Prospect of Iran-Azerbaijan relations

[Serpentine]

That is an interesting new approach.

By Dalga Khatinoglu

Despite 600 kilometers of joint border, trade between Iran and Azerbaijan stood at $210 million in 2013. Both Iran and Azerbaijan are dissatisfied with the current volume of trade.

Following to the visit of Azerbaijani president to Tehran in early spring, Iranian President Hassan Rouhani is scheduled to travel to Baku on November 12, aiming to sign 10 MOUs with Azerbaijan, including energy MOUs.

After eight years of political and security struggles between Iran and Azerbaijan, which culminated during the second term of Iranian former president Mahmoud Ahmadinejad, the bilateral ties have becoming ameliorated at a brisk pace after President Hassan Rouhani took power in Iran in August 2013.

Over the past year, several senior Azerbaijani officials have visited Iran and several Iranian officials as well as trade and economic delegations have come to Azerbaijan. The two countries signed an MOU in October to cooperate in oil exploration in the Caspian Sea.

Prospect of Iran-Azerbaijan economic ties

According to the Azerbaijani government’s official figures, trade between Iran and Azerbaijan has been declining sharply since 2009 to below $300 million. This is while the two countries boast of 600 kilometers joint border. Trade with Iran is even less than one percent of Azerbaijan’s total foreign trade. During the eight-year administration of Ahmadinejad in Iran, Azerbaijan increased its gross national production by around 7 folds to $70 billion.

Azerbaijan invested $11.8 billion abroad in 2013, the balance of payments for 2013 published by the Central Bank of Azerbaijan (CBA) said in March.

According to the State Statistical Committee of the Republic of Azerbaijan, Iran’s exports to Azerbaijan rose 17 percent last year to $208 million. Meanwhile, Azerbaijan’s exports to Iran decreased 16 percent to $74 million. However, the Iran Customs Administration has put the bilateral trade in the past Iranian calendar year, which ended on March 20, 2014, at $513 million, which is about double of the figure announced by Azerbaijan. Of course, Iran sets the US dollar exchange rate at 26,700 rials, while the free market rate is more than 32,000 rials.

Although a look at statistics show that Iran and Azerbaijan are highly dependent on hydrocarbon export revenues, but there are lots of other fields of economy which can boost trade relations between the two countries.

Iran and Azerbaijan are situated along two major transit routes: the North-South transport corridor and the Europe-Persia Express Gateway (EPEG). The two projects is projected to be completed by 2016. The transport corridor has already extended from Russia to Astara, and is projected to be connected to the Qazvin-Rasht-Astara railway. Less than 200 kilometers of the railway in Iran and 8 kilometers in Azerbaijan should be established. The railway will connect Russia and Azerbaijan to the Persian Gulf.

Once the Sari-Rasht railway, to the length of 356 kilometers, is established, the Astara border terminal between Iran and Azerbaijan will connect Iran to Central Asia. The Central Asian section of the project, which will connect Iran to Turkmenistan and Kazakhstan, has been completed and will be inaugurated by the end of the year.

Also The Europe-Persia Express Gateway (EPEG) cable system, with the design capacity of 3.2 Tbps, is stretched from Germany to Azerbaijan, and from there to Iran and Oman. The project will be completed in 2016. The project is expected to connect to the Europe India Gateway (EIG), linking Europe to India.

Azerbaijan can also invest in Iran's mines. The country can even increase its exports to Iraq via Iran. There are 408 mines only in Iran's northwestern provinces, near the Azerbaijani border.

Energy Sector

The two countries have recently held negotiations in the energy sector and signed a memorandum of understanding in the field of exploration and production of oil in the Caspian Sea.

The two countries have a long history in energy relations, but that ties have always been limited.

The Iranian part of the Caspian Sea have been studied by Azeri equipments two times - once before the fall of the Soviet Union, and the second time in 1994 and 1995 - to discover possible hydrocarbon reserves, but to no avail. Until 2011 the existence of oil and gas reserves in Iran's share of the Caspian Sea was unclear. Iran was carrying out exploratory operations with Pejvak vessel in the Caspian Sea in the past decades, but the ship caught fire during presidency of Mahmoud Ahmadinejad. Pejvak ship performed three dimensional seismographic operations in the Caspian Sea.

Azerbaijan possesses Seismic vessels and can help Iran in this regard. Also Iran's Amir Kabir drilling rig's crane crashed last March that can be repaired in Azerbaijan.

