AGP Executive Report

Public Finances: Azerbaijan posted a 3.96 billion-manat ($2.33 billion) budget surplus in the first nine months of 2026, with revenue 2.8% above forecast. External public debt fell 7.8% year on year to $4.51 billion as strategic reserves rose. Water Investment: The AIIB approved a $45 million loan for a Sumgayit desalination plant planned to produce 300,000 cubic metres of water a day under a public-private partnership with ACWA Power. Regional Trade: At the first Central Asia–Azerbaijan summit in the expanded C6 format, President Ilham Aliyev said trade with Central Asian countries grew by more than 50% last year. Leaders backed closer transport and business ties, including a proposed regional business forum in 2027. Growth Outlook: The World Bank cut its 2026 growth forecast for Azerbaijan to 1.2%, while forecasting stronger growth in 2027–28. Capital Markets: Kapital Bank raised AZN 50 million through a bond placement to a foreign institutional investor, marking its first such funding deal in manat.

Regional Integration: Azerbaijan joined Central Asian leaders in the expanded C6 summit, where President Ilham Aliyev said trade with the region grew by more than 50% last year. Leaders called for closer industrial, energy and e-commerce links. Kazakhstan proposed exploring a connection between the Middle Corridor and TRIPP, while Azerbaijan Railways reported receiving 416 block trains from China this year. Trade and Energy: Georgia plans to buy Azerbaijani electricity directly, removing intermediaries and saving the state millions of dollars annually. Azerbaijan and Türkiye also signed a memorandum to expand industrial cooperation. Public Finances: Azerbaijan ranked third among 133 countries for financial stewardship, including first for budget surplus. Fitch Solutions forecasts budget surpluses above 2% in 2026 and 2027. Digital Development: Azerbaijan and the World Bank discussed support for AI infrastructure, data centers, Government Cloud and cybersecurity skills.

Regional Trade: Azerbaijan’s trade with Central Asia grew more than 50% last year, President Ilham Aliyev said at the Avaza summit. He urged partners to turn rising trade and investment into joint production; Kyrgyz President Sadyr Japarov proposed a regional e-commerce platform and industrial projects. Industry: Azerbaijan and Türkiye signed a memorandum to expand industrial-zone cooperation, including on green technology, energy efficiency and digitalization. Capital Markets: Baku is exploring dual listings so Azerbaijani companies can raise funds from foreign investors as well as trade locally. Logistics: Azerbaijan and Dutch firm C. Steinweg discussed warehousing and critical-minerals transport along the Middle Corridor; no deal or investment timetable was announced. Energy: Georgia plans to buy Azerbaijani electricity directly, removing intermediaries to cut costs. Green Manufacturing: A solar-panel project in Alat is planned to reach 3 GW of annual capacity, with production expected to begin in stages in 2027. Economic Outlook: The World Bank has cut its 2026 growth forecast for Azerbaijan to 1.2%.

Capital Markets: Azerbaijan’s stock trading surged more than 100-fold in the first nine months of 2026, reaching about AZN 1.46 billion as investors looked beyond bank deposits. Overall exchange turnover fell, mainly because repo and government bond trading slowed. Public Finances: Tax revenues to the state budget reached AZN 13.63 billion over the same period. Regional Connectivity: At the Avaza talks, Azerbaijan called for closer Middle Corridor links, smoother transit and digitalization to lift trade flows. Baku also signed a UK cooperation memorandum covering transport and digital development. Energy: SOCAR, TotalEnergies and UAE-based XRG approved the second phase of the Absheron gas project, setting the stage for higher exports later this decade as Azerbaijan seeks to deepen ties with European buyers. Freight: Azerbaijan Railways reported an 11% rise in freight volumes.

Azerbaijan–UK Dealmaking: Baku and London signed a roadmap on transport and digital development, with plans for a joint working group covering transport infrastructure, AI and cybersecurity, following the latest Azerbaijan-UK intergovernmental commission in Baku. Middle Corridor Digital Push: A new fibre-optic line is set to launch in October along the Aktau–Sumgayit route, strengthening Kazakhstan–Azerbaijan connectivity and offering a faster, more resilient data path between Asia and Europe. Space & Comms Ambitions: Turkey’s ASELSAN unveiled the Astralink low-orbit satellite constellation, aiming for faster, secure communications; South Korea also launched its Nuri rocket carrying 15 satellites, underscoring the region’s space race. Inflation Watch: The IMF warned that AI expansion, energy prices, tariffs and higher defense spending could intensify global inflation pressures. Regional Growth Signals: The World Bank raised Georgia’s 2026 growth forecast to 7% but cut Azerbaijan’s to 1.2%, highlighting uneven momentum across the region. Cross-border Investment Interest: An Azerbaijani firm, Portofino Development, discussed Kyrgyz investment prospects and showed interest in the Asman eco-city project near Issyk-Kul. Security Headline: Germany arrested former BND chief August Hanning in a major espionage case, with reporting alleging links to Azerbaijani intelligence contacts.

