How does the oil price affect Azerbaijan?

AzerbaijanAn oil state between grand plans and dreary reality

You can tell Parvin Ahanci's enthusiasm for her job. The historian - focus on "Development of the oil industry in Azerbaijan" - is on the Bibi-Heybat oil field in the east of the country. Behind her, the Caspian Sea flashes in the winter sun. In front of her, the oldest derrick in the world - built in 1847.

"You can compare it to the gold rush in Mexico. People have heard of the 'Baku Oil', many important companies from all over the world have come to make money: The Rothschilds, the Nobel Brothers, Russian companies. You everyone wanted to benefit from the oil boom. Let me quote a newspaper report from 1873. It reads: Everything revolves around oil, oil, oil. Where is the nearest oil source to be found? Where and how can you get money invest? How much money can you earn where? Everyone was only talking about oil. "

At the beginning of the 20th century, half of the world's crude oil produced was extracted in Azerbaijan, and it is now hoped to build on these golden times: Although the "black gold" is now primarily extracted "offshore" on drilling rigs far out in the Caspian Sea, the oil pumps nod the Abseron Peninsula still up and down. Even today, the importance of the raw material for the identity of the country cannot be overestimated.

Way of modernization

It takes about half an hour to drive from Bibi-Heybat's oil pumps to Ilham Shaban's office in the capital Baku. Shaban is the director of "Caspian Barel", a research institute that specializes in energy issues related to the Caspian Sea.

"During the Soviet Union, there were no industrialized, modern cities in Azerbaijan besides Baku and Sumqayit. Since independence in 1991, but especially in the past 15 years, the entire country has been on a great path of modernization. And that is mainly due the huge revenues from the oil business. "

View of Azerbaijani oil fields in Shikhof near the capital Baku - taken in October 1998. (picture alliance / dpa / epa / Nemenov)

Indeed: The country, which only gained independence from the Soviet Union in 1991, experienced a veritable economic miracle during the years of the oil boom. Between 2000 and 2010, the economy grew by an average of over 15 percent annually. According to a study by Transparency International, the proportion of poor people in the population fell from almost 50 percent in 2001 to less than 16 percent in 2008. But in 2014 the oil price halved worldwide within a very short period of time. Azerbaijan, whose economy at that time concentrated almost exclusively on the production of crude oil, was hit hard: State revenues collapsed, the national currency manat was devalued twice as a result. In search of solutions to this crisis, the focus has been on Germany since then.

Around 400 kilometers west of the oil fields of the Caspian Sea, the church tower bells of a renovated Luther Church ring twelve times. It is lunchtime in the inland town of Göygöl.

Germany is very popular

Göygöl used to be called "Helenendorf" and was founded 200 years ago by Swabian settlers. A few years ago they started to spruce up the historical buildings and bring back memories of the German past. "Almanya", that is, Germany, is very popular in Azerbaijan 's public opinion.

The country is hoping for help from Germany. Farhad Mammadov is the director of SAM, an influential government-funded research institute. He was only back in Berlin last November:

"Germany is a very important country for Azerbaijan, especially against the background of Azerbaijani relations with the European Union. The EU is Azerbaijan's most important trading partner and Germany is the most powerful country in the European Union. In addition, Germany is a highly developed country with outstanding Technology is. Against this background, relations with Germany are so important to us. "

The high reputation of German technology is reflected in the trade relations: Above all, machines, cars and electrical engineering are shipped from Germany to Azerbaijan. In return, Azerbaijan exports oil to Germany.

Jürgen Sawatzki is one of those people who wants to advance the Azerbaijani economy with his knowledge and German technology. The 64-year-old engineer from Lippstadt in North Rhine-Westphalia worked for 19 months as a supervisor for the German medium-sized company ECON Industries in Azerbaijan.

"Azerbaijan is an oil-producing country. The boreholes that are drilled into the earth have to be cooled and lubricated so that the oil drill that goes in down there doesn't wear out too quickly. High-quality cooling oils are then added are of course contaminated with all sorts of dirt when they come back to the surface. Our systems clean this sludge, the so-called drill cuts, and separate water from solids and from these drilling oils. These drilling oils then have the property like new Oils. That is really good technology. We have built two of them here ".

