Azerbaijan's Ambitions: What's Driving The Country's Foreign Policy?

Azerbaijan, officially the Republic of Azerbaijan, is a transcontinental country at the boundary of Eastern Europe and West Asia. It is a part of the South Caucasus region and is bounded by the Caspian Sea to the east, Russia's republic of Dagestan to the north, Georgia to the northwest, Armenia and Turkey to the west, and Iran to the south. Baku is the capital and largest city.

Azerbaijan was briefly independent from 1918 to 1920 but was then incorporated into the Soviet Union for seven decades. It became a constituent (union) republic in 1936 and declared independence on 30 August 1991, shortly before the dissolution of the Soviet Union.

Azerbaijan is a unitary semi-presidential republic and has diplomatic relations with 182 countries. It holds membership in 38 international organizations, including the United Nations, the Council of Europe, the Non-Aligned Movement, the OSCE, and the NATO PfP program.

The country is rich in oil and natural gas and has the largest agricultural basin in the region. Azerbaijan's economy has benefited from oil production, but high levels of corruption have prevented greater prosperity for the population.

Azerbaijan has a population of over 10 million, with over 90% being Azerbaijani. The official language is Azerbaijani, but Russian and Armenian are also spoken. The vast majority of the country's population (97%) is nominally Muslim, but the Constitution of Azerbaijan does not declare an official religion, and all major political forces in the country are secular.

Azerbaijan has been criticized for its human rights record, with reports of worsening civil liberties, particularly on press freedom and political repression.

Nagorno-Karabakh conflict

Azerbaijan's conflict with Armenia over the Nagorno-Karabakh region has been a defining feature of the country's politics and recent history. The conflict has its roots in the early 20th century, when the territories of Qajar Iran in the Caucasus, including Nagorno-Karabakh, were ceded to the Russian Empire following the Russo-Persian Wars of 1813 and 1828.

In 1918, the Azerbaijan Democratic Republic was established, which defined the territory of the modern-day Republic of Azerbaijan. However, the country was incorporated into the Soviet Union in 1920, and Nagorno-Karabakh was designated an autonomous oblast within Soviet Azerbaijan in the early 1920s.

The conflict escalated in the late Soviet period, when an ethnic-Armenian separatist movement sought to end Azerbaijani control over the region. Following the independence of Armenia and Azerbaijan from the Soviet Union in 1991, fighting over Nagorno-Karabakh intensified. A ceasefire took effect in 1994, with separatists, backed by Armenia, controlling Nagorno-Karabakh and seven surrounding Azerbaijani territories.

Decades of cease-fire violations and flare-ups followed, until a second sustained conflict began in 2020 when Azerbaijan attempted to regain the territories it had lost. This resulted in significant Azerbaijani gains, with Armenia returning the southern part of Nagorno-Karabakh and the surrounding territories.

In September 2023, Azerbaijan launched a military offensive that resulted in the dissolution of the breakaway Republic of Artsakh in Nagorno-Karabakh and the flight of nearly all ethnic Armenians from the region. This marked the end of a decades-long conflict, with Azerbaijan regaining control of the disputed territory.

The conflict has had significant consequences for both countries, including large-scale population displacement, economic impacts, and political ramifications. The conflict has also attracted international attention and involvement, with efforts to reach a lasting political solution through organisations such as the OSCE Minsk Group.

Oil and gas

Azerbaijan is rich in oil and natural gas resources, with oil reserves of 7 billion barrels (as of 2021) accounting for 0.4% of global reserves. Oil is produced both onshore and offshore in the Caspian Sea, with offshore production accounting for about a quarter of the total. Azerbaijan's oil industry produced about 33 million tonnes of oil in 2022.

The Azeri-Chirag-Deepwater Gunashli (ACG) field, located about 100 km east of Baku, is the largest oil field in the Azerbaijan sector of the Caspian Basin. It was discovered in the early 1970s when Azerbaijan was part of the Soviet Union and comprises a series of individual reservoir horizons located 2,000 to 3,500 metres beneath the Caspian seabed. The ACG field is responsible for about 65% of the country's current oil production.

In 1994, a consortium of 11 international oil companies (including BP, Amoco, Lukoil, and SOCAR) led by BP and the Azerbaijani government agreed to the "Contract of the Century" for the development of the ACG oil field. The contract was ratified by the Parliament of Azerbaijan on 12 December 1994. The projected investment for this project is $13 billion. The Baku-Tbilisi-Ceyhan (BTC) pipeline is Azerbaijan's main export route for oil.

In 2020, the "Karabakh" field was the first oil field discovered in the years of independence, with initial estimated geological reserves of over 60 million tons of oil.

