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AZERBAIJAN


  
  

 

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)

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Update No: 332 - (29/08/08)

Aliyev a shoe-in come October
Politics in Azerbajan is very simple. Everything revolves around one man, Ilham Aliyev, head of the Aliyev clan, who hails from Nakichevan, the Azeri enclave between Armenia and Iran. The ruling party, Yeni Azerbaijan, is right behind him and dominates parliament. It will ensure his re-election in October as a formality.

Since the economy is growing phenomenally fast at over 30% per annum, this is not surprising, premised of course on sky- high oil prices. ( It should be cautioned that things are not going to be so gung-ho forever!)

The main task of the party's July session was to declare officially the nomination of working President Ilham Aliyev as a candidate for President. The Yeni Azerbaijan does not doubt that the working president will remain in the position for the next five years. Indeed.

The US courts Baku
Washington agrees. It is convenient for the Azeri regime that Bush will still be US president then. Actually it is rather convenient for any successor too. The Bush Administration, an oil one if ever there was one, can recognise the re-election as valid, while negotiating a special deal with the Azeris on discounts, the fact of the matter.

Azerbaijan is expected to produce a minimum of 50m tons of oil this year, of which 43m tons will be exported, much to the US. At present, the USA purchases over 50 per cent of oil pumped via the Baku-Tbilisi-Ceyhan oil pipeline. 

Azeri Industry and Energy Minister Natiq Aliyev, one of the clan, met Steven Mann, visiting senior aide on Eurasia issues under the US Department of State, in Baku in mid-July. Energy security was naturally high on the agenda. The delivery of Caspian hydrocarbons to world markets and cooperation in this area as well as the latest soaring oil and gas prices we re also discussed. 

Mann was visiting Baku as part of a delegation led by Boyden Grey, special representative of the US president on energy issues in the Eurasia region. Grey was in fact received by President Ilham Aliyev the day before. No doubt this visit was a response to the latest aggressive efforts of Russia to seize control over the Caspian energy resources. 

It seems that the Azerbaijani authorities are ready to sell oil at discount prices to the USA. Bearing in mind that the presidential election is nearing in the country, it would be beyond any doubt that this bargain would be of a political nature. Knowing that the US economy is in need of relatively cheap oil, the Bush administration may to a great extend turn a blind eye to the way the Azerbaijani authorities will conduct the election. At least if the USA purchases Azerbaijani oil at discount prices, it would hardly criticise shortcomings in the election or raise doubts about its legitimacy. 

Russian railroad station named after Haidar Aliyev
It is more than a straw in the wind when a Russian railroad station is named after a deceased president of Azerbaijan, Haidar Aliyev, the father of its present president, Ilham. 

For he fell from grace in the Kremlin in 1987, being evicted from the presidency, albeit winning it again in 1993 after independence without Kremlin help, indeed against its grain. But then neither Gorbachev, nor Yeltsin are popular with the siloviki running the show today. Aliyev pere once a KGB general, was one of them. 

He is, in their terms worthy of being honoured – more especially at a time when Moscow wishes to ingratiate itself with Baku and his son. 

A ceremony on the occasion brought together Azerbaijan`s Transport Minister Ziya Mammadov, Azeri Ambassador in Moscow Polad Bulbuloglu, and Head of Russian Railways Vladimir Yakunin. In 1984 Heydar Aliyev had visited the Angoya station as head of a USSR commission supervising the construction of the Baikal-Amur railroad. The station is located at the 1181st km of the railroad, and tens of trains travel on it to Moscow and Far East countries every day.

Medvedev in town
The new president of Russia, Dmitry Medvedev, is a far more likeable man than his KGB predecessor, Vladimir Putin. Foreigners infinitely prefer him, such as the EU officials at the July meeting in Siberia with Russian officialdom. But he is not a free agent in the way Putin was - and doubtless still is.

Medvedev has visited the Caspian littoral states as a top priority, with new ideas to promote, which were given a warm reception. He is feeling his way into his job, probably not quite sure himself how much leeway he has. The Kremlin insiders are wary of their politicians who are genuinely popular in the West – look at Gorbachev! 

During the visit in early July, the chief executive of Russian gas giant Gazprom accompanying the president, predicted the price of oil would “very soon” rise to $250 per barrel, bringing higher gas prices for European consumers in its wake. After talks with President Aliyev in Baku, Medvedev told journalists he saw “prospects” for energy cooperation between the two countries and noted “we have no problems in the area of transport” thanks to the existing pipeline network.

Gazprom CEO Alexei Miller said ex-Soviet Azerbaijan and Russia had agreed “on the start of negotiations on the conditions for Gazprom’s purchase of Azerbaijani gas”.

Analysts say Russia is vying for Azerbaijani gas with Western companies, which have gained a strong presence in the country since the 1991 Soviet collapse.

