Heritage.org, DC
July 12 2006
Azerbaijan: Aspirations, Regional Issues, and Global Concerns
by His Excellency Elmar Mammadyarov
Heritage Lecture #949
July 12, 2006 | |
(Delivered April 7, 2006)
Today, I would like to discuss Azerbaijan~Rs aspirations, regional
issues, as well as some global concerns we have in our part of the
world.
Azerbaijan restored its independence in 1991. Since then, we have
been conducting an active foreign policy, engaging the international
community as a member of the major international organizations. Thus,
our relations with Western nations, and in particular with the
United States, are one of the crucial components of our foreign
policy priorities. This is very important to stress. Having lived in
the United States for almost twelve years, I witnessed U.S. policy
with regard to Azerbaijan moving from what they refer to as a
~Scountry of interest~T to ~Sstrategic ally.~T It is indeed very
important that our cooperation programs, particularly in the energy
sector as well as the security areas, are deepening every year. It
brings with it very positive elements: for example, our latest
cooperative efforts in the area of democracy-building and protection
of human rights.
Rule of law is also extremely important for us, especially keeping
in mind our past. We were a member of the Union of Soviet Socialist
Republics and had our own parliament and constitution. But the major
factors of being independent are a foreign and defense policy; these
were delegated to Moscow. And because of the Soviet style of command
economy, we had little experience as to what a real democracy meant,
or for that matter, what the rule of law or even protection of human
rights actually meant.
This year we will celebrate the fifteenth anniversary of our
independence. I can say that we have spent a great deal of time and
energy on introducing the basic elements of what we call the process
of democracy-building in the country. Sometimes it~Rs not an easy
process. Honestly speaking, our efforts sometimes need to be doubled.
But this is what we call a generational issue; we need to work on the
human capital in the country so that people also recognize what
democracy truly means.
Developing Energy Wealth
We~Rre continuing to do a good job in the area of economic
development. Most people here know that Azerbaijan is a region of oil
and gas. The signing of a major oil contract in 1994 with the big
oil companies~Wwe called it the contract of the century~Wcreated a
solid foundation for our economic development.
Investment into the economy over the last 10 years was about $20
billion, which is pretty good for a population of 8 million. In the
initial years, it came mostly to the energy sector, of course, and
was around $15 billion. And we are really proud to say that $5
billion came to the non-oil sector. The development of the non-oil
sector is one of the major tasks the government faces right now. And
we already defined the niches where major efforts should be made:
agriculture, agribusiness, infrastructure, and tourism. Indeed, I~Rm
going to talk about them a little bit later.
After signing the ~Scontract of the century,~T we immediately started
to think about how to deliver these huge volumes of oil to the world
markets. The point is that Azerbaijan is a landlocked country. We
have a water roads connection with the Black Sea and through the
Black Sea to the major ports of the world. But the Russian port of
Astrakhan, on the Volga, is under the ice almost four month a year.
So we started thinking how to deliver oil to the warm ports of the
world.
Then the idea to build a new pipeline came along. Of course, we
already have two existing pipelines. The first was built during the
Soviet Union, and it runs from Baku to the Russian port of
Novorossiysk on the Black Sea, with the capacity of 70 million tons
per year. That~Rs around 490 million barrels a year. It~Rs not so big,
but it was sufficient for the exploration of our oil resources at
this time.
Then after signing the contract for the initial production of oil,
we built another pipeline which connects Baku offshore with the Black
Sea port of Supsa. The pipeline itself, because it~Rs an earlier oil
pipeline, holds 5 million tons. That~Rs about 35 million barrels a
year.
Then we started to recognize that there is too much oil, particularly
in the Azerbaijan sector of the Caspian Sea. So the decision was made
to build up a huge pipeline running from Azerbaijan through Georgia
to the Turkish Mediterranean port of Ceyhan. The capacity of the
pipeline is 50 million tons of crude oil, which is roughly 1 million
barrels per day.
It is also possible that the capacity can be increased, even up to
1.2 million or 1.4 million barrels per day, and with the addition of
chemicals, it could reach 1.7 million barrels per day.
So the pipeline is a very big project. The cost is small~W$3 billion.
