Azerbaijan and Uzbekistan are entering a new phase of energy cooperation, one that promises to draw the two Central Asian nations closer together in a mutually beneficial commercial embrace.
At the cooperation’s core lies the forthcoming production sharing agreement (PSA) between Azerbaijan’s state company SOCAR and Uzbekistan’s Ministry of Energy, which is set to govern joint exploration in the Ustyurt region.
Trilateral cooperation with Kazakhstan through the Caspian Green Energy Corridor has laid institutional groundwork for Caspian-region developments since 2023. However, this specific new bilateral move reflects a more concentrated, durable alignment that highlights the institutional, technological and geopolitical dimensions of the Azerbaijan–Uzbekistan partnership.
The agreement will establish the investment and production regime to allow SOCAR to conduct advanced geological exploration, implement enhanced recovery methods and oversee field development. The Ustyurt Basin, located in northwest Uzbekistan, suffers from legacy infrastructure issues that have constrained the development of its oil and gas reserves to this day.
For Uzbekistan, the PSA is not just an industrial agreement but the first materialization of a new shift in policy. In particular, it grants SOCAR favorable tax and cost recovery rules under Uzbekistan’s new PSA legal framework, enabling a structured fiscal and operational presence for the first time. Officials announced the agreement with expectations for imminent implementation.
Beyond its contractual terms, the PSA has geopolitical significance, anchoring the eastward diversification of Azerbaijan’s post-2020 energy strategy while tethering it to Uzbekistan’s long-term interest in multiple partnerships. Observers from both countries have emphasized the symbolic value of the agreement, noting its departure from the long-dominant Russian-Chinese corridor dynamic.
This initiative also reflects institutional trust-building and a vector for the transfer of technical knowledge. It will also likely serve as a template for subsequent PSAs with other Eurasian partners, testing Uzbekistan’s legal resilience and Azerbaijan’s upstream consultancy model.
Uzbekistan’s PSA environment remains relatively new and in a phase of institutional bedding-in. Kazakhstan, by contrast, has long hosted multiple international oil majors under a stable contractual regime. And Turkmenistan has traditionally relied on service contracts that preserve state control but limit outside technical influence.
By concluding a PSA with SOCAR, Uzbekistan is establishing a hybrid path between these two, retaining sovereign control while allowing operational autonomy within clearly delineated investment parameters. This contrasts sharply with the earlier resource nationalism that dominated the region in the 1990s and early 2000s.
For Azerbaijan, the PSA is more than a single upstream investment. It reflects SOCAR’s long-term strategy to reposition itself as a regional services and consulting powerhouse.
With its mature offshore fields in the Azeri–Chirag–Gunashli complex beginning to decline, SOCAR has sought to find new basins, diversify partnerships, and define a role in upstream capacity-building.
It has already done this in Georgia and Turkey. Uzbekistan looks to be a next frontier, where Baku can project not just hydrocarbons but institutional models, legal expertise, and project finance structuring.
The Azerbaijan–Uzbekistan PSA also operates within a wider lattice of multilateral energy governance. The EBRD has supported Uzbekistan’s energy sector reform through targeted funding and technical assistance, notably including corporate governance restructuring.
Likewise, the World Bank’s ongoing projects have helped to modernize grid infrastructure and implement market design reforms while installing renewable capacity.
The Asian Development Bank (ADB) is co-financing the Caspian Green Energy Corridor’s feasibility study and has explicitly noted the importance of hydrocarbon-derived fiscal buffers in supporting the green transition.
All these institutions look favorably on deeper Azerbaijan–Uzbekistan relations as a scalable model for rules-based, balanced partnerships between resource-rich developing economies.
Uzbekistan’s energy reforms
Uzbekistan’s turn toward a sustainable energy market began with President Shavkat Mirziyoyev’s accession to power in 2016. Since then, Tashkent has pursued coordinated reforms designed to open its energy sector to competition and capital.
In 2019, the government consolidated upstream, midstream and downstream sectors under a single Ministry of Energy, thus centralizing regulatory oversight and facilitating coherent policymaking.
It also dismantled the vertically integrated monopoly of Uzbekneftegaz, introduced market-based electricity pricing and authorized private sector entry into wind and solar power. Legislators updated and passed renovated PSA provisions that align with international standards by streamlining licensing, reducing expropriation risk and encouraging technology transfer.
These reforms enabled broader strategic flexibility. Uzbekistan has continuing connections to Russia’s pipeline system and it has accepted Chinese development finance, but it has sought to avoid over-reliance on either. It has also explored linkages with South Korea and Japan.
Notably, Uzbekistan has deliberately structured its reform process to attract varied actors without locking itself into dependency. It has accomplished this through a regulatory strategy that is reinforced by partnerships with such multilateral institutions as the ADB, the European Bank for Reconstruction and Development (EBRD), the International Bank for Reconstruction and Development (IBRD) and the World Bank, which have provided technical assistance while supporting tariff reform and environmental impact planning.
As a result of this cooperation, the legal infrastructure for Uzbekistan’s PSAs is now one the most internationally aligned in Central Asia. The PSA with SOCAR, then, will not only implement the planned upstream development but also test these reformed legal and institutional frameworks that Uzbekistan has built over the last eight years.
