Improving logistics will boost Azerbaijan-India trade

A recent trip by Indian External Affairs Minister Sushma Swaraj to the pristine south Caucasian nation of Azerbaijan, in the backdrop of the mid-term ministerial meeting of the NAM (Non-Aligned Movement) countries, had been a long-pending one.

The Hindu Business Line reports in its article Improving logistics will boost bi-lateral trade that Baku, the capital, is a historical and breathtaking city on the banks of the Caspian Sea. It is in fact a few metres below sea level and, therefore, faces harsh winds. (Interestingly, Baku is derived from the Persian name of the city Bād-kube, meaning ‘Wind-pounded city’.) However, the political and commercial winds blowing through Baku have had very little to do with India, even if for a rare mention through the late 1990s or the first decade of the 21st century.

When a strategically located, $170-billion economy with substantial oil reserves ranks low on your diplomacy index and supports your neighbours’ claim on Kashmir, going so far as calling for “reduction of Indian excesses in India occupied Kashmir”, there is a problem. Though the period 2000-2010 saw a few senior ministers like Mani Shankar Aiyer and Kapil Sibal reach out through various delegations and platforms, Azerbaijan never really figured even in the second orbit of India’s foreign policy outreach. Bilateral trade between India and Azerbaijan, however, has been a different story. It has shot up almost 10-fold from 2005 to 2017 (from about $50 million to close to half a billion dollars in 2017). This jump in bilateral trade coincided with the opening of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline to the Mediterranean port in 2007, from where Indian oil companies have been buying substantive quantities of crude oil (ONGC Videsh is an investor in BTC). Naturally, the bilateral trade between the two countries has largely been hydrocarbon-centred, with India being a minor exporter of anything worthwhile (rice, beef and tea are some of the key items exported to Azerbaijan). And this, hopefully, is set to change.

Logistical complexity between India and Azerbaijan has been a key issue that led to the setting up of a trade foundation and the exploring of synergies between the two nations. The North South Transport Corridor (NSTC), amongst others, will go a long way in removing the fundamental logistical problems facing both the nations. The NSTC is a multi-modal network of ship, rail, and road routes for moving freight between India, Iran, Afghanistan, Armenia, Azerbaijan and Russia. The objective of the corridor is to increase trade connectivity between major cities such as Mumbai, Moscow, Tehran, and Baku. Once complete, the route is set to drastically reduce transport time between India and Azerbaijan. The route bypasses the Suez Canal and will ensure Indian products reach St. Petersburg in Russia in just 14 days. At present, this is a 42-day journey, skirting North Africa and Europe. Once the Iran-Azerbaijan leg of the NSTC is completed, Indian ports can be linked with Azerbaijan via Iran (Chabahar Port), providing a smoother logistics experience for suppliers at far lesser costs. A study says that the new route will reduce distance and costs by 40 per cent and 30 per cent, respectively.

Three sectors that have substantial potential for bi-lateral trade are food processing, pharma and technology. As Azerbaijan looks to diversify and reduce its dependence on hydrocarbons, India can play a very enabling role in partnering it for the same.