Azerbaijan is laying the groundwork to boost its ambitions in the South Caucasus and is looking to China for help.
In just two months, Baku's ties with Beijing have quickly moved forward as the oil-rich country has inched closer politically and economically through a series of agreements that could boost China's presence in the region and open the door to newfound Chinese investment into Azerbaijan.
The series of recent moves began on July 3 when Azerbaijani President Ilham Aliyev met with Chinese leader Xi Jinping on the sidelines of the Shanghai Cooperation Organization (SCO) summit in Astana and declared they had upgraded bilateral ties through a new strategic partnership that calls for them to work closer together economically, militarily, and politically.
A few weeks later, Baku applied to upgrade its status within the SCO from dialogue partner to observer, setting the stage to potentially become a full member.
And then on August 20, Azerbaijan announced it had applied to join the BRICS group of emerging economies led by China and Russia that also includes Brazil, India, and South Africa as founding members.
Taken together, the collection of moves is part of China's growing momentum in the region as an investor and trade partner since Russia's full-scale invasion of Ukraine in 2022, which has left governments and shipping companies looking for alternatives due to sanctions on Russia that have left its vast rail network -- previously the main route between China and Europe for overland trade -- less viable.
For Azerbaijan, which is at a crossroads for trade on the Caspian Sea, this has led to new energy for the so-called Middle Corridor, the alternative trade route that bypasses Russia by cutting through Central Asia and the South Caucasus to connect to the European Union, and seen new investment worth billions of dollars.
"The Middle Corridor is a key issue and Baku needs Beijing's support,” Zaur Shiriyev, a nonresident scholar at the Carnegie Russia Eurasia Center, told RFE/RL. "The immediate concern is that the success of the Middle Corridor depends on a steady flow of goods from China to establish a strong China-Europe route in the long term.”
A Series Of New Deals And Beyond
Attracting more Chinese interest and investment in the Middle Corridor is a main priority for Azerbaijan and is at the center of the strategic partnership agreement signed in July.
China pledged in the document to help develop and use the trade route and Baku is hoping that it will lead to more Chinese investment in infrastructure, which would make the route more competitive and strengthen Azerbaijan's role as a central hub in the region.
But Baku's "cooperation menu with Beijing is extensive,” says Shiriyev, with Azerbaijan eyeing further deals in green energy, advanced technology, and military purchases.
The Azerbaijani government has also expressed a desire for Chinese companies to set up a regional manufacturing hub for electric vehicles in the country and has been actively calling for more Chinese investment.
Bilateral trade between the two countries is also on the rise, although heavily slanted in Beijing's favor, with China overtaking Turkey as Azerbaijan's second-largest source of imports (behind Russia) with $3.1 billion worth of goods in 2023, a 40 percent rise from the previous year.
"Chinese companies are already participating in the diversification of Azerbaijan's economy, but we expect more,” Hikmet Hajiyev, Aliyev's foreign policy adviser, told the Chinese state broadcaster CGTN during a March interview in Beijing.
Increased trade and investment appear to be motivating the recent moves by Baku as the country looks to diversify away from the hydrocarbon wealth that has underpinned its economy for decades.
Another part of the strategic partnership agreement calls for China's support for Azerbaijan's full membership in the World Trade Organization and the application for BRICS membership could also open new markets. While there is no clear procedure for admitting new members or an application timeline for joining BRICS, it expanded in January to also include Iran, the United Arab Emirates, Ethiopia, and Egypt -- and has a long list of other countries who have expressed an interest in applying.
"Membership could offer Baku the opportunity to expand access to the large and rapidly growing markets of the BRICS countries, potentially creating new opportunities for bilateral trade agreements and investments in Azerbaijan's economy,” Shiriyev said.
A New Balance Of Power
The appeal of closer ties with Beijing isn't limited to trade and investment, says Vadim Dubnov, a regional expert at RFE/RL's Echo of the Caucasus, who notes that China is also an increasingly important partner for Baku to lean on in the region's fast-changing geopolitical environment.
A decreasing footprint from Western powers combined with Russia being weakened and distracted by its war in Ukraine has given Azerbaijan more room to maneuver in foreign affairs. This has led to Baku deepening ties with Turkey and Iran and inviting China in to play a larger role.
"Aliyev is trying to reposition himself and find a new balance with all the major players in the South Caucasus,” said Dubnov. "Stronger ties with China allow Baku to not sit totally in any one camp.”
But the warming ties between Baku and Beijing are not a one-sided process.
ADVERTISEMENT
Since Azerbaijan's success in its 2020 war with Armenia, China's interest in the South Caucasus has grown and Beijing hopes that Baku's stronger regional standing will lead to more stability and opportunities for more Chinese investment and influence in the region, such as additional trade routes connecting Azerbaijan to Turkey through Armenia.
Azerbaijan is also eyeing other opportunities to use its geographic position to its advantage.
While the Middle Corridor makes up an East-West trade route that bypasses Russia, the shake up to global trade brought by the war in Ukraine has also created new interest in other alternatives, including those that look to cut out the West.
As the Middle Corridor has grown, Moscow has looked to drum up investment in the International North–South Transport Corridor that flows south from Russia to Azerbaijan and then aims to connect to Iran and India.
China, which has strong trade ties with Central Asia and the EU as well as Russia and Iran, has expressed support for both the Middle Corridor and the North-South route, which Azerbaijan is looking to capitalize on given its central position in both.
"If Baku previously was able to use its energy resources [as leverage] in its relations with the West, international trade corridors are also now tools with strategic importance in Azerbaijan's foreign policy,” Nurlan Aliyev, a lecturer at the University of Economics and Human Sciences in Warsaw, told RFE/RL.
By RFE/RL
More Top Reads From Oilprice.com
- How Long Will Gold’s Record-Breaking Rally Last?
- Looming Atlantic Current Collapse Threatens Northern Europe's Climate
- Oil Dominates the $5 Trillion Global Commodity Market
