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AZERBAIJAN


  
  

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 7,124 6,090 5,600 102
         
GNI per capita
 US $ 810 710 650 146
Ranking is given out of 208 nations - (data from the World Bank)

Books on Azerbaijan

REPUBLICAN REFERENCE

Area (sq.km)
86,600

Population
7,868,385

Principal ethnic
groups
Azeri 90%
Russian 2.5%
Armenian 2%
Dagestani 3.2%
other 2.3

Capital
Baku

Currency
Azeri Manat

President
Ilham Aliyev



President
Ilham Aliyev
 


Update No: 303- (27/03/06)

There are ominous signs that a renewal of war is brewing between Azerbaijan and Armenia. Hardliners are in power in both republics. President Kocharian is a former president of the disputed Armenian enclave in Azerbaijan, Nagorno-Karabakh, whilst President Ilham Aliyev is the scion of a dynasty entrenched in Nakhichevan, the Azeri enclave between Armenia and Iran. Enclavists are not exactly renowned for their moderation.
The dispute over Nagorno-Karabakh is one of the biggest disputes left over from the collapse of the Soviet Union 15 years ago. At least 18,000 people died in the war and more than a million have been displaced since the 1994 cease-fire. The area of 31,000 square kilometres, or 12,000 square miles, is still occupied by Armenian-backed forces, comprising some 20% of Azerbaijan's territory. 
What is tilting the balance towards war is that Azerbaijan has huge oil revenues coming in from the global oil boom, putting massive discretionary funds at the government's disposal. It could of course use them to improve the lot of the one million and a half refugees from Nagorno-Karabakh, as well as that of its own pauperised citizenry. But it is not going to do anything so meek and mild as that. It is preparing for war.

Aliyev Prefers Waiting for More Acceptable Outcome in Karabakh Issue 
Aliyev puts it in his own inimitable way as follows:-"At present, we have two options to solve the Nagorno-Karabakh conflict: either we agree to a treaty or proposal that does not satisfy us now, or we reach a result more suitable for Azerbaijan after a while. I am for the second option," said Aliyev, very much on his dignity as president of Azerbaijan, in his interview with Turkish NTV channel. Speaking of progress in Azerbaijan in the last two years, Aliyev said the Azeri budget now exceeds that of Armenia four times, and the economic and military development will strengthen the position of Azerbaijan in the talks. 
He is forgetting the small matter of the size of Russia's military forces. Their intervention on the Armenian side from the outset is a certainty. There is nothing the Kremlin would like to do better than punish Baku for cosying up to the West in developing its copious Caspian Sea oil resources.
Speaking of the devil, the Baku-Tbilisi-Ceyhan oil pipeline, the key to future oil wealth, Aliyev called it natural that there has been a delay in its construction, as the matter concerns "a large, transnational project, joining three countries and two seas. Its building, engineering works are extremely difficult. At present oil has come to Turkey, where final works are under way. I hope we will mark the opening of the oil pipeline in Ceyhan soon," the Azeri leader said.

Presidential decree on conscription made public 
Ominously, President Aliyev has issued a Decree on the conscription of citizens of the Azerbaijan Republic into active military service and on the transfer of the servicemen from active military service to reserve units on April 1-20, 2006. 
It is stated that the citizens of Azerbaijan Republic born in 1988 who are 18 years of age on the day of conscription, as well as those born in 1971-1987 who are under the age of 35 and citizens of the Azerbaijan Republic who have no rights of deferral of service in the Republic's armed forces and other military formations are to be conscripted into active military service on April 1-20, 2006. 
Consequently, the soldiers, seamen and sergeants who served a term of service stipulated by the Law of the Azerbaijan Republic "On Military Service" is to be discharged in April 1-20, 2006. 
The Cabinet of Ministers of the Azerbaijan Republic and local bodies of executive authorities are to take certain measures envisaged by the Law for the implementation of this Decree. 
The die looks cast for war at some point in the near future. Or is it all just a bluff to strengthen Azerbaijan's hand in negotiations ahead?

