Energy, Power, and Repression: Political Economy Insights from Azerbaijan

Abstract
Abstract Azerbaijan's substantial hydrocarbon endowment'particularly in crude oil and natural gas' plays a central role in shaping both its economic structure and governance model. The hydrocarbon sector constitutes the backbone of the national economy, accounting for a dominant share of fiscal revenues, export earnings, and macroeconomic stability. However, consistent with the literature on rentier state dynamics and resource dependence, the concentration of hydrocarbon rents has contributed to the consolidation of a highly centralized political system. Control over these revenues has enabled ruling elites to accumulate and sustain economic and political power, thereby limiting political pluralism and reinforcing the persistence of dominant leadership. This article examines how hydrocarbon wealth functions not only as an economic asset but also as an instrument of political control. Drawing on fiscal and sectoral data for the period 2007-2025, it shows how oil and gas revenues are accumulated in the State Oil Fund of Azerbaijan (SOFAZ), transferred to the state budget, and disproportionately allocated to defense, law enforcement, and judicial institutions, thereby expanding the state's coercive capacity. The analysis also highlights a structural shift from oil to gas production and Azerbaijan's growing role as a gas supplier to Europe. At the same time, it identifies a parallel increase in political repression, reflected in a sharp rise in the number of political prisoners since 2022. The findings suggest that Azerbaijan's increasing geopolitical and energy importance has reduced external pressure for democratic reforms. Overall, the article argues that hydrocarbon revenues play a central role in sustaining authoritarian governance by reinforcing coercive institutions and limiting accountability.

Keywords: Azerbaijan, EU, Oil and Gas Production, Hydrocarbons revenues, Energy, SOFAZ, SOCAR, Budget expenditures, Defense and security budget, Judiciary, law enforcement and prosecution budget, Gas Exports to Europe, Political Repression, Political Prisoners

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