EU’s investment focus in Azerbaijan shifts toward non-oil sectors

More than 70% of European investors in Azerbaijan plan to expand their operations, while another 22% intend to maintain their current level of activity.

According to Report, which cites the European Union (EU) review on the business climate in Azerbaijan for 2024, despite geopolitical tensions—which had both negative and positive effects on the economy—interest in Azerbaijan among EU investors is growing. The share of those who would choose the country again for investment rose from 80% in 2021 (based on the previous survey) to 92% in 2024.

Traditional industries—such as mining and oil and gas—continue to show the highest level of commitment. At the same time, the most ambitious expansion plans have been recorded in the sectors of renewable energy, construction, and information and communication technologies (ICT).

“Between 2021 and 2024, the business climate in Azerbaijan developed against the backdrop of a stable macroeconomic environment. Strong positions in foreign trade and a budget surplus contributed to stability. Although the oil and gas sector remains a key player, the country is actively promoting diversification—shifting focus toward green energy, agriculture, tourism, and ICT,” the review states.

The construction sector saw active growth in 2022–2023, driven by large-scale state investments in the reconstruction of the Karabakh and East Zangezur regions. Growth slowed in 2024, but activity remains high.

The extractive industry still attracts the largest share of foreign direct investment. The ICT sector is expanding, although growth rates have slowed. Amid geopolitical changes, transportation and logistics have gained strategic importance, and the role of alternative routes has strengthened.

The renewable energy sector is showing impressive growth thanks to government policies on decarbonization. By 2030, Azerbaijan aims to increase the share of green energy in its energy balance to 35.5%. At the same time, the country is developing electricity exports through projects such as the Caspian-Black Sea Energy Corridor.

Agriculture, despite previous challenges, has stabilized. Today, the focus is on sustainability and enhancing the sector’s competitiveness.

The report’s authors emphasize that Azerbaijan’s favorable business environment is driven by factors such as its strategic geographic location, development of transport and economic connections, political and social stability, and predictability of economic policy.

Key factors of attractiveness for investors include access to the domestic market, strategic partnerships and alliances, entry to regional markets and free trade zones. Additional advantages noted by the review include cost efficiency, tax incentives, the development of digital infrastructure, and positive evaluations of digital public services.

Among the recent government measures highlighted are the adoption of a new investment law and improvements in the investment climate through tax benefits, as well as reforms aimed at stimulating business activity.

Special attention in the report is given to Azerbaijan’s role in the Middle Corridor—a vital transit route between Europe and Asia. At the same time, the report stresses the need for further infrastructure development, digitalization, and reduction of bureaucratic barriers to boost competitiveness.