Construction, transport, and energy seen as most promising for Czech orders in Azerbaijan
Azerbaijan is one of around two dozen countries of ‘interest’ where the Czech Republic believes it should make an effort to boost its export performance. Head of state Miloš Zeman prioritized that goal with a recently concluded official visit but oil prices will probably have a substantial impact on how many contracts will result.
Oil and gas rich Azerbaijan has a formidable trade surplus with the Czech Republic. Last year its exports surged to value 39 billion crowns, up from 26.9 billion crowns in 2013. Czech goods going in the other direction came to 2.4 billion last year, down by around a billion crowns from the 2013 level. Oil is the overwhelming factor in business relation, around a third of the Czech’s still substantial consumption of oil is supplied by Azerbaijan. Zeman reflected the fact with a tour of one oil terminal. More generally, the EU, which also runs a big trade deficit with Azerbaijan, has been able to shrunk the deficit over the last three or four years. But low worldwide oil prices for Azerbaijan threaten its flow of orders for foreign firms. The country’s 2015 budget was based on an oil price of US 90 dollars a barrel. For most of the last months its been around two-thirds or around half that level.
Zeman joked at the end of his official visit that any of the Czech businessmen who did not bring back contracts from Azerbaijan should commit suicide. Still, the tangible business results of the official trip, are not totally apparent yet.
Zeman said one Czech company is on the verge of a contract worth up to 16.3 billion crowns. The name of the company and details of the deal are not being made public until the final agreements are inked.
What is clear though is Czech aircraft producer Aero Vodochody made a big play to land orders in Azerbaijan for the new generation of its L-39 training jet. The firm has some advantage from the fact that 24 of the older L-39s are already in service in the country with Aero Vodochody providing general maintenance and repairs. Aero already has around 20 firm orders for the new model and has a target for producing around 25 aircraft a year if a solid volume of orders can be built up.
Construction, transport, and energy are three sectors which have been singled out where Czech companies could make an impact in Azerbaijan. One Czech construction company, PSJ, is already on the ground with a stake in an ambitious project to build housing for around 600,000 people on an artificial island off the coast around 25 kilometers from the capital Baku. The value of PSJ’s contract is worth around 400 million euros with the whole Khazar Islands development expected to stretch out over 11 years. PSJ already has a considerable construction footprint across the world, especially in Russia and parts of the former Soviet Union.