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Nazrin Abdul

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The economic partnership between Azerbaijan and the United Arab Emirates (UAE) has evolved into a multifaceted and strategic alliance, underpinned by shared values, mutual trust, and a common vision for sustainable development. Rooted in the principles of mutual respect and long-standing diplomatic goodwill, the relationship is increasingly characterized by high-level engagement and deepening economic integration across a range of sectors.

President Ilham Aliyev’s official visit to the UAE on July 9, 2025, marked another milestone in this dynamic relationship. The warm reception, which included an honor guard ceremony at Zayed International Airport and the presence of Sheikh Mansour bin Zayed Al Nahyan, Vice President and Deputy Prime Minister of the UAE, served as a symbolic reaffirmation of the strategic closeness between the two nations.

The UAE has positioned itself as one of the leading foreign investors in Azerbaijan. In 2024, the UAE’s investments reached $490.2 million, elevating it to fifth place among Azerbaijan’s main investment partners. This figure reflects a 53% increase compared to $319 million in 2023, demonstrating a robust and growing investor confidence in Azerbaijan’s economy.

Such investment patterns are not coincidental; they reflect Azerbaijan’s efforts to create a favorable investment climate, especially in industrial parks, logistics, energy, and innovation. The government’s strategic vision, including streamlined regulations, infrastructure development, and preferential tax regimes, continues to attract interest from international investors, particularly from Gulf states seeking stable, long-term returns.

A case in point is the $17 million transformer production project recently announced by UAE-based company SENSEMI DMCC, which is now a resident of the Araz Valley Economic Zone. The plant is projected to produce 3,000 transformers annually using modern technologies, contributing not only to domestic energy infrastructure but also to industrial diversification.

This project is emblematic of the broader UAE interest in Azerbaijan's industrial ecosystem, especially within free economic zones that offer attractive entry points for foreign capital. With 18 companies already registered in the Araz Valley Economic Zone, the cumulative investment portfolio has now exceeded 140 million manats (~$82 million USD), indicating momentum in regional industrial development.

Bilateral trade is also gaining significant traction. According to the State Customs Committee, Azerbaijan’s trade turnover with the UAE increased by 1.9 times in the first five months of 2025 compared to the same period in 2024, reaching $64.9 million. Exports surged to $45.4 million, a 120% increase, while imports from the UAE rose by nearly 50% to $19.4 million.

While the UAE’s share in Azerbaijan’s overall trade turnover still stands at a modest 0.3%, the growth trajectory is clear. This upward trend is likely to continue as both countries diversify trade portfolios, particularly in non-oil sectors such as agriculture, technology, construction materials, and consumer goods.

Perhaps the most transformative area of Azerbaijan-UAE economic cooperation lies in the energy sector, particularly in the realm of renewables and green transformation. Azerbaijan, rich in renewable energy potential, has made it a strategic priority to reduce dependence on fossil fuels and move toward a carbon-neutral future. The UAE, as a global proponent of clean energy and the host of Masdar, one of the world's leading renewable energy companies, has become a natural partner in this endeavor.

The commissioning of the Garadagh Solar Power Plant in October 2023 stands as a flagship achievement. Constructed by Masdar with an investment of $262 million, the plant is the largest solar facility in the Caspian region and the CIS. With a capacity of 230 MW, it is expected to generate 500 million kWh annually, saving 110 million cubic meters of natural gas and reducing carbon emissions by 200,000 tons.

This project is not just a testament to engineering or financial collaboration, but it is a strategic move that aligns with Azerbaijan’s COP29 commitments, including reducing greenhouse gas emissions by 40% by 2050 and establishing "zero-emission" zones in liberated territories. UAE’s involvement reinforces its broader regional influence in sustainable infrastructure while enhancing Azerbaijan’s global energy profile.

Azerbaijan–UAE economic cooperation has clearly moved beyond transactional engagement and is increasingly shaped by strategic alignment and mutual long-term interests. Whether in foreign direct investment, industrial capacity building, trade, or renewable energy development, both countries are demonstrating a commitment to sustainable and diversified economic cooperation.

Looking ahead, the potential for expansion is significant. Key areas for future development include:

- Technology transfer and innovation partnerships, particularly in smart cities and digital infrastructure;

- Agro-industrial projects, where UAE can leverage Azerbaijan’s fertile land for food security goals;

- Logistics and transport corridor development, capitalizing on Azerbaijan’s role as a regional hub in the Middle Corridor between Asia and Europe.

In conclusion, the deepening economic partnership between Azerbaijan and the UAE reflects a shared commitment to strategic investment, sustainable development, and long-term regional cooperation.