One of the few countries of the former USSR that have maintained a fairly high GDP growth rate is Azerbaijan. The economy is developing steadily, despite the fact that the 2008 crisis significantly affected all indicators, substantially reducing growth in all areas of production compared to the pre-crisis level. Nevertheless, in terms of GDP growth, one of the world leaders is still Azerbaijan. The economy survived due to the export of energy resources, and anti-crisis measures were also implemented in this country through the use of foreign exchange reserves accumulated during the safe pre-crisis period.
Characteristic
The richest country in the South Caucasus is Azerbaijan. Its economy is two-thirds of the GDP of all other countries in this region. From 2005 to 2008, growth actually reached 24.1% annually, which is the highest value since the collapse of the Soviet Union. It was a real economic boom, and Azerbaijan has become the absolute leader in the world in terms of growth. The economy was growing on such a scale due to the active use of its natural resource potential: new hydrocarbon deposits were developed, energy production increased, foreign direct investment was attracted, oil and gas pipelines were built, and export deliveries of oil products, crude oil and natural gas increased rapidly. Hence the result: the transformational decline of the nineties was completely overcome, and GDP at constant prices rose by one hundred and six percent by 2008 compared with 1990. The economy of Azerbaijan in 2017 will be examined in comparison with just this grace period.
Foreign direct investment has largely determined these successes, and, of course, the bulk (that is, almost completely) of them went to the oil and gas sector. The first decade of the 21st century showed that two-thirds of external financing consisted of direct investments, and from time to time (for example, two years before 2004), their share amounted to more than ninety percent of all foreign loans and investments. That is why the country was able to accumulate funds to overcome the crisis of 2008, and the economy of Azerbaijan in 2017 not only keeps afloat, but, one might say, flourishes. Still would! For several years in a row, direct net foreign investment pulled to the highest world rate - about thirty percent of GDP. However, investment flows have undergone significant changes over time. Already after 2004, their influx into the oil and gas sector began to weaken. Moreover, in the period 2006-2008 there was even an outflow. But the matter was already done - the funds were invested, the development of the extractive field was stimulated as it should, the state of the economy of Azerbaijan became extremely stable, and now it was possible to slowly develop at our own expense.
Today
The oil and gas sector dominated until 2007, and it was it that was supported by foreign investment, while domestic resources were directed to the development of non-oil sectors, which also showed rather active growth in their contribution to the economy of Azerbaijan. Today it is they who, for the most part, support the country's stable economic condition. The infrastructure has significantly improved - water supply, transport, electric power, the main government expenditures have gone here. Azerbaijan's economy in 2017 was least affected by the outbreak of the financial crisis. But this could only happen because the injection of foreign direct investment in the development of the fields was so generous that it was very quickly possible to create and organize the extraction and transportation of energy carriers, and therefore funds were received for the development of the non-oil sector.
The economy of Azerbaijan today rests on the newly created system of pipelines that supply oil and gas to the world market. This is the Baku-Ceyhan oil pipeline in 2006, and the Baku-Erzurum gas pipeline in 2007. To this day, this country has remained the largest oil exporter in the Caucasus, and since 2007 it has become the most efficient gas exporter. Oil production from 2004 to 2010 increased almost threefold - 42.3 million tons, and export grew even faster - three and a half times - more than 35.6 million tons. The entrepreneurial role in the development of the economy of Azerbaijan is simply huge. At that time, world oil prices were also rising, and therefore, the rapid increase in oil production led to an almost tenfold increase in oil export profits (2008 - $ 29.1 billion). Ninety-seven percent of all exports accounted for gas and oil in 2010, which brought Azerbaijan nearly forty percent of government revenue.
Confrontation
In 2011, two events happened at once, the reason for which was clearly economic reasons. It is in this connection that we should consider the state of affairs in the confrontation between the two South Caucasian countries: how they spent the last decades after the collapse of the USSR, what they achieved, what remained. So, Azerbaijan and Armenia: the economies of countries. The first in 2011 was included in the project for the construction of the TANAP gas pipeline (which is still being considered by the competitor to our Turkish Stream). And in Armenia, mass protests took place at the same time to raise tariffs from the "Electric Networks of Armenia", that is, against the UES of Russia. However, the background to all these events was the political crisis of Nagorno-Karabakh. How Azerbaijan began and what it came to during these decades, we briefly examined. Now it’s the turn of the opponent.
