Home > Special Report > The Growth of Azerbaijan

The Growth of Azerbaijan

By Henry Martin

European Economic Analyst


Investments into Azerbaijan’s economy totaled AZN 9.776bn as of 1 November, 2011.

Of this, AZN 6.150bn were invested in national currency while AZN 3.525bn were invested in hard currency, according to the National Bank of Azerbaijan.

The average interest rate of loans directed into the country’s economy was 16.1%. Some AZN 8.302 of investments accounted for Baku.

So, investments into the economy increased 6.69% since the beginning of the year and 7.8% at an annualized pace.

In 10 months of the year, investment in Azerbaijan’s producing sector made up AZN 2.378bn ($3.025bn).

According to sources in the State Statistical Committee, compared to the same period of the last year investments have increased by 3.5% and their share in the overall volume of investments amounted to 27.5%.

In January-October 2011, enterprises of Azerbaijan’s producing complex manufactured commodity worth AZN 21.749bn ($21.67bn).

Compared to the same period of the last year, production in extractive sector in price equivalent has dropped by 5.8%.

Money in circulation and held in current and deposit accounts in Azerbaijan totaled AZN 9.748bn ($12.4bn) as of 1 November 2011.

This constitutes a rise of 17.5% since the beginning of the year and 33% over the past 12 months, according to the Central Bank.

The money supply was AZN 7.314bn as of 1 November last year and AZN 8.297bn at the beginning of the year.

This year, trade turnover between Azerbaijan and Belarus will reach almost $1bn.

The statement came from Belarusian Envoy in Azerbaijan Nikolay Patskevich. The ambassador noted that economic and trade cooperation between the two countries has become more dynamic recently.

“Our relations intensify year after year. This year, we plan to make trade turnover almost $1bn”.

Note that in the last five years, the trade turnover between the countries increased five times. Thus, over the first half of the current year, the figure made up $580m compared to $150m last year.

The Republic of Azerbaijan and the Republic of Turkey have signed a number of key gas export related agreements to enable Turkey to buy gas from Azerbaijan and to transit Azerbaijan gas through Turkey to Europe.

The documents signed in Izmir (Turkey) on Tuesday, October 25, included an Intergovernmental Agreement (IGA) between the Government of Azerbaijan and the Government of Turkey, Gas Sales Agreements between SOCAR and BOTAS and also between the Azerbaijan Gas Supply Company (AGSC) and BOTAS International Limited (BIL), a Gas Transit Agreement between SOCAR and BOTAS and a Framework Agreement (FA) setting the general terms and conditions for transit of gas sourced from Azerbaijan through the territory of Turkey. The IGA and FA contemplate transit through Turkey either via an upgrade to the existing BOTAS transmission network or via the development of a new-build pipeline across Turkey.

The execution of the documents was witnessed by the President of the Republic of Azerbaijan H.E. Ilham Aliyev and the Prime Minister of the Republic of Turkey Recep Tayyip Erdogan. The documents were signed by the Minister of Industry and Energy of Azerbaijan Natig Aliyev and the Minister of Energy and Natural Resources of Turkey Taner Yildiz, as well as SOCAR President Rovnag Abdullayev, the President for the Azerbaijan-Georgia-Turkey Region of BP and the Operator of Shah Deniz field, Rashid Javanshir and General Manager of BOTAS Fazil Senel.

The agreements provide a legal framework to regulate the sale of Shah Deniz gas to Turkey and its transportation to European markets through Turkey.

Shah Deniz Stage 2, or Full Field Development (FFD), is a giant project that will bring gas from Azerbaijan to Europe and Turkey. This will increase gas supply and energy security to European markets through the opening of the new Southern Gas Corridor.

The project is expected to add a further 16 billion cubic meters per year (bcma) of gas production to the approximately 9 bcma from Shah Deniz Stage 1. It is one of the largest gas development projects anywhere in the world.

Plans for the project include two new bridge-linked offshore platforms; 26 subsea wells to be drilled with 2 semi-submersible rigs; 500 km of subsea pipelines built at up to 550m water depth; additional export capacity in Azerbaijan and Georgia; expansion of the Sangachal Terminal.

Proposals for the transportation of gas from the Caspian Sea to Europe are now being evaluated by the Shah Deniz consortium with an award expected around the end of the year.

Proposals were submitted by October 1 from Nabucco, Trans-Adriatic Pipeline and IGI-Poseidon.

In addition, the Shah Deniz project team are also evaluating a fourth potential export option which would transport gas to markets in South-Eastern Europe through a system of regional existing and future interconnector infrastructure.

The partners in Shah Deniz are: BP Operator (25.5 per cent), Statoil (25.5 per cent), SOCAR (10 per cent), Total (10 per cent), Lukoil (10 per cent), NICO (10 per cent) and TPAO (9 per cent).

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