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Energy in Azerbaijan

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  • Re: Nagorno-Karabagh: Military Balance Between Armenia & Azerbaijan

    Azerbaijan Loses Its Manat Mojo

    For thousands of Azerbaijanis like 58-year-old high-school teacher Nargiz, the Azerbaijani national currency’s precipitous plunge on February 21 wiped out more than their savings. It popped a bubble of belief that Azerbaijan was protected from the kind of financial instability that has shaken other Eurasian states.

    Azerbaijan’s Central Bank on February 21 devalued the manat 33.5 percent against the dollar and 30 percent against the euro. That move cost Nargiz, who would give only her first name, the equivalent of $4,500, a decade’s worth of savings. It also amounts to her official salary for nearly the past three years from a secondary school in the capital, Baku.

    “This is a big loss for my family,” she said. “My daughter warned me that this could happen, but I did not listen to her. Now I regret it so much.”

    Nargiz could be understood for believing that the manat, and the Azerbaijani economy, would always hold its own. Authorities had offered repeated and plentiful reassurances that all was well. Though oil prices dipped below $50 a barrel in January, President Ilham Aliyev had stressed that the fall had had “no negative impact” on the manat. “On the contrary, the AZN [manat] is even stronger,” Azerbaijani news outlets quoted the president as saying on January 28.

    Symbols of a strong manat abound in Baku. Over the past decade, the city, flush with cash, has been transformed by futuristic skyscrapers. It is now in the final stages of sprucing up for this summer’s upcoming European Games, an Olympic-style competition.

    The first sign of trouble appeared on February 16, when the Central Bank stopped pegging the manat to the dollar, switching instead to a dollar-euro basket. Central Bank Chair Elman Rustamov told The Financial Times that the bank had spent “about $1 billion” of its foreign-currency reserves since the start of the year on propping up the manat.

    While President Aliyev had earlier proclaimed that Azerbaijan possessed plentiful reserves, apparently, the Central Bank decided that enough was enough. The rate has now been set at 1.05 to the dollar and 1.19 to the euro, compared with the rate on February 20 of 0.78 and 0.89 manats, respectively.

    The Central Bank claimed that devaluation aims to diversify the economy, strengthen its compatibility with international markets, boost the country’s export potential and avoid running up debt.

    To many Azerbaijanis, February 21 has simply become known as “Black Saturday.”

    Over the weekend, people swarmed exchange bureaus across the country seeking to buy dollars. The surge prompted some bureaus to stop selling dollars. Some supermarkets in Baku also stopped selling food, as locals, afraid of price-rises, began hoarding. Shopping malls in Baku likewise closed to allow managers to recalculate prices that took into account the manat’s lower value, according to local media reports.

    One policy observer, Gubad Ibadoglu, director of the non-governmental Center for Economic Research, said that he expects most food prices to rise sharply as a result of the devaluation. In some Baku markets the price of bread has reportedly doubled. Azerbaijan imports most of its retail food items. Prices for retail goods have already increased well over 30 percent, local media reported.

    One 31-year-old Baku clothes shop owner told EurasiaNet.org that he had no choice but to increase prices. “I am sorry I have to do that. I would not have expected such a betrayal from the government,” the retailer, Yavuz, who did not want to give his last name, said, referring to earlier Central Bank statements that the manat’s value would remain steady.

    Government officials could not be reached for comment on the Central Bank’s February 21 action.

    Some pro-government politicians, repeating the official line about improving exports, downplayed the notion that devaluation is damaging for Azerbaijan’s economy. "There is absolute stability in the country and there is nothing to worry about,” Fazail Agamali, chair of the Ana Vatan (Motherland) Party, told EurasiaNet.org. Claims about the potential for future upheaval “are all made up by people who have an anti-Azerbaijan attitude and want to harm the country's stability.”

    On February 21, the Ministry of Economy and Industry’s State Service for Anti-Monopoly Policy and Consumer Protection claimed on its website that it would take “measures,” including “further legal actions,” against those who use devaluation as cover to engage in price-gouging. Ministry officials did not provide criteria for what would constitute profiteering.

    There have been reports of scattered demonstrations in regions, including Lenkaran. In Baku, however, many seemed to be keeping their discontent to themselves or venting on social networks. People are well aware that the government has cracked down on any form of criticism over the past year; thus a public display of dissatisfaction over devaluation could easily result in a jail term. A February 22 protest in Baku drew only about 15 actual attendees, even though more than a thousand Facebook users had indicated they would attend.

