AFTER THE MUSIC STOPS IN AZERBAIJAN
Business News
Aug 2 2012
Europe
Jahan Hoggarth, Clare Nuttall and Nicholas Watson
Azerbaijan is an infuriating country for investors. The economy of this
energy-rich, mainly Muslim nation managed to grow 9.3% even during
the depths of the global economic crisis in 2009, though it’s ruled
over by an authoritarian regime that stamps down on any dissent and
the drumbeats of war with Armenia continually rumble in the distance.
Certainly, hosting this year’s Eurovision Song Contest in May helped
give the country a boost to its international profile. Costing the
organisers over $800m and creating a 5% “hole” in country’s budget,
according to a report from the Public Association for Assistance to
Free Economy (PAAFE), this year’s Eurovision was the most expensive
in the contest’s history.
Now that the stage lights are off and the last plane with Eurovision
fans has departed, what’s left behind? “There is a certain element
of disillusionment in people. The euphoria around the Eurovision
soon wore off and people saw it for what it is – a music festival
with an international crowd,” says Rasul Jafarov, a coordinator for
Human Rights Club.
The event also put an uncomfortable spotlight on the country’s
pretty dreadful record on human rights and freedom of speech. There
was some much publicised forced evictions of Baku residents to make
way for the $134m Baku Crystal Hall where the Eurovision was held
(the construction of which, according to an investigation by the
Organized Crime and Corruption Reporting Project (OCCRP) and RFE/RL,
personally profited the family of President Ilham Aliyev. Forced out
of their homes by property developers, evicted residents claim that
the compensation they were offered for their properties was 30% below
the market value. Plucked out of their communities, jobs and schools,
many had to move in with relatives or go abroad while waiting for
their court appeals. Others could only afford to buy houses on and
beyond the outskirts of Baku.
Meanwhile, attacks on journalists and opposition groups, which had
subsided during the run-up to the event, resumed soon after. On July 4,
police charged a prominent Azeri journalist and human rights activist,
Khilal Mamedov, who is from the Talysh region that borders Iran and
is home to several hundred thousand ethnic Talysh who speak their own
language, with treason and “fomenting national strife”, adding the
charges to a previous one of drug possession in a case his lawyers
say is politically motivated. “Mamedov was involved in cooperation
with Iranian special services since 1992… He was giving information
that could be used against Azerbaijan to Iranian intelligence,” the
Interior Ministry and Prosecutor-General’s office said in a statement.
Mamedov faces life imprisonment if found guilty of all charges.
Mamedov’s lawyers call the case “absurd.”
Tourists with benefits
Beyond the politics of the event, local businesses, such as taxi
companies and restaurants, thrived on the sudden influx of foreign
visitors to the capital. Frequented mostly by business travellers,
Baku’s hotels had their chance to learn what it is like to manage
large crowds of tourists.
Over 30,000 credit card terminals were introduced around the country,
93% of those in Baku. “Many [local banks and businesses] knew that
foreign visitors were unlikely to carry wads of cash with them,”
says Zohrab Ismail, director of PAAFE. “As a result, banks are now
competing on transaction charges.”
However, visa regulations, loosened during the Eurovision, were
tightened soon after the event. “This cannot be helpful for our
tourism industry. The sky-high visa fees and tight regulations are
deterring potential tourists from coming to Azerbaijan. We need to
work towards a sustainable, rather than one-off tourism,” says Zohrab.
The economy certainly needs a boost. The oil and gas-rich country
held up well during the economic crisis that hit in 2008, though has
struggled as oil prices fall and European demand for its for exports
decline due to the crisis there. According to the latest figures
from the Azerbaijani State Statistics Committee, the country’s GDP
in the first half of 2012 increased by 1.5% on year, a pick-up from
the first-quarter growth of 0.5%.
The non-oil part of the economy on the whole saw its total production
grow by 11.3% on year in the first half of the year, whereas decreasing
oil production contributed to a fall of 3% on year in total industrial
output. Oil and gas condensate output in the first half of 2012 fell
by 7.1% on year, while natural gas output increased by 3.1%.
“The cautious upward trend [in GDP growth] is likely to continue.
However, it still does not look likely that the official GDP growth
projection of 5.7% for this year will be achieved. Base effects will
provide some support for annual growth in the second half of the year,
while at least the growth of gas production is relatively encouraging,”
IHS Global Insight notes.
Jaw-jaw better than war-war
A constant backdrop to all this is Azerbaijan’s fraught relations
with the ethnic Armenian breakaway region of Nagorno-Karabakh and
its backer Armenia.
Tensions mounted again in July as Nagorno-Karabakh held presidential
elections that were slammed by Azerbaijan as a “provocation”. As
voters in the tiny unrecognised republic voted for sitting President
Bako Sahakian over his challenger Vitaly Balsanian, the wider outcome
of the election was a further increase in tensions in the volatile
South Caucasus region.
The day before Nagorno-Karabakh’s 98,772 registered voters went to
the polls, Azeri Foreign Ministry spokesman Elman Abdullayev issued
a statement saying that the election “is completely contrary to the
efforts of Azerbaijan and international organizations for peaceful
resolution of the conflict.”
Under international law, Nagorno-Karabakh remains part of Azerbaijan,
although it has been de facto independent since the early 1990s, when
forces backed by the Armenian army fought off an attempt to bring the
enclave back under Baku’s control. Although a ceasefire agreement ended
the bloody war in May 1994, Armenia and Azerbaijan have never signed
a peace settlement, and there is a continued threat that small-scale
border skirmishes could escalate into a full-blown conflict once more.
The EU High Representative Catherine Ashton also criticised the poll.
“I would like to reiterate that the European Union does not recognise
the constitutional and legal framework in which they will be held,”
she said in a July 18 statement. “These ‘elections’ should not
prejudice the determination of the future status of Nagorno-Karabakh
in the negotiated general framework of the peaceful settlement of
the conflict.
Fears of a new outbreak of war increased in the build-up to the vote.
Nine soldiers were shot dead in a series of border clashes between
Armenian and Azeri soldiers on June 4-5. Although there have been no
further shootings since then, a higher-than-usual level of activity
was reported along the line dividing Nagorno-Karabakh from Azerbaijan
proper. On July 11, Azerbaijan started a week of military exercises
near Nagorno-Karabakh. Speaking to APA on July 17, a spokesperson
for the Azerbaijani State Civil Aviation Administration reiterated
a threat to shoot down any planes violating Azeri airspace by flying
to the republic’s newly reconstructed Stepanakert airport.
That is a clear warning against any wider recognition of the July 19
election. Cautioning against engagement with the separatist republic,
Abdullayev said that anyone visiting Nagorno-Karabakh to monitor the
elections would be added to the Foreign Ministry’s blacklist.
That list of enemies, both domestic and foreign, grows longer by
the day.
From: A. Papazian
http://www.bne.eu/story3839/After_the_music_stops_in_Azerbaijan