How sanctions shaped Iran-Azerbaijan trade

Baku, Azerbaijan, Nov. 23

By Umid Niayesh – Trend:

“UN sanctions resolutions against Iran are a piece of torn paper.” - This is one of the famous quotes from Mahmoud Ahmadinejad, Iran’s former president, who imposed heavy expenses to the Islamic Republic’s economy by his controversial statements.

It did not take long for Iranian politicians to understand that the UN resolutions are not actually torn papers. The country’s oil export dramatically decreased from 2.5 mb/d before 2012, when the economic sanctions intensified, to roughly over 1 mb/d. Under the sanctions, the Islamic Republic lost the EU as its main foreign trade partner and forced to switch its trade towards countries such as China and India and mediator countries such as the UAE and Turkey, which acted as re-‎exporting intermediary to Iran, of course at a higher price.

The sanctions also hit the trade ties of İran with the neighboring countries, however the Iranian officials believe that the impact was less, compared to the ties with other countries.

This article investigates the Islamic Republic trade ties with Azerbaijan, one of the Islamic Republic's most important neighbors, before and under sanctions, as well as during the period after removal of sanctions in 2016, based on the Islamic Republic’s official data to clarify how the sanctions, actually shaped the mentioned ties.

Iran-Azerbaijan mutual trade

Linking Asia to Europe, Azerbaijan stands at a strategic point between East and West. The shared cultural and historical traits between Iran and Azerbaijan, and the fact that Iran is a home to the world's biggest Azerbaijani population, presents a strong foundation for close economic cooperation between the two countries.

In recent years, the level of trade turnover between the two countries was changing, going up and down, but it has rarely experienced a level beyond $600 million.

The bilateral trade turnover between Iran and Azerbaijan reached $672 million in 2007, the highest in recent decade. The figure reached its lowest, $‎265‎ million in 2015 under the international sanctions, before it revived to $404.7 million during the fiscal year to March 2017, thanks to removal of international sanctions in January 2016. Trade balance during these years was always in favor of Iran.

The following table, extracted from the data of Iran’s state-run Trade Promotion Organization(TPOI), shows Iran’s trade values with Azerbaijan in recent years.

Iran’s imports from Azerbaijan

Azerbaijan exports to Iran were in decline in recent years after experiencing the record high figure of $322 million in Iranian fiscal year, which falls to 2007-2008.

The value reached the lowest level under the sanctions in 2014 to 2016, experiencing $15 million, but then sharply revived to $46.8 million after removal of the sanctions in 2016, registering a growth by some 200 percent.

Iran’s imports from Azerbaijan (based on data from Tehran Chamber of commerce)

Iran’s exports to Azerbaijan

Iran’s exports to Azerbaijan reached to highest level in the fiscal year to March 2013, when accounted to $493 million. But it sharply decreased in the two years of the sanctions against Tehran and reached the lowest level in the fiscal year to March 2016, standing at $‎231.8 million.

The figure revived by 55 percent (to $358 million) next year, when the Iranian economy was free of international sanctions.

According to the TOPI, Iran’s exports to Azerbaijan has gradually shifted from high price manufactured products such as Shoes and dresses to raw materials such as cement, bitumen or potato in recent years.

That is the reason behind fall of Iran’s exported goods price to Azerbaijan from $0.8 per kilogram in 2008 to $0.3 in 2016.

Iran’s exports to Azerbaijan (based on data from Tehran Chamber of commerce)