During his meeting with President Ilham Aliyev, the focus will be on discussing the goals of consistently developing Russian-Azerbaijani relations, strategic partnership, and alliance, as well as addressing regional security issues.
Among the various points on the economic agenda, climate regulation issues stand out. It is expected that the parties will likely sign a memorandum of understanding on climate change and low-carbon development. The agenda for Vladimir Putin’s visit to Baku was coordinated both in economic and political terms.
Last week, Baku hosted the 22nd session of the Russian-Azerbaijani Intergovernmental Commission on Economic Cooperation, during which interim results for the current year on a range of issues were summarized.
Russia remains a key economic partner for Azerbaijan, ranking third in the republic’s foreign trade after Turkey and Italy. Significant progress in bilateral relations has been noted after the shift to national currencies in bilateral trade. By the end of last year, the share of rubles and manats in the structure of bilateral settlements was 57.8%, while by the end of January-May 2024, it had reached 73.1%—the best level in the CIS after Russian-Belarusian indicators.
For both Azerbaijan and Russia, switching to national currencies in settlements forms a system independent of Western banking infrastructure, which is attempting to limit Russia’s trade communications and transactions with its closest partners and allies. In the future, this practice will create a foundation for establishing a payment environment in national currencies on a BRICS scale, where Russia is chairing this year. It is also worth noting that it is beneficial for Azerbaijan to increase trade in manats and rubles in sectors such as electricity, agricultural products, and gas chemistry products (polymers), aimed at various consumers in the Russian Federation. Meanwhile, it is advantageous for Russia to receive rubles for the sale of grain and fertilizers. By conducting trade with Azerbaijan in manats, Russian small and medium-sized entrepreneurs create a reserve for investments in joint projects, procurement of components, and equipment. On a macro level, national currencies resulting from mutual settlements gain the opportunity to be invested in joint projects, and this process is already underway.
The stability and diversity of the economic platform between Moscow and Baku
As part of the action plan signed in January 2024 for developing key areas of Russian-Azerbaijani cooperation for 2024-2026, work continues in seven key areas: trade, transport, industry, arbitration procedural code (APC), energy, information technology, and cultural-humanitarian cooperation.
To illustrate this cooperation, let’s consider three projects launched this year:
- Automobile Assembly: AvtoVAZ has launched a project to assemble Lada cars in Azerbaijan. About 1,500 vehicles are planned to roll off the assembly line this year. By the end of 2024, in addition to the Granta model, Azerbaijan will start producing two models from the popular Niva line—Legend and Travel. In the next few years, AvtoVAZ’s annual production in Azerbaijan could reach 4,000-5,000 vehicles.
- Pharmacology: The Russian pharmaceutical company “R-Pharm” has finally launched the production of a drug for preventing complications of diabetes in Azerbaijan. Under the terms of a five-year contract, this enterprise will produce about 1 million packages per year. According to Azerbaijan’s Republican Endocrinology Center, more than 320,000 patients were registered with diabetes in 2023, about 37% of whom regularly receive insulin. Another Russian manufacturer, “Geropharm,” plans to begin production of glargine and aspart insulins and other genetically engineered insulin-containing drugs in Azerbaijan in 2025. Currently, Azerbaijan imports similar drugs from abroad. Part of the Azerbaijani-produced drugs may be supplied to Morocco since “Geropharm” has signed a contract with Moroccan partners for insulin deliveries until 2026.
- Chemical Synthesis: This year, during the XV International Economic Forum “Russia – Islamic World: KazanForum,” an agreement was signed between the Azerbaijani Agency for the Development of Economic Zones and the Tatarstan Technopolis “Khimgrad” to create a special zone of 10 hectares in the Sumgayit Chemical Industry Park for developing the chemical industry. The new cluster is expected to attract companies from Azerbaijan, Russia, and Uzbekistan actively.
Stabilizing the climate: a global agenda task
Azerbaijan and Russia continue active cooperation in the field of climate change, which began after Azerbaijan gained the right to host the 29th session of the Conference of the Parties to the UN Framework Convention on Climate Change. This significant event will be held in Baku in November this year.
