Where is Azerbaijan taking to?

A closer look at oil price downturn dynamics reveals consistent lowering of economic recession fraught with ever aggravating consequences.

It must be acknowledged that the crisis-2008 was over with slight shock. In spring 2009 the prices starting from $ 40 went up to reach $120 per barrel.

In 2014-15, prices went down again to $ 60 per barrel and thus made a telling blow at economy and forced the government to pass an unpopular decision on manat devaluation to thus pull the country through the financial collapse.

Finally, this refers to the current crisis where, like in 2014, nobody in the government, including the President, saw it coming. The country was stranded.  President Ilham Aliyev instructed to cut the state budget as was the case in 2015. In the reviewed period, the expenditure budget for 2016 was assigned to $ 9,5 billion against  $25,6 billion in 2014.

It has to be kept in mind that the expenditure budget for 2020 was raised to  $ 15,8 billion and, most probably, rise to the 2016 level especially as a drop in oil prices proved to be twofold. But it was especially dangerous after a figure fell from $ 120 per barrel to $ 60, and now to $ 25 per barrel.

On a bigger scale, Azerbaijan failed to overcome a crisis of 2015 due to the fact that the country was slow in rehabilitating the economy with an annoying emphasis on petrodollars. Today, it is safe to say that the country has entered the stage of permanent crisis.

The point to be emphasized is that the government contrives to survive due to the coronavirus pandemic prompting the authorities to use the police force and restrict civil rights.  Instead of informing the population about the real social and economic challenges of the country caused by oil price downturn and ways out of the crisis, the governmental mass media is engaged in round the clock broadcasting on the pandemic.

In other words, there is a clear dynamics of crisis aggravation and deterioration of social-economic indices of the country, its stability and security. While an interval between crises of 1998 and 2008 made up 10 years; between crises of 2008 and 2015 – 7 years, a figure between 2015 and 2020 – 5 years.  The figures quoted above suggest a regular, more critical and dangerous crisis in a short while to cripple the stability of authoritative resource systems.

It is safe to assume the third wave of crisis. Over the last five years since 2015 we witnessed a growing discontent of society and unprecedented information activity in social networks, a rising chasm between the powers that be and low-income citizens, medium stratum of society, protest actions of opposition and separate initiative groups.

Why are we faced with crises?

After Ilham Aliyev’s advent to power in 2003, both the country and abroad invested their hopes in laying fundamentals for the development of free economy, opening up access for foreign investments to the country, starting dialogue with civil society to create a strong country capable of responding any challenges. However, these hopes never materialized. It is worth remembering that Aliyev ran his own course ignoring public and international expectations. At various times this particular path of development reversed the authoritarian system – sovereign democracy, modernization and national authenticity.

Here it is worth citing that the economy marked the capital concentration, space narrowing for free small and medium business environment participants. One must bear in mind that the control over economy has become total. New barriers have been established for involvement of foreign capital in the formation of country’s economy.

Simultaneous pressures upon civil society institutions - mass media, NGOs, political parties that stymied the policy of capital and finance concentration.

Underway was the intensive formation of financial, agricultural, industrial and trade holdings and their hybrid derivatives meant to form the basis of the new economy. In this respect, the formation and development of all these structures proceeds in terms of privileged monopolism and misappropriation of budget funds by means of special orders and corruption.  From strategic standpoint, the economy of this sort should have breed conditions for consolidation of the regime and secure it against external impact, especially the country’s political life.

However, one must bear in mind that this system generated a great quantity of business subjects of artificial origin. Note that they were not nourished in terms of competition and national selection, so their instability was clearly apparent in the crisis period.

Particular emphasis needs to be placed on the fact that crises reveal the power and capital concentration and uncover the lack of minimum security for small and medium business in shaping economic growth.  It should be realized that small and medium business in economies of developed countries varies from 60% to 90%, the fact that makes their economies more sustainable and forms a certain public consensus through distribution of resources and amenities. This niche in Azerbaijan ranges within the limits of 10%.

With back to the West

It is worth remembering that the United States and its EU allies with their considerable interests in Azerbaijan – dominant roles of western companies in oil and gas production and acquisition of Azerbaijani oil and gas, have repeatedly invited Aliyev to implement reforms and create multi-faceted and sustained economy. They suggested opening doors for foreign business into non-oil business, breeding conditions for fair competition, consolidating the rule of law and granting economic and political freedoms to citizens. Western circles made no secret of the fact that these relations make Azerbaijan sustainable, developing and stable country. Note that President Aliyev has never said emphatic no. But went on moving across a particular path of development.

