Food in the inflation zone Azerbaijan’s rising dependence on imports

In 2026, Azerbaijan is once again experiencing rising food prices. Inflation in key partner countries is contributing to this trend, and these pressures have intensified following the outbreak of the war in the Persian Gulf, including Iran’s restrictions on food exports. As a result, overall inflation has increased, with data from the State Statistics Committee of the Republic of Azerbaijan showing a 7% rise in food prices in January–February of this year.

At the same time, the domestic food market faces additional challenges from structural factors: monopolisation of external supplies, weak competition among retail chains, inefficiencies in local market fairs, and high import dependence among food processing enterprises.

As recently as last autumn, reports from the United Nations Food and Agriculture Organisation (FAO) were largely optimistic. An increase in food production was expected, and deflationary forces were dominating the market. FAO statistics suggested that the inflationary pressures of 2022–2024 had largely been overcome, and that the global agricultural sector was maintaining price stability.

However, in February 2026, global food prices rose for the first time in five months. The FAO’s updated food price index highlighted a 1.1% increase in wheat, rice, and other cereals. Preliminary FAO estimates for the 2026 wheat harvest also point to a roughly 3% decline in global production, bringing the total to around 810 million tonnes.

Price rises affected a wide range of products: most vegetable oils increased by 3.3%, while lamb reached a historic high of 126.2 points. Beef and other commodities also became more expensive. The FAO index, which tracks international price movements for key food products, climbed to 125.3 points in February – nearly 1% higher than in January.

Global expert groups now predict an even sharper rise in food prices in March, with the war in the Persian Gulf acting as a key driver. Military operations and the closure of the Strait of Hormuz have caused an oil shortage and pushed up energy prices. Higher fuel costs, along with increased prices for fertilisers and agricultural chemicals, are raising production costs at food-processing plants – all of which inevitably feed into the cost of imported food, including in Azerbaijan. In particular, the conflict has led to the closure of ports in the Islamic Republic of Iran (IRI), which for many years served as a transit route for food shipments from Southeast Asia, Pakistan, and Gulf countries.

According to the Tasnim news agency, Iran imposed restrictions on the export of many food products as early as March, and these measures are already affecting Azerbaijan. As noted by Vugar Oruj, chairman of the Azerbaijani Society of Appraisers (ASA), the sharpest price increases have been seen in Iranian butter, which rose by 30–35%. Similar hikes have been observed for cheese, cream, and other dairy products from Iran, as well as dried fruits – a trend further amplified by seasonal demand ahead of the Nowruz and Ramadan holidays.

However, the Iranian force majeure is far from the only factor driving food price increases – Azerbaijan’s dependence on imported food continues to grow year by year. A recent report on the activities of the Cabinet of Ministers of Azerbaijan for 2025, submitted for discussion in the Milli Majlis (parliament), also highlighted a rise in the country’s food imports. Overall, Azerbaijan set records for food imports for the second consecutive year: in 2024, the volume of imported food exceeded $2.47 billion, and in 2025 this figure rose by a further 4.7%.

The Cabinet attributes this trend to growing demand for food products, which local producers are unable to fully meet due to limited agricultural resources, including arable land and irrigation water. According to the Cabinet, these challenges are compounded by low productivity caused by a large number of small farms, slow adoption of intensive agricultural methods, and higher production costs for local goods compared with imports. Low purchase prices for raw materials and modest wages for rural workers further reduce incentives for farmers and contribute to rural depopulation.

The Cabinet noted that in 2024 alone, agricultural producers received 362.5 million manats ($213 million) in state subsidies, with 80.8 million manats ($47.5 million) allocated for the purchase of agricultural machinery and 1.4 million manats ($0.82 million) in preferential funds for acquiring breeding livestock. However, these measures have so far had little visible impact on the pace of import substitution.

The government provides subsidies and other forms of support, but systemic problems in the agricultural sector remain largely unresolved. Small regional farms and producers of dairy, fruits, and vegetables face logistical challenges and often lack access to major retail chains. Storage in large refrigerated warehouses is prohibitively expensive for them. Meanwhile, fairs organised under the Ministry of Agriculture’s “From Village to City” programme are limited in scope, and prices at these events often match those in capital-city supermarkets.

In Baku, small “mobile” and street vendors often operate in a vulnerable position. This form of trade typically functions outside tax control and does not accept cashless payments. Large retail chains, which carry the full tax burden – including corporate tax and VAT – understandably point to unequal competitive conditions. While taxes are mandatory for all market participants, the State Tax Service could benefit from developing more flexible and accessible fiscal reporting methods tailored to street trade. At the same time, a purely enforcement-driven approach is unlikely to be optimal, as street vendors of fruits and vegetables remain, for many consumers, a real and affordable alternative to the high prices in chain hypermarkets.

As noted at the end of last year by Aydin Huseynov, a member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, one of the most pressing risks of Azerbaijan’s external dependence in the food market is imported inflation from its trade partners. Food imports, primarily from CIS countries and other neighbouring states, have become noticeably more expensive in recent years. This trend has been influenced by the Russia–Ukraine war, inflationary pressures, export restrictions on certain food products from Russia, Belarus, and Ukraine, as well as the devaluation of the Turkish lira.

At the same time, Azerbaijan’s processing and food industries remain heavily reliant on imported raw materials, components, packaging, pesticides, and additives, including vitamins and other products used in livestock and poultry feed production. This dependence becomes particularly critical during periods of global inflation.

According to economic expert Eldaniz Amirov, domestic factories must import a significant portion of raw materials and components to produce food. Meanwhile, imported products are often produced in countries with abundant local raw materials, more advanced agro-industrial infrastructure, and larger-scale production. As a result, imported food frequently proves more price-competitive than locally produced items, even after accounting for customs duties and transportation costs.

These can be seen as the objective factors driving up prices of both local and imported food products. Indeed, the State Statistics Committee recently confirmed that food prices in Azerbaijan rose by 7% in January–February 2026, a significant increase.

However, there are also numerous other factors contributing to the artificial inflation of imported food prices in the country. Azerbaijan has yet to implement effective measures to reduce market pressure from monopolistic structures in wholesale foreign trade. For many years, wholesale monopolies have controlled imports of products such as tropical fruits, seafood, potatoes, powdered milk, and butter. Operating alongside large wholesale bases and logistics companies in a “low-competition environment,” these monopolies also dominate storage in refrigerated warehouses and bulk depots. Often, they effectively dictate the pricing policies of major retail chains, enabling substantial inflation of profit margins. Evidence of such schemes is visible, for instance, in identical price tags on many imported products during simultaneous promotional campaigns across seemingly independent retail networks, all priced at the same level.

It is hoped that the “hidden hazards” within Azerbaijan’s wholesale and retail food trade will be identified and addressed by specialists from the State Agency for Antimonopoly Supervision and Consumer Market Control. Transparent oversight of the food sector is extremely important, as it is a key guarantee of social stability and national security.