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Ulviyya Poladova

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The global economic architecture in 2026 continues to present a complex web of logistical rewiring and volatile commodity flows. In Azerbaijan’s case, a pivotal energy and transit nexus bridging Eurasia, the primary trade indicators for the January-July period offer a fascinating lens into how small, strategic economies adapt to macro-level disruption.

Azerbaijan’s total foreign trade turnover reached $29.22 billion over the first seven months of the year, registering a modest 1.3% growth year-over-year.

Italy remains the anchor tenant - a quarter of everything Azerbaijan trades still runs through the Trieste terminal and the gas pipeline that ends in Puglia. But Italy's mild contraction, set against a British quadrupling, tells us that the centre of gravity is shifting in ways that have little to do with volumes pumped.

The Russian number is the one that deserves another look. A 31.3% decline to $2.1 billion is the sharpest fall among Azerbaijan's major partners, and it comes at a moment when the country's Southeastern European trade - Romania up 38.1%, Bulgaria up 21.5%, Georgia up 43.8% - is expanding briskly. Some experts call this diversification or drift, the vector is unmistakable. Thus, goods and money are moving west and south along the Middle Corridor while the northern route thins. Baku's European trade is not growing as a bloc. It is growing along the pipeline-and-corridor axis and shrinking where the relationship rests on machinery imports and industrial capital goods.

Beyond the major economic powerhouses, looking closer at the EU shows some interesting activity in smaller markets. Deliveries to several European countries saw a noticeable jump over the same period:

The European Union is Azerbaijan’s largest trading partner, playing a central role in the country’s external economic relations. It is also Azerbaijan’s primary export destination and one of its most significant sources of imports. This trade structure is largely driven by energy exports, particularly oil and gas, which constitute a major share of Azerbaijan’s export revenues. The EU’s role as a key economic partner has also contributed to Azerbaijan’s efforts to diversify its economy, attract foreign investment, and develop non-oil sectors. European companies have been actively involved in infrastructure, transport, and energy projects within Azerbaijan.

Earlier this year, European Council President António Costa said that the European Union considers Azerbaijan a key partner, particularly when it comes to energy security. He stressed that cooperation between the two sides also extends to transport, digital development and security, while Brussels and Baku are working on a new framework to further deepen their partnership.

It is also worth noting that the development of the Middle Corridor is creating new opportunities for trade between Europe and Asia. The completion of the Baku-Nakhchivan railway could become another important link in this emerging transport network, further strengthening Azerbaijan’s role as a bridge between the two regions.

The country’s strategic location at the crossroads of Europe and Asia, combined with its access to the Caspian Sea and developing transport infrastructure, gives it a geographic advantage that can support long-term economic ties with European countries. With conflicts continuing to affect both the northern and southern approaches to the country - Russia’s war against Ukraine and instability in the Middle East - traditional Eurasian transport routes are being reshaped. This has elevated the importance of the Trans-Caspian or Middle Corridor, which connects Central Asian markets with Europe through Azerbaijan, Georgia and Türkiye. For European countries, the route offers an alternative to transit networks that depend on Russian or Iranian territory, making it increasingly relevant from both an economic and strategic perspective.

For Azerbaijan, the challenge is to broaden the basket of goods it sells. Petrochemicals, fertilisers, aluminium, agricultural products, processed food, textiles and selected industrial goods could all play a larger role if producers bring their products close to EU standards and compete on price, quality and delivery.

The EU market is attractive, but it is not low-hanging fruit. Exporters should navigate strict rules on product safety, certification, traceability, environmental performance and packaging. Azerbaijan's long-running WTO accession process and the absence of a preferential trade regime with the EU also affect market access. The current EU-Azerbaijan Partnership and Cooperation Agreement has been in force since 1999 and removes trade quotas, but it does not provide tariff preferences. Negotiations on a broader agreement began in 2017, although the trade talks have been on hold since February 2022.

Baku is now supplying natural gas to 10 EU member states, with Germany and Austria joining the list under new supply arrangements that took effect in early 2026. Against the backdrop of the war in Iran, disruption around the Strait of Hormuz and growing volatility in global energy markets, the importance of alternative and reliable suppliers has only increased.

There are signs that the economic agenda may gradually move beyond fossil fuels. Cooperation increasingly covers energy efficiency, renewable power and regional connectivity. In March 2024, the EU facilitated a memorandum on wind-energy cooperation between Azerbaijan's renewable-energy agency and WindEurope. If such kind of initiative lead to investment and technology transfer, they could lay the groundwork for a more balanced relationship.

Azerbaijan’s potential participation in the EU Common Transit Convention could further strengthen this connection. The framework simplifies customs procedures and facilitates the movement of goods across participating countries. If Azerbaijan joins, the South Caucasus could become more closely integrated into Europe’s wider transport and trade system, creating a continuous commercial link between Central Asia and European markets.