Azerbaijan getting closer to Russia?

Sevinc Aliyeva, Center for Legal Initiatives (Baku, Azebaijan)

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The Constitutional Court verdict regarding the dollar-denominated loans, taken out before the devaluation of manat, has driven the borrowers into despair. Meanwhile, the country’s foreign policy was dominated by reciprocal visits of Azerbaijani and Russian leaders. Moreover, Russia’s interest in investing in different projects in Azerbaijan proved the importance of the country as an economic partner.

DOMESTIC POLICY: The 100th anniversary of the liberation of Baku

On September 15, the military parade and sequential events took place in Baku in order to celebrate the 100th anniversary of the liberation of Baku. This date in 1918 was a milestone in the history of Azerbaijan when the Islamic Army of the Caucasus led by Nuri Pasha liberated Baku from the Armenian-Bolshevik occupation. Although the country declared its independence on May 28,1918, Baku and some regions were still under occupation. Thus, the liberation of Baku enabled the government to move the capital from Ganja to Baku and set boundaries, which played the baseline for the modern boundaries of the country.

The liberation of Baku by Azerbaijani and Turkish soldiers is seen as the indicator of brotherhood and solidarity between two nations. During the celebrations, Turkish President Erdogan visited Azerbaijan and was welcomed by Azerbaijani first Deputy Prime Minister Yagub Eyyubov, Deputy Foreign Minister Khalaf Khalafov and other authorities. Turkish Ambassador in Azerbaijan Erkan Ozoral stated that the main objective of the celebrations is to explain and demonstrate the importance of this occasion to the public, especially to the young generation.

ECONOMY: Doubled credits

In September the Constitutional Court of Azerbaijan finally delivered a verdict regarding the dispute between loan borrowers and banks on how to pay off the dollar loans.

In 2015, Azerbaijani manat experienced two devaluations against the dollar, losing its value by nearly two hundred percent. Thus, people who had taken out dollar-denominated loans before 2015 now have to pay twice bigger amount than they originally agreed to. The borrowers claimed that it was unjust for them to pay off more than they bargained for; however, banks did not agree. The banks also asked the Court to make clearer Article 422 of the Civil Code of Azerbaijan , which says that loan conditions may be changed in times of significant changes. The Court verdict did not consider the devaluation a substantial change in this situation and stated that the borrowers should have acknowledged the potential risks when they got dollar-denominated loans since currency devaluation is not an unexpected event.

Vugar Bayramov, The head of the Centre for Economic and Social Development, said that almost a quarter of the country’s population took out bank loans.

After the Constitutional Court’s decision, it seems that manat devaluation will continue to create difficulties and affect residents adversely.

Three projects

The UN Food and Agriculture Organization plans to launch three important projects in Azerbaijan until the end of autumn within the framework of FAO-Azerbaijan Cooperation Program signed in 2016. The first one, which aims to achieve developments in the agriculture field, will be launched in October. The program will contribute to the knowledge accumulation in the artificial seeding and sheep breeding fields. The other two projects are related to the empowerment and self-employment of women and youth in the rural areas. The projects are expected to “…increase the income of the population and diversify the sources of income” said the Head of the Partnership and Liaison Office of FAO in Azerbaijan, Melek Cakmak.

FOREIGN POLICY: Reciprocal visits

In early September, President Ilham Aliyev paid an official visit to the Russian Black Sea resort of Sochi. As a result, 16 documents on a wide range of issues from economy to the transportation sector were signed. One of the main documents was the cooperation agreement between the top oil companies of two countries, SOCAR and Rosneft. Afterwards, Russian President Vladimir Putin paid a short official visit to Azerbaijan on September 27 to attend the 9th Azerbaijan-Russia Interregional Forum. This was already the fourth meeting between neighbor countries’ leaders this year.

At the beginning of his speech, the Russian leader said that the relationship between two countries was based absolutely on “good-neighborliness and mutual respect” and consensus is the essential factor for finding the balance. In the business forum, Putin talked about the operations of Russian companies in Azerbaijan and developments in the economic relations of two countries. He further added that the number of Russian joint venture companies in Azerbaijan has already reached 700 and the amount of investment made in the Caspian exceeds $1.5 billion. Putin talked about Rosneft’s plan to work together in the oilfields of the Caspian with Azerbaijan State Oil Company as well. President Aliyev noted that for the last two years trade turnover between two states has been rapidly increasing which can be attributed to the positive dynamics in the economic ties. According to the Russian political analyst, Ibrahimov, “two countries set a goal to increase the trade turnover up to $10 billion till 2024.

During his speech, Aliyev referred to Russia as the main import and non-oil products export partner of Azerbaijan. Aliyev mentioned the friendly relations between Azerbaijan and seventy Russian regions by stating bilateral trade missions and cooperation agreements. When talking about the transportation sector, Azerbaijani President stated the importance of the North-South corridor saying that the transportation of goods has increased by a hundred times compared to the last year through the North-South project. Aliyev also talked about the close relationship between the two nations. “…Azerbaijani airlines carry out more than 50 flights a week to various cities of Russia. In 9 months, about 700 thousand Russians have visited Azerbaijan. I am sure that this figure will also grow in the future,” he said.