Azerbaijan has proven gas reserves of 2.6 trillion cubic meters, and estimated reserves of about 3 trillion cubic meters. One of the world's largest gas fields, "Shah Deniz", was discovered by Azerbaijani geologists in the middle of the 20th century but was not exploited due to a lack of technology. In 1996, a consortium established by SOCAR and international oil companies discovered large reserves in the gas field, with an estimated 1.2 trillion cubic meters of gas. The Shah Deniz gas field is now one of BP's largest gas field finds in recent decades and has transformed Azerbaijan into a major gas producer.

Azerbaijan's state-owned oil company, the State Oil Company of the Republic of Azerbaijan (SOCAR), is a major source of income for the Azerbaijani government. However, SOCAR has been criticised for its opaque management, with complex webs of contracts and middlemen that have allegedly led to the enrichment of the country's ruling elites.

Democracy and human rights

Azerbaijan is a secular nation with a majority-Turkic and majority-Shia Muslim population. It has been accused of authoritarianism under the Aliyev family rule, which has been in power since 1993. The country's human rights record has been criticised, with reports of worsening civil liberties, particularly on press freedom and political repression.

The constitution of Azerbaijan claims to guarantee freedom of speech, but this is denied in practice. Foreign broadcasts are banned in the country, and Azerbaijan was ranked 177th out of 196 countries in the 2013 Freedom House Freedom of the Press report. Discrimination against LGBT people is widespread, and Christianity is only officially recognised if registered, which is often denied.

Azerbaijan's government functions as an authoritarian regime in practice, and the country is categorised as "not free" by Freedom House. The country has been ruled by the Aliyev political family and the New Azerbaijan Party since 1993.

Azerbaijan's human rights record has been under fire as it prepared to host UN climate talks in October 2024. Amnesty International has reported on the "severe deterioration of human rights" in the country, including the persecution of political dissent, the suppression of independent journalists and activists, and the barring and expulsion of international human rights monitors.

The US State Department's 2023 Country Reports on Human Rights Practices also noted that the government of Azerbaijan "significantly restricted the rights of peaceful assembly and freedom of association, including through violence, detention, and prosecution of participants in peaceful protests".

Azerbaijan's role in international coalitions

Azerbaijan is a member of several international coalitions and organisations. It is an active member of coalitions fighting international terrorism and was one of the first countries to offer support after the September 11 attacks. It is also a member of NATO's Partnership for Peace program, contributing to peacekeeping efforts in Kosovo, Afghanistan and Iraq.

Azerbaijan is a member of the following international organisations:

• United Nations
• Non-Aligned Movement
• Organization for Security and Cooperation in Europe
• NATO's Partnership for Peace
• Euro-Atlantic Partnership Council
• World Health Organization
• European Bank for Reconstruction and Development
• Council of Europe
• CFE Treaty
• Community of Democracies
• International Monetary Fund
• World Bank
• Organisation of Turkic States
• TÜRKSOY community
• GUAM
• Commonwealth of Independent States
• OPCW
• World Trade Organization (observer state)
• Organization of Islamic Cooperation
• Economic Cooperation Organization
• International Telecommunication Union (correspondent)
• International Olympic Committee
• International Atomic Energy Agency
• International Civil Aviation Organization
• International Fund for Agricultural Development
• International Labour Organization
• International Monetary Fund
• International Maritime Organization
• International Criminal Police Organization
• International Olympic Committee
• International Organization for Migration
• International Telecommunication Union
• International Telecommunications Satellite Organization
• International Trade Union Confederation
• North Atlantic Treaty Organization (PfP program)
• Organisation for the Prohibition of Chemical Weapons
• Organization for Security and Co-operation in Europe
• Parliamentary Assembly of the Council of Europe/European Parliament
• United Nations Educational, Scientific and Cultural Organization
• United Nations Industrial Development Organization
• Universal Postal Union
• World Customs Organization
• World Federation of Trade Unions
• World Health Organization
• World Intellectual Property Organization
• World Meteorological Organization
• World Tourism Organization
• World Trade Organization (observer)

Azerbaijan's economy

Azerbaijan has the largest agricultural basin in the region, with about 54.9% of the country being agricultural land. The non-energy economy has been expanding, reflecting greater dynamism in most economic sectors. The government has introduced reforms to diversify the economy, targeting four non-oil sectors: agriculture, tourism, information and communications technology (ICT), and transportation/logistics.

Azerbaijan has a sovereign wealth fund, the State Oil Fund of Azerbaijan (SOFAZ), which aims to transform hydrocarbon reserves into financial assets generating perpetual income. The fund's assets totalled USD 49 billion as of January 2023.

The country's financial services sector is underdeveloped, constraining economic growth and diversification. Access to capital is a critical impediment to business development. The banking sector remains small relative to the size of the economy.

Azerbaijan has made efforts to attract foreign investment and improve the business environment, but progress remains slow on structural reforms. Corruption remains a major challenge for firms operating in the country.

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