Azerbaijan ponders Russian Caspian defence initiative: CASFOR
The recent proposal by Russian Defence Minister Sergei Ivanov for a multinational Caspian Sea security collective could force Azerbaijan to choose between aligning its strategic interests with Russia or the US, local experts say. 
Although few details are known about the collective, the so-called CASFOR proposal, described by Ivanov as "a real-time interaction naval group," appears to largely mirror the Caspian Guard surveillance initiative set up by the US and Azerbaijan in late 2003 to prevent trafficking in drugs, terrorists and weapons of mass destruction (WMD) in the Caspian Sea basin. 
Like the Caspian Guard, Russia's CASFOR, stated Ivanov during his January 24th visit to Baku, is intended "to prevent the threat of terrorism and WMD proliferation, [and] the illegal trafficking of weapons and drugs "in the Caspian Sea basin. The initiative would also "protect the economic interests" of the Sea's five littoral states, Azerbaijan, Kazakstan, Turkmenistan, Iran and Russia. The plan, which would require the approval of all five Caspian Sea countries, is expected to be part of the official agenda during Russian President Vladimir Putin's visit to Baku in late February. 
Azerbaijan is already serving as a platform for surveillance activity by both Russia, which rents a radar station in Gabala region and the US, which has recently stationed two mobile radar stations in the north and south of the country to monitor the Caspian Sea. Ivanov was preceded in Baku on January 19th by General Charles Wald, deputy director for the US's European Command, which oversees the Caspian Guard initiative. 
Nonetheless, political and military experts in Baku expressed surprise both that Azerbaijan appeared willing to consider Ivanov's proposal, and questioned the likelihood that both initiatives could exist simultaneously in Azerbaijan. The fact that Russia's initiative is even under consideration suggests that Azerbaijan's foreign policy may be undergoing key changes, they argued. 
Some experts link the situation with increased regional tension connected with both the nuclear crisis in neighbouring Iran and intensified talks with Armenia over the breakaway region of Nagorno Karabakh. Others attribute the potential co-existence of two Caspian Sea security initiatives to Azerbaijani President Ilham Aliyev, who, they say, unlike his father, the late President Heydar Aliyev, has failed to balance Azerbaijani interests carefully between the US and Russia. 
Eldar Namazov, a political analyst who served as an aide to President Heydar Aliyev, says that Ilham Aliyev's domestic policies have dictated "obvious" changes in Azerbaijan's foreign policy. Azerbaijan's previous foreign policy was a sort of "symbiosis of authoritarian domestic policy and friendship with Western democracies," he said, but now that the "authoritarian" elements have "become a big issue in the West," Azerbaijan is "forced to look for allies among strong countries which do not care about democracy in Azerbaijan." The result, he argued, will be stronger ties with Russia, aided by Moscow's support for the Aliyev administration after the disputed results of Azerbaijan's November 2005 parliamentary elections. 
While Aliyev's intentions toward CASFOR are not known, Namazov suggests that negotiations on the initiative "are either a bluff or [mean that] the Azerbaijani government intends to tickle the West's vanity." The US has already started to transfer "some ships and radar stations to Azerbaijani naval forces," he noted, while the Russian proposal would first require resolution of the dispute between the five Caspian Sea states over their territorial rights in the Sea. "If the initiative will work, it means that Azerbaijan is keen to support Russia's efforts to challenge US interests in the region," Namazov said. 
Rustam Mammadov, president of the Baku-based Caspian Sea: Partnership for the Future think-tank, also argues that two such initiatives in one sea would never work, but adds that a military pact between the five littoral states would help in obtaining a treaty on territorial rights in the Caspian Sea. 