Armenia received a very strong inheritance from the USSR - the industrial base was extensive and substantial. Armenia does not have its own fuel resources, however, throughout the years of Soviet power, this country has been among the leaders in the system of distributing inter-republican goods. In mechanical engineering, Armenia was ahead of the Union (as a manufacturer of many types of machine tools), non-ferrous metallurgy (copper, molybdenum with developed deposits) was well developed, and the chemical industry was well represented. This is only the main part of the Armenian economy by 1991. Nevertheless, such a rich industrial diversity did not save the country from shocks. The economic shock was simply murderous, as, indeed, in almost all republics.
Armenia
All major economic ties broke up, and in connection with the events of Nagorno-Karabakh, Turkey and Azerbaijan imposed a blockade - the Armenians and now stop smiling, recalling these "dark years". The energy crisis began, since neither export nor import became impossible. When gas and fuel oil ran out, Yerevan and Hrazdan thermal power plants stopped. And after the Spitak earthquake - back in 1988 - the Metsamor Nuclear Power Plant was closed. By the way, this cataclysm disabled forty percent of the republic’s industry, but the Metsamor NPP remained intact. However, the 1986 Chernobyl was still fresh in the memory, and therefore they decided to close this fully operational station from harm's way. At the height of the energy crisis in 1993, Armenia decided to ignore the measures taken and restart the nuclear power plant. I must say that this phenomenon is considered to be simply unprecedented in nuclear energy. Two years later, only one block of two was launched.
And then Armenia began to rebuild its economy. Market reforms were carried out, although rapid growth was not observed, and where did he come from? The industrial base remaining from the USSR was subject to either 100% modernization or decommissioning. And with foreign investments in Armenia it was tight (unlike Azerbaijan, which lives on oil products). Compare the figures: foreign companies invested $ 1.8 billion annually in Georgia, four billion in Azerbaijan, and a maximum of nine hundred million in Armenia (and only once, the remaining years are much less). Moreover, the Armenian diaspora invested mainly around the world. In second place in financial injections is Russia. And in the two thousandth GDP of Armenia showed a good growth - fourteen percent. However, imports continue to exceed exports. Almost no one takes the machines, but the metals go, agriculture (Ararat cognac), aluminum foil … In principle, the list is almost exhausted.
If tomorrow is war
Each day of the war between Armenia and Azerbaijan in Karabakh will cost both sides fifty million manat (Azerbaijani money and as a currency are stable). The economy of Armenia, with its not very stable drama, will not be able to withstand such a heat if Russia does not "fit in" with it (and it always "fits in"). Rocky battles are expensive. Now the main economic situation, which is not deputy. In 1990-1993 he could not change the Minister of Economy of Azerbaijan, neither the Minister nor the Prime Minister himself, when there were really large-scale military operations. So, today Azerbaijan has a gold and foreign exchange reserve of fifty-three billion dollars. For example, Ukraine has only eight (it was in 2014), Belarus has twelve. This means that the Minister of Economy of Azerbaijan allocates $ 7, 800 per capita, while even in Russia it is only three and a half thousand, although the gold reserve is ten times more.
It is such an economic "subcutaneous fat" that will allow Azerbaijan not to reduce social programs even during the war (pensions, salaries, etc.). But Armenia does not have such an opportunity at all. However, Azerbaijan also understands that the consequences of the war can be very diverse, and therefore does not yet begin to return by force the lands that it somehow considers its own, and without asking Armenia, it draws its oil and gas pipelines through Nagorno-Karabakh. But preparations are underway for war. An armed forces fund has been created with an already very, very considerable amount in the account, which has not diminished by the smallest money over many years. The economy of Azerbaijan in 2016 is very different from 2011, when decisions were made to extend the gas pipeline. In 2018, it is already planned for operation. The war did not start, but armed clashes on the borders take place permanently with the use of artillery and military helicopters. So far, neither Armenia nor Azerbaijan have won victories.
