Ukraine’s Foreign Trade Relations with the Republic of Azerbaijan: State, Risks, Strategic and Innovative Areas of Strengthening

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Ukraine's Foreign Trade Relations with the Republic of Azerbaijan: State, Risks, Strategic and Innovative Areas of Strengthening

PhD in Economics, Associate Professor, Associate Professor of Department for Economy and Management of Foreign Economic Activities

PhD in Economics, Associate Professor, Head of Department for Economy and Management of Foreign Economic Activities,

O.M. Motuzka,

PhD in Economics, Associate Professor, Associate Professor of Department for Economy and Management of Foreign Economic Activities

The article contains an analysis of the state, features and effectiveness of foreign trade relations of Ukraine with the Republic of Azerbaijan. It is revealed that the top priority of Ukraine in its approach to the expansion of cooperation with the Republic of Azerbaijan is the policy of diversification of energy sources. Also, Azerbaijan is to a large extent lucrative for Ukrainian businesses as a market for metal and agricultural products and a customer of Ukrainian advanced technologies and developments and engineering works The industrial and agricultural sectors of the Azeri economy demand products and materials for oil and gas, extracting, defense, chemical, food and manufacturing industries. So, the Republic of Azerbaijan is interested in supplies of Ukrainian goods and exploitation of its science & technology capacities.

The main risks and threats limiting the expansion of trade between the two countries are highlighted: prioritization by Azerbaijan of the stability in exports of energy sources to the main partners and attraction of investment to the domestic economy It means that the Azeri party is unlikely to prioritize the supplies of hydrocarbons to Ukraine, hence, the issue of supplies will be discussed only in a declarative manner, with no visible prospects for its solution in the interests of Ukraine. The procedure of relations between Ukraine and Azerbaijan is regulated by an agreement It may involve the risk of unilateral violation of this agreement by Baku with respect to the implementation of free trade zone. Its signal is the imposition by Baku of unjustified unofficial limitations on the volume of imported products made in Ukraine. Also, in certain case Ukrainian goods may be subject to additional shadow duties.

Strategic and innovative areas of strengthening the commercial relations of Ukraine with the Republic of Azerbaijan in transport and transit, agriculture and food industry, information technologies, food safety and tourism are proposed The organization of trading houses as an effective scheme for intensifying foreign trade cooperation between Ukraine and the Republic of Azerbaijan is highlighted.

Зовнішньоторговельні зв'язки України з Республікою Азербайджан: стан, ризики, стратегічні та інноваційні напрями зміцнення

Т.М. Булах,

кандидат економічних наук, доцент, доцент кафедри економіки та менеджменту зовнішньоекономічної діяльності,

О.А. Іващенко,

кандидат економічних наук, доцент, завідувач кафедри економіки та менеджменту зовнішньоекономічної діяльності,

О.М. Мотузка,

кандидат економічних наук, доцент, доцент кафедри економіки та менеджменту зовнішньоекономічної діяльності, Національна академія статистики, обліку та аудиту

У статті проаналізовано стан, виявлено особливості та ефективність зовнішньоторговельних зв'язків України з Республікою Азербайджан. З'ясовано, що основним пріоритетом України в підході до розвитку співпраці з Республікою Азербайджан є політика диверсифікації джерел енергетичної сировини. Крім цього, Азербайджан приваблює виробників України значною мірою як ринок збуту метало- та аг- ропродукції, а також у плані застосування українських передових технологій, наукових розробок, ви-конання інженерно-технічних робіт. Промисловий та аграрний сектори економіки Азербайджану по-требують продукції і матеріалів для нафтогазової, видобувної, військово-технічної галузей, хімічної, харчової та переробної промисловості У свою чергу, Республіка Азербайджан зацікавлена у поставках українських товарів, а також використанні її науково-технічного потенціалу.

Виокремлено основні ризики та загрози, які гальмують розвиток зовнішньої торгівлі між країнами: надання Азербайджаном у рамках стратегічного напрямку зовнішньоекономічного розвитку пріоритету питанням забезпечення стабільного експорту енергоносіїв до основних країн-партнерів та залученню інвестицій в економіку країни. Це означає, що азербайджанська сторона не розглядатиме питання по-стачання вуглеводнів до України як пріоритетне, що зумовлюватиме збереження цього питання лише на декларативному рівні без існування реалістичних перспектив щодо його вирішення в інтересах України. Порядок взаємовідносин між Україною та Азербайджаном регулюється на підставі договору. Серед ризиків слід зазначити порушення цього договору в односторонньому порядку з боку Баку в частині запровадження зони вільної торгівлі Це проявляється у встановленні митними органами невмотивова- них неофіційних обмежень на обсяги ввезення до країни продукції українського виробництва. Також в окремих випадках вітчизняні товари обкладаються додатковими тіньовими зборами.

Запропоновано стратегічні та інноваційні напрями зміцнення зовнішньоторговельних зв'язків України з Республікою Азербайджан у сферах транспортно-транзитних взаємозв'язків, агропромислового комплексу, інформаційних технологій, харчової безпеки та туризму Виокремлено організацію торгових домів як дієвого механізму активізації зовнішньоторговельного співробітництва між Україною і Респу-блікою Азербайджан

Ключові слова: зовнішньоторговельні зв'язки, експорт, імпорт, ризики, торгові доми.