Mammadov, however, contends that the Russian proposal is intended to block outside countries from the Caspian Sea basin and reserve the area for Moscow's own influence. "Who from the five littoral Caspian states possesses WMD, or do these five countries really have joint economic interests to secure, and where is the threat? Which army will be the strongest contributor to this group, when some littoral states do not even have a military navy?" 
One Azerbaijani military expert also suspects that Russia intends the initiative to weaken American influence with the Aliyev administration, as well as to put a potential dampener on Western-run energy projects in the Sea by reconnoitring provisions for the defence of existing fields. "Russia justifies it with the necessity of a joint struggle against terrorism, smuggling, and WMD trafficking. However, history shows that Russia itself and Iran have been the main threats for the Caspian region," Janmirza Mirzoyev told Turan news agency on January 27th. 
CASFOR was not the only Ivanov proposal that presents a potential strategic choice for Azerbaijani foreign policymakers. Military training for Azerbaijani military staff in Russia was also discussed, but local military experts argue that the proposal is at variance with Azerbaijan's long-term plans to convert its military to North Atlantic Treaty Organization (NATO) standards by 2007. Azerbaijan cannot divide its army between "NATO-oriented and Russian-style," argued Rustam Mammadov. The training would be "useless" for "the NATO-oriented and professional army that Azerbaijan declares it wants to create," concluded Namazov. 
A recently formed bilateral commission on military and technical cooperation suggests that Azerbaijan may be willing to tolerate any such dichotomy, however. The commission, to be co-chaired by Alexander Fomin, deputy director of the Russian Federal Military Technical Partnership Service, will address the possible supply of Russian arms to Azerbaijan as well as the enlargement of military cooperation, Ivanov stated at a January 24 press conference in Baku. 
Russia's only remaining military land installation in Azerbaijan, the Daryal Radio Location Station in the mountainous region of Gabala, was the site of a January 25th visit by Ivanov and Azerbaijani Defence Minister Safar Abiyev. Built during Soviet times and now rented by Russia, the station allows Moscow to track ballistic missiles launched from the Persian Gulf area. The installation is located some 360 kilometres from a radar station to be modernized by the US on the Iranian border at Lerik, and about 130 kilometres from the second such station, at Agstafa on the border with Georgia. 
The two ministers discussed options for supplying Daryal by railroad and interferences with the station's frequencies that Ivanov claimed were caused by "different transmitting stations" in the neighbourhood. A frequency expert, speaking anonymously, told EurasiaNet that military facilities were the likely cause. Ivanov, speaking to reporters, gave no indication if Azerbaijani, Iranian or American radar stations were to blame, but affirmed that a plan exists for rectifying the problem. 
Janmirza Mirzoyev believes that Ivanov's visit served not only to sell arms to Azerbaijan, but to secure a transport corridor for arms deliveries to Iran via Azerbaijan. "Azerbaijan's military budget was increased up to US$600 millions in 2006. It attracted Russia's attention. So far, Azerbaijan has bought weapons in third countries - Ukraine, China, Eastern Europe. The Commission on Military Technical Cooperation is intended to change this," Mirzoyev told Turan. 
A secure land route would allow Russia to send arms to Iran without attracting the notice of the US radar stations, which monitor the Caspian Sea, he said. "The increased tension between US and Iran will increase the volume of military cargoes [sent] from Russia to Iran. On one hand, this situation will increase importance of the sea route through the Caspian Sea. However, the American radars will pinpoint any movement in Iran's direction. That is why Russia will likely be keen to use land transport through Azerbaijan," he said. 
Commented expert Ilgar Mammadov: "It is a difficult time for diplomacy." Indeed, for more reasons than one!

