Azerbaijan’s domestic agenda was dominated by the Sixth International Humanitarian Forum, which drew 581 representatives from 86 countries and 24 international organizations to Baku in late October. The Asian Development Bank named its three main working areas in Azerbaijan for the next five years. Improving human capital and diversifying the economy remain the two key challenges for Azerbaijan. Commissioned in late October, the STAR refinery, which is expected to save Turkey US $1.5 billion annually, is boosting ties between Azerbaijan and Turkey.
DOMESTIC POLICY: International Humanitarian Forum in Baku
Azerbaijan’s capital Baku hosted the Sixth International Humanitarian Forum, entitled “Shaping a New World and a New Humanity: Creativity and human development,” on October 25. The first family, including President Ilham Aliyev, First Lady Mehriban Aliyeva, and their daughter Leyla Aliyeva, who is vice-president of the Heydar Aliyev Foundation, attended the official opening ceremony.
A joint initiative of the Azeri and Russian presidents, the Baku International Humanitarian Forum has been held annually since 2010 and brings together different well-known individuals from political, scientific and cultural circles and international organizations, including Nobel Prize winners, to discuss a wide range of issues and exchange views through panels and sessions.
This year’s key theme was human capital development and the main debate evolved around translating the benefits of economic growth into the development of human capital. Russian historian and political scientist Oleg Kuznetsov talked about the spirit of mutual understanding, adding that the forum “will be able to offer not only political and intellectual recommendations but also practical ones to international organizations and countries interested in establishing intercultural dialog, developing the human dimension, and developing humanitarian values.”
ECONOMY: ADB focuses on three main areas
In late October, Wencai Zhang, Vice President of the Asian Development Bank (ADB), held a press conference in Azerbaijan. He spoke about the ADB’s new Country Partnership Strategy (CPS) and referred to Azerbaijan’s economy as “fast-growing” and “diversified.” He named the three main areas that ADB would be focusing on in the next five years: supporting the ongoing growth and diversification in the economy by ensuring its long-term sustainability; developing infrastructure and human capital that can meet the needs of the country’s economy; and improving the efficiency of Azerbaijan’s public sector. In the 2014-2018 Country Partnership Strategy, the priority areas included supporting sustainable development, reducing poverty and unemployment, and achieving inclusive growth.
In his interview, Zhang praised some steps taken by Azerbaijan, including fiscal regulations to decrease the state budget’s dependence on oil products and a public debt management strategy to ensure financial stability. He added that the ADB was planning to issue manat bonds to support developments in the private sector and minimize currency fluctuation risks for investors. The ADB forecast is for Azerbaijan’s economy to grow 2% in 2019.
FOREIGN POLICY: Growing ties with Turkey
The inauguration of the STAR refinery took place on October 19 in the Aliaga peninsula in Izmir. This is the first refinery to be brought on line in Turkey in the last 30 years and it is worth nearly US $6.3 billion. SOCAR, Azerbaijan’s state oil and gas company, and the country’s Ministry of Economy hold 60% and 40% stakes in the project. The STAR refinery was also the first project to be granted a “Strategic Investment Promotion Certificate” by Turkey.
As one of the leading oil and gas companies in the world, SOCAR invested in Turkey in 2008 by acquiring Petkim, a well-established chemical company. Its Turkish subsidiary is officially called SOCAR Turkey Enerji A.Ş. The refinery was founded in 2011, when a multinational consortium composed of Técnicas Reunidas (Spain), Saipem (Italy), GS Engineering (South Korea), and ITOCHU (Japan) undertook its construction. STAR’s total capacity is 10 million tonnes and it is expected to reach full capacity in January 2019.
The timing of the refinery’s commissioning coincided with a serious economic crisis in Turkey, with the lira experienced 40% depreciation against the US dollar over the first eight months of 2018. Since then, Turkey has been trying to reduce its dependence on imports and cut back its deficit. The STAR refinery is expected to meet 25% of Turkey’s domestic demand for oil products, which means it will eventually boost strategic economic cooperation between the two countries. President Erdogan called the STAR project Turkey’s biggest localization project and the largest real-sector investment in the last 30 years. He also mentioned his hopes that the facility would contribute to employment in Turkey by creating some 1,100 new jobs. The STAR project is one of the largest private sector investments, not only in Turkey but also in Europe, the Middle East and North Africa, in recent years.
From Baku’s perspective, SOCAR companies and facilities in Turkey, together with the STAR refinery, constitute the biggest investment that Azerbaijan has ever made to a single country. A SOCAR official noted that net profit from the project should be US $250 million per year after subtracting taxes and other transaction costs. Oil Research Center Director Ilham Shaban called Turkey the “most favorable” market for this kind of commercial project. “The stronger Turkey is, the stronger we are,” said President Aliyev during his speech and noted Turkey’s growing influence in the international arena.