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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: 269 - (29/05/03)

Power vacuum looming
Azeris are expecting a regime change some time soon. The president is visibly ailing; he has just had his 80th birthday. He has had heart problems for some time, being treated in the US. In early May his health worsened once again. It must be doubtful if he will stand in elections for the presidency in October. Some 25,000 of the opposition forces went n a march in Baku on May 18th demanding him to go.
His son, Ilkham, denies that he is running himself in October. "I do not intend to run. There is a candidate for the post already - the incumbent Haidar Aliyev." Still that is what he would be expected to say now.
The general assumption is that one of the Aliyev clan would stand if the present president cannot do so. The republic is run on nepotistic lines. Ilkham is vice president of SOCAR, the national oil company. But clearly if the president does not run, then there will be plenty of people rooting for a change. The Musavat party is likely to field its leader Gambar. But others could aspire to the top job. The crisis could hardly have come at a more sensitive moment. This nation is infamous for its high level corruption, indeed corruption at every level of powerholder. The other political clans are more than anxious to replace the Aliyev and so get their turn at the oil revenues trough. 

Economy holds
The Azeri economy has been booming due to oil exports rising rapidly along with revenues, as high oil prices sustain the flow of receipts.
A question mark must lie over the future, with the Iraq situation so fluid. Clearly an abrupt rise in Iraqi exports would not be in Azeri interests. This is not looking very likely right now, but circumstances could change.

The Iranian connection
Azerbaijan has another nearby rival in Iran. But there are strong historical ties that the two countries share. President Mohammed Khatami is expected in Baku soon before the summer.
Iran has extended US$40m for a gas project and road construction. The Iranians are keenly interested in the succession question. The moderate Khatami camp, among Iran's leaders, would favour a smooth transition to a government, committed to regional security. Iran's northern province, also called Azerbaijan, has nine million people of Azeri stock. It is imperative that they remain loyal to Tehran, not Baku. The Azeri government knows this well.

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BANKING

Azeri national bank earmarks US$26.8m for Baku-Ceyhan construction

The currency reserves of the National Bank of Azerbaijan (NBA) totalled US$651.1m as of 1st April 2003, NBA chairman Elman Rustamov has said, Turan News Agency reported.
In the first quarter, US$26.8m of the NBA's currency reserves were channelled into the State Oil Fund of the Azerbaijani Republic to finance the construction of the Baku-Tbilisi-Ceyhan oil pipeline. Moreover, US$18.2m was paid to cover liabilities to the International Monetary Fund. The respective growth in currency reserves for the first quarter of this year thus totalled US$14.8 m.
The profitability of placing currency reserves totalled 1.51 per cent and 13bn manats (US$2.6m) were earned from the management of currency reserves over the accounting period.

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ENERGY

BP Azeri boss cites breakthrough in pipeline talks with Turkey

A major breakthrough has been achieved as a result of talks with Turkey, president of BP-Azerbaijan, David Woodward, announced at a conference in Baku, Trend News Agency reported.
According to Woodward, even though the construction of the Turkish section of the Baku-Tbilisi-Ceyhan oil pipeline is progressing on schedule, it was feared that without the intervention of the Turkish Ministry of Energy and BOTAS state company the implementation of the project might be delayed. David Woodward noted that talks had been held in Turkey with the prime minister and the minister of energy, who convinced him that construction of the Turkish segment would be completed on schedule - at the end of this year.

Exxon Azerbaijan to start work at Zafar structure

Exxon Azerbaijan Operating Company plans to start drilling a first exploration well at the Zafar structure in the Azeri sector of the Caspian in September 2003, EAOC general manager, Drew Goodbread, said in Baku, reports New Europe. He said that drilling of the exploration well would be carried out using the new DSS-20 semi-submersible drilling unit, which will be launched by the Danish company, Maersk, in the second half of 2003.
"In terms of its technical possibilities, this will be the most powerful semi-submersible drilling rig in the Caspian and will be used to drill at a sea depth of up to 1,000 metres," he said.
In turn, EAOC drilling manager, Richard James, said that the well would be drilled 136km southeast of Baku and 90km from shore.
The sea depth in the region is 1,618 metres. He said that the well depth would be 6.8km.
An agreement for the exploration, development and share distribution at the Zafar and Mashal structures was signed on April 27th 1998, and ratified by the Azeri parliament on May 8th 2000.

