Volume 1 • Issue 2 • Winter 2020
The autumn of 2020 was marked by an important and historic event for Azerbaijan:
the country managed to restore its territorial integrity from Armenian occupation
by military means. This conflict had existed shortly from before Azerbaijan gained
independence until September 2020. After the liberation of Azerbaijan’s occupied
territories, the main task that now needs to be addressed is the restoration of those
territories and the return of internally displaced persons (IDP) to their homes therein.
Indeed, for the return of IDPs, it is necessary to create an appropriate environment,
including stable and comfortable conditions. The economic component of the liber-
ated territories will play a vital role. To this end, it is important to conduct a review
of the economic potential of the territories that have now completely returned to
the sovereign control of Azerbaijan. The article will provide a general assessment of
the economic potential of the liberated territories. The data that have been used in
this research were mostly accumulated before the occupation of theses territories
by Armenia. With the possibility of new, in-depth geological exploration, these areas
may present new economic opportunities. Nevertheless, this commentary does not
set out to analyse how these resources could or should be used.
Keywords: Azerbaijan, Nagorno-Karabakh region, economic potential of liberated
* Dr. Rovshan Ibrahimov is Professor in Hankuk University of Foreign Studies. This work was supported
by Hankuk University of Foreign Studies Research Fund of 2021 ©
Dr. Rovshan Ibrahimov*
Economic Potential of the
Liberated Territories of
Azerbaijan: A Brief Overview
CAUCASUS STRATEGIC PERSPECTIVES
For about 30 years, the territories of the southwestern part of Azerbaijan
have been occupied by Armenia. Therefore, the liberation of these
territories was the main priority of both the domestic and the foreign
policy of the Republic of Azerbaijan. For many years, Azerbaijan tried
to resolve the conflict peacefully, conducting negotiations mediated
by the OSCE Minsk Group’s co-chair countries (France, the Russian
Federation, and the USA). However, Armenia deliberately delayed
the resolution of the Armenia–Azerbaijan conflict, thereby trying to
preserve the status quo established after the 1994 ceasefire agreement.
At that time, Armenia occupied not only the territories of the former
Nagorno-Karabakh Autonomous Oblast (NKAO), but also seven
surrounding adjacent districts, thus forcing their entire local population
to leave their homes and making them IDPs in their own country.
The counteroffensive launched by the Azerbaijani Army on the 27
September in response to the Armenian forces’ armed provocations
at the frontline enlarged its scope of operation to a 44-day-long, all-
out war, dubbed the “Patriotic War” or “Second Karabakh War”. This
created a new reality: the formerly occupied territories were returned.
The next stage will be the return of IDPs to their homeland in accordance
with the trilateral statement signed by the heads of state of Armenia,
Azerbaijan, and Russia on 10 November.
During the entire period of the occupation, the Armenian military
forces and illegal residents completely plundered and
wiped out all settlements in the region. In addition,
they mined huge areas of those territories to make
them dangerous for Azerbaijanis to move through
after the liberation. In short, a lot of work is needed
on demining activities and rebuilding destroyed cities,
towns, and villages.
Another question is how the migrants will return to
their native lands and what they will be occupied with there. After
all, over 30 years, many IDPs have become resettled in new places
and formed more or less stable livelihoods. Thus, it is important to
determine the economic potential and the possibilities of the liberated
territories, so that resettlement is not only a call of patriotic need, but
also of economic expediency.
At the same time, the liberated territories will enable Azerbaijan to
strengthen its economic opportunities and accelerate the growth of the
well-being of its citizens as this region is rich in natural resources, the
During the entire period
of the occupation, the
Armenian military forces
and illegal residents
completely plundered and
wiped out all settlements in
Volume 1 • Issue 2 • Winter 2020
development of which is an additional impetus for
expanding the country’s economic portfolio. This
article will provide information on the economic
potential of the liberated territories and analyse their
possible uses. The purpose is to assess the overall
potential; there will be no discussion of how the
opportunities of the newly acquired territories can be
State of affairs regarding the liberated territories
Until 9 November, the day when hostilities ceased
with the mediation of Russia, Azerbaijan had already achieved on its
own the liberation of the districts of Fuzuli, Jebrayil, Gubatli, Zengilan,
and (partially) Khojavend, as well as the city of Shusha, which is the
cultural capital of Azerbaijan. After the parties announced a ceasefire
on 10 November, the Armenian armed forces left three more regions:
Agdam, Kalbajar, and Lachin. A total of 13,198 km2 were released
(out of Azerbaijan’s total territory of 86,600 km2). At the moment,
Azerbaijan fully controls about 10,000 km2, and in the remaining
3,100 km2 of territory, where the Karabakh Armenians are now located,
Russian peacekeeping forces are deployed for a period of five years.
