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Background Notes: Eurasia, August, 2006 [Secure eReader]
eBook by U.S. Department of State

eBook Category: Travel
eBook Description:

Bureau of European and Eurasian Affairs country background notes for international travelers to Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Each country’s brief, factual background note summarizes its geography, people (population, ethnic groups, languages, health, and religion), history, culture, government and political conditions (type, political parties and principal government officials), economy (GDP; land, climate, and demographics; agriculture and natural resources; trade, industry, and investment; and transportation), defense, human rights, and foreign relations. Each country’s background note also provides travel and business information, including principal U.S. officials (ambassador, public affairs officer, counselor for economic affairs, etc.); embassy location, telephone, and fax numbers; and passport information.



eBook Publisher: InfoStrategist.com
Fictionwise Release Date: September 2006




Background Note: Azerbaijan

PROFILE

OFFICIAL NAME:

Republic of Azerbaijan

Geography

Location: South Caucasus; bordered by Russia to the north, the Caspian Sea to the east, Iran to the south, and Georgia and Armenia to the west. Area: 33,774 sq. mi. (includes Nakhchivan and Nagorno-Karabakh); slightly smaller than Maine. Cities: Capital – Baku. Terrain: Caucasus Mountains to the north, lowland in the central area through which the Kura River flows. Climate: Dry, subtropical with hot summers and mild winters; forests, meadows, and alpine tundra in the mountains.

People

Nationality: Noun – Azerbaijani(s), Azeri. Adjective – Azerbaijani, Azeri. Population (July 2005 est.): 7,911,974. Population growth rate (2005 est.): 0.59%. Net migration rate (2005 est.): -4.64 migrant(s)/1,000 population. Ethnic groups (1999 census): Azeri 90.6%, Dagestani 2.2%, Russian 1.8%, Armenian 1.5%, other 3.9%. Note: the separatist Nagorno-Karabakh region is populated almost entirely by Armenians. Religion: Muslim 93.4% (majority Shi'a), Russian Orthodox 2.5%, Armenian Orthodox Church 2.3%, and other 1.8%. Languages: Azerbaijani 89%, Russian 3%, Armenian 2%, and other 6%. Education: Literacy – 97%. Health: Infant mortality rate – 83.41/1,000 live births (2000 est.). Life expectancy (2005 est.) – 63.35 years. Work force (3 million): Agriculture and forestry – 42.3%; industry – 6.9%; construction – 4.2%; other – 46.6%.

Government

Type: Republic. Constitution: Approved in November 1995 referendum. Independence: August 30, 1991 (from Soviet Union). Branches: Executive – president (chief of state), prime minister (head of government), Council of Ministers (cabinet). Legislative – unicameral National Assembly (parliament). Judicial – Supreme Court. Administrative subdivisions: 78 rayons, 11 cities, and 1 autonomous republic. Political parties: New Azerbaijan Party, Popular Front Party, Musavat Party, National Independence Party, Civic Solidarity Party, Social Democratic Party, Communist Party, Liberal Party, Azerbaijan Democratic Independence Party, Islamic Party, plus 50 minor parties. Suffrage: 18 years of age; universal.

Economy (2004)

GDP (2004 est.): $10.2. GDP real growth rate (2004 est.): 9.8%; estimated 21.8% for January-September 2005. Per capita GDP (2004): $3,800. Inflation rate (2004 average): 12%. Unemployment rate (est.): 15%-20%. Natural resources: Petroleum, natural gas, iron ore, nonferrous metals, alumina. Agriculture: Products – cotton, tobacco, grain, rice, grapes, fruit, vegetables, tea, cattle, pigs, sheep, goats. Industry: Types – petroleum and natural gas, petroleum products, oilfield equipment, steel, iron ore, cement, chemicals, petrochemicals. Trade: Exports – $2.17 billion: oil and gas, chemicals, oilfield equipment, textiles, cotton. Imports – $1.67 billion: machinery and parts, consumer durables, foodstuffs, textiles. Major trade partners – Italy, Russia, Turkey, Israel, U.S., Iran, other EU, and other countries formerly part of the Soviet Union.

HISTORICAL HIGHLIGHTS

Azerbaijan combines the heritage of two venerable civilizations – the Seljuk Turks of the 11th century and the ancient Persians. Its name is thought to be derived from the Persian phrase "Land of Fire," referring both to its petroleum deposits, known since ancient times, and to its status as a former center of the Zoroastrian faith. The Azerbaijani Republic borders the Iranian provinces of East and West Azerbaijan, although they have not been united into a single state in modern times.

