By Chiara Loda (@ChiaraLoda)
This post was originally published in Presidential Power and is available here
“Year 2017 is drawing to a close. All the goals we set ourselves at the beginning of this year have been achieved. Stability has been established in Azerbaijan“. With these words, the Azerbaijani President Ilham Aliyev started his last New Year’s Eve speech. First, the speech emphasised the growing international ties of the country and the commitment to “multiculturalism”. Second, the conflict over Nagorno-Karabakh was mentioned at length, specifying how Azerbaijan enjoyed both a diplomatic and military advantage over Armenia. In this regard, it was proudly said that, as a result of the warfare operations in April 2016, Azerbaijan had recovered some villages previously under the control of the enemy. Finally, the economic situation was tackled, arguing that, despite the low oil prices, the country successfully had managed its currency reserves and promoted its non-oil sector.
The emphasis on multiculturalism and international ties seems to reveal a willingness to boost the external legitimacy of the country. As already discussed in this blog, Azerbaijan has recently adopted a much less confrontation attitude vis-à-vis the international community. Political discourse now consistently portrays Azerbaijan as an internationally-oriented and multicultural country. For instance, in addition to including the multicultural nature[1] of the country in the aforementioned New Year’s speech, President Aliyev raised this theme again while giving his Christmas congratulations to the Azerbaijani Orthodox Christian community. In President Aliyev’s words: “‘The atmosphere of intercivilizational and intercultural dialogue (…) day played an exceptional role in building rich traditions of multiculturalism and tolerance, national moral and public values, establishing civil solidarity in our multinational and multiconfessional society[2]”.
Nevertheless, this type of rhetoric does not shield Azerbaijan from international criticism. Notably, in September 2017 the European Parliament called for an investigation into Azerbaijan’s alleged attempts to corrupt influential Europeans, paying them money in exchange for a favourable representation of the country. In the same month, MEP Daniele Viotti formally asked the Commission Vice-President (and High Representative for Foreign Affairs and Security Policy) Federica Mogherini to specify the Commission’s position about Azerbaijan’s repressive approach to the LGBT community[3]. The head of the Council of Europe Thorbjørn Jagland also voiced his concern over political prisoners in Azerbaijan and suggested legal actions that could lead Azerbaijan being ejected from the Council of Europe.
Along with its (only partially successful) search for international legitimacy, the president’s speech also addressed economic issues. However, it is worth noting the relatively limited emphasis placed on these issues. This is in sharp contrast to past declarations, especially those given in the happy years of the oil bonanza (i.e. when the oil price was extraordinarily high). For instance, in his presidential inauguration speech in 2013, President Aliyev declared that: “We conduct an independent policy. Our independent policy is underpinned by economic independence”.
Azerbaijan has tried to foster its economy partly to offset the drop in oil prices (as already discussed in this blog). While the New Year’s Eve speech did not provide too many details, there have recently been attempts to increase tourism and foreign investments. However, there are limits to their implementation and effectiveness.
In December 2016, the setting up of a national Tourism Council was approved by presidential decree. According to Abulfas Garayev, Minister of Culture and Tourism, in its first year of existence, the Council has already taken important decisions[4]. Remarkably, in 2017, the number of visitors increased by 20% to almost 2.5m tourists, who it is estimated spent around 1.3 billion in the country[5]. Muzaffar Agakarimov, the adviser of the Chairman of the Azerbaijani Tourism Association, recently declared to local media that: “Incoming tourism is becoming more popular in Azerbaijan, [which] is the most important part of the overall tourism sector as it brings foreign currency and creates new workplaces for local people,”. Additionally, he pointed out the abolition of licenses for tourism companies and the plans to construct more hotels, including budget ones[6].
Notwithstanding this optimism, the full development of the tourism sector faces some challenges. For instance, high taxes and fees make it particularly expensive to fly to and from Baku (reportedly, many Azerbaijani citizens chose to save money by using Tbilisi airport, in neighbouring Georgia). These costs have discouraged some foreign low-cost companies, such as the Russian ‘Pobeda’, which decided to discontinue their Baku route[7].
Similar considerations can be made about the attempts to attract foreign investors. However, foreign investments are hindered by bureaucratic obstacles, such as the slow privatisation process and unfair advantages to state enterprises[8]. These considerations are fully in line with a report of the German-Azerbaijani Chamber of Commerce about Azerbaijan’s business climate, based on a survey conducted among 300 companies from 19 EU countries. According to more than half of the respondents, the business and investment climate is negatively affected by custom scontrol and corruption, and by the ineffective measures to tackle these problems[9]. These issues were also lamented by some Azerbaijani experts. As the local expert Nemat Aliyev noted, foreign bankers and investors are discouraged not only by the economic crisis but also by “monopolism, corruption and bribery”[10].
The contradiction between Azerbaijan’s craving for foreign investments and the endurance of such obstacles is not easily explicable. However, it can be partially understood in light of Dr Farid Guliyev’s research. According to him, in the years of the oil boom the state channelled oil profits into the construction of extravagant infrastructure projects. These empowered a small elite of private entrepreneurs, whose success is rooted in political support and oil earnings. Considering the potential risks related to a radical shift of the status quo, this elite is not likely to support a genuine diversification of the economic structure, regardless of the benefits for the country as a whole[11].
In conclusion, the tone of the recent New Year’s Eve speech by President Ilham Aliyev is entirely in line with the challenges Azerbaijan is currently facing. The drop in oil prices, and the related economic consequences, are making Baku not only reform its economic structure but also its attitude in international forums. Azerbaijan needs to make economic and foreign policy adjustments to combat its diminished leverage vis-a-vis the rest of the world.
Notes
[1] Additionally, 2016 was proclaimed the year of multiculturalism.
[2] Azerbaijan News Gazette. 2018. ‘President Ilham Aliyev extends Christmas congratulations to Azerbaijan`s Orthodox Christian community’, January 5 (Retrieved through LexisNexis).
[3] Also Western newspapers, such as “The Guardian”, covered this issue.
[4] TendersInfo. 2017. ‘Azerbaijan: The board meeting devoted to the results of the Ministry of Culture and Tourism in 2017 has been held’, December 28 (Retrieved through LexisNexis).
[5] Turan Information Agency. 2017. ‘This Year Tourists Spent 1.3 Billion Dollars in Azerbaijan – Deputy Minister’, December 18 (Retrieved through LexisNexis).
[6] Azer News. 2018. ‘Association: New types of tourism develop in Azerbaijan’, January 4 (Retrieved through LexisNexis).
[7] Guliyev, E. 2017. ‘Azerbaijani Citizens Prefer to Fly through Georgia, AZAL Prefers to Remain Silent’, Turan Information Agency, October 2 (Retrieved through LexisNexis).
[8] CountryWatch Reviews. 2018. ‘Investment Climate Azerbaijan’, January 6 (retrieved through LexisNexis).
[9] Turan Information Agency. 2017. ‘EU-companies about the business climate in Azerbaijan’, January 16 (Retrieved through LexisNexis).
[10] BBC Monitoring Trans Caucasus Unit. 2016. ‘Azeri opposition daily says foreign companies flee Azerbaijan’, January 29(Retrieved through LexisNexis).
[11] Guliyev, F. 2017. ‘Azerbaijan’s Uneasy Transition to a Post-Oil Era. Domestic and International Constraints’, PONARS Eurasia Policy Memo No. 475, May.