of any port, but a hub with cargo passing through offers other opportunities and the Port of Baku intends to put all that space around to good use. Longitude, as well as latitude, sees Baku favourably placed to facilitate North-South trade. Work is already advanced on the North-South Transport Corridor to connect, at first, a railway route between Russia and Iran via Azerbaijan, with thoughts of further expansion to the Baltics in the north and India in the south already being discussed.

Azerbaijan is located at the crossroads of major Eurasian land and air transport corridors. Since the country gained independence in 1991, its government has sought to make it a bridge between Europe and Asia. It has invested millions of dollars in commercial infrastructure and transport projects over the last decade, aiming to position Azerbaijan as a lucrative link between Central Asia, the South Caucasus, and Europe. Baku understands the importance of implementing diversification strategies ahead of the depletion of the country’s hydrocarbon reserves. Its geographical position makes it a key territory for regional integration projects.

Today, Azerbaijan is at the centre of three major integration initiatives – the European Union, the Eurasian Economic Union (EEU), and the recently established One Belt, One Road (OBOR) initiative championed by China. All three initiatives target Azerbaijan.

The EU plays an important role in Azerbaijan’s trade. For a number of years, over 50 percent of the country’s foreign trade has been with EU countries. The Chinese OBOR initiative was enthusiastically greeted by the political establishment, though the public is not aware of many of these Chinese projects. Chinese investment helps to fill the funding gap in Azerbaijan’s strategic plan, allowing many projects to go ahead that would otherwise have struggled to find financing. In August 2015, the first container to take the OBOR route, or Silk Road, travelled the more than 4,000km from China in a record six days, arriving at the newly constructed Baku International Sea Trade Port. This signalled a new era in regional transport links.

China, together with partners from Azerbaijan and Kazakhstan, was a major player in implementing the project. It demonstrated to Chinese partners that cargo could reach Europe much faster via the Silk Road than by sea or by transiting through Russia. Both Kazakhstan and Azerbaijan used the project to encourage Chinese establishments to begin infrastructure in their territories so they could reap the benefits. Azerbaijani authorities believe that by 2020 some 300,000–400,000 containers will be transported via this route, bringing billions of profits.

In the context of Pakistan and Azerbaijan relations, both the countries are already enjoying strong economic partnership, as their bilateral trade reached new heights a record three times in 2017. With a lot more potential to further boost economic activities for the two nations, Baku joining CPEC would not only improve trade and economic relations between Islamabad and Baku, but also benefit the entire region. Both Pakistan and Azerbaijan are strategically vital locations in Asia, which is why an immense economic partnership between the two could improve connectivity and boost trade and economic activities in the region.

Pakistan and Azerbaijan share cordial relations categorized by distinctive political nature that have excelled geographical boundaries and distance. Both the countries share much in common on religious and historical grounds. Both the countries maintain the same stance that all the regional and global disputes should be settled by peaceful means and dialogue under the International Law. They observe homogeneous approach of like-minded ideals important for the regional connectivity and integration. Therefore, both the states have similarity of perceptions on various regional and global issues like resolving the territorial disputes of Indian held Kashmir and Nagorno-Karabakh through the implementation of the United Nations Security Council resolutions. This shows the uniqueness of their relations, which resides in the strong support that both states extend to each other on matters of shared interests. Leaderships in Islamabad and Baku uphold that the international principles of sovereignty and right to self-determination must be guaranteed in these disputed territories. Pakistan was the second country, which recognized independence of Azerbaijan in 1991. Since then, both the states enjoy cordial relations in the realms of economics, diplomacy, culture, technology and defence. Consequently, they recognise each other as strategic partners. The absence of geographical contiguity between the two states has remained a hurdle, yet they aim at countering this territorial impediment by enhancing the mutual partnership in areas of joint cooperation. Over the years Pakistani business community has invested $4.2 million in Azerbaijani economy.

