Azerbaijan amid global trade wars Can the nation maintain its economic stability?

The tensions observed in global markets since the beginning of this year—caused by U.S. tariffs and retaliatory measures from China and EU countries—are negatively impacting world trade. Commenting on the current situation, the leadership of the International Monetary Fund (IMF) recently noted that trade wars are causing disruptions in supply chains and market volatility, reducing trade turnover and slowing production dynamics. A similar view has been expressed by the World Trade Organisation (WTO), which has downgraded its forecasts for global trade this year.

Nevertheless, Azerbaijan has so far managed to minimise the negative fallout: in the first quarter of 2025, the country’s foreign trade turnover increased by 24.3%, and solid growth has also been observed in non-oil exports.

The intensification of global trade tensions, driven by the reciprocal increase in tariffs by the United States, China, and EU countries, is causing disruptions in supply chains worldwide, market volatility, a slowdown in investment flows, reduced productivity in many economies, and a worsening outlook for global growth, said IMF Managing Director Kristalina Georgieva on April 17, speaking at the Fund ahead of the Spring Meetings of the IMF and World Bank’s governing bodies. "As the giants face off, smaller countries are caught in the crosscurrents."

According to the IMF chief, small advanced economies and most developing countries rely heavily on trade to fuel their growth, making them particularly vulnerable: "Ultimately, trade is like water: when countries put up obstacles in the form of tariff and nontariff barriers, the flow diverts. Some sectors in some countries may be flooded by cheap imports; others may see shortages. Trade goes on, but disruptions incur costs."

Serious concerns over the escalation of trade wars have also been voiced by the World Trade Organisation (WTO). According to the organisation’s Global Trade Outlook and Statistics report, global merchandise trade is now projected to decline by 0.2% by the end of the current year—compared to the 3% growth forecast made in October. The WTO’s revised outlook is based on the recent surge in external trade tariffs observed in mid-April, with the organisation anticipating a particularly sharp decline in North America, where exports are expected to fall by 12.6%.

To what extent could the escalation of global trade wars impact Azerbaijan’s economy—particularly its foreign trade indicators? According to analysts from the leading Dutch banking group ING Group, Azerbaijan is largely shielded from the direct effects of U.S. trade tariffs, but it remains somewhat vulnerable to indirect consequences.

The country’s overall macroeconomic situation remains stable; however, amid global uncertainties, key risk factors are tied to Azerbaijan’s reliance on trade with China and the EU, as well as its sensitivity to oil price fluctuations and increasing pressure from imported inflation. The direct impact of higher U.S. tariffs is minimal, given that the U.S. accounts for only about 0.5–2% of exports from CIS countries, with the vast majority of export revenue coming from raw materials. In this regard, Azerbaijan is in a more resilient position: to maintain a balanced budget and current account this year, it only requires an average annual oil price of $63–64 per barrel.

ING analysts also believe that a weakening U.S. dollar is unlikely to provide significant support to the currencies of post-Soviet states. Nevertheless, it does somewhat ease monetary pressures, pushing back the risk of devaluation. As for Azerbaijan specifically, ING experts note that despite external factors, the national currency remains stable—thanks to the country’s substantial foreign exchange reserves and fiscal buffers equivalent to 100% of GDP.

One of the clearest distinctions between the current situation and previous periods is a noticeable shift in Azerbaijan’s foreign trade dynamics. The lingering effects of the global recession in 2023 and ongoing inertia in the world economy throughout 2024 have, to some extent, contributed to a slowdown in trade turnover.

Over the past two years, export figures—particularly in the oil and gas sector—have been on the decline. At the same time, an unfavourable external environment and weakening demand in Azerbaijan’s trading partner countries have also weighed on non-oil exports. According to data from the Centre for Analysis of Economic Reforms and Communication (CAERC), the total value of Azerbaijan’s non-oil exports in 2024 amounted to $3.4 billion, reflecting a marginal year-on-year growth of just 0.3%.

Nevertheless, despite mounting global headwinds and a renewed escalation in trade wars, Azerbaijan’s foreign trade indicators have remained stable in the first quarter of the current year, with growth observed in several areas. According to the State Customs Committee, the total value of Azerbaijan’s trade transactions with foreign countries reached approximately $12.049 billion in January–March 2025—an increase of 24.3% compared to the same period last year.

In turn, Azerbaijan’s non-oil exports grew by 14.7% year-on-year in Q1 2025, reaching $771.9 million. This suggests that although the export-import dynamic still favours imports and the trade surplus has narrowed, the country’s overall trade turnover continues to expand at a robust pace.

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It is worth noting that despite the objective factor of declining oil production in Azerbaijan in recent years, the State Oil Company of Azerbaijan (SOCAR) managed to increase its exports of crude oil and bitumen-derived petroleum products by 7.3% in the first quarter of this year, delivering over 6.011 million tonnes abroad.

At the same time, during the reporting period, SOCAR once again became the largest exporter in the non-oil and gas sector among state-owned enterprises, selling processed products worth $70.4 million. According to the State Customs Committee, Azerbaijan’s petroleum product exports in the first quarter of 2025 exceeded 122,286 tonnes—16.3% higher than in the same period last year.

Notably, exports of urea fertilisers saw a significant increase, methanol exports rose by a quarter, and petroleum coke exports surged 2.6 times.

Amid the dynamic global rise in precious metal prices, Azerbaijan’s export performance in this segment has also reached record levels. According to the March edition of the Export Review by the Centre for Analysis of Economic Reforms and Communication (CAERC), the country exported gold worth $40.2 million in January–February of this year—5.9 times higher than the corresponding period last year.

Azerbaijan’s agriculture and food sectors also showed strong performance in Q1 2025, delivering nearly 5% growth in foreign sales. These products are primarily exported to traditional post-Soviet markets. According to CAERC data, exports of food products reached $224.7 million—an increase of 15.1%—while total exports of agricultural and agri-industrial goods rose by 11.6%, amounting to $239.6 million.

It is also worth highlighting that in the first quarter, Azerbaijan–Russia trade demonstrated record growth—surging by 60.7% to reach $1.431 billion. Notably, the lion’s share of Azerbaijan’s exports to the Russian market consists of non-oil goods, primarily agricultural products.

Given the global challenges related to trade wars, declining oil prices, and other raw material prices, it is difficult to predict what 2025 will hold for Azerbaijan’s exporters. Nevertheless, Azerbaijan faces a significant challenge: to increase the total volume of non-oil exports to $5.3 billion by 2027. To achieve this goal, there is ongoing work to develop the country’s non-oil industry and agro-processing within export-oriented industrial clusters, enhance the technological potential of enterprises, and pursue international product certification to better adapt to the realities of global competition. Equally important are efforts to explore new markets, particularly in Eastern Europe, the European Union, and especially the countries of the Persian Gulf, the Middle East, and North Africa.