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AZERBAIJAN


  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 6,090 5,600 5,300 102
         
GNI per capita
 US $ 710 650 600 145
Ranking is given out of 208 nations - (data from the World Bank)

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: 274 - (27/10/03)

New President
As we long ago forecast, the presidential elections in Azerbaijan on October 15th were won easily by the premier, Ilham Aliyev, son of his predecessor, Haidar, who is very ill. He had only recently been made premier for that very reason. 
The elections were not contested by most of the main opposition figures. The Supreme Court, acting on the advice of the Central Electoral Commission (CEC), had refused to register two prime opposition candidates, former president, Ayaz Mutalibov (forced to resign in March 1992) and the former parliamentary speaker, Rasul Guliev, nominated by the opposition party, The Democratic Party of Azerbaijan.
Various opposition leaders had been registered by the CEC on the final list of candidates on August 22nd, such as Isa Gambar of Musavat, but they had little chance. The unanimity of the vote by parliament earlier for Ilham Aliyev as premier, without a single dissentient vote, shows that mistakes in elections do not happen in Azerbaijan, as the last parliamentary elections showed, when pro-government forces prevailed. In fact Aliyev first obtained nearly 80% of the vote, while Gambar received under 12%, a indecorous result that was greeted by riots in Baku, in which four were killed and many wounded. Gambar refused to concede defeat saying that the election had been stolen.
A failed casino owner and then vice president of SOCAR, the national oil firm, Ilham is sure to continue his father's policies. He describes his father as "a man writ large; if it had not been for his return in 1993, Azerbaijan would have encountered catastrophe. I have tried and will try to be more like him. His course must be continued."
Noble final sentiments no doubt; but in the eyes of the opposition pure humbug and nepotism. Also the regime has been notable for the deep corruption which makes Azerbaijan one of the most corrupt nations on earth, and where oil riches have been subject to flooding out to foreign bank accounts, rather than 'trickle-down' to the population.
He has his genuine supporters in the army, civil service and local as well as national government. Just the people to rig the vote for him, which they undoubtedly did. His victory was announced before the full count was in. 
It was helpful, nevertheless, for the new Aliyev to be able to point out in the campaign to excellent new figures for the economy, lending his pro-regime candidacy a veneer of respectability. GDP grew by 10% in the first eight months of the year, compared with 9.4% last year. The final figure for the year as a whole is expected to be over 13%. Meanwhile inflation rose by only 2% in the same period, compared with 2.5% last year. The final figure for the year is expected to be under 3%.

The West is complaisant
The West is not making too much of a fuss about the blatant nepotism of the affair. Too much is at stake.
Turkey and the US are Azerbaijan's closest allies. Both are keen to see some of the action when the Caspian Sea oil and natural gas riches are tapped in full in the years ahead. Azerbaijan has an estimated 31bn barrels of oil and perhaps an equivalent amount of gas, if the recent finds at Shah Deniz in the Caspian are anything to go by.
An article in The Wall Street Journal Europe of September 5-7 is typical here. By Vladimir Socor of the Washington-based Institute for Advanced Strategic & Political Studies, it was entitled 'Azerbaijan can become a success story.' It pointed out the bipartisan policy in favour of the West and its oil companies, its secular polity, modelled on Turkey, its hostility to any form of Islamic fundamentalism and the absence of a hostile fixation on Israel. All true. But not that the opposition accepts the nepotistic dictatorship.
The opposition forces, a highly beleaguered bunch in Azerbaijan, have called the recent moves a concerted de facto coup, which of course is true. Members of several leading opposition groups went to Washington recently to press their case. But they got little but sympathetic noises. 
Middle-east watchers will note that the USA has not denounced the fraudulent results and neither have the OECD, which noted the numerous and flagrant individual breeches in the democratic process, but summed up in platitudinous approval. So, how clean will Iraqi elections be?

