The Azerbaijan water scarcity crisis

Water plays a significant role in facilitating Azerbaijan's main industries and its trade. Currently 53% of Azerbaijan's GDP is from industries highly dependent on water, including oil and gas (which makes up 35% of Azerbaijan's GDP), agriculture manufacturing, and construction (with the three combined attributing 18% of total GDP).

Agriculture has been marked an important sector for Azerbaijan's economic diversification and 80-90% of Azerbaijan's agriculture is on irrigated land. For more than a decade, efforts to ramp up the production of raw cotton have been in place. Currently, cotton accounts for an estimated 25% of revenue from agriculture in the country, with roughly 90% being exported to countries like Turkey and Iran. Particular attention has also been paid to cotton production as it is more profitable, with hopes to revive the ginning and processing industries. For all aspects, freshwater is essential, leading the agricultural sector being reliant on freshwater inflows.

In the east of the country lies the Caspian Sea, which plays a vital role in Azerbaijan's interactions with major international markets, including Italy, Turkey, Greece and India. This body of water is a strategically important trade corridor for not only Azerbaijan, but rather the entire region. The Caspian Sea represents vital economic opportunities for all of its littoral states. This trade route could prove vital to the ability of these countries to diversify their export and import channels, as the old Silk Road continues to be revived.

Currently, 90% of traded goods are shipped, highlighting the importance of waterways. To avoid the pressurized Suez Canal - and the extended shipping times of going around the Cape of Good Hope in South Africa - Companies are increasingly turning to the Trans-Caspian International Transport Route (TITR). The TITR, also known as the Middle Corridor, is a key trade route linking the markets of China, East Asia, and Europe. While most of the route is by land, the Caspian Sea is used to link East and West by providing a connecting passage between Kazakhstan and Azerbaijan.

Azerbaijan, alongside a number of its neighbors, has been investing in infrastructure to increase the cargo throughput of the Middle Corridor, with the goal of reaching throughput capacity of 10 million tons per year by 2027, and transit times of 14-18 days. Waterway transportation is reliant on the bodies of water used maintaining navigable depths. When water levels are too low, ships may not be able to pass. Maintaining navigable water levels becomes increasingly important as the use of waterway transportation grows in significance to the Azerbaijan economy.

The Caspian Sea also boasts abundant natural resources, with the country's largest hydrocarbon basins located within it. The majority of Azerbaijan's oil is exported to the West - only one third is used for domestic consumption, with the country utilizing natural gas for the remaining two-thirds.

As the world transitions to other forms of energy, Azerbaijan is readying itself for change in this space. At COP26, the country committed to its target of a 35% reduction in GHG emissions by 2030 and, more recently, has committed to a 40% by 2050.