Amina Bayramova

Analyst of the Center for Analysis of Economic Reforms and Communication

The closeness between the Turkic peoples is related not only to the common culture, language, religion, and similar values but also to the establishment of trade relations starting from ancient times and the historical development of diverse cooperation. Turkey, Azerbaijan, Kazakhstan, Turkmenistan, Kyrgyzstan, and Uzbekistan are Turkic-speaking countries with important geopolitical positions and rich resources located at the territory from Central Asia to the Anatolian Peninsula.

The economic relations between these countries, which differ from each other by their economic development, key macroeconomic and social indicators, intensified in 1991 with the independence of the Turkic-speaking countries in Central Asia and Azerbaijan. In 2009, during the 9th Summit of heads of Turkic-speaking countries held in Nakhchivan, the leaders signed Nakhchivan Agreement and established the Turkic Council. Today, within the framework of the Council, our countries successfully cooperate and support each other in all fields, especially in political, trade, economic, cultural, and humanitarian spheres. Now, the instructions given by the leaders of the Turkic-speaking countries to expand cooperation are one of the main factors in deepening our economic relations. Trade relations, mutual investments, regional mega-projects, and cooperation in construction and restoration are key areas in the economic relations between Azerbaijan and Turkic-speaking countries.

Trade relations

If compared with 2016, in 2020, Kazakhstan rose from 32nd to 28th place in terms of Azerbaijan's foreign trade turnover, Uzbekistan from 58th to 34th place, and Turkmenistan moved down from 28th to 31st place. In imports of Azerbaijan, Uzbekistan rose from 54th to 28th place, Turkmenistan from 36th to 19th place, and Kazakhstan has had a stable position - 15th. In Azerbaijan's exports, Kazakhstan rose from 36th to 31st place and Uzbekistan from 49th to 33rd place. The Republic of Turkey is Azerbaijan's second-largest trading partner.

In 2020, imports of Azerbaijan with Turkic-speaking countries amounted to 1.83 billion, exports - to 2.67 billion, and the total trade turnover - to 4.5 billion US dollars. If in 2010, the share of Turkic-speaking countries in the total trade turnover of Azerbaijan was 5.6%, in 2020, it rose to 18.4%. Taking into account that in 2019 this figure was 15.2%, we can say that the tension created by the pandemic did not hinder the positive trend in trade with Turkic-speaking countries. In 2020, in the total trade turnover with the CIS countries, the share of Turkic-speaking countries that are members of the CIS amounted to 8.2%. Imports of Azerbaijan from Turkic-speaking countries fluctuated between 14.1% and 19.7% in 2010-2020, and in 2020, this figure was 17.1%. Considering that the corresponding figure in 2019 was 15.4%, we can note that the pandemic did not weaken imports from Turkic-speaking countries. In 2020, the share of Turkic-speaking CIS member countries in imports from the CIS countries amounted to 9.6%.

We can clearly observe the variety of goods imported by Azerbaijan from Turkic-speaking countries. In 2020, 95.9% of imported natural barium sulfate, 91.9% of live poultry, 77.1% of pasta, 68.3% of buses, 63.24% of poultry eggs, 63% of metal structures, 58% of furniture, 55.6% of synthetic detergents, and soap were brought from Turkic-speaking countries. In recent years, there has been an increase in the number of live poultry, certain types of food, natural sand, soap, and synthetic detergents, rubber tires, cold-rolled steel, domestic air conditioners, and road construction machinery imported from Turkic-speaking countries

In 2010-2020, the share of Turkic-speaking countries in Azerbaijan's total exports increased from 2.2% to 19.4%. Considering that the corresponding figure was 15% in 2019, we can see that the pandemic has not weakened exports to Turkic-speaking countries. The share of Turkic-speaking countries that are members of the CIS in exports to the CIS countries ranged from 0.4% to 1.4% in 2010-2020. In 2020, among exported goods, 100% of raw sheep and lambskins, 96.79% of semi-finished products from ferrous metals, 92.9% of cotton fiber, 79.6% of natural gas, 75.64% of sugar, 71.77% of unprocessed aluminum, and 60.82% of cotton yarn fell to the share of the Turkic-speaking countries. Over the past years, there has been an increase in the number of fruits and vegetables, pasta, canned fruits and vegetables, bentonite clay, natural gas, electricity, acyclic alcohols, and their derivatives, ethylene polymers, and cotton fiber exported to Turkic-speaking countries. Although the imports exceeded the exports in the total trade turnover of Turkic-speaking countries in 2009-2019, the balance in Azerbaijan was always in surplus throughout all years. 

