The oil industry dominates the industrial sector. A large part of the manufacturing industry has been oil related, such as factories that make equipment for the oil industry as well as the petrochemical and engineering industries.
Sanqaçal south of Baku is a huge oil and gas terminal, from where four oil and gas lines go to the Black Sea, Turkey and the Mediterranean. The facilities in Sanqaçal have in recent years been expanded with, among other things, a new refinery, with BP as operator.
The state oil company Socar (The State Oil Company of the Azerbaijan Republic) is part of an international consortium AIOC (Azerbaijan International Operating Company), which in 1994 signed an agreement on oil recovery until 2024.
The older petrochemical industry is located in the capital Baku. Chemical industry is also located north of Baku, in Sumqayıt which has been the most industrialized city. Sumqayıt is severely affected by the environmental degradation that followed in the wake of Soviet heavy industry.
The construction industry has been greatly helped by the expansion in the oil and gas sector, not least with new oil and gas pipelines. In the 2000s, Baku also had a construction boom, most of the state construction projects. Until 2014, the construction sector grew substantially, contributing about one-seventh of GDP. Since then, construction has declined.
The manufacturing industry manufactures plastics, foodstuffs, textiles, leather goods, carpets and furniture, among other things. Most industries have had fairly strong development in recent years.
- COUNTRYAAH: List of top trading partners of Azerbaijan. Includes countries that imported most shipments from and exported most goods to the country.
The textile industry, on the other hand, has faced stiff competition from cheap imports from Turkey and Iran. It has also applied to factories that manufacture household electronics.
The industrial sector stands with the construction industry included for almost half of GDP, but the manufacturing industry has so far found it difficult to reach an international market.
Oil and gas account for about 90 percent of Azerbaijan’s exports and have for a long time produced a large trade surplus. Italy imports a lot of Azerbaijani oil and receives only a quarter of Azerbaijan’s exports.
Azerbaijani exports were hit hard by falling oil prices in 2014 – 2015. Foreign trade was on the way to a deficit at the same time as the entire economy was in recession. Since then, the trend has turned upwards, although there is no question of a boom.
Alongside Italy, Germany, France and Israel are important export markets. Russia has fallen back as a trading partner. Problems in relations with Russia – and even more with Armenia – during the war on Nagorno-Karabakh in 1991–1994 and an unofficial Russian trade boycott in 1994–1996 forced Azerbaijan to find new markets.
In addition to oil and gas, raw sugar, fruits and metals are exported. However, the outlook is strained in several of the country’s export markets. Turkey and Iran are being squeezed by economic headwinds, for Iran’s new sanctions from the United States since 2018 that are hitting hard on purchasing power.
Important commodities are metals, vehicles, machinery, electronics and food. Imports come mainly from Turkey, Russia and Germany.
The foreign oil companies operating in the country must import goods needed for the expansion of the oil sector, for example building materials for pipelines and also various services. Valves and taps for oil and gas pipelines are therefore one of the most important import products.
The export of gas goes primarily to Turkey but also to Georgia. The export agreements mean that Azerbaijan may periodically experience a shortage of gas for domestic consumption and must therefore consider certain imports from Russia, Iran or Turkmenistan.
In recent years, Azerbaijan has emerged as one of the countries that can receive future income through expanded transport routes for goods between China and Europe. Most transit traffic plans of this kind are linked to China’s “new silk roads”. When transporting via Central Asia and the Caspian Sea, Russian territory can be avoided. Because valuable or sensitive goods, such as electronics, can damage transport at sea, the economic reasons behind transit traffic are strong. A railway investment towards Georgia and Turkey (partly newly built, partly modernized older runway) has largely been funded by the state Azerbaijani oil fund.
FACTS – FOREIGN TRADE
US $ 20,794 million (2018)
US $ 10 952 million (2018)
US $ 6,051 million (2018)
Commodity trade’s share of GDP
69 percent (2018)
Main export goods
oil and gas, machinery, cotton, food
Largest trading partner
Italy, France, USA, Turkey, Russia, China, Germany
Azerbaijan is scenic, but few tourists find their way there. The tourism industry has had little impact on the country’s economy, but it is growing.
Along the coast towards the Caspian Sea there are holiday homes, tourist facilities and campsites, but they are mostly used by new rich Azeris. Most foreign tourists come from Russia and Georgia. The ones that are growing the most are travelers from states of the Persian Gulf.
In 2018, the number of foreign tourists increased by almost six percent compared to the previous year, according to state statistics. In total, the country received over 2.8 million visitors from other countries.
Baku is beautifully situated by the sea within a few islands and is protected from northern winds by a wreath of surrounding mountains. The capital has a wealth of historical monuments from ancient Persian times as well as from the oil boom of the last century. Since the 1990s, a number of new hotels have been built in Baku, mainly to accommodate visiting experts from Western oil companies. A number of spectacular skyscrapers have completely changed the city’s profile, including a building complex designed by experimental Iraqi-British celebrity architect Zaha Hadid.
FACTS – TOURISM
Number of foreign visitors per year
2855,000,000 US dollars (2016)
The share of tourist income from exports
16.2 percent (2016)