Karabakh and East Zangezur: A Real Test for Azerbaijan’s Economic Diversification Strategy
By Abdulhamid Hamid Al-Kba- I’ve seen quite a few post-conflict reconstruction efforts in my time, but what Azerbaijan is attempting in Karabakh and East Zangezur really stands apart. This isn’t the usual “clean up the mess and move on” story. It feels like a serious, long-term bet — trying to turn land that was brutally damaged by war into the foundation for a more diversified economy less reliant on oil.
Since 2020, the government has poured more than 25 billion manats (roughly $14.7 billion) into these liberated territories. In 2025 alone, they spent over 4.4 billion, and they’ve set aside another 3.5 billion for 2026. Those are big numbers by any standard. But what impresses me more than the spending itself is the shift in thinking. These regions are no longer being treated as a painful reminder of the past — they’re now being positioned as tomorrow’s investment frontier.
For years, we’ve all heard Azerbaijan talk about reducing its heavy dependence on oil and gas. In most countries, this kind of rhetoric stays just that — nice-sounding words. Here, though, you can actually see it taking shape on the ground. Highways are carving through the mountains, new rail lines are going in, and energy networks are slowly coming back to life. The change is visible, even if there’s still a long way to go.
On the industrial side, things are starting to pick up. The Aghdam Industrial Park and the Araz Valley Economic Zone in Jabrayil have managed to attract over 190 million manats in private investment. It’s still modest compared to what the state is pumping in, but it’s real money from real companies, and it’s creating actual jobs. That’s an important first step.
The incentives the government is offering are quite aggressive — long tax breaks, customs exemptions, ready infrastructure, and easier financing. I respect that approach. In places recovering from conflict, you often need bold moves like these to jump-start things, because the market won’t do it on its own anytime soon.
That said, I’m still cautious. The big question is whether all this investment and these incentives can create real, self-sustaining economic life. Infrastructure is one thing, but getting people to return, stay, and build normal lives is something else entirely. You need steady jobs, good schools, functioning hospitals, and a genuine sense of security and opportunity.
The geography is definitely on their side. Sitting at a key crossroads in the South Caucasus, these areas have the potential to become important logistical links between Azerbaijan, Türkiye, and Central Asia. But turning that potential into reality will depend on completing the infrastructure and maintaining stability in a pretty complicated region.
From where I stand, Karabakh and East Zangezur have become the ultimate real-world test for Azerbaijan’s diversification strategy. The real success won’t be measured by how much money Baku spends or how many projects are announced. It will be measured by whether these territories can eventually stand on their own without needing constant, heavy financial support from the capital.In the end, this is about more than just rebuilding after war. It’s an attempt to reshape part of Azerbaijan’s economic future. If it works, these regions could become a genuine pillar of the country’s new economy. If it doesn’t, it will be a very expensive lesson.
I’m watching closely. There’s real ambition here — and real risks. Only time will tell which one wins.
Abdulhamid Hamid Al-Kba /Opinion writer specializing in Central Asia and Azerbaijan affairs
By Abdulhamid Hamid Al-Kba- I’ve seen quite a few post-conflict reconstruction efforts in my time, but what Azerbaijan is attempting in Karabakh and East Zangezur really stands apart. This isn’t the usual “clean up the mess and move on” story. It feels like a serious, long-term bet — trying to turn land that was brutally damaged by war into the foundation for a more diversified economy less reliant on oil.
Since 2020, the government has poured more than 25 billion manats (roughly $14.7 billion) into these liberated territories. In 2025 alone, they spent over 4.4 billion, and they’ve set aside another 3.5 billion for 2026. Those are big numbers by any standard. But what impresses me more than the spending itself is the shift in thinking. These regions are no longer being treated as a painful reminder of the past — they’re now being positioned as tomorrow’s investment frontier.
For years, we’ve all heard Azerbaijan talk about reducing its heavy dependence on oil and gas. In most countries, this kind of rhetoric stays just that — nice-sounding words. Here, though, you can actually see it taking shape on the ground. Highways are carving through the mountains, new rail lines are going in, and energy networks are slowly coming back to life. The change is visible, even if there’s still a long way to go.
On the industrial side, things are starting to pick up. The Aghdam Industrial Park and the Araz Valley Economic Zone in Jabrayil have managed to attract over 190 million manats in private investment. It’s still modest compared to what the state is pumping in, but it’s real money from real companies, and it’s creating actual jobs. That’s an important first step.
