Today.Az » Analytics » What opportunities will Azerbaijan get as result of lifting of sanctions against Iran?
06 August 2015 [19:52] - Today.Az
By Azad Hasanli
The global community has been actively discussing the lifting of sanctions against Iran and its consequences for the global economy.
Iran is the largest market in the Middle East. The lifting of the embargo will turn this country into a paradise for foreign companies. One can say that Iran, suffering from the West’s sanctions for many years, thirsts for investments.
Azerbaijan is well aware of this. Therefore, an Azerbaijani delegation’s visit to the country, which included the representatives of the oil and gas, IT, transport, finance and other fields, is not accidental. A wide range of issues, including cooperation in the fields of alternative energy, making joint investments in other countries, the implementation of railway projects, etc. were discussed during the visit.
Azerbaijan has several advantages over the West. First of all, the geographical location plays a major role here. The proximity to Iran simplifies trade relations. Currently, the trade turnover between the countries is not high. As of 2014, it amounted to only $186.6 million (0.6 percent of the total trade turnover of Azerbaijan). However, after the lifting of sanctions, one can be confident in the growth of trade between the countries.
Second, Europe and Iran have a certain lack of confidence. Being a neighbor of Iran, Azerbaijan has much in common with this country. Therefore, one can assume that Azerbaijan will have an advantage over the European companies.
Of course, most likely, the oil and gas sector will remain the basis of economic cooperation between the two countries. But, nevertheless, there are other areas where Azerbaijan and Iran could cooperate, for example, Iran’s mining sector.
The country plans various projects for the extraction of aluminum, gold, copper and steel smelting. Iran wants to draw about $29 billion to this area from abroad. As Iran, Azerbaijan is rich in minerals and has extensive experience in the mining sector.
Azerbaijan could also invest in the joint production of building materials and the construction sector of Iran as a whole. Many experts expect a building boom in Iran after returning of major international companies, as well as the representatives of the Iranian diaspora to the country.
According to the Iranian government, the tourism sector will get the greatest benefit from the lifting of the sanctions.
In order to facilitate this, Iran takes various measures such as extending the tourist visa from 15 days to one month, using electronic technology for issuing documents permitting entry, construction of new hotels and so on.
Azerbaijani travel agencies can also develop this area. Along with medical tourism, numerous historical, architectural and religious sites of Iran, as well as ski resorts, can be of interest to visitors.
Iran’s securities market with several billions dollars worth of turnover can be of special interest as well. Iranian market has great potential and stands out with its affordability.
In general, the production cost is quite low in Iran. However, the existence of free economic zones such as Aras, or Maku trade zone on the border area is also very important for Azerbaijan.
Various tax benefits are offered for Azerbaijani businessmen in these zones. For example, there are no taxes or fees for the raw materials and equipment delivered for starting production in these zones.
The lift of sanctions will also give impetus to the development of IT sphere in Iran. Foreign companies have already started to show special interest in Iranian startups. There are not so many individuals and funds investing in this sphere in Iran.
Meanwhile, despite the growth of IT market in Iran, there is little competition there for the present and foreign companies can benefit from this.
Like Azerbaijan, Iran tries to reduce dependence on the oil sector. In this regard, cooperation in the alternative energy sphere can become one of the priorities for the two countries.
The sides have already created a working group to implement joint projects in this sphere.
Azerbaijan wants to build a wind farm in Iran’s Khorasan province, as well as geothermal power plants not far from Tabriz.
Iran’s market is hungry for investments. It is also important that the vast majority of the country’s population positively assesses the presence of foreign companies in Iran.
The fact is that Iran will see a great flow of foreign capital in the near future and it is important for Azerbaijan to carve out its niche here, because, besides the fact that the Iranian market is big enough, it also opens way to other Persian Gulf countries.