Globalisation’s retreat may be creating an unlikely opportunity on the shores of the Caspian. As governments and companies rebuild supply chains around security and resilience rather than simply cost, Azerbaijan is betting that geography once regarded as a constraint can become one of its most valuable economic assets.

Sitting between Central Asia and Europe and at the intersection of east-west and north-south trade routes, Baku wants to transform itself from an energy exporter and transit state into a broader economic hub carrying goods, electricity, data, capital and people between increasingly fragmented regions.

“Efficiency remains important, while the reliability of partners and the resilience of supply chains are carrying even greater weight in economic decision-making,” Mikayil Jabbarov, Azerbaijan’s economy minister, told the Azerbaijan International Investment Forum in Baku.

The argument running through the forum’s opening session was that the world economy has not stopped globalising so much as it has begun reorganising itself. Wars, sanctions, tariffs, shipping disruptions and geopolitical rivalry are pushing governments and companies to reduce their dependence on single suppliers and routes. That process is expensive, but it increases the value of countries able to offer alternative connections between large markets.

For Azerbaijan, the proposition is straightforward: in an increasingly fragmented world, being in the middle may be becoming more valuable than being at the centre.

Jabbarov said the past six years — encompassing the pandemic, disruptions to shipping and rising geopolitical tensions — had exposed the vulnerability of production chains previously designed primarily for efficiency. Governments could not eliminate external shocks, he argued, but could make their own economies more predictable and demonstrate that agreements would be honoured. “This is where we have chosen to build trust,” he said, adding that “trust rests on evidence”.

Azerbaijan's government points first to energy as proof that such a strategy can work. The country spent three decades building an oil and gas export system linking the Caspian to international markets, beginning with the 1994 “Contract of the Century” signed with a consortium of international oil companies.

That infrastructure has since expanded into a gas network reaching European markets. Jabbarov said Azerbaijani gas was now supplied to 16 countries, including 10 EU member states, presenting this record as evidence that long-term infrastructure investments can turn an awkward geographical position into strategic leverage.

The government now wants to apply the same model well beyond hydrocarbons. Jabbarov described five flows that Baku wants to channel through Azerbaijan: goods and services, energy, data, capital and people. The distinction is important because it points to a strategy that goes beyond collecting transit fees from cargo travelling between China, Central Asia and Europe. The aim is to create businesses around those flows.

For freight, that means processing raw materials, manufacturing products and providing logistics services rather than simply moving containers across the country. For energy, it means adding renewable electricity exports to Azerbaijan’s existing oil and gas network. For data, Baku wants fibre-optic connections across the Caspian to support data centres and artificial intelligence infrastructure. Capital is to be drawn in through joint investment funds, while education and skills programmes are intended to develop the workforce needed to support the other four.

The Middle Corridor, which crosses Central Asia and the Caspian before running through Azerbaijan, Georgia and Turkey towards Europe, is central to that ambition. Azerbaijan has invested heavily in ports, railways, highways and logistics infrastructure, including the Baku International Sea Trade Port at Alat and the Alat Free Economic Zone.

The government’s next challenge is to turn what is essentially transport hardware into an economic ecosystem. Jabbarov said Azerbaijan wanted to move from “transport corridors to economic corridors”, with manufacturing and investment developing alongside the infrastructure.

That is increasingly important because the political geography of the South Caucasus is also changing. Jabbarov pointed to the August 2025 declaration between Azerbaijan and Armenia in Washington as a development that could open previously inaccessible routes, markets and investment opportunities.

A durable opening between Azerbaijan and Armenia would potentially reshape the economics of the entire region, improving connections between Azerbaijan proper and its Nakhchivan exclave while adding another route between Central Asia, Turkey and Europe. Peace, in that sense, would have an economic multiplier: transforming a region long regarded as a transport bottleneck into a junction.

Azerbaijan is simultaneously moving closer to Central Asia. Jabbarov said the country’s participation in the consultative format of Central Asian heads of state was already leading to greater co-ordination on transport, logistics, energy and investment.

The strategic idea is becoming clearer: Central Asian resources and production can cross the Caspian into Azerbaijan, where some can be processed or combined with manufacturing and services before reaching Turkey and Europe. Baku is increasingly pitching itself not as the end of a supply chain but as the place where several chains meet. 

The global backdrop makes the timing unusually favourable. Nouriel Roubini, the economist and chief executive of Roubini Macro Associates, told the forum that the world economy had proved more resilient than expected despite protectionism, conflicts and energy shocks.

Part of that resilience, he argued, reflected the power of financial markets to constrain governments when policies threaten severe economic damage. Another part comes from what he described as one of the most significant technological investment cycles in modern history, led by artificial intelligence and related industries.

Roubini argued that AI should not be seen simply as a US-China story. The boom is creating demand throughout the supply chain, from semiconductors and automation to energy and the raw materials required to build increasingly power-intensive digital infrastructure.

That provides another opening for countries such as Azerbaijan. Baku does not need to compete with Silicon Valley or Shenzhen. Its opportunity is to provide some of the connective tissue of the emerging economy: electricity, raw materials, transport, digital cables and sites for industrial investment.

Valerio De Molli, chief executive of The European House – Ambrosetti, similarly identified logistics, digital infrastructure and energy as three areas in which Azerbaijan could build future competitiveness. His presentation argued that the country had made substantial gains in economic dynamism and diversification while retaining relatively low public debt and significant financial buffers.

The investment agreements signed at the forum indicated the breadth of the strategy. Twelve documents covered areas ranging from solar and wind power and silicon-based manufacturing to pharmaceuticals, agriculture, banking, water management and technology, including an agreement between Azerbaijan’s economy ministry and Microsoft Ireland Operations.

Geography by itself does not create a hub. Infrastructure must be competitive on price and speed, customs procedures must work smoothly across several countries, political stability needs to endure and investors must have reasons to build factories and processing facilities rather than simply move cargo through Azerbaijan.

Nor has Azerbaijan escaped its dependence on hydrocarbons. Diversification has progressed, but oil and gas remain central to exports and government finances. The government’s bet is that the infrastructure built during the petroleum era can provide the platform for something broader. Pipelines were Azerbaijan’s first great experiment in turning geography into economic power. Baku now wants railways, electricity cables, fibre-optic links, industrial parks and investment platforms to perform the same function.

In a world becoming more divided rather than less, Azerbaijan is wagering that the connections between blocs may ultimately become as valuable as the blocs themselves.