Turkey, Azerbaijan and the United Kingdom: A triumvirate of prosperity?
by Vanessa Raine*

Both Turkey and Azerbaijan enjoy a special, historic relationship with the United Kingdom, which has become all the more important in today’s bleak world circumstances.

Indeed, this year’s annual The European Azerbaijan Society (TEAS) Business Forum, Azerbaijan and Turkey -- Diverse Investment Opportunities, captured this theme when it took place at No.4 Hamilton Place in London, focusing as it did on a wide range of business sectors, including energy, project finance, investment banking, ICT, agriculture and fast-moving consumer goods. The event featured around 40 speakers, each providing comment and opinion on their field of expertise, and attracted more than 250 lords, MPs, diplomats, investors and businesspersons from the UK, Azerbaijan, Turkey and across Europe. H.E. Ünal Çeviköz, Turkish ambassador to the UK, and H.E. Fakhraddin Gurbanov, Azerbaijani ambassador to the UK, were among the prominent participants.

Azerbaijan has one of the fastest-growing economies in the world, mainly due to its oil and gas resources, but today it is clear much of the “fruits” of this economy will now pass through Turkey to EU markets. Few bilateral relationships have been closer during the past two decades than Azerbaijan and Turkey’s, with strong linguistic, ethnic and cultural ties acting like diplomatic super glue. By late 2017, the State Oil Company of the Azerbaijan Republic’s (SOCAR) investments in the Turkish economy are likely to reach $17 billion, making it the biggest international investor.

Azerbaijan-Turkey relations have always been strong, with the two often being described as “one nation with two states” by the ex-president of Azerbaijan, Abulfaz Elchibey, due to a common culture and history. During the war of 1918, the 8,000-member Caucasus Islamic Army rescued Baku from its enemies, while 1,130 Turkish soldiers were martyred in Azerbaijani territory. Today there are war cemeteries for the martyred Turkish soldiers in Baku, Shaki, Shamakhi, Goychay and Neftçala. Turkey was the first state to recognize the independence of the Republic of Azerbaijan, on Aug. 30, 1991, and provided all economic, political and security support in Baku’s difficult times. Since this time, there were more than 500 agreements signed between the two countries between 1991 and 2011, forming the legal framework of their bilateral relations. The relationship particularly flourished under the first independent government of Azerbaijan, following the signing of the Protocol on Trade and Economic Cooperation leading to military cooperation and the construction of the Baku-Tbilisi-Ceyhan (BTC) and the Baku-Tbilisi-Erzurum (BTE) gas pipelines.

There have been separate phases in the relationship, one where both nations have recognized their similarities, another when both nations have behaved as strategic military partners. Turkey has been a staunch supporter of Azerbaijan in its efforts to consolidate its independence and preserve its territorial integrity -- defending the Nagorno-Karabakh conflict resolution -- and more recently as the ever-present business and geopolitical partner in the region. Azerbaijani-Turkish trade volume, including the operations of the BTC pipeline, increased from $250 million to $1 billion during 2001–09.

Given Azerbaijan’s strategic importance between Russia and Iran, huge energy resources and the daily security concerns that it faces in that part of the world, fostering closer links with Azerbaijan seems to be an extremely sensible way forward for the UK. This forum came at a pivotal moment, with statistics indicating that the UK remains the greatest contributor of foreign direct investment (FDI) to Azerbaijan, amounting to 52 percent.

UK companies’ role in Azerbaijan’s economy

H.E. Peter Bateman, recently appointed UK ambassador to Azerbaijan, acknowledged: “Azerbaijan ... experienced the highest GDP growth in the world in 2005 at 35 percent. It is now time for this wealth to benefit the rural areas of Azerbaijan but, as the country is destined for 30-40 years of considerable oil revenues, this will happen. Altogether, more than 150 UK companies are present in Azerbaijan, not just in hydrocarbons, but in the retail and financial services sectors, amongst others. The Azerbaijani middle-class is in its ascendance, and there is also a huge construction boom taking place across Baku.”