The Amir Kabir Semi Sub Drilling Rig is to explore and drill oil wells in Iran's Sardar-e Jangal field. The pressure in the western gas fields of the Caspian Sea is around 10,000-15,000 bar, so the rig can be rented and use to drill just in certain depths. The bar is a metric unit of pressure, defined by the IUPAC as exactly equal to 100,000 Pa.

Iran's share out of Azerbaijan's Shah Deniz gas field is 10 percent. The first phase of the project produces 50,000 barrels of gas condensates per day and 9 billion cubic meters of gas per year. The second phase of the project is also expected to come on stream in 2018. The second phase is scheduled to annually produce 16 billion cubic meters of gas.

Iran and Azerbaijan also swap 1.2 million cubic meters of gas per day. The two countries also swap electricity. Iran's electricity consumption in winter is less than summer, but it's exactly opposite in Azerbaijan. So the two counties can swap electricity.

Azerbaijan currently accounts for 1.5 percent of Iran's total electricity trades, but the country can also serve as a route to transit or swap Iran's electricity to Russia or even Europe.

Dalga Khatinoglu is a specialist on Iran's energy sector and head of Trend Agency's Iran News Service

Prospect of Iran-Azerbaijan relations
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This EPEG (Europe-Persia Express Gateway) project is an interesting one, I hadn't heard of it before. It's a massive cable system with maximum capacity of 3.2 Tbits/second data transfer.

Europe-Persia Express Gateway - Wikipedia, the free encyclopedia

EPEG

On June 8th 2011 a consortium of four leading telecom carriers from four countries signed the Construction and Maintenance Agreement for the new cable system — Europe-Persia Express Gateway (EPEG). The new system with an initial capacity of 540 (54×10) Gbps was put in operation in December, 2012.

The EPEG becomes a brand new high capacity fiber optic cable system which links Europe with Middle East and a possibility of further extension to Gulf regional countries and India subcontinent.

The system passes from Frankfurt across Eastern Europe, Russia, Azerbaijan, Iran and Persian Gulf to Barka, Sultanate of Oman. EPEG members Cable & Wireless, Rostelecom, Omantel, and TIC build and develop part of the network which operates through their own country. The route via Azerbaijan is organized on the basis of the capacity of the EPEG associated partner — Delta Telecom. The design capacity of the EPEG system is up to 3.2 Tbps with total length approx. 10,000 km, about 9,500 km is a terrestrial fibre cable.

The EPEG allows a telecommunication transit route alternative to the Red Sea, Suez Canal, Egypt and the Mediterranean Sea regions and plays an important role for traffic re-routing in case of earthquakes and disasters, which have been known to affect multiple systems at once.

 

[Hakan]

If sanctions get lifted iran can export its gas to europe. Maybe it can connect to the Trans Anatolian Gas Pipeline via azerbaijan.

Just waiting till this thread explodes.

 

[rmi5]

@Serpentine @Hakan
These talks about using Azerbaijan soil for transportation, has been initiated after the recent conflict between Iran and Turkey over trucks, and the customs pensions. Now, Turkish trucks are using Georgia-Azerbaijan route to reach to Central Asia, and Iranian trucks are using Azerbaijan-Russia route, instead of Turkey-Bulgaria route, it is speacially very cost efficient if Iran wants to send trucks to Germany, and Central and Northern Europe. For Turkey it is also beneficent, specially if they want to send trucks to Kazakhstan.

 

[Serpentine]

@Serpentine @Hakan
These talks about using Azerbaijan soil for transportation, has been initiated after the recent conflict between Iran and Turkey over trucks, and the customs pensions. Now, Turkish trucks are using Georgia-Azerbaijan route to reach to Central Asia, and Iranian trucks are using Azerbaijan-Russia route, instead of Turkey-Bulgaria route, it is speacially very cost efficient if Iran wants to send trucks to Germany, and Central and Northern Europe. For Turkey it is also beneficent, specially if they want to send trucks to Kazakhstan.

I think Turkey's best route to central Asia is still Iran, since it wouldn't be much economical to transport goods via truck to Caspian port and then load them on a ship to send them to Turkmenistan. Even if they want to send it via ships, then the distance between Turkish-Iran border and Iran's Anzali port is shorter than Turkey-Baku route, while the former only passes one country, which is Iran and the latter passes 2 countries, Georgia, Azerbaijan.

The recent problems about truck fees will be settled soon I believe, since Turkey also increased its fees for Iranian trucks, both sides have to sit and talk through it. The amount of deal between two countries through land border it too much to be neglected.

