In-depth country-focused analysis on Azerbaijan's economic, political and operational risk environment, complemented by detailed sector insight


Our comprehensive assessment of Azerbaijan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Azerbaijan, as well as the latest industry developments that could impact Azerbaijan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Azerbaijan before your competitors.

Country Risk

Azerbaijan Country Risk

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Core Views

  • Political tensions in the South Caucasus will remain high over the coming years as increased Russian intervention in Georgia's breakaway territories fuels concerns that Russia will attempt to annex Abkhazia and South Ossetia. Meanwhile, Azerbaijani-Armenian relations will remain strained over the conflict surrounding Nagorno-Karabakh.

  • Armenia's economy will continue to struggle during 2016-2017 primarily due to its trade and remittance flow links with ailing Russia. Beyond this we continue to see little means of diversifying its growth model away from one driven by private consumption underpinned by volatile remittance flows.

  • Georgian real GDP growth will slow over the next two years relative to the 5.9% average growth achieved between 2011 and 2015 due to exposure to Russia's economic crisis, which has...

Azerbaijan Operational Risk Coverage (9)

Azerbaijan Operational Risk

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BMI View: Azerbaijan's high levels of corruption, lack of access to international maritime trade routes and weak security situation heighten risks for investors. Tense relations with neighbouring Armenia have the potential to escalate, increasing the threat to employees and infrastructure. Furthermore, Azerbaijan's oil-reliant economy has been hit by a series of negative shocks, in particular, a marked drop in global oil prices resulting in a significant decline in private consumption and severe ...

Azerbaijan Crime & Security

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BMI View: The most prominent threat faced by businesses and investors when operating in Azerbaijan is that of conflict risk, which stems from Azerbaijan's ongoing territorial dispute with neighbouring Armenia. Furthermore, financial crime and cybercrime are also key threats (exacerbated by the high levels of corruption and organised criminal activities present in the country). Overall, Azerbaijan scores 48.5 out of 100 for the Crime and Security Risk pillar of the BMI Operational Risk Index. This places the country in 19th position out of 31 Emerging Europe states.

Higher-Than-Average Crime Vulnerability, Conflict Risk
Azerbaijan & Regional Average - Crime And Security Risk Scores...

Azerbaijan Labour Market

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BMI View: Azerbaijan's labour market is somewhat homogenous, as it primarily consists of low-skilled, rural-based workers employed in primary sectors, such as agriculture. There are significant disparities in access to education and healthcare dependent on wealth and location, where poorer and rural-based populations experience weak social services provision. Given the country's low urbanisation rates this yields poor skills development and higher risk of illness in the majority of the labour force. Under the prevailing economic headwinds, government funding remains constrained such that labour risks are likely to persist in the medium to long term. Firms looking to fill technical roles must invest extensively in training for Azeri employees and the import of skilled labour. The small population's low life expectancy raises the risk of high staff turnover and absenteeism....

Azerbaijan Logistics

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BMI View: Azerbaijan's large domestic oil production has led the country to develop its infrastructure around oil and gas supply chains and enables businesses to benefit from low energy costs. However, lack of investment in Azerbaijan's transport network and its landlocked status have prevented it from becoming a major trade hub in the region and heightens operational costs. As a result, it scores below the global average with a mark of 49.7 out of 100 in BMI's Logistics Risk Index, placing it 19th out of 31 states in Emerging Europe. We...

Azerbaijan Trade & Investment

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BMI View: Azerbaijan's endemic corruption in all spheres of public life and cumbersome legislation in certain industries limits foreign involvement and poses major risks for investors. Limited financial sector development also weighs on domestic access to finance. On the upside, the government offers generous tax breaks in technology sectors and, at least on paper, welcomes foreign investment, viewing it as a tool for economic development. Moreover a number of infrastructure and institutional development projects are in progress, which we expect to see pay off in the coming years. For now, Azerbaijan receives a poor score of 53.3 out of 100 in our Trade and Investment Risk Index, placing the country 19th among its 31...

Azerbaijan Industry Coverage (3)

Oil & Gas

Azerbaijan Oil & Gas

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BMI View: After stabilisation in 2016, we forecast renewed downside to Azeri oil production from 2017 driven by the country's maturing asset base and a lack of new output brought on stream. Condensates production from the Shah Deniz Phase II will offer temporary upside in 2019, but this will be insufficient to sustainably reverse the overall trend of decline. Our outlook on gas production is broadly bullish, with substantial reserves under development and a strong prospective resource base. The refining sector will continue to struggle, due to low complexity and ageing infrastructure and a continued lack of investment.

Headline Forecasts (Azerbaijan 2014-2020)
2014 ...


Azerbaijan Petrochemicals

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BMI View: Azerbaijan's hopes of establishing a world-class petrochemicals facility by 2020 have been dealt a major blow as the country's economic woes have prompted a freeze on the plans for a new integrated complex, the Oil and Gas Processing and Petrochemical Complex, which was intended to rival major Middle Eastern producers.

Azerbaijan's aim of becoming a significant petrochemicals exporter is unlikely to be realised in the foreseeable future. SOCAR is focusing on petrochemicals investment in Turkey, which remains a major export destination for the country's oil and is a large industrial economy with access to the EU market. Azerbaijan imports 60,000tpa of finished chemicals...


Azerbaijan Telecommunications

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BMI View: The Azeri mobile market has returned to growth in 2014 boosted by the strong uptake of 3G and 4G services. Bakcell became the second operator to launch 4G services in May 2015 with Azerfon expected to launch their LTE services shortly. This could add further positive momentum to subscriber growth in the country. To the downside, BMI is concerned about the state intervention in the ICT sector, which could hamper the growth of both the mobile and wireline sector. The government touts the importance of developing an information society and encouraging telecoms growth but in practice, its actions tend to hinder market forces.

Key Data:...

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