Diplomatic relations between Germany and Azerbaijan were in February 1992, and a Germany Embassy in Baku soon opened. Unlike most European countries, Germany actively cooperates with Azerbaijan at the governmental level and the two countries have developed good relations. Through the German Technical Cooperation (GTZ), Germany supports some enterprises and state structures in Azerbaijan. Germany actively participates in the development of the finance and banking sector in Azerbaijan, especially in the creation of credit structures of micro-financing of small and medium enterprises. GTZ actively promotes legal and judicial reform in Azerbaijan.

During bilateral talks, special attention was given to the settlement of the Nagorno-Karabakh conflict and to economic questions. In particular, Ilham Aliyev has declared the readiness of Azerbaijan to accept the Armenian population of Nagorno-Karabakh as equal citizens of the country, but that Azerbaijan cannot allow the partition of the Azerbaijani state.

Concerning economic issues, Mr. Aliyev praised economic relations with Germany, and highly assessed bilateral relations. Chancellor Schroder, for his part, noted that \"President Aliyev and I are convinced that the Karabakh conflict should be settled by political means. Germany, both earlier and today, recognizes and supports the territorial integrity of Azerbaijan and as an active member of OSCE will use the best efforts for prompt peace and the fair settlement of the Nagorno-Karabakh conflict within the framework of international principles and norms. It should be solved within the framework of observance of the territorial integrity of Azerbaijan\", declared Schroder.

The German chancellor especially emphasized the interest of German business in the development of communications with Azerbaijan. He mentioned an economic forum of investment opportunities in Azerbaijan arranged this autumn in Berlin with the involvement of representatives of German and Azerbaijan business circles. The purpose of the forum is to study opportunities for German industrialists to invest in the Azerbaijani economy.

Until presently, Germany has provided aid to Azerbaijan in the amount of Euro 303.3 million. 140 million has been aid within the framework of the European Community, 130.33 million as bilateral financial cooperation and 33 million as bilateral technical cooperation. The project of restoration of water supply in Baku city and Ganja, the second-largest city in the country, deserves special mention. Together with Euro 10 million allocated by Switzerland, an additional 54 million euro have been pledged. According to local experts, it is the most important German-led project contributing to the development of Azerbaijan.

An Agreement on “avoidance of double taxation” was signed during the visit, as well as a contract with the Airbus international aircraft consortium on the delivery to Azerbaijan’s state-owned airline AZAL of four Airbus A319 and one corporate jet. The first A319 will be already delivered to the country in mid-2005. The sum of the transaction, according to experts, is estimated in 136,8 million euro. This project will be financed by several German banks, credits will likely be given with government insurance arrangements.

During the visit, the large German company Siemens expressed readiness to invest in the construction of power stations with capacity of 500,000 Mw in Sumgayit, 30 km north of Baku. German businessmen have shown interest to invest into other branches of the Azerbaijani economy, such as textile, medical industry and agriculture. Owners of the large German banks Kommerzbank and Berlinerbank have expressed a desire to start work in Azerbaijan.

Experts noted that the visit had an evident economic character. \"The role of Germany and its capital in Azerbaijan is less than it could be, and is desirable and possible considering the potential of the two countries. So fars, though much spoken about, large German capital that could play a significant role in the development of Azerbaijan, is not represented here well enough\", economist Ingilab Ahmedov noted.

He emphasized that “Germans are participating in many small-scale projects, but do not show a desire to participate in large scale projects\". According to independent expert M. Aliyev, Germany is interested in escalating its position and investments in Azerbaijan. \"German capital does not participate in oil and petrol service projects. But one can view Germany’s participation as important precisely in the non-oil sector, which actually, is developing since several years. Germany is also interested in other fundamental things in Azerbaijan, such as institutional, systemic, and infrastructural reforms\".

During 2004-2005, Germany will render to Azerbaijan financial aid in the amount of Euro 13.8 million and technical assistance worth five million Euros. This money is planned for legal and judicial reforms, improvement of the water supply system of Baku and Ganja, purchase by the German bank KfW of stocks in the Azerbaijan bank of micro-finance, the creation of a register of real estate, as well as expanding the activity of the Germany-Azerbaijan fund.