Azerbaijan: New low in relations with Russia

Vugar Bayramov, Center for the Economic and Social Development (Azerbaijan, Baku)

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In May, Azerbaijan ends four-year-long negotiations on buying a share of the Greek national gas transmission system operator DESFA with no result. The country’s partnership with Russia faces a new crisis, while the window might open up in relations with the USA

Domestic Policy. Social housing project takes on

On 30 May, the Government of Azerbaijan announced the beginning of the registration for the social housing. The applications will be submitted by the “Electronic Government” portal, and reviewed by the State Housing Construction Agency (MIDA), created by the President earlier in 2017. As it was announced, the earlier subsidized housing system will not exceed 10% of the real estate market in Azerbaijan.

The need for the social housing has been on the table for a long time. The high prices in the real estate market created an unfavorable condition for the families with low income to obtain an apartment of their own.

At the same time the dive in the oil prices decreased the demand for the high-priced new apartments, and created some financial problems for the construction sector in Azerbaijan, which employs most of the unqualified population from the regions.

In order to prevent the construction sector from collapsing, and help the low-income families, the social housing program was initiated. This step also aims to strengthen the competitiveness in the construction sector.

Economy. SOCAR out of DESFA deal

The Azerbaijan’s State Oil Company (SOCAR) and its European partners were unable to reach a deal on the future of the signed contract on the purchase of the Greek national gas transmission system operator (DESFA) share (2). Hence, SOCAR ends the negotiations, which have been going for the last four years.

In 2013, SOCAR won a tender for purchasing a 66% stake in DESFA for 400 million euros. The deal was jammed by the antimonopoly regulations of the European Union. Thus it was agreed to sell SOCAR’s 17% share to Snam company from Italy, giving only 49% to Azerbaijan. However, in May 2017, it was announced that SOCAR and its European partners were unable to reach a common ground on the price of the deal.

Independent experts observe some political and diplomatic frictions in the relations between Azerbaijan and Russia

For the last four years, SOCAR demonstrated a strong a will to purchase the DESFA shares, and continued its efforts despite the hostile surrounding of the deal. Apparently, following the economic troubles in the country, the government-sponsored companies in Azerbaijan are less willing to invest abroad.

Foreign Policy. US–Azerbaijan relations in progress

This May was marked by several contacts of Azerbaijan with the new US President after a long pause in the bilateral relations. First Donald Trump met President Aliyev in Saudi Arabia, during the Arab Islamic American Summit. Later on Trump sent several messages to Azerbaijan: congratulation on the 99th anniversary of Azerbaijan’s Republic Day, as well as some welcome letters to the participants of the 24th International Caspian Oil and Gas Exhibition, and the 7th Caspian International Power and Alternative Energy Exhibition. The high-ranking members of the government and the parliament called the rise in the quantity of these interactions “a new page in the US–Azerbaijan relations”.

At the same time Azerbaijan faces new difficulties in relations with Russia. The media reports problems for the trucks carrying tomatoes from Azerbaijan to Russia, in the Russian border checkpoints. Russia has imposed strict weight norms for the trucks crossing the border, while the Azerbaijani partners do not obey this rule.

Earlier this May, the Russian courts terminated the license of the Azerbaijani diaspora organization in Russia. During the last month, the Russian MFA spokesperson Maria Zakharova’s statements  on Azerbaijan caused frustration in the diplomatic circles in Baku.

Despite the Russia’s President Vladimir Putin’s praises of the Azerbaijani–Russian relations with “the dynamic progress”, the independent experts observe some political and diplomatic frictions in the relations. Baku is not satisfied with the Russia’s efforts in the post-Four-Day war in Nagorno-Karabakh.

Meanwhile in May, Baku also announced a purchase of the two Italian produced military fighter-trainers. Italy was the first NATO country to sell the weapon to Azerbaijan, which is in a conflict with neighboring Armenia.