Recently, Pakistan and Azerbaijan have signed several agreements and Memorandums of understandings (MoUs) to boost bilateral cooperation in their trade as well as energy sectors. The visit of Prime Minister Shehbaz Sharif to Baku proved to be a watershed visit where he held productive exchange of views with Azerbaijani President Ilham Aliyev. These things are the beginning of a good and strategic partnership to the two countries.
The agreements mark a milestone in the transformation of Pakistan Azerbaijan relations to much more substantive economic cooperation than what has been possible by limited traditional diplomatic ties. However, the most important of all agreements includes the act of increasing bilateral investments to $2 billion through projects which will be beneficial to both parties. Beyond showing Azerbaijan’s confidence in Pakistan’s economic potential, this financial commitment helps boost Pakistan’s readiness as a profitable investment location. These collaborative efforts will be upgraded further with the signing of formal agreements during the upcoming visit of President Aliyev to Pakistan.
The next important development in this context is the MoU signed between the State Oil Company of Azerbaijan Republic (SOCAR) and Pakistan’s Frontier Works Organization (FWO) and Pakistan State Oil (PSO). The MoU outlines collaborative efforts in association with Machike Thallian Tarujabba White Oil Pipeline Project- a strategic initiative to augment Pakistan’s energy security and reducing of transportation cost. The project will hold significant importance in ensuring easy transportation of oil and its use for the sake of progress of Pakistan’s industrial and economic landscape.
In the tourism and education fields, outside the energy field, there is more long-term profit that can be derived. These sectors where the MoUs have been inked will encourage cultural exchange, educational cooperation and will help to strengthen the people to people ties between the two nations. Both Pakistan and Azerbaijan have a rich cultural history, and the scenery are beautiful, and these agreements will pave new ways for students, professionals, and investors to come and enjoy it as well as academic and tourism collaboration.
In addition, the agreements further focused on strengthening the bilateral defense ties. Pakistan and Azerbaijan have agreed to produce defense equipment in joint manufacturing, that has economic and strategic importance. JF 17 Thunder fighter jet sale to Azerbaijan is a fulfillment of Pakistan’s growing ability to produce defense production and confidence of the international community of Pakistan defense manufacturing capabilities. Besides increasing Pakistan’s defense exports, this deal fortifies Azerbaijan’s military capabilities.
In fact, Pakistan’s struggle to overcome its long-standing energy shortages is a long fought battle. But the recent agreements with Azerbaijan come at a turning point. Smooth flow of oil shall be taken care of in White Oil Pipeline and for greater flexibility in procuring energy supply agreements of LNG are given. Consequently, Pakistan would be able to cut down financial burden on its foreign exchange reserves, to procure energy in a manner which is sustainable and cost effective.
Now, the economic collaboration between Pakistan and Azerbaijan also reflects the improvement taking place in Pakistan’s business environment. Azerbaijan’s plan to invest in Pakistan is a result of the country’s increasing attractiveness as investment destination as the government is focusing on policy reforms and ease of doing business. Currently the two countries conduct trade worth $55 million in total, yet with the newly signed agreements and development projects, the trade volume between two countries is expected to cross $2 billion within the next few years. This is milestone in the economic growth and regional integration of Pakistan.
Additionally, both Pakistan and Azerbaijan hold significant geostrategic importance. Both Pakistan is a gateway to South Asia and the Middle East and so is Azerbaijan bridging Europe and Central Asia. Increased trade and connectivity between the two countries will enhance their economic cooperation as both strengthen the performance of regional economies at large. The partnership portends a model of regional economic collaboration particularly amongst the Organization of Islamic Cooperation (OIC) member states.
The agreements also fit into Pakistan’s long-term aspirations to diversify its energy sources. As a player in the oil and gas sector, Azerbaijan is an apt partner to help Pakistan transit to a sustainable energy future. The ventures on LNG and pipeline projects will allow technological advancements and expertise to enter Pakistan for the benefits of the energy infrastructure.
Moreover, Pakistan’s emerging manufacturing industry is also recognized worldwide as Azerbaijan continues buying Pakistan defense products. This is an indication of the country’s capacity to generate high quality exports of goods and the country being a strong player in defense industry as well as the world industrial fields. The China Pakistan Economic Corridor in conjunction with these new trade agreements, is locking Pakistan into a position as a trade hub to South and Central Asia. The Pakistan – Azerbaijan agreements strengthen this position by adding further to infrastructure and logistical and investment channels.
Dr. Sahibzada Muhammad Usman is a Research Scholar and Academic; Ph.D. in Political Science at the University of Pisa, Italy.
