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Economy

Today, Baku is one of the leading capital cities on a global scale.

Baku has become one of the main cities of Shirvan in the late X century. People’s activity were craftsmanship, trading, gardening, horticulture, vine-growing, sericulture, cropping, oil extraction, fishing and others. The development of feudal relations, also trading and craftsmanship gave opportunity to city progress. Baku, located in the international trade routes, was an important hub in the trade between East and West.

The city’s rise is mainly related with the development of the oil industry. The first production of industrial oil from the dug wells in Bibieybat and later Balakhany fields was realized in 1847 and the development of oil industry of Azerbaijan started from that moment. The industrial method of oil production was first used in 1871 in the Balakhani-Sabunchu-Ramana oil field in the Absheron peninsula.

In 1880, a railway Baku-Surakhani-Sabunchu designed only for the transportation of oil and extended to 26 kilometers. The Baku-Tbilisi railway extending to 550 kilometers was commissioned in 1883. Along with transport vehicles, communication branches also began to develop. The telegraph lines Baku-Tbilisi and Baku-Krasnavodsk (submarine cable) were laid in 1868 and 1879. The first telephone line in the city was enabled in 1886. The official opening of the Baku-Batum kerosene pipeline took place in 1907. In 1908, Baku gave 91.6% of the South Caucasus’s total industrial output.

Nobel brothers utilized the world’s first oil tanker “Zoroaster” in Baku in 1879.

The construction of the Baku-Batumi oil pipeline in 1896-1906 gave a powerful impetus to the development of other sectors of the economy, especially the oil industry. Foreign companies led by Nobel brothers, Siemens and others came to Baku in this period. Investment flows began to oil and copper industry, new technologies were brought from foreign countries, corresponding production infrastructure was created, oil production increased and Baku oil was put for sale on world markets. National engenieers have been apperaed in the oil field, processing facilities were built and freight transport was developed. A water pipeline was built in Baku and the housing construction was expanded.

The national bourgeoisie formed in Baku thanks to the development of oil industry and capitalist relations were in progress also. The Baku industry developed harmonic to the interests of the Russian Empire. Therefore, its field structure was unilaterally. In 1913, Absheron economic region was dominated in industrial products produced in Azerbaijan (91.4%).

The industry was rapidly developing in Azerbaijan during 20s-40s of XX century.

Baku was the major supplier of oil and oil products of the Soviet Union until the World War II. The rapid development of industry in Azerbaijan was provided thanks to oil and related fields till the World War II.

During the World War II, Baku was the supplier of 70 % of oil and 100 % of high-octane gasoline and lubricating oil. In 1942, 130 different weapons, munitions were produced in industrial enterprises of Baku. In 1949, the first time oil in the open sea was extracted in world. Norway 25 years later and USA 6 years later extracted oil in the sea.

In 50s-60s, many grant textile and food industry enterprises were built and a lot of them were technically reconstructed.

During the Soviet era, especially industrialization years, income from the exported high-quality Azerbaijani oil was directed to buy new techniques and technologies and to implement large-scale industrialization projects of the former USSR. The increase in oil and gas production has led to the creation of various processing industry spheres, as well as other service areas.

Up to the 70s of Soviet era, Baku was one of the leading capitals of the former union for the population growth. This fact created difficulties in the housing sector and other social facilities in Baku.

The years between 1970-1985 envisage the important and special period of the history of economic growth in Azerbaijan. During this period, the USSR government, with the initiative and insistence of the Azerbaijani leadership, adopted five special resolutions, envisaging the development of the national economy and its spheres. The decisions had historic significances for the Azerbaijani people, because they reflected all issues of socio-economic development of Azerbaijan SSR.

In 1985, production capacity in all industries allowed increasing productivity by 2.9 times in comparison with 1970. This increase was 2.14 times higher than the average indicator of the union.

For the first time in this period, Azerbaijan achieved the highest level of development in the gas industry and gas production increased from 5.5 in 1970 to 14 billion cubic meters in 1985.

During 1970-1985, Air Conditioner Plant, “Ozone” Scientific Production Association, the Electronic Computing Machines Plant, the Deep Water Jacket Factory, and sewing and shoe factories were opened in Baku.

Electronic machine engineering, radio industry, machinery and equipment manufacturing for textile and food industries were the new progressive spheres in Azerbaijan at that time.

In 1970s and 1980s about 30% of population, including 54% of the urban population was concentrated in the Absheron economic region. About 70% of industrial income belonged to this region.

Azerbaijan, where only 2.5% of the former USSR population lived, hold a high place in the Union economy in manufacturing the main industrial products. Thus, in the mid-80s, 70% of the oil field units production, as well as in 1970-1985, all the depth pumps, 10.5% of the electrical welding equipments, 7.8% of the rubber soda, all the household air conditionings, 5.7% of refrigerators were produced in Azerbaijan. 

On the eve of the collapse of the Soviet Union, raw materials were extracted from only 55% of the crude petroleum, the main natural resource in Azerbaijan.

As a result of objective and subjective reasons, from 1986-1987 the Azerbaijani economic growth slowed down gradually. At the Soviet era, 90% of enterprises of the republic established as part of the Union and completely adapted to the demands of the Union. About 75-80% of food products were imported and there was a serious lack of food.

The social and economic situation in the republic was aggravated as Armenia occupied the 20% of Azerbaijani lands during the Nagorno Karabakh conflict, up to 1 million refugees and IDPs, military expenditure, and many civilian casualties.

After the Heydar Aliyev’s return to the government in 1993, Steps were realized in the direction of establishment of the basis of integration to the world economy and market economy along with ensuring political stability and establishment of democratic state.

On September 20, 1994, an agreement “The Contract of the Century” was signed between the Azerbaijan International Operating Company, which included 12 companies from eight states, and the State Oil Company of the Azerbaijan Republic (SOCAR). The implementation of the strategy began from October, 1995. The Azerbaijani part of the Baku-Novorossiysk oil pipeline was re-established in 1996 to export oil. The economy starts its sustainable development from 1996-1997 and since 2001, the development accelerated.

In 1996-1997, the crisis problem was solved in the economy and Azerbaijani economy entered on a road of sustainable development.

In 1998, an International Conference for Rehabilitation of Historical Silk Road in Baku was held and Baku Declaration was adopted. Thus, Azerbaijan gave its contribution to the restoration of historical Silk Road.

The first Azerbaijani oil started to be transported by the Baku-Supsa pipeline in 1999. On December 25, 1999 the Oil Fund was established. The programs of privatization of the state-owned property were implemented.

The Baku-Tbilisi-Ceyhan (BTC) oil export pipeline was inaugurated in 2005. In 2007, Baku-Tbilisi—Erzurum gas pipeline was launched. A contract for development of the Azeri-Chirag-Gunashli block until 2050 was signed in Baku in 2017.

Commissioned on October 30, 2017, the Baku-Tbilisi-Kars railroad is designed to restore the Great Silk Road through linking the Trans-European and Trans-Asian railroad networks.

Today, Azerbaijan is a member of space satellite club and strengthens its position in the global space industry. Azerbaijan has launched three satellites: “Azerspace-1”, “Azersky” and “Azerspace-2”. Specialists managing the satellites are Azerbaijanis.

Headquarters of the Azerbaijani companies, such as Akkord Industry Construction Investment Corporation, Azercell, Azersu OJSC, Azersun Holding, the State Oil Company of the Azerbaijan Republic (SOCAR), Azerbaijan Airlines, Azpetrol, Bakcell, Caspian Telecom, Nar Mobile, Pasha Holding and Synergy Group are located in Baku.

The reconstruction works have also been carried out in Baku and its settlements in recent years. Measures are undertaken in the framework of the Action Program on acceleration of socio-economic development of settlements of Baku city for 2006-2007 years and State Programs on Socio-Economic Development of Baku city and its settlements in 2011-2013 and 2014-2016 years. They were aimed at implementation of large-scale construction projects in Baku, expansion of entrepreneurial and investing activity, improvement of the quality of public services, including quality and quantity of provision of public utilities, and the acceleration of construction works. As a result of implementation of the programs, Baku, its settlements and villages have entered the new stage of development, the most competitive and export-oriented enterprises were launched, new job places were created, and the living standards of the population have increased. 

Note: more information about the works done within the State Program on social-economic development of Baku city and its settlements is available at http://www.preslib.az/eres_baku.html electronic resource of the Presidential Library