Rising prices, a collapsing currency, international turbulence, and a nervous elite. Azerbaijan is starting 2016 in the middle of what looks like a perfect storm.
Street demonstrations in a dozen towns in different parts of the country in protest at the sudden economic downturn have been met with a show of force and arrests. Video footage on non-official television shows scenes that are depressingly familiar from Tunisia to Tajikistan: riot police on the streets of a town confronting crowds of angry young men with water cannon and tear gas.
To make matters worse for the government, this began a week ago, even before sanctions on Iran were lifted and the oil price fell below $30 a barrel. (Around three quarters of Azerbaijan’s budget revenues come from oil sales.)
It is a foretaste of the trouble that Russia may soon face for very similar reasons. The public, it seems, can forgive an authoritarian government almost anything except a falling standard of living. On January 18, President Ilham Aliyev announced a package of emergency measures that included currency controls and selling off state assets. This all follows the Azerbaijani Central Bank's decision to allow the currency, the manat, to fall dramatically for the second time in 2015, after spending $8 billion trying to support it—and despite repeated declarations, right until the eve of the devaluation, that the currency was “stable.”
It was a rude shock. On New Year’s Day in 2015, one dollar bought you 0.78 manats. Now, it will officially buy you almost 1.60 manats—and unofficially more than that. Long queues have formed to exchange foreign currency at banks.
The currency collapse has hurt Azerbaijan’s middle class, who have taken out dollar-denominated loans and come to rely on imported goods.
It has also hit the population at large outside the capital Baku, who saw prices on staples, such as flour, shoot up. One Azerbaijani economist warns of the risk of the massive inflation experienced recently by Ukraine, the only post-Soviet country which has experienced a comparable currency crash.
At what point do economic protests become political? It is a blurry line.
Many Azerbaijanis certainly feel angry at the way the billions the country has earned in the last decade have disappeared into vanity projects like the European Games or into offshore bank accounts.
For years, Azerbaijani politics has been glacially quiet. President Ilham Aliyev has obliterated the formal opposition. Over the past two years, he has had leading critics of his regime—human rights defenders, journalists, and youth activists—arrested.
But that is deceptive. Only 20 years ago, Azerbaijan had a turbulent and chaotic political life, which was put to an end by the skills of the all-powerful Heidar Aliyev.
Ilham Aliyev, Heidar's son and successor since 2003, has never been the dominant monarch that his father was, more of the pivot at the center of the elite, the “first amongst equals,” and arbiter of disputes amongst top officials, who are also rent-seeking businessmen.
Cracks are now appearing in this structure. In October, Eldar Mahmudov, Azerbaijan's long-serving national security minister—the head of what used to be the KGB—was sacked, along with most of his subordinates. There are many rumors as to why. One tells of a conspiracy with the former head of the International Bank of Azerbaijan—a relative by marriage of Mahmudov—to defraud the government. Or else, reportedly, Mahmudov was caught carrying out secret surveillance of fellow ministers and presidential officials.
It seems likely that Mahmudov will be charged before too long. The pro-government media has already put together a lurid charge-sheet against him, alleging that police discovered 30 boxes of dollar bills and glass jars of diamonds and that he had bought his son an eight-room apartment in central London worth £30 million.
Yet this is dangerous territory as it only draws attention to all-too-plausible reports in the pro-opposition media that higher-profile ministers and members of the presidential inner circle have defrauded the Azerbaijani state of even bigger sums.
Trouble at home comes within a worsening international context. Azerbaijan is in the middle of a (self-inflicted) row with the United States, after closing down almost all U.S. organizations in Baku and accusing Washington of fomenting a “color revolution” in the country. A bill threatening sanctions in response to human rights abuses was recently tabled in Congress.
The row between Russia and Turkey, its two closest international partners, has put Azerbaijan in an awkward spot. (Only last year, Aliev was convening a friendly meeting between Putin and Erdoğan in Baku.)