The gradual reinforcement of Azerbaijan’s control in these territories
will take place in further stages.1
After the liberation of the occupied territories, the question of their
restoration and ensuring the return of Azerbaijani IDPs is the key task.
In total, 890 settlements (cities, towns, and villages) were destroyed by
the Armenian military aggressor. In addition, it will take a long time
to clear the territories of landmines and unexploded
ordnance. According to an estimate by ANAMA, this
may take about 3–5 years, and the full completion of
all such works will take about 10 years.2
The restoration of the territorial integrity of Azerbaijan
is of great economic importance, as the occupation
caused great damage to the economic sector. For 30
years, Azerbaijan has not had the opportunity to access
1 Ibrahimov R., “Voda, les, zoloto- ekonomicheskiy potensial osvobojdennix territoriy Azerbaycana,” CCBS.news.
ru, December 16, available at: https://ccbs.news/ru/article/2351/ (accessed: December 28, 2020).
2 FED.az, ANAMA: It’s not necessary to wait 10 years to return to the liberated territories (translation from
Azerbaijani), November 29, 2020, available at: https://fed.az/az/qarabag/anama-isgaldan-azad-edilen-erazilere-
insanlar-daha-tez-qayidacaq-94314, (accessed: December 15, 2020).
The liberated territories
will enable Azerbaijan to
strengthen its economic
accelerate the growth
of the well-being of its
citizens as this region is
rich in natural resources,
the development of which
is an additional impetus
for expanding the country’s
After the liberation of
the occupied territories,
the question of their
restoration and ensuring
the return of Azerbaijani
IDPs is the key task.
CAUCASUS STRATEGIC PERSPECTIVES
the resources available in these territories. In 1994, the total number of
Azerbaijani refugees from Armenia was 243,682 people; from Central
Asia, 49,239 (Meskhetian Turks who were forced to leave their homes
owing to the outbreak of interethnic conflict in Central
Asia. The tragedy of the Meskhetian Turks did not end
with this: after they found a new home in Azerbaijan,
they then became IDPs because of Armenian military
aggression.); as well as 611,293 IDPs resulting from
the Armenian occupation of Azerbaijan’s territories.3
Thus, more than 900,000 refugees and IDPs for a long
period did not have the opportunity for full-fledged
economic activity. Although, many of them were
employed and received a monthly state allowance, this kind of non-
standard social orientation of budget revenues was also a serious burden
for the national economy. A large amount of funds were allocated to
provide for this social stratum of the country’s population.
Thus, the government provides a monthly allowance for 496,557
IDPs.4 The government also pays for utilities such as electricity, natural
gas, water, and household waste. Medical care and treatment are also
provided free of charge. In addition, the State pays for the education of
students from IDP families studying in higher educational institutions,
and provides schoolchildren from the same group with free textbooks.
There are also other services that are free, such as exemptions from
the fee for the issuance of an identity card and from notarial fees when
buying or selling property.5 In addition, at State expense, many houses
were built to improve the living conditions of IDPs. Thus, back in 2007,
Azerbaijan managed to destroy the last tent camp for IDPs, where they
had had to live in the most difficult of conditions. Since then, according
to the state programme, more than a hundred townships have been built
for them. Overall, about 7 billion manat (around US$4.12 billion) were
spent on resolving the problems of IDPs.6
3 Preslib.az, Armyano-Azerbaycanskiy Nagorno-Karabaxskiy Konikt, Administrative Department of the President
of the Republic of Azerbaijan, available at: http://les.preslib.az/projects/azerbaijan/rus/gl7.pdf (accessed:
December 15, 2020), p. 55.
