Azernews.Az

Qabil Ashirov

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After nearly three decades of conflict, Azerbaijan and Armenia are witnessing developments that would have been difficult to imagine only a few years ago. For some time now, weapons have effectively fallen silent between the two countries, while contacts between NGOs and limited exchanges involving officials have gradually increased.

Against this backdrop, Armenian Prime Minister Nikol Pashinyan recently announced that the first product from Armenia had been exported to Azerbaijan. He did not specify what the product was or which companies were involved, however, the announcement is important as limited commercial relations between the two countries have already begun, with Azerbaijani fuel becoming the first known product exported to Armenia. The emergence of an Armenian export to Azerbaijan suggests that trade may now be developing in both directions.

If a lasting peace is to be established, economic ties could play an important role in building mutual confidence. Businesses that develop customers, suppliers and investments across borders have a direct interest in stability.

However, the harder question is which Armenian products could actually compete in the Azerbaijani market.

Agriculture, processed food, textiles, construction materials and beverages are among Armenia's established sectors, and some of these areas may even face significant competitive pressure in Azerbaijan.

Since independence, Azerbaijan has developed substantial agricultural and food-processing capacity. Agriculture remains an important part of the non-oil economy. In contrast, agricultural and agro-industrial exports reached around $1.3 billion in 2025. Besides, Azerbaijan has also developed established supply chains for fruit, vegetables and processed food.

This makes it difficult to imagine Armenian producers rapidly gaining a large share of the Azerbaijani market in conventional agricultural products.

Azerbaijan's oil-driven economic expansion produced a major construction boom and helped develop domestic production of cement, concrete, metal products and other materials. Armenian producers would therefore face a market with considerable local capacity.

Moreover, Armenia has a garment industry, but much of its production is concentrated in clothing and sewing rather than large-scale textile manufacturing. In Azerbaijan, Armenian products would also have to compete with well-established Turkish brands and suppliers. Given Turkiye's dominant position in the regional textile industry, this would not be an easy market to enter. Armenia may therefore have better opportunities in more specialised products.

One obvious candidate is brandy and other alcoholic beverages. Armenian brandy has an established international reputation, and beverages, spirits and vinegar accounted for roughly $435 million of Armenia's exports in 2025.

Another possibility is jewellery and precious-metal products, which Armenia has developed up to the level of a jewellery-processing industry. However, its exceptionally large precious-metal export figures should be treated cautiously because a significant portion of recent flows has involved re-export and processing rather than purely domestic production.

Furthermore, Armenia has a mining and metallurgical base, although the feasibility of exports to Azerbaijan would depend on prices, processing levels and demand. So, it means that Armenian exports to Azerbaijan are unlikely to be dominated by products in which Azerbaijan already has strong domestic production. The more realistic opportunities may lie in specialised products where Armenia has an established comparative advantage.

Meanwhile, it would be unrealistic to expect bilateral trade to reach billions of dollars in the short term. Azerbaijan already has extensive commercial relations with major regional economies. In 2025, Russia, Türkiye, Georgia, Switzerland and Ukraine were among the leading destinations for Azerbaijan's non-oil exports, with total non-oil and gas exports reaching approximately $3.6 billion.

Armenia could eventually become another regional trading partner, but this will take time. To accelerate this, companies will need to establish distribution networks, build commercial relationships and, most importantly, develop confidence in the stability of cross-border trade.

The much bigger economic dividend

The economic benefits of peace extend far beyond bilateral trade. The conflict displaced more than one million people and resulted in tens of thousands of deaths on both sides. It also left large areas of land, including agricultural territory, inaccessible or underused for decades.

For Azerbaijan, the economic consequences were particularly significant as large-scale resources were directed toward defence and managing the consequences of the conflict. Those resources were necessary from the perspective of national security, but in a lasting peace environment, a greater share of capital can instead be directed toward infrastructure, investment, employment and development.

Azerbaijan now enters this new period from a considerably stronger economic position than it did in the early years of independence. It has developed major transport infrastructure, energy capacity and a growing non-oil economy. Certainly, peace with Armenia could further strengthen Azerbaijan's role as a regional transport and trade hub.

For Armenia, meanwhile, an open border with Azerbaijan could provide access to a neighbouring market of more than 10 million people and potentially improve its connectivity with the wider region. Of course, given the hard times that were experienced in the past, the economic relationship will probably begin modestly. But trade does not have to reach billions of dollars to become politically meaningful. The first shipment matters because it represents something that was largely absent for decades: two countries that once fought each other beginning to do business with each other.

Indeed, after decades of conflict, that would be a welcome development not only for Azerbaijan and Armenia, but for the wider South Caucasus.