Made in Azerbaijan: prioritising non-oil exports Economic insights by Khazar Akhundov

Since early last year, rising tensions in global markets—driven by escalating trade wars—have disrupted supply chains, increased commodity price volatility, and weighed on international trade. These trends have also impacted Azerbaijan. Declining oil production and falling energy prices have contributed to a slowdown in deliveries to foreign markets.

Despite these challenges, Azerbaijan has made notable progress in diversifying its economy, particularly by boosting non-oil exports. According to the latest edition of the Export Review published by the Center for Analysis of Economic Reforms and Communication (CAERC), exports of domestically produced non-oil goods increased by 8.1% in 2025.

In recent years, Azerbaijan’s domestic economy has been pressured by a decline in foreign trade, largely due to the high volatility of global energy prices. This slowdown in external trade has also been indirectly affected by a range of other factors, including global trade wars, the depreciation of the dollar, imported inflation, and more. Together, these issues have contributed to slower overall GDP growth: while the economy expanded by 4.1% in 2024, growth fell to 1.4% by the end of 2025.

A key factor affecting the country’s export performance is the ongoing decline in hydrocarbon production at several offshore fields. The natural depletion of reserves in the main Azeri–Chirag–Gunashli (ACG) block, which has been in operation since the late 1990s, has created a steady downward trend in output. Nationwide oil and gas condensate production in 2025 fell 4.8% year-on-year, reaching 27.679 million tonnes. According to forecasts, this trend is expected to continue: oil production is projected at just over 27.5 million tonnes in 2026, declining to 27.1 million tonnes in 2027, and further to 26.6 million tonnes in 2028.

The decline in oil production has had a direct impact on export volumes. According to customs data from the State Customs Committee of the Republic of Azerbaijan (SCC), the country exported over 23.381 million tonnes of oil in 2025, a 0.9% decrease compared to the previous year. Oil still accounts for a substantial share of Azerbaijan’s total exports — 48.28% — and the reduction in oil shipments remains the primary factor shaping the overall trade picture.

In contrast, domestic natural gas production rose slightly to 50.915 billion cubic metres. However, SCC data show that gas exports, which reached 25.187 billion cubic metres, were 2.3% lower than in 2024. However, strong demand from Türkiye, Europe, and other markets helped offset the decline in volume through higher prices. As a result, revenue from gas exports exceeded $8.821 billion, a 4.9% increase over the previous year. The share of natural gas in total national exports also grew, reaching 35.22% in 2025, up from 31.66% in 2024.

Thus, with oil and gas accounting for 83.5% of total foreign shipments, Azerbaijani hydrocarbons still make up more than five-sixths of the country’s total exports. Given this proportion, any external shocks or price volatility directly affect Azerbaijan’s foreign trade performance.

According to SCC data, Azerbaijan’s total foreign trade in 2025 amounted to $49.423 billion, an increase of $1.810 billion (3.8%) compared to 2024. Of this total, $25.043 billion came from exports and $24.380 billion from imports. However, exports declined by $1.5 billion (5.7%), while imports rose by $3.322 billion (15.8%). The combination of falling exports and rising imports sharply reduced the country’s trade surplus to $663 million, 8.3 times lower than in the previous year.

These figures underscore the urgent need to accelerate Azerbaijan’s shift from an energy-dependent economy to a more diversified domestic model. To reduce vulnerability to external shocks and commodity price fluctuations, current reforms are focused on addressing structural imbalances by promoting non-oil industrial development. Key sectors driving sustainable growth include agro-processing and non-oil manufacturing, transport and ICT, as well as “green” energy and energy efficiency.

These priorities are central to the new “Socio-Economic Development Strategy for 2027–2030,” currently being finalised by the Azerbaijani government. Under this framework, non-oil exports are expected to increase 1.8 times, non-oil GDP to grow 1.3 times, and the private sector’s share of GDP to rise to 88% over the coming years.

This includes a new stage in the large-scale diversification of Azerbaijan’s economy, where, alongside the industrial development of promising non-oil export sectors, a major focus will be placed on digitalisation and the integration of Industry 4.0 technologies. These initiatives will also fully extend to territories that have recently been liberated from occupation.

To achieve these goals, the government is developing a range of specialised industrial parks, industrial districts, and agro-parks. The Alat Special Economic Zone (SEZ) has also been established, offering fiscal and other incentives to attract both domestic and foreign investors. Currently, between one-third and one-half of non-oil products produced in industrial clusters and agro-parks are sold on foreign markets. Expanding this process is a top government priority to raise the total volume of non-oil exports to $5.3 billion by 2027.

Efforts to diversify exports have already shown tangible results, as reflected in last year’s non-oil export statistics. According to the CAERC, exports of domestic non-oil products rose 8.1% compared to 2024, reaching $3.6 billion. Agro-industrial and food products performed particularly well, increasing by 18.9% to $1.3 billion, with tomatoes, hazelnuts, and cotton among the top contributors. Key industrial exports included gold concentrate, urea, polymers, and other petrochemical products.

By trade volume, Azerbaijan’s largest non-oil exports to CIS countries were to Russia, Uzbekistan, and Kazakhstan, with commercial operations with Tashkent and Astana showing unprecedented growth. Specifically, $1.2 billion worth of Azerbaijani agricultural and industrial products were exported to Russia. Trade with Uzbekistan reached $795.2 million, a 3.1-fold increase, and with Kazakhstan $670.6 million, a 1.4-fold increase.

Structurally, exports to these Central Asian countries are predominantly non-oil products, including methanol, polyethylene, paints and coatings, other chemical products, ferrous and non-ferrous metals, sugar, various food products, and industrial equipment.