Energy in Azerbaijan

[Mher]

Re: Energy in Azerbaijan

Azerbaijan: Unemployment Rises as Economy Teeters
Feb 24th, 2016

Falling oil prices and a recent currency devaluation are spurring businesses to lay off workers in Azerbaijan. But, in a sign of the political sensitivity of the country’s economic downtown, some companies are keeping unemployment numbers under wraps.

Azerbaijan’s sudden economic plunge is forcing cuts at all kinds of enterprises, across all sectors. The list of government-connected entities that have announced layoffs include Azerenerji, the country’s largest electrical power utility; the gas-distribution network Azerigas, part of the state-run, generally cash-rich SOCAR energy company; and mobile phone operator Azercell.

In addition, seven private banks have closed over the past month after the Central Bank revoked their licenses. Culture and Tourism Minister Abulfas Garayev has even announced that “several museums will be closed because of ineffectiveness,” and warned that cultural organizations that receive government support, but post low “earnings” will be shut down.

While acknowledging job losses, some companies seem reluctant to discuss the underlying economic causes. Some attribute the layoffs to “reforms” or a “transfer [of employees] between departments.” Tellingly, numbers for the layoffs are often not made public.

In January, Labor and Social Welfare Minister Salim Muslumov stated that the government is aware of the problems posed by layoffs and will make vocational retraining available to those who lose their jobs.

So far, official data does not appear to reflect the downturn in the job market since Azerbaijan’s currency, the manat, experienced an almost 33-percent devaluation against the dollar last December. As it has for the past few years, Azerbaijan’s State Statistical Committee puts unemployment at 5 percent of the working-age population of roughly 5.8 million.

Government promises of job training and other benefits for the unemployed are ringing hollow to many in Imishli, a southern region with a population of almost 125,000, located along the Iranian border roughly 220 kilometers southwest of the capital Baku.

Imishli is the only Azerbaijani region this year that did not require government subsidies to meet its expenses. Even so, it has not escaped the collateral damage inflicted by the economic crash.

According to the regional government, 45 percent of the region’s revenue is generated by one sugar factory, part of a conglomerate that also produces limestone, plant oil and fodder. The factory, the Azerbaijan Sugar Production Association, is owned by Azersun Holding, a business operation that a report published by the International Consortium of Investigative Journalists indicated had connections to family members of President Ilham Aliyev. The president himself opened the 850-employee facility in 2006.

In December, management cut nearly 200 jobs, according to Azersun Holding spokesperson Afig Safarov, adding that those affected were sub-contractors. One laid-off worker told EurasiaNet.org the job market in the region is bleak. “Now, wherever I go for a job, I’m told to wait. … Unemployment was always a big problem here, but now it’s worse,” he said.

Even some of those who have a job complain that wages are not sufficient to keep pace with the rising cost of living. One state-sector worker in Imishli said he is unable to make ends meet on his monthly salary of 180 manats (about $115). “One should get at least $1,000 [per month] in order to be able to live in Azerbaijan. We have so many expenses,” he said. “Let’s give $115 [per month] to a minister and see how he can survive on that.”

Official data does not seem to take the sugar factory layoffs into account. As of January 2016, the latest date for which information was available, only 47 individuals were registered as unemployed in Imishli.

Until recently, profits from Azerbaijan’s abundant energy exports helped keep the issue of unemployment off the public’s radar, noted Parviz Heydarov, an economic expert at Baku’s Scientific Research Institute of Economic Reforms. Starting in 2004, Azerbaijan spent more than 50 billion manats (about $33 billion) to spur economic development in its regions. Those initiatives have had mixed results. And now, the government is not in position to spend as it once did, given that Brent crude, the international benchmark, has slipped under $33 per barrel, roughly 70 percent off its average two years ago.

Protests over the manat’s devaluation and rising unemployment have occurred throughout Azerbaijan in January.

In Ganja, the country’s second-largest city with a population of 313,200, a job fair turned into a protest on February 5 when applicants grew agitated that they would not receive job offers for one of the 750 positions reportedly available. Police stamped out the impromptu demonstration and the job fair was canceled.

