Azerbaijan potential losses: Russia ranks high among the nation's key trade allies
In recent years, trade relations between Russia and Azerbaijan have been on an upward trajectory, with the total trade turnover increasing from approximately $2 billion in 2020 to $3.6 billion in 2024, marking a 15% annual increase. However, this positive trend may be at risk due to the current strained relations between the two countries.
One of the key areas that could be significantly impacted is trade. Azerbaijan exports about 4.4% of its total goods to Russia, and a conflict could disrupt these trade flows, affecting Azerbaijan's export revenue and economy. Azerbaijan and Russia have interdependent energy and infrastructure ties, and disruptions could impact energy supplies and transit projects, potentially affecting Azerbaijan's role as a transit hub for energy exports.
Azerbaijan has been diversifying its economy and strengthening ties with other countries like Turkey, Pakistan, Israel, and China. This diversification could help mitigate some economic impacts but may not fully replace Russian trade.
In the tourism sector, Russia is a significant source of tourists for many countries in the region, and a conflict could reduce Russian tourist flows to Azerbaijan, impacting its tourism sector. Conflict escalation could also lead to regional instability, deterring tourists from visiting Azerbaijan and affecting the local tourism industry.
If a conflict were to escalate, Azerbaijan risks significant economic losses. Russia exports a variety of goods to Azerbaijan, including wheat, sunflower oil, machinery, metals, equipment, vehicles, timber, pulp and paper products, and even oil, making it the third largest trade partner of Azerbaijan in terms of trade turnover.
Azerbaijan supplies textile products, cotton, and gas to Russia in addition to agricultural products. The arrests and tensions have caused a trend towards cooling relations between Russia and Azerbaijan, which started earlier. Discussions and negotiations on several large agreements in economic areas between Russia and Azerbaijan have been suspended.
Cancelling already purchased tours to Azerbaijan involves financial losses. In 2021, nearly 730,000 Russians visited Azerbaijan, accounting for 28% of the total 2.6 million tourists. Many Russian tourists travel to Azerbaijan independently due to the simplicity of tour arrangements and the visa-free regime.
In response to the tensions, eight Russian tourists were arrested in Azerbaijan, including the head of the Russian agency Sputnik in Baku, Igor Kartataev, and the chief editor, Yevgeny Belousov.
Political scientist Tarasov believes that the cooling relations from Azerbaijan may be due to Aliyev beginning to distance himself from Russia and orienting towards London, with potential big political calculations involved. Tarasov also suggests that Britain's fingerprints may be visible in this situation, as they may be preventing Russia from breaking through to the east through Azerbaijan and Iran.
In the oil industry, there are ongoing projects between Russia and Azerbaijan, such as Azerbaijan exporting oil to Europe via the Baku-Novorossiysk pipeline through Russian territory. Russia may have enough oil and gas to replace Azerbaijan's energy resources if Azerbaijan faces difficulties in the oil market.
If a conflict were to escalate, it could lead to a shift in regional influence, with other powers like Turkey and the European Union potentially increasing their presence in the region. However, this could also introduce new dynamics and challenges for Azerbaijan. Furthermore, if Azerbaijan becomes more closely aligned with other countries due to a conflict, it might face economic repercussions from Russia, potentially including sanctions or trade restrictions.
In conclusion, while Azerbaijan has been diversifying its foreign policy and economic ties, a conflict with Russia could still have significant economic impacts due to trade disruptions, potential losses in tourism, and regional instability. However, Azerbaijan's strategic positioning and growing ties with other countries might help mitigate some of these effects.
The escalation of a conflict between Russia and Azerbaijan could disrupt the trade flows of Azerbaijan, particularly in sectors such as agriculture and textiles, given that Russia is the third largest trade partner of Azerbaijan.
In the tourism sector, a potential conflict could lead to a decrease in Russian tourist flows to Azerbaijan, impacting its tourism industry and local economy.
