Turan Research Center

The Azerbaijan-UAE strategic partnership agreement aligns with Baku's broader outreach to the Gulf region and reinforces its long-standing multi-alignment policy. More importantly, it signals a shifting geopolitical landscape – one in which Russia's traditional dominance in the South Caucasus is waning, while the region itself becomes increasingly connected with the Middle East.

Last month, Sheikh Mohammed bin Zayed Al Nahyan (known as MBZ), President of the United Arab Emirates (UAE), undertook an official visit to Azerbaijan, making a significant moment in the deepening relationship between the two nations. The high-level meeting was held in the city of Shusha in Azerbaijan’s Karabakh region. The visit resulted in the signing of 14 bilateral agreements, poised to inject fresh momentum into an already expanding strategic partnership.

Diplomatic relations between Azerbaijan and the UAE were first established in 1992. But President Ilham Aliyev’s first official visit to the UAE in 2006 marked a turning point in bilateral relations, ushering in a new era of cooperation. Since then, Aliyev has made six more visits to the UAE, with reciprocal high-level exchanges further solidifying ties. In 2024, MBZ became the first UAE leader to visit Azerbaijan. This momentum between the two nations culminated in July 2025, when the Comprehensive Economic Partnership Agreement (CEPA) was signed during Aliyev’s visit to the UAE – an accord that laid the foundation for a new phase of economic and strategic collaboration. The agreement aims at boosting bilateral trade which still largely remains untapped.

A testament to the burgeoning bilateral partnership is the scale of mutual investment. Between 1995 and 2024 ,the UAE infused $3.4 billion in Azerbaijan, while Azerbaijani investments in the UAE reached $1.1 billion. A major driver for this expansion was the establishment in late 2023 of a $1 billion Joint Investment Fund between the Azerbaijan Investment Holding and the Abu Dhabi Investment Holding Company. The Azerbaijan Trade Representative Office was established in Dubai in 2017, followed by the opening of the Azerbaijan Trade House in 2019. The latter plays a key role in promoting the “Made in Azerbaijan” brand across the UAE and the broader Persian Gulf region. Currently, more than 350 commercial enterprises with UAE capital are registered in Azerbaijan.

Among the most prominent investments is the UAE’s national oil company, ADNOC, which acquired a 30% stake in Azerbaijan’s Absheron gas field for an unknown amount. Meanwhile, momentum is building in the green energy sector. Saudi Arabia’s ACWA Power is currently developing a $300 million wind farm in Azerbaijan while Abu Dhabi-backed projects such as the Garadagh Solar Power Plant are helping Baku accelerate its transition toward renewable energy. During the latest high-level visit, both sides signed multiple Memoranda of Understanding aimed at exploring joint opportunities in renewable and clean energy projects. Moreover, a $1 billion joint venture between Abu Dhabi’s ADQ and Azerbaijan Investment Holding further signals a deepening commitment to long-term economic collaboration.

Despite the visible expansion of diplomatic and strategic ties between Azerbaijan and the UAE, bilateral trade still lags behind outwardly developing ties. In 2024 trade reached just $96.8 million – a sharp decline from $1.6 billion the previous year, signaling a major drop in commercial activity. Geography remains a major impediment, compounded by the heavily sanctioned status of Iran which under ideal circumstances would serve as a vital transit hub between the two nations.

However, this dynamic may be poised for change.

The development of the International North-South Transport Corridor (INSTC) – linking Russia’s heartland with Iran and the Indian Ocean – offers both the UAE and Azerbaijan a pathway to a more efficient north-south connectivity. Indeed, the INSTC’s major branch passes through Azerbaijan, and the UAE has recently expanded its ties with Russia, positioning itself to benefit from the corridor’s expansion.  

Yet for the INSTC to fulfill its full potential, sustained investment and robust multilateral cooperation will be essential. Streamlining customs procedures, aligning technical standards, and eliminating logistical bottlenecks must become shared priorities among participating countries. If these challenges are addressed, the INSTC could evolve into a fully optimized, major commercial route for Eurasian commerce. Historical precedent also favors its success; in ancient and medieval times, a similar route along the western Caspian Sea linked the Eurasian steppes with the Middle East.

The UAE president’s recent visit to Azerbaijan reflects Abu-Dhabi’s growing interest in the shifting connectivity landscape of the South Caucasus and the wider Black Sea region. As global trade routes shift in the wake of the war in Ukraine, the importance of alternative transit corridors has become increasingly urgent. The once-dominant northern route through Russia has lost viability, prompting China and the European Union to explore options through the South Caucasus. While the Middle Corridor -- stretching from Turkey across  he Caspian Sea to Central Asia -- may be geographically distant from the UAE, its emerging economic potential is enticing enough to attract Emirati investment. Notably, the UAE president’s mid-September visit to Georgia -- where an Emirati company is building a dry port near Tbilisi – underscores Abu Dhabi’s strategic understanding of the expanding East-West connectivity across the region.

Multi-Alignment Strategy

Azerbaijan’s foreign policy has long been defined by its pursuit of multi-vector diplomacy, and in recent years, a distinct pivot toward the Middle East has become increasingly evident. Since 1990s, Baku has actively cultivated simultaneous relationships across geopolitical divides -- maintaining strong ties with Russia and Turkey, while also deepening commercial and energy partnerships with Western countries. Azerbaijan’s strategic geography, particularly its role alongside Georgia as a key transit link between Central Asia and the EU, has further amplified its relevance on the global stage.

Building on decades of regional engagement, Azerbaijan has recently expanded its partnerships to include the Arab world. In addition to the growing relationship with the UAE, dynamic cooperation is now unfolding with Saudi Arabia, Qatar, and other members of the Gulf Cooperation Council (GCC), spanning such sectors as energy, investment, logistics, and humanitarian affairs. For the GCC – particularly the UAE and Saudi Arabia -- enhanced economic and political engagement with Azerbaijan aligns with their broader ambitions to diversify investments and assert long-term influence over the evolving connectivity landscape that links Europe, Asia, and the Middle East.

But a deeper geopolitical shift may also be underway – one that helps explain the growing convergence between Azerbaijan and the UAE: the South Caucasus’ gradual shift toward the Middle East. Historically, the formidable Caucasus Mountain range divided the region into northern and southern spheres, with the southern part naturally gravitating toward commercial, political and cultural ties with the Middle East. This pattern was evident throughout ancient and medieval times. However, the rise of the Russian Empire in the 19th century disrupted this dynamic. After defeating the Persian and Ottoman empires, Russia imposed a new order, effectively sealing off the Caucasus from the Middle East and asserting exclusive influence over the region.

That dominance now appears tenuous. Geography, once again, is dictating its logic, pulling the South Caucasus back into the orbit of the Middle East. Russia, long accustomed to near monopoly influence in the region, is facing strained relations not only with Azerbaijan but also with Armenia, traditionally one of its closest allies. This diminution of Russian influence in the South Caucasus is compounded by a broader trend that Moscow itself has championed: the emergence of a multipolar world.

In this new landscape Moscow is increasingly no longer the major actor in South Caucasus affairs, but one among several – including the UAE, Turkey, the US, China and the EU – each vying for strategic footholds in a region whose connectivity and relevance are rapidly expanding.

Emil Avdaliani is a research fellow at the Turan Research Center and a professor of international relations at the European University in Tbilisi, Georgia. His research focuses on the history of the Silk Roads and the interests of great powers in the Middle East and the Caucasus.