The Power of Azerbaijan: What Do the Figures and Facts Say?

If a state’s power is measured by its economy, Azerbaijan is not a large economy but a medium-sized state with a very strong financial cushion and a strategic position.

1. The Scale of the Economy

According to the State Statistical Committee, Azerbaijan’s GDP reached 129.1 billion manats in 2025, 1.4% higher than the previous year. GDP per capita was 12,602.2 manats. That is roughly $75.9 billion.

The structure of growth also matters. Value added in the oil and gas sector fell by 1.6%, while the non-oil and gas sector grew by 2.7%. The non-oil part of the economy now makes up most of GDP: in the first half of 2025 its share was 69.2%. In 2024, growth was 4.1%, so the pace slowed noticeably in 2025. The Central Bank raised its 2026 growth forecast to 2.4% and expects 2.9% in 2027.

2. The Main Strength: Financial Security

Azerbaijan’s best-documented advantage is its savings.

As of April 1, 2026, the assets of the State Oil Fund (SOFAZ) stood at $73.5 billion, Central Bank reserves at $11.66 billion, and combined strategic reserves at $85.15 billion.

Fitch Ratings forecasts that sovereign foreign-currency assets will reach $93 billion in 2026, equal to 117% of GDP.

The agency notes that net sovereign foreign assets relative to GDP will be the highest in the “BBB” category.

According to the EBRD, in mid-2025 reserves covered more than three years of imports, and Moody’s upgraded the rating to Baa3 in June 2025. Fitch maintains the rating at BBB- with a stable outlook and calls the external creditor position “exceptionally strong.”

For comparison: Georgia’s international reserves stood at $8.17 billion in September 2026 and Armenia’s at $6.66 billion. The comparison is not strictly like-for-like, since Azerbaijan’s figure includes the sovereign fund.

This cushion allows the state to withstand price shocks, maintain the exchange rate at 1.7 per dollar and keep room for maneuver under external pressure. In financial terms, this is a rare advantage for the region.

3. Energy: A Strategic Supplier for Europe

In 2025, Azerbaijan produced 51.5 billion cubic meters of gas; exports were 25.2 bcm, of which 12.8 bcm went to Europe. The rest was split as follows: 9.6 bcm to Türkiye, 2.3 bcm to Georgia and 0.5 bcm to Syria.

What matters is that the Southern Gas Corridor delivers gas directly to European markets while bypassing Russia and Iran. In 2026, SOCAR also began sales to Germany and Austria. A 10-year agreement for 1.5 bcm per year was signed with Germany’s SEFE. This strengthens Baku’s position in negotiations.

There are limits, however. Production growth is slow (2.4%), and pipeline capacity in the Southern Gas Corridor remains the main bottleneck, with no clear commitments to expand to the promised levels. In other words, European demand and political support exist, but rapid export growth depends on infrastructure and output.

4. Foreign Trade and Diversification: Progress Made, Dependence Remains

In 2025, foreign trade turnover was $48.9 billion. The largest partner is Italy (24% of turnover, mostly oil), followed by Türkiye, Russia and China.

There is visible progress on the budget side. The economy minister stated that the share of non-oil and gas revenues in the budget rose from 40% in 2018 to 52% in 2025, and the 2026 draft projects 57%. Non-oil exports are also growing: in January–October 2025 they rose 6.6% to $2.99 billion.

But the full picture is this: according to customs data, of total exports of about $25 billion, the oil and gas sector accounted for 85.51%. Non-oil exports are about $3.6 billion (14.5%), roughly six times less than oil and gas exports. As a result, the economy remains highly sensitive to fluctuations in the global energy market.

5. Transit and Geopolitical Position

Azerbaijan’s third source of strength is geography. In August 2025, Armenia and Azerbaijan initialed a peace agreement in Washington. In January 2026, the US and Armenia published an implementation framework for the 43-kilometer TRIPP route linking Azerbaijan to Nakhchivan. According to the same source, the route is part of the Middle Corridor, and freight volumes on that corridor have quadrupled since 2022.

The US also openly backs Baku’s role. A senior US official said Washington expects to help Azerbaijan grow its role as the central node of the Middle Corridor for energy transit. This turns economic strength into diplomatic weight. It should be noted that the peace agreement has not yet been fully ratified, and the parties’ expectations of TRIPP differ.

Conclusion: Strengths and Risks

Strengths

Weak points

Sovereign assets of about 117% of GDP (Fitch forecast)

Over 85% of exports are oil and gas

Low public debt

Oil and gas output is declining; overall growth is weak (1.4%)

Alternative gas source for Europe

Gas export growth depends on pipeline capacity

Transit position on the Middle Corridor

Peace process and TRIPP not yet finalized

Rising share of non-oil revenues in the budget

36% of SOFAZ’s portfolio is gold, exposed to price swings

On the last point, Fitch itself cautions that although higher gold prices support the sovereign rating, they are unlikely on their own to lead to a further upgrade.

Azerbaijan’s strength lies not in the size of its GDP but in its financial resilience and its energy and transit importance. This strength is real and backed by figures, but the long-term outlook depends on how quickly the non-oil economy can replace oil and gas revenues.