Other State Department Archive Sites

The State Department web site below is a permanent electronic archive of information released online from January 1, 1997 to January 20, 2001. Please see www.state.gov for current material from the Department of State. Or visit http://2001-2009.state.gov for information from that period. Archive sites are not updated, so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.

Country Commercial Guides FY 2000: Azerbaijan Report prepared by U.S. Embassy Baku, released July 1999 Note*

CHAPTER I. EXECUTIVE SUMMARY

Azerbaijan covers an area of 33,440 Square miles. It's bordered by Russia on the north, Georgia on the northwest, Armenia on the west, Iran on the south, and the Caspian Sea to the east. It has a population of 7.953 million persons (1998), slightly more than half of which live in suburban areas. There are 65 towns, eight of which have populations in excess of 50,000. The capital and largest city is Baku. Located on the western shore of the Caspian on the Apsheron peninsula, it has a population of slightly more than two million. A port city, Baku is poised to become the hub of regional transportation and communication systems for the Trans-Caucasus and Central Asian republics.

Azerbaijan was a part of the Russian Empire from the early 19th century to 1918. From 1918 to 1920 it was an independent republic until it was once more taken over by Russia. This lasted until the collapse of the Soviet Republic and it regained its independence in 1991. The Russian influence is still very strong, particularly in the capital city of Baku. Although the official language is Azerbaijani, most residents in Baku prefer to speak Russian. Approximately one-third of its people are under the age of 14, but only 15% are over the age of 50.

The currency is the Azeri Manat (AZM). The exchange rate as of July 19, 1999 was US$ 1 = 4300 AZM.

The Republic of Azerbaijan has a democratic form of government with an elected president and parliament guided by a constitution. It established diplomatic relations with the United States in early 1992.

Coup attempts, the last of which took place in 1995, and other internal political problems have caused difficulties in Azerbaijan's movement toward democracy. Although the first post-independence parliamentary election, held in November 1995, was flawed, some opposition candidates were seated.

An on-going conflict with Armenia over the region of Nagorno-Karabakh has discouraged economic activity outside the oil sector. A cease fire has been in effect since May 1994; however, localized fighting broke out briefly in the spring of 1997 and again in mid-June, 1999. With a cease-fire now in its fifth year, combined with a relatively stable government, the Government of Azerbaijan (GOAZ) now can focus on economic reform. An U.S.-Azerbaijan Bilateral Trade Treaty, ratified in April 1995, is in effect. This was followed by a Bilateral Investment Treaty signed in August 1997.

Azerbaijan has enormous economic potential, particularly in the energy sector. Although no official estimates exist for the country's total reserves, industry experts suggest that Caspian reserves may approach those of the North Sea. As a result, virtually every major oil company in the world has an interest in Azerbaijan. To help in developing this potential, the GOAZ has granted a number of Production Sharing Agreements (PSAs) to consortia comprised of the oil majors. The first PSA was granted to the Azerbaijan International Operating Company (AIOC) in 1994. Since then, the Azerbaijan Parliament has ratified a total of fifteen offshore and four onshore PSAs. These PSAs provide a solid foundation for foreign investment in oil-related sectors of the economy.

The AIOC began commercial production of oil in late 1997; other PSAs will begin to produce after the turn of the century. By 2010, total investment in the oil and gas sector could be as much as $23 billion. Oil revenues are projected to be roughly $80 billion over the thirty year life of just the AIOC PSA, of which the GOAZ will realize 80 percent.

A regional pipeline system centered in Azerbaijan is beginning to emerge. AIOC has developed two pipelines for its initial production -- so-called early oil -- and is making plans for a main oil pipeline. The northern route for early oil was opened in November 1997, to move Azerbaijani crude to the Black Sea port of Novorossysk. In April 1999, the western route through Georgia was completed. Optional routes for a new, main oil export pipeline (MEP), estimated to cost up to US$ 3.7 billion, are still under consideration. Kazakh crude has been shipped via barge and rail through Azerbaijan to Georgian ports on the Black Sea. SOCAR (State Oil Company of the Azerbaijan Republic) has formed a working group with the oil consortia negotiate MEP options through Georgia and through Turkey.

About seventy American companies, primarily in the oil and gas sectors, are now resident in Baku. Azerbaijan's largest trade event, the Caspian Oil and Gas Exhibition (COGE), is held annually the first week in June. In June 1999, the Sixth COGE attracted more than 300 companies from thirty countries.

Best prospects for U.S. products in 1999/2000 include oil/gas field machinery; telecommunications equipment and services; food products; food processing/packaging equipment; pharmaceuticals; water resource equipment; pollution control equipment; and computers/peripherals. Imported consumer goods have become increasingly available. A number of "supermarkets" have appeared on the scene introducing local consumers to western-style retailing.

In 1998, total Azerbaijani imports were $1.23 billion, including $66 million from the United States. The U.S. is the fifth largest exporter to Azerbaijan. Not included in these statistics is the re-export of U.S. products through Turkey and Dubai. While there is no good statistical data on the level of re-export, the emergence of the U.A.E. as one of Azerbaijan's principal trading partners suggests that the re-export level is significant.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the world wide web at http://www.stat-usa.gov; http://1997-2001.state.gov, and http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRADE, or by fax at (202) 482-4473.