Energy in Azerbaijan

[Mher]

Re: Energy in Azerbaijan

I genuinely have trouble believing that they have that sort of money left in the sovereign wealth fund. It simply doesn't add up, given the incoming revenue and the govt budget. A lot of that fund needed to have been used to fill that gap. Furthermore, the government wouldn't be doing what it's doing, risking total collapse, if it had that sort of money. If someone can look up the details and give us a report that would be great. You would be surprised, but most of these articles just copy this information and these numbers from other places without doing any research. I've tried looking up the numbers, but the data isn't readily available and it takes a fair amount of research. If nobody has done it, I'll try to do it by the weekend.

[HyeSocialist]

Re: Energy in Azerbaijan

* Azerbaijan's manat under pressure from plunge in oil price

* Currency was floated in December

* Move follows similar steps in Russia and Kazakhstan

* Risk of social unrest rising (Adds details, analyst comments, background)

By Nailia Bagirova and Karin Strohecker

BAKU/LONDON, Jan 14 Azerbaijan's central bank said on Thursday it had banned the sale of foreign exchange in standalone bureaux de change run by commercial banks in a further move to support the oil exporter's faltering currency, the manat.

The initiative, outlined by a bank spokesman, was taken with the recent plunge in oil prices exerting huge pressure on the public finances and currencies of oil-dependent countries in the former Soviet Union, raising the risk of social unrest.

The interior ministry said on Wednesday police and soldiers had detained 55 people earlier this week for holding unsanctioned protests. It described those arrested as "radical" political activists and religious extremists.

"Azerbaijan's economy is not so much heading as hurtling towards a crisis," said Chris Weafer, a senior partner at Macro Advisory in Moscow.

Oil and gas account for 75 percent of the Azeri state's revenues. The central bank has been tightening restrictions on sales of foreign currency since cutting the manat loose last month after Russia and Kazakhstan took similar steps to try to preserve their reserves.

Exchange bureaux in Turkmenistan, a major ex-Soviet gas producer, also stopped selling foreign currency this week.

The price of benchmark crude oil has now fallen almost 75 percent since June 2014 to below $30 a barrel.

Such a steep fall inevitably raises pressure on Azerbaijan's political system.

President Ilham Aliyev's party swept the board in a parliamentary election in November, a vote the mainstream opposition and international monitors shunned.

Rights groups accuse the government of curbing freedoms and of silencing dissent, while the opposition complains of harassment, a lack of access to air time and draconian restrictions on campaigning. The government denies wrongdoing.

In Baku, the Azeri capital, many currency exchange booths had stopped operations before the central bank publicised its ban. One booth owner, who declined to be named, said he had closed three days ago. "The central bank sent a letter with an order to close all bureaux de change," he said.

The central bank had already said this month that anyone wanting to buy over $500 must present their identity card. A Reuters reporter on Thursday saw a queue of around 250 people at one bank trying to exchange currency.

On Wednesday, the bank set an exchange rate of 1.5706 manats per U.S. dollar, valid until Friday. Street dealers in Baku were, however, offering a rate of 1.8 on Thursday.

"It (Azerbaijan) is a small, narrow economy that is fully dependent on oil, and now, when oil is falling again, the devaluation they did in December is not big enough," said Per Hammarlund, chief emerging markets strategist at SEB.

"I suspect there is more to come."

GROWTH UNDER THREAT

Azerbaijan's 10-year dollar bond, which matures in 2024, lost more than 1.5 cents on Thursday to trade at a record low of just above 90 cents.

Meanwhile the yield premium over safe-haven U.S. Treasuries blew out past 540 bps, having risen 70 bps this year alone.

Dollar debt issued by the state energy company SOCAR traded lower across the curve, with the 2023 and 2030 bonds trading at record lows in the low 80s.

The cost of insuring the sovereign debt of oil-producing countries across emerging markets has soared in recent weeks.

Russian 5-year credit default swaps (CDS) have gained almost 30 basis points, or more than 18 percent, since the start of the year, while Kazakh CDS have ballooned by 10 percent over the same period, according to financial data provider Markit.

No prices were available for Azeri CDS.

The economy of Azerbaijan, whose 2016 budget is based on an oil price of $50 per barrel, grew only 1 percent last year. It plans to revise its budget and cut spending, something Russia, its neighbour and the world's top oil producer, is also contemplating.

Azeri authorities decided to withdraw support for the manat on Dec. 21 after burning through over half the country's foreign currency reserves in an effort to defend it against the impact of falling oil prices. That triggered a plunge of 32 percent against the dollar.

The central bank this month widened the exchange rate corridor within which banks can buy and sell the manat to 4 percent either side of its official rate from 2 percent.

