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The deal was signed in the presence of Russia’s President Vladimir Putin who was on a one day visit in Baku to meet his Azerbaijani counterpart Ilham Aliyev.
The new agreement will broaden the global footprints of the two companies and aims to provide “access to new markets and resources and optimise crude oil and petroleum product supplies” said a statement on Rosneft’s website.
Rosneft and SOCAR will establish the venture for oil and gas development projects in different countries and will jointly use pipeline and terminals.
The companies also agreed to cooperate in marketing and trading operations for hydrocarbons and petroleum products.
Rosneft President Igor Sechin and SOCAR President Rovnag Abdullayev said the deal is a “significant step towards broadening full-fledged energy cooperation between Russia and Azerbaijan”.
Analysts say the two companies lack technological synergy but the deal could make financial and political sense.
“These two companies are uniting to bear the costs of hiring another company for serious extraction. Any joint project requires a technological breakthrough,” Russian energy expert and partner of RusEnergy Michael Krutikhin told The BRICS Post.
“This is a purely political move,” Krutikhin added.
President Putin and his Azerbaijani counterpart Ilham Aliyev also discussed key issues of bilateral cooperation and economic ties.
“Azerbaijan is one of Russia’s long-standing, traditional and reliable partners. We work closely in the Caucasus, the Caspian Region, within the CIS, and in leading international institutions.
“Our cooperation is founded on strong traditions of friendship and mutual respect between our countries and peoples,” said the Russian president.
Putin also stressed that trade relations between the two sides grew by at least 37 per cent last year.
“This is an obvious record in the relations between the two countries,” he said.
Over 70 of the 83 Russian regions have close economic ties with Azerbaijan and at least 500 Russian companies have operations in the country.
The sides also signed several intergovernmental agreements on cooperation in air search and rescue, on the construction of a road bridge over the Samur River across the Russian-Azerbaijani state border, and a Programme for Humanitarian Cooperation through to 2015.
By Daria Chernyshova in Moscow, Russia, with inputs from Agencies