Azerbaijan is widely known for its oil and natural gas. Indeed, home to the world’s first oil boom in the early 20th century, the capital city of Baku has become synonymous with oil exploration. Soon after independence in 1991, Azerbaijan pioneered development of the Caspian energy resources under the leadership of the late President Heydar Aliyev, whose vision and foresight has transformed both Azerbaijan and the entire Caspian region.
It was Heydar Aliyev who secured the then largest single foreign investment in the former Soviet Union. This "Deal of the Century," as it became known, between western oil companies and Azerbaijan led to the development of off shore oil fields in the Caspian Sea. Part of the formula for this success was that Azerbaijan pioneered the practice of guaranteeing the Production Sharing Agreements through a legislative process, thus upholding the sanctity of contact. As a result, the strategic Baku-Tbilisi-Ceyhan oil pipeline became the most significant infrastructure project in the region, delivering oil from the Caspian Sea to the open ocean. This project, which is strongly supported by the United States, brings prosperity to Azerbaijan and its partners in the region while enhancing security and stability through the establishment of the backbone of the East-West energy corridor.
Today, Azerbaijan remains strongly committed to enhancing energy security and diversity of energy supplies. With the increasing importance of natural gas, a more abundant and environment –friendly hydrocarbon, Azerbaijan is working with partners in the region and beyond to expand direct export routes of the Caspian natural gas to European markets. Having become a net natural gas exporter in 2007, Azerbaijan exports gas via a variety of pipelines transiting Georgia and Turkey. Notably, Azerbaijan’s own vast natural gas reserves, including the major Shah –Deniz field, make it a key partner in Europe’s energy future.
The East-West corridor, often called the modern Silk Road, is not limited to energy alone and includes the ambitious Kars-Akhalkalaki-Baku railway project jointly championed by Azerbaijan, Georgia and Turkey. Upon its completion, the railway will provide a crucial link between the European and Asian rail networks. Azerbaijan lies on the transportation corridor linking Central Asia with the western shore of the Black Sea. Strengthening this historical trading route is an important element of the strategy oriented towards closer regional integration and further diversification of trade.
While energy exploration and development play a key role in Azerbaijan’s economy, the government, under the leadership of pro- Western and reformist President Illham Aliyev, is also paying special attention to developing the economy outside the energy sector.
In 1999, Azerbaijan established its fund for future generations, the State Oil Fund. Since then, the Oil Fund has become the exemplary institution in the region, both in terms of transparency and innovation. In 2007, the Oil Fund became the first institution in Eastern Europe to receive the prestigious UN Public Service Award for Improving Transparency, Accountability and Responsiveness in Public Service. Recently, Azerbaijan has become the first county to be validated as fully compliant with all requirements of the Extractive Industries Transparency Initiative, a major international project on governance.