Page 71 - Azerbaijan State University of Economics

Bahruz Babayev: Implementıng Growth Patterns and Diversification Issues of the Non-Oil Export Sector in
Azerbaijan

the World War II. Azerbaijan gained independence in 1991 after the collapse of the
Soviet Union in 1989. In the first years of independence, the economy faced great
challenges. The people's movement for independence, the Nagorno-Karabakh war
with Armenia, and the transition from a centralized to a free market economy has
put the country's economy in a difficult position. Despite all this, a ceasefire
agreement was signed with Armenia in 1994 stopping military operations, and the
country began to build its economy.

During the Soviet governance system, Azerbaijan's economic activity was about
extraction and production of raw materials. Since 1994, the country's “oil strategy”
has started playing an important role in strengthening and building the economy of
the Republic of Azerbaijan. The Republic of Azerbaijan, which signed oil contracts
with the world's leading companies in 1994, has attracted large investments in the
country's economy. Foreign direct investment in the oil and gas sector played an
important role in terms of giving impetus to the country's economic recovery. The
long-term national strategy of Azerbaijan was “to attract investment in the oil and
gas sector of many countries to strengthen national security” (Ipek, 234). Between
2001 and 2009, Azerbaijan began to develop its oil and gas sector, and GDP began
to grow by 16% per year (Nasirov, 4). Strong oil and gas production, high
international oil prices, foreign investments put in Azerbaijan and sharply rising
government spending averaged 27% economic growth per year between 2003 and
2009 (Nasirov, 4). The full operation of the Baku-Tbilisi-Ceyhan oil pipeline in
2006 and construction of the South Caucasus Gas pipeline led to the peak of oil
export revenues to Azerbaijan between 2006 and 2012 and led to rapid growth of the
national economy.

Despite all this, the sharp fall in world oil prices between 2014 and 2015 and the
fluctuations in world oil prices indicated that the economy's dependence on oil is
dangerous for the national economy. The head of state, leading economists and
politicians understanding the need to diversify the country's national economy and
ensuring the development and sustainability of the non-oil sector decided to begin to
make important decisions in this direction. At present, the development of the non-
oil sector is very important for the President of the Republic of Azerbaijan,
Azerbaijani economists and Azerbaijani politicians, and this is often highlighted in
their speeches. In 2019, the President of the Republic of Azerbaijan, Mr. Ilham
Aliyev, said at a conference on the results of the implementation of the State
Program on Socio-Economic Development of the Regions of the Republic of
Azerbaijan in 2014-2018: “Of course, the main sector of our economy is the oil and
gas sector. This is so today; it has been before and will continue to be so. We are

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