Eugene Zhukov: ADB ready to support Azerbaijan's climate goals

Azerbaijan is an active participant in international efforts to combat climate change. The country is implementing various programs and projects aimed at reducing greenhouse gas emissions, using renewable energy sources, and sustainable usage of natural resources. Holding the UN Climate Change Conference (COP29) in Azerbaijan is a good incentive for this.

However, the successful implementation of these ambitious plans requires international support and cooperation. In this context, the Asian Development Bank (ADB) is an important partner for Azerbaijan. ADB is ready to offer its experience, financial resources and support for the implementation of climate projects in the country. Joint efforts can help not only reduce the negative impacts of climate change, but also create resilient and prosperous ecological systems in the region.

In an interview with Report on the sidelines of the ADB’s 57th annual meeting in Tbilisi, the General Director of the bank’s Regional Department for Central and West Asia, Eugene Zhukov, talked about how the bank is going to support Azerbaijan for the successful organization of COP29, about the new cooperation strategy for 2024-2028, development of the Middle Corridor, the importance of opening new regional transport corridors, and so on.

- Could you tell us what the priority areas of cooperation between Azerbaijan and ADB are for 2024-2028? What will the budget be when program approval is expected?

- This year is a special year for ADB and Azerbaijan for several reasons. Number one, this year we'll be celebrating 25 years of Azerbaijan's membership in Asian Development Bank. So since Azerbaijan joined ADB in 1999, we have provided assistance to the tune of $4.2 billion to Republic of Azerbaijan. So we hope to have a celebration sometime later this year.

The second reason is that this year Azerbaijan is hosting the COP 29. So we're very excited about that. And we have offered assistance to the Republic of Azerbaijan and we're already providing support to help the country organize and manage this very important global event.

And the third reason is that indeed, as you mentioned, we're preparing the new country partnership strategy for Azerbaijan which covers 2024 to 2028. There is no pre allocated budget for this strategy. In the case of Azerbaijan, I can tell you that if there is appetite from the government or from the private sector, we can do much more compared to what we are doing right now.

And we have various discussions on this subject, both with the government and also with the private sector companies in the country.

In terms of priority, of course, for us it is helping Azerbaijan to deal with the climate change related issues, including decarbonizing the economy and increasing share of renewable energy in overall energy production. We know that the government adopted the strategy of 30 by 2030, meaning that by that year, 30% of all the energy produced in the country would be coming from renewable sources. We would be quite keen to support implementation of that strategy.

Already as you may know, a couple of years ago, ADB invested over $20 million in a large first private sector power plant, solar power plant in Azerbaijan’s Alat. This is the Masdar managed plant which will be producing 230 MW of electricity.

Two, three weeks ago, when I was in Azerbaijan, I had the chance to visit the plant. It's very impressive. It covers about 550 hectars of land with very up to date technology.

So we are looking for more investments like that. We are also implementing floating solar power project. It's a small project in one of the lakes in the Baku, with the capacity of about 100 kW. But if the concept works, we could look at possibly expanding it.

In addition, we are working to decarbonize the economy. For example, we are helping Azerbaijan Railways to electrify some of its routes and reabilitate some of the network running from southern part of the country. And besides, we are committed to provide support to the government to digitalize the management of Azerbaijan Railways.

- Given the regional importance of the country, how can ADB support the transport sector? How will this help Azerbaijan increase the effectiveness of its efforts within the development of the Middle Corridor, as well as North-South?

Azerbaijan is not just a member of ADB. It's also a member of Central Asia Regional Economic program, which was established in early 2000. So Azerbaijan is an active participant in that CAREC program.

And the number of investments which we are making in the country are related to this. There's a lot of talk right now about Middle corridor. We've been working on this for quite a number of years before it became sort of fashion of the day in our language. This corridor runs from China to Kazakhstan, Uzbekistan, Azerbaijan, Georgia and further on. So we will continue to work in this area because for this corridor to become economically viable, there is substantial need for infrastructure investments, but also need for policy changes and reforms, to harmonize tariffs and border procedures.

Because if you talk to private sector right now, they will tell you that currently the Middle corridor is three to four times more expensive than other available alternatives. So for this corridor to fully fulfill its potential, there's a need to substantially reduce the costs of doing business there.

- How will ADB support Azerbaijan for the successful organization of COP29?

- As soon as Azerbaijan’s presidency was announced, ADB President Masatsugu Asakawa sent a letter to President of Azerbaijan, Mister Ilham Aliyev to offer ADB support. And I visited the country three weeks ago together with climate change team to discuss the specific areas for the support to Azerbaijan's COP presidency.

