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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: 261 - (26/09/02)

Two events of importance have occurred over the summer. One was a referendum on a new constitution; but the outcome was always totally predictable given the electoral methods in use, complete endorsement of the government's proposals.
The other was ultimately likely to prove more important, the commencement of a pipeline to carry oil from the Caspian Sea to the Mediterranean coast of Turkey, bypassing Russia and Iran. The first part was opened on September 19th.

Pipeline breakthrough
The new pipeline is being built by a consortium led by BP/Amoco. It is expected to begin carrying 375,000 barrels per day by 2005 and one million by 2007.
Hitherto, the pipeline faced grave obstacles. It still does; but they look more manageable in the aftermath of 9:11. The first and most important is the intractability of the terrain it needs to cross. The second is the matter of Kurdish rebels in Turkey along the route, who could regularly demolish sections of the pipeline for their own ends. The third is that Iran, the shorter, obvious route commercially, could suddenly become acceptable geopolitically. Other alternatives are also available, Russia or Georgia and the Black Sea, from which tankers now ply their way through the Bosphorus or to Bulgaria or Romania to join pipeline terminals or barge bulk carriers for Europe's river systems.
The campaign against terrorism gave the Baku-Ceyhan route a lift, however. Turkey must be kept on side in the coming struggle against Iraq, while Iran is likely to remain out in the cold for a long time yet.
There is something to be said for a range of alternatives. It is now clear that one of them will be the Baku-Ceyhan route.

Referendum win for regime
The government held a referendum in August that was in effect a vote on whether or not President Haidar Aliyev's son, Ilham, should succeed him, preserving the power of the Nakhichevan clan from the Azeri enclave between Turkey and Armenia. On a turn-out it claimed was 90% or so, over 80% voted affirmatively, according to the Electoral Commission, to nobody's surprise.
This is extremely unlikely. Indeed, it shows how stuck in Soviet times the Azeri regime is, that it thought the result would be at all plausible.
The opposition, the Democratic Party of Azerbaijan and other opposition forces, the National Independence Party, the People's Front and the Musavat Party, boycotted the referendum; and they say that turnout out was more like 20%, if that. Of that vote a majority might just have voted in favour of the suggested changes. The regime, almost any regime, has its hangers-on and naïve supporters. In fact it is just another blatant dictatorship, aiming to become a hereditary one.
This is unlikely to succeed. Azerbaijan is not North Korea, cut off from the rest of the world. Influences from Turkey and Iran clash with those from the West and, indeed, Russia, (Aliyev is a hang-over from Soviet times after all.) The Azeris are biding their time until the death of the tyrant, already an infirm 78-year old and then all hell could break loose, although the likeliest outcome is yet another clan taking over, this time from Baku.

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ENERGY

Azeri committee urges BP to employee local workers on pipeline project

Mirvari Qahramanli [an activist of the Azerbaijani Democratic Party], the chairwoman of the committee to protect the rights of oil workers, has appealed to the BP company via the mass media. She has urged that Azerbaijani specialists and workers be given priority in the construction of the Baku-Ceyhan oil pipeline, Hurriyyat has reported.
Mirvari Qahramanli said that 460 km of the 1,500-km Baku-Ceyhan oil pipeline will pass through Azerbaijani territory. BP will hire a contractor and subcontractors for construction of the Azerbaijani part of the pipeline.
However, reports coming to the committee to protect the rights of oil workers say that the company plans to restrict the services of subcontractors. "We are anxious about this issue since employees of many oil enterprises in the country are unemployed. They are almost idle. The laying of the Baku-Ceyhan oil pipeline might play a significant role in employing the workers of those enterprises. Therefore, we demand that BP increase the number of facilities for extra work."
Mirvari Qahramanli has also noted that the specialists on the construction of the Azerbaijani part of this pipeline will be mainly foreigners while local workers will be employed for manual labour. "This issue is also worrying us. Although Azerbaijan has enough specialists, foreign oil companies will mainly give preference to specialists from their own countries. However, local oil workers are employed for manual labour. BP should take into consideration the remarks of the committee to protect the rights of oil workers. For our part, we shall resort to definite measures if our remarks are not borne in mind."

