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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: 254

The Azeris are hoping to see movement on the longstanding dispute with Armenia. The two sides at least made 2001 "the year of dialogue on regulation of the Karabakh conflict between Azerbaijan and Armenia."
President Aliyev visited Paris twice in 2001 where, however, the Azeris could not agree to the "Paris Principles" as a base for settlement. France is not such a good mediator as all that because it has the largest Armenian diaspora in Europe, something like one million, which is an important constituency for a French president in an election year.
The US is also disqualified from being impartial in the dispute because of its own huge Armenian diaspora; albeit that the administration is certainly keen to see Azerbaijan develop as a counterweight to Iran and the Persian Gulf States. But this is happening anyway. Production of oil and gas from the Caspian Sea is accelerating and Azerbaijan is an increasingly important part of the global energy equation.
The energy boom is generating a wider boom, not before time. GDP grew by 9.9% in 2001, with agriculture rising by 11% and industrial production by 5.1%. Investment rose by 17.1%.
The role of the energy boom in the total economy is shown by the fact that 67% of total investment is now foreign investment, 3.8 billion mantas out of 5.6 trillion mantas. Of course local currency is at a heavy discount against the dollar, while not all foreign investment is in the energy sector. But the bulk of it certainly is or is reflected in the presence of foreign officials and employees. Baku is regaining the cosmopolitan aspect it had in the pre - 1914 days when it was one of the two leading centres of the World's oil industry, the other being Texas.
Last year Aliyev switched the republic's linguistic alphabet to Latin in emulation of Ataturk's doing so in Turkey in 1928. All signs in Cyrillic were removed.
But the Russians remain a key influence all the same and may well hold the key to the resolution of the Karabakh dispute. Aliyev was in Moscow in January, hoping to persuade Putin to that effect. He aspires for his son, Ilham, to succeed him. The return of six of the seven provinces held by the Armenians and the return of refugees to their homes would probably clinch the matter. But the Armenians are proving intractable negotiators. A resolution of the conflict may still be years away.

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AGRICULTURE

Japan gives US$3m to Azerbaijan's agricultural sector


A protocol between the Azerbaijani and Japanese governments on supporting Azerbaijan's agricultural sector was signed at the Agriculture Ministry on 1st February, Turan News Agency has reported. Azerbaijani Agriculture Minister Irsad Aliyev and Japanese ambassador to Azerbaijan Tetsuya Hirose signed the document. 
The Japanese government gave Azerbaijan its sixth grant worth 400m yen [US$3m] within the framework of the programme "Increasing production of foodstuffs." The money will be spent on the purchase of agricultural equipment.
The Japanese government has earmarked 1.97bn yen [US$14.7m] in grants for Azerbaijan within the framework of the programme over the past five years. A total of 705 pieces of agricultural equipment were purchased with this money. The equipment has been leased to 170 farms in 35 districts of the country for four years.

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ENERGY

Rolls-Royce gains US$50m contract for Azeri oil industry


The British company Rolls-Royce plc has signed a US$50m contract with the AIOC [Azerbaijani International Operating Company] to supply five Coberra 6562 generator units and associated equipment. This delivery will be implemented for the first stage (Phase 1) of the full field development of the Azeri, Ciraq and Gunasli oil fields, Trend News Agency reports.
According to the Rolls-Royce statement, the equipment will be delivered in the fourth quarter of 2002 and the first quarter of 2003.
The contract includes an option to provide additional generation equipment and two additional Coberra mechanical drive units. If exercised, this option would bring the total number of units for Phase 1 of the development project to eight.
Tom Curley, president of the Rolls-Royce Energy business, said that winning the first phase of this project provides his company with wide opportunities in the oil-rich and strategically important Caspian region.
"This agreement was signed to provide maximum equipment reliability, as well as because of the reduced costs for BP and significant capabilities of Rolls-Royce," Curley said.
Three Coberra 6562 generating units will be installed at the Sangacal oil processing terminal, while two other units will provide power for a drilling platform.
The Rolls-Royce gas turbine sets will be engineered, packaged and tested in Liverpool, UK. The En-Tronic control panels will be manufactured in Hengelo, The Netherlands.