Currently, we are pumping oil inside the pipeline, and we are
expecting in the coming months~Wmost probably this summer~W that it
will be finally inaugurated with the first tanker of oil which will
run from Ceyhan.
We have inaugurated our part. The Georgians have inaugurated their
part of the pipeline. And now we are looking at all of us~Wthat is,
Azerbaijan, Georgia, and Turkey~Wto inaugurate the last portion (the
Turkish part) of the pipeline. The route is approximately 1,720
kilometers. So if I~Rm not mistaken, after the Alaskan pipeline, it~Rs
the second longest pipeline in the world.
Besides oil, we also have gas. And so we decided to build a gas
pipeline. Again, being landlocked, we have to build a pipeline which
can deliver gas to the consumers. And the pipeline, which runs
parallel with the oil pipeline, will deliver the natural gas
supplies from Baku to Georgia and then to the Turkish city of
Erzurum, where it will be connected the Turkish gas network. And
through the Turkish gas network we can deliver our gas all over
Europe.
We signed a purchase agreement with Georgia on buying gas. And the
Turks are also committed to buying Azerbaijani gas. Negotiations with
Greece are going on, and they could be extended further to the
Balkans, even to Central Europe, which also has a serious market for
gas.
Fueling Economic Growth
This, of course, definitely brings a lot of economic development
into the country. I can tell you that over the last three years, our
GDP growth has been more than 20 percent. In 2004, it was 19.5
percent. In 2005, it was 25.5 percent. In 2006, this year, we are
expecting it to be around 27 percent.
>>From another point of view, it is also a serious challenge for the
government. For example, last year we faced high rates of inflation
in the double digits. After strong, conservative efforts to curb this
inflation, we succeeded in closing the year with a 9.6 percent
inflation rate. In the first months of this year, we curbed the
inflation rate to 6 percent, which is also pretty high, but
nonetheless visible progress.
The government is also focusing on developing the non-oil sector.
This is a very crucial element. Traditionally we were very strong in
agriculture and agribusiness. Land privatization successfully
continues. Indeed, we have a lot of success stories. We restored and
increased the production of cotton, which is very important as a
strategic material.
And now we are heavily investing in vineyards. Unfortunately, these
vineyards were ruined during the Soviet anti-alcohol campaign and are
located in an area where you have to invest heavily and then wait for
five years before the first yield.
In order to support farmers with agricultural equipment, the
government created special programs and funds. The government signed
a contract with Japan to buy agricultural equipment and machinery.
The government put $100 million into the fund for agro-leasing.
Beyond this, we established a fund to support farmers purchasing
fertilizers. The fund was established last year with an initial
investment of $50 million.
So in the agriculture sphere, we have a huge market and we~Rre
optimistic that it will prove to be an important revenue stream for
the budget.
The other area is, of course, infrastructure. We~Rre investing heavily
in our infrastructure. We began with our roads and now we~Rre
increasing the capacity of our railroads. Azerbaijan is a member of
the North~V South Consortium together with the Russians, Indians, and
Iranians. Right now the Iranians are building a railroad that they
want to connect through Azerbaijan to Russia and the north of
Europe.
On the other hand, together with the Georgians and Turks, we finished
a feasibility study on a railroad between Georgia and Turkey, which
goes through Kars to Akhalkalaki (Kars is the Turkish city and
Akhalkalaki is the Georgian city). The feasibility study shows that
the project could cost $320 million, which is not a large amount
considering the figures in our region, and it can be done within two
years. We expect that each of the three governments~WAzerbaijan,
Georgia, and Turkey~W will approve this project connecting their
countries, and then through to Europe.
This is very important from the point of view of delivering
commodities, including oil. For example, our railroad companies
recently signed a contract with Chevron to deliver the oil by
railroads~W almost 20 million tons from the Tengiz onshore field in
Kazakhstan that will come from Kazakhstan by barges and then go to
Azerbaijan and Georgia. Now we~Rre thinking that in Georgian ports
they will transfer the oil into tankers and then later to a
railroad. But the railroad will be built; you can imagine that it
will come not only through Georgia~W because there also still an issue
of the Bosporus~Wit will come through the Turkish ports on the
Mediterranean. And I think it~Rs very, very serious window, too, for
the development of the economy.
