While the Strait of Hormuz is paralyzed and Brussels urges Europeans to conserve gas, Azerbaijan is offering investors the rarest commodity of 2026: predictability. Yet the central question raised by the forum that has just concluded is different: can the country use its oil wealth to build an economy that will one day no longer need oil?
On Saturday, September 26, two news streams converged in Baku that would ordinarily seem impossible to fit into a single picture. In the first, Iran was presenting Washington with a seven-day plan to restore navigation through the Strait of Hormuz, the American side was in no hurry to accept it, and the European Commission was urging EU countries to reduce gas consumption because of high prices. Azeri Light crude was trading that morning at $123.46 per barrel. In the second, President of Azerbaijan Ilham Aliyev stepped before an audience that included representatives of BlackRock/GIP, Franklin Templeton, PGIM, Brookfield, KKR, Ares, Neuberger Berman, the Turkish Wealth Fund, and Singapore’s Temasek. Organizers estimated that the institutions attending the Second Azerbaijan International Investment Forum collectively managed approximately $30 trillion in assets.
Thirty trillion dollars is roughly comparable in scale to the annual GDP of the United States. Money of that magnitude does not attend forums out of courtesy. It calculates returns, sovereign risk, institutional quality, and planning horizons. That is why the two-day forum on September 25 and 26 is better understood not as yet another investment presentation, but as a market verdict: in a world where major trade arteries are exposed to conflict and supply chains are being severed along the fault lines of sanctions and wars, the South Caucasus has become an asset. Azerbaijan is its central component.
The theme of the forum sounded almost like a diagnosis of the era: rebuilding trust in a fragmented world and positioning the South Caucasus as a pillar of global connectivity. The strategic partner was Italy’s The European House – Ambrosetti, one of Europe’s most influential analytical institutions. The choice of partner speaks for itself. Baku is speaking to European capital in the language of Europe’s own expert platforms.
Hormuz Is Closed, Baku Is Open: What Really Brought the Money to the Caspian
Large capital usually goes not where everything is best, but where investors believe things are least likely to become worse. Global funds learned that simple truth in 2022, when the Russian market disappeared from portfolios within weeks, and they learned it again in 2026, when the conflict surrounding Iran transformed the Persian Gulf from the planet’s most reliable energy warehouse into a zone of insurance risk.
Speaking on September 26, President of Azerbaijan Ilham Aliyev recalled that more than $360 billion had been invested in the country over the past thirty years and that Azerbaijan had maintained political and economic stability for more than three decades. He also emphasized the proposition that, in essence, explains why guests of this caliber come to Baku: agreements signed thirty years ago remain inviolable to this day.
My generation of journalists remembers very well how the “Contract of the Century” was signed in September 1994. The war had not yet subsided, the economy lay in ruins, and Western oil companies were signing an agreement with a young and little-known state, risking virtually everything. Since then, the contract has never been unilaterally revised, “nationalized” in response to changing circumstances, or turned into an instrument of political blackmail. For an investor thinking in twenty-year cycles, that track record is worth more than any tax holiday.
Hence the head of state’s second message, addressed directly to European capitals: even if the geopolitical situation in the region changes, Azerbaijan will remain an attractive country for suppliers. Translated from diplomatic language into economic terms, the meaning is simple. When Hormuz is closed, Baku is open.
It is easy to see who benefits from this configuration. It is more interesting to examine who loses. First are suppliers whose reliability is now measured by tanker insurance premiums: every day of uncertainty in the Persian Gulf pushes part of Europe’s long-term contracting into a higher-risk category. Next are transit routes tied to territories under sanctions. A carrier seeking a predictable corridor from China and Central Asia to Europe is objectively being redirected toward the Caspian. Finally, political forces in the region that spent years betting on Azerbaijan’s isolation and permanent instability in the South Caucasus also lose. Thirty trillion dollars represented in a Baku conference hall is the most persuasive answer to those calculations, and that answer came from the market, not from propaganda.
An Oil Country Where Oil Is Already in the Minority
The stereotype of Azerbaijan as an “oil state” became outdated about a decade ago. Figures for January through August 2026 show an economy built on an entirely different structure. GDP for the first eight months reached 87.71 billion manats and grew by 1.2 percent in real terms. The oil and gas component contracted by 0.8 percent to approximately 26.18 billion manats. The non-oil and gas sector expanded by 2.1 percent, reaching roughly 61.53 billion manats.