"Only six months ago, we expected that the economy would grow by 2.5 percent in 2016," said Macro's Weafer. "But now, that forecast is cut to about 0.5 percent and even that number looks vulnerable." (Additional reporting by Alexander Winning in Moscow and Claire Milhench in London; Writing by Maria Kiselyova, Margarita Antidze and Katya Golubkova; Editing by Andrew Osborn and Kevin Liffey/Mark Heinrich)

http://www.reuters.com/article/azerbaijan-forex-cenbank-idUSL8N14Y0V720160114

[Artashes]

Re: Energy in Azerbaijan

And on top of all the bleeding mentioned in the above posts is ... My approx estimation -- the burning oil rig is costing at least $10,000 per day for the boats tendering that rig. If they called in Boots & Coots that's at least another $10,000 per day for services plus scores of millions to gather capping materials, plus loss of production profits, and the list doesn't stop there.
The burning rig is a hug financial bleeding sore, and it's still burning.

[Joseph]

Re: Energy in Azerbaijan

The part about protests occurring nationwide and not just in Nadaran echoes my previous posts- this is going to snowball

https://www.stratfor.com/image/azerbaijans-economic-decline

Azerbaijan's Economic Decline
Media Center, Image JANUARY 15, 2016 | 20:17 GMT Print Text Size

In Azerbaijan, the dramatic decline of global oil prices has contributed to an economic slowdown. In 2015, Azerbaijan's GDP grew by only 1 percent, down from 2.8 percent in 2014 and 5.8 percent in 2013. The country has also had tremendous trouble with its currency, the manat, over the past year. In February 2015, the government devalued the manat by 33 percent. Ten months later, the currency plunged again at the end of December when the Central Bank of Azerbaijan shifted to a free float after spending more than half its currency reserves to prop up the manat. By the end of 2015, the manat had lost roughly half its value, simultaneously raising inflation, with the cost of some goods reportedly increasing by as much as 100 percent.

The Azerbaijani government has responded with several measures to address the weakening currency and broader economic slowdown. However, any cuts can be expected to lead to layoffs in the public and energy sectors, the latter of which has already seen hundreds of jobs slashed over the past year by firms such as BP and Azerbaijan's own state-owned oil company, SOCAR.

Protesters have taken notice. The same day the government announced it would reduce spending, several demonstrations were held across Azerbaijan in the districts of Lankaran, Fuzuli and Siyazan over the price hikes and growing unemployment resulting from the devaluation of the manat. These protests, which numbered from a few dozen to several hundred people in each city, have continued throughout the week. Security personnel were deployed to many of the areas, in certain cases detaining some of the protesters. In Lankaran and Siyazan there were minor clashes between security personnel and demonstrators. Meanwhile, the capital, Baku, has remained relatively quiet but no doubt has a sizable security force placed throughout the city to pre-empt possible protests.

Though Azerbaijan has been subject to protests in the past, they have typically been concentrated in Baku or nearby areas, such as Nardaran and Sumgait, and have largely been over political issues, mainly the government's treatment of opposition parties, journalists or religious groups. All have been, until now, manageable for the Azerbaijani government.

So far roughly several hundred to a thousand people in five to 10 cities and districts across the country have participated in the demonstrations. If the protests grow and spread to other cities, it could lead to a level of social and political pressure that Azerbaijan has not experienced in decades. Baku, the political and demographic core of the country, will be particularly important to watch, as will attempts by opposition groups such as the Musavat party to capitalize on the protests in an effort to gain new supporters and ratchet up pressure on the government.

[HyeSocialist]

Re: Energy in Azerbaijan

Jan 15 Azeri state oil fund SOFAZ sold $200 million on the market on Friday to support the manat currency, while another $100 million was sold by the country's central bank, SOFAZ said in a statement.

SOFAZ sold $200 million in a bid to prop up the manat earlier this week. (Reporting by Nailia Bagirova; writing by Katya Golubkova; editing by Jack Stubbs)

http://www.reuters.com/article/azerbaijan-forex-idUSR4N14H02J

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Getting actual, reliable information from that hermit kingdom is a task. All their news agencies are state run and read more like gossip magazines and tabloids than legitimate newspapers. Reuters seems to have access to folks in the right places to give us what we need. CESD is also, true to its name, a really solid think tank. Kudos to them to operate in such a difficult environment and be honest. Check this out, they're tapping on the brakes with the "free-floating" currency

[Vrej1915]

Re: Energy in Azerbaijan

The part about protests occurring nationwide and not just in Nadaran echoes my previous posts- this is going to snowball

https://www.stratfor.com/image/azerbaijans-economic-decline

Azerbaijan's Economic Decline
Media Center, Image JANUARY 15, 2016 | 20:17 GMT Print Text Size

http://www.bbc.com/azeri/international/2016/01/160115_quba_protest

[Mher]

Re: Energy in Azerbaijan

[B].... as will attempts by opposition groups such as the Musavat party to capitalize on the protests in an effort to gain new supporters and ratchet up pressure on the government.

can anyone provide information on Musavat, it's ideology, and the level of support it has? how close do they resemble Dashnaktsutyun in Armenia (not diaspora)?

It's important to know if Aliyev falls, what comes next. Like i said before, ideally i would want a failed state with civil war. But if a new central authority rises, it'll still have access to the massive arsenal stockpiled by that government in the past eight years. So a radical nationalist movement would be worrying.

