From underground wealth to diplomatic power: Azerbaijan’s energy strategy

Azerbaijani oil passes through Turkiye to Israel, its gas reaches European markets, and Emirati and Saudi capital finances its power plants. This network places Azerbaijan at the intersection of interests that do not always align. Baku has made itself relevant to several competing actors. Its harder task is to turn those relationships into lasting influence while preserving strategic autonomy.

Continued oil deliveries to Israel, despite Ankara’s trade restrictions, illustrate the challenge. Infrastructure, contracts and commercial interests can sustain connections across political divisions. Azerbaijan gains revenue and strategic importance, while becoming exposed to disputes among its partners.

Ankara and Tel Aviv: Two relationships, one route

Turkiye is both a political partner and Azerbaijan’s gateway to overseas markets. The Baku–Tbilisi–Ceyhan pipeline carries Caspian oil to the Mediterranean, while the Trans-Anatolian pipeline forms part of the Southern Gas Corridor, connecting Azerbaijani gas to Europe. These assets give the Baku–Ankara relationship a durability extending beyond immediate political positions.

The route’s importance to Israel is measurable. Azerbaijani crude accounted for 46.4 per cent of Israeli oil imports in 2025. Reuters reported in January 2026, citing Kpler data, that imports through Ceyhan reached approximately 94,000 barrels a day, up 31 per cent from the previous year. It also described vessels declaring alternative destinations and switching off tracking systems.

These shipments expose a gap between Ankara’s declared restrictions and the operation of a multinational oil supply chain. Cargo ownership, pipeline operations and final delivery involve different commercial and regulatory arrangements. In November 2024, Turkiye’s energy ministry stated that BTC operates under the 1999 intergovernmental agreement and associated host government agreements, and that its Turkish operator has no involvement in oil purchases or sales. It also denied loading cargoes with Israel as their declared destination.

The contrast with final-destination tracking data raises questions about enforcement and oversight. Distinguishing transit operations from oil sales explains part of the commercial structure; it does not settle the extent of the Turkish state’s authority or responsibility.

Energy supplies and defence cooperation give Baku’s relationship with Israel strategic depth. According to SIPRI, Israel supplied 69 per cent of Azerbaijan’s imports of major arms in 2016–2020. Azerbaijan occupies an important place in Israel’s oil supply, while Israeli arms have contributed to Baku’s military capabilities.

These interests raise the cost of political disengagement for both sides.

For Baku, the benefits come with political costs. Against the backdrop of the Gaza war, supplying Israel with oil raises serious ethical and political questions. Azerbaijan must manage a partnership important to its trade and defence while facing scrutiny from regional publics.

Iran: Geography needs workable agreements

Iran demonstrates another feature of Baku’s energy diplomacy: neighbours with political differences can still need each other’s infrastructure. The November 2021 gas swap agreement envisaged Iran receiving 1.5–2 billion cubic metres of Turkmen gas annually and delivering an equivalent volume to Azerbaijan. Existing networks enabled cooperation without constructing a new pipeline along the entire route.

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The arrangement’s temporary suspension in early 2024 exposed its commercial limits. Trend reported at the time that Baku and Ashgabat had not agreed the terms for that year. Geography creates an opportunity for exchange; prices and contracts determine whether gas flows.

This lesson also applies to proposed connections with Nakhchivan. Routes through Iran and southern Armenia involve different geographical and legal arrangements. Their value depends on sovereignty, security and investment. For Tehran and Baku, durable cooperation requires clearly shared benefits and reliable implementation.

Gulf capital expands Baku’s options

Emirati and Saudi investment has widened Azerbaijan’s energy partnerships. Masdar announced the inauguration of the 230-megawatt Garadagh solar plant in October 2023. The 240-megawatt Khizi–Absheron wind plant, developed by Saudi Arabia’s ACWA Power, was officially inaugurated in January 2026. These projects anchor Gulf relationships in long-term economic assets.

Baku gains capital and a broader choice of partners. Gulf investors gain opportunities to expand in the Caucasus. The practical value of these partnerships will emerge through electricity production, grid development and domestic capabilities.

Renewables offer another benefit. The International Energy Agency notes that their expansion could conserve gas for exports and petrochemical production. Green investment therefore also supports the management of Azerbaijan’s export resources.

Europe and the credibility test

Europe adds weight to this network. The 2022 energy memorandum set an ambition to expand corridor capacity to deliver at least 20 billion cubic metres annually to the EU by 2027. Achieving it requires additional gas production, infrastructure and commercial commitments.

TAP’s March 2026 announcement confirmed that its first expansion phase was operational, adding 1.2 billion cubic metres of annually booked long-term capacity. This is a concrete advance, but it does not by itself establish a delivery pathway to the 2027 ambition. Meeting that target requires further transport capacity, additional exportable gas and firm purchasing commitments.

Reliable delivery strengthens Baku’s bargaining position. Political promises unsupported by the necessary investment risk weakening the credibility on which that position depends.

Today’s wealth, tomorrow’s power

The World Bank’s 2023 assessment placed oil and gas at around 90 per cent of Azerbaijan’s exports. Such concentration leaves the economy exposed to market volatility and the global energy transition.

Baku has made its resources matter abroad. Its next test is to build an economy that can sustain that influence as hydrocarbon revenues decline. Diplomatic power will endure only if Azerbaijan converts today’s resource income into productive capacity beyond the extractive sector.

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The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.