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Nazrin Abdul

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International rating agency S&P Global Ratings has upgraded the credit rating outlook for the State Oil Company of Azerbaijan (SOCAR) from “stable” to “positive” and affirmed the company’s rating at BB, Azernews reports, citing S&P.

According to the agency, the decision reflects a very high likelihood of state support for SOCAR and follows a similar improvement in Azerbaijan’s sovereign rating outlook.

S&P notes that the positive outlook is supported by several factors. Tensions between Azerbaijan and Armenia have significantly eased amid progress toward a peace settlement, with both countries reducing defense spending in their 2026 budgets. These developments lower the risk of renewed conflict and, if current trends continue, could bolster investor confidence and contribute to more sustainable medium-term economic growth by improving regional trade and transport links in the South Caucasus.

Additionally, SOCAR benefits from strong fiscal and external buffers backed by significant assets of the State Oil Fund of Azerbaijan (SOFAZ). The report highlights that sustained positive balances in the public sector and low government debt provide substantial resilience against shocks, helping to maintain macroeconomic stability and mitigating the impact of volatile hydrocarbon prices.

S&P expects that Azerbaijan’s credit metrics could improve further in the medium term if geopolitical risks continue to decline and fiscal buffers are preserved.

“While a formal peace agreement has yet to be signed, recent commitments and the initial steps toward their implementation represent the most constructive phase in bilateral relations in decades, which could enhance the investment environment and support economic growth potential,” S&P stated.

For context, on November 12, 2025, S&P upgraded SOCAR’s rating from BB- to BB.