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: 276 - (01/01/04)
The Azeri regime is a tight dictatorship, which on October 15th staged a farce of a presidential election. It is obviously disconcerted at the downfall of President Eduard Shevardnadze in neighbouring Georgia, where a genuine presidential election is now due, after the fiasco of parliamentary elections were exposed by a vocal opposition.
But the Azeri cliquev in power has never made the mistake of allowing a free press and giving opposition forces rights of free speech and assembly, as Shevardnadze did, which created the possibility to demonstrate for his removal.
No such luck for the Azeris, whose opposition is tightly repressed.
The new Azeri president is Ilham Aliyev, the son of his predecessor, Haidar Aliyev, who died in a US hospital in mid-December. His father was for decades a loyal Soviet apparatchik, a KGB general, president in communist times and a member of the Brezhnev politburo no less. He was always the reverse of frivolous. But then his son is giving up his earlier frolicsome ways, notorious for having been a playboy and former manager of casinos, which all went bust, and is now assuming the full dignity of his high office
He made an early appearance on the world stage, just before he was elected, when he was still acting premier. Not that anybody doubted for a moment that he would be the next president. He went to the US in early October to the UN general assembly session.
There he met Bush and also Stipe Mesic, the president of Croatia. Another meeting was held with Iranian Foreign Minister, Kamal Kharazi, who agreed to expand energy cooperation in the Caspian.
The inaugural address
On October 31st Ilham made his inaugural speech to the people, before any embarrassing need to mention or ignore the events in Tbilisi. He said that he would build on his father's achievements; "we shall build on your monument. I believe in Azerbaijan's lucky future," he said.
The government has been reporting GDP growth rates of 10% annually. The president promised that 60% of the budget would be spent on social services and the like. The eradication of poverty is a prime goal, he said.
Aliyev fils indicated that he was prepared for a dialogue with the opposition. Those who allege massive electoral fraud find that it becomes a monologue, often in prison addressing only the secret police. Even for those who are more circumspect, the dialogue has a strange character: "The establishment of solidarity between political parties is necessary," said the new president. There is a word for this in the lexicon of politics - totalitarianism.
The nature of the 'dialogue'
The rules of the democratic game as played out in Azerbaijan are pretty clear. They approximate to those described by Churchill for his war cabinet: "after I have exhausted the topics of debate, a ready and reasoned assent to my points of view." He was only being half humorous here. But then a war was on.
There is a war of sorts in Azerbaijan also, one conducted by the regime against the people. It is clear that the terms of any dialogue are set by the government. Officials have blamed opposition activists for creating unrest in the aftermath of the election on October 15th, a failing which has led to hundreds of arrests of loyalists to Musavat, the main opposition grouping.
Nevertheless the US and the EU have expressed no undue concern. Important oil deals are at stake. On October 30th the EU representative for the Caucusus, Heikki Talvitie, announced that "the EU will be working with Ilham Aliyev."
Many Azerbaijanis appear sceptical that Aliyev will make good on his promises to improve living conditions. Such sentiment was summarized in a November 1st commentary published in the Novoye Vremya newspaper in Baku.
"Yesterday [October 31] behind the wide shoulders of policemen who reliably sealed off the Palace of the Republic, and in conditions of heightened security, Ilham Aliyev became the fourth president of the country," the commentary said. "The first one [Ayaz Mutalibov] is in exile, in Moscow. The second one [Abulfaz Elchibey] is dead. The whereabouts of the third [Heidar Aliyev] are still unknown, and the fourth pledges to take Azerbaijan to a bright future, which was also promised by the second and third presidents before him."
"The presidents come and go, but the 'bright future' remains a mirage," the commentary added.
AZAL makes advance payment for 6 Eurocopters
Azerbaijan Air Lines (AZAL), a state-controlled enterprise, recently made an advance payment of 18m Euro to French group Eurocopter for six new helicopters, Interfax News Agency reported.
