Azerbaijan: On the way to economic recovery?

Vugar Bairamov, Center for Economic and Social Development (Azerbaijan, Baku)

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In February Azerbaijan experienced the first signs of economic recovery: following oil prices, national currency rate went up. Meanwhile, new appointments and structural changes promise the intensification of reforms.

Domestic Policy: First lady turned into the First Vice President

Upon President Aliyev’s decree, his wife and the first lady of the country, Mehriban Aliyeva, took the post of the first vice-president. Mrs Aliyeva had previously been active in political matters. She is currently a Member of Parliament, a deputy chairwoman of the ruling New Azerbaijan Party, and the head of the Haydar Aliyev Foundation. The appointment of Mrs. Aliyeva will lead to fastening of economic and political reforms as she is considered to be the representative of the reformist group.

The Conflict over Nagorno-Karabakh continues to take lives

Another military escalation between Armenia and Azerbaijan took place from 25 till 27 February. Azerbaijan announced the loss of 5 soldiers during the escalation. The status quo has not been stable during the recent years and the conflicting parties could not find a common ground. Under these circumstances, the military escalations are becoming frequent, and the sides continue to lose lives and military equipment. With no resolution in the near future, similar escalations are expected to take place.

Economy: Reverse trends in the exchange rate of the national currency

In February 2017, the national currency of Azerbaijan, Manat, experienced a surprising rise against the US Dollar. On 30 January, the official exchange rate of the Manat against the US Dollar was set by the Central Bank of Azerbaijan at 1.92 AZN/USD. However, on February 17 the official exchange rate of US Dollar reached down to the level of 1.74 AZN. This is the highest rise of the national currency against the US Dollar for the last two years. Following the growth of oil prices, the Manat reacted respectively. Though the local expert community expects the exchange rate of Manat to fluctuate within 1,80-2,00 AZN/USD range.

The highest rise of the national currency against the US Dollar for the last two years was registered

As part of structural economic and political reforms in Azerbaijan, the President Ilham Aliyev on 13 February signed the order to create a new ministry, namely, the Ministry of Transport, Communication and High Technologies, which will be headed by Ramin Guluzade. Thus the President merged two ministries – the Ministry of Transportation and the Ministry of Telecommunication. This also indicates that one of the well-known figures, the former minister of Transportation, Ziya Mammadov, left with no portfolio in the government. Mammadov had a strong footprint in infrastructure investments in the country and was considered to be one of the strongest oligarchs in the government.

Foreign policy: Azerbaijan and EU moving closer

Baku hosted the third Ministerial Meeting of the Southern Gas Corridor (SGC) Advisory Council, which was attended by the President of Azerbaijan, the Vice President of the European Commission, energy ministers from the SGC member-states and representatives of a number of organizations. The SGC aims to increase the role of Azerbaijan in the energy security of Europe, bringing Azerbaijan closer to the EU .

In the meantime, following the high level EU visit to Azerbaijan, President Aliyev visited Brussels at the invitation of the President of the European Council Donald Tusk. The issues of bilateral relations development were on the table, namely, the economic diversification agenda of Azerbaijan and the EU-support in this respect, as well as energy and regional security, including the Nagorno-Karabakh conflict.

For the last couple of months, the trend in EU-Azerbaijan relations has been positive and moving towards a deeper dialogue. Recently, the European Council granted the European Commission and the High Representative for Foreign Affairs and Security Policy a mandate to negotiate a comprehensive agreement with Azerbaijan on behalf of the EU.