Azerbaijan-UK Business Push: Baku hosted the 8th Azerbaijan–UK Joint Intergovernmental Commission, with talks spanning trade, energy, transport, digital infrastructure and more; the UK was again flagged as Azerbaijan’s biggest foreign investor, and new cooperation documents were signed on green energy, connectivity and urban mobility. Digital Public Finance: The Finance Ministry met the Digital Cooperation Organization to discuss financing for Azerbaijan’s digital priorities and reforms to digitalize public financial management. Middle Corridor Momentum: A World Bank-linked assessment says the Trans-Caspian “Middle Corridor” could sharply boost Asia-Europe freight by 2040, but warns border delays and fragmented procedures still hold it back—pointing to the need for unified digital systems. Gas Supply Talks: Germany’s VNG is seeking a 15–20 year deal to deepen SOCAR gas imports. Black Sea Shipping Disruption: Drone attacks off Bulgaria and Romania sank or damaged Turkish-owned vessels, triggering EU condemnation and renewed security concerns for regional trade routes. Banking & SME Support: BSTDB signed a EUR 25m SME facility with Basisbank to expand investment and working-capital financing for Georgian businesses.

Hydropower Expansion in Lachin: AzerEnerji is building three new hydropower plants in Lachin—Seyidlar (4.59 MW), Bulovlu (3.16 MW) and Gosasu (2.93 MW)—for a total 10.7 MW, with turbines and generators being installed and commissioning expected in the coming months, lifting Lachin’s operational HPP count to 14 and capacity to 83.3 MW. Macroeconomy & Inflation: PASHA Holding’s chief economist Elman Eminov says Azerbaijan’s inflation stays around 6% as higher global energy prices and slower non-oil growth offset each other, and that a current account surplus doesn’t automatically boost state reserves. Growth Outlook: The World Bank cut Azerbaijan’s 2026 growth forecast to 1.2%. Energy Partnership with Europe: VNG AG and SOCAR signed a long-term energy partnership aimed at increasing Azerbaijani gas supplies to Europe now and supporting a decarbonized energy transition over 15–20 years. Middle Corridor Logistics: Azerbaijan’s Alat Free Economic Zone plans a cargo airport opening by late March/early April 2027, targeting 500,000 tons annually at start and up to at least 2 million tons later. Trade & Diversification: Azerbaijan’s non-oil exports (excluding non-monetary gold) rose 17.6% in Jan–Aug 2026 to $2.81B, with agriculture and agro-industry nearing the $1B mark. Diplomacy & Business Links: Ilham Aliyev met the UK’s Lord Anas Sarwar on trade cooperation; Bayramov and Rubio discussed Armenia-Azerbaijan normalization; Mustafayev met Russia’s Overchuk on North-South Corridor and trade expansion. Regional Security Spillover: A Black Sea cargo ship (Royad Mammadov) was hit by drones off Romania; two crew died and 11 were rescued, including Azerbaijani nationals.

Energy & Trade Links: Bulgaria said gas transmission capacity from Greece to Bulgaria rose ~30% this year to 93 GWh/day, citing the “Vertical Gas Corridor” and access to Azerbaijani gas via the Trans Adriatic Pipeline plus LNG through Greece. Oil & Gas Deal: Gran Tierra Energy announced Azerbaijan’s Milli Majlis ratified its onshore Guba-Khazaryani exploration, development and production sharing agreement, alongside completion of an airborne dFTG survey to guide future drilling. Digital Cooperation: Azerbaijan’s FM Jeyhun Bayramov met the Digital Cooperation Organization’s secretary-general to expand work on digital transformation, AI, the digital economy and startups, also tying digital tools to energy security and transport corridors. Black Sea Shipping Risk: A Turkish-owned grain/corn cargo ship (Royad Mammadov) caught fire and sank in Romania’s exclusive economic zone after a suspected drone strike; Zelensky blamed Russia, saying the captain died and 11 crew were rescued, including Azerbaijani nationals. EU Funding: The EU disbursed €157m to Moldova under the EU Growth Plan Facility, while also condemning repeated Russian drone/missile violations of Moldovan airspace. Business/Finance Signals: Azerbaijan’s trade and services credit portfolio rose 10.1% year-on-year, and banking/FX coverage continued to expand in recent reporting.

