Publication: Eurasia Daily Monitor Volume: 2 Issue: 56

President Ilham Aliev’s March 17 visit to China marked a new, more expanded phase in relations between Azerbaijan and China. Although contacts between the two countries have remained relatively friendly since 1991, the last time their top leaders met was in 1994 when the late President Heidar Aliev paid a visit to Beijing. The current visit was done at the invitation of Hu Jintao, the president of the People’s Republic of China.

President Ilham Aliev signed 13 inter-governmental agreements relating to trade, economics, taxation, customs, culture and arts, sports and tourism, TV and radio, and information and telecommunications (Echo, March 18.) On March 20 ANS television’s weekly analytical program noted that it has been a long time since China signed so many agreements with any one country. Russia has only seven intergovernmental agreements with Beijing.

The two leaders re-affirmed their intentions and desire to boost bilateral economic and trade relations in the coming years. The independent daily Zerkalo reported on March 18 that China had pledged 15 million yuan ($1.8 million) of unconditional aid to Baku. The Chinese government also expressed its interest in the construction of the Baku-Tbilisi-Kars railway corridor (Turan News Agency, March 17.) This project, according to Chinese leaders, will further enhance the East-West transportation corridor and develop opportunities for increased trade though the ancient “Silk Road.” The two governments have also agreed to eliminate double taxation on income.

In economic terms, Beijing is most interested in Azerbaijan’s oil. China’s growing economy requires constant access to additional oil sources, and Azerbaijan’s expanding oil and gas sector appears attractive. Several Chinese companies have already been granted production-sharing agreements by the Azerbaijan State Oil Company for the development of onshore oil fields in the country. For example, in June 2004 China’s Shengli oil company received permission to work on the Garachukhur oil field.

Baku, however, regards the development of the oil industry as only a short-term basis for bilateral economic relations. In order to diversify its own economy and minimize its dependence on the oil sector, Azerbaijan wants to develop other, non-oil sectors and China’s experience and assistance with the development of the textile industry could be most helpful. With the organizational help of the Ministry of Economic Development, a day-long business forum was held during President Aliev’s visit. Businessmen from both countries developed mutual ties and explored opportunities for investment projects. A Chinese business delegation is expected to visit Baku soon (ANS TV, March 20).

Trade between the two countries has been stagnant in the past year. According to Chinese sources, the trade turnover decreased from $230 million in 2003 to $180 million in 2004, yet official Azerbaijani statistics claim the opposite. ANS TV argued that the decreased trade turnover is due to a plane crash on the Baku-Urumchi route in 2003 and the subsequent temporary suspension of this flight.

Nevertheless, political and security issues were at the top of President Aliev’s agenda. China was the first East Asian country to recognize Azerbaijan’s independence and opened an embassy in Baku in 1992. China and Azerbaijan both face separatist problems, and, based on this shared concern, the two leaders pledged to help each other at the international level and defend each other’s territorial integrity. In fact, Azerbaijani media outlets have quoted Hu Jintao as saying that China “supports the territorial integrity of Azerbaijan” (Trend, Zerkalo, Echo, March 17-18.) President Aliev expressed his satisfaction with Beijing’s official position regarding the Karabakh conflict and its support for a resolution of the conflict based on the four UN Security Council resolutions, passed back in 1993, that demand the immediate and unconditional withdrawal of Armenian forces from the occupied territories of Azerbaijan. For Azerbaijan, the support of a major world power and UN Security Council permanent member is crucial.

Local analysts in Baku speculated whether President Aliev’s visit to China was somehow connected to his recent visit to the Russian and Iranian capitals. “Is Azerbaijan making corrections to its foreign policy and shifting from a Western orientation to an Eastern orientation?” ANS reporter Ganira Pashaev asked President Aliev upon his return from Beijing. The President refuted these rumors, saying, “Azerbaijan’s foreign policy has not changed and it is still aimed at pursuing the national interests of the country. As for the visits to China, Iran, and Russia, I also visit the European capitals as well” (AZ TV, March 20).

Aliev and Hu did not sign a separate agreement on mutual military assistance, yet the general declaration between the two presidents did not exclude any activities on this front. In 1999 official Baku was shocked and angered by news that China had delivered eight Chinese Typhoon multiple rocket systems to Armenia, yet Beijing quickly blamed the private companies for this mistake, called it an “occasional and regrettable incident,” and promised to not make the same mistake in the future. The deal reportedly had been brokered by Moscow. For China, cooperation with oil rich and economically attractive Azerbaijan seems more important than ties with Armenia.