Baku, the capital of Azerbaijan, stands as a unique testament to the country’s journey and identity, deeply entwined with its oil-rich geography and the global energy economy. Nestled on the Absheron Peninsula with the Caspian Sea to its east, Baku’s landscape is rich with oil reserves that have shaped its growth, infrastructure, and influence. Today, as Azerbaijan prepares to host the COP29 climate conference, this nation — heavily reliant on fossil fuel exports — finds itself in a pivotal position to contribute to, or potentially hinder, global climate goals.
Since oil was first extracted in the 19th century, Azerbaijan has risen from obscurity in the Caucasus to become an essential node in global energy networks. Following independence in 1991, Azerbaijan capitalized on its rich oil fields, boosting its GDP and transforming Baku into a modern city with audacious architecture, bustling boulevards, and an annual Formula One Grand Prix. The country’s oil and gas sectors today contribute around 90% of its exports and approximately half of its GDP.
Despite such modern developments, the image of oil derricks lining the barren Absheron Peninsula highlights the persistent reliance on fossil fuels. Now, Azerbaijan’s ambition extends to leading the United Nations’ COP29 climate talks, a role that necessitates addressing its dependence on oil as the world shifts toward renewable energy.
COP29 is poised to mark the third consecutive year an oil-producing country presides over the climate talks, following the United Arab Emirates and Egypt. While critics question whether Azerbaijan’s leadership will advance or hinder climate negotiations, Azerbaijani President Ilham Aliyev has openly defended fossil fuel investments. In a 2023 speech, he remarked, “Having oil and gas deposits is not our fault. It’s a gift from God.” Yet the country’s COP29 CEO, Elnur Soltanov, stresses that Azerbaijan’s fossil fuel history does not conflict with its commitment to sustainable energy. Azerbaijan, he says, is ready to lead a “green energy revolution.”
Azerbaijan’s oil industry is facing decline as older oil fields yield less, and the country adheres to OPEC+ production quotas. From a peak in 2009, daily oil production has halved to around 479,000 barrels in 2023, driven in part by declining reserves and an increased focus on natural gas, which has surged in demand due to disruptions in Russian gas supplies to Europe. In response to European energy insecurity, Azerbaijan has ramped up gas exports, pledging to double them by 2027 and already meeting 5% of Europe’s energy needs through the Southern Gas Corridor.
Kamala Mustafayeva, an independent energy analyst, underscores this strategic pivot, explaining, “Europe needs more gas from Azerbaijan. It doesn’t matter about climate change or anything. You have to survive today, not tomorrow.” This shift has positioned Azerbaijan as a crucial player in Europe’s energy security strategy, yet it also complicates the country’s climate commitments.
Azerbaijan’s investment in green energy is a calculated move, motivated by both environmental and economic incentives. One significant milestone is the Garadagh Solar Power Plant, a 230-megawatt solar installation developed by Masdar Clean Energy. Located south of Baku, this facility represents the country’s aim to generate 30% of its electricity from renewables by 2030. Such moves could allow Azerbaijan to meet domestic energy needs through renewables, freeing more gas for export, a lucrative opportunity as global gas demand remains high.
Beyond solar, Azerbaijan has signed the Black Sea Energy Project agreement to deliver green energy from Azerbaijan through Georgia to Romania and Bulgaria. Additionally, reclaimed lands following the 2020 Nagorno-Karabakh conflict are set aside for further renewable projects, signaling Azerbaijan’s intent to utilize once war-torn regions for clean energy development.
While Azerbaijan advances its energy transformation, concerns remain regarding the social and environmental toll of its fossil fuel dependence. The Caspian Basin has long been the site of significant oil extraction, with communities living near these operations reporting severe health impacts due to toxic emissions. Research from Crude Accountability, a human rights and environmental watchdog, reveals long-standing issues such as respiratory illnesses and other health risks linked to oil field pollution.
Ms. Kate Watters, director of Crude Accountability, highlights the disconnect between Azerbaijan’s impressive economic metrics and the reality for its rural communities. “These aren’t just statistics,” she says. “These are generations of children who grow up in the shadow of toxic emissions.” Her organization argues that as a nation that exports vast energy resources to Europe, Azerbaijan must be held accountable for the environmental and social effects tied to its energy sector.
The oil boom brought economic benefits to Azerbaijan, but the wealth distribution has been uneven, concentrated in Baku while rural regions continue to grapple with poverty. Transparency International ranks Azerbaijan among the world’s most corrupt countries, raising questions about how oil revenue has been managed. In 2020, Crude Accountability reported that Azerbaijan’s oil wealth had failed to reduce poverty or significantly diversify the economy.
Despite substantial development in Baku, much of Azerbaijan remains impoverished, and corruption remains a significant barrier to inclusive growth. A 2021 report by the World Bank found that Azerbaijan’s wealth inequality is twice that of any other country in Europe and Central Asia. Furthermore, the country’s reliance on oil revenues leaves its economy vulnerable to oil price fluctuations, with government-led diversification efforts often abandoned when oil prices rebound.
European countries relying on Azerbaijani energy have faced criticism for overlooking Azerbaijan’s internal human rights issues. In 2023, the European Parliament condemned Azerbaijan’s record on repressing activists and journalists. The EU’s strategic energy partnership with Azerbaijan has proven vital for European energy security, yet lawmakers are increasingly vocal about the ethical concerns linked to this alliance.
Ms. Watters asserts that Western energy consumers bear responsibility for fostering Azerbaijan’s current energy economy. With Western corporations like BP, Chevron, and ExxonMobil heavily invested in Azerbaijan’s energy sector, the connection between Europe’s energy needs and Azerbaijan’s political and economic structure is inextricable.
Azerbaijan’s COP29 leadership will inevitably spotlight its complex relationship with fossil fuels, human rights, and economic equality. While Elnur Soltanov, COP29’s CEO, emphasizes that Azerbaijan’s transformation from “Black City” to “White City” symbolizes its journey toward a greener future, questions remain about how inclusive and effective this transition will be.
As Azerbaijan positions itself as a player in the green energy sector, the challenge of creating a just transition — one that benefits all segments of society — remains critical. Economic diversification beyond oil and gas is essential, but so far elusive, especially in rural regions.
