Tag Archives: Azerbaijan

Azerbaijan admits its GDP will shrink in 2016

OCT. 21 2016 (The Conway Bulletin) — Azerbaijan said that its economy would shrink in 2016 by 2.8%, a major reversal from its earlier insistence that it would avoid a recession and post growth of 1.8%.

Answering questions posted by Reuters, the Azerbaijani economy ministry blamed sluggish oil prices and low global growth for the GDP revision. Last week government data showed Azerbaijan’s GDP had contracted by nearly 4% in the first nine months of 2016.

“The growth at 1.8 percent was projected in 2015, when the International Monetary Fund had been projecting the oil price at $64/barrel,” Reuters quoted government officials as saying. Oil prices are now around $50/barrel, double the price in January.

Most economists have been predicting a recession in Azerbaijan this year and the reluctance to downgrade its own growth estimate has been seen by many as fanciful thinking that will damage the credibility of the Azerbaijani government.

According to the World Bank the last time that Azerbaijan’s GDP contracted was in 1995.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

DHL sets up an office in Azerbaijan

OCT. 26 2016 (The Conway Bulletin) — German logistics giant DHL set up an office in Baku, part of its drive to build a transport hub in the South Caucasus. In May, state- owned Azerbaijan Railways and DHL signed an agreement to establish a logistics hub in Azerbaijan to transport goods from China to Turkey, Russia and Europe. In Azerbaijan, DHL will initially employ Turkish management.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Azerbaijan’s GDP shrinks by 3.9%

OCT. 17 2016 (The Conway Bulletin) — Azerbaijan’s GDP shrank by 3.9% in the first nine months of the year compared to the same period in 2015, highlighting the heavy impact that a fall in the price of oil has had on the economy. The fall is roughly in line with analysts’ prediction. They had said that Azerbaijan is particularly exposed to the collapse in oil prices because it has not diversified its economy.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Oil output stagnates in Azerbaijan

OCT. 17 2016 (The Conway Bulletin) — Azerbaijan produced 31.27m tonnes of oil and gas condensate in the first nine months of the year, the State Statistics Committee said, a drop of 0.3% from last year. Oil is the mainstay of the Azerbaijani economy and the government has been urging oil companies, in particular BP, to increase the amount of oil they produce. Gas production, the statistics committee said, has risen.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Heavy rain floods Azerbaijani capital for the second time this year

BAKU, OCT. 17/18 2016 (The Conway Bulletin) — Heavy rainfall flooded parts of Baku forcing dozens of people to flee their homes and triggering a round of grumbling by locals about a lack of investment into essential infrastructure.

This is important because the popularity of Azerbaijan’s government has fallen sharply over the last couple of years with a drop in living standards linked to a devaluation in the local currency and a squeeze in GDP levels. Earlier this year, virtually unprecedented protests against a drop in living standards swept across a handful of towns in rural Azerbaijan.

This was the second major flood in Baku this year. The ministry of ecology described a flood in September as the worst for 36 years.

Reaction from Baku residents showed the levels of frustration felt by people. Aygun, a 28-year old teacher, said the government should start improving infrastructure in Baku and its environs.

“In the villages around Baku, the roads are all unpaved. So even after a day of rain, we get stuck in the mud,” she said.

And Emin, a 33-year-old consultant, agreed. He blamed corruption and mismanagement for the flooding.

“If they are going to build a new sewage system, they will need millions of manat,” he said. “But I’m not sure they have the money now when the oil prices are down. I don’t even know if they have the will.” He also referenced a cartoon on social media which showed the mayor of Baku, Hajibala Abutalibov, sitting and calmly ignoring the rain.

“I think the message is that it’s always ordinary people who suffer, never the authorities,” Emin said. “And that’s the reality.”

The government declined to comment but a spokesman for Azersu, Azerbaijan’s water operator, said the city’s sewage system needed updating.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Iran and Turkmenistan agree deal to send oil swaps to Azerbaijan

OCT. 18 2016 (The Conway Bulletin) — Iran and Turkmenistan signed a swap deal to, essentially, send 1b cubic metres of Turkmen gas to Azerbaijan every year.

The deal means that Iran will become a land bridge between Turkmenistan and Azerbaijan, potentially giving gas supplies to Europe a boost.

Under the deal, Turkmenistan will send 1b cubic metres of gas to Iran’s northern border and Iran will then deliver the equivalent to its border with Azerbaijan.

The swap deal is both an improvement for regional gas transport and an advantageous arrangement for Iran. Iran suffers from gas shortages in its north-east and supplies from Turkmenistan, besides generating transit revenues, will also help reduce this deficit.