To keep a lid on popular frustrations, the government is mulling fresh initiatives aimed at the agricultural sector, which employs roughly 37 percent of working-age Azerbaijanis. Azerbaijani officials are engaging Ukraine, China and Japan, among others, in discussions about various forms of agricultural cooperation.

In Imishli, an agriculturally oriented region, the government recently opened a “milk-collection facility,” co-financed with the US government, which could provide jobs for upwards of 1,200 people, Trend news agency reported. The regional government also plans to open a dairy farm that will produce cheese for export, a 20-million-euro ($21.9 million) project, News.az reported.

Even the sugar factory supposedly has expansion plans. Azersun Holding spokesperson Safarov maintains that the plant’s production rate of 1,000 tons per day will not drop, and that experts are looking for new projects to rehire those recently laid off, he said.

http://www.eurasianet.org/node/77516

[Artsakh]

Re: Energy in Azerbaijan

When rates rise during growth, the goal is to halt inflation.
Higher interest rate => less money supply in circulation => less inflation.

Economics is not an exact science. The current world situation has nothing to do with shortage of any resources, but artificially created circumstances (now lasting almost a decade) by the big world powers, and in particular the US/West, and one of their intentions is weakening of Russia and Iran through an artificial drop in the world oil prices.

However, I generally agree. They can speak about growth, and decline in unemployment, and betterment all they want (this is concerning the US), however, one thing they can't lie about is an interest rate increase, which is supposed to imply a stabilization of the economy.

Now, let's stay on topic concerning azergayjan.

[armnuke]

Re: Energy in Azerbaijan

How exactly does raising interest rates stimulate the economy?

When rates rise during growth, the goal is to halt inflation.
Higher interest rate => less money supply in circulation => less inflation.

[Haykakan]

Re: Energy in Azerbaijan

http://www.investinganswers.com/fina...oduct-gdp-1223


WHY IT MATTERS:

When GDP declines for two consecutive quarters or more, by definition the economy is in a recession. Meanwhile, when GDP grows too quickly and fears of inflation arise, the Federal Reserve often attempts to stimulate the economy by raising interest rates.

How exactly does raising interest rates stimulate the economy?

[londontsi]

Re: Energy in Azerbaijan

Azerbaijan's GDP declines by 3.3% y/y to €2.3bn in January
By bne IntelliNews February 23, 2016
Azerbaijan's GDP declined by 6.6% m/m and by 3.3% y/y to AZN4bn (€2.3bn) in January, according to the country's State Statistics Committee (Azstat).

http://www.investinganswers.com/financial-dictionary/economics/gross-domestic-product-gdp-1223

WHY IT MATTERS:

When GDP declines for two consecutive quarters or more, by definition the economy is in a recession. Meanwhile, when GDP grows too quickly and fears of inflation arise, the Federal Reserve often attempts to stimulate the economy by raising interest rates.

[armnuke]

Re: Energy in Azerbaijan

Azerbaijan's GDP declines by 3.3% y/y to €2.3bn in January
By bne IntelliNews February 23, 2016
Azerbaijan's GDP declined by 6.6% m/m and by 3.3% y/y to AZN4bn (€2.3bn) in January, according to the country's State Statistics Committee (Azstat).

[HyeSocialist]

Re: Energy in Azerbaijan

1- Even children in the most remote village of Kavkaz do know by now, that azeri oil output is doomed to decline.
2- The deel to freeze concerns major player, able to produce more than they do actually. (Iran)
3- How can Baku refuse to freeze = decide to produce more, if physically they do not have the capacity, even if they wished to...?

Exactly. Freezing is to freeze at current production levels. These monkeys have been going down ever since they hit the peak.

