Baku, the capital city of Azerbaijan, is the host city for COP29, leading up to the actual conference in November 2024. Baku is also the latest accession member state of ICIEC. The government of President Ilham Aliyev is prioritizing key economic development in areas such as the promotion of regional connectivity (rail, gas pipelines, and electricity transmission), decarbonization especially through solar and wind renewable energy, the ‘Middle Corridor’ project which is aimed at supporting SMEs through collaboration with local domestic banks, and the promotion of Islamic finance and utilizing ICIEC’s credit and investment de-risking insurance. As COP29 looms, the central agenda will be climate finance, which is crucial for implementing the commitments made at previous conferences. Azerbaijan’s COP 29 Presidency is also stressing the importance of reviewing past promises to ensure they are being acted upon. Arysbek Zhumabek, Country Manager, Asia Region Division, Business Development Department, ICIEC profiles Azerbaijan’s clean energy transition status and its Net Zero pathway, and ICIEC’s recent and future involvement in the country’s SDG and decarbonization journey, and the potential for collaboration especially in the pioneering area of the green economy relating to food security, energy transition, climate action and regional connectivity.
From among its 49 Member States, Azerbaijan is the newest country to join ICIEC in January 2023. The country is located at the intersection of the Middle East, Central Asia, and Europe, and is bordered by the Caspian Sea and the Caucasus Mountains.
Known as “the Land of Fire,” it boasts unique natural beauty and a rich cultural and historical heritage. With a population of about 10 million, Azerbaijan has seen significant economic growth in recent decades, driven by its abundant oil reserves and strategic leadership that invests in infrastructure, renewable energy, regional connectivity, decarbonization, and digitalization. As the country prepares to host COP29 in November 2024, it reaffirms its commitment to sustainable development.
Traditionally, Azerbaijan’s economy has been heavily reliant on the oil and gas sector. The International Energy Agency (IEA) predicts that the country’s oil reserves will last for another 25 years, underlining the need for alternative energy sources. In response, Azerbaijan ratified the Paris Climate Agreement in 2017 and aims to reduce greenhouse gas emissions by 40% by 2050. By increasing its renewable energy capacity to 30% by 2030, Azerbaijan seeks to diversify its energy sources and lead in sustainable energy initiatives.
In 2023, the International Energy Agency (IEA) highlighted an unprecedented increase in global renewable energy capacity, indicating a potential achievement of significant climate goals by the end of the decade. Azerbaijan is committed to sustainable development and aims to become a leader in “green growth.” The Presidential Order approving “Azerbaijan 2030: National Priorities for Socio-Economic Development” outlines the country’s objectives to maintain a clean, healthy, and sustainable environment.
Azerbaijan’s climate is well-suited for generating electricity from solar and wind energy. Major renewable energy sources will include onshore and offshore wind farms, solar power, and hydroelectricity. The potential for solar and wind energy is especially high, with strong prospects for wind power development on the Absheron Peninsula and along the Caspian coastline. This year declared the “Green World Solidarity Year,” the government is focusing on developing a long-term energy strategy. This strategy, extending to 2050, will address key areas such as electricity and natural gas supply, energy efficiency, and the adoption of renewable energy sources.
Following the liberation of the occupied territories, Azerbaijan has unlocked new opportunities for renewable energy development in areas like Karabakh, Eastern Zangazur, and Nakhchivan. The focus includes adopting modern construction models and establishing a “Green Energy Zone” aimed at achieving net-zero emissions. These areas have significant potential for hydro energy development, with key rivers such as the Tartar, Bazarchay (Bargushadchay), and Hakari offering substantial hydropower prospects.
Besides hydropower, the implementation of wind and solar power plants in these regions will greatly contribute to the green energy transition. ICIEC has already begun considering projects for hydropower plants and other renewable energy projects in Azerbaijan and plans to expand its activities in the country.
To meet its targets, Azerbaijan has initiated partnerships in “green energy” projects with key players like Masdar (Abu Dhabi Future Energy Company), ACWA Power, BP, and others. In 2023, Azerbaijan inaugurated the 230 MW Garadagh Solar Power Plant, the region’s largest operational solar plant, in collaboration with Masdar. Additionally, Masdar has signed agreements for solar and onshore wind projects totaling 1 GW in Azerbaijan. ACWA Power has also agreed to develop 500 MW renewable energy projects.
ICIEC continues to support clean energy initiatives, having signed a memorandum of understanding with Masdar in 2023 to promote renewable energy projects in member states using ICIEC’s credit enhancement and risk mitigation solutions. Also, at COP28 in UAE, ICIEC launched its Climate Change Policy and ESG Framework.
In its renewable energy portfolio, ICIEC supported a 316 MW Wind Farm Project in Türkiye, reinsuring Eksport Kredit Fonden (EKF) for USD 80 million. In 2018, ICIEC provided USD 68 million in political risk cover for Alcazar Energy’s plan to construct 4-50 MW solar plants. In Sharjah, UAE, ICIEC supported a waste-to-energy (WtE) project led by Masdar and Bee’ah (Sharjah Environment Company), providing insurance cover for the project’s construction financing in partnership with SMBC, a leading Japanese bank.
In recent years, Azerbaijan has prioritized the digitalization of its economy. ICIEC has extensive experience supporting telecommunications companies in member states. In June 2024, ICIEC provided coverage to a telecom equipment supplier for its exports to Azerbaijan.
Azerbaijan plays a crucial role in ICIEC’s activities across the CIS region. ICIEC has been active in Azerbaijan even before the country became a member. For example, ICIEC reinsured KazakhExport for the export of diesel locomotives to Azerbaijan Railways and insured several member country banks and exporters for transactions involving Azerbaijan.
ICIEC has outlined key priorities for its participation in Azerbaijan’s development, including promoting regional connectivity (rail, gas pipelines, and electricity transmission), decarbonization (renewable energy – solar, wind), the “Middle Corridor” project, supporting SMEs through collaboration with local banks, promoting Islamic finance and insurance, and aiding in the reconstruction of Karabakh.
