Pakistan has long sought to establish cordial relations with Central Asian countries. The latter is believed to be the solution to Pakistan’s energy crisis and open significant trade values for Pakistan. Pakistani Prime Minister Shehbaz Sharif’s recent visit to Azerbaijan is of immense significance in Pakistan’s pursuit of fostering relations with the Central Asian region.
Both countries have similar territorial issues. Azerbaijan has always supported Pakistan’s stance on the Kashmir issue, while the latter has incessantly backed the former on the Nagorno-Karabakh issue. This diplomatic alignment has fostered profound strategic and economic cooperation between the two sides. Both countries seek to bolster their collaboration to fulfill each other’s needs. Azerbaijan is a resource-rich country and could prove to be a gateway for Pakistan to reach Central Asian markets. On the other hand, the latter can provide Azerbaijan, a landlocked country, access to warm waters.
Economic Cooperation and Azerbaijan’s Investment in Pakistan
The recent agreements between the two countries highlight their shared ambition to strengthen and solidify their bilateral partnership. Baku has vowed to invest around $2 billion in Pakistan’s energy, infrastructure, and mining sectors. This would be one of the most significant, and largest foreign direct investment (FDI) pledges made to Islamabad in recent years. Pakistan’s economy is already grappling with economic challenges. It needs urgent economic stabilization to strengthen its foreign exchange reserves. Azerbaijan’s investment commitment offers significant relief to economically destabilized Pakistan. Islamabad is suffering from a lack of foreign capital. However, Baku’s commitment signals confidence in its economic potential, providing an opportunity to strengthen its stagnant economy.
Both countries already have a Liquefied Natural Gas (LNG) framework agreement, allowing Pakistan to procure LNG from Azerbaijan. During the summit between Prime Minister Shehbaz Sharif and Azerbaijani President Ilham Aliyev, the two sides made significant amendments to this framework. Currently, Pakistan imports 30 percent of its total energy needs, this agreement provides Islamabad an opportunity to gain access to more energy resources. This will assist Pakistan in stabilizing energy prices and avoid energy shortages. Pakistan’s energy shortfall has significantly impinged its industries and businesses due to power outages. Therefore, this agreement is deemed a timely intervention to halt this crisis.
Key Pillars for a Stronger Partnership
Both nations have also agreed to increase cooperation in the defense sector. Azerbaijan faces a significant threat from its arch-rival, Armenia. Therefore, it seeks to strengthen its defense capabilities. Its annual defense budget already exceeds $3 billion. Baku has expressed significant interest in acquiring Pakistan’s JF-17 fighter aircraft and other military equipment. Both countries could start a joint manufacturing venture in the defense sector, which could be a game changer and mutually beneficial for them. President Ilham Aliyev is expected to visit Pakistan in the next two months to formally announce the decision of the Azeri government to invest $2 billion in Pakistan’s infrastructure and energy sector, further solidifying the relations between the two countries.
Currently, Azerbaijan is known as the energy powerhouse of the Eurasian region. Thus, Pakistan holds the opportunity to increase collaboration with Baku in the gas and oil sector. Both countries have significant strengths that they can leverage to meet each other’s requirements. Vugar Mustafayev, Azerbaijan’s Minister of Defense Industries, visited Pakistan to Co-Chair the 8th Session of the Joint Ministerial Commission between Pakistan and Azerbaijan on 24th January 2025. Islamabad and Baku have also agreed to increase cooperation in energy, trade, people-to-people exchanges, and air connectivity during this visit of the Azeri Minister. He also emphasized Azerbaijan’s interest in strengthening cultural, defense, and business cooperation with Pakistan.
More than 72000 Pakistani citizens have visited Baku in 2024, marking a 25 percent increase from the previous year. The bilateral trade between Pakistan and Azerbaijan stood at $82 million, significantly lower than their mutual trade potential. Pakistan seeks to gain access to the Central Asian markets, which can help it strengthen its economy. Azerbaijan can prove a gateway for Pakistan to materialize this ambition. In return, Pakistan can provide Baku access to the Indian Ocean, which is crucial to increasing the latter’s energy trade.
Azerbaijan is also an influential member of the Organization of Islamic Cooperation (OIC). By bolstering cooperation with Azerbaijan, Pakistan can enhance its diplomatic outreach. However, they should work to mitigate bureaucratic hurdles. Despite these significant agreements, both countries need to explore further avenues of cooperation. People-to-people cooperation can further enhance their bilateral partnership. Cultural and educational exchange programs can also enhance their bilateral ties. Both countries hold the potential to increase cooperation between the two regions. However, the execution of these agreements is the only key to harness this potential.
Abbas Hashemite – is a political observer and research analyst for regional and global geopolitical issues. He is currently working as an independent researcher and journalist
