Comments by Center for Analysis of Economic Reforms and Communication

The Azerbaijani people are going through one of the most memorable and glorious periods in their history. Under the strategic leadership of the Supreme Commander-in-Chief, President Ilham Aliyev, in front of our eyes - online, if we may say so, the Azerbaijani army daily establishes truths that at one time seemed to be dreamlike and put an end to the sorrow of people urged to leave the occupied territories.

At a period when every day brings good news about the liberation of new lands, the time has come to write about the economic potential of the territories separated from Azerbaijan for 27 years, and the names of which are always remembered by every Azerbaijani. Of course, the historical and cultural significance of these territories is many times higher for the Azerbaijani people than the economic values, which is proved by recent events.

It is not a secret that 2020 was a severe year for all countries in the world. The pandemic and the global economic crisis have had a serious impact on the economic condition of most countries that were forced to postpone their planned large-scale policies and balance their costs. However, despite any economic, social and health difficulties, material damage caused by the war, as well as numerous and varied financial costs, the state and people of Azerbaijan repulsed the aggression and launched a counter-offensive operation to liberate their lands.

This once again demonstrates the superiority of historical and cultural values and truths for Azerbaijan. However, along with historical and cultural values, the liberated territories have rich economic potential. The new economic value that will be created by integrating these territories into the country's economy will many times exceed all the financial costs that the Azerbaijani state has borne and will continue to bear without hesitation and special financial tension.

More precisely, what is the economic potential of the territories liberated from occupation? Naturally, the format of an article does not let to reveal all the broad possibilities of these territories. At the same time, the main parameters of the occupied territories can be viewed.

In 1989-1993, Armenia occupied Nagorno-Karabakh and the surrounding Lachin, Kalbajar, Gubadli, Zangilan, Jabrayil, Aghdam (most of the regional center and territory) and Fuzuli (most of the regional center and territory) administrative districts belonging to the Republic of Azerbaijan. Looting and ineffective exploitation, carried out from the beginning of the occupation to the present day, has reduced the region's infrastructure to zero. For this reason, first of all, future restoration work should include the creation of general infrastructure (roads, gas, water, electricity, communications) and basic housing conditions, and then it should cover the implementation of economic development projects.

Natural landscape and tourism potential of the region

Various natural monuments, rare plant and animal species are widespread in the occupied region. The occupied mountainous zone of the Lesser Caucasus is a large forest region of Azerbaijan. The total forest area of the region is about 246.7 thousand hectares, including 13197 hectares of valuable forests. At the moment, the area of specially protected natural areas in our country has been brought to 890 thousand hectares, and 42997 hectares of them are under Armenian occupation.

In order to protect the natural landscape, rare flora and fauna in the occupied territories of the Lesser Caucasus, a number of reserves were created in the region. Among them are the Basitchay nature reserve and the Lachin reserve. The Basitchay reserve with 107 hectares area was established in 1974 in the south-west of Azerbaijan in the Basitchay gorge, located on the territory of the recently liberated Zangilan. The eastern plane tree is preserved here. The plane tree forest stretches along the river for 12 kilometers. In this reserve, the eastern plane trees, included to the Red Book, were up to 500 years old.

The Lachin reserve, founded in 1961 in the occupied Lachin region of Azerbaijan, has the area of 21.4 thousand hectares. Mountain goats, roe deer, wild boars, francolins and partridges were protected here. At the same time, the enchanting nature of the city of Shusha, located in Nagorno-Karabakh, is favorable for the development of tourism. The hary-bulbul flower, which grows only in the Shusha region of Azerbaijan, is a symbol of Karabakh.

Region’s industrial potential

In Soviet times, Nagorno-Karabakh developed in close economic ties with the plain zone of Karabakh and other economic regions of Azerbaijan.  Roads running in all directions created close economic ties between two areas. The occupation of Nagorno-Karabakh by the Armenians and its separation from other regions of Azerbaijan created very serious problems for the population and economy of the region. During a long period, the overwhelming majority of enterprises located on the territory of Nagorno-Karabakh functioned on the basis of fuel, raw materials and materials imported from regions of Azerbaijan, and many worked as branches of large enterprises in Baku.

In 1985, only 8% of cocoon raw materials supplied to the Silk Factory in Khankendi were produced in Nagorno-Karabakh, and the remaining 92% were imported from other regions of Azerbaijan. While in 1986 only 0.3% of the economic relations of the Nagorno-Karabakh region and 1.4% of imports made the share of Armenian SSR, 33.3% of the goods produced in the former region were sold in the remaining part of Azerbaijan.

