September 20, 1994, is not only the date of the signing of the great oil agreement in the modern history of Azerbaijan. This date was remembered as the day when one of the main foundations of independent Azerbaijan's economic model, energy policy, and integration into the world economic system was laid.
On that day, the agreement, signed in Baku's "Gulustan" Palace and later called the "Contract of the Century," was concluded with the participation of 11 companies representing Azerbaijan, the USA, Great Britain, Russia, Turkey, Norway, and Saudi Arabia. The agreement provided for the joint development of the deep-lying parts of the "Azeri," "Chirag," and "Guneshli" fields and the distribution of production. The contract was ratified by the Milli Majlis on December 12 and entered into force.
To understand the importance of this contract, it is necessary to go back to Azerbaijan in 1994.
Azerbaijan in 1994: great wealth, but a great lack of opportunities
In the first years of independence, Azerbaijan faced very difficult economic and political conditions. The war with Armenia, the occupation of territories, the problem of refugees and internally displaced persons, economic decline, high inflation, reduced production, and lack of investment created serious problems for the country.
Azerbaijan's large oil reserves in the Caspian Sea were not enough in themselves. Billions of dollars in investment, technical capabilities, and the participation of international companies were needed to develop these fields with modern technologies.
Recalling that period in his later speeches, President Ilham Aliyev stated that Azerbaijan's treasury was empty, the economy was in a difficult situation, and attracting foreign investors to the country required great political and diplomatic skill. According to him, the contract signed in 1994 became a turning point for Azerbaijan. Heydar Aliyev's political decision was of particular importance here.
Heydar Aliyev and the "Contract of the Century": the main issue was not to attract investors, but to protect the conditions
After Heydar Aliyev returned to power in 1993, one of the main issues facing him was ensuring stability in the country and reviving the economy.
The main logic of the oil strategy was simple: to extract Azerbaijan's wealth through modern technologies and foreign capital, bring it to world markets, and direct the revenues obtained to the development of the state. However, it was not enough to simply bring foreign companies to Azerbaijan. The main issue was that the terms of the contract should be acceptable for Azerbaijan.
In his speech dedicated to the 23rd anniversary of the "Contract of the Century" in 2017, Ilham Aliyev recalled that the final stage of the 1994 negotiations lasted more than a month in Houston. He stated that maximizing the protection of Azerbaijan's national interests was one of the main goals in those negotiations.
In this regard, the essence of the "Contract of the Century" was not only to bring oil companies to Azerbaijan. The issue was for Azerbaijan to use international capital in the development of its wealth, and at the same time to ensure state interests through contract mechanisms.
400-page document and 11 companies
The "Contract of the Century" was prepared in approximately 400 pages, in four languages.
Along with SOCAR, AMOCO, BP, McDermott, UNOCAL, LUKOIL, Statoil, TPAO, Pennzoil, Ramco, and Delta participated in the agreement. Thus, for the first time on this scale, the Azerbaijani oil industry began a production project in the depths of the Caspian Sea with the participation of international companies.
According to initial estimates, the recoverable oil reserves in the "Azeri-Chirag-Guneshli" block were estimated at 511 million tons. In subsequent assessments, this figure was increased to 730 million tons. The investment costs planned for the development of the fields amounted to 11.5 billion dollars, according to official data.
These figures were not just oil indicators for Azerbaijan in 1994. This meant the formation of the country's future financial capabilities.
How much was Azerbaijan's share?
According to the first "Contract of the Century," Azerbaijan's share in the total net profit was determined to be 80 percent, and the investors' share was 20 percent.
This mechanism was one of the main features of the production sharing agreement. In subsequent years, as the project developed, Azerbaijan's share and the economic parameters of the contract also changed. In 2017, a new agreement on ACG was signed, and the term of the contract was extended until 2050. According to the new terms, SOCAR's share in the project increased from 11.6 percent to 25 percent, and Azerbaijan's share in profit oil was determined to be 75 percent. In addition, foreign investors had to pay Azerbaijan a bonus of 3.6 billion dollars.
This change showed that the "Contract of the Century" was not a document signed once and finished. The contract was adapted to new economic realities.
From first oil to a multi-billion dollar economic system
One of the most important results of the contract was the short period until the first oil was produced.
