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 | | Azerbaijan's Energy Policy Under
Heydar Aliyev: Success Or... |
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| By Rafael Abbasov |
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"It's a good time to talk about Caspian energy, because we have just reached a major milestone in U.S. policy, a major milestone in the economic life of the region. And that is, the formal approval and the start of the construction phase of the Baku-Tbilisi-Ceyhan oil pipeline."- U.S. Special Envoy to the Caspian Region, Ambassador Steven Mann
Azerbaijan has lived its 11 years of independence faced with political obstacles from neighbouring countries. But the country has seen tremendous results over the last six-year period of chaotic surviving, due to the design and implementation of the successful policy of President Aliyev's government. The two primary factors have been the regionally known Baku-Tbilisi-Ceyhan Pipe Project and the country's remarkable energy development. During the presidency of Aliyev, Azerbaijan has been impressively introduced to the world through the exploitation and formation of a portfolio of several tools.
First - and most significant - is the "market based" principle of the production of energy resources. Aliyev has made the local proven and estimated oil resources a consi-derable and increasingly important factor in the energy policies of major powers, including the U.S. and Russia. Azerbaijan, the oldest oil produ-cing region in the world, has the potential of recoverable crude oil and condensate of 1,356 million tons - 931 million tons onshore and 425 million tons offshore. This equals approximately 4% of the world production. Sixty-eight oil and gas fi-elds have been discovered in Azerbaijan, with 42 onshore and 26 offshore. Of these, 61 are targeted for commercial development, 21 of which U.S.-based companies will participate in.
Furthermore, a major boost has been given to the energy sector by an $ 8 billion investment agreement signed in 1994 to exploit the Azeri-Chirag-Guneshli deepwater fields in the Caspian Sea. The agreement was signed by a multi-national consortium that includes the interests of the world powers gathered in the Azerbaijan International Operating Consortium (AIOC). The Azeri and Chirag project is a 30-year development plan to exploit estimated reserves of 600 million tons.
Secondly, Aliyev's government is aided by a highly imperative tool - the so-called "geostrategic location" in the national mass media. Within the context of the transportation and communication link betwe-en Asia and Europe, especially after the U.S.-led Antiterrorist Campaign in Afghanistan, Azerbaijan has started to become crucial as the bri-dgehead for the focus of the democratic world. Because of this, the Azerbaijan-led Caucasus are invol-ved in the realization of numerous infrastructure projects, primarily dealing with the carrying out of en-ergy resources and humanitarian aid to the least developed countries.
From this point of view, Azeri oil and gas pipeline development stra-tegies are very important, as well as sensitive, issues in the regional security policy. The building of the Main Export Route should insure stability and sufficiency, not only in volumes of Caspian crude oil to the world market, but also in the regional policy. In other words, it is described as the "defense of freedom" in Azerbaijan, which borders powers such as Russia and Iran.
In this context we logically come to the third part of the Aliyev-led Azeri government policy. This is presented as large-scale U.S. assistance to strengthen the sovereignty of Azerbaijan directly, or via Turkey, its main ally in the Islamic Middle East. In fact, Washington has strongly promoted Turkey throughout the Caspian region as the ideal outlet for foreign trade, portraying its NATO ally as a secular model for Islamic nations. Clearly, Washington wants Caspian energy resources to pass through Turkey as a key component to bolster the U.S.-led demo-cracy tendency in the region.
The second power - Russia - is less aggressive toward Azerbaijan. The close friendly relations between the KGB-experienced Azeri and Russian presidents hamper Putin's government with any acts of intervenes as in Georgia. To date, the real influence of Russia should be considered as commercial, through tariffs in transportation and attitudes toward several million Azerbaijanis, whose income comes from Russia. Basically, from the start of his presidential obligations, Aliyev's policy has actively used the above-mentioned tools to focus on solving the Armenian-provoked conflict over the Azeri Nagorno Karabakh region. This conflict is still strongly supported by the Armenian lobby.
In addition to all the mentioned features of Aliyev's governance, it is impossible to avoid the issue of ma-croeconomic stability that has been reached in the country. The reform process, initiated after independen-ce, was fostered from early 1995 with new tax legislation, a foreign ownership law, price liberalization, property reform, currency reform and improvements in banking legislation. Since the implementation of an IMF-supported programme launched in April 1995, there has been considerable progress towards macroeconomic stabilization. Financial policies have been tightened, leading to a decline in inflation from over 1,000% to 4-5% per year and he-lping to create a stable environment for further structural reform.
The continued successful development of the national economy is still based on the oil and gas sector. This remains the most significant factor, as it affects the medium-term expansion of the Gross Domestic Product and offers some of the most realistic investment opportunities in the region. According to an evaluation of the State Oil Fund of Azerbaijan, which was established by Aliyev, the country's revenues deri-ved from the BTC's exploitation in 2010 would reach $5 billion, or $0.7-$1 billion per year. In contrast, the volume of the country's state budget for 2003 is scheduled at $1.2 billion
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