Post-Conflict Resettlement in Karabakh: Rebuilding Livelihoods

Background

Following its victory in the 2020 Second Karabakh War and a military offensive in September 2023, Azerbaijan recaptured the Soviet-era Nagorno-Karabakh Autonomous Oblast (NKAO) and surrounding territories, which had been under Armenian control since the early 1990s.^[1] The First Karabakh War (1988-1994) between Armenians and Azerbaijanis resulted in large-scale displacement on both sides. Around 700,000 Azerbaijanis were forced to flee their homes in the former NKAO and seven surrounding districts.

Throughout the 1990s, as Azerbaijan recovered from the Soviet collapse and a series of political upheavals, humanitarian organizations, led by the UNHCR, played a critical role in improving the living conditions of internally displaced persons (IDPs). By the early 2000s, around 100,000 IDPs were housed in 12 tent camps located in the southern and eastern regions of the country. Additionally, many IDPs were accommodated in public buildings, such as schools, kindergartens, and dormitories, in urban areas like Baku and Sumgayit. From the early 2000s onward, fuelled by substantial oil revenues, the government became more actively engaged in improving the living conditions of IDPs. In 2002, the government initiated a comprehensive housing project, funded by the State Oil Fund of Azerbaijan (SOFAZ), to build new settlements, primarily in the form of apartment complexes, for IDPs living in the poorest housing conditions in tent camps. By mid-2011, the housing plan had led to the construction of 63 new settlements and 29 multi-story apartment buildings, successfully relocating around 100,000 IDPs from tent camps to these new housing units. SOFAZ allocated a total of USD 2.8 billion to finance various projects aimed at improving the social conditions of refugees and IDPs.

In Azerbaijan, the government has demonstrated a strong commitment to supporting the livelihoods of IDPs through various state-funded programs. These initiatives provide IDPs with benefits such as temporary rent-free housing, monthly cash allowances, subsidized utilities, healthcare, and tuition fee exemptions for higher education. However, over time, rising inflation has caused social allowance benefits to fall behind the increasing cost of living. Meanwhile, limited access to economic opportunities has led many IDP households to rely on state social benefits. A large number of IDPs are employed in the informal sector, with many depending on state allowances and subsidies as their primary source of income.

According to a recent World Bank report, most IDPs live in government-provided housing, including apartments, dormitories, or more temporary communal living arrangements. Despite receiving government-issued IDP allowances, the incomes of IDP families remain below the national average, with most of their earnings spent on food and other basic necessities. As a result, many IDP families rely heavily on state support, are poorly positioned to absorb housing costs independently, and are forced to reduce spending on essentials like food, healthcare, and education in the face of economic hardship. Among households receiving IDP allowances, 86.5% consider it as one of their top two most important sources of income (World Bank 2023, p. 6).

Post-conflict reconstruction

The reconstruction of the reintegrated territories, now part of the Karabakh (Azerbaijani: Qarabağ] and Eastern Zangezur [Şərqi Zəngəzur] economic regions, presents a formidable challenge (see Map 1). During the period of Armenian control, these areas sustained considerable damage to civilian infrastructure, loss of Azerbaijani cultural heritage sites, and negative environmental impacts. Furthermore, they remain heavily mined and contaminated with unexploded ordnance, creating serious hazards. Landmines have claimed 382 victims (70 deaths, 312 injuries), with 198 of them being civilians (55 deaths, 143 injuries). While 30,000 mines and unexploded ordnances have been cleared to date, it is estimated that removing all landmines will take at least 25 years and cost over USD 50 billion.

These threats have not only complicated efforts to ensure the safe return of IDPs but have also delayed the reconstruction process. The presence of landmines and unexploded devices poses a direct and ongoing risk to the safety of returning populations. Effective rehabilitation of infrastructure, housing, and essential services requires the mobilization of substantial resources, as well as a comprehensive and coordinated approach to demining and securing the safety of residents.

Since 2022-23, the government has initiated ambitious plans for reconstruction and resettlement in these reclaimed territories. After Azerbaijan’s full recapture of the region in 2023, the government invested heavily in rebuilding villages and cities in the recovered territories. In 2023 and 2024, the government earmarked USD 3.29 billion and USD 2.82 billion, respectively, for Karabakh’s reconstruction. Budget allocations for these efforts are expected to reach USD 2.35 billion this year. Since 2021, approximately AZN 19 billion (USD 11.2 billion) has been allocated from the state budget for the restoration and reconstruction of the recovered territories. As part of its vision to become a transit hub along the Middle Corridor, Azerbaijan is investing in rebuilding its road and railway networks in Karabakh. In light of Ankara’s diplomatic and military support for Baku in Karabakh, Turkish companies have been given priority. Most of the infrastructure reconstruction projects are being led by Turkish companies, which have reportedly secured contracts worth a total of USD 3.4 billion.

IDPs and the ‘Great Return’ program

With regard to IDP communities, the government has prioritized ‘voluntary return’ to Karabakh as the only viable long-term solution to end the protracted displacement of Azerbaijan’s IDPs. The new program, Azerbaijan 2030: National Priorities for Socio-Economic Development (adopted in February 2021), outlines two key objectives for post-war reconstruction: the sustainable resettlement of forcibly displaced populations and the economic reintegration of recovered territories.

On November 16, 2022, President Ilham Aliyev approved the ‘Great Return’ State Program covering the years 2022-2026. In the initial phase, the government aims to resettle an estimated 140,000 IDPs across 100 rebuilt settlements in Karabakh and East Zangezur economic regions by the end of 2026. This is planned as a phased resettlement process, with IDPs returning gradually over time. Since 2022, over 10,000 IDPs have resettled in 10 settlements in Karabakh and East Zangezur since 2022 and have been provided with housing. Around 30,000 people now live in these areas, including those working in construction, government, and other sectors.