    Some economic experts maintain that the devaluation shock is the result of government mismanagement. Devaluation “proved once again that the country’s economy has been operated by administrative tools, rather than economic means” since Azerbaijan regained its independence in 1991, said Ibadoglu, the policy analyst. Diversification of the economy away from hydrocarbons, which generate the overwhelming majority of Azerbaijan’s revenues, has not occurred.

    “The national economy is not capable of regulating itself in a crisis,” he said.
    Rather than drastically devaluating the manat against the euro and the dollar in one day, devaluation should have occurred gradually to allow businesses time to adapt, said economist Natig Jafarli, executive secretary of the opposition ReAL movement.

    Comment


    • Re: Energy in Azerbaijan

      Has Azerbaijan's National Currency Run Away Scared?
      Posted 2 March 2015 17:57 GMT

      The massive devaluation of the manat national currency has been a disaster for many Azerbaijanis, but it has also showcased their sense of humour.

      Comment


      • Re: Energy in Azerbaijan

        Thanks Mher.......if this keeps up aliev gonna push for more border killing of Armenian soldiers if not resumption of hostilities to take Artsakh back.
        B0zkurt Hunter

        Comment


        • Re: Energy in Azerbaijan

          Folks we live in times of fast changes , its gonna be fun to see azeris go down hard but moslty cause is their own leader's fault ,
          The only thing that we are obligated to do is , promote democracy , promote fair free institutions , eliminate corruption , change and liquidize the top leadership and let the really worthy ones to come atop .

          Comment


          • Re: Energy in Azerbaijan

            Originally posted by urmistake View Post
            folks we live in times of fast changes , its gonna be fun to see azeris go down hard but moslty cause is their own leader's fault ,
            the only thing that we are obligated to do is , promote democracy , promote fair free institutions , eliminate corruption , change and liquidize the top leadership and let the really worthy ones to come atop .
            agreed!

            Comment


            • Re: Energy in Azerbaijan

              Azerbaijan watches for dissent as economy slows
              Tue Mar 3, 2015 5:50am EST

              BAKU, March 3 (Reuters) - Azerbaijan is keeping a close eye on any sign of dissent as economic problems mount before a parliamentary election this year in the oil-producing former Soviet republic.

              Hit by the fall in global oil prices, the rouble's drop against the dollar in neighbouring Russia and the separatist war in east Ukraine, the South Caucasus country devalued the manat currency last month.

              With hardships growing before November's parliamentary poll, some discontent can already be felt in the mainly Muslim country of 9 million, ruled firmly by President Ilham Aliyev since he succeeded his father as president in 2003.

              "All the prices have risen, everything is very expensive ... Why don't they raise our salaries and pensions?" said Lala Sharifova, a maths teacher from the capital Baku.

              Only 30 people gathered in the centre of Baku on Saturday to protest against rising prices. But police, who frequently break up even the smallest protests, quickly detained seven of them before releasing them shortly afterwards.

              The police reaction is a sign of nervousness by the authorities, widely accused of human rights abuses and muzzling and jailing opponents. But there is almost no chance that public discontent could prevent Aliyev's ruling Yeni Azerbaijan Party from holding on to power in November's poll.

              "There is no threat to the leadership, as opposition in Azerbaijan is not strong enough," said Fazil Mustafa, an independent analyst, who said many people saw the government as having safeguarded stability for many years.

              French credit insurer Coface said, however, that social tensions could rise.

              "The slowing in economic growth could ... lead to increased tensions, especially in the run-up to the national assembly elections in November 2015," it wrote. "Nevertheless, the voting is unlikely to upset the continued domination of the presidential party."

              In a report on its website, it also cited the risk of regional instability from a long-running territorial dispute with Armenia.

              ALIYEV DEFENDS DEVALUATION

              Azerbaijan, which lies between Russia, Iran and Turkey, has been courted by the West as a transit route for U.S. troops to reach Afghanistan and an alternative to Russia in supplying oil and gas to Europe.

              Big Western oil companies such as BP, Exxon Mobil and Norway's Statoil have dominated the Azeri oil industry since the collapse of the Soviet Union, while relations between Moscow and Baku have been mostly cool.

              Aliyev, who has maintained a delicate balance between Russia and the West, showed his concern about the economic situation by going on television last week to explain why the central bank devalued the manat by 33.5 percent against the dollar, and by 30 percent against the euro, on Feb. 21.

