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Iran Eyes Expanded Energy ties With Azerbaijan

Iran Eyes Expanded Energy ties With Azerbaijan

Bilateral relations between Iran and Azerbaijan, the energy-rich neighbor countries, have deepened following the nuke deal and the lifting of international sanctions against Tehran.

These developments promise new opportunities and prospects for economic cooperation between the two countries, in particular in the energy sector. Hamid Chitchian, Iran’s Energy Minister, believes that development of ties will be beneficial for both countries. Speaking at a meeting with Azerbaijan’s Economy and Industry Minister Shahin Mustafayev in Tehran on February 21, Chitchian said Iran is keen to boost cooperation with Azerbaijan in the water and electricity sectors, Tasnim news agency reported.

Touching upon the project on construction of the Khoda Afarin dam on the Araz River, he said the problems hindering the implementation of the project, will be settled soon. The minister further added that Tehran and Baku have held talks over construction of geothermal and wind power plants in Iran’s Meshkin Shahr and Khaf cities respectively, and the projects are said to kick off soon.

Iran is already constructing its first geothermal zone in northwestern Meshkin Shahr city with a to-be output of 50 megawatts. The power plant is expected to come on stream in two years. Iran’s power plants are mostly hydro or fossil fuel-powered. Renewable energy makes up less than one percent of energy used in Iran. Chitchian further referred to the issue of the linking the electricity networks of Iran, Azerbaijan, Georgia and Russia saying all parties will get their benefits from the project.

“The peak electricity consumption in Azerbaijan, Russia and Georgia is in winter, meanwhile Iran experiences peak consumption in summer,” he noted adding that the parties can swap electricity, in order to avoid costs for construction of new power plants.

Iran and Azerbaijan inked a MoU last December which covers cooperation in 12 various sectors, including in the energy field. Based on the signed document the two parties will cooperate in construction of power plants at Khoda Afarin and Qiz Qalasi dams on Araz river and following the issue of agreement on the construction of Ordubad power plant on the Azerbaijani side and Marazad power plant on the Iranian side, as well as implementation of joint guideline on border rivers’ water management.

Transport

During his Tehran visit, Mustafayev and Iran’s Transportation Minister Abbas Akhoundi discussed the issues of abolishing visa for drivers, implementation of the giant North-South Corridor, as well as the two countries’ cooperation in the civil aviation sector. Noting that Iran has already removed the visa requirement for drivers from Azerbaijan, Akhoundi called on Baku to mutually abolish visa requirements for Iranian drivers, IRNA news agency reported.

He also touched upon the plans for connecting the railways of Iran and Azerbaijan saying Tehran has taken measures to speed up the process for connecting the railways. The Iranian minister said Iran, Azerbaijan, as well as Georgia share common interests in connecting the Black Sea to the Persian Gulf. Akhundi also called for increasing the number of weekly flights between Iran and Azerbaijan, which currently stands at 10 flights per week.

Azerbaijan and Iran have created favorable conditions for increasing transit cargo transportation through the territories of the two countries. The two countries are located in very favorable strategic positions that create great opportunities for benefiting from the bilateral ties. Iran, which is situated in the Middle East region, has land borders with the South Asian, Central Asian, and Middle East countries, with access to the Gulf and Indian Ocean.

Azerbaijan, in the cradle of the Caspian Sea is settled in between the West and East. The country plays a gateway role between not only the east and west, but also the north and south. The Land of Fire is positioned on one of the most important trade and transit routes to Europe. In this regard, the transportation sector is one of the main areas of cooperation between Azerbaijan and Iran.

Azerbaijan lacks a railway link with Iran and implements the vast majority of cargo traffic with this country by road transport. That greatly limits the possibilities of development of trade and economic relations between the two countries and their transit potential. The construction of Iranian portion of the North-South railway, which is a part of the North-South corridor, will become an important step towards the realization of the North-South project. Its construction will be completed by the end of 2016.

The North-South railway, with a length of 8.5 kilometers, is expected to serve as a bridge to connect the railways of Iran, Azerbaijan and Russia as well. The North-South corridor, from India to Helsinki, is one of the most important routes for the region. It is a multimodal route for transportation of passengers and cargo from Russia’s St. Petersburg to the Mumbai port. It is designed to carry transit cargo from India, Iran and other Persian Gulf countries to the territory of Russia (the Caspian Sea) and further – to Northern and Western Europe.

The North-South corridor with a length of 5,000 kilometers is designed to carry more than 20 million tons per year, which is quite a significant figure to make it significant. Tehran and Baku have recently intensified bilateral relations with an expectation to further deepen the all-out cooperation between the two close neighbors. In 2014, the trade turnover between the two countries amounted to $186.6 million.

Iran’s export to Azerbaijan during the first half of 2015 decreased 55.36 percent to $42.52 million year-on-year. Azerbaijan’s export to Iran also decreased 67.11 percent to $11.16 million during that period.