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State oil companies of Azerbaijan and Russia sign an agreement

KremlinTwo state oil companies of Russia and Azerbaijan signed a joint-venture agreement this weekend at the St. Petersburg International Economic Forum.

Azerbaijan’s SOCAR and Russia’s Rosneft have agreed to create a joint venture for exploration and production of oil and gas in Azerbaijan, Russia and other countries. The signatory on one side is Igor Sechin, the CEO of Rosneft who happens to be under the U.S.-imposed sanctions after Russia’s annexation of Crimea in March and ongoing Ukrainian crisis, which in Washington’s view is instigated by Moscow. Rosneft itself is not under U.S. sanctions thus far.

Igor Sechin and Rovnag Abdullayev, the CEO of State Oil Company of Azerbaijan Republic (SOCAR) stated that the deal will bring sides together in implementation of large scale projects in Russia’s oil-rich Siberian region and well as the Caspian Basin. The joint venture will also allow the sides to enter new markets together.

The Azeri-Russian deal follows the 30-year deal signed by Russia and China past week on gas exports from Russia to the northwestern region of China. Kremlin’s long-sought agreement with China was agreed upon in the wake of U.S. and EU-imposed sanctions which is believed to severe Russia’s energy-based economy. Azerbaijan is one of the three countries of former Soviet Union which have frozen conflicts within their borders and was thought to be under potential threat from Moscow for siding with the West upon Crimea’s annexation to Russia. Yet, official Baku has plans of its own making sure its northern neighbor is not angered.

It was also reported this week that Russia completed its supply of 100 T-90 tanks to Azerbaijan. Furthermore, according to ITAR TASS, Konstantin Biryulin, the Deputy Head of the Federal Service for Military-Technical Cooperation, stated that Azerbaijan was eligible for another round of 100 T-90 tanks. Therefore, the Azerbaijani government does not simply succumb to Russian pressure, but trades one favor for another. The U.S. Congress-passed laws, ironically, forbid Washington any sale of arms to Azerbaijan, a country thought to be an ally but remaining in a state of war with its neighbor, Armenia.

The agreement between state oil companies of Azerbaijan and Russia, both dependent on oil and gas revenues, is likely to increase mutually beneficial cooperation, despite Baku’s U.S.-backed projects.

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