[Artashes]

Re: Energy in Azerbaijan

can anyone provide information on Musavat, it's ideology, and the level of support it has? how close do they resemble Dashnaktsutyun in Armenia (not diaspora)?

It's important to know if Aliyev falls, what comes next. Like i said before, ideally i would want a failed state with civil war. But if a new central authority rises, it'll still have access to the massive arsenal stockpiled by that government in the past eight years. So a radical nationalist movement would be worrying.

--- ideally I want a failed state "with civil war". ---
Also ... What comes next ?
Baboonieve is not going to let go (my opine).
Control is too strong. Protests and crushed protests follow with an extreme rise in tension and weird confusion amongst general monkey population.
Smart money runs. 1st in small amount then gets extreme as implosion becames for drawn .
Your right in my opinion about "what comes next".
No matter how much humanity anyone wants to bequeath the turc (east/west) concerning their (or anyones) desire fore a fair and decent shake, the monkey is only concerned about the monkeys rights, and does not extent to true humanity. All that the baboon stole (and west turc or turd) is sacrosanct to them. They have no further entectual/moral/decency/character to them. Regretfully the are devoid on humanity **** unless***** it is specifically pointed at --- their --— desire for themselves. So, in my opine no matter who gets the control after this potential meltdown , those weapons are for Armenians further destruction.
Personally I don't see the feeble general population rising above the brutality they will face by the few who can curry favor.
After all is said and done --- they are turcs, there isn't enough heart amongst the entire lot to form one (1) small community.
A failed state that's contested by east/west after a strange meltdown is a real potential.

[HyeSocialist]

Re: Energy in Azerbaijan

The political structure Azerbaijan inherited from the soviets and reinforced by the Aliyev clan calls for a centralized, single party state. Azeri social structures are more clan like. It's possible that there will be a lot of inner fighting, but eventually a single party structure with almost absolute power will emerge. Will that state be too busy crushing dissent at home or too impoverished to launch a war? Time will tell. Aliyev won't be there but Azerbaijan definitely will.

[HyeSocialist]

Re: Energy in Azerbaijan

Azerbaijan’s economic woes looked set to get worse on Jan. 18 as the price of oil fell to its lowest level since 2003.


Brent crude sank below $28 per barrel on news that Iran, newly released from Western sanctions over its nuclear program, was planning to significantly increase its oil exports, adding to the global glut of supplies.

The fall in oil prices increases the economic pressures on Azerbaijan, which has seen waves of public protest over price rises and unemployment.

The oil-rich Caspian nation’s currency, the manat, has taken a hammering since mid-December, when the government unpegged it from the dollar. Set free to float, the currency immediately lost 32 percent of its value, and it has been losing ground slowly since.

The exchange rate lost 1.04 percent on Jan. 18, rising to AZN 1.5870 to the dollar.

Azerbaijani economic expert Zohrab Ismayil, writing on Facebook on Jan. 18 warned that the continued fall in the oil price would deepen the country’s problems.

“The Central Bank’s reserves will run out in two to three months, and the local currency will lose value very sharply,” Ismayil wrote. “There will be price hikes of from 30 percent to 50 percent again.”

“The crisis is deepening in the banking sector, and the construction, real estate and automobile markets are completely collapsing.”

Ismayil also said Azerbaijan’s credit rating was falling, which he warned would make it more difficult for the country to raise loans from international financial institutions and foreign banks.

Meanwhile, public protests in Azerbaijan against the effects of the economic crisis continue. In the latest demonstration, traders in the Bina Trade Center in the Garadagh district of the Azeri capital Baku held a peaceful rally calling for a decrease in rents, the independent online television channel Meydan TV reported. Traders said all the stores in center had been closed as part of the protest.

The government has responded to the wave of public protests in the country’s regions with a crackdown, deploying riot police and using tear gas and water cannons to disperse demonstrators.

In another pubic protest, this time in the Jalilabad and Astara districts of Lankaran region in the southeast of the country, local people rallied in front of the regional headquarters of the social protection agency to protest against price hikes, unemployment, problems with bank loans and receiving social aid payments, the Azeri service of Radio Free Europe/Radio Liberty reported.

Azeribaijani President Ilham Aliyev has called a government meeting to discuss the country’s socio-economic problems, but Azerbaijani economic expert, Natig Jafarly, writing on Facebook on Jan. 18, said nothing much was likely to be achieved there.

“They’ll probably just change the state budget,” Jafarly wrote. “The state budget is based on an oil price of $50 a barrel – they’ll probably drop that to $40.”

“But that will just cause more job cuts and a reduction in the state’s economic activity.”

Jafarly said the best way of saving budget funds would be to cancel this year’s Baku European Grand Prix motor racing event and the Islamic Games.

http://www.kyivpost.com/article/content/world/problems-pile-up-for-azerbaijan-as-oil-price-tumbles-406149.html

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Will Aliyev cancel the money pits of the F1 race and Islamic Games? One can sure hope not.