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Nigar Hasanova

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As the global economic landscape faced unprecedented challenges in 2023, with many nations grappling with unrest and economic crises, Azerbaijan's strategic partnerships, energy initiatives, and infrastructure developments have positioned the country for a balanced future.

In 2023, numerous countries experienced political and economic unrest, leading to a persistent global economic crisis. Escalating tensions in the Middle East, particularly the conflict between the US, UK, and the Houthis in Yemen raised concerns about the impact on vital trade routes and a fifth of the world's oil reserves. The potential fallout included a 1% drop in global GDP, a 1.2 percentage point increase in global inflation, and a surge in oil prices to $150 per barrel. The Eurozone and the UK were not immune to the economic downturn, with predictions of a 2.5% GDP decline in the Eurozone and a 4.7% contraction in the UK, although both economies remained above the threshold for recession. Asia, through economic stimulation programs, aimed to counter the collapse, with a 4.5% GDP growth forecast for 2024. Japan's decision to abandon yield curve management added an element of uncertainty to global financial markets, potentially triggering a capital flight from high-yielding assets. Meanwhile, tensions between Taiwan and China, despite a low likelihood of conflict, remained a significant concern given their roles in semiconductor manufacturing, which could impact 10% of the world's GDP. The anticipated return of Donald Trump to the White House in 2025 introduced the prospect of a significant shift in US policy, including a proposed 10% tariff on all incoming goods, with potential repercussions on global trade and the US GDP.

To maintain balance, against this backdrop of global economic challenges, last year Azerbaijan stood out with several strategic advantages that promise economic resilience and growth. Considering every facet of potential global economic processes, 2023 will be recalled for Azerbaijan. Let's examine the most advantageous economic conditions that 2023 left for the Azerbaijani economy and how they will impact the coming year.

Strategic Partnership Agreement

On February 7, 2023, President Ilham Aliyev signed the Decree on the approval of the Agreement on strategic partnership in the field of development and transmission of green energy between the Governments of the Republic of Azerbaijan, Georgia, Romania, and Hungary. This initiative aims to generate over 27 gigawatts of renewable energy in Azerbaijan, utilizing solar, hydroelectric, and wind energy from the Caspian Sea. Azerbaijan is set to export at least 3 GW in the first phase, contributing to the nation's energy security and environmental sustainability.

Equinor's Exit and SOCAR's Control

Near the end of the year, Equinor, the national oil firm of Norway, made an announcement announcing its departure from Azerbaijan after 30 years, having sold its interests in two Azerbaijani oil fields and the Baku Tbilisi Ceyhan oil pipeline to SOCAR. After the purchase, SOCAR now owns all of the Garabagh field and has a 32.27 percent share in ACG and a 33.71 percent stake in the BTC pipeline. The fact that SOCAR chose to buy all of Equinor's assets indicates that Baku wants to maintain tight control over its primary oil export route while also optimizing the returns from its key source of export revenue.

UAE-Azerbaijan Strategic Partnerships

President Sheikh Mohammed bin Zayed Al Nahyan of the UAE and President Ilham Aliyev of Azerbaijan solidified their historic visit with a comprehensive package of agreements, enhancing strategic partnerships between the two nations. The agreements include cooperation in the energy sector, with SOCAR and Abu Dhabi National Oil Company (ADNOC) signing a crucial agreement on strategic collaboration.

A formalized memorandum of understanding on strategic collaboration between Azerbaijan and the United Arab Emirates was one of the major agreements signed during the visit, demonstrating the commitment to expand their multifarious cooperation. Furthermore, the State Oil Company of Azerbaijan (SOCAR) and Abu Dhabi National Oil Company (ADNOC) forged a crucial agreement on strategic collaboration, paving the way for cooperative endeavors in the energy sector.

By signing a memorandum of understanding, the ministries of energy in Azerbaijan and the United Arab Emirates reaffirmed their commitment to working together on investment projects including the transmission of power. This action represents the common goal of improving the energy infrastructure and creating a strong basis for reciprocal development.

Turkiye-Azerbaijan Economic Relation’s Reinforcement

Azerbaijan further strengthened its regional ties with Turkiye through the Igdir-Nakhchivan gas pipeline and the memorandum of intent for the Kars-Nakhchivan railway. These initiatives, along with a green energy agreement, signify the commitment to mutual development and energy security. A memorandum of intent for the Kars-Nakhchivan railway was also signed by the presidents of the two nations. Additionally, a green energy agreement was struck by the two nations. The building of the Igdir-Nakhchivan gas pipeline will revitalize ties between the two nations.

"The construction of the Igdir-Nakhchivan gas pipeline is an important event in the history of our fraternal relations and will give a new boost to our relations and ensure the energy security of Nakhchivan to a greater extent," President Ilham Aliyev stated.

EBRD’s investment in ASCO

Additionally, Azerbaijan bolstered its commercial fleet both inside and beyond the Caspian basin last year. Azerbaijan Caspian Sea Shipping (ASCO), the nation's largest shipping firm, expanded its fleet through agreements with the European Bank for Reconstruction and Development (EBRD), enabling the nation to participate more actively in international waters. With the European Bank for Reconstruction and Development (EBRD), the ASCO reached an agreement to acquire the $60 million needed to purchase two dry cargo ships. The state-owned company stated that this initiative will enable it to expand the number of merchant fleet activities outside the Caspian Sea in international waters and to fortify its regional ties as a member of the Trans-Caspian International Transport Route (Middle Corridor).

While the global economy faced tumultuous times in 2023, Azerbaijan's strategic initiatives and partnerships position the country for economic could help in the creation of resilience and growth. By leveraging its green energy potential, consolidating control over key oil assets, and fostering international collaborations, the country shows its ability to keep stability and forward-thinking amid global uncertainty in 2024.

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