The bilateral PSA also incidentally confirms that regional actors can today strike agreements that are independent of legacy superpower templates. If successful, it may well catalyze other state companies and independents to enter Uzbekistan’s maturing resource sector.
The PSA is nested within a broader tripartite framework involving Kazakhstan, Azerbaijan and Uzbekistan, most visibly articulated through the Caspian Green Energy Corridor. This initiative, announced at COP29 in Baku in November 2024, envisions the export of renewable energy from Central Asia to Europe via high-voltage transmission infrastructure and a Black Sea interconnector.
On July 2, 2025, the three countries registered a joint venture called the Green Corridor Alliance with founding shareholders including Azerenerji, KEGOC and Uzbekistan’s national grid operator.
The joint venture is tasked with constructing and operating a 400-kilometer submarine cable under the Caspian Sea, linking Kazakhstan’s grid to Azerbaijan’s. Its mission also includes coordinating regulatory harmonization, data-sharing and market integration with EU standards.
Multilateral institutions like the ADB, Asian Infrastructure Investment Bank (AIIB) and the Multilateral Cooperation Center for Development Finance (MCDF) have financed conceptual and preparatory work on the corridor.
These studies align the corridor with EU green taxonomy and the Ten-Year Network Development Plan. The corridor’s downstream links extend into Georgia, then onward to Romania through the so-called “Black Sea Cable.”
The corridor seeks not just to be a renewables project but to promote a strategic narrative that establishes Central Asia as an energy exporter on its own terms. Azerbaijan and Uzbekistan have both emphasized this framing in public discourse, contrasting it with dependence on Russian or Iranian routes.
The institutionalization of the joint venture and its technical integration with European Network of Transmission System Operators for Electricity (ENTSO-E) protocols mark it as a high-trust interconnection project with tangible geopolitical effects.
Strategic and systemic implications
The PSA expands Azerbaijan’s eastward influence and reinforces its profile as a transregional broker. The move complements its established export role via the Southern Gas Corridor and BP partnerships, while securing early-mover advantage in Central Asian upstream sectors.
For Uzbekistan, the agreement cements its emergence as a capable actor in regional energy diplomacy and signals its capacity to partner with neighbors on an equal footing. It consolidates reforms while demonstrating that sovereign, rules-based investment partnerships are viable.
Geoeconomically, the PSA contributes to a reorientation of Eurasian energy flows, where it is no longer assumed that Russia and China will arbitrate Central Asian exports. Regional actors have now begun to define their own rules and to build their own corridors.
The transition is not without dangers that might arise from regulatory misalignment, political turnover or unforeseen infrastructure bottlenecks. However, the current trajectory has a certain institutional maturity and definite regional agency. Its unmistakable characteristic is that Azerbaijan and Uzbekistan are acting not as intermediaries but as architects of a self-designed energy order.
From a European perspective, the axis supports both Green Deal and Global Gateway priorities by facilitating westward energy flows with embedded environmental and governance safeguards. Significantly for European sympathy, the agreement offers near-term fiscal returns that can help Uzbekistan fund infrastructure and labor development for the clean transition.
Russia retains deep structural influence in Uzbekistan through remittance flows, labor migration channels and linguistic familiarity. Likewise, China’s absence from the Ustyurt deal indicates that Beijing’s leverage is not monopolistic.
Strategically, this bilateral energy axis thus signals a growing willingness among states in the region to transact with one another outside traditional hegemonic structures. It suggests that smaller powers like Azerbaijan and Uzbekistan may now lead integration processes rather than follow some alignment with larger geopolitical poles.
It also implies a strategic build-out from the Organization of Turkic States (OTS) platform, where energy cooperation is increasingly connected with digitalization, education, and standardized legal frameworks.
Conclusion
The SOCAR–Uzbekistan PSA confirms the credibility of Uzbekistan’s reform program and accelerates Azerbaijan’s role as an integrative power between Central Asia and Europe. It complements and strengthens the wider Caspian Green Energy Corridor, contributing to a layered architecture of energy cooperation.
All these moves together signal the emergence across Eurasia of a new east–west axis that is built from within rather than being imposed from without. The year 2025 may come to be seen as the moment when Central Asian energy politics crossed the threshold from dependency to self-design.
For observers of Azerbaijan, its deepening ties with Uzbekistan signify its extension of foreign-policy activity beyond intra-South Caucasus mediation and westward export. Azerbaijan is now actively shaping a multipolar Eurasian core that links Caspian and Central Asian corridors, looking to extend them to South Asia and, separately, the greater Middle East.
This emergence challenges inherited regionalisms and inaugurates a new modality of Eurasian integration, premised on lateral sovereignty rather than on vertical dependency. As the Azerbaijan–Uzbekistan axis evolves, its core strength may lie in the combination of hydrocarbon pragmatism with renewable ambition and its marriage of regional self-definition with international interoperability.
This is about much more than mere supply-chain logistics; it foretokens a structural realignment with long-term consequences for the balance of power across greater Eurasia.