Crisis trade relations

Jürgen Sawatzki, a man with alert eyes, laugh lines and a firm handshake, is beaming. His company built two plants in Azerbaijan. The reality of the trade relationship, however, is different: Azerbaijan is still Germany's most important trading partner in the South Caucasus, but German imports into the country fell by 26 percent in 2016 alone. Tobias Baumann, Head of the German Chamber of Commerce in Azerbaijan:

"The status is currently somewhat subdued because we are emerging from a crisis in Azerbaijan that has also affected German-Azerbaijani economic relations. You can say that German exports have collapsed - from almost 900 million per year to just under 300 million euros, so that is remarkable. And then even in this absolute number, no more impressive volume for us. "

Oil pump on the Abseron peninsula: only a few kilometers from downtown Baku (Deutschlandradio / Daniel Heinrich)

The reasons for the troubled trade relations also lie in the economic and political environment that companies have to face. Investing in Azerbaijan is not without risk.

A modern office building in the center of Baku. Meeting with Kestutis Jankauskas, the EU ambassador to Azerbaijan. Together with the German Chamber of Foreign Trade, the EU embassy published the "EU Business Climate Report": Some companies do not skimp on criticism of Azerbaijan as a business location: structural problems in the financial sector, a non-transparent tax system, uncertain legal situation. Jankauskas is a trained diplomat, but he takes a deep breath before answering.

"You are right. The insecure legal situation is by far the biggest problem for companies here. There are now around 300 companies based in the EU that work in Azerbaijan. We do surveys to find out what they think about the business climate Outstanding - in a negative sense - are legal problems and a kind of arbitrary justice. For the big companies this may not be so important, but for the small and medium-sized companies it is of immense importance that they can defend their interests here, in case something happens. "

Distrust of foreign institutions

This - quote - arbitrary justice is also the reason why a single German political foundation still operates an office in Azerbaijan. The legal situation is characterized by deep distrust of foreign institutions and is similar to that in Russia, China or Egypt. Farhad Mammadov, director of the semi-state research institute SAM, attributes the state's rigid stance towards foreign organizations to fear of external influences:

"The most important principle of Azerbaijani foreign policy is to regain the territorial integrity of the country. The second principle: Not to become a plaything for great powers. We can see from the example of Syria, Ukraine and others that weak, small states are becoming the plaything of great powers If such states open up too much to foreign influences, the territorial integrity of a state is weakened. This in turn has a negative effect on the economic performance of a country, for example. In the end, this may even lead to a collapse of the entire state apparatus. "

The German engineer Jürgen Sawatzki is aware of this mistrust. The interview with him was actually supposed to be supplemented by a tour of the industrial facility he was in charge of. Shortly before the appointment, the state company SOCAR canceled the inspection. Sawatzki is angry.

"If you are here on the system for so long, that's your baby. And as long as you have worked well with the people, then I think it's worth thinking about when you don't get permission to go to the system, to look at them. "

Hikmat Hajiyev, spokesman for the Azerbaijani Foreign Ministry (Deutschlandradio / Daniel Heinrich)

The rejection of the state corporation SOCAR shows how cramped official bodies deal with press inquiries: appointments with state institutions only come about, if at all, through pressure from the Foreign Ministry or the embassy in Berlin. Nothing works without personal contacts. Reporters Without Borders lists Azerbaijan on the press freedom index 162nd out of 180 countries - seven places behind Turkey.

Rampant corruption? Lack of freedom of the press? Hikmat Hajiyev, spokesman for the Azerbaijani Foreign Ministry, can only shake his head at critical reports from abroad:

Need for democracy

"Azerbaijan is a young, democratic country and we are making solid progress every day towards a democratic society. In general, the development towards democracy is a conscious decision of the Azerbaijani people and the Azerbaijani government. We are not doing this because we are supported by international organizations want to be seen as democratic. It is a national basic need of Azerbaijani society. "

Azerbaijan, as a country that is opening up, a country on a wave of success, carried by the common belief of the government and the people in democracy. Hajiyev is the spokesman for the Foreign Office, he has to say that.

In reality, President Ilham Aliyev has held the reins tightly since 2003. He had taken over the office from his father, Heydar Aliyev. A man who was considered the country's most important politician even in the days of the Soviet Union. In 2016, following the publication of the Panama Papers, it became known that the Aliyev family had holdings in virtually every area of ​​the country's economy.

