Azerbaijan – UAE 2023 Trade and Investment Development Prospects

Bilateral trade doubled in 2022 with plenty more room for growth  

In recent years, Azerbaijan’s image as a reliable trade partner has improved. As a result of the countries successful, multifaceted foreign policy, Azerbaijan has established strong partnerships with both European countries, and countries of the Turkic world, as well as with Arab states.

Concerning the Middle East, Azerbaijan has a great historical and cultural connection with the Arab world. Back in 2005, a Memorandum of Understanding was signed between Azerbaijan and the League of Arab States, where Azerbaijan has observer status. In 2007, as part of the official visit to Egypt, President Ilham Aliyev met with former Secretary General Amr Moussa at the headquarters of the Arab League and addressed the ambassadors of the League member countries.

The Declaration adopted following the results of the first “Forum of Cooperation and Economic Cooperation of the League of Arab States – Central Asia – Azerbaijan”, held in Riyadh in 2014, which emphasizes the importance of resolving the past Armenian-Azerbaijani conflict based on the principles of sovereignty and territorial integrity in accordance with UN Security Council resolutions. At the same time, the Declaration noted the importance of the Humanitarian Forum initiated by President Ilham Aliyev and held annually under his auspices.

Just last year, on June 17, 2022, President Ilham Aliyev received Secretary General of the Arab League Ahmed Abul Ghaith, who took part in the IX Global Baku Forum held in Azerbaijan.

Arab countries have also regularly expressed their support for the territorial integrity and sovereignty of Azerbaijan. At the same time, all member states of the Arab League are also members of the Non-Aligned Movement (NAM), which is currently chaired by Azerbaijan. Azerbaijan has ample opportunities for cooperation with Arab countries within the framework of this organization.

Today, Azerbaijan’s cooperation with Arab countries has entered a new stage of development. The UAE is one of Azerbaijan’s main partners in the Arab world. Over the last 30 years after the diplomatic relations were established between the two countries, Azerbaijan and the UAE have been rapidly developing their cooperation in various fields and aspects.

Economic relations between the two countries are at a high level. The trade turnover between the two countries constantly shows significant growth. In 2021, the trade turnover between Azerbaijan and the UAE amounted to US$50.42 million. There has been close to 100% growth. Azerbaijan’s trade turnover with the UAE from January through November 2022 amounted to US$94.62 million. While the growth rate is impressive, the still relatively small volumes show there is much additional capacity to develop bilateral trade ties.

At the same time, tourism ties between the two countries are expanding. In 2021, about 17,000 UAE citizens arrived in Azerbaijan. The number of UAE citizens arriving in Azerbaijan in 2022 has more than doubled.

The Joint Intergovernmental Commission on Economic, Trade, and Technical Cooperation between the Government of the Republic of Azerbaijan and the Government of the United Arab Emirates serves to strengthen this cooperation. To date, eight meetings of this commission have been held. The last meeting was held in Dubai in November 2021. The final protocol signed at the end of the eighth meeting provides for strengthening cooperation in the fields of bilateral economic relations, investment, trade, green energy, agriculture, food safety, innovation, logistics, tourism, healthcare, science, and also provides for the expansion of business relations between the two countries and partnerships between small and medium-sized enterprises, as well as the creation of Business Council and working groups on mutual investment promotion.

Moreover, since 2017, a Trade Representative Office of Azerbaijan has been operating in Dubai, and since 2019, the Azerbaijan Trading House has been operating to organize the sale of local products in the UAE and the Persian Gulf countries and promote the “Made in Azerbaijan” brand in the UAE market. Currently, 360 commercial organizations with UAE investments are registered in Azerbaijan and engaged in industry, agriculture, transport, construction, trade, and services.

One of the most outstanding projects implemented between Azerbaijan and the UAE is the construction of a 230 MW Garadagh solar power plant, carried out by Masdar company. The investment Agreement, the Energy Purchase Agreement, and the Contract on connection to the transmission network was signed between the relevant structures of Azerbaijan and the Arab company in April 2021. According to preliminary estimates, the plant will produce 500 million kWh of electricity annually, which will save 110 million cubic meters of natural gas per year, prevent more than 200,000 tons of carbon dioxide emissions, and provide electricity to 110,000 homes. The total cost of the project is about $200 million. At the same time, the project is planned to be implemented entirely at the expense of foreign investments. On March 15, 2022, Baku hosted the ceremony of laying the foundation stone of the Garadagh solar power plant.

Within the framework of the special session of the Baku Energy Week held in the city of Shusha on June 4, 2022, the Ministry of Energy of Azerbaijan and Masdar company signed several agreements on the assessment and development of solar power projects with a capacity of 1 GW, as well as onshore wind power projects with a capacity of 1 GW. An agreement on the evaluation, development, and implementation of integrated wind and green hydrogen projects with a capacity of 2 GW in the sea was also signed.

Both Azerbaijan and the UAE pay great attention to sustainable economic development. Abu Dhabi Sustainable Development Week (ADTA), which starts tomorrow in the UAE, is a global initiative supported by the UAE and Masdar company, aimed at accelerating sustainable development and achieving economic, social, and environmental progress. The participation of President Ilham Aliyev at this event is of particular importance. Azerbaijan approved the “2030 Agenda for Sustainable Development” at the UN Summit on Sustainable Development in 2015 and, thereby, joined the global efforts to implement the Sustainable Development Goals. At the same time, the National Coordinating Council for Sustainable Development of the Republic of Azerbaijan was established in 2016 by the decree of the President of Azerbaijan.

Azerbaijan’s cooperation with the UAE continues to develop in various fields, starting from business and trade to green energy. Constant high-level contacts between the two countries give grounds to say that not all the potential has been explored in the relationship yet, and both Azerbaijan and the UAE are striving to further strengthen this cooperation. The visit of President Ilham Aliyev to the UAE this week confirms this trend.

While promoting cooperation with the Western world, Azerbaijan equally pays careful attention to its partners in the Middle East. The Azerbaijani multilateral foreign policy placed Azerbaijan on a platform where investors are welcome and appreciated by different countries of the East and West – with the UAE a key new market destination for Azeri exporters and manufacturers looking to reach new regional markets.

For example, the UAE is a member of the Greater Arab Free Trade Area Agreement (GAFTA), giving it free trade access to markets in Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, Jordan, Egypt, Iraq, Lebanon, Morocco, Tunisia, Palestine, Syria, Libya, and Yemen. Additionally, within the Gulf Cooperation Council (GCC) framework, the UAE has signed Free Trade Agreements with New Zealand, Singapore, and EFTA countries. Negotiations are currently underway with several countries and trade groups, including the European Union, Japan, China, Korea, Australia, Pakistan, India, Turkey, and the Mercosur member countries: Argentina, Brazil, Paraguay, and Uruguay.

Azerbaijan is also a key transport hub with its Caspian Baku Port, able to ship goods from Europe, the Caucasus and Turkiye via the INSTC and directly to the UAE via Iran’s road and rail network to its southern Gulf Ports. Getting to market in the Middle East has never been easier for Azeri exporters.

This article has been edited and amended from the original piece by Mariana Akhmedova titled Azerbaijan-UAE Cooperation: Great Breakthrough and Promising Future that appeared on the Trend News Agency on January 18.  

Dezan Shira & Associates maintains an office in Dubai. Azerbaijani investors interested in the UAE and Arabic markets may contact us at dubai@dezshira.com or visit www.dezshira.com

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