More than 70 percent of the country’s value added is now generated outside oil and gas. The head of state specifically emphasized that figure at the forum.
An attentive reader will notice the asymmetry: overall growth of 1.2 percent is being pulled down by the natural decline in production at mature fields, while the non-oil economy is expanding almost twice as fast. Such dynamics are characteristic of countries that have passed the peak of oil dependence and entered a phase of substitution.
Intellectual honesty requires identifying the main challenge of the next stage. The structure of exports is changing more slowly than the structure of GDP. Hydrocarbons still generate the overwhelming share of foreign-currency earnings and the positive trade balance. The first phase of diversification, the emergence of a non-oil economy within Azerbaijan itself, has been completed. The second and far more difficult phase is the emergence of a competitive non-oil Azerbaijani economy beyond the country’s borders.
The distinction between the two phases is fundamental. A shopping mall, restaurant, hotel, or residential development increases GDP but does little to alter a country’s place in the global economy. A factory producing pharmaceuticals, chemical materials, industrial equipment, or food for export operates very differently. It earns foreign currency, creates expertise, stimulates adjacent sectors, and reduces the balance of payments’ sensitivity to oil prices. The next stage of Baku’s economic policy will be measured by the share of high-value-added products in exports, not by the share of the non-oil and gas sector in GDP.
A Debt That Could Be Repaid in a Single Day
The forum’s strongest statement concerned not investment, but debt. President of Azerbaijan Ilham Aliyev said the country could reduce its external public debt to zero in a single day. Against the backdrop of states that are simultaneously modernizing and servicing multibillion-dollar borrowings, the statement sounds almost provocative. The arithmetic, however, speaks for itself.
As of September 1, 2026, Azerbaijan’s external public debt stood at $4.5595 billion. Over the course of a year, it had fallen by 7.8 percent, including another $31.3 million decline in August alone. At the end of 2025, the debt had likewise decreased by 6.7 percent, to $4.8135 billion. The country’s strategic foreign-exchange reserves exceeded $90 billion at the beginning of September. The ratio of reserves to external public debt is approximately twenty to one.
The head of state’s statement, therefore, is not rhetoric. It is an accounting fact.
A second indicator is even more interesting because it receives little attention outside professional circles. Azerbaijan’s foreign-exchange market is experiencing an excess supply of dollars. In August alone, the Central Bank purchased $1.5 billion on the market, while its own reserves had increased by $3.8 billion, or 33 percent, since the beginning of the year, reaching $15.3 billion. A regulator buying foreign currency to restrain appreciation of the national currency presents a picture directly opposite to what is seen in most emerging economies.
Fixed-capital investment in January through August totaled approximately 12.68 billion manats, up 10 percent. Roughly 8.43 billion manats went to the non-oil and gas sector. Information and communications grew by 10.7 percent, transportation and warehousing by 8.7 percent, and non-oil and gas industry by approximately 5.4 percent.
These figures point to the central conclusion that distinguishes Azerbaijan from dozens of other cases. Baku is attracting global capital not because it lacks the resources to finance itself. The country is looking for partners that possess what reserves alone cannot buy: technology, production standards, intellectual property, and, above all, access to external markets. In the address to forum participants read on September 25 by Deputy Prime Minister Samir Sharifov, this logic was stated directly: Azerbaijan values technology, expertise, innovation, and access to new markets.
Not Every Billion Smells the Same
At the first forum a year ago, agreements worth more than $10 billion were signed, more than $7 billion of them in the non-oil sector. The task of the second forum was more difficult: to turn signatures into functioning industries. That is why the eleven documents exchanged by the parties on September 26 are particularly interesting for their sectoral anatomy.
Cooperation with ROX Group is planned in construction and development. A separate document concerns the digital economy with Microsoft’s participation, while another covers solar and wind projects. Plantation and processing enterprises are to be established in Agstafa. Aghdam, liberated in November 2020, will receive a poultry project involving Agro Dairy and the Czech agribusiness group AGROFERT. Documents were also signed on the production of veterinary vaccines and the establishment of a pharmaceutical enterprise. The Azerbaijan-Oman Direct Investment Fund will acquire a noncontrolling stake in Azer-Turk Bank. SOCAR, the State Water Resources Agency, and Esyasoft agreed to cooperate on water management. Azerbaijan and Ukraine signed a document on investment promotion.