On November 7, 1997, the first oil was produced from the "Chirag" platform. Later, various export routes were formed for the export of Azerbaijani oil to international markets. In 1997, the Baku-Novorossiysk line, and in 1999, the Baku-Supsa route began to operate. In 2002, the foundation of the Baku-Tbilisi-Ceyhan oil pipeline was laid, and in 2006, the pipeline was put into operation. The main issue here was not so much the production of oil as its export to world markets through independent export routes.
Thus, the "Contract of the Century" did not remain a standalone oil project. It was followed by pipelines, new fields, new investors, and a broader energy cooperation system.
From one contract to a complete oil strategy
Two years after the signing of the ACG contract in 1994, the conclusion of the contract for the "Shah Deniz" gas field in 1996 was also a continuation of this strategy. Later, Azerbaijan formed a diversified energy infrastructure that exported Azerbaijani oil and gas to international markets.
As a result of this process, the Caspian Sea was connected to the Mediterranean Sea via Baku-Tbilisi-Ceyhan, and Azerbaijani gas was connected to Turkish and European markets via other projects.
President Ilham Aliyev stated at an event dedicated to the 20th anniversary of the "Contract of the Century" in 2014 that this contract created opportunities for large investments to come to Azerbaijan, for international cooperation to begin in the Caspian, and for Azerbaijan to bring its oil resources to world markets.
In this regard, the economic impact of the "Contract of the Century" cannot be measured only by the revenues obtained from the sale of produced oil.
How did oil revenues change the state's financial capabilities?
The State Oil Fund of the Republic of Azerbaijan was established for the institutional management of oil revenues. This mechanism played an important role in integrating revenues from oil wealth into state finance and directing them towards long-term goals.
President Ilham Aliyev noted in 2019 that revenues from the "Contract of the Century" have been used in various directions, such as improving the welfare of the population, infrastructure projects, solving the problems of internally displaced persons, and strengthening defense potential.
Data from the State Oil Fund also shows that ACG has been one of the main sources of income for many years. For example, in the Fund's report for 2023, ACG revenues were shown as 6,893.3 million dollars; in the same year, ACG and "Shah Deniz" together generated 8.2 billion dollars in oil and gas revenues for the Fund.
In the first half of 2025, SOFAZ announced that it received 4,427.3 million manats in revenue from ACG.
These figures are one of the indicators showing the scale of the long-term resource base created by the "Contract of the Century" for the Azerbaijani budget and state finance.
Oil revenue was not spent only on oil
One of the most important impacts of the "Contract of the Century" on the Azerbaijani economy manifested itself outside the oil sector. Thanks to oil revenues, financial opportunities were created for financing large-scale infrastructure projects, renovating roads, energy facilities, social infrastructure, and developing regions.
At the same time, oil and gas projects stimulated the training of new specialties, engineering, and technical personnel in the country. President Ilham Aliyev stated in 2017 that thousands, tens of thousands of Azerbaijani specialists have been trained within the framework of the contract, and the vast majority of those working in the projects are citizens of Azerbaijan.
That is, the result of the contract was not only in the form of "oil was extracted and sold." Human capital, the service sector, engineering, logistics, and construction opportunities also expanded around the oil industry.
The political side of the "Contract of the Century"
Another important result of the contract was the increase in Azerbaijan's weight in the system of international economic relations.
In 1994, Azerbaijan was just forming its position as a newly independent state in the world economy. The arrival of leading world companies in Azerbaijan for the development of the Caspian's energy resources expanded the country's international economic ties.
This turned the energy issue into one of the important elements of foreign policy. Azerbaijan began to act not only as an oil-producing country but also as a state participating in the formation of energy routes. Baku-Tbilisi-Ceyhan became one of the most important examples of this. Later, projects such as "Shah Deniz," the South Caucasus Pipeline, TANAP, and TAP further expanded Azerbaijan's role on the energy map.
Thus, the oil contract signed in 1994 became the starting point for a broader energy policy in the following decades.
Heydar Aliyev's calculation: turning wealth into state strategy
The history of the "Contract of the Century" cannot be explained only by economic statistics. In 1994, Azerbaijan's main problem was not whether there was oil or not. The problem was how to develop that wealth, what technology to bring, how to attract foreign capital, and how to protect the future interests of the state.