Let’s not forget that Azerbaijan was the first secular democracy in the Islamic world, created in 1918. It gave the vote to women before women in the UK or the US had the vote, which is a tremendous history. However, Azerbaijan’s development was halted when it was annexed by the Soviet Union back in 1920. Of course, Azerbaijan was under the Soviet yoke for 71 years before its battle for independence began.

Today the key issue in relation to Azerbaijan’s economy is energy supplies. The country sits on the Caspian Sea, which has huge deposits of oil and gas, which are strategically important. Azerbaijan is the only country that can guarantee a gas supply through the southern corridor without going through Russia. A pipeline exists to take gas through Azerbaijan, bypassing Armenia, and then through Georgia into Turkey and on to Europe. BP is investing billions in Azerbaijan’s hydrocarbon economy. At a time when the UK economy is slipping back into recession, Azerbaijan is becoming an economic force to be reckoned with in addition to its hydrocarbon resources: There are a great many opportunities in financial services, agribusiness and construction.

Relations between the UK and Turkey go right back to the early 16th century when the first strong contacts between Britain and the Ottoman Empire developed as trading interests in Britain sought new market outlets in the East. The two nations have been at war several times, such as in World War I. They have also been allied several times, however, such as in the Crimean War. The UK is the second biggest importer of goods from Turkey, after Germany. Turkey exports around 8 percent of its total goods to the UK. Around 2,000,000 Britons take holidays in Turkey every year, while 100,000 Turks travel to the UK for business or pleasure.

For Turkey, the UK was the 12th largest source of imports in 2011, behind Italy and Spain as well as France and Germany among EU member states. Overall, the UK has tended to fall in the ranking of Turkey’s import sources since 2000, as Turkey’s energy demand has boosted the position of Russia and Iran and emerging economies such as India have made inroads. UK Trade & Investment (UKTI) described competition in the Turkish market as “fierce.” However, as a destination for Turkish exports, the UK has consistently ranked second or third in recent years.

London wishes to strengthen UK-Turkey relations in large part because it sees Turkey as an emerging economic power of significant potential. In Ankara in July 2010, the UK prime minister described Turkey as “Europe’s BRIC” (referring to the Brazil-Russia-India-China group of major emerging economies). Turkey has maintained a solid position as the world’s 16th largest economy since the mid-2000s. This means that, in comparison to the economies of EU member states, Turkey is larger than Belgium, Poland and Sweden and is advancing most immediately on the Netherlands. Prime Minister Recep Tayyip Erdoğan wants Turkey to be in the global economic top 10 by the centenary of the republic in 2023 (something that might involve overtaking Indonesia, South Korea or Mexico, or possibly Italy or Spain).

UK support for Turkey’s accession to the EU has not diminished for the last 30 years. Even in May 2008, Queen Elizabeth II said during a visit to Turkey, “Turkey is uniquely positioned as a bridge between the East and West at a crucial time for the European Union and the world in general.” In 2010 Prime Minister Erdoğan said, “This is the golden age of Turkey-United Kingdom relations.” Referring to economic and commercial relations, Erdogan said: “There are around 2,000 British investors in Turkey. More than 2.5 million British tourists visited Turkey in 2009. Some 30,000 Britons have purchased real estate properties in Turkey.”

The trilateral relationship between the UK, Azerbaijan and Turkey will likely enhance commercial and political opportunities and benefit what represents a triangle of prosperity in the region. If we add the EU dimension to this strategic partnership, it will become even stronger and expand the EU’s outreach to the borders of Central Asia and Iran.

*Vanessa Raine has served as the business coordinator of TEAS, www.teas.eu, for the past three-and-a-half years. Prior to that position, she worked as a headhunter in the energy, telecom and banking sectors as well as in strategic communications. The views expressed in this feature are her own and do not necessarily reflect those of any organization she is associated with. Vanessa.raine@wanadoo.fr