Azerbaijan-Türkiye ties: New goals in economy, energy, transportation (OP-ED)

  21 June 2024    Read: 950
 Azerbaijan-Türkiye ties: New goals in economy, energy, transportation  (OP-ED)

The Turkish Daily Sabah newspaper has published an article titled “Azerbaijan-Türkiye ties: New goals in economy, energy, transportation.” reprints the article by Javid Valiyev, Head of Department at the Baku-based think tank Center of Analysis of International Relations (AIR Center). 

Azerbaijani President Ilham Aliyev paid a one-day visit to Türkiye on June 10 and met with President Recep Tayyip Erdoğan. Geopolitical developments in the region were on the agenda of the presidents of the two allied countries. In addition to regional and global geopolitical developments, energy, economy and transportation issues were also expected to be discussed.

Especially in the last two months, the developments between the two countries in the fields of economy, energy and transportation have been more remarkable. It should be noted that the important decisions taken at the 11th meeting of the Joint Economy Commission of the two countries on May 11, the agreements signed in the field of energy on May 14 and June 4, and the resumption of the Baku-Tbilisi-Kars (BTK) railway following the completion of a large-scale reconstruction of the Georgian section of the railway will ensure that cooperation in these areas is in line with new targets.

Results of the meeting

On May 8, the 11th meeting of the Joint Economic Commission between the two countries was held in Ankara. At the end of the commission meeting, a 120-article protocol was signed between the two countries. This protocol includes exchanging experiences in the field of public-private partnership, signing a new agreement in the field of transport, strengthening cooperation for the Middle Corridor, organizing the 4th Energy Forum Meeting, developing inter-university cooperation, organizing a youth forum and strengthening cooperation for the restoration and reconstruction of the liberated territories.

In addition to the protocol, a memorandum of understanding between the Foreign Economic Relations Board (DEIK) of the Republic of Turkiye and the Small and Medium Enterprises Development Agency (SME) of the Republic of Azerbaijan, an agreement on the establishment of a joint working group on trade facilitation, an agreement on cooperation in the water sector and a declaration in the field of combating animal diseases was signed between the sides.

At the news conference held after the meeting, Azerbaijani Prime Minister Ali Asadov noted that more than 20 Turkish companies have implemented projects amounting to $4 billion for the restoration and reconstruction of the liberated territories. According to official figures 3,000 Azerbaijani companies operate in Turkiye and Turkish contractors have implemented 526 projects worth $19.3 billion in Azerbaijan. According to him, Turkiye's investment in Azerbaijan is $13 billion, and Azerbaijan's investment in Turkiye is $21 billion. Yılmaz also announced that a free trade agreement will be signed between the parties in the medium-term perspective.

The parties signed a preferential trade agreement in 2020 and an additional protocol in 2023. According to official statements after this agreement, the trade volume between the two countries has increased to $7.5 billion, and the aim is to increase this number to $15 billion.

Resumption Baku-Tbilisi-Kars railway capacity

The capacity of the Baku-Tbilisi-Kars railway, which connects Azerbaijan and Türkiye via Georgia, was increased from 1 million tons to 5 million tons in 2024. The first agreement for this railway line, which is an important component of the Middle Corridor, was signed in Tbilisi in 2007 and its opening took place in Baku in 2017. During the opening ceremony of the BTK in 2017, Aliyev stated that the capacity of the BTK could be increased to 5 million tons in the second stage and then to 17 million tons. Thus, the work to increase the capacity of the BTK to 5 million tons in 2023 was initiated and was completed in May 2024, and started to operate at a capacity of 5 million tons as of May 20.

Some of the geopolitical developments that occurred with the start of the railway, especially the closure of the borders of Russia, through which the northern corridor passes, and Iran, through which the southern corridor passes, due to COVID-19, the closure of the Suez Canal, which is an important passageway of the waterway where 90% of the cargo is carried between east and west, by a Japanese-flagged cargo ship and eventually the Russia-Ukraine war in 2022 increased the importance of the Central Corridor as a transportation route between East and West.

As a matter of fact, after these geopolitical developments, freight transportation began to increase via the Middle Corridor. According to the figures provided by Azerbaijan railways, the cargo flow from BTK in 2019 was 3.8 million tons, and in 2023, after the Russian-Ukraine war broke out, the figure was 6.8 million tons. In parallel with the increase in cargo volume from the Middle Corridor, BTK's capacity comes to the fore.

New agreements and targets in energy sector

On the margins of the 29th International Caspian Oil and Natural Gas Fair held in Azerbaijan on June 4, within the scope of Baku Energy Week, four agreements on natural gas delivery and exchange were signed between Turkiye and Azerbaijan. First, an agreement was signed to extend the natural gas supply agreement, which will expire at the end of 2024, until the end of 2030. According to the statement made by SOCAR, with the agreement, 3.7 billion cubic meters of natural gas will be exported to Turkiye annually from the "Şahdeniz-1" field until 2030. Moreover, agreements were signed between the parties to transport Azerbaijani gas to Europe and Nakhchivan via Turkiye, and Turkmenistan gas to Turkiye via Azerbaijan.

As in oil and natural gas, crucial steps are being taken to strengthen cooperation in electricity. An agreement on this issue was signed at the 3rd Türkiye-Azerbaijan Energy Forum held in September 2023. According to the information provided by Energy Minister Alparslan Bayraktar, technical studies are continuing to export the electricity produced in Azerbaijan to Turkiye and from Türkiye to Europe. Thus, Türkiye will be an export route for Azerbaijan's oil and natural gas as well as its electricity.

The Iğdır-Nakhchivan natural gas pipeline, with an annual capacity of 500 million cubic meters (bcm) is expected to become functional by the end of this year. A memorandum of understanding for the construction of the Iğdır-Nakhchivan Gas Pipeline was signed between the Turkish company Botas and the State Oil Company of Azerbaijan (SOCAR) in 2010. The pipeline is intended to supply gas from the Trans-Anatolian gas pipeline (TANAP) in Turkiye to the Nakhchivan Autonomous Republic, replacing the current gas supply from Iran. On Sept. 25, 2023, Aliyev and Erdoğan attended the groundbreaking ceremony of the Iğdır-Nakhchivan natural gas pipeline. Azerbaijan will be able to transmit its gas to Nakhchivan via Türkiye and will end Nakhchivan's dependence on foreign natural gas producers. This will also further increase the mutual dependence between Türkiye and Azerbaijan.

To sum up, although Azerbaijan-Türkiye relations seem to revolve around political and military issues, in recent years, successful projects and collaborations have been carried out in the fields of economy, energy and transportation. Especially the agreements and negotiations held in the last two months show that the two countries have set new goals in the energy, transportation and economic spheres. Deepening cooperation in these areas is a requirement of the Shusha Declaration on the alliance, signed between the two countries in June 2021. The agreement to establish a working group for the negotiations for a new agreement on trade relations, the transmission of Azerbaijani natural gas to Europe and Nakhchivan via Türkiye in energy, the transmission of Turkmen gas to Türkiye via Azerbaijan, and the increase of the BTK's load carrying capacity in transportation have emerged as medium-term goals.

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