4 Apa.az, The number of IDPs with increased monthly benets has been announced, (translation from Azerbaijani),
26 February 2020, Available at: https://apa.az/az/sosial_xeberler/ayliq-muavineti-artirilan-mecburi-kockunlerin-
sayi-aciqlanib-523288, (Accessed: December 16, 2020).
5 Idp.az, Privileges, (translation from Azerbaijani), Available at: http://idp.gov.az/az/content/7/parent/21,
(Accessed: December 17, 2020).
6 Prezident.az (2019), Ilham Aliyev received chairman of the State Committee for Refugees and Internally
Displaced Persons, (translation from Azerbaijani), 18 November 2019, https://president.az/articles/34479,
(December 17, 2020).
The restoration of the
territorial integrity of
Azerbaijan is of great
economic importance, as
the occupation caused
great damage to the
Volume 1 • Issue 2 • Winter 2020
Natural resources of the liberated territories
The Nagorno-Karabakh region and seven adjacent districts of
Azerbaijan have significant natural resources that, when developed,
will enable Azerbaijan to boost its economy and improve the well-
being of its citizens. As a result of the occupation, 647,900 hectares of
fertile land were destroyed: most of this land is suitable for growing
various agricultural products. For example, before the war, 199,000
hectares of land were used for crops.7 In total, 1.7 million hectares of
land were occupied. Now, this huge area has been reclaimed for the
agriculture of Azerbaijan, and it will also be possible to re-establish
the entire production chain, from growing crops to processing and
producing industrial and agricultural products. This means new job
places for the citizens of Azerbaijan who will return to their homes. For
example, before the occupation during Soviet times
in the Jebrayil and Fuzuli districts, local residents
were engaged in viticulture, animal husbandry, grain
growing, silkworm breeding, and vegetable and fruit
growing.8 It should be noted that, during the entire
period of occupation, Armenia illegally used these
territories for agricultural purposes. In his popular
address on December 1, 2020, Azerbaijan’s President
Ilham Aliyev said that Armenia was growing wheat
on tens of thousands of hectares of land in Agdam,
Fuzuli, Jebrayil, and Zengilan districts. Armenia harvested up to 90,000
tons of wheat per year in the formerly occupied territories; only a little
more wheat is produced in Armenia itself, just 100,000 tons per year.
Also, despite the fact that many vineyards were destroyed, viticulture
was still practised in some areas of the formerly occupied territories.9
In addition, the part of the Lesser Caucasus mountain range that was
under occupation has a large forested area: about 246,700 hectares,
including 13,197 hectares of valuable forests.10 This factor is very
significant for Azerbaijan, since only 12% the country’s territory is
covered by forest, which is below the world average. There are nature
reserves on the territories of both the liberated Zengilan and Lachin
districts (Basitchay and Lachin, respectively). In the Basitchay reserve,
7 Preslib.az, Armyano-Azerbaycanskiy Nagorno-Karabaxskiy Konikt, ibid, p.57.
8 Report.az, 27 years passed since occupation of Fuzuli and Jabrayil, August 23, 2020, Available at: https://
report.az/en/karabakh/27-years-passed-since-occupation-of-fuzuli-and-jabrayil/, (Accessed: December 17, 2020).
9 Youtube.com, President Ilham Aliyev addresses the people, (translation from Azerbaijani), December 1, 2020,
Available at: https://www.youtube.com/watch?v=ZGiynYxJXvs&t=1492s, (Accessed: December 18, 2020).
10 Ecoreform.az, Chto Predveshaet Osvobojdeniye Okkupirovannix Territoriy dlya Ekonomiki Azerbaycana,
Available at: http://www.ecoreform.az/contact-us, (Accessed: December 18, 2020).
region and seven adjacent
districts of Azerbaijan
have signicant natural
resources that, when
developed, will enable
Azerbaijan to boost its
economy and improve the
well-being of its citizens.
CAUCASUS STRATEGIC PERSPECTIVES
there is a forest of plane trees (listed in the “Red Book” of Azerbaijan)
where the age of some trees reaches more than 500 years. Unfortunately,
during the occupation, Armenia massively felled centuries-old trees
that were then used for the industrial purposes of Azerbaijan, mainly
for the production of furniture.
