Today President of Azerbaijan Ilham Aliyev, who is on a working visit to the Federal Republic of Germany, took part in a round-table discussion on 'Energy security for the geopolitics of the fall in oil prices' within the framework of the Munich Security Conference.
The anchor of the round-table discussion, chief correspondent of The New York Times, David Sanger, reported that discussions on the level of oil prices and their influence on oil-producing countries would have taken place at the event. He stressed that President of Azerbaijan Ilham Aliyev and guests from other countries participated in the event. They shared their views on the current situation and prospects on the oil market.
The anchor addressed Ilham Aliyev: “The economy of your region is significantly dependent on oil. Over the past 10-15 years, starting with Russia and considering other countries, several calls have been made to diversify the economy of your region. I would like to ask you whether, if oil prices remain at the present level for a certain period, what do you think about the political influence of this factor?”
“You are absolutely right,” Ilham Aliyev replied. “The countries of our region are oil producers. Regarding Azerbaijan, over the first years of independence, the development of the oil sector and investments in the oil-and-gas industry were very significant for us, as an independent country. When Azerbaijan achieved independence, I could say our economy was completely destroyed by the stagnation, the economic and financial crisis. Thus, inviting major oil companies to invest in the oil-and-gas sector of Azerbaijan wasn’t only about attracting investments for us. It meant strengthening our independence and searching for ways for our country to achieve success. Twenty years have passed since that time. And we have managed not only to attract major investments in the oil-and-gas sector and to turn into a significant oil producer and exporter, as well as a gas exporter, but also to invest the oil revenues into non-oil industries, primarily into infrastructure. Therefore, our dependence on the oil factor has seriously reduced over the past 5-10 years. Oil is only 30 percent of our GDP. We would like to see the same picture in our export operations. As yet, we haven’t achieved this result. 90 percent of our exports are oil and gas. That is why the task for the next few years is diversification of our export potential. And of course, here we need to continue economic reforms, create better conditions for the private sector, attract major investments, and start programs on large-scale privatization. All these elements have already been declared to be our state policy, and I am sure we will succeed. As for the political risks which you have mentioned, the issue depends on a country. Every country has its own political position and difficulties. Of course, the economic situation and daily life of the population influence political stability and development. However, I believe the most important moment is understanding that oil prices have a changeable nature. We used to live under high oil prices; now we live under low oil prices. The most important thing for us is to continue the reforms when oil prices grow higher again and to reduce our dependence on oil and gas as much as possible.”
Aliyev was also asked: “In the period when you are developing the program of privatization, wouldn't it have been better and easier to take the step when oil prices were $100 rather than $30 per barrel? Does it influence investment interests and hinder other reforms?”
“In fact, I believe that when oil prices are high, of course the government will do its best to hold the most important and the most attractive sectors of the economy in its hands,” Ilham Aliyev said. “However, when oil prices are at the level of $30, the government is more ready to start the program of large-scale privatization. That is why I believe that the situation with the current oil prices is more favorable for foreign investors, as privatization of our assets is more demanded by us than by investors. Of course, we need to find a balance so that the government and investors would get their shares. And here there is the important issue of economic reforms, improvement of the business environment, continuation of privatization, and reduction of oil dependence.
To be honest, we have tried to predict the situation which is happening now; but we thought oil prices would start to fall in 15-20 years. We were not ready for the period. In fact we planned to prepare for the post-oil period after 2030. However, as I have said at a recent meeting of the Cabinet of Ministers, the post-oil period has already started for us; and it was unexpected. To be honest, I think nobody could imagine that oil prices would decrease fourfold. We were not ready, and nobody was ready. So in a short time period we had to find ways to stabilize the budget to continue our social programs and to stop financing some investment projects. It wasn’t easy, as we got used to oil prices higher than $100. Of course, we had a development plan for many years. We had the Development Concept of ‘Azerbaijan 2020: Looking into the Future’, which was based on higher oil prices. And today oil prices are low.
Therefore, it was a real challenge. I would like to point out again that due to diversification of the economy and the policy of investing in infrastructure, I believe we have found a way out of the situation with minimal losses.”
