Key trends of 2023 - Karabakh's revival, Zangazur corridor, renewable energy development Analysis by Caliber.Az

For the third year, Azerbaijan has been implementing a large-scale program to revive the road, energy, and communal infrastructure of the Karabakh and East Zangazur economic regions' territories liberated from occupation. Last year, the first stage of the Great Return programme was also launched, destroyed towns and villages were settled, and jobs were created for internally displaced persons who returned to their homes.

In the new year 2023, the scale of restoration work in Karabakh will increase even more. In a recent interview with local TV channels, Azerbaijani President Ilham Aliyev spoke about international projects being implemented in the region. The key direction of the Azerbaijani government's investment strategy in 2021-2022 remained the sphere of the revival of the Karabakh region, whose settlements were completely destroyed and the infrastructure was ruined during almost 30 years of Armenian occupation. But now, in a relatively short period of time, colossal work has been carried out on the liberated lands to construct roads, bridges and tunnels, power lines and substations and restore water and other utility systems. There is also a mobile communication network, Internet, radio and television broadcasting. Railway lines have been laid, Fuzuli and Zangilan airports have been put into operation, and in 2024 another air harbour will be built in the Lachin district. Industrial clusters are being formed in the Aghdam and Jabrayil districts, where the first residents have been active since August 2022. Also, last October, the first stage of the Azerbaijani-Turkish livestock agro park Dost, designed for the maintenance of 3,500 heads of cattle, was commissioned in the Zangilan district.

All these infrastructure projects were implemented in parallel with large-scale mine clearance efforts: by the end of last year, about 59,700 hectares of land were cleared of mines and unexploded ordnance. This vital work will continue in 2023, and in general, under the first state program Great Return, 280,000 hectares of liberated territories will be cleared by 2026.

The success in creating basic communications and clearing the territory of explosive objects allowed us to accelerate the work on the return of the republican citizens to the Karabakh region. Last year, as part of the Great Return programme in the Zangilan district, the first residents began to populate the Aghali "smart" village. A similar high-tech "green" settlement is being formed in the Fuzuli district. Conditions are being created for the Shusha residents to return home, the housing stock is being restored here and a tourist cluster is being formed. The restoration of the social and communal infrastructure of Aghdam has begun, where multi-storey houses are also being constructed. "Extensive construction and restoration work is underway in the city of Lachin. This year, we will also return former IDPs to the villages of Zabukh and Sus... We use them as barracks. But a new settlement is being built for the residents in the village of Zabukh, and this year we will resettle them there," Azerbaijani President Ilham Aliyev said in an interview with local TV channels.

It is clear that such large-scale initiatives implemented in a short time frame are very costly, and the entire volume of restoration work in the liberated territories was financed exclusively from budget funds: according to the Finance Ministry estimates, 9.7 billion manats [$5.7 billion]will be provided for these purposes in the period 2021-2023. In particular, the target budget capex for 2023 has been increased by a billion to 3 billion manats [$1.7 billion], taking into account the implementation of 48 new infrastructure and rehabilitation projects in the Karabakh and East Zangazur economic regions.

"We do all the work [on the revival of the territories of Azerbaijan liberated from occupation] at our own expense. I have already said it. We have yet to receive help from anyone after the war. Only the presidents of two countries – Uzbekistan and Kazakhstan – initiated the construction of two schools in Fuzuli. Apart from that, we have not received a single manat of aid from anywhere," the president said. The head of state stressed that strengthening the army potential and restoring Karabakh and East Zangazur will remain state priorities for many years, and this area will remain a key sphere of budget spending.

Simultaneously, the financial, material and human resources and other efforts directed today at the Karabakh region's revival will eventually pay off due to the formation of agricultural and industrial production here, the development of tourism, and the development of ore and other mineral resources. Furthermore, two important vectors with significant export potential are already forming on the liberated territories. We are precisely discussing the construction of the Zangazur corridor's transportation infrastructure, in which China, Türkiye, EU countries, and, of course, post-Soviet states are interested. "The transit route through the Caspian Sea is very attractive considering the time, simultaneously, new corridors are in demand for goods coming from Central Asia," the head of state said, noting that the economic efficiency of the Zangazur corridor is very high in this regard.

On the other hand, for Azerbaijan, this project is not only economic and transport, but also strategically important. "The implementation of this project is a natural right of our country since the creation of a transport link between the western regions of Azerbaijan and the Nakhchivan Autonomous Republic is reflected in the Trilateral Statement of November 10, 2020. Despite the fact that Armenia is trying to evade its obligations and has not honoured its commitments for more than two years, we are convinced that sooner or later the Zangazur corridor will be created," the president is confident.

There really can be no doubt about this, especially since over the past two years a lot of funds have been invested in the construction of transport infrastructure in Azerbaijan's East Zangazur economic region, including key components of the future international corridor. In particular, the 124-kilometre Horadiz - Aghband highway - state border with Armenia is being built very successfully, 70 per cent of the work was completed by late 2022 and the highway is scheduled to be commissioned by late 2023. And approximately at the end of 2024, the Horadiz-Aghband railway (110 km) will also be completed - today more than 40 per cent of the track infrastructure has been laid here.

Another strategic direction has a very high potential, which provides for the formation of a multidisciplinary electric power infrastructure on the liberated territories – powerful substations and high-voltage power lines, as well as the creation of generating capacities based on renewable energy sources (RES). In general, the Karabakh region has been designated as a key platform for the development of alternative energy: according to preliminary calculations, over 10,000 MW of renewable energy can be generated here, and the Energy Ministry, with the support of the Japanese company TEPSCO, has been working on the development of a draft concept of a "Green Energy Zone" in the Karabakh region since last year. Thus, only 45 small hydroelectric power plants with a total capacity of 241.3 MW can be built or restored in the mountain districts of Gubadli, Lachin, and Kalbajar. And this work is being actively carried out: in the Kalbajar district, Azerenergy OJSC is completing work on five small hydroelectric power plants with a total capacity of 27 MW, with commissioning expected in the coming months. In the liberated territories, 10 digital substations and one regional control centre for 22 power facilities have already been built, and 11 small hydroelectric power plants are being restored, adding approximately 54 megawatts of capacity to the overall power system. BP will soon invest in the development of another renewable energy project, the construction of a 240 MW solar power plant in the Zangilan-Jabrayil zone. And, by 2025, the Khudaferin and Giz Galasy hydroelectric power plants, with a combined capacity of 140 MW, will be completed on the Araz River.

The total volume of power generated at renewable energy facilities in the Karabakh region is planned to be used not only for domestic consumption but the excess energy is also planned to be exported to Türkiye and further to Southern Europe. "To do this, we need to expand the existing power transmission lines, and in this regard, we plan to use the Zangazur corridor for electricity transmission. It is for this purpose that we are building a high-capacity substation in the Jabrayil district, and another substation should also be built on the border between the NAR and Türkiye. In turn, the possibilities of transporting electricity in Türkiye have been expanded," President Ilham Aliyev said.

According to the head of state, the development of the renewable energy segment, including in the Karabakh region, and the creation of a powerful export corridor for the transit of electricity in the western direction is a large-scale global project that may well be implemented. Moreover, billion-dollar investments for the development of the renewable energy segment are planned to be attracted mostly at the expense of private international companies. Such proposals from international companies are already available, and Azerbaijan also plans to actively cooperate with the World Bank and the European Bank for Reconstruction and Development on projects in the field of "green" energy.