Russia-Azerbaijan: Economy and Business

Russia-Azerbaijan: Economy and Business

Recently, Russian-Azerbaijani economic relations have reached a completely new level. After September meeting between Vladimir Putin and Ilham Aliyev in Sochi, it became clear that bilateral contacts will be based on elements of digital economy from now on. Last year, Russian-Azerbaijani trade volume increased by almost 35%, reaching 2.5 billion dollars.

In 2000s, AvtoVAZ, Rosselmash, Metrovagonmash, the Krasnoye Sormovo shipyard were considered the largest industrial enterprises of Russia interested in Azerbaijani market. Russian-Azerbaijani joint venture AzRosPromInvest built a facroty for bentonite processing in Azerbaijan in 2007. Both sides have an equal share in this joint venture. It's authorized capital is $12 million. Production volume of this factory is 245 thousand tons of bentonite products per year. In 2009 alone over 3 million dollar was invested in development of this joint venture.

In May of 2008, St. Petersburg company "Baltika" acquired Azerbaijani brewery "Baku-Castel". A year later, modernization of production in the amount of 20 million dollars was completed and production at the brewery in Khirdalan began. Company still produced traditional product line, while also expanding it with new brands.

Thanks to established cooperation between the Rosagromash and the local Agroleasing, export of agricultural machinery to Azerbaijan, including the Niva harvesters, has noticeably increased. In order to expand sales market for its products and improve sales in the territory of Azerbaijan, Agromashholding established the joint venture Agromashholding-Baku.

There's also KhazarLada joint venture, which was established operates with participation of AVTOVAZ company. It has over 40 service stations located in different cities of Azerbaijan.

Azerbaijani investors also invest in production facilities in Russia. In September of 2010, a tea-packing factory worth 17 million dollars was commissioned in the Krasnodar Territory. A cannery with similar worth was also commissined. It's financed by Azerbaijani company Azersun Holding.

Countries are cooperating in development of financial and banking sector. Subsidiary of the International Bank of Azerbaijan in Russia - IBA-Moscow - operates successfully. IBA-Moscow has 9 subdivisions in Russia: five in Moscow, three in St. Petersburg and one in Yekaterinburg.

Subsidiarty of VTB - VTB-Azerbaijan - is actively working in Azerbaijani financial services market (the official opening of VTB Bank (Azerbaijan) took place on November 23, 2009).

One of the largest banks in Russia, Uralsib, also has subsidiary in Azerbaijan - Nikoil bank - which is one of the top ten leading financial structures in terms of assets.

Last year, Russia's direct investment in Azerbaijan amounted to 1.5 billion dollars. Around 700 joint ventures operate in Azerbaijani market, one third of them with 100% Russian share. As Vladimir Putin said at the Sochi summit, contacts between business communities, including small and medium-sized businesses, are expanding. Last year the Russian-Azerbaijani Business Council supported 42 joint projects totaling over 450 million dollars. Russian energy companies - Gazprom, Transneft, and LUKOIL - successfully operate in Azerbaijan. Russia's and Azerbaijan's energy system is fully integrated. Cooperation in industrial sphere is deepening. For example, KamAZ produces licensed trucks and provides maintenance services at the Ganja Automobile Factory. Russian company R-Pharm has invested 74 million dollars in construction of a drug manufacturing facility in Azerbaijan, which will open in 2019. Gazprombank participates in development of the Sumgait Chemical Industrial Park. Its investments reach almost 750 million dollars.

One of the most promising projects between Moscow and Baku is creation of the North-South international transport corridor, which will connect Western European markets to Asian producers. It will significantly accelerate transport of goods from South Asia and the Middle East through Iran to Europe. Total length of this hub will be over 7 thousand kilometers. It will have rail, ferry and road routes. A significant part of the North-South corridor will pass through territories of Russia and Azerbaijan. Work on individual sections of this route is already underway. It is planned to complete construction of bridge across the border river Samur next year.

Important infrastructure projects, which are part of the North-South, have already been implemented in Azerbaijan. According to Ilham Aliyev, this year, compared to previous year, cargo corridor has transported hundred times more goods: "And this is just the beginning, since this large-scale global project will cover countries and continents, and thus transit capabilities of our countries will increase, thousands of new jobs will be created."

As for inter-regional cooperation, today over 70 subjects of the Russian Federation maintain economic ties with Azerbaijan, 17 of them signed framework agreements on trade, economic and scientific-technical cooperation.

Moscow and Baku believe that road maps in different areas of economic cooperation, which were agreed on at the Sochi summit, will allow to increase trade volume ever more. Russia is partner number one for Azerbaijan when it comes to imports, as well as when it comes to Azerbaijani exports in non-oil sector.

Right now it's obvious that current format of trade and economic cooperation doesn't allow to realize full potential of the two countries. Some bureaucratic obstacles can be removed, state support for initiatives of small and medium-sized businesses can become more effective. Systematic use of this potential will allow to intensify trade and economic cooperation between Russia and Azerbaijan.

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