              Five days earlier it had abandoned the manat's peg against the dollar and begun using a dollar-euro basket to manage the exchange rate, becoming the latest of Russia's regional trade partners to feel the impact of the rouble's decline.

              "The sharp depreciation of currencies in neighbouring countries started to affect us. At the same time, the declining oil price also affected our revenues negatively," Aliyev said.

              He said that even in the days after dropping the currency peg, the central bank had been forced to sell about $500 million a day to defend the manat. "If such a situation had continued, the currency reserves could have reduced significantly."

              Central bank reserves fell by nearly $1.13 billion in December and by $1 billion in January to stand at $12.68 billion, down more than 10 percent in the past year. Data for February are not yet available.

              Economic analysts say the government's target of 4.4 percent growth this year is at risk because it envisages oil at $90 a barrel. Brent crude is now trading near $60.

              Oil and gas account for 95 percent of the country's exports and 75 percent of government revenues.

              "I don't expect the oil price to exceed $60-$65 per barrel this year. That's why a revision of the budget is inevitable," Vakhid Akhmedov, the deputy head of parliament's economic committee, told Reuters, predicting this could happen in May.

              Azerbaijan's 2015 budget anticipates revenues of 19.4 billion manats. Analysts say it would lose 9 billion manats a year in oil revenues if the average price of oil were $40 per barrel.

              Meanwhile inflation is on the rise. Announcing moves to monitor prices, the president said "very serious measures" would be taken against any businesses that increased them artificially.

              "Annual inflation may reach 30 percent this year," said Samir Aliyev, an independent analyst from the Baku-based Economic Research Centre.

              The government has forecast annual inflation of 2.3 percent in 2015, up from 1.4 percent in 2014, although central bank president Elman Rustamov said last month prices could rise by 5-6 percent this year.

              ($1=1.05 manats) (Writing by Margarita Antidze, Editing by Timothy Heritage and Mark Trevelyan)

              Comment


              • Re: Energy in Azerbaijan

                Exxon CEO: Get used to lower oil prices

                NEW YORK (AP) -- Exxon Mobil CEO Rex Tillerson expects the price of oil to remain low over the next two years because of ample global supplies and relatively weak economic growth.

                "People need to kinda settle in for a while," Tillerson said at the company's annual investor conference in New York.

                In a presentation to investors outlining its business plans through 2017, Exxon assumes a price of $55 a barrel for global crude. That's $5 below where Brent crude, the most important global benchmark, traded on Wednesday. It's about half of what Brent averaged between 2011 and the middle of last year.

                The price of oil plunged in the second half of 2014 when it became apparent that production was outpacing global demand. The rise in U.S. production last year of 1.5 million barrels per day was the third largest in the history of the global oil industry, according to a recent report from BP. Meanwhile, weakening economic conditions in China, Japan and Europe slowed the growth in oil demand.

                BP CEO Bob Dudley made remarks similar to Tillerson's in a recent call with investors. The CEOs comments reflect an increasingly common industry view that new sources of oil around the globe, relatively slow growth in demand, and large amounts of crude in storage will keep a lid on prices for the foreseeable future.

                "When you have that much storage out there, it takes a long time to work that off," Dudley said.

                The U.S. Energy Department reported Wednesday that U.S. oil supplies have grown to 444.4 million barrels, the highest level at least 80 years.

                Tillerson cautioned that geopolitical turmoil could unexpectedly send prices higher. But he said that if tensions calm, much more oil is ready to hit the market.

                Production in Libya has been erratic in recent years because of political upheaval there. Production in Iran, once OPEC's second largest exporter, has been depressed in recent years because of Western sanctions. Those sanctions could be eased if current talks over Iran's nuclear program make progress.

                Exxon will be adding to that in the coming years, despite the low prices.

                Exxon told investors Wednesday that 16 new production projects will begin producing oil and gas through 2017, helping the company increase production to 4.3 million barrels per day, up from 4 million barrels per day last year.

                The company said it expects to spend less to develop new projects over the next three years, but mainly because prices that its suppliers charge have fallen considerably with the price of oil — not because it is cutting back exploring for oil and gas.

                Comment


                • Re: Energy in Azerbaijan

                  Given this prices, and the fact that Azerbaijan's government is losing more that one billion dollars a month in revenue at current prices, combined with the chaos its causing in terms of currency devaluation, inflation, jobs, and so forth, its hard to imagine Azerbaijan avoiding total economic turmoil and collapse past 2016.

