Aaron in Azerbaijan

Just another blog about Azerbaijan.

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Skimming through some World Bank reports on their partnership with development projects in Azerbaijan, I happened across these gems:

Azerbaijan was among the world’s leading oil producers in the late 19th century, but during the Soviet period exploitation of Azerbaijan’s oil resources was not a high priority and economic policies left little to show for the country’s oil wealth and much of its population in poverty. Since independence, oil and gas discoveries have given Azerbaijan new means of combating poverty and developing into a diversified, sustainable middle-income economy in the coming years. Driven by the new oil boom, per capita income rose to US$1,240 in 2005, up from a post-independence low of just US$470 in 1995.

That 19th century bit is particularly interesting.  It might explain why its Azerbaijani oilmen who are the experts traveling around the world, including to our very own Republic of Texas, showing us how to take advantage of petroleum resources.  In fact, in the region we live in, outside Sumqayit, there happens to be a settlement called Tagiyev, named after Haji Zeynalabdin Tagiyev.  According to my sources (mostly from my Azerbaijani teacher), Tagiyev happened across oil on his farmland in the late 1800s and proceeded to become enormously wealthy.  Prior to the takeover by the Soviets, he used his money to start schools for women and provide services for the poor.  Then came the Soviets…

The next paragraph had this to say:

Azerbaijan’s national income will be rising substantially over the next several years, as new oil production comes on stream and international oil prices are higher. A significant part of this income will be leaving the country, however, in the form of repatriation of capital and profits by foreign investors. Moreover, the revenue boom is expected to be relatively short lived, peaking in about 2010 and declining steadily thereafter.

So, in short, when Azerbaijan could have used their oil wealth in a well-managed fashion, it was ignored.  Now that their oil reserves are back on-line, most of the wealth will go out of the country and it will be gone in a couple years.  This is not a successful economic development story.  The World Bank report gets it exactly right:

Azerbaijan’s challenge is to use its oil revenues to stimulate sustainable broad-based growth and ensure the welfare of current and future generations.

There you go, Azerbaijan.  You’ve never had money before, but now that you do, you’d better know how to use it responsibly.  Good luck.


Written by Aaron

November 18, 2009 at 2:34 pm

Posted in Uncategorized

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