Little is known about Azerbaijan's history until its conquest and conversion to Islam by the Arabs in 642 AD. Centuries of prosperity as a province of the Muslim caliphate followed. After the decline of the Arab Empire, Azerbaijan was ravaged during the Mongol invasions but regained prosperity in the 13th-15th centuries under the Mongol II-Khans, the native Shirvan Shahs, and under Persia's Safavid Dynasty.

Due to its location astride the trade routes connecting Europe to Central Asia and the Near East and on the shore of the Caspian Sea, Azerbaijan was fought over by Russia, Persia, and the Ottomans for several centuries. Finally the Russians split Azerbaijan's territory with Persia in 1828 by the Treaty of Turkmenchay, establishing the present frontiers and extinguishing the last native dynasties of local Azerbaijani khans. The beginning of modern exploitation of the oil fields in the 1870s led to a period of unprecedented prosperity and growth in the years before World War I.

At the collapse of the Russian Empire in 1917, an independent republic was proclaimed in 1918 following an abortive attempt to establish a Transcaucasian Republic with Armenia and Georgia. Azerbaijan received de facto recognition by the Allies as an independent nation in January 1920, an independence terminated by the arrival of the Red Army in April. Incorporated into the Transcaucasian Federated Soviet Socialist Republic in 1922, Azerbaijan became a union republic of the U.S.S.R. (Soviet Union) in 1936. The late 1980s were characterized by increasing unrest, eventually leading to a violent confrontation when Soviet troops killed 190 nationalist demonstrators in Baku in January 1990. Azerbaijan declared its independence from the U.S.S.R. on August 30, 1991.

GOVERNMENT AND POLITICAL CONDITIONS

Although the Government of Azerbaijan consists of three branches, Azerbaijan has a strong presidential system in which the legislative and judicial branches have only limited independence. The executive branch is made up of a president, his apparat, a prime minister, and the cabinet of ministers. The legislative branch consists of the 125-member parliament (Milli Majlis). Members are elected for 5-year terms, all of whom are elected from territorial districts. The judicial branch, headed by a Constitutional Court, is nominally independent.

Azerbaijan declared its independence from the former Soviet Union on August 30, 1991, with Ayaz Mutalibov, former First Secretary of the Azerbaijani Communist Party, becoming the country's first President. Following a March 1992 massacre of Azerbaijanis at Khojali in Nagorno-Karabakh (a predominantly ethnic Armenian region within Azerbaijan), Mutalibov resigned and the country experienced a period of political instability. The old guard returned Mutalibov to power in May 1992, but less than a week later his efforts to suspend scheduled presidential elections and ban all political activity prompted the opposition Popular Front Party (PFP) to organize a resistance movement and take power. Among its reforms, the PFP dissolved the predominantly Communist Supreme Soviet and transferred its functions to the 50-member upper house of the legislature, the National Council.

Elections in June 1992 resulted in the selection of PFP leader Abulfez Elchibey as the country's second President. The PFP-dominated government, however, proved incapable of either credibly prosecuting the Nagorno-Karabakh conflict or managing the economy, and many PFP officials came to be perceived as corrupt and incompetent. Growing discontent culminated in June 1993 in an armed insurrection in Ganja, Azerbaijan's second-largest city. As the rebels advanced virtually unopposed on Baku, President Elchibey fled to his native province of Nakhchivan. The National Council conferred presidential powers upon its new Speaker, Heydar Aliyev, former First Secretary of the Azerbaijani Communist Party (1969-81) and later a member of the U.S.S.R. Politburo and U.S.S.R. Deputy Prime Minister (until 1987). Elchibey was formally deposed by a national referendum in August 1993, and Aliyev was elected to a 5-year term as President in October with only token opposition. Aliyev won re-election to another 5-year term in 1998, in an election marred by serious irregularities. Presidential elections took place on October 15, 2003. Ilham Aliyev, son of former President Heydar Aliyev, was elected to the presidency in an election that did not meet international standards. He assumed office as President on October 31, 2003. Heydar Aliyev died on December 12, 2003.

