In the first article of this series, we examined China’s growing political and economic influence in Azerbaijan.
In this article, we look through an economic lens at how the Chinese government works to increase and strengthen its influence in Azerbaijan. We also examine how China can benefit from its relations with Azerbaijan, including by increasing its influence in the region. In particular, we look at how the Belt and Road Initiative can provide new opportunities for the two countries.
Mehriban Mammadova, journalist
China has historically had mostly trade relations with Azerbaijan. However, in recent years, China has sought to increase its geopolitical influence in the South Caucasus region through other types of economic opportunities and soft power.
China is an important partner for Azerbaijan in balancing Russia’s ongoing influence and investing in necessary infrastructure projects.
As China continues to expand its trade and influence in the region, it has made use of its vast economic resources to promote transport routes through Azerbaijan, Georgia, and Turkey.
From Nonessential Partnership to Full Cooperation
Although Azerbaijan and China have historically cooperated, until recently they did not consider each other to be important partners.
China’s Belt and Road Initiative, introduced in 2013, has been a key turning point in bilateral relations between the two countries. The strategic positions of Azerbaijan and the Caspian Sea in connecting East and West make Azerbaijan a lucrative partner for China.
Chinese companies have opened railways from China to the ports of Aktau (Kazakhstan) and Turkmenbashi (Turkmenistan). Goods are transported from these locations by ferry to Baku, and from there further west to Turkey, and finally to Europe.
China has connected trade routes east of the Caspian Sea, and from there, the shortest route to western markets is through Baku. China manages the Baku International Sea Trade Port (Baku Port for short), which is part of Azerbaijan’s Alat Free Economic Zone. The port’s strategic location is important for a key proposed route of the Belt and Road Initiative and is often discussed in conjunction with the larger Trans-Caspian International Transport route.
China has invested nearly $2 million in equipment at the Alat port and allocated a grant of $70 million for port operations.
Many analysts believe that the strategic and geographic importance of Alat port preceded the Belt and Road Initiative and was a conscious effort by the Azerbaijani government to divest from oil and gas. The expansion of the port by the Azerbaijani government in 2007 was seen as a way to wean the economy from dependence on oil and gas through the development of cargo and transportation services. China is capitalizing on this opportunity for its own strategic advantage.
Azerbaijan as a Bridge between China and Turkey
While China’s economic interests in Azerbaijan are significant, China also values its relations with Azerbaijan for its potential to build connections with another important economic partner in the region, Turkey. Azerbaijan plays a key role in bridging the gap between Turkey and China, whose economic and political relations have been expanding rapidly in recent years.
Despite China’s investments in industry, energy, transport, and telecommunications in Turkey, major deals have yet to materialize. Talks of China investing heavily in Turkey’s railway network have come to nothing, and negotiations for a third nuclear power plant have also stalled.
In the report for GLOBSEC, Selcuk Cholakoglu of Turkey’s Center for Asia-Pacific Studies has suggested that Ankara is reluctant to offer lucrative contracts to Chinese firms it sees as competitors.
In addition, Turkish President Erdogan was one of the first world leaders to heavily criticize human rights violations in China’s Xinjiang region.
Azerbaijan helps to bridge the gap between Turkey and China by providing a faster and more efficient route for goods to be transported between the two countries. China has invested in the Baku-Tbilisi-Kars railway, which is a major transportation project connecting Azerbaijan, Georgia, and Turkey. The project is expected to increase the volume of trade among the three countries and will also provide a direct link between China and Europe.
In addition, China has also invested in the Baku-Tbilisi-Ceyhan pipeline, which is a major oil pipeline connecting Azerbaijan, Georgia, and Turkey.
In conclusion, Azerbaijan can play an important role in bridging the gap between Turkey and China by providing a faster and more efficient route for goods to be transported between the two countries, and by acting as a mediator between them.
Azerbaijan’s open door to China
Azerbaijan has “opened its doors to Chinese businessmen” allowing for a more robust economic partnership.
In a 2019 speech, President of Azerbaijan Ilham Aliyev emphasized the steps the country took to facilitate cooperation between China and Azerbaijan. In this context, removing visa restrictions for Chinese citizens has eased travel to Azerbaijan, and establishing Azerbaijan’s trade missions to China has opened up new opportunities for both countries to cooperate in various areas.
“Our doors are open to Chinese businessmen. As I have already said, we would like to see them as investors, as trading partners, as contractors. There are many areas we can cooperate in. Of course, there are Chinese companies operating in Azerbaijan, including in the energy sector. But I think that this is not enough. This applies to contracting and trading projects. I think that we should do this together, and this issue is one of our main priorities”, said Aliyev in his speech, highlighting the importance of trade and investment between the two countries.
These increased bilateral trade relations between Azerbaijan and China suggest that China is using its economic leverage to gain more influence in the region.
China’s Visible Presence
China has also been involved in the development of Azerbaijan’s telecommunications sector.
Chinese tech companies are providers of technology that provides free public Wi-Fi in Baku, the capital of Azerbaijan.
China’s presence in Azerbaijan can be seen mainly on billboards advertising Chinese products on the main roads of Baku.
Overall, China has established a strong presence in Azerbaijan and benefits from its relations with the country. This is due to several key areas of collaboration between the two countries, particularly in the areas of natural resources, infrastructure, and transit.
Azerbaijan’s role as a transit hub among three regions – China, Central Asia, and Europe -and as a mediator in trade with Turkey has given China greater opportunities to realize the BRI.
China benefits strategically and economically from its relationship with Azerbaijan. This position will strengthen as China expands its influence in the region.