Energy expert Ilham Shaban: Sober view of developments in his country (Deutschlandradio / Daniel Heinrich)

It is therefore hardly surprising that only a few hundred meters from the Foreign Ministry, energy expert Ilham Shaban from the Caspian Barel research institute speaks far less pathetically about the current situation in his country. Soberly, he links the economic crisis with an alleged political thaw:

"The Azerbaijani government knows that it will never match past revenues. Just a few years ago we were making $ 20 billion a year in the oil and gas sector. Such revenues are not realistic for the next ten years. During oil -Booms Azerbaijan has not opened up, has cut itself off from the rest of the world. The crisis has led to people realizing that they have to open up. So the low oil price also has its advantages: It literally forces the government to stop the market - and the country - to open up and allow competition in the country so that the country can survive. "

Sumqayit is one of the ten dirtiest cities on earth

Khayal Jafarov is one of the men who should promote this opening. He receives in an improvised container office, very close to Sumqayit, the third largest city in the country. Construction is still going on, in a few months one of the most modern fertilizer factories in the country is due to start work - export-oriented, with international participation and Jafarov as director:

"This project is financed by a consortium of international banks. One of the banks that is involved in the financing of this location is Deutsche Bank. The company involved is the Korean general contractor Samsung, the main sponsor is the Korean export-import bank. This bank has Bringing three leading European banks. In addition to Deutsche Bank, the Austrian arm of the Italian Uni Credit and Societe Generale from France are also involved. "

Jafarov is proud of the foreign participation. He can only see positive things in this:

"These banks also demand high environmental standards from us, not only during the construction phase, but also when the factory is commissioned. We therefore commit ourselves to high international environmental standards. This also includes six-monthly reviews by independent environmental experts."

The fact that high environmental standards should apply here, of all places, is symbolic: At the time when Azerbaijan was still part of the Soviet Union, 70 percent of chemical production was located in Sumqayit, and child mortality was among the highest in the Soviet Union. Even decades later, the consequences are still noticeable: In 2007, the American Blacksmith Institute, which is committed to the elimination of serious environmental damage, ranks Sumqayit among the ten dirtiest cities on earth. According to a joint study by the United Nations Development Program, the World Health Organization, the Azerbaijani Ministry of Health and the University of Alberta, cancer rates were up to 51 percent above the Azerbaijani average, even years after the end of the Cold War.

Past mistakes

Rovshan Abbassov teaches at Khazar University in northern Baku. The overexploitation of nature is frightening for the geologist not only in Sumquayit and not only in the past:

"If we look at the soil pollution from the oil drilling, we still have similar problems. If you drive around the Abseron Peninsula, you see a lot of obsolete derricks, you see pollution everywhere. For one thing, you see immense surface pollution. The pollution however, it also goes deep into the ground, maybe four or five meters in some places. I assume that excess oil, heavy metals and even small amounts of radioactive contamination in some places can be found in the soil, which has a terrible effect on the health of Impact people. "

Geologist Rovshan Abbasov: Lack of environmental awareness as a problem for society as a whole (Deutschlandradio / Daniel Heinrich)

The Azerbaijani government claims to have learned from past mistakes. Modern industrial plants such as the fertilizer factory in Sumqayit, adapted to international environmental standards, are not the only major projects that should make the economy fit for the future: The country's tourism industry should be strengthened, agriculture should become more productive. As part of a multi-billion dollar funding project in the Caspian Sea, ten billion cubic meters of natural gas are to be transported to the EU per year from 2020. The emphasis in all of this is on "should" - not much has happened yet, says Tobias Baumann, head of the Chamber of Commerce:

"Beyond the oil and gas sector, the Azerbaijani economy is not very diversified. Above all, the export economy is not very diversified. So far, there are few competitive or world-market products from Azerbaijan."

While Baumann tries to take stock of the economic situation in Azerbaijan, the geologist Rovshan Abbasov can hardly contain himself. The conversation with him about a sustainable development of the economy of his country expands into a downright social criticism:

"Whether on the radio or on television - everyone always talks about money. Nobody talks about health, nobody talks about a better education system. Of course, all of these things depend on one another. Money is important in life, I understand that. But we still live not just for the money! We have to ensure that the environment remains clean for generations to come. We have to improve our schools. "

Democratization of the political system seems to be of secondary importance

For Abbasov it is clear: "Financial success is the only thing that counts in Azerbaijan." Everything else, including a modernization of society and the associated democratization of the political system, appears to be of secondary importance:

"Have a look around Baku.How many expensive cars do you see there? Do you know how much contaminated soil could be cleaned for the value of such an expensive car? But that just doesn't happen. There is no problem awareness at all. This attitude is a problem for society as a whole. "

His criticism is aimed right at the heart of Azerbaijani economic policy. The bubbling income from the oil business has long enabled the government to cover up smoldering problems in the country, such as the uncertain legal situation, the lack of freedom of the press or the overexploitation of nature, and to evade urgent reforms in these areas. Whether the planned modernization of the economy can be a success for the entire country will also depend on whether the government is ready to allow society to be modernized as well.