In 2015-2019, the share of Azerbaijan in the total exports of Turkic-speaking countries to the world increased from 5.9% to 7.4%, and in imports from these countries - from 3.5% to 5.1%.

Table 1: Trade volume of Turkic-speaking countries (billion US dollars)

In the trade turnover of Azerbaijan with Turkic-speaking countries, the share of Turkey is 92.5% and the share of Turkic-speaking countries of Central Asia is 7.5%. This shows that we can apply the experience we gained in increasing our trade relations with Turkey in the development of cooperation in similar operations with other Turkic-speaking countries.

Table 2: Composition and commodity structure of trade with Turkic-speaking countries in 2020

Currently, we can see active work that is being implemented to increase export opportunities with Turkic-speaking countries. Thus, meetings organized within the frame of Cooperation Council of Turkic Speaking States, the Union of Chambers and Commodity Exchanges of Turkey, and summits of Turkic-speaking countries, as well as business forums with the participation of entrepreneurs and agencies of our countries, business trips and trade missions strengthen this cooperation.

The developed "Turkic Vision 2040" strategy document will strengthen the future of the Turkic world, our cooperation and integration in all areas, including the economy. To expand trade, there should be done work to support small and medium-sized businesses, improve the legislative and legal framework, and stimulate industrial and business activity.

Moreover, we should mention measures taken together with the Republic of Kazakhstan to expand the range of goods presented at the markets of both countries. As another important measure to increase trade with the Turkic world, the Preferential Trade Agreement signed between Turkey and Azerbaijan. The Agreement, which came into force on March 1, will reduce tariffs on 15 products lines between the two States and will be sufficient in eliminating non-tariff barriers.

Besides, the establishment of trade representations of Azerbaijan in Turkic-speaking countries will ensure more efficient and flexible trade between our countries. In 2021, Nur-Sultan, the capital of Kazakhstan, hosted the opening ceremony of the Azerbaijan Trade House. It is planned to open branches of the Trade House in Aktau and Almaty in the near future. Work is underway to establish a trade house of Azerbaijan in Istanbul. The opening of trade houses and representative offices will not only ensure the availability of Azerbaijan’s products for consumers in Turkic-speaking countries, but also play an important platform for the development of trade and economic relations between our countries.

Mutual investments

Among the Turkic-speaking countries, the most organized investment relations of Azerbaijan are with the Republic of Turkey. It is the second largest investor in the economy of Azerbaijan, and mutual investment is growing every year. In 2020, the share of fraternal Turkey in total investments to Azerbaijan was 12.8%, which demonstrates 7 million US dollars increase if compared with 2019. In the first quarter of 2021, the volume of investments attracted to the economy of Azerbaijan from Turkic-speaking countries has increased by 56.1% in comparison with the same period of the previous year and amounted to 212.78 million US dollars.

In 2020, the share of Turkic-speaking countries in Azerbaijan's foreign direct investment was 27.1%. In the first quarter of 2021, Azerbaijan invested 19 million US dollars in the economy of Turkey, 0.7 million US dollars in the economy Uzbekistan, 0.35 million in the economy of Kazakhstan, and 0.2 million US dollars in the economy of Kyrgyzstan. The share of Turkic-speaking countries in Azerbaijan's investment in foreign economies in the first quarter of 2021 increased from 5.6% to 15.6% compared to the same period of last year.

Among Turkic-speaking countries, for the volume of investments directed to Azerbaijan, the share of Turkey is 99%. In addition, Turkey has a 91.2% share in the volume of Azerbaijan’s investments. Currently, Azerbaijan is one of the largest investors in the Turkish economy. Thus, Azerbaijan's investment in the Turkish economy amounts to 19.5 billion US dollars while Turkey's investment in the economy of Azerbaijan is 12 billion US dollars. Turkey is the largest investor in the non-oil sector in Azerbaijan. Azerbaijani companies create capital inflows in Turkey, mainly in the energy and chemical sectors.

The Baku grain terminal can serve as an example of Kazakhstan’s investment in Azerbaijan. Created in 2017 and co-financed by both countries, the terminal, which imports grain products from Kazakhstan, not only provides Azerbaijan with quality grain, but also plays an important role in the export of Kazakh grain to the Caucasus and the Black Sea region and the European Union. Azersun Logistics and Production Center, built with the investment of Azerbaijan in the Morport Aktau Special Economic Zone, plays an important role in ensuring food and non-food security in the western regions of Kazakhstan, creating favorable conditions and trade opportunities for Azerbaijani exporters, increasing the export potential of Azerbaijani goods. Azerbaijan invests more in the transport, logistics and industrial sectors of Kazakhstan's economy. Moreover, Azerbaijani companies have been actively involved in the construction of roads, residential buildings, irrigation systems, water reservoirs, and the only tunnel in the country.