At that time, the center of the Nagorno-Karabakh Autonomous Region Khankendi was directly connected with the railways and highways of Azerbaijan and, in general, with the transport and communication system of the republic. The railway distance from Khankendi to Baku is 392 km. Сonsidering the importance of this factor for the future development of the region, transport logistics maps of the Soviet era can be used in infrastructure projects. Naturally, as a result of the Armenian aggression, the unified transport and communication system, which has been operating in the occupied territories for many years, has been destroyed and rendered unusable.

This article examines the industrial potential of this zone from 4 angles. Other existing aspects of development will be revealed in the future, after more precise research is carried out. Thus, the initial overview shows that water resources, electricity, opportunities for the development of the recreational industry, and rich mineral deposits make the skeleton of the industrial potential of the liberated territories.

Water supply capacity of the region

Climate change and the associated water scarcity are one of the most actual problems around the world. The problem of water scarcity is also important for Azerbaijan. It is no secret that for objective geographic reasons the country's water resources are limited, and the main sources are located in neighboring countries. To ensure the efficient use of water resources in the country, there is a State Commission established by the Decree of the President of the Republic of Azerbaijan dated April 15, 2020.

In this context, the rich water resources of the liberated territories are of particular importance for the industry and agriculture of the country. The Sarsang reservoir was built in 1976 on the Terterchay River in the territory of the Aghdere (currently Terter) region. Its total capacity is 560 million m³, and the height of the dam is 125 m. By the height of the dam, the Sarsang Reservoir is considered to have the one of the highest dams in the country.

The complete liberation of the Aghdere region and Sarsang reservoir located there, will create an opportunity to provide irrigation water to land in 6 districts (Terter, Aghdam, Barda, Goranboy, Yevlakh and Aghjabadi) with a total area of up to 100 thousand hectares. It should be noted that, in addition to the Sarsang reservoir the occupied zone has other reservoirs with a total capacity of 80 million m³. Their integration to the country's economy can create conditions for irrigating another 15 thousand hectares of land.

In addition, the liberation of the Khudaferin reservoir, located in the territory of Jabrayil and Zangilan, will lead to the irrigation of 75 thousand hectares of new land and improve the irrigation of existing irrigated land. According to some estimates, the volume of this reservoir is 1.6 billion cubic meters.

It is also supposed that there are 11 underground sources of drinking water in the region, which means a supply of drinking water in the amount of 1 million 986 thousand m³ / day.

Region’s energy sources

Water collection and water supply account for the main production of the electricity  in the region. Of course, here, the Sarsang and Khudaferin hydroelectric power plants are considered.

The Sarsang HPP, also known as the Terter HPP, is a hydroelectric power plant built in 1976 on the Terter River in the territory of the former Aghdere (now Tartar) region. At present, the hydroelectric power plant, consisting of two turbines, each with a capacity of 25 MW, is in an extremely unsatisfactory condition. After the repair of the station, production capacity can be further increased and used to meet the needs of the surrounding areas in electricity.

Khudaferin HPP is being built on the Araz River in accordance with an agreement signed between Iran and Azerbaijan. Thus, in February 2016, the Government of the Republic of Azerbaijan and the Government of the Islamic Republic of Iran signed an Agreement on cooperation in the continuation of the construction, operation, and use of energy and water resources of hydropower facilities and hydropower plants "Khudaferin" and "Maiden Tower" on the Araz River. The total capacity of power plants on the Araz River can reach 280 megawatts. The implementation of these projects can bring Azerbaijan 368 million kilowatt / hour of electricity per year.

It is clear that the Sarsang and Khudaferin hydroelectric power stations will be actively used to improve the energy supply of the surrounding regions and restore the liberated territories. In general, the connection of these power plants to the country's energy system, along with an increase in capacity, means geographic diversification of sources, that is, a decrease in the load on Absheron, Shirvan and Mingachevir, as well as an increase in the share of alternative (renewable) energy in the total production.

Recreational industry capacity of the region

It is assumed that 39.6% of the total geological reserves of mineral waters in Azerbaijan fall on the share of the occupied regions.

In the occupied territories there are about 120 deposits of mineral water of various composition and medicinal value. In other dimensions, this means a mineral water supply of 7805 m³ / day.

Yukhary and Ashagi Istisu, Bagyrsag, Keshdak mineral water springs ​​of the Kalbajar region, Ilygsu, Minkend in the Lachin region, and Turshsu, Syrlan in the Shusha region and other mineral waters attract special attention. Mineral waters of Istisu, located on the territory of the Kalbajar region, are distinguished by their favorable gas and chemical composition, high temperature, and large natural resources. As in the 80s of the last century, a large resort and the mineral water bottling industry can be revived at the Istisu spring. Previously, this plant produced 800 thousand liters of water per day. The Turshsu mineral spring is located 17 km far from the Azerbaijani city of Shusha. Various internal diseases were treated with water from Turshsu. At the same time, water was supplied to the city of Shusha through the water supply system.