The most revealing project on this list is the production of silicon carbide, silicon oxide, and silicon using new technologies. At first glance, it appears to be a minor line in the fine print. In reality, it may well be the most ambitious industrial signal Azerbaijan has sent in recent years.
Silicon carbide is a material used in power electronics. Modern electric-vehicle inverters, charging stations, solar converters, and high-voltage power equipment cannot function without it. By available estimates, the silicon carbide substrate market is becoming increasingly concentrated in China, while Western automakers and energy companies are urgently seeking alternative sources. A country with inexpensive electricity, its own gas, logistical access to Europe, and a stable jurisdiction fits precisely the profile they need.
History provides a precedent. In 1972, Intel opened a small assembly facility on the Malaysian island of Penang. Half a century later, Penang had become one of the world’s key semiconductor hubs, while electronics had long since overtaken oil and palm oil in Malaysia’s export basket. It all began with a single plant that local authorities refused to leave isolated, building engineering schools, supplier networks, and service companies around it.
Azerbaijan stands to benefit from permanently abandoning the model of “extract raw materials, export them, then buy back the finished product at three times the price.” The longer the segment of the production chain retained inside the country, the higher the wages, tax revenues, and technological maturity of the economy. One billion dollars invested in import-dependent real estate and one billion dollars invested in export-oriented technology manufacturing are equal only in investment statistics.
Exxon Returns, Absheron Expands: A Gas Renaissance in Defiance of Fashion
Baku never accepted fashionable predictions about the imminent death of hydrocarbons at face value, and it turned out to be right. Speaking on September 26, President of Azerbaijan Ilham Aliyev announced the signing of an agreement on the second stage of development of the Absheron gas-condensate field. According to him, the project will increase the country’s gas production by another 5 billion cubic meters within three to four years.
The scale should be understood correctly. The first phase of Absheron, where SOCAR’s partners are France’s TotalEnergies and the UAE’s ADNOC, produced its first gas in the summer of 2023 but operated on a limited basis. Industry estimates for the second phase envision output of approximately 5 billion cubic meters of gas per year and about 1 million tons of condensate. For comparison, Azerbaijan’s total gas exports to Europe through the Southern Gas Corridor have remained in the range of 12 to 13 billion cubic meters in recent years. The additional volume is equivalent to roughly one-third of current European deliveries.
A second agreement signed that same day is even more telling. Azerbaijan signed a document with ExxonMobil on the development of unconventional oil and gas resources. The head of state stated the wager without diplomatic qualification: if exploration is successful, it could lead to a new oil and gas boom in Azerbaijan.
The return of the American giant to Azerbaijan’s hydrocarbon sector in a new capacity is a direct consequence of changes in Washington. President of Azerbaijan Ilham Aliyev publicly noted that the basic trend toward fossil fuels had changed across the Euro-Atlantic space and thanked President Trump for that shift. Just three years ago, such a statement at an international forum would have been almost unthinkable. Today it reflects a new reality: the U.S. administration has removed the ideological stigma from oil and gas, and Baku, which never apologized for possessing its resources, has gained maximum advantage from that reversal.
The geography of supplies is also expanding in directions that would have seemed implausible only recently. Since August 2025, Azerbaijani gas has been flowing through Turkey to Syria, reportedly at volumes of up to 1.2 billion cubic meters per year, with financial support from Qatar. The Syrian route could potentially open the way to neighboring Middle Eastern markets suffering from chronic energy shortages.
Here, however, the most uncomfortable conversation for Azerbaijan’s European partners begins. Major gas projects require long-term contracts. No one will invest billions in production and transportation without knowing who will buy the gas ten or fifteen years from now. Europe, which today urges its citizens to conserve gas and yesterday proclaimed that it would soon abandon the fuel, must make up its mind. Any discussion of additional Azerbaijani gas makes sense only as a discussion of how investment risk will be shared between seller and buyer. Baku has already assumed its part of that risk.
160 Gigawatts of Wind and 250 Megawatts of Battery Storage: Azerbaijan Wants to Sell Electricity to Europe
The paradox of Azerbaijan’s strategy is that the country is simultaneously expanding gas production and investing in solar and wind power. There is no contradiction. Every kilowatt-hour generated domestically by solar or wind frees up gas for export. Green energy supports gas revenues rather than undermining them.