Lifting of sanctions on Iran is a triple blow. It removes a major card Baku was playing with the West (that it was a bulwark against a hostile Iran), reinvigorates a regional power which has a number of quarrels with Azerbaijan, and depresses oil prices. Moreover, there is talk in Georgia of importing oil from Iran via Armenia, which would end Azerbaijan's monopoly on gas imports.
There are two wild cards here. One is the unresolved conflict with Armenia over Nagorny Karabakh. Over the last few years, the ceasefire regime established in 1994 has deteriorated, Azerbaijan has acquired a fearsome new arsenal of weaponry, and the country has turned up the dial of bellicose rhetoric against the Armenians for occupying Azerbaijani land.
The increasing worry is that an Azerbaijani regime that is in desperate straits might choose to “play the Karabakh card”—-the one grievance that can rally all Azerbaijanis around the flag—and start a military operation, large or small, to recover lost territory. In that case, the Armenians would be bound to strike back and a new and potentially catastrophic conflict in the Caucasus would break out.
The other wild card is political Islam. For understandable reasons, Azerbaijan’s secular pro-Western political prisoners have captured most of the attention abroad. (On December 28, one of the most prominent of them, well-known journalist Rauf Mirkadirov, was given a six-year jail sentence on the absurd charge of spying for Armenia.)
But the majority of the prisoners are Muslims accused of political radicalism, whether they be Shias from the pro-Iranian village of Nardaran or Sunnis accused of sympathy for the so-called Islamic State. The level of support for political Islam is hard to judge because it is below the surface. We can only be certain that, as in much of the Middle East, the more it is suppressed the stronger its appeal will be.
Last year, the Azerbaijani government predicated its budget forecasts on $50-a-barrel oil. Now, President Aliyev faces the near-impossible task of how to buy off very different groups of discontented citizens with oil at little more than half that level.
Comments(20)
It turns out that the BTC was an unmitigated disaster for the people of Azerbaijan; whatever happens with Artsakh or Political Islam, the country is paying a very heavy price for its economic entanglement with the West. De Waal shows his Russophobia by basically wishing the same catastrophe on Russia. Is Russia facing troubles, of course it is, but at the end of the day comparing Russia with Azerbaijan is like comparing a Baobab with a sunflower.
Azerbaijani dilemma well covered. I may add another dimension which seems now more probable in the realm of territorial disputes that lay dormant until now alongside brewing up Nogorny Karabakh conflict with Armenia. With Iran, now relatively free from the Western noose, is likely to play its Azerbaijani card more forcefully. The ethnic Azri population on Iranian side is more than the Azri located in Azerbaijan. Iran has been keeping tight grip traditionally on its side of Azri population and blaming simultaneously to discredit Azerbaijan for failing to protects its territory against Armaneia...a propaganda tool that worked straight to the Iranian advantage while quelling Azris reunification sentiments. Thus the challenges to the Azri leadership in 2016 are likely to exacerbate than recede any further. Call it a tri-lemma.
