What can you say about bilateral relations, which are developing quite successfully? What have you noted for yourself? What projects are planned for this year?
Our relations are developing dynamically, consistently and effectively. Political contacts are at a high level, allowing us to pass really effective decisions. Therefore, we have a right to describe our relations as strategic partnership. We are neighbours and we have always relied on the principles of neighbourliness and friendship; we have been neighbours for centuries and it is very important that during the period of Azerbaijan's formation as an independent state, these positive trends were maintained and multiplied.
Economic ties are also strengthening. Our trade fell a bit during the crisis, but we are now making up for it by improving the trade structure. Russia is of particular interest to us as a market for our goods and Russia is also our main partner in terms of imports since most of Azerbaijan's imports come from Russia.
There are very good results in the humanitarian sphere. This year we will hold the first international humanitarian forum in Baku at the initiative of the Russian ambassador to Azerbaijan. A Russian-Azerbaijani humanitarian forum was held last year and brought together the elite of the Russian intellectual community in Baku and was productive.
Very positive dynamics are recorded in all areas. We are cooperating actively in the sphere of energy, while military and technical cooperation is developing successfully. These are the realities of the past few years and we are resolved to strengthen our relations.
One of the main documents signed in the recent past is the document on the delimitation of the state border. It is one of the main documents for any country - the definition of its borders with neighbours. These borders were defined on the basis of mutual interests and justice. This agreement will further raise bilateral relations between our countries and our nations. There are no issues that require immediate solution in our bilateral ties. All problematic issues have been settled. We will increase the positive potential for bilateral cooperation in the future
Azerbaijan’s economy is not developing badly after the crisis. You are producing good results, but you still say the investment climate needs to be improved. Russia is now actively working on this, looking for a solution. Have you already found one?
It is difficult to say. Certainly, Russia and Azerbaijan cannot be compared in scale. The investment initiatives that we have carried out in Azerbaijan have been effective. We have attracted foreign investment which was essential for us in the early period of our independence when all countries were in a tough position - I mean the economies of the post-Soviet countries had been devastated and had no domestic financial resources, which is why it would have been difficult for us to develop without foreign investment, so we created good conditions for investors and provided legal protection for their investments. We can still see the positive results of this cooperation. Of course, the billions of dollars invested in the oil and gas sector encouraged investment in service infrastructure, other sectors and industry
At this stage of development, we almost no longer depend on foreign investments. Although if you look at the figures for last year, you will see that $15.5 billion were invested in the economy. Of this sum, $8bn were internal investment and 7bn foreign investment. Despite the crisis period, Azerbaijan remained attractive to foreign investors. First of all, this was a consequence of the good investment climate, the protection of foreign investment and the country's dynamic development. Foreign investments go where results have already been achieved, where there is predictability, stability and confidence that no-one can change the terms of a contract signed maybe 10 or 15 years ago.
We created the State Investment Company, which holds a 20% stake in important investment projects for our country, and this also has a positive effect. We are of course counting on attracting investment in future too. Even if this does not happen, the economy of Azerbaijan has already gained momentum and will continue its stable development.
The Nabucco gas pipeline is under active discussion and Azerbaijan is expected to settle the pipeline's fate. What decision will it take? Will this pipeline exist as an alternative to Russia’s South Stream?
Given that the demand for natural gas in Europe will grow, while there are almost no new alternative sources, the concern of Western partners is understandable especially since, geographically, Azerbaijan is not so far from European consumers and there is already a working gas pipeline, transporting our gas to Turkey. Both geography and infrastructure increase the interest in Azerbaijan, as a possible gas supplier in the future.
As for our priorities, we are primarily engaged in issues of our own energy security. We have reached the maximum level of oil production - one million of barrels of oil per day. In fact, this production level is completely satisfactory and triggers a flow of revenue into the country’s economy which allows us to tackle socioeconomic issues. We do not face an urgent need for financial resources. This is why we view cooperation in the gas sector as a long-term project, which can be implemented when the interests of all parties coincide.
