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Historial Overview

Azerbaijan is one of the oldest sites of modern human habitation in the world, as evidenced by ancient settlements and petroglyphs dating back 20,000 years.

In the 12th century, Azerbaijan served as the crossroads of commerce and culture when it became an important link along the Silk Road that moved silk, precious stones, metal and spices between Asia and Europe.

In 1846, Baku drilled the world’s first oil well, more than a decade before America’s first well was drilled in Pennsylvania. By the late 19th century, Azerbaijan was home to the world’s first oil boom.

Azerbaijan enjoyed a brief period of independence from Russia, lasting from 1918 with the creation of the Azerbaijan Democratic Republic, until Baku was invaded by the Red Army in 1920. For the next seven decades, Azerbaijan was a state withing Soviet Union.

Azerbaijan declared independence from the Soviet Union in August 1991. Early independence was marked by Armenian military attacks against Azerbaijan’s Nagorno-Karabakh region, tremendous economic distress, and internal struggles for power.

Heydar Aliyev, elected president in 1993, brought stability to the country, created conditions that allowed a cease-fire with Armenia to be signed, and opened Caspian energy reserves to world markets by inviting foreign companies to prospect for oil and gas in what is now called “The Contract of the Century.”

Today, Azerbaijan provides more than one percent of the world’s daily demand for oil through the Baku-Tbilisi-Ceyhan pipeline. In addition, the Baku-Tbilisi-Erzurum gas pipeline has made Azerbaijan a key transit country to move major volumes of gas to European markets in the quest for energy security.

Azerbaijan’s energy boom has allowed for the funding of major infrastructure, transportation links and education projects, which are key investments in the country’s plan to stimulate the non-energy sector and achieve long-term sustained growth and economic stability.

Azerbaijan’s strategic location has also made it a key Western ally in regional security and stability operations. Azerbaijan is of geostrategic importance to the U.S., providing a critical flow-through point for Caspian oil reserves moving westward to world markets, and as a transportation corridor moving supplies eastward to Afganistan.

2013 Highlights

Azerbaijan had a number of notable events and milestones in 2013. 

  • Trans Adriatic Pipeline (TAP) established Azerbaijan as a major gas supplier to Europe
  • Azerbaijan launched its first telecommunications satellite into orbit, marking 2013 as the Year of Communications and Information Technologies in Azerbaijan
  • Azerbaijan successfully completed a two-year tenure as an active permanent member of the United Nations Security Council
  • Baku hosted the World Economic Forum's first Strategic Dialogue on the Future of the South Caucasus and Central Asia
  • The Head of State declared 2014 the Year of Industry
  • The country's currency reserves grew to over $50 billion
  • The poverty level continued to fall, ending the year at below 6 percent
  • Wages and pensions were increased, and deposits remaining from the Soviet era were fully paid to the population
  • Azerbaijan's GDP growth grew to 6.0 percent
  • Unemployment remained low at 5.3 percent
  • Azerbaijan's non-oil sector grew 9.8 percent
  • Military expenditure exceeded $3.7 billion
  • Exports in Azerbaijan rose by more than 50 percent
  • Azerbaijan's currency, the manat, remained stable against the US dollar

2014 OUTLOOK

  • Azerbaijan plans to increase supplies of crude oil to European and Asian markets to diversify its energy exports
  • The final agreement of Trans-Eurasian Information Super Highway (TASIM) project will be signed in the first quarter
  • Baku will host the meeting of the United Nations World Tourism Organization (UNWTO) European Commission
  • Azerbaijan will compete at the 2014 Winter Olympics in Sochi, Russia
  • The economy will grow at about 5.3 percent
  • The non-oil sector will expand to 10 percent
  • Inflation will remain in single digits, although growth in consumer demand will exert inflationary pressures
  • Oil prices are expected to hover around $100 per barrel
  • The manat is expected to remain stable against the US dollar
  • High oil exports will continue to be the main driver of Azerbaijan's substantial trade surplus
  • The construction of a new car factory is planned to start

(SOURCE: Economist Intelligence Unit and USACC)

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