Karabakh emerges as test case for Azerbaijan’s post-oil growth model

Azerbaijan is making significant strides in restoring life to territories liberated from occupation, marking one of the most ambitious post-conflict reconstruction efforts in the region. For tens of thousands of people displaced for nearly three decades, the process represents not only physical return, but also the restoration of identity, dignity, and economic opportunity.

The foundation of this process, known as the Great Return, can be traced back to 2016, when the April battles marked a turning point in the conflict. During these four-day clashes, the Azerbaijani Army regained control over strategically important areas, creating both a psychological and political shift that laid the groundwork for future reintegration efforts.

A key milestone followed in 2017, when Azerbaijani President Ilham Aliyev signed an order for the restoration of Jojug Marjanli village. This initiative effectively launched the Great Return program, making Jojug Marjanli the first successful model of resettlement in previously occupied territories.

However, the large-scale transformation began after the 2020 Patriotic War, which restored Azerbaijan’s territorial integrity. In the immediate aftermath, the government initiated comprehensive reconstruction efforts across Karabakh and East Zangezur, regions that had suffered extensive destruction during years of occupation.

To date, more than 22.1 billion manats have been allocated from the state budget for reconstruction and development. As a result, over 75,000 citizens now live and work in the liberated territories, reflecting a gradual but steady repopulation process.

From a policy perspective, the adoption of the First State Program on the Great Return in November 2022 institutionalized these efforts, transforming reconstruction from a post-war response into a long-term development strategy. The program integrates infrastructure development, economic revitalization, and social reintegration, three pillars essential for sustainable resettlement.

One of the most critical challenges addressed in the early stages has been demining. Large-scale clearance of landmines and unexploded ordnance has been a prerequisite for any civilian return, highlighting the security dimension of reconstruction. At the same time, Azerbaijan has prioritized the creation of modern infrastructure, including roads, energy systems, and digital connectivity, effectively building “smart” and sustainable communities from the ground up.

Economically, the liberated regions are being repositioned as new growth centers. Their strategic location and resource potential provide opportunities for diversification beyond the traditional oil and gas sector, an objective long emphasized in Azerbaijan’s economic policy.

A key driver of this transformation is the Agdam Industrial Park, which has emerged as a cornerstone of industrial revival in Karabakh. Spanning more than 190 hectares, the park symbolizes a shift from reconstruction to production, creating a self-sustaining economic ecosystem in the region.

The park offers a favorable investment climate, supported by tax and customs incentives that have attracted both domestic and foreign investors. Enterprises operating within the park cover a wide range of sectors, including construction materials, food processing, light industry, and high-tech equipment assembly.

This diversification is particularly significant from an economic standpoint. By producing construction materials locally, the park reduces dependency on imports and lowers the cost of large-scale rebuilding projects, thereby increasing efficiency and accelerating the reconstruction timeline.

Equally important is the park’s social impact. With around 1,000 permanent jobs already created and further expansion underway, it plays a vital role in ensuring sustainable employment for returning residents. This is a crucial factor in preventing secondary migration and ensuring that resettlement translates into long-term stability.

Currently, 30 residents and 5 non-residents operate within the industrial park, with total investments reaching nearly 150 million manats. As additional enterprises become operational, both production capacity and employment levels are expected to rise further.

From an analytical perspective, Azerbaijan’s approach reflects a shift from traditional post-conflict recovery to a model of integrated regional development. Rather than focusing solely on rebuilding infrastructure, the strategy emphasizes economic viability, social cohesion, and technological modernization.

The broader implication is clear: the success of the Great Return will ultimately depend on how many people return, as well as the quality of life and economic opportunities available to them. In this regard, the ongoing transformation of Karabakh and East Zangezur may serve as a model for post-conflict reconstruction, where rebuilding is not just about restoring the past, but about designing a more resilient and sustainable future.