Uzbekistan and Azerbaijan: Turning Political Alignment into Economic Growth

Over the past few years, Uzbekistan and Azerbaijan have evolved from a strategic partnership to a fully fledged alliance. Two distinct dimensions now stand out in how they engage with one another. On the one hand, the institutional foundation of their cooperation is firmly in place; on the other, its economic momentum is only beginning to build. In our view, the balance between the development of political and diplomatic machinery and the practical substance of economic cooperation will define the next chapter in relations between Uzbekistan and Azerbaijan.

The Institutional Architecture

The framework for bilateral ties between Tashkent and Baku rests largely on top-down coordination: the agenda is set at the level of the heads of state, while intergovernmental, ministerial, and business mechanisms implement it. It is President Shavkat Mirziyoyev of Uzbekistan and President Ilham Aliyev of Azerbaijan who set the principal vectors of cooperation and its tempo, and who significantly shorten the time needed to approve individual decisions.

This has gradually produced an extensive system of engagement mechanisms. The Supreme Interstate Council was established in 2023 and held its first session in 2024; the same year, the Treaty on Allied Relations was signed. In July 2026, Tashkent hosted the fifteenth meeting of the Intergovernmental Commission. The Uzbek–Azerbaijani Business Council has operated since 2020; three Forums of Regions have been convened, and eleven cities have entered into sister-city arrangements. In the past three years alone, there have been more than twenty high-level inter-parliamentary contacts, and in 2025 Khiva hosted the first inter-parliamentary forum.

This density of contact is normally found between neighboring countries or between states whose mutual trade runs at far higher levels. For Uzbekistan and Azerbaijan – separated by the Caspian and still trading comparatively little – the degree of institutionalization achieved looks all the more striking.

The practical effect is to lower political and administrative barriers, shorten approval timelines, and make it easier for companies to enter the partner’s market. Yet an institutional framework does not, in itself, generate trade flows or investment demand. It creates favorable conditions for business activity, but it is no substitute for the economic incentives on which the further momentum of cooperation depends.

The next stage, therefore, is likely to be defined less by adding to the number of existing formats than by the capacity of those formats to convert the political relationship already achieved into concrete economic results.

Economic Dimension: Scale in Comparative Perspective

Political dialogue between the two countries is still running well ahead of the underlying economic indicators, as the statistics make plain. Bilateral trade reached $307 million in 2025, up roughly 15 percent. Uzbek exports grew by 8 percent to $227 million, while imports from Azerbaijan rose by 39 percent to $80 million. The Uzbek export basket widened by 116 product lines.

These figures take on a different meaning, however, when set against Uzbekistan’s total foreign trade turnover, which exceeded $81 billion in 2025. Azerbaijan accounted for less than 0.4 percent of that total. That number should not be read as a verdict on the quality of the bilateral relationship. Rather, it shows how difficult it is to translate political alignment into economic ties of real scale – a difficulty rooted in several objective structural constraints.

These include the lack of a shared border and the resulting need for multimodal shipping across the Caspian; partial overlap in export baskets (textiles, fruit and vegetables, selected chemical products); and similar approaches to diversifying economic ties, which leave the two sides competing in third markets more often than complementing one another.

This leads to a practical conclusion. Simply scaling up conventional trade is unlikely to bring the two countries to the $1 billion mark set by their presidents. Growth will have to come from investment and industrial cooperation, with trade flows arising from shared production chains.

Both countries appreciate the importance of putting such systematic work in place, and in recent years the center of gravity of the agenda has shifted noticeably from trade toward investment. The Azerbaijan – Uzbekistan Investment Company (AUIC), created in 2023 with charter capital of $500 million, is already involved in fifteen projects worth some $360 million, according to Uzbekistan’s Ministry of Investment, Industry and Trade. The wider pipeline is considerably larger, with more than twenty projects worth around $6 billion, plus another twenty-five worth almost $1.5 billion in preparation.

How far investment cooperation extends beyond declared intentions is best judged by what is happening at specific production sites. The most visible example is the joint vehicle assembly operation run by Uzavtosanoat and Azermash at the Hajigabul industrial park, which has already produced more than 11,000 Chevrolet cars and Isuzu buses. The project is now entering its next phase: a full-cycle plant with an investment of more than $84 million. Textile and sericulture clusters are developing in parallel with agro-industrial and logistics projects.

The significance of such ventures is not measured by output alone. Their principal value lies in forging durable production links between the two countries.

Joint manufacturing generates steady demand for mutual deliveries of components, raw materials, and equipment, thereby embedding bilateral trade within a single production chain.

Ties of this kind tend to be less sensitive to swings in the market because they rest not on one-off deals but on the long-term needs of production. Another consideration matters just as much. Localizing production in Azerbaijan, provided the relevant rules of origin are met, could open the door to third-country markets with which Baku has preferential trade arrangements.

In that sense, joint ventures can be seen not merely as a means of serving the two national markets, but as a possible platform for jointly promoting products beyond Uzbekistan and Azerbaijan. That effect does not materialize automatically, however: it requires dedicated work on the trade, customs, and legal mechanisms involved.

What Factors Will Influence Future Growth?

The institutional architecture now in place, together with the results already achieved in economic cooperation, creates considerable scope to take the relationship further. Realizing that potential, though, will depend on the two sides’ ability to overcome a number of structural constraints.

Foremost among them are the competition between similar products in third markets noted above and the volatility of Caspian logistics, which reflects the condition of the ferry fleet and the seasonality of shipping. Another constraint stems from the difficulty of making direct payments between the two countries’ banks and of insuring cargo, both of which add to the cost and duration of foreign trade transactions.

Against this backdrop, a natural question arises: what could accelerate cooperation?

One of the most practical steps would be mutual recognition of certificates and laboratory test results, especially for agricultural produce, which would reduce both the time and the cost of bringing goods to the partner’s market.

In the financial sphere, there is a strong case for broadening correspondent banking relationships and settling in national currencies through direct payments between banks and convenient currency-conversion arrangements. This would reduce reliance on intermediaries and make the settlement of trade and investment operations more predictable.

Transport deserves attention in its own right. Expanding the capacity of the Caspian routes, harmonizing tariffs and shipping schedules, and developing digital cargo tracking would all help reduce business costs.

Relations between Uzbekistan and Azerbaijan have thus reached the point where the political capital accumulated over recent years is gradually gaining economic and practical substance. In this sense, it can be said with confidence that the two countries have laid a solid foundation for moving into new areas and deeper forms of allied partnership.

Miraziz Mirumarov, 

Leading Research Fellow,

Institute for Strategic and Regional Studies under the President of the Republic of Uzbekistan

Iroda Imamova,

Leading Research Fellow,

Institute for Strategic and Regional Studies under the President of the Republic of Uzbekistan