Azerbaijan: to the new year with old problems

Azerbaijan: to the new year with old problems

The outgoing 2015 turned out to be a very tense and difficult year for almost all the post-Soviet countries. There is no end to the 'Crimean-Donbass' crisis in Russian-Ukrainian relations; the rapid depreciation of the national currencies of Russia, Ukraine, Kazakhstan, Azerbaijan, Georgia and other post-Soviet states have exacerbated socio-economic problems in these countries; the lack of meaningful progress on the Syrian settlement issues continues to heat up the degree of geopolitical tensions in the region, which has already become the cause of a sharp deterioration in the relations between Russia and Turkey, which recently seemed pragmatic and strong.

Neither have key geopolitical contradictions between Russia and the West been resolved: against this background, the EU extended the package of anti-Russian sanctions until the summer of next year, the United States, in turn, tightened them, thus nullifying the expected success of the visit of Secretary of State John Kerry to Moscow. Finally, the collapse of world oil prices, catastrophic for oil-producing countries, which also hurt the economies of Russia, Kazakhstan and Azerbaijan, is still not over, and the announced return of Iran to the global oil market and the US decision on the beginning of its own oil exports leave little hope for the stabilization of prices at an "acceptable" level for exporters.

Even today, at the governmental level Baku acknowledges that the coming year will be difficult for the country. "The next year will be difficult. The situation on the oil markets also affects Azerbaijan. However, we will come out of this situation, the state has a corresponding concept," the assistant of the president of Azerbaijan on Social and Political Issues Ali Hasanov stated. The senior official of the presidential administration did not share the details of the government's concept. Judging by the first signals and the anti-crisis initiatives coming from the government, the ruling team plans to take measures for a specific reduction of the financial burden on the population after two waves of devaluation in March and December of this year. On the results of an extraordinary meeting with the participation of representatives of the banking sector, the Central Bank of Azerbaijan, among other things, recommended the country's banks to carry out the restructuring of dollar loans of customers. A similar decision has already been taken in the Nakhchivan Autonomous Republic: loans taken in US dollars will be paid to the population according to the old exchange rate. At the same time, measures are being taken to prevent the increase in food prices by market speculators. Although it is impossible to stop the sharp rise in prices for imported goods.

For his part, President Ilham Aliyev expressed the need to liberalize the economy. "The struggle against monopolism will be tightened. We cannot allow monopolies in both domestic production and imports. Those who hinder budget revenues will be punished. Therefore, maximum transparency will be provided in the customs and tax spheres," the president stated. The fact that the issue of the fight against monopolies has been increasingly addressed in recent months in the speeches of the head of state is not accidental: due to the fall in foreign exchange earnings to the state budget, the liberalization of the economy and the greatest possible improvement in the business climate is becoming an urgent task of the government. For many months there have been rumors in Baku that the customs and tax services will give full management to the ASAN service, which has established itself as transparent and absolutely non-corrupt. In a recent speech by Ilham Aliyev the achievements of the ASAN service were actually given as example to other structures.

Paradoxical as it sounds, the low oil prices have created a favorable domestic political background for advancement of important economic reforms. And the main task of the ruling team is the organization of their painless implementation, in terms of maintaining political stability, and maintenance of real execution of decrees and the prevention of sabotage of the decisions of senior management by local officials.

Countering the proliferation of radical religious movements in the republic will obviously remain one of the priorities of the internal security policy. The example of recent developments in the village of Apsheronsk in Nardaran, where two policemen and four activists were killed while trying to arrest a radical activist who, according to the investigators, had prepared the overthrow of the secular authorities, it shows the need to strengthen the prevention of religious extremism in the country. The continuing operation by the security forces in Nardaran caused discontent among the Iranian clergy and individual parliamentarians, as well as a wave of criticism in the Iranian media. Representatives of the political leadership of the Islamic Republic of Iran, on the other hand, have distanced themselves from the Nardaran events, describing them as an internal affair of Azerbaijan. It is hard to tell how this incident will affect bilateral relations, but the news of the impending visit by Iranian President Rouhani to Azerbaijan became a positive signal.

Against the background of complications in the domestic economic situation, Azerbaijan will have to make every effort to neutralize external threats. The first and the main threat continues to come from Armenia, occupying Nagorno-Karabakh and the surrounding seven regions of Azerbaijan. The latest round of talks between Presidents Aliyev and Sargsyan in Bern, Switzerland, ended in mere agreement to continue negotiations next year with an obvious lack of progress in the process itself. Moreover, not only the high intensity of armed clashes along the front line before the meeting in Bern is notable, but also the absence of any tension decrease after it. Reports from the front zone about the use of large-caliber weapons, mortars and artillery by the sides of the conflict have become commonplace. The only real foreign player in the settlement is the Kremlin, but how often will Moscow be able to restore the cease-fire "in manual mode", as was done during the trilateral meeting in August 2014 in Sochi? Even the official statistics of losses on both sides over the past few years show that the conflict is consistently approaching a "defreeze". And if the diplomatic activity of Russia in solving this sensitive issue will not increase in the foreseeable future, the risk of resumption of full-scale hostilities would become extremely high.

Baku's relations with the West also have to endure another durability test in 2016. In particular, the legislative initiative of Congressman Christopher Smith, introduced to the US Congress at the end of this year, which implies the introduction of strict sanctions against Azerbaijan, continues to haunt the country's public opinion. The expert community has not come to a consensus about the reality of the threat. But it is clear that US-Azerbaijani relations will be on the socio-political agenda in Azerbaijan. Baku cannot help but understand that any institutional deterioration in relations with the United States carries risks to backfire on relations between Azerbaijan and Europe, not to mention that such a development could slow down the implementation of the major energy projects TAP and TANAP, in which both parties are interested. Taking into account the possible risks, I dare to say that Baku will not abandon the traditional multi-vector policy, and will continue to work with foreign partners and seek a compromise on controversial issues, and will make every lobbying effort so that Smith's bill will not be adopted.

Finally, next year Azerbaijan will have to balance between two friendly states – Russia and Turkey. Baku's mediation initiative, aimed at reconciliation between Ankara and Moscow, is hanging in the air, because the intensity of the emotions after the incident with the downed Su-24 has not calmed down. Currently, Azerbaijan can only hope and, where possible, try to contribute to the restoration of relations between Russia and Turkey. Their aggravation, though, may bring short-term economic benefits to Azerbaijan (in particular, the issue of substitution of Turkish agricultural products to the Russian market), but in terms of policy, it carries a number of disadvantages for Azerbaijan. For example, Russian-Turkish confrontation leads to the polarization of public opinion in Russia on 'the Armenian issue', which can ricochet on the position of Baku in the Karabakh issue. Moreover, all the attempts by Ankara to play a more active role in the Nagorno-Karabakh settlement in the framework of its bilateral negotiations with Russia will be doomed to failure, which is also not good for Azerbaijan. So it is expected that Azerbaijan will continue to make efforts to restore Russian-Turkish relations.

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