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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: 257 - (30/05/02)

The Azeri economy is enjoying an extraordinary boom, overwhelmingly due to its abundant energy, whose production and export are coming on stream. GDP grew by 11.1% in 2000 and 9.9% in 2001 and is expected to grow by 8.5% in 2002.

FDI floods in
The Western majors are coming in force. Foreign direct investment (FDI) has soared from US$117m in 2000 to US$$314m in 2001 and to a prospective US$1,307m in 2002.
The latter figure is so spectacularly high due to 9:11 and the realisation that Azerbaijan is now a world centre for energy. Baku was the oil and gas capital of the USSR. It is now the nodal point of Caspian Sea energy development.
The general population does not much benefit. FDI and growth are not employing more people, to speak of, or alleviating the plight of over one million refugees since the Karabakh conflict in 1988-94.

Morally bankrupt regime
Nepotism and corruption are the absolute norms. The general population must feel great resentment with the venal elite, who are ensuring that instead of trickle-down effects there are trickle-out effects into foreign financial havens.
The Aliyev clan hail from Nakhichevan, the Azeri enclave between Armenia and Turkey. They are seen as provincials and are much despised by the majority; the regime has no serious legitimacy.

End-game scenario
Some of the oil revenues are being used on welfare measures of course, but not enough to stem mounting disaffection. Once the strong man Aliyev goes (he is 76 and has health problems), a social explosion is perfectly possible. The son, Ilham Aliyev and his like might well have to decamp to where they put the money. Moderate Islamicists could then come to power, but more likely another political family from the traditional power broking clans of Baku, that have been impatiently waiting for their turn at the trough.

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AGRICULTURE

USA launches two agricultural projects in Azerbaijan


Representatives of the US embassies in Baku and Ankara held a press conference at the Hyatt Regency Hotel devoted to the implementation of two crediting programmes in the sphere of agriculture in Azerbaijan, Turan News Agency has reported.
The programmes, each worth US$5m, were approved by the US Department of Agriculture in March this year and are being implemented under guarantees from the US Imports Credit Corporation. The programmes aim to further exports of food and agricultural products from the USA to Azerbaijan.

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ENERGY

Azeri oil official optimistic about future of oil production in Caspian Sea

"We do not believe that the withdrawal of some firms from oil projects could decisively undermine the exploitation of the Caspian Sea's natural resources. Business is business, and in taking decisions every participant is guided by its own understanding," First Deputy President of SOCAR [State Oil Company of the Azerbaijani Republic and MP] Ilham Aliyev told Izvestiya-Azerbaijan newspaper.
He believes that the estimated reserves of the Azari-Ciraq-Gunasli structure amounts to over 600m t of oil, and the Sah Daniz structure contains about 1bn cu.m. of gas. The above figures will be amended when the development process gains momentum. The remaining structures are at the level of prospecting.
Aliyev said: "Our geologists believe that the reserves are higher. Other experts do not share this view." In his opinion, the efficiency of structures in the world practice stands at 30 per cent, but in Azerbaijan it is 50 per cent.
Given the successful implementation of all agreements (Azerbaijan has signed altogether 21 agreements with foreign companies), the envisaged level of investments will amount to US$50bn, Aliyev added.
At present about US$5bn has already been invested in the oil production. About US$2.5bn will be invested in the construction of the main export oil pipeline and about US$1bn in the construction of the Baku-Erzurum gas pipeline.
In case of the successful prospecting of the contractual structures, the process of further investment will not take long. Therefore, the approximate sum of US$50bn will be corrected depending on circumstances, Aliyev said.

Azeri, Greek ministers sign accord on cooperation in gas sector

Greek Minister of Development, Apostolos-Athanasios Tsokhatzopoulos, and Azerbaijani Fuel and Energy Minister, Macid Karimov, have issued a joint statement confirming Azerbaijan's and Greece's intention to actively cooperate in the energy sector, particularly natural gas. As Trend News Agency reports, the statement notes the importance of the roles of both sides in the development of the energy sector in southeastern Europe.
Under the agreement, the DEPA (Greece) and the producer of Azerbaijani gas [SOCAR] will discuss and assess conditions supplying natural gas from Azerbaijan to the Greek market via Turkey.
Moreover, the Azerbaijani Republic and Greece will promote transit sale of the Azerbaijani gas in Europe via Turkey and Greece by means of the Turkish-Greek connecting gas pipeline which is to be constructed.
The two sides will carry out a joint evaluation of market demand for gas as well as develop a feasibility study within the framework of joint activities. The companies will also take all measures for the transit of Azerbaijani gas by means of the Turkish-Greek connecting section to Europe.

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FOREIGN INVESTMENT

Over US$1bn invested in Azeri economy in 2001

A total of 39.5 per cent or US$31.3m were invested in Azerbaijan by joint venture companies and companies with 100 per cent foreign capital in 2001. Quoting recent data from the Azerbaijani State Statistics Committee, Trend News Agency reports that the overall level of investments by joint venture companies and companies with 100 per cent foreign investment totalled US$79.3m last year. A total of 8.9 per cent (US$7.1m) of the investment were directed to the construction sector, while 32.9 per cent (US$26.1m) to the trade and social services spheres. 
In all, US$1,091bn were invested in the Azerbaijani economy in 2001, which is US$164.8m or 17.8 per cent more than in 2000. It is noteworthy that 82.4 per cent of funds account for direct investments, and 17.6 per cent for credits. The investment in the oil sector was 45.4 per cent higher than the year 2000.

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TOURISM

Azeri, Greek ministers sign cooperation accord on tourism

Greek Minister of Development, Apostolos-Athanasios Tsokhatzopoulos, and Azerbaijani Minister of Youth, Sports and Tourism, Abulfaz Qarayev, signed a cooperation accord on tourism in Baku on 23rd April, MPA News Agency has reported. 
The accord takes into account the opportunity for a tourism policy which will be applied at the upcoming 2004 Olympic Games in Greece. Tsokhatzopoulos noted that cooperation in the energy, economic development, industrial, commercial, sports and tourism sectors were the main factors for the favourable development of cooperation between Greece and Azerbaijan. 
The minister said that his country was interested in the growth of commercial and trade relations with Azerbaijan and Greece intended to back this cooperation and launch special programmes to strengthen the market economy in Azerbaijan.

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