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BANKING

Toronto Dominion Bank to provide loan to Tekhnikabank 

Canada's Toronto Dominion Bank has signed an agreement with Azerbaijan's Tekhnikabank to open a credit line for four million Euro, Samir Guseinov, CEO of Tekhnikabank said, Interfax News Agency reported.
"The Canadian bank will provide three million Euro in the first stage. It will provide two million Euro to the leasing company TekhnikaLeasing (the bank is a founder of the company) and one million Euro to the bank," he said. TekhnikaLeasing will use the resources to buy equipment. The bank will use them for trade financing. "Since TekhnikaLeasing doesn't have an international audit, the credit resources will be raised through the bank," Guseinov said. The remaining amount will likely be provided to the bank if it needs it to finance future projects. Guseinov did not reveal the rate of the loan, but said the loan is being provided for five years with a grace period of six months. The bank will make payments on the loan once every six months.

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ENERGY

LUKoil investment to reach US$1bn in 2006

Investment by Russian oil major LUKoil in the Azerbaijani economy by the end of 2006 is to reach US$1bn, a source in LUKoil-Azerbaijan said, Interfax News Agency reported.
"According to our forecasts, investment by our company in the economy of Azerbaijan in 1994-2006 may exceed US$1bn. This total also includes forecast investment in 2006," the source said.
He said the main volume of investment is under contracts to develop the Azeri-Chirag-Gunashli and Shakh Deniz fields. The company also has 12 filling stations and a fuel base in the republic and is also one of the founders of the telecoms company, AzEuro Tel and the bank, Nikoil.
LUKoil has taken part in five oil and gas contracts in Azerbaijan: Azeri-Chirag-Gunashli, Shah Deniz, Karabakh, Govsany-Zykh and D-222. Of these, the company currently retains a 10 per cent stake in the Shah Deniz project and an 80 per cent stake in the D-222 project.
In December the company sold a 10 per cent stake in the Azeri-Chirag-Gunashli project to Japan's Inpex for US$1.375b. LUKoil had a 12.5 per cent stake in the Karabakh project and 45 per cent as part of an alliance with Italy's Agip. This project was shut down after exploration work due to the fact that reserves were not commercial. The Govsany-Zykh project was shut down due to unresolved ecological issues.

Oil exports from Azerbaijan up 50% 

Oil exports from Azerbaijan in January 2006 amounted to 1.293 million tonnes, up 78.6 per cent year-on-year, a source in the State Oil Company of the Azerbaijani Republic (SOCAR) said, Interfax News Agency reported.
All of the oil was exported by Azeri-Chirag-Gunashli operator Azerbaijan International Operating Company, and SOCAR did not export any oil. "We pumped about 85,000 tonnes through the Baku-Novorossiisk pipeline, but did not manage to ship a tanker in January," the source said. AIOC exports through the Baku-Supsa pipeline amounted to 599,200 tonnes, with exports through the Baku-Novorossiisk pipe of 339,700 tonnes and exports by rail to Batumi - 353,900 tonnes. Exports through the Baku-Tbilisi-Ceyhan pipeline in January amounted to 60,000 tonnes. 

Azerbaijan, Ukraine discuss Central Asian gas supplies 

Ukraine and Azerbaijan plan to develop cooperation in supplying natural gas from Central Asia. The press service of the Ukrainian National Security and Defence Council said recently that Council Chairman, Anatoly Kinakh, made this announcement when commenting on progress in negotiations with Azerbaijani President, Ilham Aliyev, and Azerbaijani Security Council Secretary, Ramiz Mekhtiev. "Azerbaijan already has concrete proposals for the construction of these gas pipelines," Kinakh said.
He said Ukraine is working with Azerbaijan to implement the Odessa-Brody-Gdansk oil pipeline project. 
He said that Azerbaijan plans to continue cooperating in this project, so as to use the pipeline as an alternative route to supply oil to Europe, through Ukrainian territory. 
Kinakh said growing natural gas production in Azerbaijan means that during the year the republic will fully meet its own requirements and start gas exports. 
"A very serious and interesting route for supplying this gas is through the Ukrainian gas transport system to Europe," he said. Kinakh said the sides have agreed to consider joint production of hydrocarbons at the level of intergovernmental bilateral commissions on energy cooperation and also at meetings of energy ministers from GUAM members (Georgia, Ukraine, Azerbaijan and Moldova).
He noted the importance of Ukraine and Azerbaijan entering into energy cooperation at a strategic level and the need to prepare the corresponding declarations for approval by the Azerbaijani government. This includes fuel transit, and joint exploration and production of oil in the Black Sea and in the Caspian region.

Azerbaijan gas production up 25% 

Azerbaijan produced 531.3 million cubic metres of gas in January 2006, up 25.2 per cent year-on-year, a source at the State Oil Company of the Azerbaijani Republic (SOCAR) said, Interfax News Agency reported.
Azerbaijan International Operating Company (AIOC), the operator for Azeri-Chirag, and Gunashli fields, produced 191.5 million cubic metres of gas, up 120 per cent due to the start of production at the Azeri field. SOCAR production increased 0.7 per cent to 339.9 million cubic metres in the period. 

SOCAR receives US$750m credit at 1.75% per year 

Azeri state oil company SOCAR is to receive a syndicated credit of US$750 million at 1.75 percent per year, Azeri Industry and Energy Minister Natik Aliyev told Interfax. "This is a good rate. We expect to sign a credit agreement soon," he said. Azeri State Oil Fund Executive Director Samir Sharifov told journalists that an official ceremony to mark the signing of the credit agreement was planned for the end of February. "The main agreement with the organiser of the syndicated credit - BNP Paribas, has already been signed, and with the syndicate it will be signed at the end of February," Sharifov said. He said that the participants in the syndicate are leading world banks. "There will be around 15 banks," he said.

