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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
 

  

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: 270 - (26/06/03)

Ailing president to stand again
The regime in Azerbaijan has a huge problem. It is far from confident that it can successfully ensure the succession to its ailing president, Haidar Aliyev, who has just had his eightieth birthday. It is not so much his age as his health that is the problem. He has cardiac problems and has had US medical attention more than once, as well as in Turkey.
His son, Ilkham, has nominated his father as a candidate on behalf of the Yeni (New) Azerbaijan Party in forthcoming presidential elections. Actually, he is being groomed as the successor in time. But the Aliyev clan and its cronies know that they are loathed and despised by the bulk of the people. For they are anything but Yeni (New), they are old-hat apparatchiks of the communist era, who have regained power after a brief spell of mild Islamicist government after independence in 1991-94.
In 1994 a Russian-backed coup brought the return of Aliyev and his installation of the old apparat, albeit in new guise, that of pro-capitalism. It was a matter of 'return' because Aliyev had for long been the president under Brezhnev, to whose politburo he belonged. He was then the greatest sycophant and bearer of gifts to the leader of the Kremlin imaginable. It is clear why the Moscow elite wanted him back after he had fallen out with Gorbachev; losing favour with Gorbachev meant him finding it under Yeltsin.
In the years out of the limelight he was still president of Nakichevan, the Azeri enclave squeezed between Turkey and Armenia and still his power base. But the Baku populace are getting increasingly restive at these provincial sharks who practice corruption on a gargantuan scale. There have been a series of demonstrations against them in Baku.

The economy still booming
A booming energy sector is leading to a booming GDP, growing at around 10% per annum. But it is premised on high oil prices and an Iraqi oil sector not fully functioning. Things could change rapidly.
The IMF is involved in a Poverty Reduction and Growth Facility Programme (PRGF), which involves a second tranche of eight million SDR and third tranche of 12.87 million SDR. The World Bank is involved in Structural Reform Programme (SAC-2) loan, whose second tranche is worth US$34m. Meanwhile the EBRD is to launch a review of the international Bank of Azerbaijan and purchase 20% of the bank's shares. The West is determined to remain closely engaged.

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ENERGY

Azerbaijan may become leading oil and gas producer, Soros says

Azerbaijan may become a leader in oil and gas production, financier George Soros told the press at the conference "Caspian Oil Revenues: Who Will Use Them" in Baku recently. Soros said he does not know Azerbaijan's oil strategy, but he can see that Azerbaijan is trying to make all oil projects open and transparent for society.
International non-governmental organisations have shown interest in oil sales revenues being made transparent, Interfax News agency reported. Soros thinks that such openness and attention to oil projects contributes to the development of Azerbaijani society.
The Open Society Institute (the Soros Foundation) organised the one-day conference in Baku. Azerbaijan's leading energy projects were presented at the conference. The delegates also discussed the influence of pipeline construction on the environment. Azeri state oil company SOCAR President, Natik Aliyev, Azeri Minister of Economic Development, Farhad Aliyev, Environmental Minister, Gusein Bagirov, and Executive Director of the Oil Foundation, Samir Shirifov, attended the conference.
There was a three per cent year-to-year growth in oil and gas condensate production in Azerbaijan, making 3.83m tonnes in the first quarter of 2003, says a monthly report from the Azerbaijani State Statistics Committee.
Most of the growth came from the Azerbaijani International Operational Company, which produced 1,614,300 tonnes of crude oil in January-March 2003. That made 95,100 tonnes more than in January-March 2002.
Gas production was down two per cent to 1,269,800,000 cubic metres, including 472.5 million cubic metres of natural gas, in the first quarter of this year. The year-to-year growth in oil and gas condensate production in Azerbaijan increased 2.9 per cent to 15.335 million tonnes in 2002, while gas production was 7.1 per cent down to 5.143 billion cubic metres.