Today our gas potential is used on the regional market. We transport gas, as well as electricity to all neighbouring countries - Russia, Turkey, Georgia, Iran. And there is the potential to increase supplies to these traditional areas. We can say today that a specific part of our gas resources are sold. On the other hand, our capacities and the potential volume of production and transportation are much higher than the current regional markets. And in this case, naturally, we face the task of either seeking entry to new markets or raising our exports to traditional ones.
To answer your question about Nabucco in clearer terms, I would like to say that we support this project but with respect to mutual interests. Primarily, we must secure commercial interests and ensure fair prices. There are very many issues related to the transit of our gas, its price for the end consumer and the financing issues of building a new gas pipeline, the role of Azerbaijan as a transit country, since it is clear that Nabucco cannot be filled only with Azerbaijani gas, which means gas must also be supplied from Central Asia. Who will be dealing with the commercial and technical issues, as well as the political aspects of the project? There are many unclear points and, at the same time, very many issues requiring solution.
But at the beginning of this year the EU and Azerbaijan signed a declaration on the Southern Corridor for transport. A joint working group was created under the supervision of our minister of energy and the EU energy commissioner, who have started consultations on implementing the Southern Corridor project. It is not only Nabucco, there are several, at least two, options under active consideration now. For this reason, if negotiations are successful and all the interests of the parties are met, we will certainly be interested in entering one more gas market. But it will depend on the process of the negotiations and the extent to which Azerbaijani interests are secured.
Experts say the Caspian littoral states need clear conditions for investment. Why do you think there has not been any integration yet? What has not been envisaged, what is needed and what requires coordination?
We held a very successful summit of Caspian states last year in Baku and came to good decisions, primarily, on bioresources. We instructed the relevant structures to develop a program to ban sturgeon fishing. We also gave clear instructions on the drafting and coordination of issues concerning territorial waters in the near future. As for energy sources, in this case every country develops the fields located in its sector of the Caspian Sea and here we can probably speak more of bilateral rather than multilateral ties.
But what's most important is that we need to settle the Caspian status, which has not been defined yet. But there is already a good basis for it. Primarily, these are bilateral agreements, signed between Russia and Azerbaijan, Russia and Kazakhstan and Kazakhstan and Azerbaijan. The three countries have already coordinated everything, based on the norms of international law. For this reason, if this approach is taken as a basis for a five-sided agreement, we will be able to settle the issues concerning the Caspian as soon as possible.
Additionally, I have to say that even the current situation, when the legal status is not defined, does not hamper the development of neighbourly relations between Caspian States. We are interested in the greater involvement of all Caspian states in integration processes, especially now that four of the five countries are parts of the former USSR, the CIS countries, that maintain regular contacts. I think we will gradually move in this direction. I view the Baku summit on the Caspian as an important, positive step forward.
Have you assessed the needs of Europe or any of the other states where you will probably supply your gas in 2030? Maybe they won't just need the raw product?
Yes, certainly, we have made such assessments. Certainly, it is difficult to predict and forecast the new types of energy that will appear by 2030, given that now Europe's technical and scientific brains are trying to find alternative sources. It is difficult for us to say whether this search will be successful. But if everything proceeds as at present and dependence on traditional energy sources is preserved at least at the same level, the current volumes of gas supplies to Europe will not be enough. Though Russia is the biggest gas supplier to Europe; as far as I remember, it supplies some 150bn cubic metres a year, which will not be enough for the Europeans.
This is the reason why they are interested in additional sources. Certainly, I find it difficult to judge and estimate and give my comments on the reasons for such an interest in Azerbaijan and the Central Asian countries, but I think they are driven more by pragmatism than political motives. Because really by 2030 Europe may have a serious deficit in gas supplies and it will certainly hamper economic development and have even more serious implications.
