BAKU, Azerbaijan, June 18. It appears that oil price uncertainty is a major channel through which the geopolitical tension in the Middle East could affect Azerbaijan, Dmitry Dolgin, Chief Economist, Russia and CIS at the Netherlands-based ING banking group, told Trend.
“Based on our estimates, each $1 per barrel of oil price translates to approximately $300 million in annual fuel export receipts and around $190 million in annual fuel-related fiscal revenues. Currently, the Brent crude oil price significantly exceeds the $60-65 per barrel range, which is the breakeven range for Azerbaijan’s current account and consolidated budget. However, the sustainability of this price movement is in question, given that oil prices were as low as $60 per barrel just over a month ago,” he said.
Dolgin noted that in terms of geography, Azerbaijan's trade routes have limited direct exposure to the tensions surrounding Iran.
“If the situation escalates further and tensions are prolonged, it could negatively impact the investment sentiment towards the broader region. Nonetheless, it is important to note that trade flows have been more significant for Azerbaijan compared to foreign capital inflows,” said the analyst.
Dolgin pointed out that while tensions in the Middle East are certainly important to monitor, Azerbaijan’s investment case in the long run are more strongly influenced by relationships with Türkiye, Armenia, and the European Union.
Israel launched airstrikes on Iran in the early hours of June 13, killing a significant number of military personnel. Among the dead were Iran’s Chief of the General Staff Mohammad Bagheri, IRGC Commander-in-Chief Hossein Salami, Khatam al-Anbiya Central Headquarters Commander Gholamali Rashid, and IRGC Aerospace Force Commander Amir Ali Hajizadeh. Nine nuclear scientists and several high-ranking officials were also reported killed.
That same evening, Iran responded with a large-scale attack, firing more than 150 ballistic missiles and over 100 drones at Tel Aviv and other locations. The strikes caused civilian casualties and extensive damage.