                  Comment


                  • Re: Energy in Azerbaijan

                    Bulgaria seeks to transit Azeri gas to Europe

                    Sofia (AFP) - Bulgarian Prime Minister Boyko Borisov said on Wednesday his country would seek to join Azerbaijan's new Southern Corridor to transit Caspian gas to Europe.

                    After talks with Azerbaijan's President Ilham Aliev in Sofia, Borisov said Bulgaria wants "to unfreeze the Nabucco project, or rather its part starting from the TANAP (pipeline that runs through Turkey) and Nabucco-West through Bulgaria".

                    The Nabucco-West pipeline is meant to get gas from the huge Shah Deniz II field in Azerbaijan via the Trans Anatolian Pipeline (TANAP) through Turkey and transit it on to Bulgaria, Romania, Hungary and Austria.

                    However, the project was ditched in mid-2013 as the Shah Deniz II consortium opted for the rival Trans-Adriatic Pipeline (TAP).

                    TAP will chanel the Azeri gas from TANAP in Turkey on to Greece and Albania and then under the Adriatic Sea to southeast Italy, leaving out Bulgaria.

                    But Borisov said on Wednesday he was optimistic that Azeri gas will flow through his country.

                    "In the current situation there is a real chance for Azeri gas to ... be transited through our territory to neighbouring states," he said.

                    He planned to hold talks with the European Commission in Brussels on the project.

                    Bulgaria currently gets 88 percent of its gas from Russia via the highly insecure Ukraine route and has no access to other gas routes except an interconnector to Greece which can pump limited reverse flows in case of emergency.

                    Sofia's long-time projects to branch off its pipes to neighbouring Romania and Serbia have been severely delayed.

                    The Balkan country's diversification plans were also scorched by Russia's decision last December to abandon the South Stream pipeline that was intended to bring gas to Bulgaria under the Black Sea.


                    Comment


                    • Re: Energy in Azerbaijan

                      Azerbaijan Presses EU on Greek Gas Deal
                      March 11, 2015 - 9:56am, by Giorgi Lomsadze Tamada Tales Azerbaijan Energy
                      Azerbaijan is running lower on energy income, but, amidst a revived push for a role in gas distribution in Europe, not on energy-ambitions.

                      Baku is pushing for the European Union’s seal of approval on the planned takeover of Greece’s gas distribution grid by Azerbaijan’s state oil and gas corporation, SOCAR. Energy Minister Natiq Aliyev expressed dismay that EU-regulators are taking their time to make sure the deal is compatible with EU competition laws, EurActiv reported on March 11.

                      The deadline for the decision already was extended to April 22, but the minister's patience, nonetheless, is running thin, as SOCAR's tax contributions begin to slim down.

                      Tax payments for February from the country’s cash cow dropped to some 108 million manats ($103.23 million), an 8.6 percent-decline from January, Azerbaijani news outlets reported.

                      That’s the effect of both slumping oil and gas prices, and a currency devaluation. The manat now can buy less for Azerbaijan than it could last month before losing more than a third of its value against the dollar and 30 percent against the euro. (Promoted within Azerbaijan as a patriotic symbol, it currently trades at 1.05 to the dollar and 1.11 to the euro. )

                      Arguably, SOCAR’s longstanding plans to run gas-distribution networks in Europe could shore up some of that revenue slack for Azerbaijan. As one local outlet put it, the country plans to “control” what gas it sends to European markets. In 2013, SOCAR paid 400-million euros (based on current rates, some $423 million) for two-thirds of Greece’s gas-distributor DESFA, and has its sights on Eastern Europe as well. Albania appears to be one of the first places where Azerbaijan hopes to get busy.

                      The EU, however, has concerns that Azerbaijan may get too much of that “control” as both a supplier and distributor of natural gas. Azerbaijan is set to become an important gas supplier to Europe through the Trans-Anatolian Natural Gas Pipeline, which will feed gas to Greece, Albania and Italy, and, via a link with Greece, to Bulgaria. SOCAR owns a 20-percent stake in the conduit, on which construction is slotted to begin this year, but Energy Minister Aliyev sees no conflict of interest with the company's DESFA holding.

                      Rather, Baku has claimed that Greece, struggling with a severe economic crisis, and energy-thirsty Europe need Azerbaijan more than Azerbaijan needs them. Yet its anxiety over the DESFA-decision suggests a slightly different tale.

                      Comment

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