BAKU, Azerbaijan, August 24. Azerbaijan is
preparing to introduce another support mechanism aimed at expanding
non-oil and gas exports. Under a decree signed by President Ilham
Aliyev on June 9, 2026, the state will cover part of the
transportation costs incurred when exporting Azerbaijani-origin
non-oil and gas products. The mechanism will take effect on
September 1, 2026, and will apply to exports and domestic
transportation carried out through September 30, 2036.
At first glance, the measure may appear to be a subsidy aimed at
reducing transportation costs for exporters. Its economic
significance, however, is broader. The mechanism is designed to
reduce the cost of bringing Azerbaijani non-oil and gas products to
foreign markets, facilitate access to new markets, and potentially
change the geographical structure of exports.
The challenge is not only production, but market
access
Despite the growth in Azerbaijan’s non-oil and gas exports in
recent years, further expanding export opportunities requires
taking into account a number of structural factors. According to
the State Statistics Committee, non-oil and gas exports amounted to
$3.63 billion in 2025. In nominal terms, this was 8.1% higher than
in 2024, while in real terms, the figure declined by 18.1%. This
dynamic reflects the impact of price and other market factors and
points to further opportunities to increase export volumes.
For Azerbaijani companies, entering foreign markets depends not
only on producing competitive goods but also on ensuring their
delivery at an acceptable cost. When accessing more distant and
alternative markets in particular, logistics costs can have a
noticeable impact on the final price of products. This is
especially relevant for sectors such as agriculture and food
processing, where transportation costs can have a significant
effect on production costs. At the same time, logistics remains one
of the factors shaping international competitiveness for higher
value-added industrial products as well. This is why the
development of transport infrastructure and the reduction of
logistics costs are viewed as important areas for expanding export
potential. The decree identifies high logistics costs as one of the
factors affecting export diversification. It notes that a
significant share of long-distance transportation costs in the
final price of goods can constrain the expansion of export
geography and product range, highlighting the importance of further
strengthening the country’s logistics capabilities.
Non-oil exports are growing, but geographical
diversification remains a challenge
Azerbaijan's non-oil and gas exports recorded significant growth
in the first seven months of 2026. According to the State Customs
Committee, the country exported $5.93 billion worth of non-oil
products in January-July, an increase of $3.845 billion, or 2.8
times, compared with the same period of last year.
However, the geographical structure of exports is just as
important as the growth itself. During the reporting period, $3.48
billion of non-oil exports went to the UK, accounting for 58.6% of
total non-oil exports. Russia accounted for $731.7 million, or
12.3%, Türkiye for $390.6 million, or 6.6%, Georgia for $328.1
million, or 5.5%, and Switzerland for $251.6 million, or 4.2%.
Other countries accounted for a combined 12.7%.
These figures show that Azerbaijan's non-oil exports are
expanding rapidly, while also highlighting significant room for
further geographical diversification. Alongside maintaining
existing markets, accessing new and more distant markets could
become one of the key priorities of Azerbaijan's export policy in
the next stage. The main challenge is therefore not only to
increase production in the non-oil sector, but also to find new and
broader foreign markets for those products.
President Ilham Aliyev emphasized this task during his speech at
the opening ceremony of the Islamic Development Bank Group Annual
Meetings 2026: "Today the share of the non-oil and gas sector in
our GDP is more than 70%, which is a remarkable achievement, but
still we have to work hard in order to continue to change the
balance of oil, gas, and the non-oil and gas sector in our export.
Today, absolute majority of our export is energy resources. So we
are working very hard in order to change the situation, and for
that, of course, we need more reforms, more investments, and also
we need new markets, and this is a problem. Because the struggle
for markets has become very active, I would use this word. So
diversification of economy is already a reality, but we have to
continue, definitely."
The president's remarks indicate that the challenge facing
Azerbaijan is no longer simply increasing the share of the non-oil
sector in the economy. The next step is to convert this production
potential into export revenues and establish a stronger position
for Azerbaijani products in new markets.
This also requires closer alignment between investment policy
aimed at developing the non-oil sector and the country's export
strategy. Expanding production and investment opportunities in
industries such as manufacturing, agriculture and agro-processing,
mining, critical minerals, transportation and logistics can
increase both the volume and range of products Azerbaijan is able
to export. However, expanding production capacity does not
automatically mean that export opportunities will grow at the same
pace. Delivering a product to an international market at a
competitive price is at least as important as production
capacity.