Introduction

Republic of Azerbaijan in particular, has become a vitally important objective for Ukraine along with the escalating military and political conflict with Russia that used to be a critical trade partner for Ukraine Literature review. The always important issue of setting foreign trade strategies has long been in focus of foreign and domestic researchers, including O. Bilorus, R. Vernon, B. Hubskyi, C. Johnson, I. Kirzner, A. Kyseliov, P. Krugman, D. Lukianenko, A. Marshall, J. Mill, B. Olin, Yu. Pakhomov, M. Pozner, A. Poruchnyk, D. Ricardo, A. Smith, Yu. Solodkovskyi, R. Solow, F. Hayek, G. Hamel, E. Heckscher, J. Hix, T Tsyhankova, E. Chamberlain, J. Schumpeter and many others [3]. But only few research works devoted to performance and outlooks of cooperation between Ukraine and Azerbaijan have been published by now

The article's objective is to analyze the performance of foreign trade relations of Ukraine with the Republic of Azerbaijan and elaborate strategic and innovative areas for their expansion

Research results

foreign trade relations azerbaijan ukraine

Ukraine nowadays is deeply integrated in the global economic area, maintaining economic relations with more than 200 countries. The Republic of Azerbaijan is an important trade partner of Ukraine with the immense unexploited potential for the expansion of trade and economic relations To reveal the performance, tendencies, problems and prospects of commercial relations between the two countries, the study is supported by an analysis of export and import transactions

In the soviet times, the economy of Azerbaijan was closely linked to the other soviet republics Azerbaijan used to supply them with the products of chemical and fuel industries, ferrous and non-ferrous metallurgy, mechanical engineering (oil and electrical equipment, household conditioners), metalwork, light industry Azerbaijan used to be a principal supplier of vegetables (especially early varieties), fruit, grapes, tea leaves The other republics exported to it mainly finished products: machine tools, agricultural machinery, cars, clothes, tableware, foods [7].

Trade relations of Azerbaijan with Ukraine both in the soviet era and in the independence period tended to feature a positive trade balance for Ukraine. In 1987, imports from Ukraine accounted for 57% of the total Azeri trade in goods, including the products of food, mechanical engineering and metalwork industries, which aggregate share was 85% Goods like sugar, animal fats, steel pipes and rolling, TV sets, cars, freight mainline wagons were characteristic of the Azeri imports. More than 60% of cast iron, 40% of ferrous metal rolling, 55% of steel pipes, 60% of sugar and table sugar, nearly 30% of milk and dairy products were imported to Azerbaijan from the Ukrainian Soviet Socialist Republic The largest shares of Azeri exports to Ukraine in that period were with products of light industry (38%), mechanical engineering and metalwork (17%), chemical and oil refinery (12%), and food industry Also, a large contribution in the Azeri exports was made by goods like tobacco, cotton fibers, silk fabric, household refrigerators, petroleum oils, fresh vegetable, carpets, and synthetic rubber

The scopes of trade between the two countries plummeted in 1991, once Ukraine gained independence The main factors were:

(i) declined macroeconomic indicators of both countries since that beginning of 1990s;

(ii) disrupted payment schemes or too bad communications between the two countries;

(iii) declined scopes and changed structure and destinations of the foreign trade;

(iv) weakening transport links between the two countries;

(v) instable political situation in the neighboring regions [7, p. 181].

An essential factor of this decline was devaluation of the Russian ruble, provoking a reduction of export prices in Russia with a subsequent growth in the Russian exports to all the countries of the Commonwealth of Independent States (CIS).

The Agreement “On Economic Cooperation between the Ukrainian and Azerbaijan Republics in 2000-2009” was signed in 2000. After that, beginning with 2002, the trade volume between the two countries started to rapidly grow [10]. In 2010, the bilateral trade in goods made nearly $ 1,000,000,000 [2]. This trend was being on until 2014. On account of worsening Russian-Ukrainian relations and difficult geopolitical situation in Ukraine, first and foremost in Donbas region, the trade volume between Ukraine and Azerbaijan plummeted in 2014-2016 (by thrice): from $ 979,000,000 to $ 321,000,000.The period of 2017-2020 was marked by gradual 1, compiled according to data from [8]). It should recovery of the positive trade dynamics both for goods be noted that currently Ukraine is the second, after and services, with absolute figures remaining low Russia, main partner of Azerbaijan in bilateral trade compared with the potential of mutual trade (Table in the post-soviet area [2].

Table 1

The dynamics of trade in goods and services between Ukraine and the Republic of Azerbaijan

The upward dynamics of commodity exports from Ukraine to Azerbaijan could be recovered in 20172020 (Table 2, compiled according to data from [8]). The main factor for its decline is that factories in Donbas, an industrial center of Ukraine which used to be metal products supplier to Azerbaijan, worked intermittently due to the warfare. Another factor is a series of limitations on the transit of Ukrainian goods across the Russian territory, imposed by Russia once Ukraine ratified the Free Trade Agreement with EU.

Table 2

The dynamics of bilateral trade in goods between Ukraine and the Republic of Azerbaijan