Azerbaijan’s investment push: Fixed capital investment in 2025 leaned heavily toward the non-oil economy, with 75.3% of spending (16.358bn manats) going to non-oil and gas, while oil and gas took 24.7% (5.380bn). Trade & logistics digitalization: Kazakhstan, Azerbaijan and Georgia rolled out the Digital Trade Corridor platform on the TITR rail route, using a single-window customs setup that cuts transit clearance from 8 hours to 30 minutes and reduces delivery times from 38 days to 13–17. Central banking spotlight: Azerbaijan’s central bank governor is among those expected at the Istanbul Economic Forum (Oct 8–9), alongside major global central bankers, to discuss inflation, monetary policy and the outlook. Energy cooperation abroad: SOCAR Downstream was picked as project management consultant for Congo’s CORAF refinery modernization, supporting the Pre-FEED phase. Green & innovation ties: Azerbaijan and Sweden discussed cooperation on green transition and innovation through a Swedish program focused on financing and public-private partnerships. Business finance & markets: UK remained Azerbaijan’s top foreign fixed-capital investor in 2025 (29.2% share), while Fitch Solutions lifted its 2026 Brent forecast to $93 amid revised expectations for the Strait of Hormuz outlook.

Azerbaijan–EU Talks: Azerbaijan’s EU delegation meetings focused on a new partnership agreement, energy and transport connectivity, climate cooperation and regional issues, with the Middle Corridor getting special attention. Iran–Azerbaijan Cooperation: Azerbaijan’s deputy PM met Iran’s president in Tehran and discussed expanding trade, transport and energy projects; separately, EU officials met Armenia on integration and connectivity. Middle Corridor vs TRIPP: Georgia’s PM said TRIPP won’t compete with the Middle Corridor but should complement it as freight volumes rise. Finance & Banking: Azerbaijan’s financial institutions’ deposits jumped 37.5% (to 46.053bn manats as of Sept 1), while banks’ net foreign assets rose 25.6% to $19.1bn. Sovereign Investment: SOFAZ signed a strategic partnership MoU with Brookfield to open new investment platforms and access global capital. Energy & Trade: Azerbaijan leads OTS countries in imports from Türkiye; Azerbaijan also discussed gas deliveries to Europe and broader regional energy cooperation. Defense & Tech: Bayraktar’s KASIRGA loitering munition was unveiled at ADEX 2026 in Baku.

Sovereign Wealth & Global Capital: SOFAZ has signed a strategic partnership memorandum with Brookfield, bringing Azerbaijan’s ~$72bn sovereign fund into closer alignment with Brookfield’s $1tn investment platform and opening new regional investment platforms across the South Caucasus and Central Asia. Banking Momentum: Azerbaijan’s financial sector is expanding fast—bank deposits rose 37.5% and net foreign assets increased 25.6% to $19.1bn, while net foreign assets reached 32.46bn manats as of Sept 1. Insurance Growth: Voluntary insurance premiums climbed 13% in Jan–Aug 2026 to 901.9m manats, signaling stronger consumer and corporate risk coverage. Regional Connectivity & Trade: World Bank-linked discussions keep pushing the Middle Corridor idea—corridor investments could multiply trade and jobs, while Trans-Caspian sea freight volumes are rising. Climate Diplomacy: COP29 officials visited Fiji and Tuvalu ahead of COP31, stressing climate finance and adaptation for small island states. Energy Risk Watch: Gazprom warned Europe’s gas storage is at historic lows ahead of winter. Defense & Tech Showcase: ADEX 2026 highlighted Chinese J-10CE and other aviation systems, reinforcing Azerbaijan’s growing defense procurement interest.

Banking Momentum: Azerbaijani banks’ deposits jumped 37.5% to 46.053bn manats as of Sept 1, while net foreign assets rose 25.6% to $19.1bn, signaling stronger external buffers. Insurance Growth: Voluntary insurance premiums climbed 13% in Jan–Aug 2026 to 901.9m manats, pointing to rising consumer demand. Investment Push: At the Azerbaijan International Investment Forum, deals and agreements worth over $10bn were signed, with talks spanning industry, tourism, real estate and AI. Energy & Trade Links: Siemens Energy and the Green Corridor Alliance signed an MoU for Trans-Caspian Green Energy Corridor transmission systems, reinforcing the Middle Corridor’s role in connecting Europe and Central Asia. Regional Connectivity Politics: Swiss officials met Azerbaijan’s presidential representative on Zangazur Corridor and TRIPP, framing transport links as a peace and trade catalyst. Geopolitical Risk Watch: Gazprom said Europe’s gas storage is at historic lows (72% full), raising winter supply concerns. Diplomacy: Azerbaijan’s Aliyev sent a congratulatory letter to Germany’s Steinmeier on Unity Day, highlighting expanding economic and energy cooperation.

