FT: Azerbaijan may be first to receive assistance from IMF/World Bank following oil price collapse

The FT reports: "IMF and World Bank move to forestall oil-led defaults. Team flies to Azerbaijan over possible $4bn emergency loan" See also here [rferl.org]. The country has been burning through it's foreign reserves, but it's SWF would still have ~ $35bn, 60% of GDP, according to the article.

We've noted the potential difficulties, and economic and political contradictions in Azerbaijan before.

EITI progress and countries' back-pedalling.

The Economist highlights this week the progress of the Extractive Industries Transparency Initiative (EITI), to bring transparency and reduce corruption in the oil and other minerals industries across the world.

The article highlights some cases of "back-pedalling" in Africa, where countries find ways around the requirement of transparent accounting to siphon off money to corrupt individuals. Still, one could argue that the EITI exactly helps to highlight such behaviour.

Similarly, Azerbaijan which lost [eiti.org] its EITI compliant country status earlier this year, and was downgraded to candidate. The major concern here is the involvement of civil society. NRGI put out a press-release [resourcegovernance.org] condemning the beating of one of its advisory council board members, Ilgar Mammadov, by "high-ranking staff" of a prison where he's held since 2013.
Mr. Mammadov was arrested in in 2013 on charges of inciting mass violence in relation with an anti-government protest, and subsequently sentenced to 7 years in jail. The Council of Europe and European Court of Human Rights have ruled that the judgement was illegal and ordered his release [amnesty.org]. The government chose to ignore that ruling. The Council of Europe withdrew [azerireport.com, see also CoE website] from a working group it had initiated with Azerbaijan due to its suppression on human rights defenders in past years. Following the beating Mammadov's life is reportedly [azerireport.com] in danger now.

We posted earlier on Azerbaijan, see here.

The Sight of inevitability II

A week late, but last weeks Economist [economist.com, some registration necessary, "Pegs under pressure" 7 oct 2015], seems to have an article inspired by a graph we posted earlier. It could be completely coincidental of course.

The sight of inevitability

Kazakhstan has been devaluing it's currency since last month. See the story in the FT for some comments by the Central Bank Chief Kairat Kelimbetov.

Azerbaijan has been doing the same at the beginning of the year, while Saudi Arabia has been running down its reserves. I put some of these series together in a graph (sorry for the overflow to the right).

Azerbaijan jails journalist who exposed president's family links to gold mine ownership

A court in Azerbaijan sentenced, Khadija Ismayilova, a journalist to 7.5 years in prison for tax evasion and embezzlement (see reports by the Guardian, incl. response of mother, FT, and Radio Free Europe).

Working for Radio Free Europe, she has exposed the links of the family of the President Aliyev to profitable Azerbaijan businesses, including a Gold mine [rferl.org] in the west and mobile phone operator.

However, the gold mine is not the 'big thing' in Azerbaijan (the mine reportedly contains US$2.5B worth of minerals), oil and gas is. Although there is strong interest in this story from western governments, including the US [rferl.org], and international organisations, Azerbaijan position in the supply of natural gas from the Caspian sea to the same countries, makes a criticism muted. BP has largest stake in the gas project Shah Deniz in Azeri Caspian Sea, next to Socar, the national oil and gas company, followed with smaller stakes of others. Norway's Statoil and France' Total recently sold [bloomberg.com, see also FT] their stakes in the project.

Some human rights organisations now press governments to consider sanctions [eurasianet.org] on Azerbaijan for its crackdown on and jailing of human rights activists and journalists. As the article in Eurasianet indicates, the potential for sanctions has recently increased as the geopolitical position of and western corporate interests in Azerbaijan have diminished.

The situation that would make potential action against the Azeri government possible, may simultaneously also be the reason why the government is behaving as it does. Weakened links with western countries may make it feel more independent. At the same time, de decline of energy prices makes there less of the spoils to around, which may explain the resulting tendency of the more autocratic leaning governments to start using the stick to stay on top. This was also something that came up during our visit to Baku in February.

Ms. Ismayilova thought it funny she was jailed for things that she accuses the government and presidential family of. She wrote in her closing statement [rferl.org] to the court that she would continue exposing government abuse from prison.

FT Special report on Azerbaijan

Since our visit to Baku [oxcarre.blogspot.com] a few weeks ago, we gained additional interests in the developments in Azerbaijan. Today, the Financial Times issued a Special Report on the country. available here [FT.com], with the main tag line:
Reform offers the best hope for national stability

OxCARRE Trip to Azerbaijan

From 20 to 24 February, Gerhard Tows, Thomas Nielsen (LSE) and Wessel Vermeulen joined a group of researchers and practitioners, many associated with the Centre for Euro-Asian studies at Reading University, for a workshop on "Sustainable development in resource rich countries" at Khazar University in Baku, Azerbaijan. The workshop was made possible through support of the British Council in Azerbaijan.

During the conference we discussed with students, professors, representatives of SOFAZ (The sovereign wealth fund of Azerbaijan) and SOCAR (the state energy company) on matters such as development of resources, governance, macroeconomic management and international linkages. The delegation from the UK was able to offer new and critical views on the current state of knowledge on how to manage resources in a country such as Azerbaijan, while our hosts were able to highlight how Azerbaijan is coping with the large increase of revenues in recent years and the current situation where revenues are expected to decline rapidly in line with the fall of the oil price. Additionally, it was an occasion to share research ideas and methods with the potential of future collaborations and joined-projects between researchers from universities in the UK and Azerbaijan.

The city of Baku is an almost surreal mixture of new property development, large and modern architectural structures, with a carefully renovated historic centre, whereas only a few kilometres out of the centre gives a picture on what is probably the situation of the large majority of the people of Baku and supposedly the rest of the country. A distinctively less wealthy part of town, around soviet-era structures, but an also more lively buzz on the streets and around small shops and teahouses.

In the short time we were in Baku, and given the time left after the main sessions we were able to taste a little from the new Baku and how people view the development of Azerbaijan as an important oil and gas supplier for Europe. There is proudness in this thought but also acknowledgement of the often inefficient ways the riches are used in domestic spending and investment, and disappointment in the way that critical views are under-appreciated. The government of Azerbaijan has a large responsibility to shoulder. We hope that with our visit to the country we have contributed positively, if only in a small way, in showing how it can find the best way of using its new found riches for the benefit of the entire population.

For more information on Azerbaijan and its natural resources, see the NRGI website, which offers plenty of new developments. For instance, the country risks being expelled from the EITI program soon after having severely cracked down on voices from civil society that had critical views of the government. A country report [nrgi.com] on Azerbaijan from RevenueWatch, now NRGI, gives a fairly good overview of the situation, including recommendations the country has received from various international organisations and independent institutions.