The presence of Russian companies in Azerbaijan is growing

The deal was announced on the birthday of Russian President Vladimir Putin, which is probably a pleasant coincidence that can be appreciated both in Russia and in Azerbaijan, since both states this year demonstrate similar positions in all areas of cooperation.

In the post-Soviet space, entering any large business projects is impossible without political support, and the fact that such giants as LUKOIL and Gazprom are increasing cooperation with Azerbaijan this year is an indicator of the progressive development of the Russian-Azerbaijani ties.

Commenting on the  deal on  the increase  of the presence in the Shah Deniz project, the President of LUKOIL said the following: “About a thousand companies with Russian capital, including LUKOIL, have integrated into the implementation of the Action Plan for the development of key areas of Russian-Azerbaijani cooperation, signed in 2018 by the  heads of state - Vladimir Putin and Ilham Aliyev. An increase in our share of participation in the Shah Deniz project opens up new opportunities for synergy in promising sectors of national economies. Over the past two and a half decades, LUKOIL has accumulated tremendous experience in the Caspian Sea, in a strategic region for us, by creating a serious production and transport infrastructure. And we are proud that the Caspian states, leaders in oil and gas production, trust our competence in the implementation of priority international projects."

It is noteworthy that on September 28, 2021, PJSC LUKOIL bought from bp a 25% stake in the SWAP exploration project in the Azerbaijani sector of the Caspian Sea (the transaction is expected to be closed by the end of 2021). And then Alekperov noted that "joining a joint project with BP and SOCAR meets the national interests of Russia and Azerbaijan to develop international cooperation in the energy sector."

The next project, which is expected to start in 2021-22, will be the Caspian Dostlug project, in which LUKOIL wants to become an operator (due to a part of the share of Turkmenistan), and SOCAR will have 30%.

For several years, LUKOIL has been using the Baku-Ceyhan oil pipeline to deliver part of its oil from the Korchagina and Filanovskoye fields of the Russian sector of the Caspian Sea to the world market.

One gets the impression that LUKOIL has decided to become for SOCAR the same strategic partner as BP is.

"LUKOIL is a successful business, has multi-billion dollar revenues and is studying projects that it considers promising to enter," said Ilham Shaban, the head of the Azerbaijan Oil Research Center, in an interview with ASTNA.

SOCAR Deputy Vice President for Investment and Marketing Vitaly Beglyarbekov told ASTNA that “LUKOIL's growing interest in Azerbaijani hydrocarbon projects is explained by their commercial attractiveness, the stability of legal regimes in Azerbaijan, as well as knowledge of the region, including the Shah Deniz field, in the development of which LUKOIL has been participating since the very beginning of this project”.

LUKOIL's experience in responding to global climate change is also important, and the company is trying to supply industrial facilities in the world with the most efficient fossil energy resources, while focusing on reducing the carbon footprint of their production. As for Gazprom, in 2021 it tested gas transit and swap operations with Azerbaijani partners.

The talk is about the transit of Russian gas to Georgia through the territory of Azerbaijan due to repairs on the North Caucasus-Transcaucasia gas pipeline. This transit was carried out from March 17 to early May. Georgia reported  that thanks to this operation, Armenia was able to cover its needs in "blue fuel", that is, in fact, there was a friendly regional gesture.

In August 2021, Gazprom and Azerkontrakt agreed on seasonal swap gas supplies until 2023 (0.5 million cubic meters per day). Azerbaijan, represented by SOCAR, has been conducting these operations since August, and Gazprom will return similar volumes to Azerbaijan in winter.

Note that Gazprom supplied gas to Azerbaijan from 2000 to 2006 on a regular basis. Then supplies were stopped due to the launch of the Shah Deniz field.

From 2010 to 2014, Azerbaijan supplied gas to Russia. In 2015, there were attempts to arrange Russian gas supplies for the Azerbaijan Methanol Plant (not for long).

Then Gazprom supplied gas to Azerbaijan in 2017 and 2018, but with the launch of Stage 2, Shah Deniz suspended such operations. An office of "Gazprom" operates in Baku, which is not going to curtail its activities.

Non-oil cooperation

It is noteworthy that in 2021 the level of cooperation between the Russian Federation and Azerbaijan in the non-oil sector is also on the rise. So, according to the Azerbaijani customs, for 8 months of 2021, the Russian Federation became the leader among other partners of Azerbaijan in the procurement of Azerbaijani products from industries not related to the fuel and energy complex - $ 522.28 million - a third of all exports of Azerbaijani non-oil products.

The foreign trade turnover of the two countries in January-August exceeded $ 1.7 billion. The Russian Federation also ranked the first in the list of those countries whose products Azerbaijan purchased this year ($ 1.235 billion - 16.81% of Azerbaijan's total imports). Azerbaijani exports to Russia in January-August 2021 increased by 15% and amounted to $ 545 million against $ 463 million in the same period of 2020.

At the end of September, Ruslan Mirsayapov, the trade representative of the Russian Federation in Azerbaijan, announced that the Russian Federation plans to increase mutual trade turnover with Azerbaijan by 40% by 2024 compared to 2019.

According to the results of 2019, the trade turnover between Azerbaijan and Russia amounted to $ 3 billion, but in 2020-21. its decrease is affected by quarantine restrictions due to the coronavirus pandemic.-0-