Azerbaijan's Minister of Economy Mikayil Jabbarov said at a news
conference devoted to the results of the Islamic Development Bank
Group Annual Meetings 2026 in Baku: "Azerbaijan's main focus is on
developing the non-oil and gas economy, and this sector has become
the main driver of economic growth in the country over the past
five to six years. Investment opportunities mainly cover non-oil
industrial production, mining and critical minerals, agriculture
and agro-processing, as well as transportation and logistics."
This approach also helps explain the rationale behind the new
transportation support mechanism. While the government is seeking
to expand production and investment opportunities in the non-oil
and gas sector, it is simultaneously developing instruments aimed
at reducing logistics barriers to bringing those products to
foreign markets. In other words, producing a product and bringing
it to market are increasingly being treated not as two separate
parts of economic policy, but as stages of a single export chain.
The new transportation support mechanism targets one of the most
costly elements of that chain — logistics.
What advantages will the new export support provide to
businesses?
The state will cover up to 70% of transportation costs incurred
when exporting Azerbaijani-origin non-oil and gas products. The
measure is expected to reduce exporters' logistics costs and
strengthen the competitiveness of local products in foreign
markets. The support will take effect on September 1 this year. The
amount of support paid to businesses will be determined based on
transportation costs and customs value, depending on the mode of
transportation used for exports.
For rail, air and sea transportation, as well as cargo
transported by Azerbaijan-registered vehicles, the calculation will
be based on 70% of the transportation costs paid. For
transportation by foreign-registered vehicles, the calculation will
be based on 50% of the relevant costs. For customs value, the
calculation will amount to 5% of the value for sea transportation
and 15% for other modes of transportation. The lower of the amounts
calculated under the two methods will be paid as the support
amount.
In addition, from September 1, the state will cover 70% of
transportation costs incurred to move Azerbaijani-origin non-oil
and gas products manufactured in the Nakhchivan Autonomous Republic
to other parts of the country. This could allow producers operating
in Nakhchivan to deliver their products to other regions under more
favorable conditions and expand their sales opportunities.
The mechanism will remain in effect for exports and domestic
transportation carried out through September 30, 2036. Businesses
will be able to collect documents confirming their export or
domestic transportation operations each quarter and submit them to
the Ministry of Economy after the end of the relevant quarter. The
amount of support will then be calculated and paid to the business
based on those documents.
An important tool for accessing new markets
The geography of Azerbaijan's non-oil and gas exports remains
concentrated in a number of markets. In 2025, Russia, Türkiye,
Georgia, Switzerland and Ukraine were among the main destinations
for non-oil exports. There is no question of reducing the
importance of these markets. Rather, one of the key potential
benefits of the new mechanism is the opportunity to expand the
geography of exports while maintaining existing markets.
Entering an alternative market requires a company to do more
than simply find a buyer. It may need to establish a new logistics
route, calculate transportation costs, study customs and
certification requirements, and sometimes create distribution and
warehousing infrastructure. These costs can be particularly
significant for small and medium-sized businesses. By covering part
of transportation costs, the state can remove one of the initial
barriers to entering new markets. In this sense, the new mechanism
can be viewed not simply as an export subsidy, but as a tool for
market diversification.
Logistics support should be complemented by new
transportation opportunities
Covering part of transportation costs creates an important
financial instrument for expanding Azerbaijan's export
opportunities. However, the long-term impact of the mechanism will
depend not only on the size of the subsidy, but also on how
effectively the country's transportation and logistics
infrastructure is used.
In this regard, the Middle Corridor is particularly important
for Azerbaijan's non-oil and gas exports. The multimodal route
connecting China and Central Asia through the Caspian Sea,
Azerbaijan and Georgia and onward to Türkiye and Europe is
expanding Azerbaijan's opportunities both as a transit country and
as an exporter.
The important point is that government support for logistics
costs and investment in transportation infrastructure can
complement each other. The availability of a more efficient route
can optimize transportation time and distance, while state support
can reduce the financial burden on exporters using that route.
As a result, the share of logistics costs in the final price of
an Azerbaijani product in a foreign market can potentially be
reduced. The issue is becoming increasingly relevant as the Middle
Corridor develops. Azerbaijan has paid growing attention in recent
years to improving the route's infrastructure, transit capacity and
digital logistics solutions. The 2026 cooperation agenda also
places emphasis on digitalizing transportation processes, expanding
electronic document circulation and increasing data exchange
between customs authorities.
In this context, the Middle Corridor can serve not only as a
route for transit cargo, but also as an alternative logistics
platform for bringing Azerbaijani products to markets in Central
Asia, China and Europe. The simultaneous expansion of such
opportunities and state support for transportation costs could
create a more favorable logistics model for exporters.