So, the mineral water reserves of the region can contribute to the creation of new processing capacities in the drinking industry and a modern hub in the triangle - drinking industry / tourism / recreation.

Region’s food industry potential

As a result of the military encroachment of Armenia, 1.7 million hectares of the territory of the Republic of Azerbaijan were occupied. Most of these lands are suitable for growing various types of agricultural products. The processing of these products will allow new powers in the food industry to emerge and form a reliable supply base.

Mineral and raw materials potential of the region

In the occupied territories, there are 155 deposits of various types of minerals, including: 5 gold deposits, 6 mercury deposits, 2 copper deposits, 1 lead and zinc deposits, 19 facing stone deposits, 10 sawn stone deposits, 4 cement deposits, 13 deposits of various types of building stones, 1 deposit of soda raw materials, 21 deposits of pumice and volcanic ash, 10 deposits of clay, 9 deposits of sand and gravel rocks, 5 deposits of building sand, 9 deposits of gypsum, anhydride and clay gypsum, 1 deposit of perlite, 1 deposit of obsidian, 3 deposits of vermiculite, 14 deposits of colored and decorative stones (agate, jasmine, onyx, cad, pephritoid, etc.).

The following are the names of the main deposits of the above-mentioned minerals: Gizilbulaq, Mehmana, Damirli, Janyataq – Gyulyataq, Agderk, Shirbulaq, Shusha, Shirlan, Turshsu, Khodjali, Zarinbah, Aghchay, Khankendi, Edish, Khodjavend, Soyudlu, Aghduzdaq, Tutun Aghyataq, Levchay, Kilsali, Keshdek, Kecheldagh, Chelli, Yukhari Istisu, Ahsaghi Istisu, Mozchay, Qoturlu, Chikaz, Narzanli, Ahmedli, Khodjaz, Lachin, Novruzlu, Yukhari Akarachay, Qushchu, Minkend, Khadjili, Gubadli, Vedjnali, Bartaz, Okhchuchay, Zangilan, Sharifan, Tuluz, Qaradjali, Soltanli, Chakhmachay, Goyercin-Veysalli, Minbashili, Aghtepe, Jafarabad, Shahverdiler, Chakhmaqqaya, Dovletyarli, Dilayagerdi, Kurdmahmudlu, Quruchay, Shakhbulaq, Gulabli, Chobandagh, Boyahmedli, Aghdam, Qarqarchay, Khachinchay etc.

Minerals of great importance for the development of the economy were discovered in theses deposits. The following minerals with proven industrial significance can be listed among them: 132.6 tons of gold, 37.3 thousand tons of lead, 189 million m³ of sawn stone, 1 million 526 thousand tons of gypsum, 18 million 432 thousand m³ of facing stone, 23 million 243 thousand m³ clays, 57 million 965 thousand tons of building stone, 96 million 987 thousand tons of sand and gravel, 1,898.4 tons of mercury, 4 million 473 thousand m³ of perlite, 2 million 144 thousand m³ of pumice, 129 million 833 thousand m³ of limestone for the production of soda, 147 million 108 thousand tons of cement raw materials, etc.

Deposits of rare and valuable minerals are widespread in the region. Reserves of significant copper-zinc ores are concentrated in the Mehman deposits in the eastern part of the Lesser Caucasus. Ore deposits in this territory were studied previously, and now are ready for exploitation. The industrially important reserves of mercury are located in Shorbulag and Agyatag of the Kalbajar region.

The occupied territories are very rich in various types of building materials, which are of great importance in the industry and construction of Azerbaijan. There are large reserves of such materials at the Chobandag (140 million tons of limestone, 20 million tons of clay), Shahbulag (25 million tons of clay), Boyakhmedli (45 million tons of clay) deposits and others located in the Aghdam region. Also, large deposits of large building stone are located in Khankendi, and marble - in Kharov.

This table provides a list of minerals separately for each occupied region:

Of course, the information on the above minerals is somehow relative, and at the next stage it is necessary to assess all the deposits, as well as to clarify the figures relating to the Soviet period. It should be borne in mind that over the past 30 years the territories have been plundered. In addition, new assessment methods have emerged. A new geological map of the region's mineral resources should also be developed.

The initial review demonstrates that the future exploitation of minerals can be carried out in 3 blocks: non-ferrous metals and non-ferrous metallurgy, construction materials, and rare metals. Non-ferrous metals and building materials are areas typical of the traditional economy, and the available resources will allow new capacities to be created in these areas. The work can be based on the research done in these areas during the Soviet era and on primary infrastructure (depending on availability). In addition, research and geological work can be carried out regarding the presence of rare metals, which are widely used in high technologies.