The Transformation of Karabakh Under Azerbaijan

In 2020 and 2023, Azerbaijan succeeded in restoring its control over Karabakh that had been occupied by Armenian forces for over three decades. This ended the confrontational status quo between the two neighbours, leaving the door open for a lasting peace between these former Soviet states.

Azerbaijan has since embarked on an ambitious revival programme to transform Karabakh, which was under-developed under Armenian occupation, and to resettle more than 600,000 Azerbaijanis who had been evicted from their homeland in Karabakh and Eastern Zangezur by Armenia in the 1990s. These Internally Displaced Persons (IDPs) have been living in other parts of Azerbaijan for three decades, waiting for a chance to return to their homes in Karabakh.

There are few precedents for the reconstruction of an isolated territory that had been in a time-warp for over three decades. The closest analogy to Karabakh would be the redevelopment of East Germany after Germany’s reunification in 1990, which cost $2 trillion over 24 years.

President Ilham Aliyev of Azerbaijan established the Karabakh Revival Fund in January 2021 to carry out reconstruction in the newly-liberated territories, to ensure modern living conditions and to transform the region into a sustainable economy.

The Fund, established as a public legal entity, provides financial support and attracts investment to Karabakh, while ensuring the development of public-private partnerships to develop the region. In 2024 alone, Azerbaijan allocated approximately $2.4 billion to its reconstruction efforts in Karabakh.

The master plan for the region was released in 2022. So far, four cities have been partly resettled – Lachin, Fuzuli, Shusha and Khojali – and four villages: Agali, Talysh, Zabukh and Sus. Two more cities and ten more villages are expected to be resettled by the end of 2024 while the Government still has to effectively address a major challenge on the ground – heavy contamination of the liberated territories by more than 1,5 million landmines and unexploded ordnances.

“Today, Fuzuli is being completely rebuilt. Being here the day before, we gave a start to construction of several important objects: foundations of two villages, kindergarten, sports complex, new residential quarters, administrative centre have been laid,” President Ilham Aliyev said on October 26, 2023, while inaugurating Fuzuli International Airport.

“According to the results of the implementation of the first stage of our State Programme ‘Great Return’, at the end of 2026, a total of 22,000 people will live in Fuzuli district, and 140,000 people in Karabakh and Eastern Zangezur as a whole,” President Aliyev noted.

In the city of Fuzili, over the next two years, the government plans to build about 2,330 apartments, along with 3,350 private houses in the surrounding villages. It will soon start construction of a central hospital in Fuzuli as well as a vocational school.

With over 500 abandoned villages scattered across Karabakh, some in remote mountainous areas with fewer than 100 former inhabitants, it is unlikely that Azerbaijan will reconstruct each village individually. Instead, it plans to merge several nearby villages into larger new settlements. This was seen in Agali, which is built upon the ruins of the former villages of Ikinji Agali and Uchunju Agali.

The largest city to be rebuilt is the ruined Aghdam, which will now almost triple in size compared to its pre-1992 size to become the largest city in the region.

Apart from the construction of three new airports – at Fuzuli, Zangilan and Lachin – new transport and communication lines are being built, as well as the restoration of historically existing roads. Over 1,400 km of roads are currently under construction in Karabakh as part of 15 different projects.

Several countries have contributed to the reconstruction efforts in Karabakh. In Fuzuli, Uzbekistan built a large school and Kazakhstan is constructing a Center for the Development of Creativity. Hungary is rebuilding the village of Soltanly in southern Karabakh, while Slovakia is rebuilding the village of Bash Garvand in eastern Karabakh. This international support shows the collaborative efforts behind Azerbaijan’s revival of its territory.

The emphasis will be on building ‘smart cities’ and ‘smart villages’, helping Karabakh attract technological investment as well as playing a role model for applying smart city-village technologies in other regions.

The first ‘smart village’ in Karabakh has been built in Zangilan district. The ‘smart villages’ being built will have modern schools, kindergartens, polyclinics and e-government centres, along with tourism infrastructure. In addition, all buildings, facilities, and processing of agricultural products are provided with alternative energy sources.

The most important aspect of the rebuilding and restoration efforts in Karabakh is the development of renewable and innovative energy sources. Karabakh was designated as a ‘green energy’ zone in 2021, with the around 30 new towns and villages planned by 2026 expected to run mainly on clean energy, aiming for ‘net zero’ emissions.

This is particularly important as Azerbaijan hosted COP29 in Baku last month. The government has built a dozen hydropower plants in Karabakh and seeks to attract foreign investment in solar and wind.

Azerbaijan is also planning to achieve ‘net zero’ carbon emissions in Karabakh by 2050, as outlined in its latest national climate action plan (NDC) submitted under the UN climate process. It says that “to revitalise the territories liberated from occupation”, the government will establish ‘smart’ settlements, promote ‘green’ energy zones, agriculture and transport, and reforest “thousands of hectares”.

The establishment of Karabakh University in 2024 in Khankendi, the regional capital of Karabakh, will help in this economic and technological revitalisation. Education plays a critical role in rebuilding post-conflict communities by providing opportunities for the youth, generating employment, and fostering a sense of normalcy. The university’s presence in Khankendi signifies a commitment to long-term stability and development, creating a foundation for economic and social advancement.

In Lachin district, a modern film studio has also been built as a regional audio-visual centre. Hochazfilm will provide local and foreign filmmakers with production facilities and location services. It will also offer audio-visual content to local and foreign media, state agencies, state and private film studios. Film producer Tale Heydarov said: “Karabakh has so many stories that need telling. Building a strong regional film industry will give a voice to local filmmakers as well as support foreign filmmakers who want to produce their films in Azerbaijan.”

Film location services is a growing industry worldwide. Karabakh and the rest of Azerbaijan have a large potential with a wide range of geographical zones and locations that foreign film crews could use as settings for their productions.

As Karabakh looks to the future, the government’s reconstruction and resettlement efforts could set a precedent for other war-torn countries like Ukraine and Gaza to follow, providing a template for recovery and renewal after prolonged conflict.