The country's economy in development
State policy is currently being implemented in the field of macroeconomics (social development). State property is being privatized, the entrepreneurial role in the development of the Azerbaijani economy is increasing. Trade is booming, foreign investment continues to be attracted, and the management of state property after privatization limits monopolies and develops competition. Since 2008, the Ministry of Economy of Azerbaijan has been headed by Sh. Mustafayev.
However, this country began to develop not from the time of separation from the USSR, but much earlier, in 1883, when the Russian railway, included in the general network, came from Tbilisi to Baku. At that time, merchant shipping on the Caspian Sea expanded significantly. At the end of the nineteenth century, Baku is already a large railway junction and a large Caspian port. Oil production began to develop, industrial enterprises, and boreholes with steam engines appeared. The first foreign capital appeared here also in the nineteenth century, making half of the world’s share of oil production in Azerbaijan.
Italy
Today, of course, Azerbaijan has much greater opportunities for economic development. The investment presence here plans to significantly expand Italy. She started investing in this country many years ago, and her first contributions were from the fashion industry. Numerous joint ventures have appeared that are still operating today. The market is now changing, expanding, and both countries are realizing opportunities for mutual cooperation in the fields of logistics and transport. After the crisis, commodity circulation is beginning to recover, and infrastructure and construction projects are emerging that can attract significant foreign investment.
Since 2010, the volume of direct investments by Italian companies in Azerbaijan exceeded one hundred and five million dollars, and from here to Italy even more - one hundred and thirty-three, and in 2016 alone, Azerbaijan invested almost one hundred and thirty million dollars in Italian projects. Now more than twenty companies work together, among them such well-known as Tenaris, Technip Italy, Maire Tecnimont, Drillmec, Valvitalia, Saipem and others. In 2017, Italy will increase investment in the economy of Azerbaijan. Details are already being published in the press. In 2016, a contract was signed with Danielle, and she has already begun work here. In total, the presence of Italian companies in this country reaches a huge number - up to a thousand, and every year it grows. In terms of trade, this state is Azerbaijan’s most effective partner.
Economic areas: Baku
The regions of the Azerbaijan Republic are characterized by the special economic and geographical position of the country, its territorial and economic unity, peculiar natural conditions and historically established production specialization are determined. There are ten economic regions plus a separate territory of the Absheron Peninsula, where the capital of the republic, Baku, is located. The latter includes the Khizyn, Absheron regions and Sumgait. It is the main fuel and energy base of the country, it produces the most significant amount of gas and oil, as well as the most electricity generated.
The chemical and petrochemical industries are highly developed, followed by heavy metallurgy, mechanical engineering, energy, and electrical engineering. Further, also significant enterprises of the light and food industries, building materials. The service sector and transport infrastructure are very well developed in this economic region. Agriculture is also present: there is poultry, livestock meat and dairy (cattle), sheep. Gardening, viticulture, floriculture, vegetable growing, according to excellent agro-climatic conditions, allow us to grow saffron, olives, pistachios, figs, almonds, watermelon, the best grape varieties and much more.
Ganja-Gazakh economic region
Here are two large cities - Naftalan and Ganja, as well as nine administrative districts. This area is very rich in minerals, not only gas and oil are extracted here, but also cobalt, pyrite, iron ore, barite, limestone, alunite, gypsum, marble, bentonite, zeolite, gold, copper and much more. In addition, there are three hydroelectric power stations in these territories, since the Kura flows here. Manufacturing enterprises occupy a huge place in this economic region. These are heavy metallurgy, mechanical engineering, instrument making, factories for the production and repair of agricultural machinery, automobiles and communication equipment. Light industry produces products based on local raw materials: canned meat and dairy, cognac, wine.
There are many construction enterprises where they produce wide panels, reinforced concrete, brick, expanded clay, marble building materials. In cities, primary processing of raw materials for ferrous and non-ferrous metallurgy, potash fertilizers, and sulfuric acid is carried out. Agriculture supplies crops and potatoes, grapes and other fruits. Livestock, vegetable growing, and gardening are developed. This area is of fundamental transit importance: pipelines transporting oil and gas are located on its territory. Tourism is well developed, since the climatic conditions are extremely good. There are numerous health centers, including those of international importance.
