Azerbaijan is an Islamic former Soviet Republic on the Caspian Sea, an oil rich and strategically important nation that is the key geopolitical power in the Caucasus. Azerbaijan's location has always made it a gateway between east and west, and the country was an important stop on the Silk Route. Over the centuries, Azerbaijan has been incorporated into most major regional empires, including the Russian, Turkish and Persian and has been an independent republic since the breakup of the Soviet Union in 1991.
Taking in the stunning Caucasus Mountains to the north, the lush green valleys of the south and large swathes of arid semi-desert in between, Azerbaijan is a beautiful country with superb scenery, although it remains virtually unknown to the average traveller. Visitors usually base themselves in the capital Baku, from where it is easy to visit most of the country's biggest attractions.
GOVERNMENT AND POLITICAL CONDITIONS
Although the Government of Azerbaijan consists of three branches, Azerbaijan has a strong presidential system in which the president dominates the legislative and judicial branches. The executive branch is made up of a president, his administration, a prime minister, and the cabinet of ministers. The legislative branch consists of the 125-member parliament (Milli Majlis). Members, all of whom are elected from territorial districts, serve 5-year terms. The judicial branch, headed by a Constitutional Court, is only nominally independent.
Azerbaijan declared its independence from the former Soviet Union on August 30, 1991, with Ayaz Mutalibov, former First Secretary of the Azerbaijani Communist Party, becoming the country's first President. Following a March 1992 massacre of Azerbaijanis at Khojali in Nagorno-Karabakh (a predominantly ethnic Armenian region within Azerbaijan), Mutalibov resigned and the country experienced a period of political instability. The old guard returned Mutalibov to power in May 1992, but less than a week later his efforts to suspend a scheduled presidential election and ban all political activity prompted the opposition Popular Front Party (PFP) to organize a resistance movement and take power. Among its reforms, the PFP dissolved the predominantly Communist Supreme Soviet and transferred its functions to the 50-member upper house of the legislature, the National Council.
Elections in June 1992 resulted in the selection of PFP leader Abulfez Elchibey as the country's second President. The PFP-dominated government, however, proved incapable of either credibly prosecuting the Nagorno-Karabakh conflict or managing the economy, and many PFP officials came to be perceived as corrupt and incompetent. Growing discontent culminated in June 1993 in an armed insurrection in Ganja, Azerbaijan's second-largest city. As the rebels advanced virtually unopposed on Baku, President Elchibey fled to his native province, the Azerbaijani exclave of Nakhchivan. The National Council conferred presidential powers upon its new Speaker, Heydar Aliyev, former First Secretary of the Azerbaijani Communist Party (1969-81) and member of the U.S.S.R. Politburo and U.S.S.R. Deputy Prime Minister (until 1987). Elchibey was formally deposed by a national referendum in August 1993, and Aliyev was elected to a 5-year term as President in October with only token opposition. Aliyev won re-election to another 5-year term in 1998, in an election marred by serious irregularities. A presidential election that took place on October 15, 2003 resulted in the election of Ilham Aliyev, the son of Heydar Aliyev. The election did not meet international standards. Ilham Aliyev assumed the office of president on October 31, 2003. Heydar Aliyev died December 12, 2003.
Ilham Aliyev won re-election on October 15, 2008, taking 88.7% of the vote in an election boycotted by the major opposition parties. While the presidential election marked progress toward meeting Organization for Security and Cooperation in Europe (OSCE) commitments and other international standards with regard to some technical aspects of election administration, the election process failed to meet some OSCE standards, according to the final report of the OSCE/Office for Democratic Institutions and Human Rights (ODIHR) election monitoring mission. In December 2008, the Azerbaijani parliament approved a measure calling for the abolition of presidential term limits. After limited public debate, the measure passed in a March 18, 2009 referendum on constitutional amendments. Observers noted serious shortcomings in voting procedures, and in the counting and tabulation process.
Azerbaijan's first parliament was elected in 1995. The present 125-member unicameral parliament was elected in November 2005 in an election that did not meet a number of international standards. Subsequent rerun elections in 10 out of 125 constituencies showed some improvement as well as continuing problems. A majority of parliamentarians are from the President's "New Azerbaijan Party." The parliament also includes up to 10 opposition members and a sizeable number of nominal independents. Many of these independents are believed to have close ties to government, while as many as 20 others are business leaders whose political affiliations are not clear. In the 1995 constitution, the speaker of parliament stands next in line to the president. However, constitutional amendments approved in a flawed process in August 2002 included a provision replacing the speaker of parliament with the prime minister in the line of succession to the presidency. The parliament remains a weak body with little real influence. The current Speaker is Oktay Asadov, and the next parliamentary elections will take place in 2010.
