Azerbaijan’s importance to global trade is rooted in the country’s ties to the ancient Silk Road, which also renders it a node in the modern-day east–west corridors of the Belt and Road Initiative (BRI). A country dependent on oil and natural gas exports, Azerbaijan has leveraged BRI projects and the global push for the development of transport infrastructure to diversify its economy and raise its standing in international trade. Sino-Azerbaijani diplomatic relations are friendly, with general agreement on expanding trade, territorial sovereignty, and security issues.
Similar to countries such as Kazakhstan and Iran, Azerbaijan’s relationship with China can be traced back to the cultural and economic exchanges that took place on the Silk Road in the premodern era. In particular, the location of Baku, the capital of Azerbaijan, on the Caspian Sea cemented its position as the bridge between East and West. To this day, Azerbaijani state rhetoric continues to invoke the ancient Silk Road in its calls for development and new agreements.
Not only is Azerbaijan’s physical position on the Caspian Sea integral to its modern-day role in facilitating east–west trade across Asia and Europe, but also culturally, Azerbaijani people share connections with many of their neighbours. With its history of rulers of various origin, including the Shirvanshahs, the Safavid dynasty, Imperial Russia and, later, the Soviet Union, the present territory of Azerbaijan is home to people with Turkic, Persian, and Russian ties, not to mention others who belong to ethnic minority groups such as Lezgin, Talysh, and Armenian. These ties with other states and peoples shape Azerbaijani cultural memory and are sometimes used in state rhetoric to bolster the creation of economic and infrastructure efforts (such as those with Kazakhstan)—including BRI projects.
Contemporary relations between Azerbaijan and the People’s Republic of China (PRC) began in 1991 after the dissolution of the Soviet Union, when China recognised Azerbaijan’s independence. In 1994, former president Heydar Aliyev first travelled to China, where he met with then president Jiang Zemin and premier Li Peng and discussed the Nagorno-Karabakh conflict—an ongoing territorial dispute between Azerbaijan and Armenia—as well as historical and future economic relations. Generally, the two countries have aligned their positions regarding territorial sovereignty and expanding trade, including invoking the historical memory of the Silk Road to push for increased joint opportunities for development. High-level diplomatic visits started under President Aliyev (in office from 1993 to 2003) and have continued under his son and successor, Ilham Aliyev (President of Azerbaijan since 2003).
Following the beginning of Xi Jinping’s presidency in 2013, relations between the two countries deepened, particularly starting in 2015—two years after the launch of the BRI. In April 2015, Azerbaijan became a founding member of the Asian Infrastructure Investment Bank (AIIB), which was initially conceived of as a financing body for the BRI. The two heads of state signed a memorandum of understanding (MoU) on cooperation under the BRI during President Ilham Aliyev’s official visit to China in December 2015. In March 2016, Azerbaijan became a dialogue partner in the Shanghai Cooperation Organisation—an organisation with the broad aim of fighting terrorism, separatism, and extremism—partly as a way for the country to push forward its agenda with Armenia, which includes territorial control over Nagorno-Karabakh, as well as control over the narrative of the conflict.
Although Azerbaijan as a state is relatively removed from China (literally buffered by other Central Asian states), there are instances of grassroots interaction between the Azerbaijani and Chinese sides. This includes informal interaction—such as through the presence of Chinese labourers and migrants in the country—as well as formal cultural and educational ties. The latter include the establishment of Confucius Institutes (such as at Baku State University and the Azerbaijan University of Languages), MoUs on educational cooperation between Azerbaijani and Chinese universities, the expansion of Mandarin-language classes, and the establishment of the Chinese Language and Culture Centre at the Azerbaijan University of Languages.
Azerbaijan signed an MoU to participate in the BRI in 2015 during President Ilham Aliyev’s visit to China. Both Chinese and Azerbaijani state language has since invoked the BRI to emphasise high-level strategic alignment, particularly in discussions about infrastructure and transport projects that are key to such trade. There is a two-step thought process here: 1) the BRI relies on infrastructure and transport projects, and 2) Azerbaijan is prioritising the development of such projects, such as the Middle Corridor, the Baku International Sea Trade Port (Ələt Port), and the Baku–Tbilisi–Kars (BTK) Railway. Generally, these projects are domestically or regionally led with minimal funding or influence from the PRC.
One of China’s stated BRI priorities is the creation of transport routes to deliver goods from China to Europe and back. These routes are often referred to as ‘economic corridors’, in contrast to their maritime counterparts. Azerbaijan—specifically, its port on the Caspian Sea—is key to many of these east–west corridors. Of significance is Azerbaijan’s role in corridors that bypass Russia and Iran, such as transport routes through Kazakhstan and Turkmenistan. One such route is the Middle Corridor—formerly called the Trans-Caspian International Transport Route, established in 2014—along which goods travel through China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Europe, and Türkiye. Currently active, the Middle Corridor has progressed largely through regional funding through public–private investments and management rather than Chinese funds. In 2022, Azerbaijan, Kazakhstan, Georgia, and Türkiye announced their intention to establish a joint venture to continue to push harmonisation efforts for transport logistics. The corridor cuts the transportation time for goods from approximately 45 to 15 days.