"...Azerbaijan has acquired a fearsome new arsenal of weaponry, and the country has turned up the dial of bellicose rhetoric against the Armenians for occupying Azerbaijani land..." There are two facts that the readership of this article must be aware of: Second: Armenians cannot be occupying Azerbaijani land when they have been indigenous to those lands nearly 2,000 years before any Azeris arrived. Fact-checkers are invited to verify the following: Karabakh (which was called Artsakh for several centuries) was an integral part of the Armenian Kingdom, as referenced in the works of authors from antiquity (Strabo, Pliny the Elder, Claudius Ptolemy, Plutarch, Dion Cassius and others), as well as the many cultural and historical testimonials of Armenian presence on the very lands claimed by Azerbaijan (monuments, churches, cemeteries, etc.). When one examines those ancient writings one will find numerous references to 'Armenia' and none to 'Azerbaijan'. First: During the Karabakh war in the early '90s the Armenians were out-numbered and out-gunned by their Azeri attackers, yet they prevailed and asserted their right to live freely on their ancestral lands. In the intervening years since, Azerbaijan has reframed the narrative to have the Armenians appear as the aggressors. They have achieved this with the help of the western media's lazy journalists and paid anti-Armenian propaganda pieces disguised as editorials. In 1991 the Armenians of Karabakh seceded from Azerbaijan in a referendum that was internationally observed and deemed fair. The referendum in was held in order to legally correct a historical injustice imposed in 1923 by Joseph Stalin's regime that artificially placed the Armenian-majority Artsakh under the jurisdiction of Soviet Azerbaijan. The region was renamed to "Nagorno Karabakh Autonomous Oblast of the Azerbaijan Soviet Socialist Republic". The Azerbaijani regime's decision to ignore the results of the referendum is the chief cause of instability in the Southern Caucasus region.
This written absurd by History Matters does not surprise anyone. Armenian never lived in Daqrilq Qarabag and it was Russia who brought Armenians to Caucasus. This is an Armenian propaganda made many people believe of "Armenian Kingdom" which was never existed . It is well know facts in Academia how Armenian " historians" falsifying historical facts. Yes, Daglig Qarabag ( Nagorniy Karabakh) is occupied territory of Azerbaijan Republic by Armenian forces and Azeri population was cleansed from their land. There are several UN resolution related to this, and the referendum in 1991 never been accepted by anyone, even by the Republic of Armenia itself. Despite being in war with Armenia, today in Azerbaijan we have more than 30,000 ethnic Armenians living without any problem in peace and prosperity. And there is 0 Azeri living in Armenia. Azerbaijan is a strong country and we will united to deal with current issues, and the stability will come again.
All those references to ancient authors are essentially unsubstantial. Nobody talks here about ancient times, when boundaries of countries/territories were non-existent and opinions of antique travelers were typically highly biased and in many cases just simply wrong. The modern borders of Caucasian republics, established in 20th century are much more important . If we concentrate of factual part (and ignore that highly unverified and simply made up Armenian claims on historical artifacts in Caucasus), the facts are that Armenia indeed is occupying close to 18% of Azerbaijani land, including Nagorno-Karabakh. These are undeniable facts and it is just a waste of time to argue about these facts. The whole world is confident that Armenia must vacate the occupied lands and the sovereignty of Azerbaijan over those territories needs to be restored.
Azerbaijan does not have any credibility on making arguments about History. Nakhichevan - which is historically Armenian land - was gifted to Azerbaijan much like Karabakh, as part of the deal that Stalin struck with Turkey in 1923. Nakhichevan's Armenians were systematically driven out as a result of discriminatory and harsh treatment by Azerbaijan. By the 1980's there were no Armenians left in Nakhichevan. Soon after the Armenians were physically removed, Azerbaijani authorities engaged in the destruction of all Armenian cultural monuments in Nakhichevan. The most notorious example that elicited worldwide condemnation was the 2003 -2005 destruction of thousands of "khachkars" - elaborately carved gravestones - from the historic Armenian cemetery in Julfa. In the face of video evidence showing Azeri soldiers destroying the stones with sledgehammers and bulldozers levelling the cemetery, Azerbaijan in 2005 released a statement that "Armenians have never lived in Nakhichevan". That is very definition of Cultural Genocide. Today, at the place where those gravestones once stood, is an Azeri military firing range. Karabakh has asserted clearly that it will not become another Nakhichevan.
