Russian President Vladimir Putin arrived on a state visit to Azerbaijan on August 18, highlighting Baku's increased importance to Moscow since its invasion of Ukraine.

The Russian dictator offered Moscow's help in reaching a final peace deal between Armenia and Azerbaijan. In recent years Moscow has switched its support from Armenia to Azerbaijan, given Baku's regional importance as an oil and gas producer and transport corridor, as well as Yerevan's shift westwards.

"[...] Russia's historical involvement in the situation in the South Caucasus, even over the past few years, makes it necessary for us to participate in these developments – of course, to the extent that it is required by the parties, there is no doubt about that," he said. "Let me emphasize that Russia will continue to do everything possible to promote the normalization of Azerbaijani-Armenian cooperation and the conclusion of a peace treaty," he added. "We are also ready to facilitate the delimitation and demarcation of the border, given that we have relevant documents from the times of the Soviet Union, the unblocking of cross-border routes, and the establishment of humanitarian contacts," Putin added, situating himself as principal arbiter between the two rivals in the Southern Caucasus.

Speaking about regional geopolitics, Azerbaijan President Ilham Aliyev highlighted the importance of Russia. "Azerbaijan completely restored its sovereignty and territorial integrity. Naturally, the new situation opens up ample opportunities for establishing a strong and lasting peace in the South Caucasus. The stability and security of the entire South Caucasus region largely depend on close cooperation between Russia and Azerbaijan," Aliyev said.

Russia also placed itself squarely on Baku's side on the vexed question of the Zangezur corridor, where Moscow hopes to win a place for Russian peacekeepers, maintaining its role as a regional policeman.

"We are for the earliest possible conclusion of a peace treaty and the unblocking of communications. Unfortunately, as far as communications through the Syunik region of Armenia are concerned, it is the Armenian leadership that is sabotaging the agreement signed by PM Pashinyan. It is difficult to understand the meaning of such a position," Russian Minister of Foreign Affairs Sergei Lavrov said, commenting on the unblocking of the Zangezur corridor between Azerbaijan and its exclave of Nakhchivan across Armenian territory.

Russia also appears keen to draw Azerbaijan deeper into its network of regional alliances and for Azerbaijan to join the BRICS grouping of developing countries. Inviting  Aliyev to Moscow in October for the meeting of the Council of CIS Heads of State, Putin added that it will be held within the framework of the BRICS summit in Kazan.

Earlier, on August 18, the outgoing Azerbaijani ambassador to Russia Polad Bulbuloglu mentioned the possibility of joining BRICS. "There is a long queue of those willing to join BRICS. Azerbaijan has indeed stated such willingness. We have talked about it with our Russian colleagues, but this process and issue is in progress," he said when asked by the TASS agency.

However, there remains tension between Moscow and Baku over Nagorno-Karabakh, an Armenian enclave within Azerbaijan that Baku forcibly reconquered in December. Russian peacekeepers were meant to be protecting the enclave but stood aside to allow the Azerbaijan invasion, in a grave embarrassment for Moscow. Now Moscow is apparently considering opening a consulate there, in a move viewed with suspicion by Baku.

Bulbuloglu told TASS Agency that Russia may open a consulate in Azerbaijan without mentioning a city. On 27 May, Grigory Karasin, the head of the Committee on International Affairs of the Federation Council, noted that Russia intends to open a consulate in Khankendi (also known as Stepanakert to Armenians) in Nagorno-Karabakh when he met with his colleague from Azerbaijan, Samad Seyidov.

This intention drew ire from nationalist circles in Azerbaijan, which saw this as the return of ethnic Armenians to Karabakh under Russian aegis and an increase in Russian espionage.

"The opening of the consulate is possible only on the condition of whom it will serve. Russian citizens do not live in Khankendi. There are no Russians there yet. The other party can justify other arguments even if the Russian citizen does not live here. It depends on the centre and other factors. They wanted to justify the presence of the Russian military contingent in Gabala and open a Russian consulate in Ganja. They said that 'because Gabala is a small region, we chose Ganja'. This is certainly related to intelligence," Elmar Mammadyarov, former MFA of Azerbaijan said in an interview with Teleqraf.com. 

"The interesting thing is that Russia does not want to open a consulate in Nakhchivan. Because there are consulates of Turkey and Iran in Nakhchivan, there is no problem with Russia opening a consulate here. Today Russia can closely monitor the processes by opening a consulate in Lankaran or Astara in the context of its interest in the Zangezur Corridor and the road to be opened through Iran. It is very difficult to understand the logic of opening the consulate in Khankendi," he added.

"Although Russia wants to appear as a friend to Azerbaijan, it is known to everyone that this is not the case in reality. For this reason, the answer to Russia's idea of ​​opening a Consulate General in Karabakh is hidden here," Natiq Miri, head of Azerbaijan National Strategic Research Center, said in an interview with Azerbaijani media. "The opening of a Russian consulate in Karabakh means the presence of Moscow's spy network in that region. The question is whether Russians are living in Karabakh, Shusha, or Zangezur. No. So, what will the said consulate serve? Logically, such a question arises. I believe that Russia's statement in this direction indicates a dangerous situation. At the same time, it serves to prepare the Azerbaijani public opinion for this," he added.