Baku International Sea Trade Port
As previously noted, the key node in Azerbaijan’s modern international transport network—including the Middle Corridor—is the Baku International Sea Trade Port. The historic Port of Baku was located inside the capital and eventually became constrained by the development of the surrounding city. In 2007, President Ilham Aliyev announced plans for the construction of a port 65 kilometres south of Baku, in Ələt. In 2014, the main ferry terminal was commissioned and, in 2018, the first phase of development was completed and the complex was opened. The next phases include general expansion of capacity, as well as of the surrounding free-trade zone and logistics services. Although Chinese funding was limited, support did include grants and the gifting of equipment. Additionally, there have been connections and agreements between the port and relevant Chinese stakeholders, such as an MoU signed with the Port of Qingdao in 2023. Other countries with ports on the Caspian Sea have adapted to this new port infrastructure, with landlocked neighbours such as Uzbekistan starting to take advantage of the opportunities presented by this significant increase in transport and logistics infrastructure in the region.
The BTK Railway, a flagship project of the Middle Corridor, was inaugurated in 2017 at the Baku International Sea Trade Port. Currently active, the total amount of goods delivered via the BTK Railway in 2022 increased by 30 per cent from 2021, according to Azerbaijan’s national railways operator. The BTK Railway route provides overland movement of cargo and passengers from Baku, Azerbaijan, through Tbilisi, Georgia, to Kars, Türkiye. Notably, it does not include existing routes through Armenia—a fact that led to financers such as the World Bank and Asian Development Bank withdrawing their support, and the subsequent increase in Azerbaijani funding. Although Azerbaijan and Türkiye mainly financed this particular railway segment (with Azerbaijan’s State Oil Fund financing Georgia’s 178-kilometre section through loans), surrounding segments have been backed by Chinese funding.
Current Economic Relations
Trade: China is not a major destination for Azerbaijan’s exports. Based on Azerbaijani Government statistics, China accounted for an average of 1.3 per cent of Azerbaijan’s exports between 2011 and 2022. China was Azerbaijan’s third-largest source of imports in 2022, accounting for 14.3 per cent of imports, after Russia (18.8 per cent), and Türkiye (15.8 per cent). According to Observatory of Economic Complexity statistics from 2021, the top export product from Azerbaijan to China was crude petroleum, which is in line with Azerbaijan’s history as an oil and gas producer. The top export products from China to Azerbaijan were pharmaceutical products, including vaccines, which is in line with China’s recent vaccine diplomacy efforts.
Generally, Azerbaijan exports resources: crude petroleum, petroleum gas, refined petroleum, raw cotton, and gold. Its top imports are cars, wheat, packaged medicaments, broadcasting equipment, and refined petroleum. From 2020 to 2021, its fastest growing export markets were Italy, Israel, and Germany, and its fastest growing import markets were Türkiye, China, and Russia. Economically, Azerbaijan sees China as a market primed for the diversification of its exports and services, aligned with Chinese rhetoric that highlights the BRI’s focus on increasing not only Chinese exports, but also Chinese imports.
Investment: Azerbaijan is receptive to Chinese financing for digital services and industrial development. Diplomatic signals of the importance of bilateral investment include the participation of Azerbaijan in the first China International Import Exhibition in Shanghai in 2018 and the subsequent opening of Azerbaijani wine houses in China. High-level meetings between Azerbaijani and Chinese stakeholders emphasise the opportunity for Chinese capital investment in Azerbaijan and, more generally, opportunities for joint ventures and collaboration in the private sector. Although Chinese private investment in Azerbaijan is still limited, there have been notable deals between state-backed actors—as seen in the agreements worth 821 million USD made during the second Belt and Road Forum in 2019. These deals included China National Electric Engineering Company’s investment in a tyre factory in Sumqayit’s chemical-industrial park, the building of a greenhouse complex in Kurdamir, and the creation of the Azerbaijan Trade House in Chengdu, China. Separately, Huawei Technologies has been involved in the construction of information infrastructure and information and communication technology talent programs, and China Telecom and ZTE have signed agreements to participate in Azerbaijani broadband expansion and digitisation efforts.
Aid and Other Financing: There is no official record of Chinese aid to Azerbaijan. Beyond instances of grants or investments mentioned earlier, publicly known Chinese loans include financing for the Gas Processing and Polyethylene Petrochemical Complex Project, Baku–Tbilisi–Ceyhan Pipeline construction, and a 200MW wind farm project on the Absheron Peninsula. Additionally, Azerbaijan has been a recipient of China’s Covid-19 aid. In 2020, China donated Covid-19 test kits to Azerbaijan and, a year later, Covid-19 vaccines.
Generally, Azerbaijan and China enjoy friendly relations. Certain ongoing domestic and regional issues (such as Azerbaijan’s conflict with Armenia) have the potential to disrupt regional stability and, by extension, Azerbaijan’s relationship with China.
- Jafarli, Shahin. 2020. ‘Azerbaijan–China Relations.’ Baku Research Institute. Link.
- ‘Restoration of Great Silk Road.’ President of the Republic of Azerbaijan Ilham Aliyev. Link.
- Schulz, Dante. 2022. ‘China–Azerbaijan Bilateral Relations.’ Caspian Policy Center. Link.