< Mr. Brauner, how do you evaluate economic relations between Germany and Azerbaijan?

Germany and Azerbaijan are linked by relations in many fields. There is a long tradition of German exports to Azerbaijan: more than a century ago, what was then the world’s longest pipeline was built using German pipes. In particular, our bilateral economic relations made a great leap forward at the beginning of the twenty-first century, when the pipelines to transport oil and gas from the massive deposits in the Caspian Sea to the West were completed. This sparked off a rapid economic upturn for Azerbaijan. The country became an important partner for Germany, firstly as a significant source of oil, and secondly as a trading partner with strong financial resources.
Azerbaijan disposes of enormous oil and gas deposits, and it can thus make an important contribution towards enhanced energy security for Europe and Germany. It is the seventh largest supplier of crude oil to Germany.
We hope that Azerbaijani gas will also soon be flowing to central Europe. The first steps have been taken. In January 2011, President Aliyev and EU Commission President Barroso signed a strategic gas agreement. Azerbaijan agreed to supply gas for the Southern Corridor.
Besides its own energy resources, Azerbaijan is also growing in significance as a transit country. It is the base for major pipelines for diversified energy supplies from the Caspian region, such as the BTC oil pipeline and the BTE / South Caspian gas pipeline. They bring oil and gas from Azerbaijan and Central Asia to Europe.
Germany is Azerbaijan’s third-largest source of imports. Cars and machinery, as well as electrical engineering and chemicals, are our top exports. The diversification and modernisation of Azerbaijan’s economy offers interesting opportunities for both sides. With their technology, equipment and expertise, German companies can be a strong partner for Azerbaijan. They can help to build up a competitive industrial sector, an efficient services sector and high-grade infrastructure.
We wish to intensify our bilateral economic co-operation even further. To this end, we established a German-Azerbaijani working group on trade and investment at government level during the visit to Berlin by Minister Mustafayev in May 2011. On the German side, I am chairing this group, which first met at the end of October. We aim to give backing to the activities of German and Azerbaijani companies. In this way, we can tap even more of the potential which lies in our economic co-operation.
Further to this, we are planning to establish a bilateral chamber of commerce in Baku. It will provide advice and support to companies from Germany and Azerbaijan.

Economic relations between Azerbaijan and Germany offer great potential for the future.

Today Azerbaijan is a leading state in the economic field in the Caucasus region. How much have German companies invested in Azerbaijan following the independence of Azerbaijan? 

Azerbaijan is Germany’s most important economic partner in the Caucasus by some distance. The stock of direct investment by German firms in Azerbaijan amounts to a total of €128 million. Germany’s statistics register direct investment by those companies which have a balance sheet of more than €3 million: investment by companies which fall below this reporting threshold is not included in the figures. So overall German investment is likely to be somewhat higher than is recorded by the statistics.

In addition to the level of direct investment, the transfer of expertise and state-of-the-art technology is also an important factor driving economic development. Azerbaijan has started to diversify its economy. German products and German technology can help to pave the way here. German machinery can support the establishment of a competitive industrial sector. German engineering can play a helpful role in the planning of sophisticated infrastructure. Technology developed in Germany can open up new commercial opportunities to utilise renewable forms of energy. German companies have much to offer.

There are many examples of this sort of successful co-operation, so I shall just mention a few of the most recent ones: The German construction firm Alpine has been commissioned to plan and build the “Baku Crystal Hall” for the 2012 Eurovision Song Contest. The German firm Brainpool GmbH has been selected as an official production partner for this competition and will contribute to the success of the event by providing design, expertise and cutting-edge technology. The German firm Werner & Pfleiderer Backverfahren Technik GmbH has won the contract to deliver bakery technology worth roughly €13.6 million for a large bread factory in Sumgait which will be making 122 tonnes of bread and bakery products every day. Siemens has been contracted to help modernise a Baku Steel Company plant by providing a 50 tonne blast furnace which will both increase the facility’s capacities and cut its emissions of pollutants.

Is there an interest in the prospects of German business, and especially in consumer-oriented business development in Azerbaijan? I ask this question because the Azerbaijani Government holds various forums to invite investors to Azerbaijan, providing information about the very good business climate in Azerbaijan. International financial institutions also confirm this in their official reports. In this situation, why do we not see a flow of German business people to Azerbaijan?

In the World Bank’s 2012 Doing Business Report, which compares the business climate in various countries, Azerbaijan was able to improve its ranking by three places compared with a year before, and is now ranked 66 out of a total of 183 countries. Different business locations compete internationally to attract investment and companies. So there may be a need for further efforts in some areas if Azerbaijan is to be able to attract even more companies. In this context, it is important to have a good framework for business in fields like legal protection, transparency, market-based structures and the fight against corruption.
In addition to the large number of companies which export goods and services from Germany to Azerbaijan, some 100 German firms are also active in Azerbaijan itself. The number of such firms has kept rising over the last few years. Many of them are well-known large companies, or even the market leader in their segment. The German-Azerbaijanian Business Association (DAWF) in Baku supports both German and Azerbaijani companies as they initiate and expand their business activities. The DAWF receives financial support from the Federal Ministry of Economics and Technology.

According to the official report of the Azerbaijan State Statistical Committee, Germany is ranked third in terms of Azerbaijani imports during the first 8 months of 2011. The amount of exports from Germany was 478.6 million dollars. In this period the amount of exports from Azerbaijan to Germany was 80.5 million dollars. Do the figures from Azerbaijan coincide with the German statistics?

For this period, German statistics record the following: German exports to Azerbaijan totalling €382.0 m (roughly $552 m*) and German imports from Azerbaijan totalling €842.2 m (roughly $1,127 m*). It is difficult to compare the two countries’ statistics. There are based on different definitions, and can vary for this reason. The exchange rate used to calculate the figures can also play a role.

The bulk of German imports from Azerbaijan consist of crude oil, which is largely transported via Italy. Azerbaijan’s trade statistics register the countries of origin and destination of goods by shipping destinations, i.e. in some cases to middlemen. For this reason, Azerbaijan records the crude oil purchased by Germany as being exported to Italy, even though Germany is the final destination. German statistics record movements of goods on the basis of the country of origin and the final destination. So German figures regard this crude oil as an import from Azerbaijan. This inevitably causes discrepancies in trade statistics.

In order to reduce these discrepancies, experts from Germany’s Federal Statistical Office (Destatis) have been giving advice to their counterparts from Azerbaijan’s State Statistical Committee, not least on bringing Azerbaijan’s economic statistics into line with EU standards. This twinning project was backed by €900,000 in funding from the European Union, and was successfully completed at the end of November 2011.

(*    calculated at the interbank rate of €1 = $1.445 from the end of August 2011)