Baku looks for sources offsetting lowered contribution of oil to GDP

Baku looks for sources offsetting lowered contribution of oil to GDP

Russia, Kazakhstan and Azerbaijan can take part in a meeting of the member-states of OPEC and other oil-producing countries, Russian Energy Minister Alexander Novak said. Today Moscow and Baku increasingly talk about the prospects of forming a common strategy to overcome the crisis.

The head of the Political Scientists Club ‘South Caucasus’, Ilgar Velizade, recognizes that both  Russia and Azerbaijan have seriously felt the effects of the fall in world oil prices and energy in general. "A major adjustment to the current situation was recently made in the [Azerbaijani] budget. The budget was was readjusted based on a price of $25 per barrel. Major changes were made to the expenditure of the budget. However, the priority directions of development of the economy were not affected. There is a serious safety cushion in the form of savings in the oil fund, the country still has significant gold and foreign exchange reserves of the Central Bank. This enables us to some extent to deal with the current risks and challenges,’’ Velizade said.

At the same time, he said, in the longer term serious calculations are made to raise funds in the economy and further oil sector sources through the development of transport infrastructure through the creation of joint ventures, including with partner countries. "Now we are addressing issues of coherent conditions of transit through Azerbaijani territory of goods from neighboring countries and regions. Consultations are under way with major financial institutions and regional financial institutions, with possible donors. The focus is on investment cooperation. And cooperation with Russia is of particular interest, not only bilaterally, but also in trilateral and multilateral formats, ‘’ Velizade said.

A researcher of the Institute of Oriental Studies of the RAS, Stanislav Pritchin, agrees with him: "The countries exporting oil and gas such as Russia, Kazakhstan and Azerbaijan have come under economic blows. But Russia's  oil production is increasing,  a number of new fields, which were intended to offset the natural decline in production from older fields, were launched. Ultimately, the total production amounted to 534 million tons of oil. And Azerbaijan's key oil fields, which were launched in 1990, peaked production in 2011-2012. Last year the downward trend of the natural plan of oil production was predictable , and production amounted to about 41.6 million tons of oil. There are a number of factors that influenced, for example, the tragedy that occurred in the field which is operated by SOCAR. For several months production there was not carried out, which seriously affected the production plans in this field, taking into account the fact that the production from the deposit was about a thousand tons of oil per day. At the end of 2016 this reduction will affect the overall oil production in Azerbaijan. Therefore, the situation faced by the Azerbaijani authorities, to an even greater degree was a more serious challenge than to Russia. The supply of oil to the world market was emphasized mainly. But these factors – price reductions and the natural decline in production affected the economic performance. But Azerbaijan has already recovered from the first shock, and there is now systematic work in the search for new sources that could compensate for the decline of oil's contribution to the GDP of Azerbaijan."

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