Phase 2 of major oil project to cost US$5.2bn 

The cost of development within the framework of the Azari, Ciraq and Gunasli Phase-2 Full Field Development project is estimated at US$5.2bn, BP Azerbaijan President, David Woodward, has said. He stated that of this sum, about US$3.8bn would be spent on the construction of facilities and pilot drilling, and the remaining amount would be spent on the drilling of production wells during the next stage of extraction, MPA News Agency has reported.
According to information received by MPA news agency, Phase-2 envisages the development of the western and eastern parts of the Azari field. Along with Phase-1 (central part of the Azari field), this will cover the full development of the Azari field. Phase-2 facilities will be integrated into Phase-1 with the aim of creating an offshore and onshore complex for the development of the Azari field. Phase-2 will be followed by the Phase-3 project that envisages the development of the deep water part of the Gunasli field.
The Phase-2 project includes the construction of two drilling, production and living quarters platforms for 48 wells each, the construction of another pipeline from the Sanqacal terminal, the expansion of the Sanqacal onshore terminal and of the compression and water platform constructed within the framework of the Phase-1 project.
Early oil is planned to be extracted from the platforms, which are to be constructed on the eastern and western parts of Azari, in the second quarter of 2006 and the first quarter of 2007 respectively, which will increase production volumes by over 20m t a year (420,000 barrels a day).
Oil reserves in Phase-2 are 210m t (1.6bn barrels). Up to 96 additional production wells, water and gas-injection wells and 113 additional sideholes will be drilled to reach this production level during the exploitation of the Azari field.

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FOREIGN LOANS

Azerbaijan's chances of next IMF tranche in 2002 "slim" 

Within the framework of programmes for cooperation with the International Monetary Fund, the Azerbaijani government has repaid US$ 125m on its loans, about US$ 60m of it this year. So far US$ 459m of the US$ 562m agreed under credit agreements has been received from the fund, Sarq News Agency has reported.
The results of negotiations with IMF experts show that the chances of receiving the next tranches by the end of this year are slim. At least, the meeting of the IMF board of directors which is scheduled for the end of September is not expected to approve the third tranche of US$ 16m, to say nothing of the fourth tranche of the same amount which was to be allocated in 2002. The reason is the failure to fulfil the IMF's main recommendations to submit a plan for the privatisation of the International Bank and to bring domestic energy prices in line with world prices. Experts of the fund who are currently in the country have therefore postponed the discussion of these issues until the next visit.

World Bank supports social care projects

The World Bank is going to take part in the realisation of two projects in the social sphere of Azerbaijan in 2003. Approximately US$16m will be allocated for the implementation of the programme to increase social care in the pension system, the Turan News Agency recently reported. Preparatory works on the second project in the sphere of education has already begun. Within the framework of this project the share of the WB will be US$14m.

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TELECOMMUNICATIONS

Azeri, Iranian communications ministries sign cooperation agreement

Documents relating to cooperation between the communications ministries of the two countries were signed in the course of a visit to Baku by Yunis Bakhshmandi, a member of staff of an Iranian communications company.
The Iranian embassy in Azerbaijan told MPA News Agency that the documents envisage Iran granting to Azerbaijan communications routes with Turkey and other countries and the passing of a communications channel to the Naxcivan Autonomous Republic via the Iranian territory.
An agreement has been reached on using Azerbaijani channels for communications between Iran and Russia. According to information from the Iranian embassy, Iran has access to European, Central Asian and Persian Gulf countries.

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TRANSPORT

Four new bridges to connect Azerbaijan and Iran

Azerbaijani and Iranian experts have met to discuss the construction of four bridges that will connect Azerbaijan and Iran, Trend News Agency has learnt from diplomatic sources.
Under the project, three bridges will be built in Astara [province of Gilan, Iran] (railway, road and pedestrian bridges) and one in Culfa District in the Naxcivan Autonomous Republic [Azeri exclave]. 
The 8-km-long railway bridge will start in Iran and will be linked to the Baku-Astara main railway. The road will be 240 km long. Under the agreement, Iran will finance 85 per cent of the project and Azerbaijan the remaining 15 per cent.

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