Azerbaijani oil strategy during the Mutalibov regime. Part 1
"He who possesses oil, possesses the whole world"
Lord John Fisher
The year 1990 was a time of dramatic changes for our country.
President Mikhail Gorbachev had begun a series of system reforms
aiming to alter the whole political structure of the Soviet Union. As
a result a political and economic system was brought to a collapse for
it soon became evident that Gorbachev had no particularly strategy. He
didn't know in fact what his administration should do. The reforms
that were started in order to improve the life-standards of the Soviet
people were actually destabilizing the whole political system of the
USSR. In addition to this the international powers interested in the
further decaying of the Soviet Union had begun to support the
nationalistic movement in the republics of the Union for they
understood how dangerous it may be for a multi-ethnic country. At the
same time the administration of Gorbachev remained absolutely
indifferent this process. The first bloody conflict that occurred
during perestroika was a territorial conflict between Armenia and
Azerbaijan in 1988. Eventually President Gorbachev ordered troops to
be sent to Azerbaijan and Soviet soldiers killed a lot of residents of
Baku.
One of the essential parts of the Gorbachev's policy was to
decentralize the country. Addressing the delegates of the XIX Congress
of Soviets he said that it's necessary to introduce a post of the
president in each republic of the USSR. In end of 80s and in the
beginning of the 90s the former Azerbaijani elite balancing between
the Federal center and the Popular front, that was becoming more and
more influential, was unable to control the situation in the republic.
Gorbachev appointed Ayaz Mutalibov the First Secretary of the
Communist Party of Azerbaijan. Mutalibov (unlike his predecessor) was
always working in the sphere of economy. He was the head of the State
Planning Committee (Gosplan) of Azerbaijan and then, in the late 80s,
the Chairman of the Council of Ministers of the Azerbaijani Soviet
Socialist Republic.
In the middle of the 80s the situation in the country has begun to
change. The international companies were interested in the rich
natural resources of the country that were in those times the property
of the State. Mutalibov did not always approve the policy of Moscow.
Addressing the meeting of the Central Committee of the Communist Party
of Azerbaijan at January 28th, 1991 he has mentioned that the central
power has made several mistakes during the period of Perestroika.
At the same time there was no real opposition in the Communist Party
itself. After the repressions during the regime of Joseph Stalin, the
Party, no matter how massive it was (there were almost 20 million
people in it in the 80s) always approved the policy of its leader.
This leader was worshipped and his orders were never argued with. Our
opponents also understood it. The Soviet elite had been deteriorating
since the 60s. The country's leaders were interested in their personal
well-being rather than in the values of socialism and public security.
The elite desired to plunder the rich natural resources of the country
and use them to enrich themselves.
The deep economic crisis made the Soviet authorities adopt a new
policy. The lack of food became evident at the end of 70s and in the
80s the problem was so acute that a special program was elaborated in
order to prevent starvation. This program was unable to be fulfilled
due to the systematic crisis of the Soviet Union. In the beginning of
the 90s the country was on the verge of a catastrophe. The Soviet
Union began to exchange oil for food. But the situation was not
improving and that forced the central powers to start more serious
reforms. At the meeting of the Central Committee of the Communist
Party of the USSR in October, 1990 it was declared that the Soviet
Union was going to switch to a market economy for it seemed to be the
only way out of the economic crisis.
Baku annually provided 10 tons of oil. This amount was enough to
satisfy the needs of the republic, but the country possessed also the
rich resources of the Caspian Sea. However the Soviet authorities were
not interested in the development of the Caspian oil resources for it
seemed less costly to develop the oil deposits in Siberia and the
Urals. That is why there were no plans to develop the Caspian deposits
in the Caspian Sea after the end of WWII.
Baku, as one of the most prominent world's centers of oil industry
since 1948 and giving 95% of the Russian oil storage, didn't seem
interesting to the Soviet powers in the second half of the century.
The Soviet Union was one of the most oil-rich countries of the world,
but its main deposits were situated in the western Siberia. In spite
of this Azerbaijan remained the most important center of the
construction of the machinery necessary to produce oil. Here the
"Soyuzneftemash", the largest enterprise in this sphere of production,
was situated.
Together with other kinds of industry and agriculture oil industry was
the most important sphere of production for Azerbaijan. Mutalibov as
well as other local officials approved the conversion to market
economy. He believed that it may be the way to struggle with the
economic crisis that was striking the Soviet Union.
On January 24th, 1991 the Government of the Azerbaijani Soviet
Socialist Republic issued a decree about the foundation of the Baku's
stock exchange. The aim was to provide the republic with the necessary
investment and products. The co-founders of the stock exchange were
the Executive Committee of the Communist Party in the city of Baku,
"Azneft" company, "Kaspmorneftegaz" and other enterprises.
The crisis that was striking the USSR in the end of the 20th century
was different to those that were frequently striking the western
countries. In the countries of capitalism the crisis was connected
with over-production of the products that were not in demand. In the
USSR with its planned economy the situation was the opposite, there
was a constant demand and lack of industrial products that caused
deficit. The soviet authorities decided to switch to market economy
but were not ready to it. The leaders of the Communist Party could
hardly understand the principles of free enterprise. For instance
Mutalibov addressing the meeting of the Central Committee has said
that the Party should not leave the sphere of economy, but only change
the way to control it. The situation continued to change to the worse
due to the conflict with Armenia. In the end of the 80s the Armenian
residents with an Azerbaijani origin were forced to leave the
republic.
All this caused an obvious collapse of the local political system. The
country was facing a budget deficit of 5 billion rubles (35% of the
whole budget) and it didn't bankrupt only because of the federal
subsidies. Still the government had not enough money to pay the
salaries to the workers employed by the state. It has become evident
that the Government had to adopt a new development strategy.
Analyzing the economic policy of President Mutalibov's administration
we have to admit that no sufficient development strategy was
elaborated. However no such strategy was worked out by the federal
center either. Nevertheless some remarkable steps were made exactly
during the Mutalibov's regime. For example, the decision to allow the
international companies to enter the oil market of Azerbaijan was made
when President Mutalibov was still in office.
After the dynamic development of the oil deposits of the Apsheron
semi-peninsular almost 30% of its oil resources remained untouched.
However the republic itself had no funds to finance the development of
the oil industry in Apsheron. The cooperation with the foreign
enterprises provided the country with the necessary money.
One of the most important characteristic of those days was that
Azerbaijan was a country affected by the conflict with Armenia over
Nagorno-Karabakh. President Mutalibov underlined that the only way
out of the economic and political crisis was to stabilize relations
with Armenia and increase the role of international enterprises in the
Azerbaijani economy.
Ismail Agakishiev, the Director of the Russian State University for
the Humanities' Center of Caucasian Studies
