Our Insights

Azerbaijan: Central Asia's New Gateway

Situated on the western shore of the Caspian Sea, Azerbaijan holds keys to the Black Sea ports in Georgia that are connecting the economies of the land-locked Central Asia to the European markets. This unique geographic feature, however, until recently didn’t play such a prominent role in regional affairs. Azerbaijan as late as 2019 paid little attention to the economic dimension of cooperation with Central Asia beyond the exploration of the Caspian Sea basin that Azerbaijan shares with Kazakhstan and Turkmenistan, and the potential expansion of trade routes with China. Promising initiatives, such as the Trans-Caspian pipeline, connecting Central Asia energy producers to the European markets through Azerbaijan often remained on paper due to various geopolitical considerations on both sides and lacking economic momentum.

In 2022 the geopolitical situation changed so dramatically, that some analysts dubbed the country’s rapid rapprochement with the neighboring regions as Azerbaijan’s pivot to Central Asia - which in turn can be also seen as Central Asia’s reciprocal pivot to Azerbaijan. When in the span of a mere two years the freight trains running from the Uzbek capital through Turkmenistan and from Chinese Xian through Kazakhstan reached Baku for the first time and the cargo trans-shipment between Azerbaijan and Central Asia grew six-fold in 2022 alone, the country found itself to be a critical multimodal hub connecting East and West. This mutual convergence not only redirects the trade flows away from the traditional routes running north to Russia towards the so-called Middle Corridor but changes the power dynamic in the region.

The launch of the Trans-Caspian International Transport Route (TITR), the infrastructure backbone of the Middle Corridor, built by Azerbaijan, Kazakhstan, and Georgia as an alternative to existing transit links largely controlled by China and Russia, has allowed countries in the region to put their economic interests first. Now appearing as a viable alternative to the existing land and maritime trade routes between China and Europe, last month TITR attracted EUR 10 billion in investments from European and international investors.

Trans-Caspian International Transport Route

Azerbaijan already plays a prominent role in the European energy security policy, with the potential to diversify its supply from hydrocarbons to green hydrogen. The renewed interest of the EU in Central Asia, driven by both geopolitical and economic considerations, such as getting access to critical resources, from uranium to rare earth minerals, inevitably brings up the Middle Route - and Baku at its center - to the global stage.

Notwithstanding its relations with the West, Azerbaijan has another geopolitical card to play - its strategic alliance with Türkiye. The country which has decades-long political and economic interests in Central Asia as a market for its industrial output, is increasingly becoming a major consumer of raw materials and energy resources from Central Asia and South Caucasus. The Middle Corridor will potentially allow Türkiye to reduce the dependence of its trade with Central Asia on Iranian routes. With its unique “one nation, two states” relations with Türkiye, Azerbaijan’s strategy of trilateral alliances now encompassing Kazakhstan, Kyrgyzstan, Turkmenistan, and Uzbekistan among other countries, made it an important power broker and intermediary between the Turkic-speaking states.

As the predominant economic and military actor in its immediate neighborhood Azerbaijan has secured access to the Black Sea by boosting the economic development of Georgia, which benefits from energy and goods transit to Europe and Türkiye. Following the series of successful military operations in 2020-23, Baku not only restored its control over the Karabakh region but significantly strengthened its negotiating position over the so-called Zangezur Corridor through the territory of Armenia, connecting Azerbaijan to its southern exclave Nakhichivan bordering Türkiye and Iran.

As a result, Azerbaijan, earlier seen as a mere energy supplier, in the last two years re-emerged as the critical trade gateway and power broker, controlling Central Asia’s access to the key markets and shaping its trade diversification agenda. The European policy approach towards Azerbaijan, especially in the light of straining relations with the EU and its members, would have to account for the Union’s ambitions both in the Caucasus and Central Asia and may require a careful rebalancing of economic and political interests.

On the other hand, the intensive bilateral and multilateral contacts between Azerbaijan and Central Asia, as well as evidently increasing foreign policy alignment between the Turkic-languages states, could be seen not necessarily as a product of cultural and linguistic affinity, but of the growing economic interdependence. The strengthening of Central Asia - South Caucasus links, with Azerbaijan at the core of this process, will continue to play out for the foreseeable future, driving trade and supporting economic growth and diversification.
Photo by Ismail O. Ukav