The potential for wind generation in Azerbaijan’s sector of the Caspian Sea is estimated at approximately 160 gigawatts. Technical potential should not be confused with installed capacity: tens of billions of dollars in generation facilities, substations, storage systems, and interconnectors lie between the two. The first step has already been taken. According to President of Azerbaijan Ilham Aliyev, the country has 250 megawatts of energy-storage systems in operation, and that is only the beginning.
The head of state’s formulation at the forum was unambiguous: Azerbaijan wants to become a highly important electricity supplier. The economic foundation for that ambition was laid in December 2022, when Azerbaijan, Georgia, Romania, and Hungary signed a strategic partnership agreement on green energy in Bucharest, envisioning a submarine cable across the Black Sea. The project was once treated as an exotic idea. The energy crisis of 2026 has transformed it into a matter of European security.
There is a third dimension, discussed at the forum with noticeable enthusiasm. Few countries in the region possess surplus energy capacity; most neighboring states import energy, including from Azerbaijan. An abundance of inexpensive electricity is the raw material of data centers and artificial-intelligence infrastructure. According to the head of state, Baku is already engaged in highly active negotiations with leading global companies. Ninety-six percent of the country is supplied with natural gas, and that level of coverage provides a ready-made foundation for energy-intensive digital industries.
A two-track model is taking shape. The first track, oil, gas, petrochemicals, and fertilizers, provides revenue and energy security. The second, solar power, wind power, storage systems, and data centers, expands the country’s gas-export capacity and, over time, becomes an export product in its own right, transmitted to Europe by cable.
Sixteen Million Tons of Transit, and Why That Is Not Enough
Azerbaijan’s next enormous resource is geography. President of Azerbaijan Ilham Aliyev recalled that the country is among the few states actively participating in both the East-West and North-South corridors, while transit freight volume this year is expected to reach 16 million tons.
The figure is impressive, but geography alone does not generate revenue. The profits of global logistics are created not by the movement of a container itself, but by what happens to it in transit: warehousing, sorting, packaging, insurance, trade finance, repairs, and e-commerce. It is not enough for Azerbaijan to be a road along which Chinese goods travel to Europe. It is more profitable to become the place where those goods leave behind part of their value. Hence the strategic importance of the Alat Free Economic Zone, the Baku International Sea Trade Port, and the modernized railway network.
The head of state put the point more sharply at the forum than any consultant might have. He said that a country can build many bridges, ports, and ships and still lose if it falls behind in digitalization and customs administration and fails to simplify cargo clearance. Containers do not go where the most eloquent speeches about transit are delivered. They go where passage is faster, cheaper, and more predictable. Synchronizing the information systems of the port, railway, and customs authorities is now worth more than another berth.
The geopolitical environment for transit has never been so favorable. At the 81st session of the United Nations General Assembly, Foreign Minister Jeyhun Bayramov stated that peace between Azerbaijan and Armenia had de facto been achieved. Following the Washington meeting of August 8, 2025, where the text of a peace agreement was initialed and the concept of a route through Zangezur was established, the South Caucasus for the first time in thirty years appears to investors as a region without an active front line. More than 90,000 citizens have already returned to the liberated territories. The head of state’s statement on September 25 that the emerging peace in the South Caucasus creates new investment opportunities sounds, coming from the victor, like an invitation rather than a request.
Central Asia is also beginning to move. U.S. Secretary of State Marco Rubio is preparing to visit Uzbekistan with a delegation of American businesses. Any American container traveling to or from Tashkent along the shortest route that avoids Iran and Russia will inevitably cross the Caspian Sea and Azerbaijan.
Copper, Gold, Water: The Second Generation of the Underground Economy
In the age of the energy transition, mining is no longer an “old industry.” Electric vehicles, batteries, wind turbines, and power grids require copper, zinc, and rare metals in volumes for which global production is not prepared. On the eve of the forum, September 24, two figures illustrated the scale particularly well. The economic value of the Filizchay polymetallic deposit project was estimated at 29.7 billion manats. The head of AzerGold reported that 1.28 million ounces of gold would be extracted from the Seyudlu and Ortakend deposits. At the forum, the European Investment Bank openly expressed interest in investing in Azerbaijan’s mining sector.
