Although the oil is running out Aliyev continues to splurge
MARK GODFREY
Thu, Dec 11, 2008
LETTER FROM BAKU:A man for big cars and building projects – the Azeri
president’s excesses know no bounds, writes Mark Godfrey
WALKING BY Baku’s tastefully restored Philharmonic Hall recently I got to eat
the dust churned up by a presidential convoy of 15 black cars tearing up
Niyazi Street towards government buildings. Riding in the second Mercedes,
President Ilham Aliyev was probably rushing from a ribbon-cutting downtown.
The mustachioed president, a man with reputedly Tony Soprano appetites for
gambling and women, has gone on a building spree to ready Baku for the Olympic
Games, an honour he has sought with obsessive zeal. Baku is the oil capital
of the world in the 19th century and still soaks in the stuff. The handsome
mansions built during the city’s first oil boom in the 1890s have been
renovated into a museum- perfect citadel peppered with boutiques and
embassies.
Oil and crony capitalism have allowed Azerbaijan to escape the worst effects
of global economic turmoil. A decade of oil earnings and average annual GDP
growth of 15 per cent give the Caspian Sea state a comfortable buffer of
foreign exchange; and because the economy is controlled by a handful of
interconnected officials and businessmen, overseas borrowings by local banks
or enterprises was limited.
That doesn’t mean Azerbaijan has a sound economy, because it hasn’t. It’s
easy to think that the Azeri leadership blew its chances on vanity building
projects and shockingly corrupt administration that has kept the bulk of
proceeds from prodigious gas and oil sales in the pockets of the politically
connected elite.
Chinese immigrant workers are an extravagance in a country with plenty of
poverty and unemployment. But ostentation is a way of life in Azerbaijan.
Baku’s prosperity is its curse. It has the least pedestrian-friendly cities
in the world which are ruled by jams of SUVs and saloons belonging to the
wealthy minority. The majority of the population, meanwhile, squeeze on to its
overwhelmed and uncomfortable Soviet-era subways lines.
It occurred to me, as I was swept along in a shuffling queue for the lone
escalator out of a subway station to the city’s main train station, that the
Azeri people had been badly served by their oil wealth.
"The bulk of the economy is controlled by a handful of officials and
businessmen," a local lawyer said. Like most local business people I talked
to, he didn’t want to be quoted but wanted it known that the country’s economy
is failing a young, relatively well-educated workforce.
Baku was only 100 years ago the world’s top oil exporter. In the
desert-barren landscape that surrounds it the smell of oil pervades the airm,
and soil
is streaked with black from exposed pipes and discarded metal oil rigging. But
this is no Dubai. Outside the oil and gas sectors, there’s been little
serious success at building alternative industries for the day when the wells dry
up. A economics lecturer at Baku State University curses Baku’s lack of
vision in investing its oil profits. "We’re just sucking out the existing reserves
. . . in the last five years there’s been no major find . . . there doesn’t
seem to be any plan for what happens when the oil runs out." Here’s his
suggestion: a bridge between Europe and the East, Azerbaijan needs to become a
services hub for multinationals servicing their operations in resource-rich
central Asia. It must hurry, says the professor. Across the Caspian, Kazakhstan
is leading Azerbaijan in busting corruption and attracting foreign investment.
"It’s building the financial services industry that Azerbaijan could have."
There is some hope amid the stench of corruption and oil. The state
investment agency Azpromo has belatedly been looking for foreign investmentin
mechanising agriculture. And despite the waste and the cronyism, roads have being
built with oil and gas revenues. "The government is well aware of Azerbaijan’s
infrastructure needs," says Daniel Matthews, a partner at the Baku office of
Baker Makenzie. He points to new highways that lead from Baku to the
Russian, Georgian and Iranian borders, and projects like a new Baku port.
My taxi driver insisted a seat belt wasn’t necessary as he showed off the
smooth new airport expressway at 140km/h. We whizzed past billboards along the
road bearing the wise, slightly smiling face of Heydar Aliyev, the country’s
deceased former president. A casual visitor would think he’s still the boss-
and in a sense he is: President Aliyev today rules with his father’s old
cronies looking over his shoulder. "They’re resistant to change, so don’t expect
much in the next five years, before the old crew begins to shuffle off,"
explains the local lawyer.
A man for big cars and building projects, Azerbaijan’s president will need to
keep building if he is to host the Olympic Games. He hasn’t lost his
ambition, judging by the generous use of the Olympic logos and a rash of
administrative buildings built for the national Olympic Committee, chairedby one Ilham
Aliyev.
Aliyev is unlikely to ever host the Olympics but a sharp fall in oil prices
means there will be less cash around in 2009 to build the infrastructure and
alternative industries Azerbaijan needs to guarantee future growth.
© 2008 The Irish Times