Turan Research Center

In the first half of 2025, a notable shift occurred in Eurasian investment dynamics: while China halted direct investment in Russia, Kazakhstan emerged as the top recipient of Chinese foreign investment under the Belt and Road Initiative (BRI). In July alone, Beijing and Astana signed 58 agreements totaling $24 billion.

Chinese capital and infrastructure  activity also expanded  across other Central Asian states, bringing the region’s total Chinese direct investment to $25 billion in just the first six months -- representing 44% of all BRI investment globally. Kazakhstan alone accounted for $23 billion of that sum.

Yet this surge of capital is not solely driven by Beijing. Gulf Arab states and Western powers have entered an increasingly competitive race to invest across Central Asia, the South Caucasus, and particularly Azerbaijan.

What’s particularly striking is who’s left behind. Despite possessing the world’s largest proven natural gas reserves and vast oil wealth, Russia and Iran are increasingly absent from the region’s investment map. Iran remains isolated by decades of sanctions, while Russia continues to suffer the economic fallout of its 2022 invasion of Ukraine -- over $60 billion in net negative foreign direct investment since then. For the first time since the BRI’s launch, Moscow received zero Chinese direct investment in the first half of this year.

The Rise of Renewables in Central Asia

International interest in Central Asia is not confined to fossil fuels. Global energy markets are undergoing a profound structural transformation, with renewable sources now accounting for over 90% of net additions to electricity generation. Between 2015 and 2024, global solar capacity grew more than eightfold, while wind generation power increased by 172%.

This rapid adoption has been driven primarily by plummeting costs. Over the past 15 years, solar panel prices have dropped by 80%, and the levelized cost of electricity from solar and wind is now 41% and 53% lower, respectively, than that of thermal plants using the cheapest fossil fuels.

Central Asian countries and Azerbaijan have capitalized on these trends. In recent years, they’ve increased their non-hydro renewable electricity capacity to nearly 6 gigawatts (GW), with projections indicating this figure will nearly triple to 17 GW within the next two years.

A diverse coalition of investors is driving this growth. In addition to Chinese, Vietnamese, Korean, and Western firms, regional heavyweights like the UAE’s Masdar and Saudi Arabia’s ACWA Power have merged as key players in solar and wind projects across Central Asia.

This shift has long-term strategic implications. By diversifying domestic energy portfolios and redirecting fossil fuels for export, renewables reinforce Central Asia’s role as a stable energy supplier to global markets.

Oil: Declining Share but Resilient Demand

Oil’s dominance in the global primary energy mix has steadily declined – falling from a peak of 46% 50 years ago to around 30% today. Yet absolute demand continues to grow — driven no longer by road transport, but by petrochemical feedstocks and international transport.

Petrochemical feedstock consumption alone drives about half of global oil demand growth while the other half stems from increasing fuel needs in aviation and maritime shipping. In volumetric terms, feedstocks account for roughly 70% of the total growth.

Natural Gas: Expanding Regional Trade

Natural gas, the cleanest-burning fossil fuel, now supplies roughly one quarter of the world’s energy demand. Around 6% of worldwide production is consumed as feedstock for petrochemicals.

In 2024, Central Asia remained a key supplier: Kazakhstan, Turkmenistan, and Uzbekistan exported a combined 53 billion cubic meters (bcm) of gas, the bulk of it destined for China. At the same time, Azerbaijan exported 25 bcm to 12 countries via the South Caucasus Pipeline and its recent expansions.

A development with potentially far-reaching consequences occurred in mid-2025, when Azerbaijan and Armenia agreed to open the Trump Route for International Peace and Prosperity (TRIPP) or Zangezur Corridor, a 43-kilometer road and rail corridor linking Azerbaijan and Turkey through Armenia’s Syunik province. Azerbaijan has already constructed a pipeline close to the border with an initial capacity of 2 bcm per year. Plans to extend the line to Nakhchivan and connect it to the Nakhchivan–Igdir pipeline in Turkey could create a new export route with a final capacity of 5 bcm. This corridor would enable gas deliveries to Armenia, Nakhchivan, and eastern Turkey — regions currently dependent on Iranian imports. With the 25-year Iran–Turkey gas supply contract set to expire in 2026, Azerbaijan is well-positioned to expand its market share.

Azerbaijan’s Energy Strategy

Azerbaijan is actively developing its gas reserves and export infrastructure. In partnership with France’s TotalEnergies and the Abu Dhabi National Oil Company, Baku is advancing the second phase of the massive Absheron field, alongside other key development projects—most notably the gas layer of the bp-led Azeri–Chirag–Gunashli block. By 2030, Azerbaijan aims to raise its annual export capacity by 32% to 33 bcm.

Simultaneously, Azerbaijan is targeting 10 GW of renewable capacity by 2030 and is advancing transmission projects to deliver gas from Georgia across the Black Sea to European markets.

Historically, Azerbaijan was a global oil powerhouse. At the start of the 20th century, Baku and the United States each produced about half of the world’s oil. But since 2010, Azerbaijan’s oil output has declined sharply. In response, the government now focuses its energy strategy on a diversified mix of gas, condensates, electricity, and petrochemical products.

The results are striking. In 2024, oil exports generated about $15 billion, while gas revenues reached $8.5 billion. A decade earlier, oil had brought in $18.5 billion, while gas earned just $300 million. This dramatic rebalancing underscores Azerbaijan’s evolving energy profile and its determination to remain a central player in the global energy landscape.

Turkmenistan and Kazakhstan: Linking to Global Markets

In recent years, Turkmenistan has relied on Iran as a transit corridor for regional gas swaps, exchanging around 1.5 bcm of gas annually with Azerbaijan. In a notable expansion, March 2025, marked the start of sending 2 bcm per year to Turkey via the same route.

Meanwhile, oil exports from Turkmenistan as well as a portion of Kazakhstan’s crude continue to flow to global markets through the Baku–Tbilisi–Ceyhan (BTC) pipeline, underscoring Azerbaijan’s strategic role as a key transit hub for Caspian energy.

Strategic Outlook

The transformation of Central Asia’s energy landscape is reshaping the region’s role in the global economy. The combination of expanding renewable capacity alongside steady fossil fuel exports positions as a reliable long-term supplier to global markets.

The active involvement of China, Gulf Arab states, and Western investors underscores an intensifying competition for influence—one increasingly defined by infrastructure development, technology transfer, and market access rather than purely hydrocarbon volumes.

Azerbaijan’s strategy -- balancing natural gas development with large-scale renewable projects –- offers a model for other resource-rich states seeking to mitigate volatility in fossil fuel markets. Meanwhile, Central Asia’s ability to diversify export routes, both eastward toward China and westward toward Europe, will be a decisive factor to its long-term economic resilience.

The relative absence of Iran and Russia from major investment flows signals a broader structural shift in Eurasian energy geopolitics. For regional producers, this vacuum creates new opportunities to attract capital, diversify partnerships, and assert themselves at the crossroads of multiple energy corridors.

For global markets, the evolving mix of fossil fuels and renewables from Central Asia offers both supply security and flexibility in an era of accelerating energy transition.

Dalga Khatinoglu is an expert on Iran’s energy and macroeconomics, and a researcher on energy in Azerbaijan, Central Asia and Arab countries.