The Zangezur Corridor could become another link in the
network
The prospects for the Zangezur Corridor are also significant in
this context. Its implementation could strengthen the
transportation link between Azerbaijan and Nakhchivan while
expanding alternative connections between the Middle Corridor and
European markets.
This becomes particularly relevant when considered alongside the
domestic transportation support planned for Nakhchivan. On the one
hand, the state plans to compensate 70% of the cost of transporting
non-oil and gas products manufactured in Nakhchivan to other parts
of Azerbaijan. On the other hand, new connections that could
strengthen the region's integration into the transportation
networks of Azerbaijan, Türkiye and the wider Eurasian region are
being discussed.
Thus, the state support mechanism could serve not only as a tool
for compensating existing logistics costs, but also as an
instrument encouraging more efficient use of Azerbaijan's
transportation capabilities. If new routes create lower and more
predictable transportation costs, the need for state support could
naturally decline over the longer term. This would be closer to the
strategic objective of the mechanism: rather than permanently
compensating exporters for high logistics costs, the government
would help establish a logistics ecosystem that allows products to
reach foreign markets on more competitive terms.
Particular importance for Nakhchivan
Another important element of the decree is support for
transporting Azerbaijani-origin non-oil and gas products
manufactured in the Nakhchivan Autonomous Republic to other parts
of the country. 70% of the transportation costs for moving such
products by road from Nakhchivan to other parts of Azerbaijan will
be covered by the state.
Improving access to Azerbaijan's main consumer markets could
encourage local production in Nakhchivan to expand. If
transportation costs significantly increase the final price of a
product, its competitiveness in Baku and other major consumer
centers can weaken. Transportation support could partly offset this
difference. The mechanism is therefore important for Nakhchivan
both in terms of expanding production and strengthening its
integration into the domestic market.
The implementation mechanism will be
critical
The decree establishes the general framework, but a number of
details that will determine its actual economic impact still need
to be defined through separate regulations. The Ministry of Economy
will determine the list of non-oil and gas products and export
destinations covered by the support, application and review
procedures, as well as the mechanism for calculating support in
multimodal transportation.
This is particularly important because international logistics
often involves several modes of transportation. For example, a
product may be transported by road, then transferred to rail and
subsequently shipped by sea. In such cases, the way support is
applied to each cost and at what rate will be critical for
exporters. At the same time, the application process should be
simple and digital. For small and medium-sized businesses,
extensive paperwork and long processing times could reduce the
practical economic value of the subsidy.
Measuring results will matter more than simply providing
funds
The long-term nature of the mechanism is also notable. The
support will cover exports and domestic transportation carried out
from September 1, 2026, through September 30, 2036. The ten-year
horizon indicates an intention to create a more predictable
environment for exporters. Government support should help companies
become more competitive in international markets. However, over the
longer term, the foundation of their competitiveness should be
productivity, quality, innovation and efficient logistics rather
than subsidies.
Part of a broader strategy
Transportation cost compensation should not be viewed separately
from other support measures adopted in June for non-oil and gas
exports. Another presidential decree signed on June 16 provides for
state compensation of certain customs clearance costs for exporters
that are micro, small and medium-sized enterprises. This mechanism
will also take effect on September 1, 2026, and will apply to
export operations carried out through September 30, 2031.
The government's approach is therefore expanding beyond the
production stage to support different parts of the export chain,
including financing, customs clearance, logistics and market
access. This approach is particularly relevant for an economy such
as Azerbaijan, which has a strategically important geographical
position and significant transit potential but also faces distance
and logistics-cost challenges when accessing many foreign
markets.
Overall, the new transportation support mechanism could become
an important tool in Azerbaijan's non-oil and gas export policy.
Its greatest potential lies not simply in reducing exporters'
costs, but in making it economically more viable for Azerbaijani
products to reach foreign markets. The fact that non-oil and gas
exports stood at $3.63 billion in 2025 shows that there remains
significant room for expansion. The new support mechanism could
ease one of the financial barriers to realizing that potential.
Ultimately, however, the success of the mechanism will be
measured not by the amount of subsidies provided, but by the
additional exports generated. If state spending on logistics helps
open new markets, encourages more companies to become exporters and
improves the global competitiveness of Azerbaijani products, the
mechanism will have achieved its objective. Otherwise, it could
simply result in part of the existing export volume being
transported at a lower cost at the expense of the state.