Just waiting till this thread explodes.

Thread bans my dear, thread bans are the solution, sit and watch.

 

[rmi5]

If sanctions get lifted iran can export its gas to europe. Maybe it can connect to the Trans Anatolian Gas Pipeline via azerbaijan.


View attachment 149873

Just waiting till this thread explodes.

Iran was very interested to join to nabucco pipeline, and I doubt if they are not interested in joining Southern Caucasus-TANAP-TAP, but as USA opposed to it, it got impossible for Iran to join the pipeline.

 

[rmi5]

I think Turkey's best route to central Asia is still Iran, since it wouldn't be much economical to transport goods via truck to Caspian port and then load them on a ship to send them to Turkmenistan. Even if they wan to send it via ships, then the distance between Turkish-Iran border and Iran's Anzali port is shorter than Turkey-Baku route, while the former only passes one country, which is Iran and the latter passes 2 countries, Georgia, Azerbaijan.

The recent problems about truck fees will be settled soon I believe, since Turkey also increased its fees for Iranian trucks, both sided have to sit and talk through it. The amount of deal between two countries through land border it too much to be neglected.

The advantages of Iranian route for Turkey:
Passing one country instead of two countries, so there would be less delay.
no necessary costs for loading/unloading from ships

The advantages of Azerbaijani route for Turkey:
Shorter distance (Turkey-Baku is shorter than Turkey-Anzali route )
Passing from allied countries.
Using ships as a cheap transportation for part of the route
Having access to Kazakhstan with no extra customs costs

 

[xenon54 out]

The recent problems about truck fees will be settled soon I believe, since Turkey also increased its fees for Iranian trucks, both sides have to sit and talk through it. The amount of deal between two countries through land border it too much to be neglected.

I have seen more Iranian Trucks this year than usual on the highway to Istanbul, Iran starting to increase the fees in which Turkey also increased to retaliate was a bad move, it will only damage the trade.

Turkey is building a train line to Azerbaijan, which also will connect Turkmenistan with ferries, where Iran can be bypassed to reach CA but Iran doesnt have much alternative to reach certain European countrys.

 

[Serpentine]

I have seen more Iranian Trucks this year than usual on the highway to Istanbul, Iran starting to increase the fees in which Turkey also increased to retaliate was a bad move, it will only damage the trade.

Turkey is building a train line to Azerbaijan, which also will connect Turkmenistan with ferries, where Iran can be bypassed to reach CA but Iran doesnt have much alternative to reach certain European countrys.


View attachment 149905

The problem is that Iran is also best way for Turkey to export goods to Afghanistan, Pakistan and perhaps even India, also southern Arab states of Iran (GCC).
As I said, the recent problem in trucks is nothing that can persist, given the amount of trade between both sides. So even if you build that rail road, I think it won't have much impact on delivery of goods through trucks between two countries.

The advantages of Iranian route for Turkey:
Passing one country instead of two countries, so there would be less delay.
no necessary costs for loading/unloading from ships

The advantages of Azerbaijani route for Turkey:
Shorter distance (Turkey-Baku is shorter than Turkey-Anzali route )
Passing from allied countries.
Using ships as a cheap transportation for part of the route
Having access to Kazakhstan with no extra customs costs

Just checked, distance between Turkey-Georgia border crossing to Baku is 792 km, while distance to Anzali is about 700 km, but it seems the difference is not that much. Other points are true though.

 

[xenon54 out]

Just checked, distance between Turkey-Georgia border crossing to Baku is 792 km, while distance to Anzali is about 700 km, but it seems the difference is not that much. Other points are true though.

The possibility of rail transportation is compensating it.

 

[Serpentine]

The possibility of rail transportation is compensating it.

Yes maybe, but only for Central Asia, for other states, there is only this way. Btw we should we should see the developments in coming months in the trades to judge.

 

[xenon54 out]

Yes maybe, but only for Central Asia, for other states, there is only this way. Btw we should we should see the developments in coming months in the trades to judge.

Last year they was talking about increasing the trade between Turkey and Iran, im surprised why this happened in the first place.

 

[rmi5]

Just checked, distance between Turkey-Georgia border crossing to Baku is 792 km, while distance to Anzali is about 700 km, but it seems the difference is not that much. Other points are true though.

That's true if you consider the direct route to the turkish border, but you need to consider the distance to the junction of these two routes which happens in North east of Turkey. Anyway, the difference is not much as you mentioned.

