Social and Economic Impacts of Keeping Azerbaijan's Land and Sea Borders Closed

Azerbaijan's oil and gas sector accounted for only one-third of the country's gross domestic product (GDP) during January-September, but showed modest growth (close to 1%) due to high global oil prices in the third quarter of this year, despite declining oil production in the country.

Diversification, which has long been crucial for Azerbaijan's economy, is even more relevant in the current situation. However, without a competitive environment, a diversification policy implemented through the state's administrative and financial resources cannot ensure sustainable development in the medium and long term. Such policies, while having short-term effects, primarily serve to strengthen the dominance of more monopolistic companies.

In recent years, Azerbaijan has not only lagged behind the European and Central Asian regional indicators in terms of economic growth levels but also fell behind the average GDP growth rate of developing countries. The economic analysis and forecasts from the United Nations Department of Economic and Social Affairs indicate that in Least Developed Countries (LDCs), economic growth is expected to rise to as much as 4.8 percent in 2024 compared to the previous year. In LDCs, the average GDP growth in 2023 was 4.2 percent. For landlocked developing countries (LLDCs), a GDP growth of 4.7 percent is anticipated in 2024, which is close to the level recorded in 2023[1].

Azerbaijan is known worldwide as an oil country, and this is not without reason, as crude oil, petroleum products, and natural gas have constituted at least 90% of the country's exports over the past 15 years[1]. The oil and gas sector has also significantly contributed to the formation of GDP[2], attracting direct foreign investments[3], and maintaining fiscal stability[4]. From stabilizing the national currency[5] to preserving political[6] and social[7] stability at all levels, oil and gas resources have played a leading role in addressing these issues. On July 18, 2022, Azerbaijan signed a "Memorandum of Understanding on Strategic Partnership in the Field of Energy" with the European Union, driven by these political dividends[8].