The trap is well known: extract, load, export. The greatest return comes from keeping beneficiation, metallurgy, materials production, and component manufacturing inside the country. Silicon carbide and Filizchay are links in the same chain of logic.
Food security is the second issue that has evolved from a sectoral concern into a strategic one. President of Azerbaijan Ilham Aliyev called it one of the main priorities associated with domestic demand. Agriculture, forestry, and fisheries account for approximately 6.2 percent of GDP, but their actual importance is far greater than that figure suggests: regional employment is concentrated in these sectors, while food imports and consumer inflation also originate there. The poultry complex in Aghdam, enterprises in Agstafa, veterinary-vaccine production, and SOCAR’s water project with Esyasoft form a single chain. In an arid region, water is worth more than oil, and digital management of water resources may be the most underrated of the eleven documents signed.
The Scarcest Resource Cannot Be Bought at Any Price
A modern factory can be purchased. Equipment can be ordered, software acquired, consultants hired. A national engineering school cannot be created overnight with money.
President of Azerbaijan Ilham Aliyev called education the number-one priority at the forum, and that may have been the most precise statement on the entire agenda. Near-universal literacy provides a solid foundation. A high-value-added economy requires semiconductor engineers, chemists, biotechnologists, energy specialists, artificial-intelligence and cybersecurity experts, logisticians, and financial analysts. An investor arriving to build a silicon carbide plant or a data center must be confident that, five years later, half the workforce will not have to be recruited from abroad.
Public policy is already moving in the right direction. On the eve of the forum, a new financing mechanism for public general-education institutions was announced. Cooperation with Microsoft and the development of the digital economy and cybersecurity infrastructure will acquire lasting value when a domestic ecosystem of specialists, startups, and research centers grows around them. In this logic, education spending is capital investment in productive infrastructure, no less important than the port at Alat.
What Comes Next: Four Dates for the Calendar
Analysis without forecasts is literature. I will venture to identify several benchmarks against which readers can later test this article.
By the end of 2026, transit through Azerbaijan will reach the announced 16 million tons, and in 2027, as geopolitical risks on the Armenian route decline and interest in Central Asia grows, it will exceed 18 million tons.
By January 1, 2027, external public debt will fall below $4.5 billion, while strategic foreign-exchange reserves, assuming current oil prices, will remain above $90 billion.
By the end of 2027, at least one of the major funds represented in Baku will announce a direct investment in Azerbaijan’s energy or logistics infrastructure. The most likely candidates are infrastructure-focused institutions, above all GIP within BlackRock and Brookfield.
The first gas from the second phase of Absheron will arrive in 2029 or 2030, while the issue of long-term contracts with European buyers will become the central subject of the gas dialogue between Baku and Brussels as early as 2027.
One question remains to which I still have no answer. How many years will it take before the first Azerbaijani engineer trained at a silicon carbide production facility establishes a company of his or her own and sells its products in Germany?
Oil as Seed Capital
Sensible diversification differs from a populist struggle against an oil economy in one fundamental respect: it does not renounce the source of wealth, but uses it as seed capital. Azerbaijan does not need to abandon oil and gas. It needs to use the period while hydrocarbons remain expensive and in demand to build, with that money, an economy capable of remaining competitive without them.
Baku has already performed a transformation of this kind once before. In 1994, the country converted oil into geopolitical agency. The task now is more difficult: to transform reserves into productivity, geography into logistics rent, gas into a source of financing for a new industrialization, Caspian wind into an export commodity, and education into a national productive force. The criteria for success will be uncompromising: the share of non-oil and gas exports, labor productivity, the number of high-paying jobs, exports of digital services, and the presence of Azerbaijani companies in international supply chains.
When the plenary sessions ended in Baku on September 26, representatives of funds managing thirty trillion dollars dispersed into bilateral meetings. Somewhere at roughly the same time, another tanker was waiting at the entrance to the Strait of Hormuz for permission that no one could give it. That is the entire difference between two worlds. One sells risk. The other sells a signature that remains valid thirty years later.
The true question of the next decade, however, is no longer how much capital Azerbaijan will manage to attract. It is how much of that capital the country can make work for its own value creation, in factories, laboratories, universities, and in the minds of people who may one day matter more to the country than all the reserves beneath the Caspian seabed.