Economic outcomes of 2021: Azerbaijan takes new heights

2021 turned out to be full of economic events. Large-scale restoration work began in the lands liberated from the occupation, the 500 millionth ton of oil was transported through the Baku-Tbilisi-Ceyhan pipeline, Azerbaijan and Turkmenistan agreed to jointly develop the Dostlug field, non-oil exports reached a historic record high… and the list is not over yet.

There were so many events that one article is not enough to list them all, so we will limit ourselves to the main ones.

The outgoing year has become the second “coronavirus” year for the world. While the year 2020 shocked everyone and the global economy received a serious blow, in 2021 the world began to gradually recover.

For Azerbaijan, 2021 is a year of recovery in the first place. From January through November, the country’s GDP (more recent statistics are not yet available) grew by 5.3% after shrinking by 4.3% in 2020. Tangible growth was recorded in the non-oil economy – 6.4% against a 2.6% decline a year earlier.

Historic year

One of the most significant events for Azerbaijan’s economy took place in 2021, when the country’s non-oil exports reached record highs, exceeding $2 billion in January-October.

The country has not seen such a figure in the entire history of it independence – the previous record was $1.9 billion. In January-November, non-oil exports already exceeded $2.4 billion.

The country laid the foundation for this record several years ago amid a sharp drop in oil prices in 2014-2015. This period marked the start of large-scale measures for the development of exports, with Azerbaijan’s trading houses opened in various countries, organization of export missions launched, entrepreneurs-exporters encouraged, new agricultural and industrial parks opened, and some other initiatives implemented.

The base created over the past years is precisely what made it possible to achieve such high growth this year, even as coronavirus restrictions have caused disruptions in product supply chains around the world.

It is worth noting here another export record – residents of the Sumgayit Chemical Industrial Park exported products worth $764 million in January-November 2021, which is approximately the same as exported by residents over the past decade combined!

Economic revival of Karabakh

Almost immediately after the liberation of Karabakh, large-scale reconstruction work began in the region. The volume of work done is amazing – new roads are being laid almost throughout the region, the first international airport of Karabakh was opened in Fuzuli, the Agdam industrial park and the “Economic zone of the Araz Valley,” 4,800 bee families were brought to Kalbajar and Lachin districts, tourist routes are being developed, the restoration of Shusha, Adgham and other settlements proceeds at a full pace.

Separately, it is worth noting the projects “Smart Village” and “Smart City”, which will become the “face” of the renewed Karabakh. It’s no secret that according to the government’s plans, the territories freed from occupation will become a high-tech zone. At present, the first “smart village” of the republic is being created in the Zangilan region.

Now in the village of Agaly, where the project is being implemented, 200 houses are being built, a school for 360 children, a kindergarten for 60 children, and other civil construction is underway.

The project consists of 5 components: housing, manufacturing, social services, smart agriculture and alternative energy infrastructure.

It is here that the AirPON technology of Huawei will be used for the first time to reduce the laying of fiber-optic lines from 10 to 1 km and to provide up to 100 megabits of wireless Internet.

The village will produce the famous Italian cheese mozzarella di buffala, and a farm for 300-400 buffaloes will be built. The number of cattle will subsequently be increased to 1000. The farm will be built by an Israeli company. Here, manure will be processed for fertilizers and biogas production, treated wastewater will be reused, electricity generated from solar energy will be consumed.

The Karabakh and East Zangazur economic regions have a huge potential. In the coming years, the share of the East Zangazur economic region is expected to form 4% of the country’s economy. This means that in the near future, it will possible to produce agricultural and industrial products worth around $3 billion in the East Zangazur economic region

Entrepreneurs also understand the potential of the region. Though the restoration work and demining of the territories have not yet been completed, almost a thousand investors have already turned to the Small and Medium Business Development Agency to obtain permission to work here.

Azerbaijan’s ‘blue’ gold

In the second half of the year, Europe was overwhelmed with panic amid the rising price of gas, which reached the historical highs several times. The figure hit another record on December 21, when the exchange price of “blue fuel” in Europe reached $2,150 per thousand cubic meters.

The rise in gas prices was promoted by both periodic news that Gazprom had once again failed to book volumes of gas pumped through the Yamal-Europe pipeline, as well as insufficient filling of gas storage facilities in Europe and an abnormally cold winter.

Against the background of these events, the attention of energy market participants turned to Azerbaijan. It was originally planned that this year the country will supply about 5 billion cubic meters of gas to Europe, but in fact the volume of supplies in January-November 2021 amounted to 7.3 billion cubic meters.

The situation this winter has clearly shown how important it is to diversify sources of gas supplies. Azerbaijan proved to be a reliable partner and this only strengthened the desire of European countries to cooperate.

Economic integration: Countries in the region enhance cooperation

This year will also be remembered by the strengthening of economic cooperation in the region. Azerbaijan and Turkey organized the first energy forum and renewed the agreement on gas supplies via Baku-Tbilisi-Erzurum. A business forum was held jointly with Georgia, which ended with the signing of five documents. Azerbaijan and Iran launched a test train on the Persian Gulf – Black Sea route, and together with Turkmenistan signed an agreement on swap gas supplies. Azerbaijan signed a similar agreement with Russia in the summer.

And, finally, there has been some progress between Azerbaijan and Armenia in unblocking communications in the region – an agreement has been reached on the construction of railways and highways. The Zangazur corridor, which will lay the foundation for the accelerated development of the region, is gradually becoming a reality.

The regional processes that have taken place this year show that the countries understand the need for closer cooperation. This is, first of all, necessary to ensure regional security. Secondly, to stimulate the growth of the economies participating in regional projects. And, thirdly, to transform the region into a logistics and trade hub, which in turn will become the basis for sustainable development of all parties involved.

Azad Hasanli, analyst