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‘One Belt, One Road’: Azerbaijan courts Chinese investors as Xi meets Aliyev

11 July 2024
Ilham Aliyev (left) and Xi Jinping. Official photo via president.az

Azerbaijan appears to be looking east in a bid to attract Chinese investment to its economy, despite concerns raised by experts about ‘dependency’ on China’s production and economy.

On Monday, Azerbaijan hosted the Shanghai Cooperation Organisation (SCO) summit in Baku. The SCO is an international trade and security organisation established by China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan in 1996, to which Azerbaijan has been a dialogue partner since 2015. 

Azerbaijan and China’s presidents had earlier met in Astana on 4 July, discussing bilateral relations between the two countries and adopting a joint declaration. 

At the meeting, Xi referred to a ‘new starting point’ in Azerbaijan-China relations, and expressed his gratitude to Azerbaijan for always supporting the One China policy. An Azerbaijani write-up of the meeting also noted that the leaders had stated their agreement on issues relating to extralateralism, extremism, and separatism. 

In recent years, Baku has appeared to be courting deeper Chinese investment in Azerbaijan. 

As the summit convened, state media reported that there were around 245 Azerbaijani companies operating in Beijing, specialising in industry, agriculture, transport, trade, and other services, as well as six ‘trading houses’ providing Azerbaijani products to the Chinese market.

Ten Chinese companies have also reportedly applied to operate in Nagorno-Karabakh, which fully came under Azerbaijan’s control in September 2023, following Stepanakert’s surrender and the mass exodus of the region’s Armenian population.

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Azertag and other state media appeared to have focused their coverage on the implementation of China’s Trans-Caspian International Transport Route, better known as the Middle Corridor, on Azerbaijani territory.

The Middle Corridor’s significance grew following Russia’s invasion of Ukraine, as it became an alternative to trade and transport routes through Russian territory.

On 5 July, Azertag reported that China had begun ferrying lorries from Kazakhstan to Azerbaijan across the Caspian Sea, to be sent to the EU through Georgia and Turkey.

Trade between the two countries has been steadily growing since 2020, from $1.4 billion in 2021 to $3.1 billion in 2024.

Outside of their economic ties, China has also moved to establish an academic and cultural presence in Azerbaijan, paralleling similar moves in Georgia and Armenia.

In late April, the Baku Research Institute published an essay detailing the growth of China’s ‘global soft power’ in Azerbaijan since 2011 through Confucius Institutes — China-funded programmes in local universities.

The Institutes are often accused of being hubs for Chinese espionage abroad.

‘Dependence on Chinese capital’

As Azerbaijan appears to move closer towards a China-dominated market, some in the country have warned that Azerbaijan could become entirely dependent on Chinese capital.

Economist Rovshan Aghayev told OC Media that closer economic ties with China could lead Azerbaijan’s own economy to a standstill.

He said that China would always remain dominant over Azerbaijan in the petrol production sector by purchasing raw petroleum from Azerbaijan and processing it on its own.

Aghayev also warned that deeper ties with China could isolate Azerbaijan from ‘the civil world; and it means that the Middle Corridor will also be under the control of China and Russia, and that the scale of money laundering will doubtlessly grow even more’.

Seymur Hazi, a deputy chair of the opposition Popular Front Party, has suggested that Baku was likely to choose China ‘in the face of foreign pressure for democratisation’ in Azerbaijan, adding that Baku did not ‘like allies who interfere in its internal affairs’.

‘The Azerbaijani government wants to sell oil and gas to the EU, send troops to Afghanistan, and send an army to Iraq, but no one should interfere in [its internal] politics’, he said. ‘China does not interfere in anyone’s internal affairs. However, China interferes in the internal affairs of its partners in other indirect ways.’

Outside of trade and economic cooperation, the SCO also focuses on security and the war on terror.

Ding Tao, adviser to China’s Ambassador in Azerbaijan, said on 5 July that members of the organisation should be ‘prepared for real calls for intervention’, and ‘join forces in solidarity’.

‘We must unite to resist external interference, provide each other with resolute support based on mutual interests, resolve internal differences through peaceful negotiations, and manage problematic cooperation in the spirit of solidarity and tolerance.’

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