And in the future, British business is ready to expand such investments in the republic, not only in the mining sector but also in alternative energy and green hydrogen production, startups and IT, agricultural processing, and tourism.
The other day, the new guidelines for cooperation were considered in London during the regular meeting of the Azerbaijani-British Intergovernmental Commission (IBC) for Economic Cooperation, which included the panel discussions on “Doing business in Azerbaijan”.
Over the years since Azerbaijan gained independence, relations between Baku and London have moved from a business partnership to a level of strategic cooperation. Since the Contract of the Century was signed in 1994, almost all important milestones in the development of the national extraction industry and energy and transport infrastructure have been associated with the active participation of British business. The world’s largest oil and gas company – British Petroleum (bp) plays a major role here. It is bp that leads the implementation of the major energy projects in Azerbaijan – offshore oil fields Azeri-Chirag-Guneshli (ACG) and gas-condensate Shah Deniz, has shares in the export oil and gas pipelines Baku-Tbilisi-Ceyhan (BTC) and South Caucasus Pipeline, and also participates with a 20% stake in the South Gas Corridor (SGC) consortium. Over 27 years of presence in Azerbaijan, investments of bp and its affiliated companies in the above projects amounted to $79.7 billion.
The oil and gas path is undoubtedly the basic one in the Azerbaijani-British economic relations, and about 98% of Azerbaijan’s trade with the UK is based on crude oil supplies. Accordingly, the volume of trade largely depends on the current market conditions: for example, in 2019 the trade turnover between the two countries increased by 34% and reached $704.6 million, while during the pandemic and oil collapse in 2020, this figure dropped by 35%. Since 2021, bilateral trade has been on the rise again, supported by the high demand for energy resources.
But oil is not the only point where Baku and London’s business interests meet: there are currently about 437 British companies in Azerbaijan, and about half of them are involved in areas far from energy. British businesses are well represented in banking, insurance, consulting, intermediary and legal fields and leading transport, architectural, technological, service and agricultural companies have their offices in Baku.
And judging by the panel discussions recently held in London as part of the fifth meeting of the Azerbaijani-British Intergovernmental Commission on Doing business in Azerbaijan, the two states intend to maximize cooperation in non-oil sectors.
“Great Britain is the largest foreign investor in Azerbaijan, and last year the trade turnover between the two countries grew by 47% and amounted to about $668 million,” said Azerbaijani Energy Minister Parviz Shahbazov, who attended the London meeting of the intergovernmental commission. According to the minister, today Great Britain is a strategic partner of Azerbaijan in the field of “green” energy. During the meeting, the IGC reviewed the prospects for long-term cooperation between the two countries in such important areas as investment, alternative energy, digital economy, infrastructure, health, education and agriculture.
And this interest is mutual: for British business, Azerbaijan has been a key investment base in the South Caucasus region for decades; moreover, companies operating in our country are actively developing markets in Central Asia and elsewhere. Given the recent geopolitical events associated with the war in Ukraine, British companies are massively curtailing their activities in Russia, and therefore the role of Azerbaijan as the most convenient business platform in the post-Soviet space for the development of business cooperation with London is noticeably increasing.
In particular, Azerbaijan in Britain is considered as a key pilot site for expanding cooperation in the field of renewable energy sources (RES). British Petroleum plans to reduce investments in conventional energy to 50% by 2030, and the released financial resources will be directed to the sphere of “green” technologies. And this leading trend of bp’s new policy will be primarily felt in Azerbaijan. So, at the end of May 2022 bp presented to the Ministry of Energy of Azerbaijan a master plan for decarbonization of the energy sector of Azerbaijan, providing the formation of integrated “green” energy and transport systems, creation of energy-efficient buildings, waste management, development of waste-free industry, as well as the implementation of renewable energy projects in the country. “Azerbaijan’s close cooperation with Great Britain in the transition to green energy plays a significant role in the diversification of relations in the non-oil sector. In particular, we are talking about cooperation in the construction of a 240 MW solar power plant in Jabrayil, as well as other projects in the field of “green energy” and decarbonization,” Energy Minister Parviz Shahbazov said recently. Under this project, which involved an investment estimated at $200 million, a construction site has already been allocated where all necessary research is being completed: together with bp specialists, preparation for the purchase of the necessary equipment is carried out, and logistics issues are studied, a feasibility study is developed.
In turn, UK ExportFinance (UKEF) actively monitors solar energy projects in Azerbaijan and is considering the possibility of cooperation with the country on other renewable energy projects in the near future.
Equally promising is the cooperation between Baku and London in the field of offshore wind energy, as well as the production and export of hydrogen fuel. In particular, leading British companies – bp and KBR in partnership with specialized firms from Norway and the UAE have already begun studying the prospects of introducing in Azerbaijan technologies for the production of “green” hydrogen by electrolysis of seawater using electricity from offshore wind turbines, as well as production of “blue” hydrogen by the processing of natural gas produced at sea.
Another high-potential cluster for Azerbaijani-British cooperation is the attraction of investments and technical support for digital economy projects. In particular, the project to support the startup ecosystem in Azerbaijan is implemented by BP-Azerbaijan, which runs several training modules, workshops and consulting for students and supports startup businesses with the opportunity to visit the world’s leading innovation centers. In the future, such cooperation can be expanded, and a number of British IT companies are studying the possibility of participation in the development of components of Industry 4.0 in our country.
“Great Britain looks forward to deepening cooperation with Azerbaijan in various spheres, including high-tech agriculture, tourism, as well as investments in new technologies, health and education,” British Export Minister Michael Freer said in London at the fifth meeting of the IGC.
Within the panel discussions on Doing business in Azerbaijan, the Azerbaijan Export & Investment Promotion Agency (AZPROMO) presented a report on business and investment opportunities in Azerbaijan. Judging by the results of the meeting the British business showed considerable interest in participation in contract works and establishment of joint ventures within the revival of the Karabakh and East Zangazur economic regions and especially participation in projects on the “green energy zone” concept in the liberated territories of Azerbaijan.
At the meeting of the Azerbaijani-British IGC, detailed information on new investment opportunities was presented, the importance of launching the Azerbaijani-British Chamber of Commerce, and acceleration of the work on the Partnership and Cooperation Agreement between Azerbaijan and Great Britain for the development of bilateral economic relations were stressed. A memorandum of understanding on cooperation between the Azerbaijani innovation company IDRAK Technology Transfer and British ApplianSys was signed following the IGC meeting. The final protocol of the commission meeting was signed and it was agreed that the next meeting of the IGC will be held in Baku in 2023.