 

[asena_great]

well i believe baku is much better and econamical for CA the goods will go from turkey to azerbijan by railway there and by ship they will move to turkmenbashi and aktau port from turkmenbashi the goods will move agian by railway to turkmenabat than serdar than ashgabat than merv and from merv to uzbekistan and rest of the CA countries , track will be very expensive and also dont have good road for all the city of turkmenistan and CA ,while the soviet railway is rdy

 

[Hakan]

TURKEY HOPES TO NORMALIZE TRUCK TRANSIT FEES WITH IRAN
​

ANKARA — Turkey retaliated with increasing transit fees for Iranian trucks only when Iran hiked the rates for our Turkish trucks, Customs and Trade Minister Nurettin Canikli has said.

The transit fee for trucks has lately become a sticking point between Turkey and its neighbor Iran.

In an interview with Turkish broadcaster A Haber channel on Monday, Canikli said that despite the disagreement over the fee, Turkey and Iran remained friendly neighbors with strong trade ties.
Turkey and Iran inked an agreement on road transportation in 1994.
However, the minister acknowledged that the high transit fees were affecting the numbers of Turkish trucks crossing the border into Iran.

"Turkey only used its right to retaliate. We tried to negotiate with Iran, but they insisted on that fee. Our transport sector cannot progress in Iran with that high fee," he said.

He said the recent development was bad for both sides. "It hurts Turkish transport sector as well as Iran's transport sector. We see that the number of Iranian trucks and Turkish trucks crossing the border has decreased. We are trying to normalize this using the proper channel. But we are also committed to protecting the rights of our trucks," the minister said.

Canikli added that the high fee was also seriously damaging Iran's trucks.

"We estimate that the process will damage Iran's transport sector more than Turkey. We also estimate that Iran will understand its damages after realizing its costs and it will proceed to normalize routine transport fees," he said.

According to Turkish Customs and Trade Ministry, Iran previously charged each Turkish truck that passed through its territory using the formula of distance in kilometers multiplied by 0.32.

Then Iran increased the rate to distance in kilometers times 0.32 multiplied by 0.8.

Turkey then increased its transit fee for Iranian trucks using the same formula.

However, Iran increased the transit fee formula again to distance in kilometers multiplied by 0.32 multiplied by 0.80, multiplied by 1.60 on October 10. Turkey retaliated by also changing its fee for Iranian trucks using the same formula.

For example, if an Iranian truck passes from Turkey's eastern customs gate to the country's western customs gate, the distance will be roughly 1200 kilometers. According to the previous formula, this truck would pay $307 as transit fee, but according to the recent hike, each driver would now have to pay $614.

Professor Selçuk Çolakoğlu, Vice President of an Ankara-based think-tank USAK, described Iran's move to increase the transit fee as a way to protect its own logistics sector.

"Iran is trying to protect its logistic sector by implementing the high transit fee since the logistics sector of its neighbor, Turkey, is highly competitive," Çolakoğlu said.

Can Acun, an analyst from the Foundation for Political Economic and Social Research, said Iran was perhaps trying to increase Turkey's costs for its exports to Central Asia.

"Turkey and Iran's relations were characterized by years of rivalry, Iran has responded to Turkey's good faith by attempting opportunism. Iran has been creating some difficulties for Turkey to transport goods to Central Asia and Iraq after the recent turmoil in the Middle East," he said.

Turkey's trucks use Iranian territory to export goods to Central Asia.
The self-proclaimed Islamic State of Iraq and al-Sham's (ISIS) invasion of Mosul has hampered Turkey's route to the region.

"Iran is also trying to get Turkish goods markets in Central Asia. Iran does not want Turkish logistic companies to be more active inside the country," Acun added.

According to Turkish officials, the trade between Turkey and Iran stood at $22 billion in 2012 before dipping to $14.5 billion in the following year due to economic sanctions imposed on Tehran.

The trade volume between the two countries stood at $3.2 billion in the first quarter, according to Turkey's official statistics office.

Turkey hopes to normalize truck transit fees with Iran | Economy | Daily Sabah

 

[-SINAN-]

This conflict is because Iran wants to dominate transportation business. They are charging Turkish trucks with extra charges so that we can't do business and they can steal our business. Turkey retaliated with the same, and by-passed Iran.

Situation solved. Inshallah we will stop buying over-priced natural gas from Iran when TANAP completes.... it is impossible to do business with Mullahs.