Pakistani Prime Minister Shehbaz Sharif’s two-day visit to Azerbaijan on February 23-24 reflects the growing affinity between the two nations that share religion and culture. Among the South Caucasus countries, Pakistan’s relationship with Azerbaijan ranges from political and defence to economic relationships. During this visit, Prime Minister Sharif promised to “solidify and expand this friendship” that “extends from the warm waters of the Arabian Sea to the Caspian Sea”.

As Pakistan is facing economic challenges and seeking investment, this visit would bring in Azerbaijan’s $2 billion investment in the areas that serve mutual interest. The two countries also signed 10 MoUs. Agreements to operationalise these MoUs are expected to be finalised in April. Notably, in July last year, President Ilham Aliyev of Azerbaijan made his first bilateral state visit to Islamabad, where Prime Minister Shehbaz Sharif received him. This signifies the growing depth of the bilateral ties between the two countries.

Growing defence cooperation

Pakistan’s defence cooperation agreement with Azerbaijan is vital, especially in the context of India’s close defence cooperation with Armenia and the ethnic and territorial conflict between Azerbaijan and Armenia over the region of Nagorno-Karabakh. In September 2024, Azerbaijan purchased JF-17 Block III fighter jets worth $1.6 billion from Pakistan. Pakistan Aeronautical Complex (PAC) and China’s Chengdu Aircraft Corporation jointly developed the aircraft under an MoU signed by the two nations in 1995.

Interestingly, while this sale for Pakistan means expanding its nascent indigenous defence production market, for Azerbaijan, it also signifies the diversification of its defence procurement that has primarily depended on Russia. Moreover, bolstering the defence partnership is essential in the context of its conflict with Armenia. India has close defence cooperation with Armenia, and Azerbaijan is critical of this. Unlike India, which maintains good relations with Azerbaijan and Armenia, Pakistan has yet to establish a diplomatic relationship with Armenia.

At a strategic level, this defence collaboration between Pakistan and Azerbaijan gives Islamabad a foothold in the Caucasus. Azerbaijan is a fellow Muslim country, and Pakistan has supported Baku in its conflict with Armenia. As a quid pro quo, Baku has supported Pakistan’s position on the Kashmir issue.

The ‘Three Brothers’ partnership

Initiated in 2017, Turkey, Pakistan and Azerbaijan have forged a trilateral strategic partnership that promises to deepen the relationship, especially as Turkey aspires to emerge as a leader in the Muslim world. The leaders of these three countries also met in Islamabad last year. In a trilateral Parliamentary format that the three countries have forged, the parliament Speakers of these countries, in a meeting held in Baku, pledged support for their countries’ territorial integrity regarding each country’s position on the Nagorno-Karabakh, Kashmir and Cyprus conflicts.

Turkey has a robust military presence in Azerbaijan, facilitating Islamabad’s close relationship with Baku. The three countries also had a joint military exercise, which began in 2021, known as “Three Brothers”, with the expectation that “three brothers will grow closer” as regional partners and have a common understanding of global affairs. Pakistan is an important defence partner for Turkey, and this trilateral collaboration assumes significance in the evolving geopolitics of the Caucasus region.

Trade and energy cooperation

Pakistan is an energy-deficient country largely dependent on fossil fuels for electricity production. In fact, after the independence of Central Asian countries in 1991, it has been keen to gain access to Central Asian energy resources. However, due to the instability and conflict in Afghanistan, the pipeline project that could have carried gas to Pakistan has not fructified. According to a Central Asia Regional Economic Cooperation (CAREC) report, “Pakistan’s energy demand will continue to increase and is expected to reach 108-126 million tons of oil equivalent (TOE) by 2030”. Therefore, it is not surprising that it is diversifying its energy import source and considering cheaper supplies.

In 2023, when Shahbaz Sharif visited Baku, the two countries agreed that the State Oil Company of the Republic of Azerbaijan (SOCAR) would deliver liquefied natural gas (LNG) to the energy company Pakistan LNG Ltd (PLL) at discounted rates for a year. During the visit this February, the MoU was modified to facilitate PLL’s sourcing of energy from Azerbaijani resources. It is important to note that Pakistan signed an agreement with Saudi Arabia to defer a $1.2 billion payment on oil imports this month, revealing the importance of energy imports from Baku.

SOCAR will collaborate to establish a Joint Trading Company in Singapore and will be an equity partner with Pakistani companies, Frontier Works Organisation and Pakistan State Oil (PSO) in the 477-kilometre-long Machike-Thallian-Tarujabba White Oil Pipeline Project. Pakistan is keen on joining the proposed international infrastructure corridor and wants Gwadar to be Baku's hub of imports and exports.

Azerbaijan-Pakistan Chamber of Commerce and Industry was established in February this year. In 2023, Pakistan's exports to Azerbaijan were $5.64 million, and its imports from Azerbaijan were $1.31 million, which is minuscule compared to Azerbaijan’s total trade. Pakistan’s total trade with Azerbaijan, which stood at 27 million dollars according to Azerbaijan state news agency, is minimal compared to India. India’s import from Azerbaijan was $1.23 billion during 2023, in which crude oil dominated the export basket, while its export to Azerbaijan was $200.77 million. According to the Ministry of External Affairs of India, bilateral trade stood at $1.435 billion in 2023. In December that year, Pakistan and Azerbaijan signed a bilateral Preferential Trade Agreement. Pakistan also announced tariff concessions on several items imported from Azerbaijan. Pakistan-Azerbaijan Transit Trade Agreement signed in 2024 would allow Azerbaijan vehicles to enter Pakistan via Karachi Port, Port Muhammad Bin Qasim, and Gwadar Port to facilitate seamless cargo transport.

As bilateral trade boosts and defence cooperation between Pakistan and Azerbaijan deepens, Baku will provide Islamabad with a gateway to several trade and transit corridors, especially the Middle corridor linking China, Central Asia, the Caucasus and Europe. The Pakistan-Azerbaijan relationship will also support Islamabad on Kashmir as most Middle Eastern countries have distanced themselves from the issue. Through defence and energy cooperation, Pakistan will acquire a strategic stake in the region. Therefore, the strategic underpinning constitutes a lynchpin in defining Pakistan’s relations with Azerbaijan.