Observers say Western sanctions against Russia may have repercussions on Azerbaijan
April 20, 2022, 7:16 am

Observers say Western sanctions against Russia may have repercussions on Azerbaijan

East Azerbaijan province (Photo: Pixabay)

The Voice of America reported, that as Western sanctions against Russia continue to mount, observers in Azerbaijan are concerned about the potential ramifications in a country with close economic ties to Moscow.

Some experts believe Russia's worsening economic position will harm Azerbaijan's trade relations and money transfers with the country, which is Azerbaijan's main import partner and home to over 2.5 million Azerbaijani migrant laborers.

Economist Natig Jafarli told VOA that economic sanctions on Russia will create problems for the banking sector of Azerbaijan and could create certain obstacles to international money transfers, since Azerbaijan does not have a separate money transfer system with Russia.

Jafarli said: “If Russia is completely excluded from the international money transfer system, at the very least, interbank money transfers and transfers between Azerbaijan and Russia will become impossible."

Observers in Azerbaijan are concerned about the potential ramifications in a country with close economic ties to Moscow, as Western sanctions against Russia continue to mount (File photo: Pixabay)

According to Gubad Ibadoglu, senior economist and visiting fellow at the London School of Economics and Political Science, the State Oil Fund of the Republic of Azerbaijan will be the most affected by the rapid changes in the Russian economy.

“SOFAZ's investments in Russia have exceeded $903 million," he said. “These investments are currently at risk, which will ultimately lead to exchange rate losses for SOFAZ. In other words, there will be an increase in extra-budgetary expenditures, which will increase its foreign exchange earnings,” suggesting that SOFAZ and other Azerbaijani government bodies must sell their assets before “the economic catastrophe” in Russia and withdraw their investments.

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In addition to SOFAZ, Ibadoglu said Azerbaijan’s trade relations with Russia will be affected, considering that Russia is Azerbaijan’s main import partner.

Azerbaijan bought $2.1 billion worth of goods and sold $920.8 million on the Russian market in 2021. More than 95% of those goods were non-oil products. Ibadoglu said problems with bank settlements with Russia, which is the traditional market of the non-oil sector, and the devaluation of the ruble this year could create serious difficulties for exporters.

He said: “Those who export goods from Azerbaijan to Russia will face losses due to the sharp depreciation of the ruble against the Azerbaijani manat, which will reduce the income of producers and exporters, especially in the non-oil sector, mainly in agriculture."

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Ibadoglu said that remittances sent from Russia by the approximately 2.5 million Azerbaijanis living there will be another area affected by the situation in Russia.

In most Azerbaijani districts, Azerbaijani labor migrants play an important role in determining household income. Ibadoglu said tensions in the Russian labor market, as well as the decline and devaluation of earnings as a result of the tensions, matched with the ruble's depreciation, will result in a decrease in remittances to Azerbaijan.

Ibadoglu said: “According to the data from the Central Bank of Azerbaijan for the first nine months of 2021, about 60% of remittances came from migrants living in Russia. This means that last year, remittances sent through banks by migrants living in Russia amounted to $680 million. A sharp decline in this transfer is expected this year."

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Azerbaijani parliament member Rasim Musabeyov agrees that remittances will be affected.

He said: “Russia's sanctions will significantly limit banking operations. With the economic downturn in Russia, it will be difficult to send money to families."

He also argues that sanctions will have a negative impact on Azerbaijan’s foreign trade with Russia.

Musabeyov said: “We used to import very important food products from the Russian market. But it is difficult to say to what extent it will be possible to import them now."

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Yet the lawmaker says Russia's economic downturn also creates opportunities. He claims that since communication routes through Russia are restricted, and Ukraine’s borders are closed due to the war, trade that was previously carried out through Russia, Ukraine and Belarus, will now mainly pass through the Baku-Tbilisi-Kars route.

Musabeyov said: “The importance of our transport routes will increase significantly. Both the Southern Gas Corridor and the Baku-Tbilisi-Ceyhan oil pipeline will be heavily loaded. It is estimated that a large part of Kazakh oil will be exported to the markets, not through Novorossiysk, but through Azerbaijan, and it is likely to significantly increase our capacity."

