Latvia is interested in Azerbaijan's largest transport project
Trend Agency conducted an interview with State Secretary of the Latvian Ministry of Transport Kaspars Ozolins
About Baku-Tbilisi-Kars railway
The commissioning of the Baku-Tbilisi-Kars railway will open up new opportunities for the development of the international freight transport to Eurasia, State Secretary of the Latvian Ministry of Transport Kaspars Ozolins said in an interview with Trend.
"The development of a transit corridor from Central Asia through Azerbaijan and the Black Sea to the Baltic Sea region, in particular to Latvia is a very promising direction," he said.
"The commissioning of the BTK railroad will further strengthen the strategic importance of Azerbaijan in the region and open up new opportunities for the development of international cargo transportation from the Baltic Sea region, along with the growth of cargo transportation from the ports of Georgia to Azerbaijan and Turkey."
"There is the convenient transportation infrastructure from the Baltic countries to the Black Sea," he said. "In particular, Latvian Bison container train, connecting the Baltic ports with the ports of Ilyichevsk and Odessa on the Black Sea, is operating.
"Moreover, Latvia intends to use the Baltika-Transit container train in case of developing the cargo transportation from Azerbaijan to the Baltic countries," he said. "This train passes through the territory of Russia and connects the ports of the Baltic countries with final destinations in Kazakhstan and Central Asia.
"Latvia is still interested in joining of railways of the Baltic States with the railway projects of the Caucasus and Central Asia with the help of Baltic-Transit and Zubr container trains, and it sees Azerbaijan as an important partner for the development of transit transportation to Central Asia and Iran," said Ozolins.
He said that any railway opens up new perspectives.
He said that if the length of the railway is more than 300 kilometers, then it is much more profitable to transport cargo using it.
The ministry spokesman said that in particular, the sea route is not suitable for the transportation of food products, which form the basis of export of Latvia, since it takes a long time.
"Air transportation between Baku and Riga has great potential, but its cost is high," he said.
However, it is currently difficult to talk about how beneficial the transport of goods via the Baku-Tbilisi-Kars railway will be, since everything will depend on tariffs, according to Ozolins.
Baku-Tbilisi-Kars railway is being constructed on the basis of the Georgian-Azerbaijani-Turkish intergovernmental agreement.
The State Oil Fund of the Republic of Azerbaijan (SOFAZ) finances the project in accordance with the Azerbaijani president's decree 'On the implementation of the Baku-Tbilisi-Kars project activities' dated February 21, 2007.
A new 105-kilometer branch of the railroad is being constructed as part of the Baku-Tbilisi-Kars project. In addition, the railway's Akhalkalaki-Marabda-Tbilisi section is under reconstruction in Georgia that will increase its capacity to 15 million metric tons of cargo per year. A depot is under construction in Akhalkalaki for the transition of trains from the existing tracks in Georgia to the European ones.
The peak capacity of the corridor will be 17 million metric tons of cargo per year. At the initial stage, this figure will be equal to one million passengers and 6.5 million metric tons of cargo. The railway is expected to be commissioned by the end of 2015.
About cooperation between Azerbaijan and Latvia in transport sphere
A subsidiary of the Azerbaijani airline is constructing a freight logistics terminal in the Riga International Airport for the cargo transshipment from and to Baku, Kaspars Ozolins said.
"The planned freight turnover of the terminal is 6,000 metric tons of cargo per month (100 metric tons of export and 100 metric tons for import per day.)," said the state secretary.
He said that the construction work is underway and it is planned to commission the terminal by January 2016.
Ozolins said the construction of the freight terminal in Riga is envisaged in the memorandum on cooperation in the sphere of aviation. The mentioned memorandum was signed during the visit of Latvian communications minister to Baku in January 2014.
The agreement on territory leasing in the Riga airport was signed in December 2013.
The cargo transshipment through the Riga airport can be very beneficial for Azerbaijani companies, according to Latvian state secretary.