The liberated territories are also rich in minerals. There are 155
deposits of minerals there, including five gold deposits (according to
the estimates available from the years before the occupation, there are
about 132 tons of gold in these deposits).11 Zod-Soyudlu, the largest
gold deposit of Azerbaijan, is located on the border between Armenia
and the Kalbajar district of Azerbaijan (74% or 219 hectares of the field
are located on Azerbaijan’s side, 26% on that of Armenia). The total
volume of industrial reserves of the Zod-Soyudlu field in the Kalbajar
district is estimated at 112.5 tons and the minimum output of ore mined
from this deposit is 0.8 grams per ton.12
It should be noted that, before the return of the Kalbajar district, the
Armenian occupiers illegally mined gold reserves therein. GPMGold,
a subsidiary of Russian GeoPro Mining Ltd, has been mining ore in
Soyudlu village since 2007.13 Earlier, Canada’s First Dynasty Mines
tried to conduct similar activities in Soyudlu; in 1998, it bought out
the remaining 50% of shares from the Armenian Ararat Gold Recovery
Company, thus bringing its block of shares to 100%. The total gold
production of GPMGold from this deposit amounted to 130,000
ounces. The Armenians also exploited the Aghduzdag and Tutkhun gold
deposits, both located in the Kalbajar region, with estimated reserves of
more than 13 tons.14
The liberated territories also have significant deposits of mercury
(1,900 tons), lead (40,000 tons), copper, and zinc.15 According to the
calculations of previous years, in the territory of the Kalbajar district
alone, the total quantities of existing mercury deposits in Aghyatag,
Levchay, and Chorbulag were 850 tons; in Gamishli and Aghgaya more
than 200 tons; and the Chilgazchay and Narzanli large mercury deposits
11 Ecoreform.az, ibid.
12 Azertag.az, Rauf Hajiyev: Damage to nature and monuments of Kalbajar region will be calculated in a short
time and appropriate measures will be taken (translation from Azerbaijani), December 1, 2020, available at: https://
hesablanacaq_ve_muvaq_tedbirler_gorulecek (accessed: December 19, 2020).
13 Omarov V., “Cruel exploitation of Karabakh and adjacent regions occupied by Armenia,” Sia.az, August 24,
2020, available at: https://sia.az/az/news/social/822274.html (accessed: December 22, 2020).
14 Nuriyev Q., “Azerbaijanskiy Klondayk: Armyane Doljni Vozmestit Usherb ot Ekspluatasii Mestorojdeniy v
Karabakhe,” Report.az, October 10, 2020, available at: https://report.az/ru/energetika/azerbajdzhanskij-klondajk-
armyane-dolzhny-vozmestit-usherb-ot-ekspluatacii-mestorozhdenij-v-karabahe/ (accessed: December 23, 2020).
15 Ecoreform.az, ibid.
Volume 1 • Issue 2 • Winter 2020
are located in Lachin district. Many of these deposits were illegally used
by Armenia. In this connection, the Azerbaijani government intends
to invite international audit companies to carry out an independent
audit in order to calculate the total damage that can be presented to the
international courts for claiming compensation from Armenia.16
At the same time, during the occupation period of the southeastern
regions by Armenia, Azerbaijan was deprived of the use of about 14
deposits of coloured and decorative stones, such as jasmine, agate,
onyx, jasper, pyrite, pemphigoid, cad, etc. In addition, the region has
19 deposits of various kinds of facing stone and other
deposits suitable for the production of construction
materials, such as cement raw materials, building
stone, pumice and volcanic ash, clay, building
sand, gypsum, anhydride and clay gypsum, perlite,
obsidian, and vermiculite.17
For example, in the Jebrayil district, there is
practically everything that is needed for construction:
a cube-stone can be mined in the Toulouse deposit, the reserves of
which are estimated at 2.296 million m3. There are 4.672 million m3 of
clay in Garajaly, plus at least four deposits of cement raw materials with
total reserves of 6.644 million m3 available in Geyarchin-Veisalli. In
addition, there are deposits of sand, crushed stone, gypsum, and other
construction materials in the region.18
All of this will be of particular importance in the period when
the liberated territories are being restored. Building materials can
be produced directly in the region, which will reduce the cost of
construction materials needed for rebuilding and can create new jobs.