Business & Investment Reform: Azerbaijan launched a new Agency for the Development of Small and Medium Businesses, Investment and Export Promotion, merging KOBIA, AZPROMO and the former SME body into one platform to link entrepreneurship, investment and exports. Oil Market Watch: Azeri Light crude fell to $124.01/bbl (down $0.75), still above the $65 budget benchmark. Regional Connectivity & Finance: Azerbaijan and the World Bank reviewed cooperation on financial access and transport, while talks also covered a credit guarantee mechanism and new business-loan support. Cybersecurity: Azerbaijan’s State Security Service warned that foreign organized cybercrime groups are using AI to run more convincing fraud targeting officials and businesses. Trade Routes: Trans-Caspian sea freight hit 4.5m metric tons in seven months of 2026, up 60% vs all of 2025. Diplomacy & Normalization: Azerbaijan and Switzerland discussed bilateral ties, Armenia peace steps and humanitarian demining; meanwhile Armenia’s PM said EAEU export/transit barriers remain unresolved. Energy & Renewables: Sugovushan-1 and -2 generated 61.6m kWh over five years after reconstruction. Defense Industry: ADEX 2026 in Baku wrapped with a record 270+ companies; TUSAŞ said KAAN prototypes are nearing flight tests and Azerbaijan is set to receive 14 Hürkuş-II trainers.

Cybersecurity Alert: Azerbaijan’s State Security Services warns that organized cybercriminals are using AI to make fraud messages look more convincing, pushing victims to send money or data to fake “official” accounts. Trade & Logistics: Georgia says an illegal shipment of cigarettes and undeclared medicines headed to Azerbaijan was stopped at the Red Bridge checkpoint. Middle Corridor & Connectivity: Azerbaijan expects the Trans-Caspian fiber-optic link with Kazakhstan to launch in less than a month; Azerbaijan and the World Bank also reviewed cooperation on financial access and transport, including credit guarantee support. Energy & EU Business: An Azerbaijan–EU Clean Energy roundtable in Brussels focused on renewables, grid links and private-sector participation; Azerbaijan also highlighted gas supply and clean energy corridors. Regional Trade Growth: Trans-Caspian sea freight topped 4.5 mln tons in seven months, up 60% vs all of 2025. SME & Investment: ASK joined the Belt and Road Global Forum to help Azerbaijani entrepreneurs reach new markets. Agribusiness: Aghdam Industrial Park approved a ₼14.2m vegetable oil project, while agriculture lending reached ₼520.8m by end-August. Tech Talent: Bir launched “Ctrl is hers” training for 66 women in multiple IT tracks.

YAP Congress & Foreign Policy: President Ilham Aliyev told the 8th New Azerbaijan Party congress that the National Leader’s political course is unchanged, stressing economic independence and Azerbaijan’s growing international respect. CAMCA Regional Forum: Hikmet Hajiyev said peace with Armenia must move beyond “paper,” while Azerbaijan’s foreign policy is increasingly driven by economic diplomacy—connectivity, energy cooperation and green power. Defense & Aviation Trade: At ADEX-2026, China’s J-10CE fighter jet drew attention as Azerbaijan deepens defense ties; Russia’s Supercam S350 drone is being updated for new battlefield needs. Middle Corridor Push: The World Bank-backed “Middle Corridor: Next Stage” forum in Baku highlighted plans to speed trade and improve logistics performance across the Trans-Caspian route. Customs Cooperation: Azerbaijan and Greece discussed expanding customs links, digitalization and authorized economic operator experience. Energy & Markets: Azeri Light oil rose above $124/bbl; Europe’s LNG imports hit a four-month high, with Azerbaijan supplying 3.5% of flows. Film & Culture: Azerbaijan’s Cinema Agency funded five international co-productions under its first joint film support competition.

Middle Corridor Momentum: A World Bank forum in Georgia focused on making the Trans-Caspian route more efficient and competitive by 2040, with Azerbaijan, Georgia, Armenia, Kazakhstan and Türkiye discussing logistics, infrastructure and policy priorities. Energy & Trade Links: Azerbaijan and Greece advanced cooperation at their joint commission meeting in Athens, citing strong trade growth and noting 61+ bcm of Azerbaijani gas delivered to Europe via TAP since operations began. Power Project in Serbia: SOCAR signed a shareholders’ agreement with Serbia’s EPS and Srbijagas for a 500 MW combined-cycle gas plant in Niš, setting up a 50/50 joint venture. Regional Cooperation Platform: The OTS secretary general highlighted the Turkic world’s scale and pointed to the Middle Corridor’s rapid cargo growth as a key example of interdependence. Public Service Innovation: Azerbaijan introduced its ASAN Khidmet model to Caribbean countries, sharing how people-powered, inclusive governance can improve public service delivery. Transport Demand: Azerbaijan Railways will add four daily Baku–Tbilisi–Baku services from Nov 1, boosting seats by ~50% and starting standard fares at AZN 36. Digital Transformation: Azerbaijan’s digital development ministry signed an MoU with SpaceXAI to explore Grok-based AI for public services and other government digital upgrades.