"There is a very convenient infrastructure in Latvia for organizing deliveries to the whole Europe," he said. "There are three large ice-free ports and distance between the airports and ports is short."
Emphasizing the existence of a convenient railroad system in Latvia, Ozoliņs said that there is an opportunity to create logistics centers for organizing cargo distribution.
Moreover, he added that port free zones with lower taxes operate in his country and, "People in Latvia fluently speak Russian."
Furthermore, Ozolins said that Latvian ports could handle such Azerbaijani export goods as oil and petroleum products, metals and mechanical engineering products, plastic and chemical products, vegetables, fruits, tea and other agricultural products, as well as cotton and textile products.
He added that there is an opportunity to import from Azerbaijan to Riga raw materials and components at relatively lower prices for production of final products in Latvia.
As a result, the final product will have a status of "made in EU" which will allow it to be more popular among consumers in EU, according to Latvia state secretary.
The trade turnover between Azerbaijan and Latvia stood at $10.5 million in 2014, according to Azerbaijan's State Customs Committee.
About bilateral meetings between Azerbaijan and Latvia
The Latvian Ministry of Economy intends to organize the sixth meeting of the Azerbaijani-Latvian intergovernmental commission in the second half of this year, State Secretary of the Latvian Ministry of Transport said.
The co-chairmen of the bilateral intergovernmental commission are Latvian and Azerbaijani Ministers of Transport. The fifth meeting of the intergovernmental commission was held in Baku on April 24, 2013.
"Riga intends to hold a meeting of the Azerbaijani-Latvian Joint Commission for Road Transport in 2015," he said.
The last meeting was held in Baku on April 9-10, 2014.
Ozolins appreciated the cooperation between the governments and businesses of Azerbaijan and Latvia.
He said that the two countries signed a number of partnership agreements and there is a potential for further development of bilateral cooperation.
About Riga-Baku direct flight
During summer, the Latvian airline Air Baltic will resume Riga - Baku - Riga direct flight, the State Secretary, Ministry of Transport of Latvia said.
"The flight will be conducted twice a week from May 20 to September 7," said Ozolins.
The plane from Riga to Baku will depart at 23:45 on Wednesday and at 21:30 on Sunday. Return flights from Baku to Riga will be conducted on Thursday at 6:30 and at 4:20 on Monday.
The flight is carried out in cooperation (code-sharing) with Azerbaijan Airlines.
The company that implements the flight and its partners sell seats on the same flight on its own behalf, so this flight has its own code and number, own tariffs at each carrier, according to the code-sharing. One aircraft of the operating company actually implements the flight.
This is beneficial for those passengers who want to buy a ticket for a transit flight through Baku or Riga and collect bonuses of one of these airlines, said Ozolins.
The demand for the Riga-Baku-Riga route is seasonal, and its realization in winter will be unprofitable, according to the Secretary of State. Therefore, there are no plans for now to implement a direct flight between Baku and Riga all year round. However, the airline is closely monitoring the market and may revise its plans in case of an increase in demand.
About interest in new markets for Latvian goods
Latvia is interested in increasing the export of its goods, especially food, to the new markets, Kaspars Ozolins said.
He said that in particular, this is connected with the cessation of food exports from Latvia to Russia due to Moscow's restrictions.
"But we must find the markets where these products will be in demand," he said. "They may be popular in the CIS countries because everybody knows these products there. But it will be difficult to export to other countries because there are other principles of nutrition. We will have to supplement our products. As a result, we will obtain other, not our product that everyone knows."
He said that in particular, the shipments from Latvia to Azerbaijan have increased.
The previous agreement about increasing the number of vehicle transport permits for the both countries' companies for 2015 testifies to this.
The cargo shippers of each country obtained 250 permits for bilateral and transit freight transportation and 80 permits - for shipments to (from) the third countries.