In addition, the use of local construction materials will contribute to the
ability to restore the region’s authentic architectural style.
Water and energy potential of the liberated territories
The liberated territories of Azerbaijan are also very rich in water
resources, which provide a very significant contribution to Azerbaijan’s
limited water reserves. Given the fact that, lately, the problem of
supplying the country with fresh water was becoming critical, these
resources will be most useful.
16 Youtube, President Ilham Aliyev addresses the people, ibid.
17 Ecoreform.az, ibid.
18 Preslib.az, Armyano-Azerbaycanskiy Nagorno-Karabaxskiy Konikt, ibid., p63.
The liberated territories of
Azerbaijan are also very
rich in water resources,
which provide a very
signicant contribution to
Azerbaijan’s limited water
CAUCASUS STRATEGIC PERSPECTIVES
Back in the 1970s, on the initiative of Heydar Aliyev, then First Secretary
of the Communist Party of Azerbaijan (equivalent to the capacity of a
leader of Azerbaijan), the Sarsang reservoir was built (at the moment,
the reservoir falls within the region where the Russian peacekeepers are
deployed) on the Tartar River, with a total capacity of 560 million m³,
as well as the Sugovushan reservoir, with a capacity of 80 million m³
for irrigation and energy purposes. The area of the Tartar river basin is
2,650 square kilometres, and the river is 184 km long, with an average
water flow of 23.1 cubic meters per second. This is the largest river
in the Nagorno-Karabakh region and is of great importance for the
economy of Azerbaijan, as it is used for both agricultural and industrial
needs.19 The Sarsang reservoir will provide irrigation opportunities for
agricultural land in six regions of Azerbaijan with a total area of about
100,000 hectares.20 During the occupation of the Azerbaijani lands,
these areas were deprived of the opportunity to receive water from the
reservoir because, during the sowing season, Armenians cut off the
water supply, releasing it only in the winter, which was causing flooding
for the agricultural land of these districts. Currently at the Sugovushan
reservoir, the necessary works are already being carried out to ensure
the irrigation of land during spring, which will create the conditions for
the irrigation of another 15,000 hectares of land. Immediately after the
liberation of the village of Sugovushan, for the first time in 28 years,
water was released from the reservoir to the Terter, Goranboy, and
In the south, in the Jebrayil and Zengilan districts, the Khudaferin
reservoir on the Araz River, which is used jointly with Iran, was also
released. This reservoir will enable the irrigation of about 75,000 hectares
of land. According to some estimates, the volume of this reservoir is 1.6
billion m3. The liberated territories also have underground sources of
drinkable water that can provide a daily volume of up to two million
The significance of these water resources is reinforced with the capacity
for energy production from hydropower plants. In the occupied territories,
there are, including those built later by the Armenian occupiers, about
34 hydroelectric power plants (HPP). The largest among them are the
Sarsang HPP, with a generation capacity of 50 MW, and the Khudaferin
19 Azertag.az, Rauf Hajiyev: Damage to nature and monuments…, ibid.
20 Ecoreform.az, ibid.
21 Report.az, Spustya 28 let Voda iz Suqovushana Pushena v Reku Terter, October 9, 2020, available at: https://
report.az/ru/karabakh/spustya-28-let-voda-iz-sugovushana-pushena-v-reku-terter/ (accessed: December 25, 2020).
22 Ibrahimov, R., ibid.
Volume 1 • Issue 2 • Winter 2020
HPP (102 MW), which is being built on the Araz river in collaboration
with Iran.23 In addition, there are plans to construct the Maiden Tower
HPP, which will also be located on the Araz river. It should be noted
that the that the construction of the Khudaferin and Maiden Tower HPPs
was agreed back in 1982 as a joint project between the USSR and Iran.
