Sharing a common past as former Soviet republics, Ukraine and Azerbaijan — two countries separated by 2,200 kilometers — are seeking to expand bilateral trade.
Both nations’ leaders advanced this goal in late 2019, when presidents Volodymyr Zelensky and Ilham Aliyev signed numerous documents.
“The desire of the country’s leaders, their messages, their meetings indicate that the turnover should grow,” said Jalal Huseynov, head of the six-member Ukraine-Azerbaijan Business Association.
In 2020 bilateral trade reached $717 million, not high, but double the 2015 amount.
Ukraine imported mainly oil and gasoline, which accounted for almost a third of the total turnover. Among other goods were fruits and vegetables, wine and mineral water. Azerbaijan bought mainly Ukrainian ferrous metals, dairy products, sausages, sunflower oil, honey, cereals, and pharmaceuticals.
“Ukraine is a very important partner, both from a political and economic view,” Sabir Rzayev, a counselor of the Embassy of the Azerbaijan Republic, told the Kyiv Post.
Azerbaijani businesses also view Ukraine as a country to invest in.
Mainly through SOCAR, the state oil company, which currently has around 60 gas stations and four oil storage facilities in Ukraine — Azerbaijan has invested around $1.1 billion since 1995, according to Rzayev.
Moreover, since the beginning of this year, Ukraine added another $170 million of Azerbaijani direct investments, Huseynov estimated.
Among the most lucrative sectors were construction, energy and infrastructure.
“Azerbaijani investors are interested in those sectors in which the state can guarantee stable return,” said Huseynov.
In Ukraine he observes several positive trends despite “political and economic instability” like adoption of the law on investment nannies, as well as the law on industrial parks.
Furthermore, in September, for the first time in the last decade Azerbaijan increased the quota for permits for Ukrainian road freight carriers and allowed 850 trucks to enter.
This should reduce the price for the transportation of goods, since previously the only route was through the Black Sea via Georgia to Azerbaijan.
With the new permits he believes that the competition will force the prices for goods to go down.
“This will be the impetus for increasing trade turnover,” said Huseynov.
‘Terezi’
Creating the Azerbaijani-Ukrainian Business Association was a timely step as in Ukraine there are 1,937 legal entities with final beneficiaries registered in Azerbaijan.
According to Huseynov, nearly 90% of them are operating.
Established in May 2020, the association called Terezi (Scales)— the word means the same in both Azerbaijani and Ukrainian languages — currently has six members.
“Our association is made to weigh plans and ideas, in order to correctly assess risks and opportunities,” said Huseynov.
During the next year the association, which guides businesses through Ukrainian legislation and provides analytics, expects to add at least 15 more companies.
Describing SOCAR and NEQSOL holding, which bought mobile operator Vodafone for $734 million in 2019, the “tip of the iceberg” of Azerbaijani business operating in Ukraine, Huseynov is aware of many medium and small entrepreneurs operate in the country.
Located throughout the country, mainly in large cities such as Kyiv, Lviv, Odesa, Kharkiv, Dnipro, such enterprises are “playing a big role in the economic relations of the two countries.”
“We are focused on their work too,” said Huseynov.
He expects that Ukrainian companies will also join the association, so they can enter the Azerbaijani market.
For instance, Ukraine’s construction companies can participate in Baku’s ambitious plan for reconstruction territories over which the war with neighboring Armenia occurred last year.
“Ukrainian companies can participate in tenders and Azerbaijan is flagging this,” Huseynov added.
Making bucks
In Azerbaijan, a country of 10 million people, there are nearly 220 Ukrainian companies operating. They have invested some $25 million.
Mostly, according to Rzayev, they work in retail, agriculture, and construction.
But what Azerbaijan has learned from the COVID-19 pandemic is the importance of the information technology industry.
“We realized how unprepared we were. The country needs a lot of IT specialists. We have very few.”
According to Huseynov, there are currently there are no major problems, including the bureaucracy, facing Ukraine’s entrepreneurs working in Azerbaijan. Problems may, however, occur with miscommunication.
“It’s more of an issue of mentality. The East is a delicate matter,” he explained.