TotalFinaElf to invest US$150m in Azeri projects

France's TotalFinaElf plans to invest about US$150m in projects in Azerbaijan in 2003, Interfax News Agency reported. From 1997 to 2002 TotalFinaElf invested about US$300m in the Azerbaijan industry.
Of the total amount of investment this year, over half will be in the implementation of the Phase-1 project to produce early oil at the Shah Deniz field. The company has already invested about US$120m in this field.
In addition, in 2003 the French company will invest US$70m in the construction of the Baku-Tbilisi-Ceyhan pipeline as part of the company, BTC Co. Spending on this project in 2002 amounted to US$26m.
TotalFinaElf is currently participating in three oil and gas projects in Azerbaijan: the Shah Deniz gas condensate field (share in contract - 10%), the exploration of Apsheron structures (20%, about US$40m has already been spent on this project) and in the pipeline company BTC Co - 5%. Previously TotalFinaElf was the operator of a project to develop the offshore structures Lenko-ran-Deniz and Talysh-Deniz, where it had a 35% share. However, exploration drilling showed the fields to be commercially ineffective and that the project was halted at the end of 2001.

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FOREIGN ECONOMIC AFFAIRS

Iranian foreign minister notes "positive changes" at Caspian status talks

Iran is interested in developing relations with Azerbaijan and there are no problems in bilateral relations, Iranian Foreign Minister, Kamal Kharrazi, has said. Paradoxical as it may sound, Kharrazi contends that Baku and Tehran are developing closer ties not only because they are situated in the same region, but also because their policies on the region are similar, reports Ekspress. In an exclusive interview, Kharrazi clarified several contentious issues in relations between Azerbaijan and Iran.
"I see no problems in these relations at this juncture," Kharrazi said. "Relations between our two countries are developing well, both diplomatically and economically. Azerbaijan occupies a special and important place among Iran's neighbours. Therefore, we are taking into account the reaction of other regional countries to steps that we take. Speaking about the specifics of Iran-Azerbaijan relations, following the 2002 visit by Azerbaijani President Heydar Aliyev, to Iran, many issues concerning the development of bilateral relations were resolved and the rest are about to be resolved.
"My visits to the South Caucasus states can be explained by Iran's desire to review its policies with neighbouring states," Kharrazi said.
"It is no coincidence that I started my visit with Baku. It is because we consider Azerbaijan as the closest state to us. During the meetings here we will look into ways of further developing our relations and comparing Azerbaijan's and Iran's views on the current regional processes," he added.
"One of the main objectives of my visit to Baku is to prepare for the upcoming visit to Azerbaijan by Khatami. The visit has not yet taken place only due to technical reasons. There are no problems regarding Khatami's visit to Azerbaijan. The exact dates of the visit will be agreed upon by the presidential executive staffs and then will be announced officially," he said.
When asked if there were any changes regarding Iran's stance on the status of the Caspian Sea, Kharrazi replied, "yes, there are positive changes in this regard. Iran and Azerbaijan are holding talks at the level of personal representatives and I regard these talks as positive. Iran is satisfied with both the course of bilateral talks and with talks involving all the five states."
He added that the Caspian Sea's status is being discussed at talks between the Iranian president's special envoy for Caspian issues, Mehdi Safari, and Azerbaijani Deputy Foreign Minister, Xalaf Xalafov. He believes that the issues of principle will be resolved at these talks.

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FOREIGN LOANS

World Bank credit to help fund Azeri irrigation projects

Azerbaijan may possibly receive a credit of US$30m from the World Bank by the end of the year to execute irrigation projects, Interfax News Agency reported. An Azerbaijani government delegation, headed by the First Deputy Prime Minister, Abbas Abbasov, went to Washington to hold final consultations on the credit with the Bank's management.
"Talks on the technical details of the draft agreement were due to begin on the legal aspects of the draft agreement. The sides will sign a protocol after the talks are concluded," Rzayev said. He said that it is expected that this protocol will be submitted to the board of directors of the World Bank in June.
If all the procedures for confirming the credit are carried out on schedule the credit may be received by the end of this year, Rzayev stressed. The World Bank credit will be granted for 35 years with a grace period of seven to ten years, at 0.75 per cent per annum.
The funds will be used to modernise the country's irrigation network and improve the activity of the Association of Water Users. In total, it is planned to develop the irrigation system over an area of 60,000 hectares in five regions of the country. The Azerbaijani government should contribute US$4m for this project.

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