Geology's Impact On Azerbaijan's Economy And Future

Azerbaijan's economy is heavily dependent on its oil and gas industry, which accounts for roughly 92% of its export revenue and over half of its state budget. The country is rich in mineral deposits, including gold, silver, iron, copper, zinc, and cobalt. The petroleum industry is the most important sector of the local economy, with oil being produced from both onshore and offshore oil fields. Azerbaijan's economy is also characterised by corruption and inequality, with a small private sector and over half of the formal labour force working for the government.

Azerbaijan's oil and gas industry

In 1994, Azerbaijan signed the "Contract of the Century", a landmark agreement with 11 international oil companies, which saw the development of the Azeri-Chirag-Deepwater Gunashli (ACG) oil field, the country's main source of oil for export. The ACG field is responsible for about 65% of the country's current oil production.

Azerbaijan has also become a significant natural gas producer, with the BP-operated Shah Deniz field being the country's largest gas development. The field supplies gas for the Southern Gas Corridor (SGC) pipeline to Europe.

In recent years, the country has also been pursuing wind and solar projects with the goal of becoming an exporter of green energy to European markets.

Azerbaijan's economy and its dependence on oil and gas

Azerbaijan's economy is heavily dependent on its oil and gas industry. Oil and gas exports make up around 90% of the country's total exports, and the industry finances around 60% of the government's budget. The petroleum industry is the most important sector of the local economy, and Azerbaijan is referred to as the world's most ancient oil-producing region.

Azerbaijan has large oil reserves, and the country has been extracting oil since the 7th and 6th centuries BC. In 1985, about 1.2 billion tons of crude oil had been produced in Azerbaijan, with 25% of this coming from offshore oilfields.

Azerbaijan's economy has been affected by the volatility of oil prices, and the country experienced an economic contraction in 2021 due to the Covid-19 pandemic.

The country's oil and gas industry is predominantly government-owned, with the State Oil Company of the Republic of Azerbaijan (SOCAR) controlling upstream oil and gas operations.

Azerbaijan has been attempting to diversify its economy away from oil and gas, and the government has invested in the construction of new power plants and the rehabilitation and modernisation of its gas and electricity networks.

Azerbaijan has considerable renewable energy development potential, with excellent solar and wind resources, and significant biomass, geothermal and hydropower prospects. The country has committed to reducing its greenhouse gas emissions by 35% from 1990 levels by 2030.

Azerbaijan's economy and its diversification

Azerbaijan's economy is heavily dependent on its oil and gas industry, which accounts for roughly 92% of its export revenue and over half of its state budget. The country is one of the top ten most fossil fuel-dependent economies in the world.

Azerbaijan has the largest agricultural basin in the region, with about 54.9% of the country being agricultural land. The country's fishing industry is focused on the dwindling stocks of sturgeon and beluga in the Caspian Sea.

Azerbaijan's economy is characterised by corruption and inequality. The country's oil wealth has significantly strengthened the stability of the regime and enriched ruling elites.

The Azerbaijani government has sought to attract foreign investment and has introduced reforms to diversify its economy, targeting four non-oil sectors: agriculture, tourism, information and communications technology (ICT), and transportation/logistics.

Azerbaijan is also expected to continue to develop its central position on the east-west Middle Corridor, an increasingly important trade route because it avoids Russia.

Azerbaijan's economy and its agriculture

Azerbaijan's economy is heavily dependent on its oil and gas exports, with the petroleum industry being the most important sector. The country has large oil and gas reserves, with fossil fuels accounting for two-thirds of its GDP. Azerbaijan is also rich in mineral deposits, including metalliferous ores, non-metallic minerals, and underground water.

The country has designated agriculture as one of four priority sectors for diversifying its economy, as the sector is the largest employer in the country, with about 39% of the population working in agriculture and agro-processing. However, agriculture only accounts for 6-7% of Azerbaijan's GDP. The government supports the agricultural sector through grants, tax exemptions, and subsidies for machinery, pesticides, and fertilizers.

Azerbaijan has the largest agricultural basin in the region, with about 54.9% of the country being agricultural land. The country's agricultural scientific research institutes focus on meadows and pastures, horticulture, viticulture and wine-making, cotton growing, and medicinal plants. Livestock, dairy products, and wine and spirits are also important farm products.

Azerbaijan's economy and its trade

Azerbaijan's economy is heavily dependent on its oil and gas exports, which account for roughly 47.8% of the country's GDP and over 92.5% of its export revenue. The country has large oil and gas reserves, with the petroleum industry being the most important sector of the local economy.

Azerbaijan has the largest agricultural basin in the region, with about 54.9% of the country being agricultural land.

Azerbaijan's economy is characterised by corruption and inequality. The country's oil wealth has significantly strengthened the stability of the regime and enriched the ruling elites.

The country has taken steps to diversify its economy away from oil and gas, with the government targeting the agriculture, tourism, information and communications technology (ICT), and transportation/logistics sectors.

Azerbaijan has a floating exchange rate, with the national currency being the Azerbaijani manat. The country has an abundant supply of semi-skilled and unskilled labourers, with the service and agricultural sectors dominating the labour market.

The country's top import products are iron and steel, machinery, vehicles, and food products, with its top export destinations being Italy, Turkey, Israel, and India.

Frequently asked questions