The Current State of the Azerbaijani Economy and Future Prospects

30 years ago, on September 20, 1994, Azerbaijan signed a Production Sharing Agreement (PSA) with foreign companies for the development of the “Azeri-Chirag-Guneshli” (ACG) oil fields located in the Caspian Sea. The PSA for the ACG, initially set for 30 years, was extended on September 14, 2017, until the end of 2049, thereby commencing the second phase of the “Contract of the Century.”

The State Statistical Committee (SSC) and the State Customs Committee (SCC) have released data on Azerbaijan's economic performance for the January-August period, reaffirming that despite efforts toward economic diversification, oil continues to be the dominant driver of the country's GDP and export portfolio, including its contribution to the state budget.

Hosting COP29 necessitates Azerbaijan to take several steps in the energy sector, environmental protection, and climate finance. Therefore, the Azerbaijani government should establish a National Agenda before COP29. This agenda should not only focus on mitigating the negative impacts of climate change and protecting environmental balance but also on accelerating the energy transition. Crucially, it should outline strategies for securing the necessary financing, as this is a key determinant of the success of these initiatives.

For the Azerbaijani government, exporting not only gas to Europe but also "green energy" has become a priority. As a result, Azerbaijan has started to pay special attention to energy production from alternative sources, as well as conserving fuel oil and natural gas used for power plants. Cooperation agreements on "green energy" projects have already been signed with the United Arab Emirates' "Masdar"[1] and Saudi Arabia's "ACWA Power."[2] Under these agreements, the construction of the 240 MW Khizi-Absheron Wind[3] and the 230 MW Garadagh Solar Power Plants[4], with a total investment value exceeding $500 million, is planned.