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Azerbaijan: Oil billions and poverty in ex-Soviet Azerbaijan

Agence France Presse
October 31st, 2005

A dozen workers trudge through the oil-logged mud teeming with rusting Soviet-era pumps along the Caspian Sea in the shadow of the hills over Baku.

"We are not living well. Wages are very low," complains Ruslan Khalilov, 42, a foreman earning 152 dollars (125 euros) a month to repair old wells, dig up pipes and replace faulty pumping equipment.

Azerbaijan may be experiencing an oil boom but analysts warn it could be short-lived and millions of ordinary Azerbaijanis have so far seen little of the windfall from oil revenues.

The country's top foreign investor, British oil giant BP, signed its first contract here in 1994 and has been pumping oil for the last eight years as well as developing a series of offshore fields.

A BP-led consortium has spent almost 11 billion dollars on projects here, such as the Baku-Tbilisi-Ceyhan (BTC) pipeline that links Azerbaijan to Turkey's southern coast for shipping to Western markets.

This ex-Soviet Caucasus state pumped a total 15.5 million tons of crude oil last year and plans to increase the amount to 20 million this year and to 40 million tons by 2007.

"It will be producing over 50 million tons for quite an number of years from 2008," said David Woodward, the head of BP in Azerbaijan, despite analyst warnings that the boom could end in 10 to 15 years unless new reserves are found.

The boom has fueled an impressive economic growth in Azerbaijan, with the Gross Domestic Product (GDP) rising by 16 percent last year and expected to soar by 21 percent this year.

But 38 percent of Azerbaijanis still live below the poverty line and the minimum public sector wage is just 30 dollars a month -- although the amount has tripled since 2003 -- according to official government figures.

"The oil boom makes no difference to us," says Sergei Ovsyanikov, a Baku-based electrical engineer, who just spent two months on a fishing trawler working for 240 dollars a month.
"We will never be another Kuwait," echoes Khalid Asgarov, a top executive at Azerbaijan's Unibank.
A fund set up by Azerbaijan to manage some of the oil windfall has amassed over a billion dollars -- or 125 dollars per citizen -- but observers say its management is too politicised and have called for greater transparency.

On the streets of Baku new oil money is prominently on show in the form of Mercedes cars zooming past and high-rise buildings mushrooming in the city's downtown.

But corruption is also rife, many ordinary Azerbaijanis and opposition politicians say.

"We have a huge influx of oil dollars on the one hand, and a corrupt, authoritarian system on the other -- it's a terrifying situation," said Eldar Namazov, head of the "YES" (New Policy) opposition bloc.

The non-governmental group Transparency International this year ranked Azerbaijan 137th out of 159 states on a corruption index ranging from the least to the most corrupt.

To avert budgetary dependence on oil revenues, the government should develop other sectors of the economy such as agriculture, argues Unibank's Asgarov, adding that Azerbaijanis "have an instinct for business."

Entrepreneur Arif Huseinov has been buying up clothes in Poland and importing them overland to Azerbaijan for the past 17 years.
Huseinov says he makes a net monthly profit of 2,000 dollars -- "a huge sum for Azerbaijan, where the middle class market is almost non-existent."




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