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India and Azerbaijan: The Economic Relationship

India and Azerbaijan have maintained cordial relations with each other since ancient times. A little survey of the pages of history would reveal the fact that there is a close relationship between India and Azerbaijan in the past. If we come to the medieval period, it can be seenthat as part of the Turkic-Islamic world, Azerbaijan has had very close interactions with medieval India. In this regard, mention should be made of the culture and people-to-people engagement which greatly acted as a bridge between the two countries in bolstering ties and cementing the bonds. It would also show that it is based on an age-old historical relationship and at the same time shared traditions. For example, we can refer to the name of the teshgah fire temple which is located in the vicinity of Baku. This is a medieval monument where we can detect the Devanagari and Gurmukhi wall inscriptions. It proves the age-old relationship between the two countries. If we come to modern times, as an aftermath of the dissolution of the Soviet Union, India was among the first countries to extend recognition to Azerbaijan’s independence on December 26, 1991, which is required for a new State under International law. In the subsequent period, India established diplomatic relations with Azerbaijan on the 28th of February, 1992. At this juncture, it should be mentioned that the status of the relationship did not take off well in the initial years of Azerbaijan’s independence. But

it was significant that during the last few years, the relationship has greatly taken a  substantial shape and was largely cemented. At the present moment, both countries are sincerely exploring new areas to expand their engagement in a much greater way. 

ECONOMIC RELATIONSHIP BETWEEN INDIA AND AZERBAIJAN

The economic relationship is mostly dependent on the trade relationship. Trade is the foundation of the economic relationship between two countries of the world. On the part of Azerbaijan, the trade links with India have led to renewed contacts of the Indian merchants heading towards Europe through the Silk Route. A cursory glance in the dimension of economic relationship would also show that India’s bilateral trade with Azerbaijan has been growing steadily in recent times. One of the most important areas where the economic

relationship between the two countries is based in the area of pharmaceuticals. India’s pharmaceutical sector is very well known in Azerbaijan. It can be seen that many of the Indian pharmaceutical companies are represented in Azerbaijan and they have already gained substantial ground. We may also detect the ground behind this factor. There is no doubt that India has a strong foothold in the pharmaceutical sector in the global market. The main reason behind this is that the Indian products are definitely of good quality and easily affordable. In today’s society, everyone is primarily concerned with the quality of the product. In this respect, Indian products have already gained significant ground. 

The Pharmaceutical Export Promotion Council of India (PHARMEXIL) has been established and it is conducting several promotional activities which include buyer-seller meets. The main purpose is to bolster the exports to the CIS countries. It is significant to note that in order to fast-track the cooperation, Azerbaijani authorities since February 2016 have substantially initiated the process of accepting dossiers for registration of Indian pharma products. On completion of this process, it is expected that much other good quality and reasonably priced Indian pharmaceutical products would be easily available in Azerbaijan. A special mention should be made of the fact that during the meeting between Indian Ambassador to Azerbaijan Mr. Sanjay Rana and PHARMEXIL in December in the year of 2016 which took place in Mumbai, many of the Indian pharma companies expressed their willingness to explore opportunities for carrying out business in Azerbaijan through joint ventures with Azerbaijani companies. It was also taken into account to explore and the possibilities of setting up manufacturing or packaging units for pharmaceuticals. Another area of the India- Azerbaijan economic relationship is the aspect of agriculture. This area has already been given adequate importance and highlighted by both countries. The major areas of cooperation in this regard re cattle identification, agriculture machinery, plant breeding, and the exchange of agri-scientists and students. As a part of the system, Azerbaijan has also been making concerted efforts relentlessly to develop its food processing sector. It is highly expected that the Indian manufacturers of processing equipment and machinery would find good opportunities for expanding their presence in Azerbaijan. Apart from that in some other areas also the economic relationship between the two countries revolves in a significant manner.

We can refer to some of the items of direct and indirect imports from India which include clothes and textiles, information technologies, food items, and heavy machinery, electronic cards, steam boilers, and other plant equipment. If we look at the other aspects of economic cooperation between the two countries, on the part of India, the primary import from Azerbaijan is crude oil. So far as Azerbaijan is concerned, it has a huge repository of oil and natural gas. These are definitely of crucial significance for India in order to meet India’s energy demands. The import of oil from Azerbaijan constitutes the bulk of the bilateral trade between the two countries. If we look at the statistical part, the volume of bilateral trade increased substantially from around US$ 50 million in 2005 to US$ 214 in 2007. It is heartening to note that during the past years, bilateral trade has increased substantially. It is seen that from around US$50 million in 2005 to around US$ 497 million in 2016. 

This is a sharp rise in the trade sector. It should further be said that the Indian oil companies have purchased substantive quantities of crude oil. While in 2010, the total trade was a little over US$ 330 million as per Azerbaijani official figures, in 2011, the trade turnover between India and Azerbaijan was US$ 411 million. This is a 22 % increase as compared to 2010. In order to boost trade in the area of oil, in the year 2010, the ONGC has opened its office in Baku. The ONGC Videsh has attained the ability to produce about one million tons of oil per year for about a decade. Another significant milestone that needs a special mention is that in November 2014, the Gas Authority of India Limited (GAIL) concluded a Memorandum of Understanding (MoU) with the State Oil Company of Azerbaijan (SOCAR). The main purpose was to collectively avail LNG opportunities through capacity booking, LNG procurement, and most importantly, the promotion of LNG projects on a global basis. As part of the MoU, both the companies will also cooperate in the optimization of LNG marketing, sourcing, and hipping requirements. It should be mentioned that the trade between the two countries has not been always on the rising side. India’s trade with Azerbaijan in the year 2014 was US $ 815 million which was substantially reduced to US $ 305 million in the year 2015. It may be attributed to the decline of oil prices in the international market and a series of official restrictions on imports. There was a silver lining, and in the year 2016, it witnessed an increase of over 60 percent in bilateral trade which increased to the US $ 497 million. 

Bilateral trade between the two countries was also expanded in other areas. In the year of 2012, the Indian software development companies were given some contracts by Azerbaijani banks and insurance companies. This expanded the horizons of bilateral trade between the two countries.

Again, some engineering consultancy companies have also been successful to bag some important projects in the cement and power sectors also. While we speak of the bilateral trade between the two countries, we should also mention that while oil and natural gas continue to capture and dominate the areas of bilateral relations between India and Azerbaijan, but at the same time, with the onward march of time, both the sides have identified various other potential areas of cooperation. They include pharmaceutical, tourism, IT, science and technology, agriculture, and education. 

MECHANISMS

The bilateral trade between the two countries is being greatly increased through the Mechanism of the India-Azerbaijan Intergovernmental Commission (IGC) on Trade, Economic, Scientific and Technological Cooperation, which was established in 2007. We should also mention another important aspect of India-Azerbaijan cooperation which lies in the launching of the International North-South Transport Corridor (INSTC). This will connect Indian ports with Azerbaijan and Russia through Iran. The 4,500-mile route would be statically reduce transport time between India and Azerbaijan. This transport corridor will have substantial potential to increase trade and commercial exchange in the region.

We can therefore say that the relationship between the two countries has evolved over a substantial period. It has been possible on the part of both countries to identify potential areas of further cooperation. It can be said that the relationship between the two countries has moved beyond bilateral cooperation and getting strengthened through various regional initiatives like the INSTC route and BTC pipeline. Both countries are endeavoring to explore further prospects in the renewable energy sector and energy efficiency. The orbit of the relationship has undoubtedly broadened and is to go ahead in the positive directions in the future.

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