Azerbaijan’s Victory Is Also An Economic Victory For The U.S.
Seeking Alpha Analyst Since 2020
Nikita Yudin graduated from the Baku State University in the Department of Social Sciences and Psychology. Since 2018, he has worked as a journalist covering the intersection of culture, technology, and the local startup ecosystem. He also runs his own blog, TechTechTime, covering startup ecosystems in Azerbaijan and surrounding countries.
Summary
- An Azerbaijani oil route can now run through Armenian territory. The strength of global oil prices in 2021 will play a major role in the performance of Azerbaijan's economy.
- With Nagorno-Karabakh's gold fields now under the administrative and physical control of Azerbaijan, the U.S. has an opportunity to increase its mining presence in the region.
- Nagorno-Karabakh could also emerge as a new hub for innovation, given Azerbaijan's plans to create a technopark that would likely attract international investment.
The outcome of the recent six-week war over the Nagorno-Karabakh region in the South Caucasus not only represents a momentous victory for Azerbaijan, but also carries substantial benefits for economic relations between Washington and Baku.
At the 36th session of the Standing Committee on Economic and Trade Cooperation of the Organization of Islamic Cooperation in late November, Azerbaijani Minister of Economy Mikail Jabbarov called for the expansion of U.S.-Azerbaijan cooperation. He noted that 257 American companies already operate in various spheres of Azerbaijan’s economy and that the U.S. invests $14 billion in Azerbaijani industries, including $12.8 billion in the oil and gas sector.
Indeed, with Azerbaijan reclaiming control of Nagorno-Karabakh following three decades of Armenian occupation, business ties between the U.S. and an economically strengthened Azerbaijan are poised to flourish.
Oil and gas
As one of the primary exporters of oil and gas to European countries, Azerbaijan leads the $45 billion, triple-pipeline Southern Gas Corridor initiative that aims to reduce the continent’s reliance on Russian energy. While the occupation of Nagorno-Karabakh forced Azerbaijan to take a circuitous route to Turkey by laying the Baku-Tbilisi-Ceyhan pipeline through Georgia, an Azerbaijani oil route can now run through Armenian territory, which could save Baku up to $200 million annually.
Global oil prices reached a nine-month high in mid-December amid the initial rollout of coronavirus vaccines and progress toward a new U.S. stimulus deal, then fell following developments surrounding new strains of the virus in the U.K. and South Africa. The strength of oil prices in 2021 will play a major role in the performance of Azerbaijan’s economy.
Gold mines
Gold deposits are located in Zengilan and Kelbajar, two regions adjacent to Nagorno-Karabakh. The precious metal has been mined illegally in the area for the past 30 years, including by the Swiss company Franck Muller and Canada’s First Dynasty Mines, and 150 tons of gold were exported from the Karabakh deposits. RV Investment Group Services, an American company which in 1997 signed a contract with Azerbaijan for the development of the three largest gold fields in Nagorno-Karabakh, repeatedly opposed the illicit activity.
Now, the fields are under the administrative and physical control of Azerbaijan, presenting the U.S. with an opportunity to increase its gold mining presence in Nagorno-Karabakh.
The road to Nakhchivan
According to the trilateral Armenian-Azerbaijani-Russian agreement that ended the war, Azerbaijan now has access to a road connecting its territory with the Nakhchivan Autonomous Republic, an enclave of Azerbaijan which does not actually share a border with Azerbaijan. Instead, Nakhchivan borders Armenia, Turkey, and Iran. Azerbaijan has gained not only a direct route to its exclave, but also a new trade route to Turkey.
Forests
Nagorno-Karabakh is home to hundreds of tree species, including rare ones, and Azerbaijan can now use the territory to grow its timber processing industry and export wood to neighboring countries.
Rivers
Azerbaijan reclaimed four rivers as a result of the war, a strategically significant development.
“Of course, the fact that the sources of four large rivers are located on the territory of our country is our great advantage,” Azerbaijani President Ilham Aliyev has said. “But these territories were under occupation. Now these territories have been liberated from occupation. For the restoration of the lands liberated from the occupation and life there, our water resources, of course, will be of great importance. The relevant instructions have already been given and the construction of reservoirs is planned. This in itself is one of the factors that will have a very large impact on the development of agriculture, ensuring the ecological balance.”
Tourism
Nagorno-Karabakh’s majestic mountains, snowy slopes, natural landscapes, and healing springs give the region tremendous potential as an attraction for tourists from America and around the world. The area is also rich in historical sites such as the Khudaferin bridges, which were built around the 12th century and to this day serve as a ferry for local residents across the Araz River. Nagorno-Karabakh is also home to ancient Christian shrines and Muslim mosques, which will pique the interest of religious pilgrims worldwide.
In order to improve access to Nagorno-Karabakh, the Azerbaijani government has already ordered the construction of a new six-lane highway. A railway will connect the region with a number of large Azerbaijani cities, and an airport in the city of Khojaly will enable foreign tourists to visit the area.
Innovation
Nagorno-Karabakh could emerge as a new hub for innovation. Chairman of the Azerbaijan Innovation Agency Tural Karimli has spoken about plans to create a technopark in the region, which would likely attract international investment.
Ultimately, the liberation of Nagorno-Karabakh will diversify Azerbaijan’s economy and position the country as a stronger business partner for the U.S.
Nikita Yudin graduated from the Baku State University in the Department of Social Sciences and Psychology. Since 2018, he has worked as a journalist covering the intersection of culture, technology, and the local startup ecosystem.
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