What effect will anti-Russian sanctions have on Azerbaijan?

In response to the outbreak of war between Russia and Ukraine, world powers announced the introduction of unprecedented sanctions against Azerbaijan's northern neighbor. Against the backdrop of coming news in the financial sector of this country, unrest has already begun. Yesterday, the ruble fell to historic lows against the dollar and the euro. During the auction, the maximum rate limit was 89.6 rubles and 99.99 rubles, respectively. The Russian stock exchange is also restless. Thus, the main stock indices fell by 45-50% during the day.

Russia is Azerbaijan's main trading partner in non-oil exports. In the CIS space, this country accounts for 71% of the total imports and 51.4% of the total exports of our country.

How will the deterioration of the economic situation in Russia affect Azerbaijan?

Economist Rashad Hasanli told Report that the aggravation of the geopolitical situation between the two countries will inevitably affect Azerbaijan.

According to him, the embargo on some products will turn the eyes of Russian importers to Azerbaijani products: “This means that certain opportunities may arise for our exports in some directions. If an embargo is imposed on, for example, agricultural products, the volume of exports from Azerbaijan to the Russian market may increase. On the other hand, if the process drags on for several months, then in the next 3-4 years, purchasing power will drop sharply. Large farms and business entities will suffer losses from this to a greater extent.”

According to the expert, the deterioration of the economic situation in Russia may be reflected in a decrease in the volume of remittances from this country to Azerbaijan.

“Migrants living in Russia are the main participants in the formation of income for family farms in most regions of Azerbaijan. Remittances by these individuals form the monthly income of their families. After the fall of the ruble, the amount of their money sent to their homeland will decrease significantly. At the same time, a decrease in purchasing power will increase competition in the labor market and lower wages. If we are talking about an entrepreneur, then income will be reduced to a minimum, and the opportunities to earn and send to the Azerbaijani market will be limited. Azerbaijanis living in Russia have long been the main buyers in the local real estate market. The deterioration of the situation will lead to massive sales of houses, which will increase the supply in the real estate market, causing stagnation.”

According to Hasanli, a sharp fall in the ruble exchange rate can stimulate imports from Russia to Azerbaijan.

“Products imported from Russia will be offered on the market cheaper compared to products from other countries. Entrepreneurs working in this direction will be able to increase their market share with the right pricing policy. This may lead to an increase in imports from Russia.”