The incentives the government is offering are quite aggressive — long tax breaks, customs exemptions, ready infrastructure, and easier financing. I respect that approach. In places recovering from conflict, you often need bold moves like these to jump-start things, because the market won’t do it on its own anytime soon.
That said, I’m still cautious. The big question is whether all this investment and these incentives can create real, self-sustaining economic life. Infrastructure is one thing, but getting people to return, stay, and build normal lives is something else entirely. You need steady jobs, good schools, functioning hospitals, and a genuine sense of security and opportunity.
The geography is definitely on their side. Sitting at a key crossroads in the South Caucasus, these areas have the potential to become important logistical links between Azerbaijan, Türkiye, and Central Asia. But turning that potential into reality will depend on completing the infrastructure and maintaining stability in a pretty complicated region.
From where I stand, Karabakh and East Zangezur have become the ultimate real-world test for Azerbaijan’s diversification strategy. The real success won’t be measured by how much money Baku spends or how many projects are announced. It will be measured by whether these territories can eventually stand on their own without needing constant, heavy financial support from the capital.In the end, this is about more than just rebuilding after war. It’s an attempt to reshape part of Azerbaijan’s economic future. If it works, these regions could become a genuine pillar of the country’s new economy. If it doesn’t, it will be a very expensive lesson.
I’m watching closely. There’s real ambition here — and real risks. Only time will tell which one wins.
Abdulhamid Hamid Al-Kba /Opinion writer specializing in Central Asia and Azerbaijan affairs
By Abdulhamid Hamid Al-Kba- I’ve seen quite a few post-conflict reconstruction efforts in my time, but what Azerbaijan is attempting in Karabakh and East Zangezur really stands apart. This isn’t the usual “clean up the mess and move on” story. It feels like a serious, long-term bet — trying to turn land that was brutally damaged by war into the foundation for a more diversified economy less reliant on oil.
Since 2020, the government has poured more than 25 billion manats (roughly $14.7 billion) into these liberated territories. In 2025 alone, they spent over 4.4 billion, and they’ve set aside another 3.5 billion for 2026. Those are big numbers by any standard. But what impresses me more than the spending itself is the shift in thinking. These regions are no longer being treated as a painful reminder of the past — they’re now being positioned as tomorrow’s investment frontier.
For years, we’ve all heard Azerbaijan talk about reducing its heavy dependence on oil and gas. In most countries, this kind of rhetoric stays just that — nice-sounding words. Here, though, you can actually see it taking shape on the ground. Highways are carving through the mountains, new rail lines are going in, and energy networks are slowly coming back to life. The change is visible, even if there’s still a long way to go.
On the industrial side, things are starting to pick up. The Aghdam Industrial Park and the Araz Valley Economic Zone in Jabrayil have managed to attract over 190 million manats in private investment. It’s still modest compared to what the state is pumping in, but it’s real money from real companies, and it’s creating actual jobs. That’s an important first step.
The incentives the government is offering are quite aggressive — long tax breaks, customs exemptions, ready infrastructure, and easier financing. I respect that approach. In places recovering from conflict, you often need bold moves like these to jump-start things, because the market won’t do it on its own anytime soon.
That said, I’m still cautious. The big question is whether all this investment and these incentives can create real, self-sustaining economic life. Infrastructure is one thing, but getting people to return, stay, and build normal lives is something else entirely. You need steady jobs, good schools, functioning hospitals, and a genuine sense of security and opportunity.
The geography is definitely on their side. Sitting at a key crossroads in the South Caucasus, these areas have the potential to become important logistical links between Azerbaijan, Türkiye, and Central Asia. But turning that potential into reality will depend on completing the infrastructure and maintaining stability in a pretty complicated region.
From where I stand, Karabakh and East Zangezur have become the ultimate real-world test for Azerbaijan’s diversification strategy. The real success won’t be measured by how much money Baku spends or how many projects are announced. It will be measured by whether these territories can eventually stand on their own without needing constant, heavy financial support from the capital.In the end, this is about more than just rebuilding after war. It’s an attempt to reshape part of Azerbaijan’s economic future. If it works, these regions could become a genuine pillar of the country’s new economy. If it doesn’t, it will be a very expensive lesson.
I’m watching closely. There’s real ambition here — and real risks. Only time will tell which one wins.
Abdulhamid Hamid Al-Kba /Opinion writer specializing in Central Asia and Azerbaijan affairs
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Karabakh and East Zangezur: A Real Test for Azerbaijan’s Economic Diversification Strategy
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