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  AZERBAIJAN

REPUBLICAN REFERENCE

Area (sq.km)
86,600

Population
7,771,092

Principal ethnic
groups

Azeri 90%
Russian 2.5%
Armenian 2%
Dagestani 3.2%
other 2.3%

Capital
Baku

Currency
Azeri Manat

President
Heidar Aliyev

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Background:
Azerbaijan - a nation of Turkic Muslims - has been an independent republic since the collapse of the Soviet Union in 1991. Despite a cease-fire, in place since 1994, Azerbaijan has yet to resolve its conflict with Armenia over the Azerbaijani Nagorno-Karabakh enclave (largely Armenian populated). Azerbaijan has lost almost 20% of its territory and must support some 750,000 refugees and internally displaced persons (IDPs) as a result of the conflict. Corruption is ubiquitous and the promise of widespread wealth from Azerbaijan's undeveloped petroleum resources remains largely unfulfilled.

Update No: 259 - (25/07/02)

Baku beckons
The Azeris are in a special position, the owners of huge oil reserves, put at 31bn barrels, although how many of these are recoverable is a moot point. There may be far more oil than that deep down in the seabed of the Caspian. But extracting it is another matter.
The key is that Baku is once again, as it was in the nineteenth century, a major capital not just of Azerbaijan, but of the entire world's oil industry. Baku used to match Texas in those days, when Gulbenkian and others were making their way. The Azeri oil industry was a prime objective in the Second World War, German encroachment towards Stalingrad having it in its sights as its premier strategic target.

FDI to the fore
It is now the object of Western interest in a more acceptable manner, that is of interest to foreign direct investors. BP-Amoco heads the AOIC consortium developing three fields in the Caspian - Azeri, Chiraq, Gunelchi. The development of others will follow.

Economic boom
The resurgence of growth in the oil industry has led to a massive spurt in growth of GDP. The economy grew by 11.1% in 2000, 9.9% in 2001 and a prospective 8.5% in 2002. This is all from a low base. But the momentum is there.
As an accompaniment, the growth of foreign direct investment (FDI) is also expanding apace. FDI rose from a mere US$177m in 2000 to US$314m in 2001. But this year it is billed to be 1,307m, a massive surge due to the new-found conviction that the Caspian Sea is going to rival the Persian Gulf as the world's premier energy source.
A lot needs to happen before that will be so. But Azerbaijan is clearly the darling of the seven sisters right now.

Nagorno-Kharabakh
Negotiations are continuing on the vexed issue of Nagorno-Kharabakh. The ageing president, Heidar Aliyev, needs a success here if there is to be any smooth transition to his son, Ilham, now vice-president of SOCAR, the national oil firm.
It is vital for secrets to remain secret for Aliyev. His own son would be discretion itself.
But it takes two to tango. Robert Kocharian, president of Armenia, is proving a hard-liner, not so surprising in a former president of the enclave. The return of all but the Lachin corridor from the enclave to Armenia would seem a fair compromise since at the moment Armenia holds 20% of Azeri territory.
The issue remains a contentious one but at least the fighting is over. From now on the Azeris will be concentrating on making money, not war. 

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ENERGY

BP to receive US$500m for Azeri project 


BP may receive as much as US$500m from the World Bank for a project to expand oil output in Azerbaijan and build a 1100 mile pipeline, according to reports, Al Hilal Publishing & Marketing has reported.
The loan would boost a US goal of keeping the oil away from Iran, which the State Department says sponsors terrorism. 
The International Finance Corporation, a World Bank arm that lends to companies, may provide funds within the next year to expand a BP oil reserve and build a US$2.9 billion trans-Caucasus pipeline stretching from Azerbaijan's capital to Turkey, an official said. It has already unveiled the project to banks such as ABN Amro NV and Deutsche Bank AG at a recent seminar. 
''There are some real business risks, but we want to do this correctly,'' Rashad Kaldany, who handles oil and gas for the agency, said of the project, which would be the biggest in the lender's portfolio. 
The pipeline would carry oil out of the Caspian Sea region while bypassing Iran, as well as Russia. Getting the pipeline built has been a US objective in the region for almost a decade. 