Azerbaijan is expected to collect the first of the helicopters in August under a contract worth 52m Euro, AZAL President, Janangir Askerov, said at a news conference. "All of the helicopters will be based at the Zarbat airport near Baku," Askerov said. "AZAL has ordered two 20-seater AS33211 and four 12-seater ES155B1 helicopters," he added
AIOC extracts 5.39m tonnes of oil from Chirag
The Azerbaijani International Operating Co (AIOC), which operates the development of the Azeri-Chirag-Guneshli oil field in Azerbaijan's sector of the Caspian Sea, extracted 5.39m tonnes of oil from the Chirag deposit in January-October 2003, up 1.5 per cent compared to the same period in 2002, Interfax News Agency reported.
The AIOC press service told Interfax that in October 2003 oil output at the Chirag deposit totalled 530,000 tonnes, which is 7,000 tonnes less than October 2002. A total of 6.45m tonnes of oil was planned to be extracted from the deposit in 2003. The AIOC exported 5.238m tonnes of oil from the Georgian port of Supsa to the west. Of them, 523,000 tonnes were exported in October 2003. Oil exports in January-October 2002 stood at 4.167m tonnes. Some 30m tonnes of oil have been extracted under the Early Oil project from November 7th, 1997 to September 2003. Of them, about 6.387m tonnes were extracted in 2002.
The contract to develop the Azeri-Chirag-Guneshli oil deposit was signed on September 20th, 1994 and took effect on December 12th. The project involves Britain's BP (34.1367 per cent), US Unocal (10.2814 per cent), ExxonMobil (8.0006 per cent), Devon Energy (5.6262 per cent), Aerada Hess (1.0413 per cent), Azerbaijan State Oil (10 per cent), Japan's Inpex Corp (10 per cent), ITOCHU Oil (3.9205 per cent), Norway's Statoil (8.5633 per cent), Turkey's TPAO (6.75 per cent) and Saidi Delta Oil (1.68 per cent).
Azerbaijan to double gas production
Azerbaijan expects to double gas production, from an anticipated 5.02 billion cubic metres in 2003 to 10.4 billion cubic metres as early as 2007, as the Shah-Deniz gas condensate field comes on-stream and production increases at the Azeri-Chirag-Gunashli (ACG) group of fields.
Interfax News Agency quoted a government official as saying ACG would yield 910m cubic metres in each of 2003 and 2004, rising to one billion cubic metres in 2005. Shah-Deniz, where production begins in 2006, and ACG will produce 3.8 billion cubic metres between them in 2006 and 7.2 billion cubic metres in 2007. Azeri state oil company, SOCAR, expects its gas production fall gradually, from 3.8 billion cubic metres in 2004 to 3.2 billion cubic metres in 2007. Domestic gas sales are expected to dip from 3.73 billion cubic metres in 2003 to 3.56 billion cubic metres in 2004 and 3.54 billion cubic metres in 2005, but to shoot up to 4.28 billion cubic metres in 2006 and 4.87 billion cubic metres in 2007.
Azerbaijan International Operating Company (AIOC) exported 5.238m tonnes of Azeri Light oil, up 25.7% year-on-year. SOCAR exported 2.15m tonnes, down 4.6%. In October, AIOC exported 523,000 tonnes and SOCAR 219,400 tonnes. Azeri Light oil is produced under a contract for the development of the Azeri-Chirag-Gunashli fields. SOCAR produces Urals oil and exports via the Baku-Novorossisk pipeline. SOCAR exports 2.5m tonnes of oil a year and AIOC 6m to 6.5m tonnes.
Foreign oil companies lost over US$500m in Azerbaijan
Foreign oil companies have lost over US$500m that were invested in prospecting Azerbaijani oil fields, the president of the State Oil Company of the Azerbaijani Republic (SOCAR), Natiq Aliyev, has said in Azerbaijan's parliament, Turan News Agency has reported.
Prospecting and seismic work that met modern standards were carried out on several oil fields, and wells were drilled. Oil reserves were found in some cases but, for various reasons, Azerbaijan's foreign partners refused to continue the work. As a result, the companies have lost over US$500m that were spent on prospecting," Aliyev said.