Cult of personality the norm
As an astute Russian analyst, Sergei Markov of the Institute of Political Studies in Moscow, puts it concerning, not just Azerbaijan, but all the FSU states, except the Baltic ones: " These countries have failed to create stable politics based on institutions, so they rely on personalities." He went on:" Politics is clan-based in Azerbaijan. Civil society does not exist. People see the State as a big family and want a father at its head."
In Azerbaijan the dominant clan hails from Nakhichevan, the Azeri enclave between Armenia and Turkey. Proximity to Turkey seems to be the key to success in Azerbaijan, not just metaphorically but even physically, at least in origin.
Leaders from Nakhichevan dominated even in the years of Islamicist rule, 1991-93, when the war with Armenia over Nagorno-Karabakh, the Armenian enclave in Azerbaijan, was still raging. Turkish support has always been seen as vital to obtaining a better result by diplomacy then the Azeris were able to achieve on the battlefield. Some 15-20% of Azeri territory remains in Armenian hands. In July there was a renewed outbreak of violence on the border, leaving up to seven dead.
Ilham, backed by the Nakhichevan clan, is very likely to continue his father's pro- Western policy. Even in the old days in the 1980s when Aliyev pere was then president, and a member of the Soviet politburo to boot, he was not that hostile to the West. When a British journalist was in Baku in 1986 he was surprised to find how full of admiration the leading Azeri politicians were of Margaret Thatcher. He said : " 'but you realise that she is not a communist!' "Well," came the lightning response, 'neither are we.' "
Azeri leaders need to be on good terms with Western frontrunners, notably BP, the leader of the Caspian Sea consortium on which so much depends. Oil accounts for about 90% of Azeri exports, almost 90% of foreign direct investment and 40% of state budget revenues.
As an Azeri analyst at the Economist Intelligence Unit in London, Leila Butt, says: "Oil is the backbone of the Azeri economy. Oil companies would be wary of extending investments in Azerbaijan if Nagorno-Karabakh erupted into war again."

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ENERGY

Azeri oil chief says about US$500m needed to modernize oil refineries

About US$500m will be required to modernize Azerbaijani oil refineries, Natiq Aliyev, president of SOCAR [State Oil Company of the Azerbaijani Republic], told journalists on 3rd October, according to Trend News Agency.
He said that the capacity of the republic's oil refineries was 10m tonnes of raw materials per year. They are using only 35 per cent of their capacity today, but this totally meets the country's demand for petrol, diesel fuel, aviation fuel, lubricants and other oil products.

Azerbaijan financing its share of Shah-Deniz project

Azeri state oil company, SOCAR, said it is managing to finance its share of the Shah-Deniz gas condensate project. SOCAR expects to receive a credit from the European Bank for Reconstruction and Development (EBRD) by the end of this year, but meanwhile "we are financing our share of the project ourselves," said Natik Aliyev, the head of SOCAR, New Europe reported. 
SOCAR is using funds it receives from the sale of profitable oil produced at the Azeri-Chirag-Gunashli fields and entered on a special account, Aliyev added. "We have received assurances from the EBRD and reached an understanding with the bank that a credit will be granted for us to finance our share of the project," Aliyev said. "The bank has made the environmental aspects of the Shah-Deniz project and the construction of the Baku-Tbilisi-Erzurum pipeline available for public hearings," he said. 
EBRD senior banker, Charlotte Philips, earlier said the EBRD intended to lend SOCAR US$200m for Shah-Deniz. She said the EBRD itself would finance one half of the loan and a syndicate of private banks the other.

BP drills 2nd well in Azerbaijan

BP, which operates the Shah Deniz gas condensate field project, started drilling a second well at the field on September 25th, Interfax News Agency quoted BP-Azerbaijan as saying in a press release. The well is on the north-western wing of the field at a water depth of 101m. Projected depth is 6,610m and 135 days are required for drilling, the release said. BP contractor, Caspian Drilling Company, is carrying out the work with the Istiglal drilling rig. 
Three wells are to be drilled at Shah Deniz. The first well has a depth of 6,566m.

Russia gears up to sell electricity to Azerbaijan

Azerbaijan is prepared to buy 1.5bn kWh of electricity from Russia next year, Azerenergy President, Etibar Pirverdiyev, said recently, Interfax News Agency reported. "This import volume is contained in an agreement between Azerenergy and Unified Energy Systems of Russia," he said. Russian electricity is supplied at 2.6 cents per kWh. According to Pirverdiyev, it is not possible to raise imports for technical reasons, as there is insufficient transportation capacity. Azerbaijan holds a 100% stake in Azerenergy.