For comparison: the initial quota was set at 200 permits for bilateral and transit transportation and 50 permits for cargo transportation to (from) the third countries in 2014. In case of necessity, the quota for 2015 can be increased.
"The potential to increase the turnover exists, but its implementation requires infrastructure," said Ozolins.
In order to deliver the goods to alternative markets, it is necessary to adjust supply via the existing rail infrastructure, according to the ministry representative. It is necessary that the goods would be delivered via the Black Sea and further transported by trucks, he said.
He also said that after the commissioning of the Baku-Tbilisi-Kars railway Latvia will consider the possibility of transporting goods along this route.
However, the most promising alternative market for the export of Latvian goods is China, according to Ozolins.
"This is a very serious potential partner, with whom a dialogue is currently being held," he said. "It is being discussed which certification Latvian businesses and products should have in order to meet the requirements of China."
"Transportation of goods in this direction is primarily possible via Baltic-Transit container train via Russia, as well as by air and sea," said the representative of the ministry.
He said that currently the Latvian goods, which were planned to be delivered to Russia, but the import of which was banned, were redirected to other EU countries.
What are benefits of manat depreciation for Azerbaijan?
The Central Bank of Azerbaijan made an important decision today that will minimize the negative impact of falling oil prices on the country's economy.
Starting from today, the official exchange rate of the dollar to the manat has been set at 1.05 manat, which is 33.86 percent more than the exchange rate set before the beginning of the weakening process of the rate [February 16].
The matter rests in the fact that the basis of Azerbaijan's export is oil products. On the results of January 2015, the share of oil products in the country's export amounted to 87.69 percent. Given the fact that the sale of oil is carried out in dollars and euros, now Azerbaijan will benefit from conversion of foreign currency earnings from oil revenues into manats.
For example, if in January 2015, oil products worth $1.120, 5 million were exported, incomes in manat equivalent would have amounted to 878.9 million manat at the old exchange rate (0.7844 manat), but now the same amount upon conversion will be equal to 1.176, 5 million manat.
Given the fact that the economy of Azerbaijan still retains dependence on the oil factor, an integral part of budget revenues to the state budget consists of oil revenues. The share of revenues from the oil sector to the state budget for 2015 exceeds 65 percent. Given the fact that the budget for 2015 was set at 19.438 billion manat, the revenues from the oil sector are expected to reach 12.6 billion manat.
At the same time, the price of $90 was taken as the base price for a barrel of oil during the formation of the budget forecasts. This was before the "oil crisis", the price of oil has had time to fall since the adoption of the budget, and as of February 20, 2015, the price of Azeri Light oil was $63.42 per barrel.
That is, taking into account the national currency's rate of 0.7844 manat per dollar, in 2015, the government expected oil revenues of about $24.78 billion [at $90 per barrel of oil].
In practice, due to the fall in oil prices, the incomes would have reduced.
Therefore, the decision to change manat's rate against the US dollar is more than appropriate, because in reverse conversion to manats, it will be possible to compensate for this difference and provide additional revenues to Azerbaijan's state budget and minimize the negative impact of falling oil prices.
Additional revenues to the treasury will allow not to reduce the funding for social and investment projects. On the contrary, it will be possible to direct additional funds for example to increase the salaries of employees of the organizations financed from the state budget, grants, scholarships, healthcare costs, etc.
This will also allow keeping the pace of construction, reconstruction and restoration of schools, orphanages, hospitals and other facilities.
Of course, a certain influence on the rise of prices of imported products isn't ruled out, but the state will not allow artificial increase in prices, and will hold monitoring to prevent such cases.
In addition, with the development of domestic production, Azerbaijan is already self-sufficient in products of basic necessity, particularly in agricultural products.
The country is already fully meeting its needs in some products and exports its products to foreign markets.
Thus, the weakening of manat's rate will further stimulate the development of export-oriented production, the competitiveness of which in foreign markets will increase.
This in turn corresponds to the tasks of the state to diversify the economy.