BAKU, Azerbaijan, August 24. Azerbaijan is preparing to introduce another support mechanism aimed at expanding non-oil and gas exports. Under a decree signed by President Ilham Aliyev on June 9, 2026, the state will cover part of the transportation costs incurred when exporting Azerbaijani-origin non-oil and gas products. The mechanism will take effect on September 1, 2026, and will apply to exports and domestic transportation carried out through September 30, 2036.
At first glance, the measure may appear to be a subsidy aimed at reducing transportation costs for exporters. Its economic significance, however, is broader. The mechanism is designed to reduce the cost of bringing Azerbaijani non-oil and gas products to foreign markets, facilitate access to new markets, and potentially change the geographical structure of exports.
The challenge is not only production, but market access
Despite the growth in Azerbaijan’s non-oil and gas exports in recent years, further expanding export opportunities requires taking into account a number of structural factors. According to the State Statistics Committee, non-oil and gas exports amounted to $3.63 billion in 2025. In nominal terms, this was 8.1% higher than in 2024, while in real terms, the figure declined by 18.1%. This dynamic reflects the impact of price and other market factors and points to further opportunities to increase export volumes.
For Azerbaijani companies, entering foreign markets depends not only on producing competitive goods but also on ensuring their delivery at an acceptable cost. When accessing more distant and alternative markets in particular, logistics costs can have a noticeable impact on the final price of products. This is especially relevant for sectors such as agriculture and food processing, where transportation costs can have a significant effect on production costs. At the same time, logistics remains one of the factors shaping international competitiveness for higher value-added industrial products as well. This is why the development of transport infrastructure and the reduction of logistics costs are viewed as important areas for expanding export potential. The decree identifies high logistics costs as one of the factors affecting export diversification. It notes that a significant share of long-distance transportation costs in the final price of goods can constrain the expansion of export geography and product range, highlighting the importance of further strengthening the country’s logistics capabilities.
Non-oil exports are growing, but geographical diversification remains a challenge
Azerbaijan's non-oil and gas exports recorded significant growth in the first seven months of 2026. According to the State Customs Committee, the country exported $5.93 billion worth of non-oil products in January-July, an increase of $3.845 billion, or 2.8 times, compared with the same period of last year.
However, the geographical structure of exports is just as important as the growth itself. During the reporting period, $3.48 billion of non-oil exports went to the UK, accounting for 58.6% of total non-oil exports. Russia accounted for $731.7 million, or 12.3%, Türkiye for $390.6 million, or 6.6%, Georgia for $328.1 million, or 5.5%, and Switzerland for $251.6 million, or 4.2%. Other countries accounted for a combined 12.7%.
These figures show that Azerbaijan's non-oil exports are expanding rapidly, while also highlighting significant room for further geographical diversification. Alongside maintaining existing markets, accessing new and more distant markets could become one of the key priorities of Azerbaijan's export policy in the next stage. The main challenge is therefore not only to increase production in the non-oil sector, but also to find new and broader foreign markets for those products.
President Ilham Aliyev emphasized this task during his speech at the opening ceremony of the Islamic Development Bank Group Annual Meetings 2026: "Today the share of the non-oil and gas sector in our GDP is more than 70%, which is a remarkable achievement, but still we have to work hard in order to continue to change the balance of oil, gas, and the non-oil and gas sector in our export. Today, absolute majority of our export is energy resources. So we are working very hard in order to change the situation, and for that, of course, we need more reforms, more investments, and also we need new markets, and this is a problem. Because the struggle for markets has become very active, I would use this word. So diversification of economy is already a reality, but we have to continue, definitely."
The president's remarks indicate that the challenge facing Azerbaijan is no longer simply increasing the share of the non-oil sector in the economy. The next step is to convert this production potential into export revenues and establish a stronger position for Azerbaijani products in new markets.
This also requires closer alignment between investment policy aimed at developing the non-oil sector and the country's export strategy. Expanding production and investment opportunities in industries such as manufacturing, agriculture and agro-processing, mining, critical minerals, transportation and logistics can increase both the volume and range of products Azerbaijan is able to export. However, expanding production capacity does not automatically mean that export opportunities will grow at the same pace. Delivering a product to an international market at a competitive price is at least as important as production capacity.
Azerbaijan's Minister of Economy Mikayil Jabbarov said at a news conference devoted to the results of the Islamic Development Bank Group Annual Meetings 2026 in Baku: "Azerbaijan's main focus is on developing the non-oil and gas economy, and this sector has become the main driver of economic growth in the country over the past five to six years. Investment opportunities mainly cover non-oil industrial production, mining and critical minerals, agriculture and agro-processing, as well as transportation and logistics."
This approach also helps explain the rationale behind the new transportation support mechanism. While the government is seeking to expand production and investment opportunities in the non-oil and gas sector, it is simultaneously developing instruments aimed at reducing logistics barriers to bringing those products to foreign markets. In other words, producing a product and bringing it to market are increasingly being treated not as two separate parts of economic policy, but as stages of a single export chain. The new transportation support mechanism targets one of the most costly elements of that chain — logistics.
What advantages will the new export support provide to businesses?
The state will cover up to 70% of transportation costs incurred when exporting Azerbaijani-origin non-oil and gas products. The measure is expected to reduce exporters' logistics costs and strengthen the competitiveness of local products in foreign markets. The support will take effect on September 1 this year. The amount of support paid to businesses will be determined based on transportation costs and customs value, depending on the mode of transportation used for exports.
For rail, air and sea transportation, as well as cargo transported by Azerbaijan-registered vehicles, the calculation will be based on 70% of the transportation costs paid. For transportation by foreign-registered vehicles, the calculation will be based on 50% of the relevant costs. For customs value, the calculation will amount to 5% of the value for sea transportation and 15% for other modes of transportation. The lower of the amounts calculated under the two methods will be paid as the support amount.
In addition, from September 1, the state will cover 70% of transportation costs incurred to move Azerbaijani-origin non-oil and gas products manufactured in the Nakhchivan Autonomous Republic to other parts of the country. This could allow producers operating in Nakhchivan to deliver their products to other regions under more favorable conditions and expand their sales opportunities.
The mechanism will remain in effect for exports and domestic transportation carried out through September 30, 2036. Businesses will be able to collect documents confirming their export or domestic transportation operations each quarter and submit them to the Ministry of Economy after the end of the relevant quarter. The amount of support will then be calculated and paid to the business based on those documents.
An important tool for accessing new markets
The geography of Azerbaijan's non-oil and gas exports remains concentrated in a number of markets. In 2025, Russia, Türkiye, Georgia, Switzerland and Ukraine were among the main destinations for non-oil exports. There is no question of reducing the importance of these markets. Rather, one of the key potential benefits of the new mechanism is the opportunity to expand the geography of exports while maintaining existing markets.
Entering an alternative market requires a company to do more than simply find a buyer. It may need to establish a new logistics route, calculate transportation costs, study customs and certification requirements, and sometimes create distribution and warehousing infrastructure. These costs can be particularly significant for small and medium-sized businesses. By covering part of transportation costs, the state can remove one of the initial barriers to entering new markets. In this sense, the new mechanism can be viewed not simply as an export subsidy, but as a tool for market diversification.
Logistics support should be complemented by new transportation opportunities
Covering part of transportation costs creates an important financial instrument for expanding Azerbaijan's export opportunities. However, the long-term impact of the mechanism will depend not only on the size of the subsidy, but also on how effectively the country's transportation and logistics infrastructure is used.
In this regard, the Middle Corridor is particularly important for Azerbaijan's non-oil and gas exports. The multimodal route connecting China and Central Asia through the Caspian Sea, Azerbaijan and Georgia and onward to Türkiye and Europe is expanding Azerbaijan's opportunities both as a transit country and as an exporter.
The important point is that government support for logistics costs and investment in transportation infrastructure can complement each other. The availability of a more efficient route can optimize transportation time and distance, while state support can reduce the financial burden on exporters using that route.
As a result, the share of logistics costs in the final price of an Azerbaijani product in a foreign market can potentially be reduced. The issue is becoming increasingly relevant as the Middle Corridor develops. Azerbaijan has paid growing attention in recent years to improving the route's infrastructure, transit capacity and digital logistics solutions. The 2026 cooperation agenda also places emphasis on digitalizing transportation processes, expanding electronic document circulation and increasing data exchange between customs authorities.
In this context, the Middle Corridor can serve not only as a route for transit cargo, but also as an alternative logistics platform for bringing Azerbaijani products to markets in Central Asia, China and Europe. The simultaneous expansion of such opportunities and state support for transportation costs could create a more favorable logistics model for exporters.
The Zangezur Corridor could become another link in the network
The prospects for the Zangezur Corridor are also significant in this context. Its implementation could strengthen the transportation link between Azerbaijan and Nakhchivan while expanding alternative connections between the Middle Corridor and European markets.
This becomes particularly relevant when considered alongside the domestic transportation support planned for Nakhchivan. On the one hand, the state plans to compensate 70% of the cost of transporting non-oil and gas products manufactured in Nakhchivan to other parts of Azerbaijan. On the other hand, new connections that could strengthen the region's integration into the transportation networks of Azerbaijan, Türkiye and the wider Eurasian region are being discussed.
Thus, the state support mechanism could serve not only as a tool for compensating existing logistics costs, but also as an instrument encouraging more efficient use of Azerbaijan's transportation capabilities. If new routes create lower and more predictable transportation costs, the need for state support could naturally decline over the longer term. This would be closer to the strategic objective of the mechanism: rather than permanently compensating exporters for high logistics costs, the government would help establish a logistics ecosystem that allows products to reach foreign markets on more competitive terms.
Particular importance for Nakhchivan
Another important element of the decree is support for transporting Azerbaijani-origin non-oil and gas products manufactured in the Nakhchivan Autonomous Republic to other parts of the country. 70% of the transportation costs for moving such products by road from Nakhchivan to other parts of Azerbaijan will be covered by the state.
Improving access to Azerbaijan's main consumer markets could encourage local production in Nakhchivan to expand. If transportation costs significantly increase the final price of a product, its competitiveness in Baku and other major consumer centers can weaken. Transportation support could partly offset this difference. The mechanism is therefore important for Nakhchivan both in terms of expanding production and strengthening its integration into the domestic market.
The implementation mechanism will be critical
The decree establishes the general framework, but a number of details that will determine its actual economic impact still need to be defined through separate regulations. The Ministry of Economy will determine the list of non-oil and gas products and export destinations covered by the support, application and review procedures, as well as the mechanism for calculating support in multimodal transportation.
This is particularly important because international logistics often involves several modes of transportation. For example, a product may be transported by road, then transferred to rail and subsequently shipped by sea. In such cases, the way support is applied to each cost and at what rate will be critical for exporters. At the same time, the application process should be simple and digital. For small and medium-sized businesses, extensive paperwork and long processing times could reduce the practical economic value of the subsidy.
Measuring results will matter more than simply providing funds
The long-term nature of the mechanism is also notable. The support will cover exports and domestic transportation carried out from September 1, 2026, through September 30, 2036. The ten-year horizon indicates an intention to create a more predictable environment for exporters. Government support should help companies become more competitive in international markets. However, over the longer term, the foundation of their competitiveness should be productivity, quality, innovation and efficient logistics rather than subsidies.
Part of a broader strategy
Transportation cost compensation should not be viewed separately from other support measures adopted in June for non-oil and gas exports. Another presidential decree signed on June 16 provides for state compensation of certain customs clearance costs for exporters that are micro, small and medium-sized enterprises. This mechanism will also take effect on September 1, 2026, and will apply to export operations carried out through September 30, 2031.
The government's approach is therefore expanding beyond the production stage to support different parts of the export chain, including financing, customs clearance, logistics and market access. This approach is particularly relevant for an economy such as Azerbaijan, which has a strategically important geographical position and significant transit potential but also faces distance and logistics-cost challenges when accessing many foreign markets.
Overall, the new transportation support mechanism could become an important tool in Azerbaijan's non-oil and gas export policy. Its greatest potential lies not simply in reducing exporters' costs, but in making it economically more viable for Azerbaijani products to reach foreign markets. The fact that non-oil and gas exports stood at $3.63 billion in 2025 shows that there remains significant room for expansion. The new support mechanism could ease one of the financial barriers to realizing that potential.
Ultimately, however, the success of the mechanism will be measured not by the amount of subsidies provided, but by the additional exports generated. If state spending on logistics helps open new markets, encourages more companies to become exporters and improves the global competitiveness of Azerbaijani products, the mechanism will have achieved its objective. Otherwise, it could simply result in part of the existing export volume being transported at a lower cost at the expense of the state.