During Uzbek-Azerbaijani business forum in 2018, it was mentioned that 84 Azerbaijan companies, including 71 joint ventures and 11 Azerbaijan-invested companies, operate in Uzbekistan. The main areas of our investment in Uzbekistan are trade, metal processing, finance and insurance, real estate, energy, jewelry, food and light industry. In its turn, Uzbekistan invests in transport sector in Azerbaijan.

Turkmenistan and Azerbaijan are developing mutually beneficial cooperation in industry within the Trade and Economic Cooperation Program. Thus is particularly related to measures on increasing and diversifying mutual investments, especially in non-primary sectors. Our countries assist in the implementation of joint projects in various industries, including light industry, production of construction materials, as well as other areas of mutual interest.

According to the mentioned program, Azerbaijan and Turkmenistan will continue cooperation in the fields of energy, innovation and high technology, as well as the application of energy-efficient and energy-saving technologies and the development of alternative energy biotechnologies.

Among Turkic-speaking countries, our weakest economic ties are with the Republic of Kyrgyzstan; however, over the past years, important steps have been taken to increase cooperation between two countries. The establishment of a joint investment fund and the opening of an Azerbaijani Trading House in Kyrgyzstan will contribute to the increase of mutual investments and the development of trade. There are broad opportunities between our countries to develop cooperation in the oil and gas sector, energy, tourism, finance and banking, to establish joint ventures in the mining and electrical industries, agriculture, and manufacturing, to strengthen ties between business entities and associations, as well as to enlarge the range of goods in mutual trade. Kyrgyzstan is also interested in strengthening cooperation between Turkic-speaking countries in the field of information and telecommunications technologies and the development of a "green" economy. This opens a new potential direction for our country to increase mutual investment.

Cooperation in digital economy

Azerbaijan supports the initiatives of the 4th Industrial Revolution and the challenges of the digitalization of the economy. Our country plays the role of a bridge between Europe and Asia in the context of information exchange. With the laying of Trans-Caspian fiber-optic cables from Kazakhstan and Turkmenistan, Azerbaijan has undertaken the mission of a digital telecommunications corridor.

A fiber-optic cable is planned to be laid on the route Azerbaijan-Kazakhstan from Siyazan to Aktau. It is expected to complete the construction of the 400 km long Trans-Caspian fiber-optic highway in 2021-2022. This highway will allow the Internet and content to be transported from the European continent via Azerbaijan to Kazakhstan and then to China.

The second fiber-optic line will be between Siyazan and Turkmenbashi, which will be both an alternative and a new route. The commissioning of this cable line will meet the data traffic needs of Turkmenistan, Uzbekistan, Afghanistan, Pakistan, and India.

Cooperation in the field of the digital economy will contribute to the elimination of the digital divide in Azerbaijan both regionally and globally, the provision of quality Internet and data exchange, digital security, and the formation of the Digital Silk Road connecting Europe and Asia.

Cooperation in the development of transport links

Historically, one of the key areas of economic ties between our countries, located on the ancient Silk Road, was the cooperation in the sphere of transport. Along with other spheres, Azerbaijan has great significance for Turkic-speaking countries in terms of the development of transport and communication links. At the same time, Azerbaijan has great potential and significance being a transit country for Central Asian countries without direct access to the high seas in bringing the region's energy resources to the world market, as well as in importing goods from Europe to these countries. The favorable geographical position of our country, the availability of the necessary transport infrastructure, as well as the new Baku International Sea Trade Port, play an important role for Azerbaijan to become a strategically important logistics center for Turkic-speaking countries.

As a reliable transit country, Azerbaijan continues its efforts to provide Turkic-speaking countries with access to world markets. The Baku-Tbilisi-Kars railway, commissioned in October 2017, is a major contribution to the restoration of the historic Silk Road. The doubling of the volume of cargo transported on the Baku-Tbilisi-Kars railway in 2020 is a clear example of the effectiveness of joint projects in the field of transport and communications. The Baku-Tbilisi-Kars railway envisages the connection of Azerbaijan and Turkey, and, on a larger scale, Europe and Asia. The project is important for Turkic-speaking countries on the Silk Road, which are interested in passenger and cargo transportation, in terms of reducing transport costs and duration, as well as increasing the scale of economic trade relations.

