BRI & Azerbaijan Expert opinion

Analytics 09:30 07.12.2022

Eurasia Diary presents an article titled "BRI & Azerbaijan" published in Pakistan Observer. 

Article by Dr Mehmood Ul Hasan Khan, expert on geopolitical and regional studies. 

AZERBAIJAN has become a full-fledged participant of the BRI. Bilateral relations between China and Azerbaijan have been further strengthened after the meeting of two heads of states in SCO-2022. Azerbaijan is an important economic and trade partner for China. China sees Azerbaijan as a single investment market. It has keen interest in cooperating with Azerbaijan in the financial and agricultural sectors. China attaches great importance to the development of mutually beneficial and close cooperation with Azerbaijan and has implemented several large-scale infrastructure and industrial projects that have played an active role in the socio-economic development of Azerbaijan.

While meeting with President of Azerbaijan IIham Aliyev, the Chinese President Xi Jinping assured China’s support of Azerbaijan’s cooperation with the Shanghai Cooperation Organization (SCO) in terms of security, stability, development and prosperity in the region. He called on both sides to view and plan for bilateral relations from a strategic height, increase strategic mutual trust, strengthen mutual support, deepen mutually beneficial cooperation and work for steady, in-depth and practical cooperation in various fields between the two countries. Xi also said China welcomes Azerbaijan to join China in implementing the Global Development Initiative (GDI) and the Global Security Initiative (GSI).

He desired that both countries should also expand trade, improve the trade mix, increase the number of China-Europe Express freight train services, and ensure unimpeded international supply chains. Xi also expressed confidence that the Belt and Road cooperation between China and Azerbaijan enjoys broad prospects. For his part, Aliyev said that Azerbaijan and China are true strategic partners, that the two sides maintain close communication in international affairs and that bilateral cooperation is advancing steadily.

The Azerbaijani side supports the GSI and GDI proposed by the Chinese side and will actively engage in Belt and Road cooperation with the Chinese side, he said. BRI is China’s long-term commitment and aims to improve connectivity within Asia, Central Asia, South Caucasus, Africa and Europe and other continents via transport corridors (rail, road, maritime, air) and deeper economic, political, and cultural integration between China and the countries.

It is estimated that BRI has a great impact on Azerbaijan’s macro-economy through Azerbaijan’s connectivity and trade with the BRI economies. BRI projects have further improved its transport, power, and ICT infrastructure. Azerbaijan is a BRI partner country in the South Caucasus strategically located between Asia and Europe. It can play the role of a strategic partner, middle corridor and hub connecting China with the Middle East and Europe. In this regard, Azerbaijan perceives BRI as a promising initiative. The Azerbaijani government has a strong political will, economic ability and the infrastructural capacity to contribute a win-win proposition for both the countries.

For further strengthening of bilateral relations and widening of scope, utility and strategic importance of mutual ties and BRI, China and Azerbaijan should closely work to strengthen the BRI’s influence in Central Asia and South Caucasus and prioritise the Trans-Caspian International Transport Route (TITR) passing through Azerbaijan. The TITR, known as the Middle Corridor, had been in development as part of China’s BRI for several years. The 6,500-kilometer network of roads, railroads and ports spanning Kazakhstan, the Caspian Sea, Azerbaijan and Georgia, then into Turkey and/or the Black Sea is intended to reduce shipping times from 60 days by ocean to a fortnight. It is backed by billions of dollars in loans and grants from the Chinese government.

Both countries have already inked several agreements including investment of US$ 300 million by China National Electric Engineering Company (CNEEC) into a tire factory in Azerbaijan. It will create 800 new jobs and boost the plant’s production potential to 3.3 million tires per year. Another multimillion dollar agreement would see investments into the agriculture sector. In 2018-2019, imports from China increased by 40 percent and trade turnover reached $1.3 billion. Azerbaijan has become China’s number one trading partner in the South Caucasus compared to Armenia and Georgia. On the other hand, Azerbaijan’s investments into China’s economy reached $1.7 billion, while China’s investments into Azerbaijan’s economy came close to $800 million. About 119 companies relying on Chinese capital are operating in Azerbaijan which is indeed a good omen.

Interestingly, Azerbaijan is located within the Middle Corridor of the Silk Road Economic Belt. Covering 4,256 km of railways and 508 km of sea routes, this corridor stretches from the Chinese-Kazakh border to Azerbaijan (via the Caspian Sea), Georgia and Turkey (Middle East Institute, 2019). The location of both the BTK and the BSTP in the central corridor turns Azerbaijan into a key country in terms of realizing and reaching the full potential of the BRI. It is shorter and more cost-effective than other available alternatives. Goods shipped from China by sea take 36 days to reach Europe, while shipping along the Trans-Siberian route takes 20 days. The Middle Corridor, however, offers a time span of 12 days for the Chinese goods to reach the same destination in which the role of Azerbaijan as a connecting hub is vital.

To conclude, the Middle Corridor strengthens Azerbaijan’s position as a regional transit centre and contributes to the further deepening of the Azerbaijan-Georgia-Turkey strategic triangle. Baku’s decisive role in this corridor increases Azerbaijan’s strategic importance not only for China, but also for European and regional countries. It is estimated that Azerbaijan’s greater role in the East-West corridor may increase its attractiveness along the North-South corridor and encourage countries in the neighbourhood. Moreover, the Middle Corridor may help Azerbaijan to diversify the national economy and reduce dependence on oil.

The development of the Azerbaijan-Chinese relations may also attract more Chinese investment and increase the region`s potential to become a transport hub by developing the business environment and making it an integral part of the country’s international supply network. On April 19, a 940-meter freight train carrying 82 containers was sent from Turkey to Uzbekistan via Azerbaijan, Kazakhstan and Turkmenistan along the Middle Corridor. The increase of the BTK`s freight capacity and the growing demand for freight along this route may further increase the strategic importance of Azerbaijan within the BRI framework.

Azerbaijan is blessed with special geography which has further enhanced its geopolitical and geostrategic value for China. In April 2022, both the governments celebrated 30 years of diplomatic relations. It seems that their partnership is evolving at an increasing pace in the economic, political, and social spheres, with the economic sector being the priority. The direction of current economic relations between the two countries was determined by a memorandum signed in 2015 during Ilham Aliyev’s last official visit to China. That year, China became Azerbaijan’s largest trading partner.

Today, over 125 Chinese companies operate in Azerbaijan, and the two countries invest in each other’s economies. Areas of cooperation include industrial production, the oil and gas sector, heavy machinery, high-tech, infrastructure, education, culture, and tourism. Azerbaijan has now become an important partner of BRI. Since the start of the BRI in 2013, China’s trade turnover in Azerbaijan has increased by 100 percent. The Second Belt and Road international forum was held in the Chinese capital on April 24th, 2019, and at that event, Azerbaijani and Chinese companies signed 10 agreements in various sectors worth a combined $821 million. It includes the construction of a tire plant in Sumgayit Chemical Industrial Park, the construction of a modern greenhouse complex on an area of 300 hectares in Kurdamir region, and the establishment of agro-logistics industrial parks in Guba, Khachmaz, and Goychay.

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