Azeri state oil company commissions 479 wells in 2001

SOCAR [State Oil Company of the Azerbaijani Republic] put into operation 479 of a planned 542 wells in 2001. Four hundred and fifty nine previously non-operating wells became operating and 66 new wells were drilled, SOCAR's press service told Turan News Agency.
The SOCAR-owned offshore oil and gas production association commissioned 110 wells (107 were planned), of which 77 became operational after being transferred from the fund of dormant wells and 33 are new wells.
The association put into operation 369 wells (while the plan was 435), of which 141 were drilled by onshore joint ventures and operating companies. Three hundred and thirty six wells became operational after being transferred from the fund of dormant wells and 33 new wells were drilled. SOCAR also completed construction of 68 wells, 38 of which are offshore and 36 onshore.

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FOREIGN INVESTMENT

US-Romanian drilling equipment firm opens branch in Azerbaijan


A branch of the US-Romanian company PCC Steron S. A, registered in Azerbaijan in December 2001, was opened in Baku on 30th January.
MPA News Agency has been told that the Baku branch will cover Azerbaijan, Kazakstan and Central Asia. Effective management of PCC Steron S. A. in the Caspian region necessitated the opening of the branch. PCC Steron is engaged in the production of oil drilling and extraction equipment. The company has a number of contracts on the local market with Salyan Oil, Karasu Operating Company and Shirvan Oil on the import of oil and gas well drilling and oil extraction equipment.

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FOREIGN LOANS & AID

US aid money to be spent on boosting Azerbaijan's security


Since Section 907 of the Freedom Support Act [banning US government aid to Azerbaijan] was temporarily suspended, US agencies and officials have become more active in Azerbaijan, US envoy to Azerbaijan Ross Wilson has told ANS TV in an exclusive interview.
Wilson has said that the main portion of the US$50m US assistance would go towards security needs.
He added: "We want to spend the aid on border protection, provide assistance to the military, train law-enforcement professionals here, and help Azerbaijani fight drug-trafficking and terrorism."
The other part of the assistance will go to the economy. This includes assistance to the finance, economy and tax ministries and assistance in implementing economic reforms agreed between Azerbaijan and the IMF and World Bank. A group of US specialists will visit Azerbaijan in late March to discuss military assistance. The aim is to ensure that Azerbaijan's integration into NATO is carried out more effectively.
Moreover, various delegations are expected to arrive in Baku.
Wilson added: "Representatives of the energy department, customs and military bodies, will visit Azerbaijan in the next 18 months."
An economic delegation headed by State Department representative, William Taylor, will visit Azerbaijan to hold official meetings in Baku, Ross Wilson said.

WB mission, Azerbaijan to review possible 2003 cooperation

A World Bank (WB) mission arrived in Baku recently in order to discuss the outlook for cooperation in 2003 with the Azeri government, a government source told Interfax News Agency.
The bank officials were due to meet with members of government, representatives of the presidential administration, Finance Ministry, Economic Development Ministry and the Fuel and Energy Ministry. Plans also included talks with top executives from Azerigaz and Azeravtodor. In addition, the team was to monitor implementation of various projects being financed by the WB. This includes a project to restore part of the Great Silk Road, the highway from Baku to the Georgian border, for which the WB has issued a 30-year loan worth US$40m at 0.75% annual interest, the source informed. Construction of other highway sections is being financed by a Kuwaiti fund together with the European Bank for Reconstruction and Development (EBRD).
The WB board would also look into a SAC-2 structural adjustment credit for the country in the near future, the source stated, adding, "If the programme is approved by the board, the first tranche may be released at the end of March."
In December, Azerbaijan and the WB agreed to a structural reform programme calling for a loan of US$60m to be disbursed in two tranches.

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RETAIL INDUSTRY

Azeri capital's biggest supermarket reopens


The new Ramstore supermarket was opened at 1129 Babak Avenue on 29th January. It covers a total area of 10,000 square metres, while the actual trading premises occupy 2,500 square metres, 'Zerkalo' has reported. According to the Ramstore office manager, Asgar Rasulov, the supermarket sells 9,500 different products, 60 per cent of which are manufactured locally. "Current prices are below previous ones and the market average," Rasulov said.
The Ramstore premises are leased to 12 tenants. The shop employs around a hundred people Another major supermarket is to be built in Baku this year.
Ramstore's insurance company, Gunay Anadolu Sigorta, paid it US$4.5m in compensation for last year's fire. The first supermarket was opened on 15th April 1996. Over a six-year period Ramstore has invested US$15m in expanding its network and has paid US$7m in tax to the state budget.

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