Who will benefit from the country of fire?

In Baku, the capital city of Azerbaijan gas seeps through the rocks and lights up the hillside.  One of the most ancient first worshiper’s temple dating back to the 17th and 18th century is also located in Baku named Ateshgah “home of fire.” It is not definitive if this temple is a Hindu or Zoroastrian structure but one thing is clear – fire, oil and gas have been important in this region for a very long time.

As Elshad Nassirov, the vice president of Socar, the state oil company said, “Everything that was conducted for the first time in the oil and gas industry was conducted here – the first industrial production of oil, the first oil tanker, the first pipeline, the first offshore oil production.” [1] 

What is not as clear is who will be the main beneficiaries internally from the oil industry and how will the nation continue to support the growth of the energy sector as an important pillar of its economy over time?

Azerbaijan is approximately one third the size of Britain but has significant energy resources for its size. Azerbaijan has been estimated to have seven billion barrels of oil reserves which accounts for approximately one million barrels of oil production per day. Ten years ago Azerbaijan did not export any natural gas. By 2030 by the International Energy Agency the country will export 35 billion cubic meters a year of natural gas. The country natural gas reserves are estimated at under one trillion cubic meters. [2]

In the Black Sea-Caspian Basin, Azerbaijan has taken a leadership position in transnational energy projects and has built massive pipelines between Baku and Turkey to transport millions of barrels to Europe and the U.S. every day. Europe, Central Asia, Russia and the Middle Eastern countries are all trying to strengthen ties  with Azerbaijan. Russia unsuccessfully in 2010 tried to pressure Azerbaijan into supplying all of its gas to Russia. Azerbaijan has been growing closer to the Western world in recent years.

This unique country which has been able to  fuse aspects of both the Eastern and Western cultures faces imporant challenges and opportunities in the years to come. The oil sector has been the primary driver of growth of the economy (with grow rates averaging 16 percent during the last decade). The World Bank states that Azerbaijan “faces a unique opportunity to propel itself into the ranks of a sustinable higher middle income country.” Currently though the  total annual income per person remains low compared to global terms  “less than $5,000 per year.”  

Important questions will need to be answered in the coming years in the capital city of Baku. Some key questions are:How will the economy sustain its growth when the production of oil plateaus and begins to decline?  Who are the primary beneficiaries both foreign and internally that are benifiting from Azerbaijan’s oil resources?

Lastly, will there be enough trickle down effect from this industry to help stregthen social services and increase the income of the lower income population?

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