Azerbaijan: Foreign Energy Company Strike Raises Social Tensions

More than 1,000 local workers employed by McDermott, a leading US oil services company in Azerbaijan, renewed a strike on November 29 to protest low wages, discrimination and poor working conditions. The action ended late in the evening after McDermott management agreed to raise wages and meet demands for health insurance, but the long-term effects promise to linger on. The two-day strike is the first serious protest action by local employees of foreign companies operating in Azerbaijan, and has raised concerns about copycat actions throughout the country's strategic energy industry.

The action follows a one-day strike on November 22 that saw workers briefly take control of McDermott's seaside facility 20 kilometers south of Baku. Later the same day, the strike was suspended. The workers had promised to continue the protest action on November 29 if the company's management did not fulfill their demands for higher salaries, health coverage, better treatment and unionization.

McDermott constructs pipelines and builds oil rigs for British Petroleum (BP), the head of a group of Western companies building a major oil export pipeline for Azerbaijan from the Caspian Sea. The company, which employs more than 2,500 people, is BP's biggest contractor in Azerbaijan. The strike reportedly brought work at the company to a complete halt.

Under the terms of an agreement reached between workers and management on the afternoon of November 29, local employees will receive a 20 percent salary increase by December 1. McDermott managers also promised to resolve the question of health insurance for local workers by December 3, the Turan news agency reported.

Some non-governmental organization representatives have forecast that strikes could be duplicated on other Azerbaijani pipeline construction projects if workers' demands are met. "Strikes can start everywhere," said Sahib Mammadov, head of the League for Protection of Labor Rights, a Baku-based NGO. "In all oil projects in Azerbaijan, workers have the same problems."

Multiple reports have recently circulated about problems which Azerbaijanis face working in foreign companies in the country's oil sector. Mirvari Gahramanly, head of the Committee for Protection of Oil Industry Workers' Rights, a Baku-based non-governmental organization (NGO), says local workers at foreign oil companies and their contractors have long suffered. "However, the Azerbaijani government and the management of foreign companies do not react to their [workers'] complaints," she said on November 23.

In addition to roughly 1,600 local employees, McDermott employs more than 500 foreign laborers from India, the Philippines and elsewhere. A 17.5 percent increase in salaries for McDermott's foreign employees at the beginning of November motivated local workers to ask for a 15-20 percent increase in their own pay, strikers said. One striker who spoke with EurasiaNet complained about an uneven distribution of pay between similarly qualified foreign and Azerbaijani workers. "Without giving any reason, the salaries of local workers in McDermott have been reduced 50 percent since October 1, 2005, and now we get $250-$300 per month," said Shakhkamal Bagirov. "Foreign workers who have the same qualifications are getting several times more."

Local workers also say they are treated as second-tier employees. Striking workers told a EurasiaNet correspondent that foreigners from India and the Philippines or other countries eat in separate rooms from Azerbaijani workers and are served better quality food. Foreign workers "enjoy all kinds of respect here," the strikers said.

Mirvari Gahramanly agrees that Azerbaijani workers have been ill-treated by the company in the past. When 19 local employees were fired on November 18, Gahramanly said, "[t]hey were just asked to sit in a bus and got dismissal notices. No reason was given to them."

The workers' rights advocate also agrees that a huge gap exists between salaries for local and foreign workers at McDermott. Gahramanly cited information provided by strikers that indicates a nearly ten-fold difference can exist between local and foreign salaries. Based on these figures, salaries for an expatriate rigger can range from $5,000-$6,000 per month, reportedly, while an Azerbaijani rigger with the same qualifications earns just $500-$600 per month. The difference is supposedly even larger for management; foreign senior managers can earn $25,000 - $30,000 per month, while Azerbaijani top managers would receive a maximum of $2,000, she said. "Besides, foreign employees also get $800 per month for accommodation, and $500 for meals. There is an obvious violation of Azerbaijanis' rights in foreign companies," Gahramanly said.

Official statistics tend to confirm these allegations. According to January 2005 data from the Azerbaijani State Statistics Committee, local employees at foreign oil and oil services companies received on average $482 per month, while foreigners earn thousands of dollars per month.

A lack of medical insurance also featured prominently in local workers' demands. "There were seven accidents in McDermott . . . this year. One resulted in the death of a local worker. However, these people and their families did not get enough compensation because of a lack of health coverage," Mirvari Gahramanly said.

On November 22, David Lipman, McDermott's Caspian Sea region manager for contracts and legal affairs, told journalists that McDermott paid compensation to the family of the worker who died this year, but refused to name the amount of the payment. He said that he "partly agrees" that local employees do not have medical insurance, but added that workers can visit a medical station at the McDermott facility in case of emergency.

At the time, however, Lipman argued that raising workers' salaries was "not McDermott's jurisdiction" since the wages are set by agreements signed between BP and the State Oil Company of Azerbaijan (SOCAR). A Production Sharing Agreement (PSA) signed in September 1994, as part of the so-called Contract of the Century, between the Azerbaijani government and a consortium of Western oil companies dictates that salary rates for contractors' companies are included in the budget established for contractors' work with BP. According to the PSA, salaries cannot be changed without coordination between BP and SOCAR and revisions to the contractors' budgets.

In a November 24 interview with Day.az, Sabit Bagirov, president of SOCAR from 1992 to 1993, who now runs the Economic Research Center NGO, said that workers should have addressed their demands to government officials since foreign oil companies set their pay rates in coordination with the Azerbaijani government.

Bagirov described himself as at a loss to explain the difference in wages between foreign and local workers. "I can only assume that the government does not wish the situation when [a] local worker in [a] foreign company like McDermott receives much more that his colleague at SOCAR," Bagirov said. "It is a wrong approach and illustrates [the] old Soviet mentality of our government."

BP-Azerbaijan issued a statement on November 29 saying the company is confident its project timeline for McDermott's work would not be affected by the strike.

One foreign oil company senior manager, who asked not to be named, told EurasiaNet that the Azerbaijani government unofficially encourages foreign oil companies to hire foreign workers. "There is a reason for that. Most of the contracts will expire soon. For example, the contract of McDermott with BP expires in the first half of 2006 and all of McDermott's employees would lose their jobs. A foreign worker will just leave the country after that and will not create any problems for the government, unlike his Azeri colleagues. So, the fewer potential unemployed [people] in the country, the better for the government," the source said.

Sabit Bagirov admits that such a problem exists. More than 12,000 local workers could lose their jobs over the next four years in the oil industry, he said, as construction of oil and gas pipelines and oil rigs comes to a close. "It will be [a] tough problem for the government," Bagirov told Day.az. "These people got used to get relatively high salaries and it will be difficult to them to find equal jobs. It will create some social tension in the country and the government must start [to] think about it now."

In the week following McDermott workers' initial November 22 strike, Azerbaijani authorities and opposition supporters have made no overt effort to politicize the conflict, but pro-government and pro-opposition media have floated various allegations. The opposition Azadlig (Freedom) and Yeni Musavat (New Musavat) papers alleged on November 25 that the government organized the McDermott strike to put pressure on foreign oil companies. Meanwhile, the pro-government Lider TV channel aired an allegation on a November 23 news program that the opposition bloc Azadlig provoked the strike.

McDermott workers themselves refute all such allegations and have called on outsiders not to politicize their demands. "Our action is only about social problems," a statement issued by strikers read.