The foreign companies did all prospecting under PSA [production-sharing agreement] agreements. According to the terms of the contracts, all costs during the prospecting stage are covered by SOCAR's foreign partners.
Aliyev said that despite this, the work "has been beneficial since it has significantly enriched SOCAR's information database on prospective fields."
Aliyev also noted successful operations of oil companies in the Azerbaijani sector of the Caspian Sea. "At first, in our contract on the Azari-Ciraq-Gunasli field we estimated the reserves at 511m tonnes of oil. However, the evaluation of the project showed that the resources add up to more than 700m tonnes of oil. In addition, we vest a lot of hope in the
Zafar-Masal field, where a prospecting well is being drilled at the moment," he said.
Out of the 22 PSA contracts signed by SOCAR on prospecting and developing oil fields, six have been cancelled at the behest of foreign partners and two more contracts are about to run out.
American oil giants are the ones which suffered the most from prospecting oil in Azerbaijan: they were operators in four out of the eight projects. Chevron has proved the most "spendthrift" as it spent US$78m - a record amount for the entire Caspian Sea - to drill just one well.
Yet, despite all the misfortunes of its companies, the USA is still the standard-setter for Azerbaijan's policies (foreign, domestic, economic and energy). Apparently, it is because of this US activity that many observers in the foreign mass media dub even the most economically profitable projects of Azerbaijan "political" and "pro-American" (including the Baku-Tbilisi-Ceyhan pipeline with its expected profit of 12.5 per cent a year).
So far, Britain's BP remains the only company that has been successful in oil and gas projects. BP is the operator of the major oil (the Azari-Ciraq-Gunasli) and gas (Sah Daniz) fields of Azerbaijan, with reserves of over 700m tonnes of crude and 600bn cu.m. of gas respectively. In addition, the company has two more projects to be prospected.
Azerbaijan draws up strategic plan on mine clearing
The Baku government needs some US$250m-300m to carry out mine clearing operations on Azerbaijani territories, the director of the Azerbaijan National Agency for Mine Action (ANAMA), Nazim Ismayilov, has told Trend News Agency.
He said that ANAMA had drawn up a strategic plan to combat the mine danger in 2004-2008. A total of 500m-600m sq.m. of land which was temporarily occupied and then returned, and the land contaminated during the deployment of the Soviet army need to be cleared of mines.
Mine clearing in Azerbaijan today costs US$1.1 per square metre, whereas it costs US$1.7 in Croatia and 45-50 cents in Afghanistan. The cost of mine clearing will reduce after special equipment is purchased, as envisaged by the 2004-2008 strategic plan.
Azerbaijan records trade deficit of US$192m in nine months of 2003
Azerbaijan recorded a trade deficit of US$192.7m in the first nine months of the current year, the State Statistics Committee has said, Media-Press News Agency has reported.
In January-September, the country's exports totalled US$1,587.6m, which is 4.9 per cent higher than during the same period of the previous year. The country increased its imports by 56.4 per cent as compared to the same period last year. It was recorded at the level of US$1,780.3m.
In nine months of the previous year, Azerbaijan recorded a foreign trade surplus of US$375.8m.
In general, Azerbaijan's foreign trade turnover increased by 27 per cent within a year, reaching US$3,367.9m.
Azerbaijan deals with World Bank on SACs
Azerbaijan and the World Bank recently agreed on three structural adjustment loans (SAC) worth US$60m for the next three years, Interfax News Agency quoted the bank's office in Baku as saying. Each loan (SAC-111, SAC-1V and SAC-V) will total US$20m. Azerbaijan needs to meet certain conditions by May 2004, after which it will start receiving the funds.
The loans will be used to cover the budget deficit Azerbaijan has received a SAC-1 loan of US$30m and SAC-11 of US$64m.
Our analysts and
editorial staff have many years experience in analysing and reporting
events in these nations. This knowledge is available in the form of
geopolitical and/or economic country reports on any individual or grouping
of countries. Such reports may be bespoke to the specification of clients
or by access to one of our existing specialised reports.
For further information email: