Caspian Energy Journal Caspian European Club
Wednesday, 09 March 2016 18:30

"Friend in need is a friend indeed" - positive commitment and “trademark” of Austrian companies, - Axel Wech Featured

Caspian Energy (CE): Mr. Ambassador, could you please tell about the plans of your mission for 2016?

Axel Wech, Ambassador Extraordinary and Plenipotentiary of the Republic of Austria to the Republic of Azerbaijan: 

In 2016 the Austrian Embassy intends to put its main focus on three areas: 

We took very well note of H.E. President Ilham Aliyevs announcement that Azerbaijan will focus on agriculture in 2016. In June this year the Austrian Minister for Agriculture, Environment and Water Management will visit Baku with a specialized economic delegation. We also hope for a visit of the Austrian - Azerbaijan Parliamentarian Friendship Group. In 2017 Austria will take over the Chairmanship of OSCE from Germany. As you can expect we have already started preparing for this challenging task.
The second area we want to put our focus on is the expansion of our consular services in Azerbaijan. Azerbaijan is presenting itself as an interesting tourism destination. We therefore are looking to expand our network of honorary consulates. I hope we can install already one or two this year and follow up with more in the next years.

Finally we would like to put our focus on culture. We would like to organize a Viennese ball and make it an annual feature in Azerbaijan. We also plan to join hands with a big Austrian company in organizing some sport events.


CE: Which problems does Austria consider the most challenging ones nowadays? What impact will they have on the external economic activity, the bilateral relations between Austria and Azerbaijan?

Axel Wech: Europe and also Austria are currently working hard on solving the migration crisis but we must not forget all the other challenging issues we are facing like the crisis in Ukraine, Syria, Libya, the economic situation in general or environment. From an EU perspective it is important to maintain the Schengen Area, secure the Schengen borders and maintain the essential freedoms of the EU. On the bilateral level I do not foresee any serious problems as Austria and Azerbaijan have very similar positions in many fields. Due to our good bilateral relations we can easily discuss our divergent point of views. In bilateral economic terms the main problem for Azerbaijan is the collapse of oil and gas prices as revenues from oil and gas is the main income for Azerbaijan. As a consequence Azerbaijan is not investing as much as before in areas where Austrian companies are engaged e.g. construction. Hence diversification of the Azerbaijani economy is the priority of the day. We really hope that the initiatives for diversification set by H.E. the president will show fruits soon. We stand ready to cooperate with Azerbaijan in any areas needed.


CE: Which obstacles for a growth of Austrian investments in Azerbaijan do you see?

Axel Wech: Austrian direct investments in Azerbaijan are rather low. Austrian companies are more evolved in project management, design or delivery of high quality products.

In general I believe that Azerbaijan needs more FDI. To attract FDIs security of law is an absolute necessity. Azerbaijan has already identified this area as major area which needs improvement. As far as I know a commission has been set up to work on this issue. Security of law should also comprise specialized training for judges who are dealing with economic issues. Economic law is an extremely complicated, highly specialized area where on top speedy decisions would be required.


CE: How many Austrian companies do work in Azerbaijan? In which areas, do you believe, should the cooperation be expanded? What opportunities does the non-oil sector offer?

Axel Wech: In general around 50 – 60 Austrian companies are doing business with Azerbaijan; around 20 – like Siemens Austria, Red Bull, Generalplan or ILF among others - are having permanent representations here.

In many conversations with Austrian companies I have discovered that even though Azerbaijan is facing economic difficulties nearly all Austrian companies I have spoken to have clearly expressed their intentions to stay engaged with Azerbaijan. They have confidence that Azerbaijan will master its difficulties in the foreseeable future. I do believe this is generally a very positive feature of Austrian companies compared to others. Austrian companies are not here for just a quick bug. They commit themselves for a longer period of time and are willing to stay with Azerbaijan also in difficult times - "friend in need is a friend indeed". Actually this is a very positive commitment and “trademark” of Austrian companies.

As the non-oil-sector is not yet fully developed it offers good opportunities in many fields. Already before the crisis hit we were engaged in planning, design and construction but this area was largely driven by oil-money. Even at the time when high oil-prices where masking weaknesses in the Azerbaijani economy we were making a case for diversification. Austria since a long term focused on the development of tourism infrastructure but we can easily go further. We can offer expertise in agriculture, mountain farming, organic farming, food processing technologies, we have excellent companies dealing with environment, including desalination of water and soil or in the whole sector of alternative energy especially hydropower but also the sector of connectivity which includes everything from high speed internet to airports harbors railways or roads. I could also imagine that Austrian and Azerbaijani companies could develop jointly certain niche products. In a highly developed interconnected economy specialization is necessary to compete with other countries. One must not forget that specialization also needs a highly skilled motivated and flexible labor force. In preparation of EU accession Austria was forced to do away with many protective regulations, adapt to new standards and improve its productivity to compete in this huge market. Of course many jobs got lost but other new jobs were created. Even though Azerbaijan is outside of EU it will have to compete with European products and will have to improve its production to make its products fit for a market of over 500 Million consumers. I do believe that Azerbaijan has to look towards EU and its market for a future – other markets, might be easier to access but will not challenge Azerbaijani entrepreneurs enough to come up with highly innovative products. If Austria could do it I do not see the reason why Azerbaijan cannot be as successful as Austria and other small countries are.


CE: Azerbaijan’s economy has been impacted indirectly from the sanctions policy of its western partners, which caused regional instability of the markets. Don’t you think that EU and the entire western bloc have not foreseen all regional consequences of this step and perhaps should provide more support to Azerbaijan in the current financial-economic situation?

Axel Wech: I cannot share your assessment. Azerbaijan is suffering because of the collapse of the oil and gas price and not because of Western sanctions against Russia. On the contrary - if I only look e.g. at the agriculture sector Azerbaijan, which is not taking part in the sanction regime, is benefiting in a certain way by the sanctions and Russian counter sanctions as it has increased its export of agricultural products to Russia significantly. The reason for the difficulties of Azerbaijan’s current financial- economic situation should not be blame on the West. These problems are mainly homemade because the huge revenues Azerbaijan made out of the oil and gas business overshadowed the need for many necessary reforms. Especially diversification of the economy, investments in the non-oil-sector, improvements in the investment climate and so on were not undertaken. Western sanctions are targeted sanctions mainly against individuals or companies aiming not to hurt the Russian population. On the other hand we have rather indiscriminately Russian counter sanctions against the EU especially in the agricultural area. May I also remind you that the sanction regime was put in place because Russia by occupying Crimea and destabilizing the Donbass region is endangering the sovereignty, territorial integrity and independence of Ukraine.


CE: How many years will it take to develop the non-oil sector in Azerbaijan? Are the reforms now conducted in the country enough? 

Axel Wech: How many years? I cannot tell you. The truth is that you always have to improve, to innovate and develop. You cannot sit back and stop – the world has become very competitive nowadays. The current situation with the downturn in most of your neighboring markets doesn’t make the situation easier but it is a fact with which you have to deal with.

In his speech beginning of the year H.E. President Ilham Aliyev has rightly pointed out the absolute necessity to diversify Azerbaijan’s economy. However diversification is not an easy and speedy process. It will take time and only show fruits at a later stage. Most recently we, the Austrian Trade Commissioner and I visited the adviser to the President for Economic Affairs and he was quite optimistic about the non-oil sector. I do share with a certain degree his optimism because the non-oil-sector in Azerbaijan is underdeveloped which makes it easier to achieve growth rates there. Unfortunately the non-oil-sector so far does not significantly contribute to your GDP yet. Currently it is more of a question when the growth in the non-oil-sector will be capable to cover the losses Azerbaijan has because of the downturn in the oil and gas sector.

When I look at the import/export data between Austria and Azerbaijan one sees that Azerbaijan has a trade surplus with Austria. But this is only one part of the picture as over 90% of this trade surplus is based on Azerbaijan’s oil and gas exports to Austria. The rest of Azerbaijan’s exports to Austria are unfortunately still negligible.


CE: How does Austria see a strategic agreement between the EU and Azerbaijan? Which elements of integration should it foresee? 

Axel Wech: In principle, this agreement is negotiated between Azerbaijan and the European Commission. I hope you understand that I therefore can only comment on the broad outlines but not on the details. So far we are at the stage of exploratory talks between both sides. As soon as these are over the European Commission will go back to its member states and ask for a mandate to start negotiations between Azerbaijan and the EU. We of course understand Azerbaijan’s desire to work speedily but EU has to follow its internal rules as cumbersome as they might seem to be sometimes from the outside.

In our understanding a Strategic Agreement has to be broad-based taking under consideration all the interests, wishes, needs and concerns of both parties. I take it that energy, economics and connectivity will have a place in the Agreement as well as political issues, Nagorno Karabakh, rule of law, human rights and democracy.


CE: European Commissioner Cañete has recently said about construction of an interconnector between Romania, Hungary and Austria. This project seems like a rebirth of the old Nabucco project. Do you support it?

Axel Wech: The Southern Gas Corridor is a strategic project of the EU with the aim to diversify our energy supply sources but also our supply routes. Diversification of sources is excellent but the gas has to reach the consumers too. A huge part of the consumers are located on the Balkans and in Central Europe so it makes sense to construct new interconnectors. But I do believe that we have to go much further. I believe that we as EU should not be too dependent sources outside of the EU. Without knowing the economic feasibility we should be looking into developing gas fields in the Aegean, before Cyprus or in the Black Sea. New terminals for liquefied gas in Rotterdam and also in the Adriatic enable us to get gas from the USA, the gulf region and Iran. I do not want to forget the commitments and obligations of the latest climate conference in Paris. Actually we have to reduce our dependence on fossil fuels in general and step up our efforts to find alternative energy sources.


CE: Is Turkmenistan viewed as a potential source of gas?

Axel Wech: Yes, but the question is how to bring gas from Turkmenistan to Europe. There is not yet a pipeline through the Caspian Sea. With respect of Turkmenistan I believe that Azerbaijan has an additional chance to position itself – this time not as a supplier but as an important transit country and hub. On the other hand we have to take into consideration the political circumstances. I believe that some neighbors might not be very supportive to the idea of a Trans-Caspian-Pipeline and of Turkmenistan as a supplier of gas to the west.


CE: What do you think about EU’s involvement in the Great Silk Road project from China to Central Europe?

Axel Wech: The Great Silk Road Project would significantly shorten transport routes from China to Europe but I would like to remind you that the Silk road was not only one road between Europe and China but a huge network of roads that also went to Iran, India and the Levant. I believe that Azerbaijan is excellently positioned for the Silk Road Project but also for a new Spice Route connecting Northern Europe via Moscow – Dagestan – Baku – Teheran to Bandar Abbas and even going East to Pakistan and India. Azerbaijan would be on the cross road of the Silk and Spice Route with all the possibilities but also challenges such a location offers. I do believe that these projects will be very interesting and offer great opportunities for the future.


                                                                                                                                                          Thank you for the interview 

 Interview made by Sabina Mammadova and Olga Nagiyeva

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