Azerbaijan is seeking to turn the global scramble for critical minerals into the next stage of its industrial development, betting that its position between resource-rich Central Asia and European markets can allow it to capture a larger share of the processing and manufacturing value chain.

The message emerging from a panel on critical raw materials at the Azerbaijan International Investment Forum in Baku, was that the geopolitical contest over minerals is rapidly moving beyond ownership of deposits. Processing capacity, technology, transport routes and even relatively mundane industrial components are becoming as strategically important as the ore itself. 

For Azerbaijan, that presents an opportunity to position itself not merely as another producer of raw materials, but as a processing and logistics hub connecting the mineral wealth of Central Asia with Europe and other international markets. “We do not say, come and mine in Azerbaijan,” Zakir Ibrahimov, chairman of the executive board of state mining company AzerGold, told the forum. “We say, come and let's have the processing together with us.”

The ambition comes as Baku attempts to diversify an economy that has for decades been heavily dependent on oil and gas. President Ilham Aliyev this week approved a state programme for development of the mining and metallurgical industries for 2027-2030, which envisages investment of AZN5.3bn (USD3.1bn), of which about 80% is expected to come from non-budget sources. The government expects new capacity to increase the sector's added value and annual export potential 2.6-fold over the next four years.

The programme reflects a broader shift taking place across the critical minerals industry. Securing access to copper, lithium, rare earths and other strategic materials has become increasingly important as electrification, renewable energy, artificial intelligence, digital infrastructure and defence industries drive demand.

But the panel's central argument was that having deposits in the ground is no longer enough. “The question is not only where are the resources,” Ibrahimov said. “The question is where can we process them? And how can we bring them safely and reliably to the global markets?”

Azerbaijan believes its answer lies partly in Alat, the transport and industrial zone south of Baku that sits on the Trans-Caspian or Middle Corridor linking Central Asia to Europe. Ibrahimov said the planned Alat Critical Minerals Hub would combine processing, logistics and international transport connections in one location, allowing companies to bring in raw materials from elsewhere in the region as well as process Azerbaijani production.

Baku has already begun looking beyond its own deposits. Ibrahimov said Azerbaijan had agreements with Uzbekistan covering joint exploration and extraction, with the possibility of linking production to processing capacity in Azerbaijan. Domestically, he pointed to the Filizchay polymetallic deposit in northern Azerbaijan, which he said contains about 3mn tonnes of zinc, 500,000 tonnes of copper and more than 1mn tonnes of lead.

The strategy mirrors a wider push by mineral-producing countries to capture more of the value generated between extracting ore and producing the sophisticated components used in batteries, power grids, electronics and industrial machinery.

The Asian Development Bank launched a Critical Minerals-to-Manufacturing Financing Partnership Facility this year specifically aimed at moving Asian economies beyond primary extraction into processing, manufacturing and recycling. 

Sunnia Durrani-Jamal, ADB country director for Azerbaijan, argued that governments should think about critical-mineral value chains both “vertically and horizontally”. Vertically, that means moving from extraction through processing and manufacturing and ultimately recycling. Horizontally, it requires capital, technology, infrastructure, access to markets, environmental standards and institutions capable of supporting the industry. The challenge is scale.

China's dominance of many critical-mineral supply chains did not arise simply because it possessed mineral resources, said Marco Castagnini, chief executive of Green Spark Kazakhstan. Beijing built an ecosystem around processing that competitors now struggle to reproduce. “Why China today is considered the leader in processing and developing rare earth and critical material? Because they created an ecosystem,” he said.

That leaves Central Asia and the Caucasus with a difficult choice. Individual countries may possess large reserves but lack sufficient domestic demand or production volumes to justify expensive processing plants.

Castagnini argued that the answer is regional specialisation, with countries combining production to create processing facilities large enough to compete internationally. “This required, from my point of view, mandatory cooperation between all the Central Asian countries,” he said.

The economics of the sector are also becoming intertwined with geopolitics. Birol Ergüven, a board member of Turkey's Limak Energy Group and Limak Investment Company, offered perhaps the bluntest assessment of the shift. “Globalization is over,” he said. “Even if you have money, you cannot buy everything.”

Turkey had already encountered the problem in its defence industry, Ergüven said, where access to strategic materials, machinery or components could no longer be taken for granted. That experience, he argued, meant governments increasingly needed to view supply chains through the lens of national security rather than pure economic efficiency. “Something might be in your country, not so much competitive, not so profitable,” he said. “Normally what you do, you shut it down. No, you have to keep it in the new world order.”

The risk is that governments concentrate on securing highly publicised commodities such as lithium and rare earths while overlooking less glamorous bottlenecks further down the supply chain.

Tatiana Rybalko of Kazakhstan Insulator Plant offered glass insulators used electricity networks as an example. China, she said, controls about 75% of the global glass insulator market. An individual insulator might cost only around $10, she said, but without such components utilities cannot operate the grids needed to transmit electricity generated by billions of dollars of new energy infrastructure. The example captured one of the broader lessons of the discussion: economic security does not end at the mine.

For Azerbaijan, the opportunity therefore extends beyond discovering more deposits. Its more ambitious proposition is to combine Central Asian resources, Caspian transport routes and Azerbaijani processing capacity into a regional industrial ecosystem.

Whether Baku can achieve that will depend on investment, technology and — perhaps most importantly — whether neighbouring states are prepared to treat critical minerals as a regional value chain rather than a collection of national mining projects.

As the panel's moderator summed it up: “Mineral wealth alone doesn't create economic security. The strategic value lies in what can be built around it.”