Relations between the two countries soured in 2007, when Gazprom demanded Azerbaijan pay twice as much for gas imported from Russia. Azerbaijan abruptly halted gas imports from Russia and replaced them with its own supplies. 

Led by Britain’s BP, Western energy companies have built a strategic corridor of pipelines to deliver Caspian Sea oil and gas through Azerbaijan, Georgia and Turkey to European markets, bypassing the Soviet-era network.

Gazprom has been buying gas from Central Asia at knock-down prices for years to cover its own large export and domestic needs but has pledged to switch to market prices from next year. Miller said Gazprom was prepared to buy “a maximum volume” of Azerbaijani gas “on a market basis”, though he refused to discuss specific prices. Gazprom spokesman Sergei Kuprianov said the company was ready to buy “as much production as Azerbaijan proposes” and that “the infrastructure is already in place for delivery”. 

Miller also said he expected Russia’s oil production to level off in the next few years and warned gas prices for the European Union would rise to $500 (320 euros) per 1,000 cubic meters by the end of 2008 from $400 (250 euros) at present, following higher oil prices. The European Union relies on Russia for a quarter of its gas and oil supplies.

Azerbaijan announced in June it plans to nearly double natural gas production by 2015 as it increases output at the enormous Shah Deniz field offshore in the Caspian.
The EU is also wooing Azerbaijan as a potential supplier of its flagship Nabucco gas pipeline, a 3,300-kilometer pipeline, which would run via Turkey and the Balkan states to Austria. Construction is scheduled to begin in 2009, with the completion date set for 2013.

Russia backs a rival pipeline, South Stream, being built by Gazprom and ENI of Italy. That project entails building a gas pipeline under the Black Sea from Russia to Bulgaria and then branches to Austria and Italy.

Europe's gas bill will double
Europe's bill for Russian gas will rise by a quarter by the end of 2008 and will eventually double, the head of Gazprom said on July 17, repeating his view that the oil price will rise by another $100 a barrel.

Alexei Miller told reporters during a trip to Azerbaijan he expected prices to rise to $500 per 1,000 cubic metres from the current $400 by the end of 2008. If oil prices were to hit $250 per barrel, gas prices would hit $1,000, he said.
Many analysts and oil executives have already described Miller's previous predictions of an oil price rally to $250 as apocalyptic.

They also warned against attempts to talk oil and gas prices up, especially when predictions come from the very company that supplies a quarter of Europe's gas needs.

With a market capitalisation of $320 billion, Gazprom is one of the world's five most valuable firms, and Miller has said rising oil prices would help Gazprom become the world's most valued stock, worth over $1 trillion.

On Thursday he said oil prices could rise faster than many people expect.

"According to certain forecasts, the price of oil may reach $250 per barrel in the near future. If it does happen, the price of gas will exceed $1,000 per 1,000 cubic metres," said Miller, who was accompanying Russian President Dmitry Medvedev on his trip to Azerbaijan.

"But this price won't be something extraordinary for the market," he added. "We at Gazprom are now reviewing the price forecast for the year-end and we believe prices in Europe will exceed $500 (per 1,000 cubic metres)".

Miller said the global oil production would not be able to cope with demand for the foreseeable future.

"We see that production of hydrocarbons in the world is beginning to work on the basis of new principles. It is not the principle of supply and demand, but the principle of balance between price and production volumes. Today people are focused on achieving a maximum long-term economic return," he said.

Gazprom is already enjoying record revenues in Europe and it said in June it expected its export sales to soar 62 percent this year to a record $64 billion. 

The price spike would mean bad news for customers, who are already suffering from record energy bills.

Russia's neighbour Ukraine will have the most to lose as Gazprom has told Kiev it would switch to European prices from next year. This year Kiev is paying a fixed price of $179.5 per 1,000 cubic metres.

Gazprom's export gas prices depend on international oil products prices and change with a lag of six to nine months.

U.S. light crude futures CLc1 hit a record of $145.85 per barrel on July 17.

Miller also said Russia and Azerbaijan had agreed to start talks on Gazprom's purchases of Azeri gas after agreeing on the idea in principle a month ago. 

Baku is planning to supply its gas to Southern Europe via Turkey, the first major project on the territory of the former Soviet Union that bypasses Russia.

Azerbaijan's key gas project is known as Shakh Deniz, located off the shore of the Caspian Sea. It already supplies Turkey with over 5 billion cubic metres a year.

Baku has only a minority stake in the project, which is controlled by BP and StatoilHydro; they have been cool to the idea of gas sales to Russia so far.

Miller's spokesman Sergei Kupriyanov said Gazprom would be ready to buy as much gas as Baku is prepared to sell and would pay market prices. He also said the two countries were discussing the idea of gas swaps in Europe.
Azeri President Ilham Aliyev said after talks with Medvedev he was aware of new joint projects but refrained from direct comments about the sale of Azeri gas to Russia.

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