From Hydrocarbons to Corridors: Institutional Constraints on Azerbaijan's Transit-Led Diversification

This article examines Azerbaijan’s transformation from a hydrocarbon exporter into an increasingly important Eurasian transport and logistics hub, situating this shift within the political economy of connectivity rather than treating it as a purely infrastructural achievement. It traces the origins of this strategy to the 1998 TRACECA agreement, well before the post-2022 surge of international interest in the Middle Corridor, and argues that recent geopolitical shocks — the COVID-19 pandemic, Russia’s invasion of Ukraine, and instability in the Middle East — have accelerated rather than created Azerbaijan’s transit role. Drawing on recent freight and transit data, the article shows that Azerbaijan has successfully embedded itself within Eurasian trade networks, but that freight growth since 2022 has been driven substantially by external diversion from competing routes rather than by domestic structural transformation. It further examines the European Union’s Global Gateway investments, Azerbaijan’s own infrastructure programme at the Port of Alat and along the Baku–Tbilisi–Kars railway, and the emergence of the Trump Route for International Peace and Prosperity (TRIPP) as an instrument linking connectivity to regional peacebuilding. The article concludes that Azerbaijan’s long-term competitiveness as a transit hub will depend less on geography or infrastructure than on institutional modernization — customs reform, digitalization, regulatory harmonization, and economic diversification — without which the country risks capturing only a limited share of the value generated by the trade it facilitates.