South China Morning Post
China working with Azerbaijan on belt and road transport route even as
Baku restricts investment
By Su-Lin Tan
China is actively pursuing investment in Azerbaijan through the Belt
and Road Initiative to take advantage of its strategic position in
central Asia, experts said, even as Baku maintains rigid limits on
foreign capital inflows, thwarting Chinese efforts to invest in the
service sector.
Beijing has used the ongoing bilateral negotiations on Azerbaijan’s
prolonged World Trade Organisation (WTO)
membership process to open up access for projects under its belt and
road plan to grow global trade.
Rather than seeking a purely export-import trade deal, China has been
seeking market access commitments from other belt and road countries
seeking to join the WTO since announcing its plan to grow global trade
in 2013, according to international trade lawyer Julien Chaisse.
The Azerbaijani government is seen to be slow walking its efforts to
join the WTO so that it can maintain barriers that safeguard the
state-supported monopolies that control the country’s underdeveloped
service sector, particularly financial and business services, as well
as telecommunications.
Chaisse, who has handled some negotiations for Azerbaijan, said
China’s demands for market access were one of the stumbling blocks for
Azerbaijan, even though the requests did not go against WTO rules.
Talks with China are not believed to have stopped entirely, although
there are obstacles around “how much” market access is suitable.
“The basic idea is that China is using the WTO accession process to
leverage interest towards the Belt and Road Initiative to obtain
greater commitments from existing and potential [belt and road]
nations. China is not offering any [trade deal] as part of WTO
accession but … on the contrary China is requesting market access
commitments from candidate countries such as Azerbaijan,” Chaisse
said.
“China’s trade commitments from potential accession countries are
becoming more pronounced since the [Belt and Road Initiative] launch
in 2013, with increasing and sometimes onerous expectations of the
acceding countries.”
Belt and Road Initiative explainedBelt and Road Initiative explained
The main belt and road project involving Azerbaijan is the
Trans-Caspian International Transport Route, a land transport network
stretching from China and Southeast Asia to Europe, part of China’s
effort to replicate the ancient Silk Road route between China, the
Middle East, Africa and Europe.
China’s focus on Azerbaijan started with its oil and gas resources
before the launch of the belt and road strategy, Anar Valiyev, a
Baku-based public affairs researcher, said, although it was the Belt
and Road Initiative that really kicked off its interest some five
years ago.
Azerbaijan State University of Economics lecturer Bahruz Babayev said
Azerbaijan, located at the crossroads of the East and West, offers
China “an advantageous location and logistic opportunities to
accommodate Chinese exports coming through Central Asia and the
Caspian Sea”.
“And the [Belt and Road Initiative] overlaps with the strategic
interests of Azerbaijan, therefore it is perceived as a welcome
initiative,” he said.
It is seen locally as a mutual win for both countries, with the plan
enabling Azerbaijan to boost its domestic market particularly as a
“transit hub”, Babayev added.
Aside from the exports of oil and gas, Azerbaijan wants to offer
transport services such as port and rail facilities for shipments
moving between western China and Europe on the Trans-Caspian
International Transport Route.
Transport time from China to Europe along the so-called middle
corridor, one of the six official routes of the New Silk Road, is
significantly quicker than transport by sea, as well as offering an
alternative to the route through Russia.
Current government policy in Azerbaijan is therefore both a blessing
and a curse for China in that it provides support for the belt and
road strategy, but also shuts out China’s market access efforts that
would be boosted by WTO membership.
And even if Azerbaijan is willing to offer more access, its structure
of the domestic economy would complicate Chinese investment.
“It is not the case that Azerbaijan does not want to give China
[market] access. Simply, the Azerbaijani market is highly
monopolistic,” said Valiyev added. “Thus, it creates unfavourable
conditions for everyone.”
Xi sets tone for future Belt and Road development at Beijing forumXi
sets tone for future Belt and Road development at Beijing forum
For now, as it focuses on its own economy, Azerbaijan appears to be in
no hurry to join the WTO, having started the process in 1997.
“I think the time has not yet come. This is due to the fact that the
bulk of our exports is still oil and gas and you do not need to be a
member of the WTO to export these products,” Azerbaijan President
Ilham Aliyev said in December.
“Instead, our main task is to develop the non-oil sector, increase
local production, and protect our domestic market. If we become a
member of the WTO, our producers may face major problems. It is
possible that large quantities of low-quality imported products will
come to Azerbaijan and take market share, causing harm to local
producers.”
The coronavirus outbreak has also put another spanner in the works on
the WTO membership, as Azerbaijan is now focusing on deepening its oil
and gas sales to Europe, Babayev from the Azerbaijan State University
of Economics said.
“We are selling [more] oil and gas to Europe in the next three months
… we would be interested in the WTO, but it probably won’t happen in
the next five years,” Babayev said.
Azerbaijan’s business sector, though, would welcome more Chinese
investments, according to Baku-based public affairs researcher
Valiyev.
There are currently around 119 companies in Azerbaijan relying on
Chinese capital, with one of the most recent, a US$300 million
injection into a tyre factory in Azerbaijan by the China National
Electric Engineering Company, which was signed during the second Belt
and Road Forum for International Cooperation in April 2019.
“Both the Azerbaijani public and political establishment contend that
China does not have a political agenda in the region due to its
geographical distance. Chinese projects are therefore considered in
purely economic terms,” Valiyev added.
Baku-based carpet maker and distributor Murad Muradov said his main
interest was in securing more capital to expand his business.
“Of course if the [WTO membership] brings additional foreign
investment to Azerbaijan, the membership would [also] be good,” he
said.
