Azerbaijan’s President Ilham Aliyev used an exclusive session at the Azerbaijan International Investment Forum to set out what amounts to a blueprint for the country’s next phase of development: oil and gas will remain the principal source of wealth, but that income is increasingly intended to finance growth in renewables, logistics, artificial intelligence, data centres, mining and food security.

The significance of the session lay as much in Aliyev’s presence as in the sectors he identified. Rather than leaving the investment pitch to ministers or state companies, the president personally addressed an audience that moderator Adebayo Ogunlesi, chairman and chief executive of Global Infrastructure Partners, said represented about $30 trillion in assets under management. The forum itself was held under Aliyev’s patronage, and the president also attended the exchange of investment documents signed on its sidelines. 

Aliyev’s message was that Azerbaijan had spent the past three decades building the financial reserves, infrastructure and political stability required for investment, but now wanted to use that platform to broaden the economy.

“We need to build on that positive momentum,” he said, pointing to more than $350bn of investment over the past 20 years, about half of which he said came from foreign sources. “We need to be in line with the general trend of development and use our potential in sectors beyond oil and gas to have long-term and sustainable growth.” 

Yet Aliyev was equally clear that hydrocarbons would not disappear from the model. “Oil and gas will continue to dominate our economy and to generate the wealth, which will be reinvested,” he said.

That formulation captures the central paradox of Azerbaijan’s diversification strategy. Baku is attempting to build an economy less dependent on oil by continuing to exploit the hydrocarbons that made diversification financially possible in the first place.

Aliyev identified renewables as one of the most important destinations for that investment. He said Azerbaijan’s sector of the Caspian Sea alone had an estimated 157GW of offshore renewable-energy potential, alongside solar and wind projects already under development onshore.

The objective is not simply to reduce emissions. Aliyev said Azerbaijan wants to cut the amount of natural gas burned to generate domestic electricity, freeing more gas for export while replacing it with renewable power. “Our target is to reduce to maximum degree consumption of natural gas to generate power and to use that reserve for exports,” he said.

The proposition therefore turns renewable energy into an extension of Azerbaijan’s existing export strategy rather than an immediate substitute for hydrocarbons. The country also plans to develop electricity storage and new transmission capacity, including links towards European markets.

Aliyev highlighted plans for a subsea electricity connection across the Caspian involving Azerbaijan, Kazakhstan and Uzbekistan and a separate Black Sea cable running through Georgia towards Romania. Such projects, he argued, would require substantial outside financing.

Logistics was the second major pillar of the president’s pitch. Azerbaijan has invested heavily in railways, highways, ports and other transport infrastructure in an attempt to exploit its location between Central Asia and Europe and along north-south trade routes. Aliyev said transit cargo through Azerbaijan was expected to reach 16mn tonnes this year, with a target of 25mn tonnes by 2030, potentially more.

The geopolitical fragmentation of traditional trade routes has strengthened that opportunity, he argued, but Azerbaijan should remain competitive even if some of those disruptions disappear. “If geopolitical situation in our end change and go back to as it was five years ago, still we should be attractive for suppliers,” he said.

Baku does not want the Middle Corridor and other transit routes to depend solely on the disruption created by sanctions or wars. Aliyev argued that digitalised customs systems, predictable regulation and efficient logistics must make Azerbaijan economically attractive in their own right.

Perhaps the most novel element of his investment pitch was digital infrastructure. Aliyev repeatedly linked Azerbaijan’s future power surplus to the development of AI and data centres, saying the country was already in negotiations with leading international companies.

The country’s advantages, he argued, included relatively cheap energy, its location between Europe and Asia and fibre-optic infrastructure, including a planned Caspian connection with Kazakhstan. “We definitely want to be in line with the general trends of development of global economy,” Aliyev said, adding that Azerbaijan needed to work actively with hyperscale technology companies.

Asked what major technology companies should do, his answer was concise: “First, open the office.” That ambition could allow Azerbaijan to use energy in a different way. Instead of exporting every additional unit of power, electricity could support data centres and computing infrastructure at home, potentially creating digital services and higher-value economic activity.

Mining was another area identified by Aliyev. He pointed to a recently approved four-year state programme intended to stimulate greater activity in the sector, describing it as one of Azerbaijan’s potentially important new growth engines.

He also put agriculture and food security high on the list of priorities. Supply-chain disruption, drought and other pressures had increased the strategic value of domestic food production, he said, while Azerbaijan wanted to reduce its dependence on imports.

The investment case Aliyev presented rested heavily on financial stability. He said Azerbaijan’s foreign public debt was approximately 5.6% of GDP, while foreign-exchange reserves exceeded that debt nearly 30 times.

He also pointed to the manat’s exchange rate, unchanged at AZN1.70 to the dollar since April 2017, and to the durability of production-sharing agreements signed with international oil companies.

“Not a single word was changed,” Aliyev said of the agreements, arguing that Azerbaijan had sometimes accepted contractual provisions it disliked because maintaining credibility with investors was more important than renegotiating them.

Aliyev also acknowledged the limits of diversification so far. While the non-oil sector accounts for more than 70% of GDP, he said, hydrocarbons still generate almost 90% of exports.

That gap may be the most important measure of whether the strategy outlined in Baku succeeds. Azerbaijan has broadened domestic economic activity considerably, but replacing oil and gas as sources of foreign currency will be considerably harder.

For that reason, Aliyev stressed that foreign investors could contribute more than capital. Azerbaijan also wants expertise, technology and training.

He cited the oil industry as a precedent. When international energy companies first arrived in the 1990s, he said, more than 90% of their employees were expatriates. Today, he estimated that the proportion was closer to 5%, after decades of skills transfer to Azerbaijani workers. “Capacity building, which we cannot buy,” was particularly important, Aliyev said.

The president closed by inviting investors to judge Azerbaijan for themselves, arguing that forums held inside the country were more persuasive than investment roadshows abroad.

The broader proposition was clear. Azerbaijan has spent the oil era accumulating reserves and building infrastructure. Aliyev is now asking global capital to help turn those assets into new sources of growth before hydrocarbons lose their dominant role.

The unresolved question is whether renewables, logistics, mining and digital infrastructure can eventually generate export earnings on the scale required to reduce that dependence. For now, Azerbaijan’s post-oil ambitions remain firmly financed by oil.