For Turkmenistan the deal is an essential part of its diversification strategy. Turkmenistan and Azerbaijan have long touted a pipeline running across the Caspian Sea that could pump Turkmen gas westwards to Europe, as part of the wider Southern Gas Corridor network. This would secure valuable supplies from the region to Europe by giving Azerbaijan’s gas sector, which needs extra gas to fill the prospective TAN- AP-TAP pipeline network, a boost and also allow Turkmenistan to reduce its dependence on China.

The sticking point for a Caspian Sea pipeline has been Russia, though.

Russia has repeatedly said that a trans-Caspian pipeline would have to be approved by all littoral states and has, at times, threatened the use of force against unilateral decisions.

This swap deal, potentially, creates a way to send oil shipments from Turkmenistan to Azerbaijan, and then on to Europe, using Iran as a land bridge.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Azerbaijan’s SOCAR wants to sell stake

OCT. 11 2016 (The Conway Bulletin) – SOCAR Turkey Enerji, a subsidiary of Azerbaijan’s state-owned energy company SOCAR, said it will consider selling part of a 5.32% stake it directly owns in Petkim, a petrochemical complex, near Izmir. SOCAR Turkey is also considering participating in the construction of the new Star refinery together with Russia’s Rosneft. Sustained low oil prices have pushed SOCAR to reshuffle their investments abroad.

ENDS

(News report from Issue No. 300, published on Oct. 14 2016)

Azerbaijani court releases Huseynov

OCT. 12 2016 (The Conway Bulletin) – A court in Baku released Javid Huseynov, an Azerbaijani international football player jailed at the end of May for links to the killing of a journalist in 2015. Initially sentenced to four years in prison for obstructing justice, Mr Huseynov was freed after an appeal. A group of people linked to Mr Huseynov beat Rasim Aliyev, a journalist, to death after he had criticised Mr Huseynov’s behaviour.

ENDS

(News report from Issue No. 300, published on Oct. 14 2016)

Azerbaijan and Kazakhstan’s oil and gas

OCT. 7 2016 (The Conway Bulletin) – As shown in our charts this week, markets were upbeat, especially due to a steady increase in oil prices over the past two weeks, following a landmark agreement among the world’s top oil exporters.

OPEC, the exporters’ lobby group, decided to cut oil output by around 1.5% in an effort to put pressure on the US dollar and send oil prices higher.

This is OPEC’s first production cut in eight years, since the 2008 Global Financial Crisis. And the decision is an important one.

It marks a formal agreement between Saudi Arabia and Iran, whose diplomatic spats had been at the core of OPEC’s inability to decide in the past year.

It also has an important effect on countries around the Caspian Sea.

Azerbaijan has quickly eroded its reserve base, pumping its oil money into the budget to contain its currency crisis. This could have not lasted much longer. Now, if oil prices continue to float around $50/barrel, a good 20% higher than two months ago, transfers from the oil fund can slow down and the leadership can breathe.

Perhaps out of excitement from the impending re-start of Kashagan in the Caspian Sea, Kazakhstan is also rallying on higher oil prices, cutting interest rates and transfers from its oil fund into the budget.

Two caveats, however, are needed for Azerbaijan and Kazakhstan. First, don’t believe in any proposal from these two non- OPEC countries on freezing or cutting production. If their output falls it is because of economics.

Second, you need to wait until their mega projects, from Kashagan to Shah Deniz II, come online before making long-term assumptions on the energy might held by Kazakhstan and Azerbaijan.

ENDS

(News report from Issue No. 299, published on Oct. 7 2016)

Azerbaijan’s Bank Standard files for bankruptcy

OCT. 6 2016 (The Conway Bulletin) – Bank Standard, one of the largest banks in Azerbaijan, filed for bankruptcy, delivering a sharp shock to the country’s banking sector which is trying to recover from a currency crisis.

The sight of Bank Standard, considered a stalwart of the high street since the mid-1990s, going bankrupt in Azerbaijan will worry ordinary Azerbaijanis who have already seen the manat collapse and other smaller banks disappear in a harsh economic downturn.

Azad Javadov, director of the Azerbaijan Deposits Insurance Fund, a government fund that insures people’s savings in banks, told media the government had tried to save Bank Standard.

“The state tried to normalise Bank Standard, but failed. It was decided to declare the bank bankrupt to prevent more loss,” he said.

Bank Standard has, effectively, been on life-support for some time receiving funds from the government which wanted to save the bank and protect its financial sector.

But like several other smaller banks which have filed for bankruptcy this year, Bank Standard couldn’t weather the financial storm generated since 2014 by a collapse in oil prices, a recession in Russia and the fall in value of emerging market currencies.

Part of the blame, some analysts have said, lies with the Azerbaijani government which imposed heavy capital requirements on banks in 2016.

A few days after Bank Standard declared bankruptcy, the Central Bank ordered its deposits be transferred to Muganbank, a mid-sized bank. Zaminbank, another small bank, was also declared bankrupt on Oct. 4.

ENDS

(News report from Issue No. 299, published on Oct. 7 2016)