The Political Economy of Azerbaijan-Russia Relations: Intersecting and Overlapping Interests

Gubad Ibadoghlu and Ali Askerov

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This article analyzes the political economy of Azerbaijan-Russia relations during the deterioration of bilateral political relations in 2024-2025. It argues that the 2024-2025 conflict exposed the fragility of bilateral political relations and demonstrated how political tensions increasingly spill over into economic, societal, and cultural domains. Despite growing political tensions, Russia has continued, until recently, to serve as the principal anchor of integration for Azerbaijan's non-oil economy. An examination of macroeconomic indicators for 2017-2024 shows that the Russian Federation remains the largest destination for Azerbaijan's non-oil exports, its leading import partner, the primary source of formal remittance inflows from Azerbaijani labor migrants, and the largest source of inbound tourism. In this context, the article assesses the extent to which escalating political frictions since late 2024 have begun to affect economic relations, focusing on foreign trade, remittances, foreign direct investment (FDI), and tourism. It further evaluates the potential implications of these developments for Azerbaijan's economic stability, diversification strategy, and evolving geopolitical orientation. Beyond economic ties, the study also considers the consequences of the post-December 2024 escalation for security cooperation and humanitarian, scientific-technical, and cultural exchanges. The findings suggest that sustained political deterioration may gradually constrain bilateral economic interdependence, while simultaneously pushing Azerbaijan toward a cautious recalibration of its strategic alignments within an increasingly fragmented regional order.

Keywords: Azerbaijan; Russia; Political Economy; Tourism; Remittances; Foreign Direct Investment (FDI); Non-Oil Exports; Finance; Logistic; Regional Integration; Political Relations; Security (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:337505

DOI: 10.2139/ssrn.5973655

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