Our Analytics 9 august — 14:11

Ilham Aliyev changes world map (First assessment)

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BY ECONOMICS SECTION

Yesterday, Baku hosted the first trilateral meeting of the Presidents of Azerbaijan, Russia and Iran - Ilham Aliyev, Vladimir Putin and Hassan Rouhani. 'This is a historic event. Today, among the three countries a new format of cooperation is being created,' said President of Azerbaijan Ilham Aliyev at the summit on Monday.

Yes, Azerbaijan, Russia and Iran are really creating a new form of cooperation, which in the future may lead to a redivision of the entire political and economic map of the region. And it must be emphasised that the summit has been held on the initiative of President Aliyev, who has always attached great importance to strengthening political and economic relations with all countries of the region, where Baku is playing a growing role. Only in February this year, the head of Azerbaijan proposed to hold a trilateral summit in Baku during a telephone conversation with Putin. And in April in Baku on the initiative of the Azerbaijani side the foreign affairs ministers of the three countries met, who prepared this summit. The speed, with which the diplomats worked this time, showed the importance that the heads of the three countries gave to the Baku meeting.

Putin's summary

The importance of the trilateral summit of the presidents of Azerbaijan, Iran and Russia has been noted yesterday in Baku by President Putin, according to whom, the event would allow countries to coordinate actions on a wide range of issues. The demand for this format is obvious: all three countries share willingness to coordinate the approaches to a wide range of regional and global issues, the desire to further strengthen multifaceted practical cooperation in trade and economic sphere. The three countries are facing similar problems and challenges, such as the ongoing global economic crisis. Also, Azerbaijan and Iran are Russia's good neighbours and important partners.

Rouhani's initiative

And from the words of Iranian President Hassan Rouhani one can even conclude that these summits will now become traditional. He proposed to hold the next trilateral summit Russia-Iran-Azerbaijan in Iran. By the way, Iranian Ambassador to Azerbaijan Mohsen Pak Ayin said earlier that the meetings in this format could become regular.

Political aspects of the meeting are clearly reflected in the declaration adopted at the summit in Baku, which the Moscow media vividly summed up as follows: 'Washington is losing credibility, Moscow is scoring points.' The document notes the determination of the parties to counter terrorism, extremism, transnational organised crime, illicit trafficking in arms, narcotics and precursors, human trafficking and crimes in the sphere of information and communication technologies. But the heads of state were to give to economic issues no less attention at the summit, as it was announced earlier. And this has justified itself, although negotiations on the economic theme were not so much in the course of the summit, but in the course of meetings of business circles of Azerbaijan and Iran, as well as Russia and Azerbaijan, which took place in these days in Baku within the framework of the summit.

Rogozin's unexpected statement

Interesting news on the results of the summit has been expressed to journalists, for example, by Deputy Prime Minister of Russia Dmitry Rogozin. According to him, Azerbaijan is interested in buying Russian MC-21 aircraft. It is planned that this will happen either later this year or early next year. In February, the parties aim to sign a contract for at least 10 MC-21 aircraft. But we have long been accustomed to purchasing Russian aircraft and helicopters, while Rogozin promises that a helicopter centre will be established in Baku. There are a lot of planes and helicopters of Soviet and Russian origin, their modernisation, servicing will now take place on the territory of Azerbaijan. Deputy PM also said that an aircraft assembly plant would be opened in Baku, and Azerbaijan would have its own aircraft production.

Ulyukayev's proposal

An Azerbaijani-Russian joint venture for the production of medicines will have importance for Azerbaijan too. In June, a Russian company 'R-Pharm,' Azerbaijani companies 'Vita-A' and Azerbaijan Investment Company (AIC) signed a protocol of intentions to organise the production of pharmaceutical products. The Azerbaijani side estimated the initial investment of the project at 47 mln. euros. The project will create 200 new jobs. Today, the Russian side has already states that the enterprise is planned to be put into operation in late 2018.

In turn, physical volume of export of Azerbaijani goods to Russia this year also increased significantly, as Minister of Economic Development and Trade of Russia Alexey Ulyukayev said. According to him, trade between the countries is experiencing a number of difficulties due to the fluctuation of exchange rates and a decrease in energy prices. But along with this has been an increase of the physical volume of Azerbaijani export to Russia, in particular, crop production. At the expense of Azerbaijani investments in the amount of 25 million. dollars is implemented a project to build a sanatorium in Yessentuki. And Azerbaijani Azersun Holding invests in projects in the Krasnodar region. In general, the relations between Azerbaijan and Russia are actively developing in all directions. Now, actively developing are bilateral relations in the economic sphere and in the sphere of mutual investments. So, Russian investments in Azerbaijan are estimated in billions. Only in the oil sector of Azerbaijan's economy Russia has invested 2.8 billion. dollars. At the same time Russian companies' profit from these investments has reached $2 billion. SOFAZ investment in Russia also amount to hundreds of millions.