[Vrej1915]

Re: Energy in Azerbaijan

Azerbaijan refuses to freeze oil production levels
Agence France-Presse on Feb 16, 2016 @ 8:36 AM


As oil prices have fallen to near 13-year lows the manna of petrodollars diminished, and Azerbaijan's once-booming economy quickly hit the skids, the national currency plummeted and inflation soared.

http://www.globalpost.com/article/67...duction-levels

1- Even children in the most remote village of Kavkaz do know by now, that azeri oil output is doomed to decline.
2- The deel to freeze concerns major player, able to produce more than they do actually. (Iran)
3- How can Baku refuse to freeze = decide to produce more, if physically they do not have the capacity, even if they wished to...?

[Mher]

Re: Energy in Azerbaijan

Azerbaijan refuses to freeze oil production levels
Agence France-Presse on Feb 16, 2016 @ 8:36 AM

Energy-rich Azerbaijan refused Tuesday to join global producers Saudi Arabia and Russia in freezing crude output to prevent a further slide in oil prices.
"We are not planning to freeze oil production," the Caspian nation's energy ministry said in a brief statement.

Saudi Arabia, Russia, Qatar, and Venezuela agreed to freeze oil output at January levels in a bid to shore up prices after a 70 percent drop due to chronic oversupply.

The announcement marked the first move between OPEC and non-cartel producers to stem the price fall since it began falling nearly 19 months ago.

However the agreement was conditional to other major producers joining in, and the effort to bring other producers on board may prove complicated.

Oil markets were hoping for a cut, and prices soon resumed their drop. In late London trading benchmark Brent crude oil was down 64 cents to $32.75 a barrel, while the main US contract, WTI, was down 0.43 cents to $29.01.

Ex-Soviet Azerbaijan's government has said it was expecting to produce this year 40.7 million tonnes of oil -- a 2.3-percent decline compared to 2015.

Exports of hydrocarbons constitute up to three quarters of the Azerbaijan government's revenues, making the Caucasus country's economy highly dependent on global energy prices.

As oil prices have fallen to near 13-year lows the manna of petrodollars diminished, and Azerbaijan's once-booming economy quickly hit the skids, the national currency plummeted and inflation soared.

http://www.globalpost.com/article/6733764/2016/02/16/azerbaijan-refuses-freeze-oil-production-levels

[Mher]

Re: Energy in Azerbaijan

Iran Joins Georgia’s Caucasian Gas Circle

As the price of natural gas keeps declining, competition among Caspian Basin suppliers is picking up.

Georgia, which serves as a crossroads for Caspian Basin energy exports, has become the focal point of a three-way scramble among natural gas exporters. Citing a wintertime shortage of natural gas, Tbilisi is considering deals from Azerbaijan, which already supplies 90 percent of Georgia’s gas; Russia, which provides the other 10 percent as a fee for transiting Russian energy to Armenia; and, now, Iran.

Georgia’s selection could have long-term implications. Diversifying Georgia’s gas supplies would mean moving away from Azerbaijan, the energy power behind the Southern Gas Corridor, an upcoming mega-gas-export tube that crosses Georgian territory en route to Turkey and Europe. Both the European Union and the United States have promoted the corridor as a way to wean Europe off gas imports from Gazprom, Russia’s energy behemoth, and an economic tool often used by the Kremlin for geopolitical purposes.

But Georgian officials now see Gazprom as a potential supplier to meet a growing local demand for gas, estimated at 2.5 billion cubic meters (bcm) per year. Energy Minister Kakha Kaladze met with Gazprom representatives on February 19.

“Azerbaijan is our strategic partner and friend, but it is also a virtual monopolist on the Georgian market,” Kaladze told EurasiaNet.org. He claimed that Baku does not have the technical capacity to make additional gas deliveries, which are needed due to rising demand in rural Georgia and higher electricity production. Georgian officials have said the country currently suffers from a gas shortfall of 2.5 million cubic meters, a tiny fraction of overall annual use. The seemingly small deficit raises questions about why Georgian officials are considering new gas deals.

After the price of Azerbaijani gas for corporate clients increased last spring by roughly 30 percent (to $318 per 1,000 cubic meters), Tbilisi approached Gazprom, and received “a very competitive offer,” he said.

