One of the most significant events in the history of modern and independent Azerbaijan was the signing ceremony of the “Contract of the Century,” held on September 20, 1994, at the Gulustan Palace. This agreement had a substantial impact on the country’s economy and political development.
The signing of the contract, along with the political events of that time, highlights the importance of this step for Azerbaijan, particularly in terms of its independence and economic security. The contract is closely linked to the period when Heydar Aliyev returned to political power, which played a crucial role in stabilizing the country and strengthening its position on the international stage.
To fully understand the “Contract of the Century,” it is essential to consider the complex political circumstances of the early 1990s. At that time, the political forces that came to power after public protests were unable to manage the newly independent state, leading to the loss of territorial integrity and economic recession. Heydar Aliyev, who returned to Azerbaijan from Moscow, had already gained political authority due to his work during the Soviet period. In September 1991, he was elected Chairman of the Supreme Assembly of the Nakhchivan Autonomous Republic, where the Azerbaijani tricolor flag was first adopted as the state flag.
The situation in the country reached a critical point in the early 1990s. Responding to public demand, Heydar Aliyev returned to Baku in June 1993 to lead Azerbaijan and prevent further crisis. Daniel Yergin, an author specializing in the history of the oil and gas industry, describes this period as a time when Aliyev was able to stabilize the country and provide effective governance.
After being elected President of the Republic of Azerbaijan, Heydar Aliyev secured a ceasefire agreement with Armenia and initiated the implementation of his oil strategy. Without the involvement of major Western oil companies, it would have been impossible to secure the necessary investments for the development and export of oil. Ilham Aliyev, the First Vice President of the State Oil Company of Azerbaijan Republic (SOCAR), played a key role in the negotiations that led to the signing of the contract.
The negotiations for the “Contract of the Century” were held under challenging conditions, especially during the final stages in Istanbul and Houston. Despite several critical moments, the contract was drafted in line with Azerbaijan’s national interests. On September 20, 1994, 12 companies from six countries signed the agreement to develop the Azeri, Chirag, and deepwater Gunashli fields. This contract, comprising about 400 pages, became known as the “Contract of the Century” due to its significance and scale.
The implementation of the “Contract of the Century” marked a turning point in Azerbaijan’s oil strategy. It led to the creation of the Azerbaijan International Operating Company, which, in cooperation with SOCAR, began developing the fields. The agreement also paved the way for the signing of more than 30 contracts with 41 oil companies from 19 countries.
The contract provided Azerbaijan with substantial economic benefits and became a key tool for international cooperation in the energy sector. The construction of the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines enhanced the region’s energy security. The establishment of the Southern Gas Corridor, which includes the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) pipelines, enabled Azerbaijan to enter global energy markets.
Today, Azerbaijan exports approximately 20 billion cubic meters of gas annually to Europe, and by 2027, this volume is expected to increase to 30 billion. Oil production from the Azeri, Chirag, and Gunashli fields has reached 593 million tons, a significant portion of which has been transported via the Baku-Tbilisi-Ceyhan pipeline. These projects have contributed to Azerbaijan’s economic development and strengthened the country’s energy security.
In addition to economic gains, the “Contract of the Century” provided Azerbaijan with critical political guarantees. The establishment of the State Oil Fund of Azerbaijan (SOFAZ) in 1999 was a step toward effective management of hydrocarbon revenues, ensuring long-term financial stability and development.
On September 14, 2017, the contract for the development of the fields was extended until 2049. Under the new agreement, 75 percent of the profits will remain with Azerbaijan, highlighting the long-term prospects of the country’s oil industry.
The experience gained through the “Contract of the Century” now plays a vital role in Azerbaijan’s efforts to develop green energy. Revenues from oil exports are being used to finance projects in the field of alternative energy. Azerbaijan aims to increase the share of renewable energy in its energy balance to 30 percent by 2030, contributing to sustainable economic growth and improving the environmental situation.
The 29th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29) will be held in Azerbaijan in 2024, underscoring the country’s role in addressing global challenges. This development has been made possible by the social and economic progress achieved since the signing of the “Contract of the Century.”