Our country provides Turkic-speaking countries with alternative transit through not only East-West but also North-South transport corridor as well. The North-South transport corridor is a project that connects India, Pakistan, Iran, Azerbaijan, Russia, and Northern Europe. Thus, the Turkic-speaking countries of Central Asia, as well as Turkey gain the opportunity of quick and efficient transportation of their products to the North-South corridor, especially to Russia and Iran, using the territory of Azerbaijan.

The glorious victory of our country creates new opportunities for the development of transportation and communication links of Turkic-speaking countries. Through Zangazur Corridor, Central Asia countries will gain diverse transport systems, diversification, the safety of transportation, as well as efficiency in access to international markets.

These opportunities mean new prospects for Turkic-speaking countries as well as for Azerbaijan. The completion of railway and highway construction for launching the Zangazaur Corridor will ensure diversified access of Azerbaijan and Turkic-speaking countries to transport corridors and have time- and resource-saving effects during transportation. Also, in terms of international trade and transportation, the potential of the South Caucasus region will increase in the integration of Turkic-speaking countries, including regional states.

The construction of new transport lines and the renovation of existing ones, Azerbaijan's infrastructure capabilities and favorable geographical position, as well as new regional opportunities, have great potential to increase exports of Turkic-speaking countries, as well as reduce transport costs and time. Also, the modern infrastructure of the ports of Aktau, Turkmenbashi, Alat, Samsun, and Mersin and the organization of their transit and logistics centers has an important potential to increase the efficiency of cargo transportation. The commissioning of the Baku International Sea Port with a capacity of 15 million tons of cargo and 100 thousand containers, as well as the establishment of Azersun Production and Logistics Center in Kazakhstan as the first foreign logistics center of Azerbaijan, demonstrate the importance, which our country attaches to transport and logistics in the region and the Turkic world. Besides, the work was undertaken to reduce logistics costs along the transport corridors, improve the agility of transport and customs operations will also increase the efficiency of communication lines.

In the future, all these measures will allow integrating North-South and East-West transport corridors and turning Azerbaijan – the only country participating in projects in both directions, into a transport and logistics hub. As a result, it will contribute to strengthening our country’s position in the Turkic world, region, and world, as well as holding a key position in transit operations. Besides, the outcomes of the implemented work to diversify transport and communication relations will accelerate the economic integration of Turkic-speaking countries with each other, as well as with the region and the world, facilitate the decrease of transport costs, stimulate exports and imports, and finally, let Turkic-speaking countries gain strategic and geopolitical advantages.

Energy cooperation with Turkic-speaking countries

Energy cooperation with the Turkic world in regional projects has particular significance. In this context, Azerbaijan holds a position of an oil and gas exporter rich in natural energy resources and a transit position in the western transportation of natural resources of the Turkic-speaking countries of Central Asia. Today, Turkic-speaking countries, especially Turkey and Azerbaijan, are jointly implementing great projects, redrawing the energy map of Eurasia.

The projects envisaging multilateral cooperation between Azerbaijan and Turkic-speaking countries in the field of energy began with the signing of the Contract of the Century in 1994 and  oil exploration of the Azeri, Chirag and Gunashli fields, and expanded in the following years. In this mega project, the State Oil Company of Azerbaijan (SOCAR) represents Azerbaijan and Turkey Petroleum Corporation represents Turkey. In 2017, under the leadership of President Ilham Aliyev, this agreement was extended until the middle of the century. This shows the continuity and longevity of relations in the field of global energy between Azerbaijan and Turkey as representatives of Turkic-speaking countries and promises sustainability in economic development.

Azerbaijan has also initiated and has been implementing energy projects of regional and global importance, such as the Baku-Tbilisi-Ceyhan and Southern Gas Corridor, which are important projects for energy cooperation with regional and Turkic-speaking countries.

The Baku-Tbilisi-Ceyhan (BTC) main export pipeline named after Heydar Aliyev, which was opened in 2005, increases the importance of Azerbaijan and Turkey in access to international energy corridors and Europe's energy security. The pipeline, along with transit fees and revenues from the sale and storage of oil, contributes to the development of national corporations involved in the project and, consequently, to an increase in the gross domestic product of both countries.

BTC has also raised the economic importance of the Turkish port of Ceyhan, resulting in increased revenues obtained through the port and investment flows. BTC also prevents the overloading of existing straits in the Black Sea. The existing pipeline reduces environmental tensions in Turkey's Dardanelles and Bosphorus Straits by sharing the cargo from the east with the port of Ceyhan.