For this reason, when they look at the energy map of the world and see that there is a country with vast, I would say, virgin gas reserves, like Azerbaijan, since traditionally it produced oil, while gas received no special attention, they of course show their interest. In this case, I believe that the best option would be to coordinate the efforts and joint activity of producers and consumers and transit countries, where necessary, so that the issues of gas cooperation do not turn into issues of unhealthy competition or confrontation. Producers must protect their interests and, in this case, Russia and Azerbaijan, as producers and suppliers, naturally, have their interests.
There is a need to bring all these interests to a common denominator, attain consensus and agree on prospects for cooperation. If this does not occur, misunderstandings or improper assessments will spoil the picture of energy cooperation, since we believe that everything must defined precisely in this business and every party has to know its duties and its interests in order not to steal a march on somebody else or not to hamper the development of its own potential and economy in an artificial manner.
As for Azerbaijan, I would tell you that this year Azerbaijan will produce 28bn cubic metres of gas; 10-11bn will be for domestic consumption while the rest will be available for export. But as our export is limited so far and also in order to maintain pressure on the oil strata, part of this gas is pumped back into the strata. For this reason today we have a resource that may already be in demand on the gas markets. Also if additional investments of some $20bn are provided, we would be able to raise gas production by 15bn and probably even more. But in order to make these investments, there is a need for contacts, for markets, because the gas business cannot work without them. Everything is interdependent here, which is why everything must be planned and coordinated.
The situation in the Middle East and North Africa has triggered a strong oil price hike. How will you use the revenues in the State [Oil] Fund to develop the country? On the one hand, if pensions and social benefits are raised, this will trigger inflation, which is not good. On the other hand, certainly, these social benefits have to be raised. What decision will be taken in Azerbaijan?
These issues are regulated quite effectively in our country. Of course we increase salaries and pensions every year and this process must continue, since even today the level of the minimum wage and pension is not right. Though in the last few years we managed to settle unemployment issues, creating 900,000 new jobs in the past seven years, and to reduce the poverty level from almost 50% to 9, I think 9% is also too much. For this reason, we will continue social programs to increase wages and pensions, of course as you have mentioned, with respect for inflation risks. But we also use oil revenues, primarily, to develop infrastructure projects, create conditions in the regions, build power stations, a gas supply network, hospitals, schools, roads and lend to businesses. Every year we assign huge amounts for preferential loans in the private sector. In so doing we create jobs in the regions and people earn their living through their entrepreneurial activities.
We have strongly liberalized our economic policy. Legislation is very liberal and no bureaucratic decisions are required for business. I think anyone can register a company within three days and start doing business. Additionally, as I have already said, the state also encourages this by assigning preferential loans.
There is one more question that has been discussed for over 17 years: it is Nagorno Karabakh. How do you assess the prospects for a settlement and the role of the negotiators, including Russia?
We highly appreciate the role of Russia. President Dmitriy Medvedev is putting in considerable effort to help resolution of the conflict. Several trilateral meetings have been held on his initiative. These meetings are very important and produce positive results.
Unfortunately, this conflict has not been resolved for many years now. We hope that in the near future we will be able to make progress. Even though many long years have passed and practically all international organizations have passed resolutions on the problem, the conflict has yet to be resolved. The UN Security Council adopted four resolutions on the withdrawal of Armenia's occupying forces from the territory of Azerbaijan but not one of them has been fulfilled. We saw resolutions of the UN Security Council on Libya being fulfilled within hours of their adoption. The resolutions on Nagorno-Karabakh haven't been fulfilled for 17 or 18 years. Of course, this gives rise to questions. What is the reason? Reaction here was rapid, while we can see passivity on our issue.
We hope for increased activity by the mediators, primarily the Minsk Group co-chairs and Russia, as a regional country and our neighbour, particularly, given the active role Russia has been playing recently.
Thank you so much for the interview.
Thank you, too.