BP sees no political risk for business in Azerbaijan, Georgia 

"We see no political risks in Azerbaijan and Georgia. Our company has been carrying out oil and gas operations in this region for many years. The Baku-Supsa pipeline is successfully transporting 130,000 barrels a day," representatives of the head office of the UK-US oil company BP have commented on political situation in the Southern Caucasus at a briefing in Baku, Media-Press News Agency has reported.
BP representatives said that their projects in Azerbaijan were the most complicated in the world. "Huge investments are going to be made. This will reflect positively on the economies of each country involved in our large-scale projects, namely Azerbaijan, Georgia and Turkey."
Speaking about the role of Azerbaijani companies in BP projects, BP representatives said that the company adhered to high international standards. The level of participation of local companies will increase if they follow the same standards.

Baku-Ceyhan pipeline to be built by two firms 

The Baku-Tbilisi-Ceyhan (BTC) oil pipeline project will be implemented by two companies - BTC Co. and BTC Investment - the head of the SOCAR's [State Oil company of the Azerbaijani Republic] foreign investment department, Valeh Alasgarov, has told journalists, Turan News Agency has reported.
In his words, the BTC Co. will be directly engaged in the construction work, while the BTC Investment will be dealing with the funding of the project. Thus, 30 per cent of the project's cost will be financed by its participants, and 70 per cent by international financial institutions and commercial banks.
At present, negotiations are conducted with financial organizations and commercial banks, and "their names will be made public after contracts are signed and the project is sanctioned, which is expected soon," he said.
In financing the project, the participation of export-credit agencies of countries whose companies will be engaged in the supply of materials and equipment for the construction of the pipeline, is also possible, which includes the Japanese bank, JBIC, since pipes for the BTC will be purchased from the Japanese Sumitomo and ITOCHU companies.
The winner of the tender for the supply of ground equipment for the BTC project will be made public soon.

Azeri NGOs deny Baku-Ceyhan is ecological hazard

The Baku-Tbilisi-Ceyhan (BTC) oil pipeline will not cause any ecological or social damage to Azerbaijan, the chairman of the National NGO Forum, Azay Quliyev, has said when commenting on the position of 64 European and American NGOs, which have appealed to international financial institutions not to finance the project, Turan News Agency has reported.
The international NGOs have motivated their position by saying that the project will cause ecological problems in Azerbaijan and lead to the violation of the social rights of the Armenian and Kurdish population living in the vicinity of the BTC pipeline.
According to the Azerbaijani NGOs, the BTC does not threaten anyone. In fact, its implementation will have a positive impact on the Azerbaijani economy.
The NGO Forum has adopted a statement to be forwarded to international organisations.

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FINANCIAL NEWS

Azeri premier receives World Bank working group

Prime Minister of Azerbaijan Republic, Artur Rasizadeh, recently received the Executive Director of the World Bank's working group, Shengman Aian. Assessing highly the existing relations between the World Bank and Azerbaijan, the guest stressed the necessity of expanding the cooperation on mutual beneficial ground.
"The key goal of the visit was to get acquainted with the plight of refugees and IDPs in the Aaatli and Bilasuvar regions, the opportunities of creating farms in Lankaran with the financial assistance of the World Bank," the World Bank executive director was quoted as saying by local news agencies. Touching upon the poverty reduction programme, Aian spoke about the necessity of developing the non-oil sector, agriculture and infrastructure, as well as widening the private sector.

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FOREIGN LOANS

EU allocated 30m euros to Azerbaijan as emergency aid

The European Union has allocated a grant of 30m euros to Azerbaijan within the framework of its emergency aid programme, Ali Mammadov, director of the agency to restore Azerbaijan's liberated territories, told a news conference on 19th July, Media-press News Agency has reported.
He said that the first two tranches, each 10m euros, have already been received. The first one was spent on the restoration of fences around the Ceyranbatan reservoir, getting rid of illegal constructions in this zone, creating a woodland belt and other measures linked with the improvement of ecology in this district. The second tranche from the European Union is being channelled into completing construction of the Hazi Aslanov metro station in Baku.
The agency to restore the liberated territories has already sent the European Union a plan of measures in order to receive the third and final tranche. The endorsement procedure for this will last for about two months, after which the money will be sent to Azerbaijan. It is planned to spend these funds on treatment for disabled children, Mammadov said.

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TRANSPORT

Baku opens new metro station

A grant provided by the European Union will aid in the construction of a new metro station in Baku, a city transport official said recently, as reported by Azeri news agencies. The new station, to be named after WWII hero, Hazi Aslanov, will open on December 31st this year and will be situated in Akhmedli district near Ukraine Square. The EU provided 4.1m Euros, while 1.3bn manats will be provided by the Azeri government. In related news, the number of metro users has dropped to about 280,000 people per day from a May average of 340,000 per day, thanks to school holidays, the transport office data informed.

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