EurasiaNet Eurasia Insight - Pipeline Opening Helps Spur Political Opposition in Azerbaijan

EURASIA INSIGHT

PIPELINE OPENING HELPS SPUR POLITICAL OPPOSITION IN AZERBAIJAN
Shahin Abbasov and Khadija Ismailova 6/06/05

The Baku-Tbilisi-Ceyhan pipeline may prove either a blessing or a bane for President Ilham Aliyev’s administration in Azerbaijan. The export route is expected to generate revenue that could fuel the rapid expansion of Azerbaijan’s economy. At the same time, the opening of the pipeline has helped spur opposition protests that aim to break the Aliyev administration’s virtual monopoly on power.

An estimated 10,000 anti-government protesters gathered in central Baku on June 4 to press demands for free-and-fair parliamentary elections, which are scheduled to be held in November. "We want to form a parliament that represents the will of the Azerbaijani people," Ali Karimli, leader of the Popular Front, part of an opposition coalition that helped organize the protest, told the demonstrators.

Unlike a similar demonstration on May 21, police made no move to disrupt the June 4 rally. The use of force during the May protest generated international criticism just days before Azerbaijani officials hosted a ceremony inaugurating the Baku-Tbilisi-Ceyhan (BTC) pipeline. [For background see the Eurasia Insight archive]. International leaders and executives associated with the pipeline consortium used the opening of BTC to express concern about the upcoming elections, saying a fair vote was needed to ensure future political and social stability in Azerbaijan.

Hundreds of police tracked the protesters on June 4, but made no move to intervene. It marked the first occasion since Azerbaijan’s controversial presidential election in late 2003 that police had refrained from acting to break up an opposition protest. [For additional information see the Eurasia Insight archive].

Some experts in Baku say that the BTC opening marked the unofficial start of the parliamentary election campaign. Aliyev and other top officials have offered assurances that the parliamentary vote will be fair. Opposition leaders have voiced doubts about such claims, and expressed a desire to intensify the pressure on the government. Opposition protesters on June 4 agitated for electoral amendments designed to dilute the Aliyev administration’s influence over election commissions on all levels.

The pipeline certainly has the economic potential to provide a political boost for Aliyev’s administration. Whether Aliyev’s administration fully realizes the political benefits, however, will depend heavily on how the profits are distributed, political analysts say. Azerbaijan’s oil fund, which is supposed to devote a share of energy profits to public infrastructure and social welfare initiatives -- currently stands at about $1 billion. Roughly $460 million of fund resources are already earmarked for a variety of infrastructure and social welfare programs. A lack of transparency in the fund’s management, however, has prompted opposition politicians and foreign experts to wonder whether the money will be spent appropriately.

If the price of oil remains at least $45 per barrel, Azerbaijan could expect to reap as much as $160 billion by 2030, according to some projections. "It is an overwhelming number, taking into account that the revenue for the country’s budget in 2005 is expected to be $2 billion," said Inglab Ahmadov, who heads the Baku-based Public Finance Monitoring Center. [EurasiaNet operates under the auspices of the Soros foundations network, which also has provided funding for the Baku monitoring center].

BTC’s potential capacity could reach 75 million tons of oil per year, some experts say. "Naturally it will increase the competitiveness of Caspian oil in the world market," Ilham Shaban, the energy analyst of Turan News Agency told EurasiaNet.

Azerbaijan’s opposition has embraced increasingly aggressive tactics since the start of 2005, drawing inspiration from revolutionary developments in Georgia, Ukraine and Kyrgyzstan over the past year-and-a-half. [For background see the Eurasia Insight archive]. Some analysts in Russia -- which has steadfastly opposed BTC because the new conduit stands to severely weaken Russia’s grip on regional energy exports � suggest the new pipeline could increase the political pressure on Aliyev’s government.

"While the pipeline will carry oil from the East to West, the spirit of �color revolutions’ will flow in the reverse direction," said a commentary published by the Russian business daily Kommersant on May 26. The commentary went on to suggest that Western governments want to promote democratization in Azerbaijan out of a desire to protect the considerable investment made in the pipeline. The 1,760-kilometer pipeline cost roughly $4 billion to construct. [For background see the Eurasia Insight archive].

To support democratization, the British government and international financial institutions have provided financial support to Extractive Industry Transparency Initiative. Meanwhile, the US Agency for International Development (USAID) is planning to launch a new multi-million-dollar program to encourage civil society development. Concerning the election, US Ambassador Reno Harnish indicated that Washington, at Baku’s request, would sponsor exit polling and other initiatives designed to promote electoral fairness.

Beyond the parliamentary election, managing Azerbaijan’s newfound wealth could prove an economic challenge that turns into a political liability for the Aliyev administration. Several Azerbaijani experts suggest the country is a prime candidate for Dutch disease, in which the sudden and rapid influx of revenue from energy development stifles the competitiveness of other economic sectors. "Owing to oil revenues, the local currency rate is getting stronger and local production becomes less attractive for non-oil business," Ahmadov said.

To avoid Dutch disease, the Azerbaijani government will have to introduce a far greater degree of transparency in the management of the state oil fund than currently exists, Ahmadov contended. If the fund is mismanaged, the result could be a rise in unemployment and the widening of the already sizeable income gap separating rich and poor in Azerbaijan, Ahmadov continued. That, in turn, would likely create an increase in public dissatisfaction with the Aliyev administration. "History shows that sometimes it is more difficult to spend money than to earn it," he said.

Editor�s Note: Shahin Abbasov and Khadija Ismailova are freelance journalists based in Baku.

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