Azerbaijan Could Become the Second Country in the World After Angola in Terms of Depletion of Oil Revenues

Azerbaijan’s economy, which is heavily dependent on oil revenues, faces a stark warning in the 2021 report by Carbon Tracker titled “Beyond the Oil States: The Urgent Need to Reduce Dependence on Oil in the Context of the Energy Transition.” The report ranks Azerbaijan among the most vulnerable oil-dependent countries, placing it in the "5th group" — a category reserved for nations expected to experience a decline in oil and gas revenues exceeding 40% over the next decade. This group includes Angola, Bahrain, Timor-Leste, Equatorial Guinea, Oman, and South Sudan, highlighting shared economic risks for these states.

The findings are part of a broader assessment, which forecasts that 40 oil-dependent countries around the world will face an average revenue drop of 46% due to stricter climate policies and advancements in alternative energy. Such changes could result in combined losses of $9 trillion, underscoring the economic challenges ahead. The report emphasizes the social impact of these shifts, as more than 400 million people live in the 19 countries at the highest risk. According to economist Gubad Ibadoglu, Azerbaijan could face an income deficit of up to 68%, leading to substantial cuts in public services and widespread job losses.

In parallel, the World Bank’s long-term economic forecasts paint an equally grim outlook for Azerbaijan. Under the current policy framework, the World Bank’s Long-Term Economic Growth Model (LTGM) predicts economic stagnation, with an average annual GDP growth of just 0.5% from 2024 to 2050. Over this period, GDP per capita is projected to increase by only 11%, highlighting limited growth prospects without significant policy reforms.

The World Bank’s 2022 memorandum on Azerbaijan’s economy outlines structural challenges, including a shrinking and aging population, alongside depleting hydrocarbon reserves. The report stresses that without a decisive shift toward diversification, the weakness of the non-oil private sector will place additional pressure on the country’s economic trajectory. These factors could hinder Azerbaijan’s development, leaving it vulnerable as global energy markets transition away from fossil fuels towards renewable energy sources.