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  AZERBAIJAN

REPUBLICAN REFERENCE

Area (sq.km)
86,600

Population
7,748,163

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: 253

The Azeris are in an unusual situation; Allah has heeded their prayers. They have oil in abundance. 
But as experience shows elsewhere, the consequences are not necessarily always beneficial. Even Saudi Arabia with 25% of the world's oil reserves, has never been able to convert its energy wealth into permanent prosperity. Its GDP per capita has slipped from over US$25,000 over a decade ago to US$10,000 today, causing many problems.
The parallel with Saudi Arabia is worth pursuing further. The ruling clique of the House of Saud, 7,000 or so strong, plus a few very rich families, among them of course the bin Laden clan, cream off the riches and stuff much of the money abroad. Something similar is in the offing, indeed is already underway in Azerbaijan.
A smaller clique dominates the economy, while the masses are poor, often without jobs or decent homes. Azerbaijan has a million and a half refugees from the war with Armenia in the early 1990s, over the Armenian enclave there, Nagorno-Kharabakh. The clique in Azerbaijan are extraordinarily corrupt and much-resented by the bulk of the population. They do not have even the legitimacy of royalty or religion, and are in an even weaker position that the House of Saud.
Things look ominous for the ruling clan, which faces a succession problem soon. The ailing president Haidar Aliyev, once KGB chief when this was a Soviet republic, wants his son Ilham to succeed him, naturally already a bigwig in the national oil firm SOCAR. 
The Aliyev clan hail from the Azeri enclave between Armenia and Turkey, Nakhichevan, which both gives them their cohesion, but renders then vulnerable. There are plenty of people in Baku just waiting to send the upstart former communist provincials packing, but if their clan is displaced by another, there is no certainty that it will be any the less corrupt.

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ENERGY

Azerbaijan imports over 3.5bcm of gas from Russia in 2001


Azerbaijan imported 3.528bn cu. m. of natural gas from Russia in 2001, Interfax News Agency quoted Azeri state oil company SOCAR as saying. Over 3.1bn cu. m. of this amount were supplied to Azerbaijan by the ITERA international group and the rest by the Russian company Transnafta. SOCAR plans to buy four billion cu. m. of gas from ITERA in 2002. In the first quarter, Azerbaijan is to import 1.285bn cu. m. of gas, including 462bn in January, 420m in February and 403m in March. ITERA sends Azerbaijan 13.5m cu. m. of gas for US$52 per 1,000 cu. m. through the Mozdok-Baku pipeline daily. SOCAR has not extended its contract with Transnafta, which expired on December 31st, 2001.
Under the contract signed at the end of September 2000, Transneft was to export 2.6bn cu. m. of gas to Azerbaijan from October 2000 to December 2001.
But the company managed to export only 16% of the agreed amount over this period. SOCAR said it plans to hold talks with Transnafta on gas supplies for the current year before January 20th.
Azerbaijan extracted 5.54bn cu. m. of gas in 2001, 111.4m less than in 2002, SOCAR said. Of the total amount of gas produced in the republic last year, SOCAR accounted for 4.64bn cu. m. or 96% of the planned target. SOCAR produced 5.65bn cu. m. of gas in 2000.
Over the same period, Azerbaijan's International Operating Company (AIOC) turned over to SOCAR 898.9m cu. m. of gas, or 91.2% of the planned target, for free as part of 'the contract of the century.' The amount of gas extracted from the Azeri shelf in the Caspian Sea exceeds land-based production by nearly 22 times.

Azeri oil official upbeat on construction of Baku-Ceyhan pipeline

Talks on financing the construction of the Baku-Ceyhan main export pipeline have finished in Washington, MPA News Agency has reported. The head of the foreign investment department of the State Oil Company of the Azerbaijani Republic [SOCAR], Valeh Alasgarov, and the vice-president of BP Azerbaijan for exports of hydrocarbons, Michael Townsend, attended the talks. Alasgarov positively assessed the talks and noted that SOCAR and BP, who were negotiating with financial institutions and banks on behalf of the sponsor group, expect the project's detailed engineering to finish earlier than the envisaged date (19th June). 
Afterwards, agreements on acquisition of building materials, pipes, equipment and pumps will be signed with various companies and the construction itself will begin. 

ChevronTexaco mulling Baku-Ceyhan participation

US oil major ChevronTexaco has not ruled out the possibility of its participation in a project to build the Baku-Tbilisi-Ceyhan pipeline, ChevronTexaco deputy CEO, Richard Matske announced after a meeting in Baku with Azeri President, Heydar Aliyev. At the same time, Mastske did not respond to the question as to what share in the sponsorship group for the Baku-Tbilisi-Ceyhan pipeline would be received by ChevronTexaco, Interfax News Agency reported.
Matske and Aliyev also considered the issue of future participation by ChevronTexaco in projects to develop structures in the Azeri sector of the Caspian.
At present the sponsorship group includes the Azeri state oil company, SOCAR (45%), British BP (25.51%), US Unocal (7.75%), Norwegian Statoil (6.47%), Turkish TPAO (5.12%), Italian ENI (5%), Japanese Itochu (3.02%) and Saudi-US Delta Hess (2.13%).
The future pipeline will stretch 1,730 kilometres and will have a capacity of 50 million tonnes of oil per annum. The planned launch date for the pipeline is 2004. The cost of the Baku-Ceyhan project is estimated at US$2.75bn.