At the current pace, which translates to an average of 3,333 IDPs per year (10,000/3 years) between 2022 and 2025, it would take roughly 39 years to repopulate Karabakh, assuming the current target of 140,000 out of a total registered IDP population of 658,000. However, to meet the government’s target by 2026, the pace of resettlement would need to increase significantly, with 65,000 IDPs resettled per year in 2025 and 2026 (130,000/2 years).

Table 1 (see below) presents the number of IDP returnees by city/district in the Karabakh and East Zangezur economic regions as of January 2025. The data show that the total number of IDP returnee families is 2,614, with a total of 10,274 returnee individuals. The return of IDPs to Aghdam (Ağdam) district, once home to 150,000 people, is set to begin in 2025, with rapid infrastructure development already underway. Aghdam is poised to become the largest city in the region, reflecting its pre-war prominence as the largest urban centre of the region.

Table 1: IDP Returnees by City/District in Karabakh and East Zangezur Economic Regions

Note: last updated: 22.01.2025. Source: compiled by the author from newspaper reports

Fuzuli has the highest number of returnees, with 3,132 persons (822 families) returning to the city. Lachin district also has a high number of returnees, particularly in Lachin city (2,090 persons) and Zabukh village (823 persons). Zangilan’s Aghali village shows a substantial returnee population of 871 individuals. Notably, Aghali is the region’s first ‘smart village,’ designed as a model of sustainable development, combining digital technologies with environmentally sustainable elements. The village features advanced infrastructure and ‘smart solutions’ such as smart street lighting, environmentally resilient housing, waste management, solar panels, and high-speed internet connectivity.

The cities of Shusha and Jabrayil report relatively high returnee figures, with 1,386 and 1,346 individuals, respectively, showing a notable increase in the second half of last year. Smaller settlements like Ballija village (Khojaly district) and Talish village (Tartar district) have fewer returnees, with 152 and 90 persons, respectively. Khojaly city has 169 returnees. Urban areas like Fuzuli, Lachin, Jabrayil, and Shusha have a higher concentration of returnees, suggesting that resettlement tends to follow the rebuilding of urban infrastructure. Rural settlements, such as Zabukh and Aghali villages, also experience a notable return rate, though the number of returnees remains lower compared to urban centres.

Moving ahead

While the government has made significant progress in prioritizing reconstruction and resettlement, thereby restoring livelihoods in the formerly occupied territories, the pace of resettlement has been slower than expected and falls short of the government’s target. Moreover, it remains uncertain how many of those who have returned will ultimately choose to stay. Objective challenges, such as mine contamination and the reconstruction of essential public infrastructure, have contributed to these delays. However, other factors also continue to hinder the IDP return process.

Firstly, the ‘Great Return’ program needs to address the diverse needs of IDPs more effectively. A key challenge is the generational gap between older and younger IDPs. Many older IDPs who come from rural backgrounds may find it challenging to adapt to modern housing in smart cities or villages, which do not always align with their rural lifestyle preferences. These returnees will require training to adjust to new living models, particularly as many are unfamiliar with smart technologies. In contrast, younger IDPs, some of whom have already integrated into urban communities like Baku, may be hesitant to relocate permanently. Having established lives in the city, they are reluctant to leave their urban environments. Furthermore, many IDPs express a desire for greater involvement in the rebuilding process. They seek more autonomy in reconstructing their homes and communities, preferring to play an active role rather than relying solely on top-down government solutions.

Secondly, Azerbaijani policymakers should place a greater emphasis on rebuilding livelihood opportunities for IDP returnees. As noted by Jacobsen (2014), restoring livelihoods is a key challenge for forced migrants. This concept focuses on the need to enhance the self-reliance of IDPs, which can be achieved through both supply-side and demand-side interventions. While Azerbaijan’s government has concentrated efforts primarily on social assistance programs, such as cash transfers and housing subsidies, these measures have contributed to financial dependence on the state rather than facilitating long-term economic integration. The shift toward resettlement offers an opportunity to refocus from fulfilling basic needs to fostering sustainable livelihoods for IDPs.

On the supply side, policy interventions could include skills training programs designed to improve IDPs’ employment prospects. This might encompass technical and vocational education and training (TVET), along with business skills programs. Additionally, providing access to capital through microfinance could help IDPs start businesses and improve their economic independence. On the demand side, the government could focus on job creation schemes, such as supporting agricultural projects or offering micro-credit and financing for small and medium-sized enterprises (SMEs). Job training and employment generation schemes — such as public works projects — could also provide immediate opportunities for IDPs.

Finally, to successfully achieve these goals, Azerbaijan must develop strategies to attract substantial foreign direct investment (FDI). This will require fostering a conducive environment for foreign investment, implementing supportive legal and regulatory frameworks, fostering non-profits through liberalization, and harnessing the potential of the domestic private sector. Engaging foreign donors for reconstruction and technical assistance is crucial, as many donor-funded projects are implemented in collaboration with local civil society organizations.

Farid Guliyev is an Assistant Professor in the Department of International and Middle Eastern Studies at the American University in Dubai (AUD), United Arab Emirates. His research interests include regionalism, sustainable energy transitions, and forced displacement in Central Eurasia.

KEYWORDS: IDPs, Azerbaijan, Nagorno-Karabakh, ‘Great Return’, Internal Displacement

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[1] Following the recapture of the territory by Azerbaijani forces in September 2023, more than 100,000 Karabakh Armenians fled to Armenia (UNHCR, 2023).