Betting on non-oil exports amid economic restructuring

On June 10, President of Azerbaijan Ilham Aliyev signed a decree on state support for the export of non-oil and gas products. The document provides for compensation to micro, small and medium-sized enterprises for expenses related to customs clearance of exported goods. The support will be provided by the Ministry of Economy at the end of each quarter, based on applications submitted by exporters.

The decree continues Azerbaijan’s ongoing policy of stimulating non-oil exports. We have previously written about the introduction of instruments to compensate expenses related to the promotion of products in foreign markets. Earlier, at different stages, mechanisms for export incentives for producers were introduced, concessional business lending programs were expanded, Azerbaijani trade houses were established abroad, export missions were organized, and projects were implemented to develop industrial parks, industrial zones and agro-parks.

This policy has already produced certain results. In 2020, Azerbaijan’s non-oil exports amounted to around $1.9 billion. By the end of 2025, this figure had reached $3.6 billion. Thus, over five years, non-oil exports almost doubled. The highest growth rates were recorded in supplies of agricultural products, food industry products, chemicals, aluminum and aluminum products, as well as electricity.

At the same time, the results achieved so far do not yet allow us to speak of a fundamental change in the structure of the country’s foreign trade. By the end of 2025, the oil and gas sector still accounted for more than 85% of Azerbaijan’s total exports, while the share of non-oil products stood at around 14.5%. In monetary terms, non-oil exports reached $3.6 billion, compared with more than $21 billion in export revenues from the oil and gas sector.

Further expansion of non-oil exports is also constrained by a number of systemic problems that cannot be resolved through financial incentives alone. In a number of areas, Azerbaijani products still lag behind foreign competitors in terms of competitiveness, packaging quality, marketing and promotion in external markets. For many producers, adapting their products to the requirements of foreign consumers, international standards and certification systems remains a serious challenge.

The situation in the domestic market is another limiting factor. The relatively low level of competition in some sectors of the economy does not always create sufficient incentives for modernizing production, improving product quality and reducing costs. A high degree of market monopolization persists in several segments, objectively weakening the pressure of the competitive environment on producers. As a result, some enterprises remain focused mainly on domestic demand and do not feel the need to constantly improve the competitiveness of their products.

For this reason, the further growth of non-oil exports will depend not only on the expansion of state support programs, but also on the economy’s ability to ensure a higher level of competition, technological modernization of enterprises, brand development and the promotion of Azerbaijani products in foreign markets.

Economic diversification is therefore continuing, but its pace still does not allow us to speak of the formation of a full-fledged alternative to the oil and gas sector. Looking at the figures, the highest growth rates were recorded in individual commodity groups. Sugar exports increased by 57.4%, fruit and vegetable exports by 27.4%, aluminum and aluminum products by 24.2%, cotton yarn by 19.3%, and chemical industry products by 8%. Gold, tomatoes and carbamide were among the largest items of non-oil exports.

In effect, the economy is entering a stage in which diversification is ceasing to be merely a long-term goal and is becoming a practical necessity. Maintaining high growth rates in the medium term will depend not so much on the dynamics of oil and gas production as on the ability of non-oil sectors to compensate for the declining contribution of the raw materials sector to the country’s economic development.

At the same time, it should be noted that in most successful export-oriented economies, it is small and medium-sized businesses that form the bulk of exporters, provide economic flexibility and contribute to the diversification of the export commodity structure. This is why the authorities are simultaneously expanding support instruments for exporters, developing industrial infrastructure, attracting foreign investors and encouraging the creation of joint ventures. Nevertheless, this remains a long-term process of structural economic transformation, the results of which often become visible much more slowly than the effect of major oil and gas projects.

Ilgar Velizade