The human rights situation in the country remains poor with backsliding in some areas, especially media freedom, religious freedom, and political participation. Restrictions on freedom of assembly, expression, and religion continue, as do arbitrary arrest and detention, and the imprisonment of persons for politically motivated reasons. Over the past few years, political space for opposition voices has become more limited. Arrests and detention for unregistered religious activity continues in some localities. Authorities have destroyed or closed a number of mosques. Corruption remains pervasive, as does the lack of accountability for torture of individuals in detention, violence against journalists, and excessive use of force against peaceful demonstrators.
Azerbaijan is an economy in transition in which the state continues to play a dominant role. It has important oil reserves and a significant agricultural potential based on a wide variety of climatic zones. During the late 1990s, in cooperation with the International Monetary Fund (IMF), Azerbaijan pursued a successful economic stabilization program, with annual growth exceeding 10% since 2000. In 2009 Azerbaijan's gross domestic product increased by 9.3%, with growth in 2010 estimated at 9.8%. Output expansion has been largely driven by oil-sector foreign direct investment (FDI) and related spillover effects in the construction and transportation sectors, although there have also been substantial gains in agriculture. Inflation remains a major risk that could accelerate in the context of further increases in fiscal spending, high oil prices, and an inflexible exchange rate. Factors attributable to the global financial crisis may mitigate some of the inflationary trend, however. Importantly, the higher inflation also reflects customs restrictions that are in place due to supply constraints that limit import competition and monopolies that continue to control many sectors of the economy. The national currency, the Manat (AZN), is artificially stable and was allowed to appreciate against the dollar by 6.1% in 2005, 5.4% in 2006, 3.4% in 2007, and 1.1% in 2008. By early 2009, one AZN was worth $1.24, which is its current worth.
The 2009 consolidated state budget set spending at $14.8 billion, an increase of about 16% over 2008. The IMF has expressed concern about the impact on inflation and macroeconomic stability as well as governance if the capital budget is not well managed. The State Oil Fund (SOFAZ) was established as an extra-budgetary fund to ensure macroeconomic stability, transparency in the management of oil revenue, and the safeguarding of resources for future generations. All oil revenue profits from the development of new oil fields now flow into SOFAZ, and are held offshore. The State Oil Fund continues to play a critical role in promoting macroeconomic stability and in dampening the impact of massive energy revenues upon the economy. SOFAZ, as of January 2010, reported assets of 12 billion Manat ($14.9 billion). These assets constitute a 32% increase over SOFAZ's January 2009 reported assets ($10 billion). In 2007, the United Nations awarded SOFAZ a public service award for its transparency, accountability, and responsiveness in the public sector. Nevertheless, SOFAZ's sterilization effect is limited since it does not cover SOCAR, the State Oil Company. Both the IMF and the World Bank continue to emphasize the need to coordinate the budget planning process to integrate a medium-term spending framework with financing plans and the government's broader oil-revenue management strategy.
Azerbaijan has made efforts to modernize and reform its economy. The World Bank named Azerbaijan “Top Reformer” in its “Doing Business 2009” report, reflecting its significant efforts to simplify its domestic regulatory requirements. The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy, but inefficient public administration, in which commercial and regulatory interests are co-mingled, limits the impact of these reforms. The government has largely completed privatization of agricultural lands and small and medium-sized enterprises. Azerbaijan is still plagued by an arbitrary tax and customs administration, a court system lacking independence, monopolistic regulation of the market, and systemic corruption.
Azerbaijan is considered one of the most important spots in the world for oil exploration and development. Proven oil reserves in the CaspianBasin, which Azerbaijan shares with Russia, Kazakhstan, Turkmenistan, and Iran, are comparable in size to North Sea reserves several decades ago.
Azerbaijan has concluded 28 production-sharing agreements with various oil companies. Azerbaijan celebrated first oil for the Baku-Tbilisi-Ceyhan (BTC) pipeline in May 2005, and the official completion ceremony was held in Turkey in July 2006. The BTC pipeline is now operational and has a maximum capacity of one million barrels per day. A parallel Baku-Tbilisi-Erzurum gas export pipeline opened in September 2006. In October 2008, the first tanker carrying oil from Kazakhstan’s Tengiz field departed for Azerbaijan. New pipeline and delivery route systems for natural gas through the southern corridor to Europe are currently being considered and negotiated.
Azerbaijan is a member of the United Nations, the Organization for Security and Cooperation in Europe (OSCE), NATO's Partnership for Peace, the Euro-Atlantic Partnership, the World Health Organization, GUAM Organization for Democracy and Economic Development, the European Bank for Reconstruction and Development, the Council of Europe, the International Monetary Fund, the Organization of the Islamic Conference, and the World Bank. Azerbaijan is an observer at the Community of Democracies.