Moreover, if we closely look at the Azerbaijani market, there is huge potential for Pakistani businessmen including joint ventures in various sectors including sports goods, leather industry, pharmaceutical, energy, production of lightweight agriculture equipment and value addition in agriculture products. It is very important to note here that the trade turnover during the January to June 2018 has remained at the 5.82 million USD. The growing connectivity and B2B meetings better set the course of future bilateral trade. Pakistan can potentially replace other competitors in Azerbaijani markets. As stated earlier, oil and gas makes huge chunk of economy of Azerbaijan which are cheap commodities worldwide and its prices are likely to stay stable.

Thus, Azerbaijan can help Pakistan to find new areas of revenue generation to feed its economy where Pakistan can play its role. Pakistan is one of the major oil and gas consuming countries in the world, wherein it can call on investments in energy sectors in Pakistan.

Due to the same reason, Azerbaijan launched an economic vision ‘Azerbaijan in 2020-Looking to the Future’ which resorts to diversify its economic markets and trade avenues. As Azerbaijan seeks interest in agricultural and textile apparels widely produced in Pakistan, this can be a huge potential. While seeking investments in energy sector by Azerbaijan, Pakistan can potentially invest in the above mentioned commercial sectors in Azerbaijan. It can also successfully maintain the supplies of goods and services that might be required. This all will depend on how well the opportunities and the business ventures may be finalized in the coming future from both sides.

With China emerging as a prominent stakeholder in economic and security fabric of Asia, there is a change of pace for geo-economics. There is a growing need for security and strategic cooperation; as well as via energy and pipeline politics which is now more of a reality. Pakistan and Azerbaijan need to further strengthen their ties, especially in the defence and trade sector and forge more sustainable relations with each other. Pakistan and Azerbaijan believe that they are destined to play an important role in helping to establish peace, security and economic progress in South and West Asia. The emerging geopolitical and economic realities in the region offer both challenges and opportunities. The challenges stem from extremism, indefinite presence of the US forces in the region, expanding pockets of the ISIL in Afghanistan, the Indo-US strategic alliance, US attempt to counter Chinese and Russian influence in the region, and the hostile measures to engineer instability in Pakistan. The opportunities emanate from trans-regional economic initiatives such as China’s Belt and Road Initiative and the Russia-led Eurasian community. Pakistan's leadership is fully aware of the significance of its relations with Azerbaijan, especially with reference to possibilities offered by China Pakistan Economic Corridor (CPEC), which holds significance in terms of initiating new trade businesses between them. Through the North-South Transport Corridor, Azerbaijan could be directly connected with Russia, Iran, Pakistan and China.

For Azerbaijan CPEC would bring an even more effective engagement on trade and economic issues as well as turn it into a favourable investment environment. CPEC would be a profitable opportunity to help its companies to boost cooperation with Pakistan. Azerbaijan is among the few countries involved in realization of the Belt projects that have the capacity, experience and willingness to invest in upgrading its transport infrastructure and thus can be considered very suitable partner for China in this regard. Pakistan is a strategic, brotherly country and the government and people of Azerbaijan are always ready to improve and strengthen relations. Pakistan’s importance to Azerbaijan cannot be underestimated, as Pakistan is the only country in the world that has not established diplomatic relations with Azerbaijan’s enemy, Armenia. For Azerbaijan CPEC would become a yet another factor driving Pak-Azerbaijani economic-military cooperation forward at the time when it requires advanced military equipment from both Pakistan and China to be prepared for any outcome of the unresolved territorial conflict in the Nagorno-Karabakh region.

Conclusively, Azerbaijan is fast becoming an important transport and trade hub. It has a “multilateral, balanced, proactive and independent foreign policy. There has been a 23% increase in trade between both countries, and visa procedures for Pakistanis had been eased to facilitate travel and tourism, and in the near future, direct flights between both countries are also being planned. Energy projects and scholarship programmes for Pakistani students were also being implemented. The sincere relations, similar vision to international issues and very positive synergy between Azerbaijan and Pakistan are the very foundation for cooperation, peace, stability, and security from which not only people of our countries, but also all people in the region might benefit.

The writer is a Research Head at the Center for Global and Strategic Studies (CGSS), an Islamabad based think-tank. She is Master of Philosophy (M.Phil.) in Governance and Public Policy. Her areas of research incorporate regional as well as extra regional subjects especially United States, Russia, China and Central Asian Republics.