Climate change issues affect every region of the planet and are equally relevant to all countries. The Caspian region, including the ecosystems of the Caspian Sea and the Volga and Samur rivers, is one of the significant markers of global climate change, notably the problem of freshwater scarcity and the shallowing of coastal port and tourist areas.
However, beyond the problem of our planet’s evolution, which is difficult to regulate, Moscow and Baku share the task of implementing principles for a fair transition to a low-carbon economy without excessive external pressure and the imposition of unfavorable economic formulas.
As the chairing country in BRICS, which includes Brazil, India, China, South Africa, the UAE, Iran, Egypt, and Ethiopia, Russia will host a High-Level Dialogue and BRICS Forum on Climate Change in Moscow on August 29-30. Azerbaijan has been invited to this event and will participate in discussions on the climate agenda across a wide range of issues with representatives from the public sector, business, and academic circles from BRICS member countries. Additionally, the Russian side is offering to train Azerbaijani specialists to work on the national greenhouse gas emissions and absorption inventory.
A draft “Mountains and Climate” declaration, developed with the participation of Russian experts, has also been prepared for discussion. Regarding the Memorandum of Understanding on Climate Change and Low-Carbon Development, on which the governments of Russia and Azerbaijan have completed work, this document will serve as the basis for exploring the possibilities of using carbon market mechanisms and exchanging experiences on climate adaptation issues. Within the framework of the Memorandum, both sides also intend to actively engage the private sector in solving the challenges of sustainable low-carbon development.
This document is likely to be presented for signing during Vladimir Putin’s upcoming visit to Azerbaijan.
Trust as the foundation of a new security system
In the political sphere, the coordination of Putin’s visit agenda was discussed during the visit to Baku by Russian Security Council Secretary Sergei Shoigu.
Besides potentially discussing problematic elements in some joint projects (SOCAR gas supplies to the European Union through Ukraine), as well as discrepancies and conflicts of interest on this topic, Shoigu’s visit to Baku confirmed mutual support and the friendly nature of relations between high-level officials.
It’s worth noting that Sergei Shoigu is one of President Putin’s close associates, who is also engaged in close interaction with the Azerbaijani elite. For example, in June 2001, as head of the Russian Ministry of Emergency Situations, he met with President Heydar Aliyev. That meeting, held shortly after the national leader created the Azerbaijani Ministry of Emergency Situations, was a crucial step in forming the Azerbaijani agency. An agreement was reached on training specialists, providing equipment, and new technologies, and working together in the region.
The Security Councils of Russia and Azerbaijan are key structures in discussing and preparing high-level decisions and determining the final components of the joint response of the two countries on various issues.
Shoigu informed Baku of the contents of his negotiations in Tehran and may have briefed the Azerbaijani side on the nuances of coordinating the efforts of Russia and Iran in the area of Iran’s security and preventing Tehran from making decisions that could lead to a full-scale war with Israel. Trust between Baku and Moscow is based on a shared understanding of mutual threats. Russia shares with Azerbaijan the basic principles of regional security in the South Caucasus, giving Baku priority in defining the mechanisms for maintaining the emerging regional system.
Let me remind you that the essence of Ilham Aliyev’s “3+3” initiative (Azerbaijan, Armenia, and Georgia + Russia, Iran, and Turkey) is that the region should have a system that physically frees the South Caucasus from armed interstate conflicts.
Within the framework of President Ilham Aliyev’s project, all crisis issues should be resolved at sequential levels of consultations, from political to economic departments. Since 2020, it is within the “3+3” format that relations between Armenia and Azerbaijan, as well as Russia and Georgia, should advance. The complex regional problems are expected to fit into a consistent, step-by-step system of mutual consultations without involving third parties.
In the future, the regional initiative of the Azerbaijani President may well work. However, at present, the risk is too great that states with weak sovereignty, such as Armenia, may become a platform for the next round of confrontation between Western and Eastern powers.
During the upcoming meeting in Baku, Ilham Aliyev and Vladimir Putin will try to develop subsequent steps to stabilize the situation and implement the principles of the “3+3” platform in political practice.
We can only hope that an optimal scenario will be realized in the end.
Alexander Karavayev
Translated from haqqin.az