Azeri oil major starts operating highly productive offshore well

A highly productive well, with daily yields of 120,000 tonnes of oil and 130,000 cu m of gas, has started operating in the shallow-water part of the Gunasli field exploited by SOCAR [State Oil Company of the Azerbaijani Republic]. The well was drilled from deep-water platform No 8 at a depth of 3,040 metres.
The drilling of the well started in May 2001 and was completed 45 days earlier than planned. At the same time, the Bayil Limani [port of Bayil] offshore drilling department managed to save 1bn manats [US$218,818] on drilling.
This is the fifth highly productive well drilled at the Gunasli deposit in 2001. As Media-Press News Agency has learnt from SOCAR, in 2002, it is planned to lay the foundations for another six wells.
Some 65 per cent, or 83 per cent of Azerbaijan's offshore oil, comes from the shallow-water part of Gunasli. The remaining reserves of the deposit are estimated at 94-130m tonnes of oil.

EBRD to cede its share in Azeri onshore oil project

The European Bank for Reconstruction and Development [EBRD] intends to cede its 30-per-cent share in the project for the rehabilitation and development of the Kursangi-Qarabagli fields. SOCAR [State Oil Company of Azerbaijan] told Mediapress news Agency that the bank had already announced a tender and that five foreign companies expressed their desire to participate in it.
SOCAR and the Salyan Oil operating company of the Kursangi-Qarabagli fields refused to give the names of the companies, but Mediapress managed to learn that these are companies were from China, Britain, Romania, the USA and Germany.
The EBRD has one month to consider the tender proposals, but according to unconfirmed reports the bank prefers to choose a Chinese company that has cheaper equipment and onshore drilling and oil production technology. In any case, whomever the EBRD chooses, they have to agree this with SOCAR.

Turkish company to spend US$6m on Azeri capital's power network

The president of the Turkish Barmek Azerbaijan Elektrik Sabaka, Huseyn Arabul, held a news conference recently devoted to the handover of the Bakielektriksabaka [Baku power network] open-type joint-stock company for long-term management by Barmek from 1 January 2002, Turan news agency reported.
He said that the company's capital expenditure in 2002 would total US$6m and exploitation expenditure US$3.6m. In total, capital expenditure over 25 years will be US$200m and exploitation expenditure US$29.7m. 
Arabul also said that electricity prices would not change for the next three years. 

Azeri transport company to double oil shipments in 2002

The Aztrans company transported 3.2m tonnes of oil and oil products, mostly Central Asian oil, in 2001, Turan News Agency has reported.
The press service of Azpetrol holding company [of which Aztrans is a subsidiary] told Turan News Agency that this year the company intends to transport 6m tonnes of oil and oil products. In this connection, Aztrans is going to purchase 800 railway tank wagons in 2002, thus bringing their total number to 1,000.
The company has also reached an agreement with Azerbaijani Railways on acquisition of a modern electric locomotive to haul only the Aztrans tank wagons from Baku to Poti and Batumi.
Besides, Aztrans intends to expand the infrastructure of its terminal this year and is currently in talks with a number of international financial institutions to obtain a credit on favourable terms.

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FOREIGN INVESTMENT

Foreign investment in Azeri economy in 2001 exceeds US$783m


Foreign financial companies invested 3,800bn manats [US$783.5m] in the Azerbaijani economy in 2001, Trend News Agency has reported. Quoting the State Statistics Committee, Trend reports that the share of foreign companies amounts to 67.7 per cent of all capital investment. 
In general, all companies invested 5,600bn manats [US$1.15bn] in the country's economy over the same period, which is 17.1 per cent higher than in 2000. A total of 88.2 per cent of money were spent on the construction of industrial buildings. 
A total of 71.7 per cent were invested in the industry, 0.7 per cent in agriculture, 0.9 per cent in the construction sector, 3.5 per cent in trade and services, 4.9 per cent in transport, 6.4 per cent in communications, 8.2 per cent in building houses and 0.9 per cent in health care and social services.

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FOREIGN LOANS

World Bank grants loan for development of Azeri financial sector


The World Bank has given Azerbaijan a credit of US$5m within the framework of the project "technical aid to the financial sector," Mediapress News Agency reported.
The project envisages the development and restructuring of Azerbaijan's banking system and drawing up of the country's financial strategy. The main components of the project are consulting services and aid to the National Bank of Azerbaijan in forming its further strategy, regulating the private banking sector and helping the United Universal Bank bring accountancy procedures in line with international standards.
The project is designed for five years and will end on 28 February 2006. Its cost is US$5.4m, of which the Azerbaijani government will allocate US$400,000.

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