Azerbaijan can become economic bridgehead for Arab countries
A serious need emerges, amid the global political and economic crisis, for the dialogue among religions, cultures, different political forces, and an important role in this process is in recent years played by Azerbaijan.
In this regard, the Azerbaijani President Ilham Aliyev's visit to Saudi Arabia is significant. It is also worth recalling that recently Baku was visited by the prime minister of the United Arab Emirates, Dubai's Emir Mohammed bin Rashid Al Maktoum.
Azerbaijan, located at the intersection of economic and political interests of all major political players in the world, can act as a mediator in the dialogue among these players.
This is also facilitated by Baku's good relations with all the countries in the region, namely, Russia, Iran, the Middle Eastern countries. It is also necessary to highlight Azerbaijan's close cooperation with Europe and the US.
Baku, at the same time, may become a bridgehead for the Arab countries in terms of economic cooperation with other countries in the region and making investments.
During President Ilham Aliyev's meeting with the Saudi king, it was noted that the two countries actively cooperate and support each other within international organizations.
It is important that both countries are members of the Organization of Islamic Cooperation. The OIC condemns unreservedly the occupation of Azerbaijani territories, as well as the destruction of monuments, acts of vandalism in these areas.
The prospects of expanding cooperation in economy, in particular oil and gas, tourism, agriculture spheres, as well as between the business circles, issues of mutual investment were also discussed.
At the same time, this visit becomes even more relevant in terms of lifting sanctions against Iran by the West. Having agreed to lift the sanctions, the United States also struck its most loyal allies - the oil-producing Arab countries. Previously, these countries contributed to the decline in oil prices, provided ensuring their own control of them in favor of the interests of the United States.
However, Iran is not subject to the decisions of these countries, despite the fact that they are all members of the oil cartel - OPEC. Today, a question of regulation of oil prices in terms of return to the market of such a major player as Iran arises before the Arab monarchies. And for that, they need support of all players, including Azerbaijan.
In addition, a favorable geographical position of Azerbaijan in terms of development of transport communications between Europe and Asia opens new opportunities for the country.
Thus, Saudis regard Azerbaijan not only a mediator in the development of intercultural, interreligious, interregional relations, but also economic relations with the West and Russia.
Azerbaijan, the economy of which is still highly dependent on the oil and gas sector, and Saudi Arabia have mutual interests in expanding the cooperation.
Diversification of economy is important for achieving long-term stability and agriculture can be the main export sector for Azerbaijan, while Saudi Arabia can become one of the main important markets for supplying agricultural products.
Arab countries are very interested in the development of cooperation in the sphere of agriculture, since they almost have no suitable lands: up to 90-95 percent of the agricultural products consumed in Arab countries is imported.
Moreover, trade relations play an important role in the development of relations between Saudi Arabia and Azerbaijan. However, the trade turnover between the two countries more than halved and stood at $14.7 million in 2014, according to Azerbaijani State Customs Committee.
It should be noted that in 2014, Saudi Arabia joined the negotiation process as part of Azerbaijan's accession to the Word Trade Organization and is quite active in this issue.
Seven companies from Saudi Arabia carry out the investment activity in Azerbaijan. These companies are working in the field of insurance, banking, trade, industry and services. The total volume of investments, made by these companies in Azerbaijan's fixed assets in 2002-2014, was $ 370 million.
At present, the two countries have great potential to expand the trade and investment relations. The reason is that the signed agreements on mutual promotion and protection of investments, as well as on the elimination of double taxation are a guarantee for security and promoting these relations.
The two countries have signed 18 agreements on economic and trade cooperation so far.
Thus, by confirming once again its support for Azerbaijan in the international organizations, Saudi Arabia fixed Baku's importance as an ally and a mediator in the development of not only bilateral but also regional relations.
Opportunities to invest in Iran open up to Azerbaijan
One of the main international issues today is to lift Western sanctions against Iran, and if so, the question is what kind of preferences this process will bring to Azerbaijan.
Political relations between Baku and Tehran have always been at a high level. However, the economic cooperation, although not obviously, was limited due to the sanctions against Iran.
Today, Iran, is limited regarding the export of its main product - oil, and the country desperately needs investments. The funds may be invested in virtually all areas beginning from agriculture to power engineering, to oil and gas production.
At the same time, funds can be invested on more favorable terms before Tehran can reach the pre-crisis sales volumes, as well as in terms of low oil prices in the world.
Meanwhile, Azerbaijan today is actively investing in almost all countries of the region. However, Iran has so far stayed aside. The current conditions open significant opportunities for Baku to invest in the Islamic Republic.
The resumption of cooperation of West and Iran paves the way for Iranian gas to Europe.
Today, the most promising direction of export may become namely the Southern Gas Corridor, initiated by Azerbaijan and its partners on development of the Shah Deniz field.
By the way, the National Iranian Oil Company (NICO) is also among these partners. Previously, participation of the Iranian company in pipeline projects to deliver gas to Europe was not even considered due to the sanctions. Now, however, the possibility of acquiring a share in TANAP by the Iranians is not excluded. In the future, the gas produced in Iran can be transported via this route as well.
Among the major transport projects, realized jointly by Azerbaijan, Iran and Russia, there is the North-South railway corridor, which is being delayed, including due to lack of investments.
A significant increase in the flow of goods from Europe to Iran and back is expected if the sanctions are lifted.
In this regard, the speedy implementation of the North-South project will bring significant preferences for Azerbaijan as a transit country.
However, the lifting of sanctions from Iran can also have a negative impact on oil prices, which in turn may negatively affect Azerbaijan's revenues, some 60 percent in the budget of which accounts for the incomes from the oil sales.
The growth of oil export by Iran to western countries as well, will lead to increase in the volume of supply with demand remaining at the same level and this will definitely affect the oil prices. The reduction of political tension around Iran improves the security of the entire region and for the investors as well.
Naturally, this process will not fully start soon, since investors will be cautious. Nevertheless, good political relations between Azerbaijan and Iran, lifting sanctions on Iran open great opportunities for Baku to invest in this country.