Source: voa

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BENEFIT, the Kingdom’s innovator and leading company in Fintech and electronic financial transactions service, held its Annual General Meeting (AGM) at the company’s headquarters in the Seef District.
During the meeting, shareholders approved all items listed on the agenda, including the ratification of the minutes of the previous AGM held on 26 March 2024. The session reviewed and approved the Board’s Annual Report on the company’s activities and financial performance for the fiscal year ended 31 December 2024, and the shareholders expressed their satisfaction with the company’s operational and financial results during the reporting period.
The meeting also reviewed the Independent External Auditor’s Report on the company’s consolidated financial statements for the year ended 31 December 2024. Subsequently, the shareholders approved the audited financial statements for the fiscal year. Based on the Board’s recommendation, the shareholders approved the distribution of a cash dividend equivalent to 10% of the paid-up share capital.
Furthermore, the shareholders endorsed the allocation of a total amount of BD 172,500 as remuneration to the members of the Board for the year ended 31 December 2024, subject to prior clearance by related authorities.
The extension of the current composition of the Board was approved, which includes ten members and one CBB observer, for a further six-month term, expiring in September 2025, pending no objection from the CBB.
The meeting reviewed and approved the Corporate Governance Report for 2024, which affirmed the company’s full compliance with the corporate governance directives issued by the CBB and other applicable regulatory frameworks. The AGM absolved the Board Members of liability for any of their actions during the year ending on 31st December 2024, in accordance with the Commercial Companies Law.
In alignment with regulatory requirements, the session approved the reappointment of Ernst & Young (EY) as the company’s External Auditors for the fiscal year 2025, covering both the parent company and its subsidiaries—Sinnad and Bahrain FinTech Bay. The Board was authorised to determine the external auditors’ professional fees, subject to approval from the CBB, and the meeting concluded with a discussion of any additional issues as per Article (207) of the Commercial Companies Law.
Speaking on the company’s performance, Mr. Mohamed Al Bastaki, Chairman BENEFIT , stated: “In terms of the financial results for 2024, I am pleased to say that the year gone by has also been proved to be a success in delivering tangible results. Growth rate for 2024 was 19 per cent. Revenue for the year was BD 17 M (US$ 45.3 Million) and net profit was 2 Million ($ 5.3 Million).

Mr. Al Bastaki also announced that the Board had formally adopted a new three-year strategic roadmap to commence in 2025. The strategy encompasses a phased international expansion, optimisation of internal operations, enhanced revenue diversification, long-term sustainability initiatives, and the advancement of innovation and digital transformation initiatives across all service lines.
“I extend my sincere appreciation to the CBB for its continued support of BENEFIT and its pivotal role in fostering a stable and progressive regulatory environment for the Kingdom’s banking and financial sector—an environment that has significantly reinforced Bahrain’s standing as a leading financial hub in the region,” said Mr. Al Bastaki. “I would also like to thank our partner banks and valued customers for their trust, and our shareholders for their ongoing encouragement. The achievements of 2024 set a strong precedent, and I am confident they will serve as a foundation for yet another successful and impactful year ahead.”
Chief Executive of BENEFIT; Mr. Abdulwahed AlJanahi commented, “The year 2024 represented another pivotal chapter in BENEFIT ’s evolution. We achieved substantial progress in advancing our digital strategy across multiple sectors, while reinforcing our long-term commitment to the development of Bahrain’s financial services and payments landscape. Throughout the year, we remained firmly aligned with our objective of delivering measurable value to our shareholders, strategic partners, and customers. At the same time, we continued to play an active role in enabling Bahrain’s digital economy by introducing innovative solutions and service enhancements that directly address market needs and future opportunities.”
Mr. AlJanahi affirmed that BENEFIT has successfully developed a robust and well-integrated payment network that connects individuals and businesses across Bahrain, accelerating the adoption of emerging technologies in the banking and financial services sector and reinforcing Bahrain’s position as a growing fintech hub, and added, “Our achievements of the past year reflect a long-term vision to establish a resilient electronic payment infrastructure that supports the Kingdom’s digital economy. Key developments in 2024 included the implementation of central authentication for open banking via BENEFIT Pay”
Mr. AlJanahi concluded by thanking the Board for its strategic direction, the company’s staff for their continued dedication, and the Central Bank of Bahrain, member banks, and shareholders for their valuable partnership and confidence in the company’s long-term vision.