And we’ve already allocated some technical assistance funding to provide capacity building to the government agencies involved in this to enable them to conduct the meeting itself and also help them to prepare for the forthcoming negotiations.

In addition to that, we want, in general, to help Azerbaijan to increase the share of renewable energy in its production, so that Azerbaijan will demonstrate to the rest of the world its commitment to decarbonize and deal with the impacts of climate change.

I mentioned one project, which we did a couple of years ago with Masdar, and we're looking for further investments in this renewable energy area this year.

-You mentioned the importance of joint work between ADB and Azerbaijan on climate change issues. How can the bank help the country achieve its goal of reducing greenhouse gas emissions by 2030, besides the projects that you have already mentioned?

- I mentioned already some of these projects. And we're looking for more opportunities to help the country to develop its solar power potential, but also discussing with SOCAR and other agencies possibilities of investment in offshore wind energy. So we're quite excited about this. We want to help the government to reach its goal of having 30% of energy produced fully from renewable sources by 2030.

There is also ongoing discussion on the undersea cable extending from Azerbaijan to the European Union through Georgia. World Bank is providing coordinating role and providing technical assistance to prepare feasibility study. So once the approval of the concept is there, we'll be quite happy to participate in this project.

We also noted a few days ago, three governments, Azerbaijan, Kazakhstan, Uzbekistan, signed an agreement or MoU for the underwater cable to connect the western part of Uzbekistan, Kazakhstan with Azerbaijan. So, it is about a so called green energy corridor.

You know, Uzbekistan is investing a lot in solar and wind power. Uzbekistan developing a lot of renewable energy sources on the western part of the country. However, most of the economy is actually in the eastern part. So I think there's a potential for export of green energy from this green corridor from Uzbekistan to Azerbaijan and further to European Union through Kazakhstan and Caspian sea, if or when that cable for the Black Sea is designed and implemented.

That's just one example. And we also, of course, want to continue work with Azerbaijan Railways to electrify the whole network, which will also kind of reduce the carbon footprint of the company.

- You noted the importance of the undersea cable project in the Black Sea. Is ADB interested in investing in the Azerbaijan-EU Green Corridor project?

- If the feasibility study shows that the idea is reasonable to undertake, we will be very much interested in discussing it with both Azerbaijan and Georgia participation in such project.

I'm sure if it goes ahead, it will be a very large project. So I think there will be room for World Bank, ADB and others.

- During your speeches here in Tbilisi, you noted that the CAREC climate change program had been adopted. Could you talk about the significance of this initiative?

- Last year in November, during CAREC ministerial meeting which was held here in Georgia, the ministers adopted what we call current climate vision. This is the high level statement signaling to the world that these countries are very serious about dealing with the impacts of climate change and about participating in green transition.

This year current CAREC chairman is Kazakhstan. So the next ministerial meeting will be held on November 8 in Astana. And by that time we hope to translate that the general strategic climate change vision into climate change Action Plan and then following that, try to develop more kind of projects dealing with this.

We also signed a memorandum of understanding with the Republic of Korea, under which we established a fund to finance the preparation of a Green Infrastructure project for the CAREC region.

Therefore, we hope that this trust fund and funding mechanism will continue to grow in the future.

- And the last question, what areas of cooperation between Azerbaijan and ADB could be deepened, besides those that you have already mentioned?

- Like I said, in Azerbaijan, which is upper-middle income country, we see more future opportunities of shifting from public sector ADB investments to private sector investments.

As of now, I mean, if we talk cumulatively, since 1999, we have invested about $4.1 billion in the public sector. In our private sector window, we have invested only slightly more than $50 million.

So we see opportunity in the future to increase this. If we look at the sectoral distribution, I think we also want to continue our engagements in education sector in Azerbaijan. we've been working for a while on technical education policy and project program, and we hope that the government will take up our offer to provide assistance in the this area.

But before I conclude, I want to come back again to regional cooperation. I think for the country like Azerbaijan and of course Armenia and Georgia, it's very important because regional connectivity can be significantly improved.

I don't know if you had a chance to attend our CAREC meeting on May 2. That was the hot topic of discussion there. So our countries, including Azerbaijan, remain to be not very well integrated in global value chains.

So regional economic integration, we think is a route for that. And also I think it will be an opportunity to increase peace and prosperity in the region. For example, if or when the peace agreement between Azerbaijan and Armenia is signed, that will allow to unlock additional transport corridors, for example, connecting Azerbaijan to Türkiye and the rest of the world through Armenia and Nakhchivan.