How To Help Reform, Development, and Stability in Azerbaijan
Summary
Azerbaijan faces a complex search for a new geopolitical and internal identity after the full restoration of territorial integrity and sovereignty in 2020–2023. The decades-long conflict with Armenia, now nearing a peace agreement, has shaped repressive governance, which the government justified by the need for internal discipline during the Karabakh conflict. The government shows no sign of easing its long‑standing authoritarianism. Stagnation in the oil‑dependent economy, corruption, and declining public trust strain the political order. The country’s medium‑term trajectory hinges largely on signing a peace agreement with Armenia, which will shape its domestic stability and international engagement.
Opposition parties have been neutralized through a combination of repressive measures against genuine critics and the government’s capitalizing on military victory. The once‑vibrant civil society has been dismantled through repression, imprisonment, and forced emigration, leaving only limited space for independent activity, mainly in peace-building. Exiled activists have little domestic influence, while the state promotes and funds government-organized nongovernmental organization to dominate the civic sphere. International support for civil society, especially from the EU, is constrained by strict controls on foreign funding. Heavy dependence on shrinking oil and gas revenues, and the presence of monopolies and corruption, has undermined productivity and stability. Demographic decline, low wages, and mass emigration further strain the system, threatening the social compact based on oil revenue and future political stability.
After the military developments of 2020–2023, Azerbaijan shifted its rhetoric away from Armenia and toward other perceived external adversaries—France, Iran, the United States, and especially Russia. There has been progress toward a peace agreement with Armenia, with the United States replacing Russia as the main mediator. The signing of an agreement hinges on constitutional change in Armenia and on progress on the Trump Route for International Peace and Prosperity transport project. Western engagement more than ever prioritizes energy and security over democracy while Baku is increasingly attracted by non-Western institutions and initiatives with a focus on economics and geopolitics. The outbreak of the Iran War has now created a large element of security and economic uncertainty for Azerbaijan.
Over the next 12 to 18 months, Azerbaijan will face intertwined economic, political, and international challenges. Since parliamentary elections, which could provide a mechanism for adjusting the course of key policies, are not due until 2028, the government will have to acknowledge the limitations of its long-standing economic strategies and reform them so as to mitigate the unraveling of the social compact and to ensure domestic stability. Baku will also have to recalibrate its relations with its Western partners and neighbors. In this context, this brief presents two scenarios: a peace agreement is signed relatively soon, prompting new regional momentum, or the peace process slows down and regional tensions rise.
The brief concludes with recommendations for the EU, its member states, and the United States as to how they can support Azerbaijan’s reform, development, and stability. They focus on the areas of political dialogue and electoral reform, civil society and media freedom, economic diversification and reform, demographic and migration challenges, and regional peace and stability.
The author of this policy brief is an Azerbaijan expert who requested anonymity.
The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.