In fact, Bulbuloglu echoed this concern in his interview: "Azerbaijan have two consulate general’s offices in Russia, namely in Yekaterinburg and in St. Petersburg. This is natural considering the size of your country and the number of Azerbaijanis living in your country. However, in Azerbaijan itself, the field of work for consulates is limited," Bulbuloglu said.

Ilham Ismayil, a former employee of the abolished Ministry of National Security told Ayna-Zerkalo newspaper that after the withdrawal of the Russian military contingent from Karabakh, Russia wants to demonstrate that it somehow remains in Karabakh and that its influence remains in the South Caucasus. "Russia will do its best to gather intelligence through its consulate in Khankendi," he said. According to him, Turkey also such a consulate plan for Khankendi.

Moscow is keen to consolidate its relationship with Baku and strengthen transport and energy ties, notably by expanding Russian oil exports via Azerbaijan. Putin is reportedly looking for ways to sell Russian gas to Europe via Azerbaijan amid Western sanctions imposed on Russia over its ongoing invasion of Ukraine.

"In the energy sector, the situation was analyzed in detail, both in the oil and gas sectors and in the electricity sector. We are working hard in this direction, and I am sure that we will continue to coordinate our activities," Putin said.

"The situation in the oil and gas sphere and in the electric power was analyzed in detail in the energy sphere. We are proactively working in this direction and I am confident we will coordinate our activities further," Aliyev said.

The State Oil Company of Azerbaijan (SOCAR) and PJSC Gazprom have reached an agreement to expand their strategic partnership. According to the press service of the Russian oil company, the interaction between Gazprom and SOCAR continues to develop "dynamically".

In particular, this concerns the North-South project and the signing of a comprehensive scientific and technical cooperation programme in September 2024. Alexey Miller, the head of Gazprom, said that an agreement had been reached to expand the multifaceted strategic partnership.

"In particular, a project known as Shah Deniz, where our Russian company Lukoil holds almost 20%, has invested a large amount. We have projects related to the supply of oil and oil products," the Russian Deputy PM Alexander Novak told Russia Today. However, he didn't elaborate further.

Putin added that the United Shipbuilding Corporation of Russia is starting to produce modern river-sea tankers for the transportation of oil products together with the Baku Shipyard.

Talking about the implementation of the North-South project, Aliyev noted that they are modernizing the railway segment. "We are talking about the possibility of transporting cargo of 15mn tonnes per year and increasing it to 30mn, [...] we have already allocated approximately $120mn for the modernization of this railway section to achieve the required throughput capacity," Aliyev added.

Talking about economic relations, Aliyev said that in 2023 countries crossed the $4bn mark. "This is not the limit," he added. "This will enable us to reach the shores of the Indian Ocean and use these routes for mutual benefit and interest," Putin commented on the project.

"In the first half of the year, it has already been supplemented by 17%. There is more than 4bn of direct investment in the Azerbaijani economy. And of course, the almost 1,300 enterprises working in the Azerbaijani market are evidence of the fact that our situation is developing positively and has good prospects for further development," Putin said. "Our companies feel quite comfortable in the Azerbaijani market. [...] These are LUKOIL, KAMAZ, which has organized assembly production, Sollers, and UAZ. They work successfully and there are prospects for further development," he added.

However, the Russian side seems to have voiced concerns over the US-planned transport route passing through Azerbaijan. "The United States' project to construct a new route from Central Asia through Azerbaijan and Armenia should not be politicized," Bulbuloglu said in an interview with TASS. "Yes, Washington is considering plans to open such a transport corridor bypassing Russia and China. But the thing is that any transport initiatives do not mean that when a new corridor opens, everyone will immediately abandon the already tested and convenient ones and run along the new route. It does not work that way at all. This requires a lot of time, large investments and the consent of many countries," Bulbuloglu said. "What is a transport corridor? It is an opportunity to transport goods and people, it is an opportunity to trade. The more roads, the more convenient it is to do business and the more convenient it is to trade, to develop tourism. Any road is the development of territories," he concluded.

There is also tension over water levels in the Caspian Sea. While Aliyev noted that sea levels are decreasing, Putin didn't comment on it during the press statements part.

"I showed Vladimir Vladimirovich the rocks that were underwater just two years ago, and today they are already one meter above the surface. We are observing this along the entire coast of the Absheron Peninsula – in fact, not only there but also along the entire coast of Azerbaijan. We have agreed to jointly analyze the situation and outline solutions both in a bilateral and five-party format to prevent a possible environmental disaster. In other words, we can already see the manifestations of this environmental disaster with the naked eye," Aliyev said.

Earlier, Nazim Mahmudov, head of the National Hydrometeorology Service noted that declining sea levels have significant implications for particularly oil and gas operations in the sea, maritime transport and port operations.

The Volga River alone accounts for around 80% of the Caspian's inflow, with the Ural and other rivers passing through Russian territory playing secondary roles. Putin's silence can be explained by the fact that Russia has built 40 dams on the Volga River and 18 more dams are under study and construction.

Russia's detrimental effect on the Caspian Sea was also criticized by its close ally, Iran. "Water inflows, especially the one through the Volga River, into the Caspian Sea, have been blocked by the neighbouring countries," said Ali Salajegheh, the Iranian vice-president in August 2023.