Azerbaijan and Iran share a common border but this has not been enough to foster close relations between the two. Iranian President Mohammad Khatami visited Azerbaijan in early August 2004. It was the first official visit to the neighboring country by an Iranian leader in more than 10 years.

The three-day visit began on August 5th and featured talks between Khatami and Azerbaijani President Ilham Aliyev. Speaking after the meeting, Khatami called for closer bilateral ties. He said history and geography have brought the fates of the two countries together.

“The border between the Islamic Republic of Iran and the Republic of Azerbaijan is a border of peace, friendship, and brotherhood,” Khatami said.

An Azerbaijani consular office will open in the northwestern Iranian city of Tabriz, the center of an Iranian province where millions of ethnic Azeris live.

Iran and Azerbaijan also signed gas and electricity swap deals, but the leaders of the two Caspian Sea states did not give details how they planned to solve problems of disputed oilfields once tapped by BP.

Khatami, whose long-awaited visit to Azerbaijan had been repeatedly postponed over the past few years, and his Azeri counterpart Ilham Aliyev signed a total of 10 social, cultural and economic agreements in Baku.

“The implementation of the agreements signed will create thousands of jobs in Azerbaijan,” he said. “And agreements on energy and gas swaps will allow us to provide [the Autonomous Republic of] Nakichevan, which is an integral part of Azerbaijan, with electricity and gas.”

One of the key deals signed between the two states involves gas swaps, which will start with small volumes in 2005 and rise to 350 million cubic meters (mcm) of gas a year by 2009. The swaps will allow Azerbaijan to supply its remote Nakhichevan province via the Iranian territory. Baku cannot supply the region directly as it is separated from the rest of the country by the territory of Armenia, still formally at war with Azerbaijan.

Azeri state oil and gas company SOCAR will sell 80 mcm of gas in the last quarter of 2005, awaiting the launch in 2006 of the large Shakh-Deniz offshore gas field, led by BP and Norway’s Statoil. SOCAR is involved in the giant project, which will be exporting the bulk of gas to Turkey, but the state firm wants to use its share of output for domestic needs. It will be sending 200 mcm to Iran from 2006, 250 mcm in 2007, 300 mcm in 2008 and 350 mcm in 2009.

Iran will in exchange supply its own volumes to Nakhichevan, keeping 15% of volumes as a service commission. Tehran also agreed to lend Baku $75 million to build new equipment and facilitate trade in electricity.

The sides also signed an agreement to improve road and rail links and to fund building an electricity line between Imisli in southern Azerbaijan and Astara at the Iranian border.

Khatami said the two states were keen to resolve all disagreements. “There is no problem which cannot be solved by talks,” he was quoted as saying.

Azerbaijani leader Aliyev expressed satisfaction about the agreements, saying he believes relations between Azerbaijan and Iran are developing successfully.

On the political front, Aliyev praised Iran for what he called its “support” for Azerbaijan in the conflict over the Nagorno-Karabakh enclave. “We have always felt Iran’s support in the conflict between Azerbaijan and Armenia over Nagorno-Karabakh,” he said. “And we are still feeling that today.”

Khatami said Iran is ready to contribute to a peaceful solution of the conflict. He added that Iran considers Nagorno-Karabakh part of Azerbaijan and that the use of force in settling international problems is “unacceptable.”

However, talks did not produce any breakthrough on the issue of the maritime borders of the Caspian Sea, which touches both countries. The legal status of the Caspian, which contains large reserves of oil and gas, has been in dispute since the Soviet Union collapsed in 1991.

Davood Hermidas Bavand teaches international law in Tehran. He said the visit was important nevertheless. “The significance of the visit is [the] development of good neighborly relationships with Azerbaijan, bearing in mind that we have certain difficulties with that state in connection with the Caspian Sea,” he said. “The very objective of this visit is to [come to terms with] existing problems. When the two parties accept this kind of communication, it’s an indication that there is a certain intention for improvement of the existing problems.”

Speaking in a meeting with the Speaker of Azerbaijan National Assembly Murtuz Aleskerov, he pointed to the decisive role of the parliaments of both countries in expansion of mutual ties and urged implementation of the mutually signed agreements, despite bureaucratic problems.

Turning to Iran-Azerbaijan historical, religious and cultural relations, he said bolstering of ties with the Caucasus, particularly its Muslim neighbors including Azerbaijan was part and parcel of Iran’s foreign policy.

Appreciating the steps taken to establish a legal regime for the Caspian Sea, he said that the Majlis was quite serious on the issue. The chief executive hoped that a comprehensive plan serving the interests of all the five Caspian Sea littoral states would soon be drawn up.

Turning to the environmental problems in the Caspian and the health of its aquatics as a key factor to healthy life in the region, he urged the protection of its environment considering its unique position in the world.

“The convention on the Caspian Sea environment inked by the littoral states will soon be examined by the Iranian Majlis. We expect Azerbaijan National Assembly to take a similar step,” he added.

For his part, Aleskerov expressed pleasure over the Iranian president’s visit and said dialogue between the high-ranking Iranian delegation and Azeri officials will help expand mutual ties. The speaker pointed to parliamentary relations between the two neighboring states as a proper lawful basis for bolstering cooperation.

Addressing the audience at the award ceremony, the head of the academy Academician Mahmud Karimov said Khatami was being awarded the doctorate not only because he was a great man of politics and social life but also because of his international distinction as a great scholar.

He said the academy, by awarding him the doctorate, recognizes his contribution to global efforts to achieve peace with his proposal of “dialogue among civilizations” at a time when there was increasing evidence of a “clash of civilizations”.

He also touched upon the development of the Azerbaijan-Iran scientific cooperation including joint researches, conferences, symposia, and scientists’ reciprocal visits. “We attach great importance to these links; our states and people are bound up with a number of factors such as our common history, religion, customs and traditions,” he said.

Today’s level of friendship and brotherhood has been consolidated by the “Agreement on Friendship and Cooperation” signed by President Aliyev and President Khatami in Tehran, he said.

President Khatami presented the Divan by the famous Azeri poet Shah Ismail Khatai published in Iran in Latin alphabet to the Azerbaijan National Academy of Sciences.

Khatami was warmly welcomed by the city authorities and representatives of intelligentsia.

President Khatami said he was pleased to visit the Mausoleum of Great Nizami and left a record in the Mausoleum’s guestbook.

Abdolreza Golkar, Director of Public Relations Department of Azerbaijan Regional Electricity Company told Petroenergy Information Network that the ceremony was attended by the Iranian Energy Minister Habibollah Bitaraf and Azeri authorities.

Also, managing director of Azerbaijan Regional Electricity Company, Fattah Qarabagh announced that the project followed a bilateral agreement between officials from Iran’s Tavanir Company and Azerbaijan’s Azerenergy.