As during the Soviet era, Azerbaijan's economy depends heavily on foreign trade, including commerce with the other former Soviet republics. In the late 1980s, exports and imports averaged about 40 percent of GDP. At that time, Azerbaijan's exports to other Soviet republics averaged 46 percent of GDP and over 90 percent of total exports; its imports from those republics averaged 37 percent of GDP and nearly 80 percent of total imports. In the early 1990s, Azerbaijan's main trading partners in the CIS were Russia, Ukraine, Kazakhstan, and Belarus, in that order.
In the last years of the Soviet Union, Azerbaijan showed a net trade surplus. After a sharp decline in net trade surplus in 1990, oil sales outside the Soviet Union boosted the surplus in 1991 and 1992. In 1992 Azerbaijan made major gains in hardcurrency exports, mainly from selling refined oil products abroad at world prices. Trade with CIS countries, determined by yearly bilateral agreements, declined significantly after 1991. Although products from those countries still dominated Azerbaijan's imports, less than half of exports went to them. Important obstacles were the bypassing of the state order system in the Baltic states and Russia, the high VAT on some items, and the complexity of central-bank credit systems in the transitional period. Trade agreements were negotiated for 1993 with Belarus, Estonia, Kazakhstan, Latvia, Lithuania, Moldova, Russia, Turkmenistan, and Ukraine.
In 1990 Azerbaijan's major trading partners outside the Soviet Union were led by Germany and Poland. In 1992 Azerbaijan's main non-CIS trading partners were Britain and Iran. According to government statistics for 1993, Azerbaijan had a large trade surplus with Russia, and more than US$60 billion was owed Azerbaijan by customers in Greece, Iran, and Turkey. Through 1993 Turkish enterprises, considered a primary source of new foreign capital, refrained from large-scale investment in Azerbaijan because of concerns about political instability in Baku. Disagreements with Russia and Turkey delayed construction of an oil pipeline that would connect Baku with the Mediterranean through Turkish territory.
In the early 1990s, increasing numbers of products were sold directly by Azerbaijani enterprises to foreign enterprises without government export licenses, although the inefficient state-managed trade system of the Soviet era remained in place. In 1993 the Ministry of Foreign Economic Relations monitored all foreign trade and supervised the export of petroleum products and other strategic items. In late 1993, government control was tightened because most private firms were keeping hard-currency foreign-trade earnings outside Azerbaijan.
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