However, a new agreement was concluded directly between Azerbaijan
and Iran in 2016. In fact, the construction of the Khudaferin HPP was
completed by Iran, but it has not yet begun operation. Equal value from
water and electricity supply is expected. It is anticipated that the profits
from the sale of electricity generated by the Khudaferin and Maiden
Tower HPPs will be divided equally between the two countries.24
About 39.6% of the total geological reserves of mineral waters (120
sources of various compositions and medicinal values) of the Republic
of Azerbaijan fall within the liberated territories. This means that the
potential supply of mineral water is in the order of about 7,800 m3 per
day. Among these, the Istisu (Kalbajar district), Turshsu (not far from
the city of Shusha), and Syrlan (Shusha city) springs are of particular
importance. This mineral water is distinguished by its chemical
composition and it is a natural remedy for many diseases. Before the
conflict there was a large resort and sanatorium at the Istisu spring as
well as a mineral water bottling plant, which were completely destroyed
during the occupation. The water from the Turshsu and Syrlan springs
is believed to treat various internal diseases.25
The presence of many mineral waters in this region makes it possible to
develop a curative tourism destination, along with the existing tourist
potential. It will be possible to develop many other types of tourism in
the region by mobilizing other indigenous elements such as religion,
cooking, ecotourism, and healing. For the latter, the restoration and
construction of new hospitals and sanatoriums is necessary, which will
attract not only Azerbaijani citizens, but also foreign tourists.
The presence of certain reserves of oil and natural gas in these territories
is also known. In short, their estimated reserves in the liberated territories
are estimated at 200 million tons and 250 billion m3, respectively.26
Although these areas comprise rough, mountainous terrain, thanks to
new technologies, their extraction can become possible and economically
23 Ibrahimov R., ibid.
24 Krivosheev K., “GES, Kotoraya Jdala Konsa Voyni, “Ъ” Posetil Gidrouzel s Tyajeloy Sudboy”, Kommersant,
December 9, 2020, Available at: https://www.kommersant.ru/doc/4605407#id1986968? (Accessed: 2 January, 2021)
25 Ecoreform.az, ibid.
26 Interfax.com.ua, Zapasy nefti v Karabakhe otsenivayutsya v 200 mln t, gaza - 250 mlrd kub. m - AN
Azerbaydzhana, December 14, 2020, Available at: https://interfax.com.ua/news/economic/709809.html, (2 January,
CAUCASUS STRATEGIC PERSPECTIVES
viable, which will create new jobs, provide the region with additional
energy sources, and increase the export of hydrocarbon resources.
The natural potential of the liberated territories is enormous. Considering
how important they were for the Armenian economy, it has become
clear that Azerbaijan will make the most of the restored opportunities.
According to some estimates, the use of natural resources in the territories
formerly occupied by Armenia will enable Azerbaijan to extract up to an
additional 30% of its GDP. Now these resources will give a big impetus
to the economy of Azerbaijan and will also contribute to the early return
of local residents (former IDPs) to their homeland.
Moreover, the development of these territories will create positive
opportunities for Armenia as well. Indeed, according to the Statement of
10 November, there are projects that will positively affect the development
of regional cooperation, which will create interdependence between the
countries and therefore reduce the likelihood of potential conflicts in
the future. In accordance with the ninth paragraph of the Statement, “all
economic and transport links in the region shall be restored.” For the
first time since independence, Armenia has the opportunity to become
part of a long-established regional economic system. In the case of a
constructive approach and the rejection of revanchist ideas, Armenia will
receive significant dividends for its economy from the new arrangements.
In addition, the statement assumes the restoration of existing and
construction of new transport and communications links between the
western regions of Azerbaijan and the Nakhchivan Autonomous Republic
of this country, links that pass through the territories of the Republic of
Armenia. Owing to the occupation of the southern districts (Fuzuli, Jabrail,
and Zengilan), all ground communications had been interrupted. If this
transport route starts operating, a positive effect will be provided not only
for Azerbaijan, but also for Armenia, which will have the opportunity to
escape regional isolation, as well as to gain access to regional transport
links with Azerbaijan and, through Nakhichevan, Turkey.
Restoring its territorial integrity will enable Azerbaijan to fully use
the economic potential of this region, which will positively affect the
well-being of its citizens and will also become an additional impetus
for regional cooperation in the South Caucasus, where Armenia was
intentionally isolated during the years of the ongoing conflict.