Azerbaijan covers an area of 33,400 square miles and it is a nation situated within the South Caucasus area. Azerbaijan is often considered to be one of the wealthy nations in the world since its gross domestic product in 2017 was approximately $40.75 billion which was the 88th highest at the time. Regarding the per capita gross domestic product, Azerbaijan was ranked 72nd in the world in 2017. The Azerbaijani economy is considered to be one of the strongest economies in the region, and its economic strength can be attributed to some factors. Some of the reasons for the success of Azerbaijan include proper utilization of the country's natural resources and ambitious policies implemented by the Azerbaijani government. Azerbaijan has a wealth of natural resources that include minerals, arable land, water, and the nation's beautiful scenery.
Azerbaijan's Natural Resources
Statistics from the World Bank indicated that in 2015 approximately 23.5% of Azerbaijani land was considered arable. The data suggests that the amount of arable land in Azerbaijan has been increasing steadily since 2004. A variety of crops are grown in Azerbaijan with some of the most important being potatoes, grapes, and cotton. Since the early periods of Azerbaijan's history, agriculture has been one of the country's most important economic sectors. In the 1990s, after identifying several of the primary challenges that faced the Azerbaijani agricultural sector, the government put in place some measures to increase the nation's agricultural productivity. In 1993, the Azerbaijani government set up an agricultural ministry to oversee agricultural activities in the country. The Azerbaijani government provided subsidies to the local farmers and also encouraged them to implement modern agricultural techniques. Currently, most of the Azerbaijani agricultural land is owned by either the government or by cooperatives. Cooperatives are popular in Azerbaijan because private farmers are unable to take advantage of government subsidies. Despite the measures that the Azerbaijani government has put in place the major challenge facing the country's agricultural sector is the use of child labor.
Cotton has been one of the most important crops in Azerbaijan particularly during the communist era. During this period, the crop was often referred to as white gold due to its tremendous economic value. For a time, Azerbaijan was one of the most prolific cotton-producing regions as it produced nearly 400,000 tons of cotton each year. Data indicates that Azerbaijan's cotton production was at its highest in 1981 when it produced roughly 831,000 tons of cotton. Azerbaijan's cotton production began declining in the late 1980s due to the combination of several factors such as the mismanagement of cotton farms and the production of low-value cotton. Despite the decline in the quantity produced cotton was still the most vital commercial plant in Azerbaijan. A significant challenge facing the country's cotton sector is the fact that none of the cotton grown within its borders is considered to be organic. Another challenge facing Azerbaijani cotton is the fact that farmers rely on child labor to produce the crop.
For a long period of Azerbaijan's history, grapes have been one of the most important crops in the country. Numerous foreign grape varieties thrive in Azerbaijan such as the Pinot noir, Pervenets Magaracha, as well as the Kishmish Moldavski. Some of the grape varieties native to the country include Ganja Pink, Black Shani, and Agdam Kechiemdzhei. Vineyards can be found in several regions of Azerbaijan such as close to the Kür River and around the base of the Caucus mountains. The Azerbaijani government estimated that close to 7% of its total agricultural area is used to grow grapes. The grapes are an essential ingredient in Azerbaijani wine which is famous around the world due to its high quality. During the Soviet era, the government invested heavily in improving grape farming in Azerbaijan and most of the wine produced in the country during this period was sold to Russia and Belarus.
Azerbaijan has been blessed with a vast variety of water resources that range from rivers to lakes. Apart from the naturally occurring bodies of water in the country, there are also several human-made water bodies such as canals and ponds. Geographical data indicates that there are close to 8,360 rivers flowing within Azerbaijan's borders. Most of the country's rivers, close to 8,190 according to some estimates only flow for less than 16 miles. Less than 25 of Azerbaijani rivers flow for more than 62 miles. The Kür, Iori and Araz Rivers are three of the most important waterways in the country. There are several massive lakes within Azerbaijan's borders such as Lake Ağgöl, Lake Sarysu, and Ajinohur. Lake Sarysu, which has a surface area of roughly 25 square miles, is the largest lake within Azerbaijan. Azerbaijan's water resources are used for different purposes such as irrigation and fishing among others.
Azerbaijan has several minerals of significant economic value such as iron ore, gold, and fossil fuels. Information from the mineral yearbook indicates that in 2014, mineral production was roughly 70% of the nation's industrial output. In the same period, mineral products were some of the most critical trade items from Azerbaijan. The information in the yearbook indicated that the production of several minerals such as copper ore and lime increased significantly in 2014. The largest increase was witnessed in the production of copper which increased by 135%. The production of silver declined significantly as estimates indicated that the production fell by close to 62%.
One of Azerbaijan's most essential minerals is gold. One of Azerbaijan's leading gold mining companies is the Anglo Asian Mining company which began mining of gold in the country in 2009. The company obtains gold from the Gedabek Mine which also produces other minerals such as silver and copper. Another gold mining site in Azerbaijan is the Gosha Mine which began producing gold in 2014.
Historically, Azerbaijan was a significant player in the production of oil. The oil industry in Azerbaijan dates back to 1871 when Ivan Mirzoev constructed a derrick to extract oil. In the modern era, both onshore and offshore oil fields are exploited in the country. Some of the biggest offshore fields in Azerbaijan include Sangachal-Deniz and Duvanni-Deniz. In 2013, according to data from the government, Azerbaijan produced roughly 875,000 barrels of oil each day.
Economic Challenges Facing Azerbaijan
The Azerbaijani economy faces numerous challenges with the most significant one being the decline in the global price of oil. The decrease in the prices of oil has caused the value of oil exports from Azerbaijan to decrease significantly.