SOCAR negotiates with partners on Baku-Ceyhan construction

Azeri state oil company SOCAR has begun negotiations with its partners under the project to build a Baku-Tbilisi-Ceyhan oil pipeline. The talks concern the financing of part of SOCAR's share in the pipeline's construction from July to November 2003, SOCAR President, Natig Aliyev, said.
"We have an agreement on principle with our partners under the BTC Co concerning the financing of our share in the project from July to November 2003, and the terms of this financing are being negotiated at the moment," he said.
Starting from November 2003, the construction of the pipeline will be financed by loans provided by international financial institutions, such as the European Bank for Reconstruction and Development, the International Finance Corporation and the US and Japanese Export-Import Banks.
SOCAR in 2002 provided US$70m to finance its share in the project. In 2003, the Azerbaijani State Oil Fund should allocate US$115m, and SOCAR also needs to provide more money. "We do not want to spend the country's foreign currency reserves from the National Bank, and therefore we are counting on our partners in the project," Interfax News Agency quoted Aliyev as saying.
An International Monetary Fund mission, which left Baku recently, strongly recommended that Azerbaijan not spend the National Bank's foreign currency reserves for financing SOCAR's share in the BTC Co so as not to upset macroeconomic stability in the country.
As of April 1st, 2003, Azerbaijan's foreign currency reserves stood at US$1.38bn. Overall, US$727m of them are kept at the State Oil Fund and the rest, at the National Bank of Azerbaijan. The cost of construction of the Baku-Tbilisi-Ceyhan oil pipeline has been estimated at US$2.95bn. The project should be completed by 2005.

Azerbaijan set to build three underwater pipelines

The cost of construction of three underwater pipelines running ashore from the Azeri section of the Azari-Ciraq-Gunasli (ACG) area on the Caspian Sea shelf is estimate at US$700m, an official with the Azerbaijan International Operating Company (AIOC), told Prime-Tass News Agency on 30th May.
AIOC is an international BP-led consortium that develops the Azari-Ciraq-Gunasli contract area.
The construction of the first 204-kilometre oil pipeline is slated to start in the middle of the summer and is expected to last about a year and a half depending on the weather, the official said.
Two more pipelines, one for oil and one for gas, with a length of 224 and 200 kilometres respectively, as well as a 34.5-kilometre link for transporting associated gas from the Ciraq field ashore via Azerbaijan, are planned to be built within the project.
Earlier it was announced that only one oil and one gas pipeline were to be built, whose cost was estimated at US$ 375m.
Currently only the Ciraq field within the area yields oil. Oil output at the field is expected to rise this year to 6.5m tonnes from 6.4m tonnes in 2002.
The first oil at the Azeri field is expected to be produced late in 2004 or early 2005, while by the end of 2006 the field's daily production is expected to reach 800,000 barrels. The development of the Azeri field is estimated to cost US$8.6bn.
Oil production at the Gunasli field is planned to start in 2008.
Partners in the AIOC consortium include BP Azerbaijan, with 34.1 per cent, the Azerbaijani State Oil Company SOCAR with 10.0 per cent, Norway's Statoil with 8.6 per cent, the US' Exxon Mobil with 8.0 per cent, and several others.

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FOREIGN ECONOMIC RELATIONS

Iranian official hails Azerbaijani visit as "fruitful"

The deputy governor of Esfahan, Faramarz Nikseresht, has described the four-day visit of an Iranian delegation to Azerbaijan that ended on 31st May as fruitful. The
delegation included heads of major provinces and enterprises, Trend News Agency has reported. 
The delegation held a series of meetings at the Azerbaijani Economic Development and Agriculture Ministries and familiarized itself with the country's economic potential.
Nikseresht said that the Iranian entrepreneurs had discussed future cooperation with their Azerbaijani colleagues, in particular, the supply of mineral fertilizers and agriculture machines.

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FOREIGN LOANS & AID

Azerbaijan signs credit deals worth US$70m in 2002

By 1st January 2003, Azerbaijan had signed with international financial organizations and other institutions credit agreements to the tune of US$2,033m. Of them, US$1,356m are used credits, which accounts for 23 per cent of GDP. In the opinion of specialists, this is lower than the admissible norm for foreign loans, Turan News Agency has reported.
In 2002, Azerbaijan signed credit agreements to the tune of US$70m with a limit of US$200m envisaged by the main economic law of the same year.
Last year US$225m in foreign state loans were used, which is 14 per cent or US$27.5m higher than in 2001. A total of US$117.4m were used to clear debts in 2002. Of this, US$97.2m were the debts themselves and US$20.2m interest.

Britain grants Azerbaijan US$250,000 for mine-clearing

An agreement on granting US$250,000 to the Azerbaijani mine-clearing programme has been signed at the office of the ANAMA national mine-clearing agency. The UK government's Department for International Development made this contribution via the UN Development Programme, Turan News Agency has reported.
The document was signed by the UNDP resident-coordinator, Marco Borsotti, and the ANAMA director, Nazim Ismayilov. The money will be spent this year on mine-clearing, purchase of equipment, etc.
Since the start of its activities in 1999, ANAMA has received over US$7m from the USA, the European Commission, Britain, Canada, Italy, Norway and Japan.
Nazim Ismayilov noted that ANAMA was currently working in Goranboy, Agstafa and Xanlar Districts. After a mine-clearing operation in Fuzuli, about 50,000 people could return to this district, he said.

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