Third oil project abandoned in Azerbaijan - paper

Another major oil project has been halted in Azerbaijan. A source within a foreign oil company who wanted to stay anonymous, has said that the oil companies participating in the Lankaran Daniz and Talis Daniz project have decided to pull out of the project completely, 'Ekspress' in Baku has reported. 
The agreement on the field development was signed in Paris on 13th January 1997. The shares in the project are distributed as follows: the French-Belgian TotalFinaElf has 35 per cent, SOCAR [State Oil Company of Azerbaijan] 25 per cent, Germany's Wintershall 30 per cent and Iran's OIEC [Oil Industry Engineering and Construction] 10 per cent.
A total of US$2bn were expected to be invested in the project, and the field's oil reserves were estimated at 50m tonnes. However, the first drilling well did not yield positive results in 2001. Following that, the companies decided not to drill again and paid SOCAR US$15m in compensation. Thus, this is the third unsuccessful oil project in Azerbaijan after the failure of Qarabag and Dan ulduzu-Asrafi prospects.

Azeri oil major builds underwater gas pipeline

SOCAR [State Oil Company of the Azerbaijani Republic] has told Turan News Agency that the construction of the underwater gas pipeline which is 68 km in length with a capacity of 5.5m cubic metres, has been successfully completed. The pipeline will connect the Bahar deposit with Oily Rocks.
SOCAR, which planned to increase the amount of the drilled gas, constructed the Bahar-Oily Rocks pipeline with its own funds (Kaspmorneftstroy [Caspian Sea oil construction company] and with the help of the Suleyman Vazirov pipeline construction ship) and its funds (US$14m).
At present, tests are under way on the gas pipeline and in the event of the positive results, the pipeline will start operating in the third quarter of the year.

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MINERALS & METALS

Armenian copper company developing deposits in Karabakh

On 29th September NKR President, Arkadiy Gukasyan, received the general director of the closed-type joint-stock company Manex and Valex [also known as the Armenian Copper Programme], Valeriy Mezhlyumyan, the head of the Base Metals company, which is the regional branch of Manex and Valex, Artur Mkrtumyan, and the general director of the Armenian Peasants' Mutual Assistance Bank, Stepan Gishyan. During the talks Mr Gishyan said that he had come to Nagornyy Karabakh to see the opportunities to provide credits to the agrarian sector of the OKR economy. According to the bank director, there are good prospects in this field for developing small and medium-sized businesses, Artsakh State TV has reported. 
The meeting also discussed a wide range of issues concerning the exploitation of the Drmbon gold and copper ore deposit. The head of the Base Metals company said that the company was already running a complex, which produces concentrate, in the village of Drmbon. He also mentioned the construction of a recreation zone. Currently there are 600 employees at the Drmbon ore deposit, mainly residents of the nearby villages. The guests asked the OKR president to give them permission to examine other potential deposits in Nagornyy Karabakh. The NKR president agreed.
Arkadiy Gukasyan highly appreciated the activities of the Base Metals company and expressed confidence that the company would expand its activities in Nagornyy Karabakh, simultaneously underlining the importance of ecological protection. NKR Prime Minister Anushavan Daniyelyan and the chairman of the board of administration of Artsakhbank, Kamo Nersisyan, were also present.

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TRANSPORT

Azerbaijan to invest in border highway project

Azeri Deputy Prime Minister, Abid Sharifov, recently announced the state plans to invest over US$650m in the reconstruction of the Baku-Kazi-Magmoed-Yevlakh-Gyandzha-Georgian border highway, Interfax News Agency reported. The project is part of the TRACECA transport corridor, the deputy premier said. 
"The project will be financed from various sources, including grants from the European Commission and loans from banks and international financial organisations," Sharifov was quoted as saying. "The government is in talks for the loans," he added. "Reconstruction of the 500-kilometre highway should be completed by 2007." Azerbaijan will meet global standards by 2006-2007, according to Sharifov. This will help give a boost to cargo transport along the Eurasian corridor. 
"Azerbaijan has suggested holding the 10th anniversary meeting of TRACECA countries in Baku," he said. Created in 1993, the TRACECA programme includes Azerbaijan, Armenia, Bulgaria, Georgia, Kazakstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Uzbekistan and Ukraine. To date, 53 investment projects and technical aid projects have been finalised under the programme. Some 110m Euro was granted by the European Commission, while another US$1bn was spent in the transport infrastructure of member countries.

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