It is important to keep in mind that in mid-first decade of the 21 century American Ambassadors Rino Harnish and Ann Ders invited Aliyev to pursue the policy of openness and warned him against emphasis on growing oil revenues. It was fashionable to claim till 2008 on threats of “Dutch disease” for resource-based economy. However, oil prices in the post 2008 financial crisis argued Aliyev into continuation of the policy of monopolization and concentration of power and capital. 

Subsequent Washington envoys in 2011-2013 Matthew Bryza and Richard Morningstar failed to warn President Aliyev against forthcoming upheavals and adjust the course in line with experience of countries that succeeded in transforming from Soviet authoritarianism into western democracies. In contrast, President Aliyev managed to nullify the participation of independent actors at markets, including activities of NGOs, mass media and political organizations. Business take-off and arrests of civil activists on the eve of 2015 crisis became standard practice.

However, the country failed to escape the crisis where neither opposition nor NGOs and mass media played any role. In other words, the crisis, like today’s, is a man-made result of the present authorities.

It must be acknowledged that in 2015 President Aliyev expressed readiness to start a dialogue on reforms and even prepared jointly with American participation 12 road maps for the development of country’s economy. However, following a certain oil price and domestic life stabilization has been accompanied by reanimation of capital and power concentration. The current crisis is illustrative of the fact that percentage indices of non-oil economy “growth” failed to stand oil price downturn and burst like a bubble. It surfaced that the economy of today is dependent, like yesterday, upon oil and world prices.

Worthy of note is the fact that such a policy strained relations between the West and Azerbaijan that led to the stage-by-stage political isolation of the regime. This happened straight after country’s entering into the economic crisis in 2015. Suffice it to remember the offshore scandal around “Panama file”, unmasking of “caviar diplomacy’ that included bribery of politicians and blocking of initiatives aimed against official Baku within the verge of the Council of Europe.

One has to admit that attempts to unmask “Azerbaijani wash-house” to launder dirty money and bribe the European elite. So the Azerbaijan’s isolation in the European Parliament and exposures led to the neutralization of official Baku’s allies in the European structures. The last decisions of European non-governmental organizations against Azerbaijan have been adopted by overwhelming majority of votes to reaffirm a collapse of the defense system and enhance its vulnerability in the international structures.

It cannot be emphasized enough that this vulnerability was apparent in the course of coronavirus crisis. Note that Baku’s self-isolation threw the country back to the outsiders of European integration process. As a consequence, Azerbaijan proved to be at the end of the list of Eastern partnership, so the assessment of this position ended in EU’ paltry assistance worthy of 14 million Euro while its neighbors received hundreds millions worth Euro aid to fight the pandemic. Added to this can be that the EU allocated Euro 80 million for daily requirements and Euro 883 million for short- and medium-term needs. This is not about funds but its assessment. It will suffice to mention that even “the last dictator of Europe”, as named by western mass media, Belarus President Alexander Lukashenko proved to be a front-runner of the EU aid.

Facing the Third World

Of late years, the authorities tried to establish relations with the emerging countries and thus curb the western influence on Azerbaijan. The aforementioned refers to the Third World countries, including Russia, the CIS, Non-aligned Movement and Turkic Council. Have these associations of outsiders worldwide snatched them out of economic collapse and delivered stability? President of Venezuela Nicholas Maduro who handed over the chairmanship in Non-aligned Movement to President Ilham Aliyev while Russia betrayed Venezuela to the United States through moving its assets out and ambitious Rosneft.

It must be acknowledged that Putin’s Anschluss with Belarus remained on maps of the Russian General Staff, and a hybrid war in Ukraine acquired no continuation. Russian stooge to Libya, marshal Haftar suffered defeats under fires of NATO’ member-state - Turkey.

A reasonable question arises: will we go continue drifting in the Third World thus driving the country into the group of rogue nations or, instead, moving along the same track of young democracies – former Baltic countries and socialist camp. Choice is not unthinkable in terms of permanent crises.

Conclusion. A list of issues facing Azerbaijan may be increased, including country’s territorial integrity impending like Damocles’ sword. However, internal and external concerns mentioned above give cause for reflection.

There are:

Internal concerns:

-in-time and –depth, accelerated economic crises

-growth of estrangement between the authority and society

External concerns:

-Raising estrangement between the authority and the West

-Weakening of the already weakened role and influence of the Third World

All in all, there is violation of internal and external stability which is touted as comprehensive crisis.