The prospect of increased purchases from Gazprom heightens fears among many Georgians. Enmity for Russia remains widespread in Georgia since the two countries fought a brief war in 2008. Kaladze has downplayed the notion that a deal with Gazprom would compromise Georgian sovereignty in any way.

“At best, it may go from 10 to 12 percent [of the Russian share in Georgia’s gas imports],” Kaladze told EurasiaNet.org. Only a handful of corporate gas consumers would benefit from Russian gas, he added.

Kaladze said he took Gazprom’s proposal back to Baku, hoping to negotiate a price match, but that, as yet, has not happened. Georgia and Azerbaijan for now have agreed to redistribute supplies so that Georgia gets less Azerbaijani gas in summer and more in winter, when consumption peaks.

Meanwhile, enter Iran.

Following the lifting of international sanctions, Tehran has proposed selling Georgia up to 14 million cubic meters per day via Armenia, which is currently dependent on Russian-supplied gas.

Normally protective of its own status, Russia seems surprisingly amenable to Iran’s moves. So far, Gazprom has voiced no objections to the South Caucasus’ energy pie expanding to include Iran.

Energy analyst Ara Marjanian, president of the E-Cub, an energy think-tank in the Armenian capital, Yerevan, believes that the partnership between Iran and Russia in Syria, as well as the end of sanctions against Iran, explains Gazprom’s apparent tolerance.

“Let’s not jinx it, but the new geo-strategic and economic realities made Russia more cooperative,” Marjanian commented.

Not all Georgians welcome the idea of obtaining Iranian gas via Armenia. Liana Jervalidze, an independent energy analyst in Tbilisi, believes that energy security, economic benefit and geo-strategy dictate that “It is in Georgia’s best interest to remain a place for gas transit to Armenia, not the other way round.”

Kaladze earlier had claimed that, to push Tbilisi to accept cash rather than gas as a transit fee, Gazprom had threatened to stop supplying Armenia altogether and let Armenia get its gas from Iran. Whether Iran’s proposal and Gazprom’s alleged threat are related is not known.

Taking Iran up on its offer does not seem immediately feasible for Tbilisi. For now, Armenia’s Gazprom-run pipeline to Iran can handle only about 1.1 bcm per year, and its line to Georgia takes only Russian gas. No mention has been made of building a second pipeline.

Steve LeVine, energy commentator and adjunct professor of security studies at Georgetown University, calculates that any Moscow-Tehran cooperation in Armenia, where Moscow has carefully cultivated a dependence on Russian energy, will be limited.

“There is no history of Russia, certainly modern-day Russia … deserting an intimate ally in that manner,” LeVine said.

“I don’t see Iran and Russia going hand-in-glove,” he continued. “They are rivals; Iran will act in its own interest.”

Nonetheless, even the notion of using Armenia as a transit country for Iranian gas enrages its foe, Azerbaijan, Georgia’s dominant gas supplier.

Already miffed by Kaladze’s talks with Gazprom, Baku, to keep its cards in play, has promoted Azerbaijan’s own potential as a conduit for Iranian gas – an idea deemed “common sense” by a columnist for the government-aligned Trend news agency.

On February 17, while on a trip to Tehran, Kaladze announced that Tbilisi could consider this option, too.

Pipelines from Azerbaijan to Georgia and on to Turkey and Europe might appear an additional attraction for Iran. Tehran earlier this year expressed interest in such an export route, but has made no official commitment to join the Southern Gas Corridor.

If Iran’s ultimate market is Europe, commented Baku-based energy analyst Ilham Shaban, director of the Caspian Barrel energy-research center, it can connect directly from the northwestern Iranian city of Tabriz to the Turkey-based Trans-Anatolian Natural Gas Pipeline, the midsection of the 3,500-kilometer-long Southern Gas Corridor, designed for pumping Azerbaijani gas through to Europe.

Meanwhile, Tbilisi is pursuing yet another option – increasing its take from the South Caucasus Pipeline, the Corridor’s initial section. If that works, Kaladze stated on February 18, then Georgia would not buy Iranian or additional Russian gas.

http://www.eurasianet.org/node/77436