It is typical of Azeri responders to dismiss 2,000-year-old references to Armenian presence on Karabakh when those references contradict their stories. So is their characteristic mockery of "historical artifacts", in light of the Azeri government's aggressive removal of any and all evidence of Armenian presence on those lands. A case in point is the deliberate destruction of the Armenian cemetery of Julfa in Nakhichevan between 2003 and 2005, its current use as a military firing range, and a subsequent proclamation by the Azeri president that "Armenians have never lived in Nackichevan". Karabakh has decided that it will not allow the Azerbaijani regime to turn it into another Nakhichevan.
the head of state gave a relevant instruction on making proper changes in the budget
Karabakh is not an 'occupied' piece of land, nor it's a territory with a sticker 'belongs to Azerbaijan' - it has its historic indigenous population who fought a war and proved that it can and should be independent from Baku. The Author should know better. #disappointed
It is strange, that the author haven't left any room for the fact that, a large scale economic reforms are implementing in Azerbaijan after several decrees signed by the President. Instead, there are some utopia ideas of "wild cards". You have a strong imagination, Mr. De Wall. And I didn't know that you are an expert on economic issues:-)
Azerbaijan survived even the worst periods of history. Every upcoming economic challenges bringing new solutions.
As far as you tried summaries what is going on in Azerbaijan. I can not say you are whether successful or not, but it is thorough analysis. I could say decreasing oil revenues of Azerbaijan, make the government to be careful with less oil income. Expecting inflation and devaluation of manat will make Azerbaijan non-oil country and will lead to the development of other sectors in near future.
I do not know why you are writing biased opinions about Azerbaijan. Current economic situation cannot analyzed based on the facts that you took from media. You should carefully analyze the country interests and how Azerbaijan was affect by this.
it is not the first time that the author of this article covers unobjective articles about Azerbaijan. The economic problem is not only problem of Azerbaijan, this is the problem of all countries. Azerbaijan as a young country is a leading country in the Caucasus region, realizes international economic projects and takes attention to non-oil industry too. President Ilham Aliyev took measures to solve this issue, to create better condition for business world and struggle against artificial increasing. Why dont you write about the dead economy and poverty of Armenia which still keeps 20 % territory of Azerbaijan under occupation?! Poors, Armenian people are trying to get rid of the poverty and regime's criminal activity.
Azerbaijan is an integral part of the Muslim world. At the same time, we have strong ties with European countries. We successfully cooperate in political, economic, energy and other areas. We constantly strive to further strengthen the inter-religious and inter-civilizational dialogue. We have made a contribution to this cause and set an example. Therefore, the inter-civilizational misunderstandings experienced in the world today can’t but disturb us. This is a very dangerous trend. Azerbaijan, for its part, will try to make every effort to mitigate these trends and put them on a positive track.
Good summary for Azerbaijan in 2015. Following up the 'two wild card' theme, (a) the tension over Nagorno-Karabakh was acceding even before the recent economic developments. So the start of the II Karabakh War may not fully correlate with the new economic context. The new economic context obliged the government for economic reforms. The radical reforms are announced by the President and under the way. Nevertheless, the earliest results of the announced reforms, may take longer than hoped. While the 'Karabakh card' is the one that Azerbaijan can trigger itself, triggering 'Political Islam' card is not on the governments hands. The Saudis and Iranians both can contribute to the factor. Taking into account the recent developments between Iran and Saudi Arabia, soon Azerbaijan may be forced to choose between Iran and Saudis. One is for sure, 2016 is going to be much interesting year for the region.
Devaluation can occur in a certain period of time on each country's economy but as underlined by Mr. President, two-headed political factors play a significant role rather than economic factors.
Azerbaijani government do all the best for keeping stable the prices in devaulation.
Absolutely correct: Armenia is occupying the Azerbaijani province of Karabakh and it is considered an aggressor-state. The forthcoming peace resolution will only reconfirm this and crush all the losing Armenian counter-arguments.
Economy woes due to falling oil prices affect Russia and Iran, as well as Azerbaijan. Real source of instability in the region continues to be the illegal occupation of Azerbaijan soil by a militant Armenia which ignores UN resolutions to end occupation and allow million or so Azeris to return to their homes.
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