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FOREIGN COOPERATION

Baku, Moscow to improve bilateral cooperation

The presidents of Russia and Azerbaijan have instructed the governments of the two countries to take measures to improve the legal basis for bilateral military-technical cooperation, Interfax News Agency reported recently.
A joint statement signed by Azeri president, Ilham Aliyev, and Russian president, Vladimir Putin, in Baku said the governments should develop a programme of bilateral interaction in the area of military-technical cooperation, "which will not be aimed against third countries and will not run counter to the two countries' international obligations."
The two presidents view military-technical cooperation as an important component of strategic partnership, the statement read. They also reaffirmed their interest in long-term cooperation in the joint development and use of national and international transportation infrastructures and in providing favourable conditions for transit along the North-South transportation corridor.
Putin and Aliyev confirmed their countries' commitment to the 1997 treaty of friendship, cooperation and mutual security and other bilateral agreements. They expressed their satisfaction with the recent growth in bilateral trade turnover and pointed to "the necessity to implement joint projects in strategic economic areas." The presidents stated their interest in developing cooperation in the fuel and energy complex, in interaction in the area of transiting hydrocarbons to world markets and in the electrical energy industry.
Both sides will also step up bilateral cooperation in countering international terrorism, and drug trafficking and agreed to complete the delimitation of their border. The border "should remain one of friendship, good-neighbourliness and cooperation," the statement read. Putin and Aliyev reiterated their commitment to respecting both nations' sovereignty, territorial integrity, the inviolability of their borders and other accepted principles of international law. "The presidents of the two countries spoke in favour of finding a political solution to the Nagorno-Karabakh conflict as soon as possible on the basis of appropriate resolution of the UN Security Council and the Organisation for Security and Cooperation in Europe and with the help of the OSCE Minsk Group - Russia, the US and France," the document read.
The presidents also underscored the importance of an upcoming summit of the five Caspian littoral countries in Tehran in the joint statement signed in Baku. "The countries emphasised the need for further negotiations aimed at determining the legal status of the Caspian Sea, including talks within the framework of a working group comprising the Caspian states' deputy foreign ministers," the statement read.
Meanwhile, the leading Russian aluminium producer RusAl plans to invest more than one billion Euro in a smelting project in Azerbaijan, Azerbaijani First Deputy Prime Minster, Abbas Abbasov, said. The smelter will have the capacity for 300 million Euro tonnes of aluminium per year," Abbasov said. Abbasov said the smelter's location still had to be decided. The smelter will probably use alumina imported from Guinea, he said. RusAl CEO, Alexander Bulygin, said, RusAl intends to launch electricity-related proects in several regions in 2006 and was looking at the opportunities in Azerbaijan.
"We are looking at the possibility of building a 300,000-tpy smelter in Azerbaijan. Work has begun on a pre-feasibility study and the final decision will be based on that," RusAl spokeswoman, Vera Kurochkina, told Interfax News Agency.
Dutch company, Fondel, has already undertaken to invest up to one billion Euro in Azerbaijan Aluminium, the country's existing aluminium corporation, which comprises the Ganja alumina refinery, Sumgait smelter and Zag-lik alunite quarry. Azerbaijan put these enterprises into Fondel's trusteeship for a period of 25 years in 2001.

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FOREIGN ECONOMIC RELATIONS

Azerbaijan, Indonesia to develop economic ties 

Azerbaijan's Foreign Minister, Elmar Mammadyarov, met with Amin Rian, extraordinary and plenipotentiary ambassador of Indonesia accredited to Azerbaijan on February 7 on completion of his diplomatic mission, foreign ministry's press-service said, Interfax News Agency.
During the meeting, Mammadyarov expressed support of deepening Azerbaijan-Indonesia relations and predicted that the Indonesian embassy would soon open in Baku, given Azerbaijani diplomatic mission exists in Jakarta. He was pleased with cooperation with Indonesia within international organisations and stressed that both countries can further expand relations in business and culture as well as energy, tourism, agriculture sectors.

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