The Baku-Tbilisi-Erzurum Pipeline (BTE), commissioned in 2007, ensures the export of Azerbaijani gas to Georgia, Turkey, and Greece. The main significance of this project for Azerbaijan and Turkey is that these countries have become the key transit countries for the transportation of natural gas from Asia to Europe. Thus, countries increase both their strategic positions and their level of economic prosperity and income. This results in the strengthening of economic relations between both Turkey and Azerbaijan, as well as between the producers and consumers of both countries.

The Southern Gas Corridor, TANAP and TAP projects are an important east-west gas transmission network covering the South Caucasus, Anatolia, and Southern Europe. The initial phase of the project was implemented in 2014, the second phase in 2018, and the third phase in 2020.

The foundation of the Southern Gas Corridor, a giant gas pipeline designed to transport gas from the Caspian Sea to Europe at a distance of 3,500 km, was laid in September 2014 in Baku. The main resource base of the pipeline is the Shah Deniz gas field. It was the first time when within the frame of the project that was worth more than 40 billion US dollars and involves 7 participating countries, including Azerbaijan and Turkey, gas supply of the Caspian region was connected with European markets.

The project covers three economically important areas: the Caspian Sea, the Black Sea, and the Mediterranean. This project opens great prospects for the Turkic-speaking countries of Central Asia, rich in hydrocarbon resources, to bring their resources to the European market in the future and to have a share in ensuring world energy security. Being a reliable energy corridor in the implementation of this integration, Azerbaijan will contribute to the welfare and economic development of the Turkic-speaking nations. At the same time, along with its resources, by serving as a transit point for other countries, Azerbaijan will increase its economic value for both the Turkic world and the European Union.

The active participation of Turkey and Azerbaijan in 3 of the 4 main phases of the project, as well as the passage of about 70% of the length of the South Caucasus Pipeline (SCP), TANAP, and TAP gas pipelines through Turkic-speaking countries, provide additional impetus for economic integration of Turkic-speaking countries, as well as promises wide potential opportunities.

At the 2018 Aktau summit held in Kazakhstan, the heads of the Caspian agreed on determining the legal status of the Caspian Sea, what will increase efficiency in both the development of transport and logistics network and the implementation of new mega projects in the Caspian Sea. The adoption of this convention will play an important role in strengthening relations between the Caspian littoral states, including Turkic-speaking countries, in trade and economic cooperation, transport, energy, innovation, tourism, information, and other spheres, and ensuring prosperity in the region and the Turkic world.

Determining the legal status of the Caspian Sea also provided an important basis for an agreement with Turkmenistan on the joint development of the conflict Dostlug field. In 2021, in Ashgabat, the two countries signed a Memorandum of Understanding on joint exploration and development of hydrocarbon resources of this field. This agreement will make a significant contribution to the oil industry and economy of Azerbaijan and Turkmenistan. There is an opportunity to export Turkmenistan's natural resources from the Dostlug field to world markets via the Baku-Tbilisi-Ceyhan pipeline. The realization of these opportunities will make an important contribution to increasing the profitability of the pipeline, as well as transit. Under the signed agreement, Azerbaijan's oil and gas revenues will increase due to field development.

Against the background of all these measures, the experience of our country in the field of energy, modern and constantly updated infrastructure, strategic position and reforms create great opportunities and prospects for Turkic-speaking countries. Oil and gas-rich Central Asian states can both increase their revenues and strengthen their position in the international economic and political arena by safely and comfortably exporting their resources to European energy markets through Azerbaijan.

Cooperation in reintegration of Karabakh

One of the main tasks of our country is the implementation of new infrastructure and business development projects in the lands liberated due to the glorious victory of our country. The revival of our liberated lands creates great opportunities for other countries, as well as for Turkic-speaking ones. Among the Turkic-speaking countries, Azerbaijan has built effective cooperation with Turkey in this field. Turkish companies are actively involved in the infrastructure projects and construction of roads in the economic regions of Karabakh and East Zangazur. Also, in order to develop economic relations, in February 2021, Azerbaijan and Turkey signed a total of 11 protocols in the fields of mining, textiles, transport logistics, small and medium business, and investment promotion, architecture, and design.

Against the background of all these opportunities, the expansion of cooperation between the two countries, the establishment of joint ventures, transport and logistics, as well as the use of favorable geographical location will increase mutual trade, investment, strengthen transport and communication ties in the region, as well as increase efficiency in the restoration and development of our liberated lands.

Along with that, measures to be taken in the liberated territories to revitalize and integrate potential sectors such as tourism, agriculture, mining and production industry, construction materials production, alternative energy into the country's economy, as well as the formation of new transport and logistics corridors in the region opens new prospects for expanding our relations with Turkic-speaking countries.