The Ministry of Energy of Azerbaijan also presents the "Contract of the Century" as the beginning of the new oil strategy formed by Heydar Aliyev. The main directions of the strategy were attracting foreign investment, exporting oil to international markets, and directing revenues to the country's development.
Ilham Aliyev also evaluated this contract as one of Heydar Aliyev's main historical services in his various speeches. In his speech in 2014, he stated that Heydar Aliyev's political will, foresight, and diplomatic activity made it possible to sign the contract.
From 1994 to 2050
Another fact demonstrating the importance of the "Contract of the Century" is its extension until 2050 with new terms in 2017.
This showed that the project's role in Azerbaijan's economic system will continue for many years.
The new agreement allowed Azerbaijan to gain a larger participation share based on the experience gained from the previous contract: SOCAR's share increased to 25 percent, Azerbaijan's share in profit oil was determined to be 75 percent, and a bonus of 3.6 billion dollars was provided. Thus, the cooperation model that began in 1994 also reflected the change in Azerbaijan's negotiating position and economic capabilities over time.
What if there was no Contract of the Century?
It is not possible to accurately calculate an alternative scenario for historical events. However, in Azerbaijan's official political and economic assessment, it is emphasized that this contract played a fundamental role in the country's subsequent development.
President Ilham Aliyev openly stated in 2017 that if the "Contract of the Century" had not been signed, it would have been difficult to imagine Azerbaijan's subsequent level of development. He noted that the contract played a special role in the formation of the country's economic capabilities and its ability to pursue an independent policy.
When explaining this approach with facts, the picture becomes clearer:
Contract in 1994;
"Shah Deniz" in 1996;
First oil in 1997;
New export routes in 1998–1999;
Laying the foundation of BTC in 2002;
Commissioning of BTC in 2006;
Start of export of Azerbaijani gas to Turkey in 2007;
Extension of the ACG contract until 2050 in 2017;
and in the subsequent stage, the expansion of Azerbaijan's participation in Europe's energy security.
This sequence shows that September 20, 1994, was not just a single day, but the starting point of the energy and economic policy formed in the following decades.
From oil to economic independence
One of the most important results of the "Contract of the Century" in Azerbaijan's political life was the increase in the state's maneuverability with the expansion of economic opportunities. Economic independence allows the state to make more independent decisions in its foreign policy, finance large infrastructure and defense projects, implement social programs, and invest in new economic sectors.
In his speech in 2022, Ilham Aliyev also emphasized Heydar Aliyev's oil strategy's contribution to Azerbaijan's development, listing the "Contract of the Century" and the "Shah Deniz" contract among the country's main economic driving forces.
In this regard, oil became not only Azerbaijan's export product but also one of the important components of the financial base of state building.
The true legacy of the Contract of the Century
When the "Contract of the Century" was signed in 1994, Azerbaijan faced two main problems: activating the country's existing economic potential and connecting this potential to the international system.
The contract yielded important results in both directions. Large foreign investments came to the Azerbaijani sector of the Caspian. New technologies were applied. Oil production accelerated. Export infrastructure was built. State revenues increased. Institutional mechanisms for managing oil revenues were formed. Azerbaijan's role in international energy projects expanded.
Most importantly, the foundation laid in 1994 created political and economic trust for larger projects in subsequent years. For this reason, calling the "Contract of the Century" merely an oil contract does not fully express its essence. This was a strategic turning point in the economic history of independent Azerbaijan, where capital, energy, diplomacy, infrastructure, and geopolitics converged at one point.
This is precisely where the importance of the document signed in the "Gulustan" Palace on September 20, 1994, lies: Azerbaijan combined its natural wealth with international capital and technology, laying the foundation for a long-term economic development model. The political authorship of this strategy is associated with the name of Heydar Aliyev in the official history of the Azerbaijani state. In subsequent years, this line was continued with new energy projects, export routes, and the extension of the ACG contract until 2050.
The contract signed in 1994 opened the door for Azerbaijan's oil to the world market; the next three decades showed that a complete economic and energy system was formed behind that door.