Despite this, Russian President Putin at a meeting with Azerbaijani President Ilham Aliyev stressed that the two countries could find ways to increase turnover, the volume of which fell in dollar terms. The reasons for this reduction are the crisis in the global economy and the economies of the two countries, the fall in prices for traditional export commodities, the known issues concerning the exchange rates differences. According to Putin, a good base has been created to find a way out of the situation. 'We still maintain the physical volume, but of course, we have good long-term projects, not only in the energy sector, but also in other sectors,' said the Russian president. Putin pointed out that nearly 600 Russian companies operate in Azerbaijan, and direct investment is approximately $1.5 billion. 'We have continued cooperation in the Caspian Sea, including military cooperation,' he said. Bilateral cooperation, added the President of the Russian Federation, 'is not on paper, but in fact has become a strategic partnership, which is very important for the diversification of relations.'

Falls with Russia, but grows with Iran

If there is a decline in mutual trade in dollar terms with Russia, with Iran this figure, on the contrary, is growing. Trade turnover between the two countries in the first quarter of this year compared with January-March of the last year grew by 53% to $41.4 million. The countries have signed 120 documents, including 40 in the field of economy.

In Azerbaijan today everybody sees the greatly increased flow of Iranian tourists to the country. A similar, but less marked increase, thanks to the efforts of the two countries' leaders, is seen in other areas. And this growth is likely to occur in the future.

Thus, on Thursday in Baku Azerbaijani and Iranian companies are expected to sign four memoranda within the framework of the implementation of joint projects in the field of pharmaceutical and vehicle production. Memoranda will be signed between the Sumqayit Chemical Industrial Park, the Azerbaijan Investment Company, Azersun Holding and Iranian Darou Pakhsh and Iran Khodro. Currently in Azerbaijan there are 439 companies with Iranian capital; countries expand cooperation in agriculture, tourism, pharmaceuticals, transport, banking, etc. SOCAR intensifies relations with the Iranian oil and gas companies. And on the proposal of the Iranian side is planned to establish a joint regional bank and thus to develop financial cooperation between the two countries.

Ilham Aliyev's concept

President Aliyev believes that the format of cooperation Azerbaijan-Russia-Iran is a source of security and stability in the region; in the future, the three countries should strengthen political ties. At the same time, he stressed the potential for expansion of trilateral economic cooperation, particularly in trade and energy. The president offers to form a reliable energy corridor that will provide power exchanges between the three countries, and access to new markets. The priority area of cooperation in the energy sector is the implementation of projects for the exploration and development of oil and gas deposits, primarily in the Caspian region. SOCAR is also interested in participating in the work carried out in the Iranian and Russian sectors of the Caspian Sea. The tripartite format will create a good opportunity to raise the economic cooperation of the three countries to a higher level.

Prospects for cooperation in the field of transport infrastructure look especially promising, in particular, plans to create a western branch of the North-South international corridor, which is designed to connect northern Europe to South-East Asia.

Our afterword

We wrote a lot about developments around the project, so let us focus only on the fact that today, Russian Railways are negotiating with Iran on the construction of the railway section Rasht-Astara, in particular, on the financing of the corridor area. The cost of construction Rasht-Astara railway is about $1.1 billion, half of which Iran has attracted by a loan of the International Bank of Azerbaijan. By the way, uniform rates for the North-South corridor have already been established, which allows to create a single tariff policy for Iran, Azerbaijan and Russia.

It is difficult to cover all the negotiations of the parties during the trilateral summit, as well as within its framework. They were about cooperation in culture, tourism, youth exchange, education, to promote the development of direct links between the regions of the three countries. Therefore, the parties agreed to set up working groups in areas of mutual interest. That is, the heads of state put all these questions to the rails, and the relevant authorities will now have to bring them to full realisation. But this is a technical question, the solution of which can already be considered final.

But this is not important. The important thing is that the North-South corridor, as now becomes clear, is not only a transport and energy corridor. The same corridor will provide all three countries with a large number of tourists, finance, different products, will increase the attractiveness of the region, which will soon acquire a special significance, not only economic, but also political. And in the middle of all these threads will be situated Azerbaijan, geopolitical significance of which will increase many times.

Hardly anyone could imagine that this is how the February initiative of President Aliyev supported by the heads of Russia and Iran would result. If you change the direction of global flows, it means that one must change the entire world map.

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