Azerbaijan's first parliament was elected in 1995. The present 125-member unicameral parliament was elected in November 2005 in an election that showed improvements in democratic processes, but still did not meet international standards. A majority of parliamentarians are from the President's "New Azerbaijan Party, although the 2005 elections brought in a much more diverse parliament, with up to 10 opposition members and a sizeable number of independents. Many of these independents may have close ties to government, while as many as 20 others are business leaders whose political affiliations are unknown. According to the constitution, the speaker of parliament stands next in line to the president. However, the parliament is historically a weak body with little real influence. The new Speaker is Oktay Asadov.

Principal Government Officials

President – Ilham Aliyev Prime Minister – Artur Rasizade Foreign Minister – Elmar Mammadyarov Ambassador to the U.S – Hafiz Pashayev Ambassador to the UN – Yashar Aliyev

Azerbaijan's embassy in the United States is at 2741 34th Street NW, Washington, DC 20008; tel (202) 337-3500; fax (202) 337-5911; Consular tel (202) 337-5912; Consular fax (202) 337-5913; www.azembassy.com.

ECONOMY

Azerbaijan is an economy in transition in which the state continues to play a dominant role. It has important oil reserves and a significant agronomic potential based on a wide variety of climatic zones. During the late 1990s, in cooperation with the International Monetary Fund (IMF), Azerbaijan pursued a successful economic stabilization program, with annual growth exceeding 10% since 2000. Real GDP rose 10.2% in 2004 and accelerated to 21.8% for the January-September period of 2005. This figure is expected to increase dramatically now that the Baku-Tbilisi-Ceyhan (BTC) pipeline is fully functional. Output expansion has been largely driven by oil-sector foreign direct investment (FDI) and related spillover effects in the construction and transportation sectors, although there have also been substantial gains in agriculture (growth in agriculture was 5.5% in the first nine months of 2005). Inflation, which peaked at 13.7% year on year in April 2005 before easing to 11.9% year on year in September, is a major risk and could accelerate in the context of further increases in fiscal spending, high oil prices, and an inflexible exchange rate. Importantly, the higher inflation also reflects customs restrictions that are in place due to supply constraints that limit import competition and monopolies that continue to control many sectors of the economy. The national currency, the manat, is stable against the dollar, but was allowed to strengthen in 2005 by 5%. The IMF has warned that significantly more appreciation (roughly 10%) will be necessary to prevent inflation from increasing.

The 2006 budget now assumes a 70% increase in spending (in dollar terms) with the bulk going to the military, wages, infrastructure projects, and social assistance. Part of the increase in expenditures will be financed by revenues from the oil fund. The IMF has expressed concern about the impact in inflation and macroeconomic stability as well as governance if the capital budget is not well managed. The State Oil Fund (SOFAZ) was established as an extra-budgetary fund to ensure macroeconomic stability, transparency in the management of oil revenue, and the safeguarding of resources for future generations. All oil revenue profits from the development of new oil fields now flow into SOFAZ, and are held offshore. SOFAZ assets amounted to $1.3 billion as of September 2005. Nevertheless, SOFAZ's sterilization effect is limited since it does not cover SOCAR, the State Oil Company.

Progress on economic reform has generally lagged. The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy, but inefficient public administration in which commercial and regulatory interests are co-mingled limit the impact of these reforms. The government has largely completed privatization of agricultural lands and small and medium-sized enterprises. Azerbaijan is still plagued by an arbitrary tax and customs administration, a weak court system, monopolistic regulation of the market, and corruption.

For more than a century the backbone of the Azerbaijani economy has been petroleum. Now that Western oil companies are able to tap deepwater oilfields untouched by the Soviets because of poor technology, Azerbaijan is considered one of the most important spots in the world for oil exploration and development. Proven oil reserves in the Caspian Basin, which Azerbaijan shares with Russia, Kazakhstan, and Turkmenistan, are comparable in size to the North Sea, although exploration is still in the early stages.

Azerbaijan has concluded 21 production-sharing agreements with various oil companies. Azerbaijan celebrated first oil for the BTC pipeline in May 2005, and the official completion ceremony was held in Turkey July 2006. The BTC pipeline is now operational and has a maximum capacity of one million barrels per day. Eastern Caspian producers in Kazakhstan also have expressed interest in accessing this pipeline to transport a portion of their production. A Baku-Tbilisi-Erzurum gas export pipeline was sanctioned in February 2003.

Copyright © 2006 by U.S. Department of State.


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