Security Partner
When we talk about economic development, security issues arise. Let
me offer just a few words about security. Azerbaijan is a member of
the ~Scoalition of the willing,~T having sent a contingent to Iraq.
Thank God, they are working quite successfully. We do not have any
casualties so far, and I hope that we will continue our duty there to
bring peace and stability into Iraq, which is very, very important
for the greater Middle East.
We also sent a contingent to Kosovo and to Afghanistan. This is very,
very important for our transition to a regional leader in our part
of the world, and indeed we are behaving as regional leaders in our
part of the world. Our involvement in peacekeeping operations, and
supporting and maintaining international peace and security, is one
of the commitments and obligations which we took on our shoulders.
Our cooperation with NATO within the Individual Partnership Action
Plan is developing quite successfully. It~Rs very important for us to
reform our army. It~Rs very important for us to increase the
capability of our army. We are working hard at doing this. Just last
month we made a round assessment with regard to the Partnership
Action Plan programs and found areas in which we need to continue
and deepen our cooperation
Besides that, of course, we have bilateral security relations and
programs. With the United States we~Rre developing it quite
successfully, starting within the Foreign Military Finance Program,
and also the International Military Education and Training (IMET)
program for Azerbaijani officers in United States military
institutions. So I think it runs within the national interest of
Azerbaijan for the general reforming of the whole country.
Seeking a Solution with Armenia
Now I am giving you this good picture of the development, but there
is always a problem. I should talk about the problem. And the major
problem is the conflict with our neighbor, Armenia.
With the occupation of Nagorno-Karabakh and the large numbers of the
refugees, it is, of course, a huge political, economic, and social
burden. From an economic perspective, we can handle the issue. From
the perspective of the social burden, we have already approved
programs that assist the internally displaced people and the
refugees with a special allocation of money from the oil fund of
Azerbaijan. The only spending so far has been done to support the
refugees. Instead of the tent camps where they used to live, we are
building mobile villages so that when we achieve the liberation of
the territories, they can return to their homes. Last year there was
a fact-finding mission, which visited the occupied territories. They
clearly indicated and filed a report that everything that can be
stolen has been stolen, everything that can be destroyed has been
destroyed, and everything that can be looted has been looted. So at
least they will take these mobile houses when they return to their
villages.
The peace talks are, unfortunately, not as successful as one would
like, and I think that we need to double our efforts, mostly our
educational efforts. We have to explain-and we speak about this at
every meeting on the level of foreign ministers-that one cannot live
back in the 20th century. Indeed, the world has changed. The idea
that you can decide the fate of the territory by forcibly changing
borders, by ethnic cleansing, or by expelling the people is gone.
Everyone knows that this is the phenomenon of Yalta 1945, when the
three leaders came together and started drawing the lines that ended
up dividing the world.
Now it’s gone. International relations have changed. The people have
changed. And the role of the borders is diminished.
So the major priority-what we need to do-is to create the possibility
for the normalization of the lives of those who used to live there
for centuries, both Armenians and Azerbaijanis. No one can just expel
them from the territory.
That’s why I’m saying that 2006 can definitely be a window of
opportunity. As soon as Azerbaijan is developing successfully from
the economic point of view, we’ll definitely develop the military as
well. And when frustration comes to the society and people ask why
should we keep our eyes closed on the occupation of our territories,
then it can be a very serious challenge to the peace and stability in
the region.
And that’s why we ought to begin to clear the table for finding a
real, durable solution. And a durable solution works only within a
legal context. We have definitely found out that any agreement, any
decision-making with regard to the conflict resolution should be
based on the law, particularly the international norms and principles
of this law.
Nagorno-Karabakh is a part of Azerbaijan, and no one can change the
territorial integrity by force. We will move slowly and find out the
way in which to normalize the life between the two communities,
because the hatred which has existed now is definitely not
productive for the development of the region.
His Excellency Elmar Mammadyarov is Minister of Foreign Affairs of
the Republic of Azerbaijan.
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