Azerbaijan - Overview

The Republic of Azerbaijan, a secular, independent republic since the break-up of the Soviet Union, is mostly on the southern side of the Greater Caucasus mountain range. It is on the Caspian but otherwise landlocked with good rail and road communications with Georgia, Turkey and Iran. The climate is moderate. The Azerbaijani autonomous republic of Nakhchivan in the south-west is separated from Azerbaijan proper by Armenia. (Some of the place names in this report have various transliterations into English from the Russian or Azeri names.)

An oil producer since the nineteenth century, Azerbaijan has recently become a more significant exporter of oil (up to perhaps 20 million tonnes in 2005) and gas, largely as a result of foreign investment through production sharing agreements. A positive trade balance has resulted and the currency is reasonably stable, now about 5000 manats per US dollar. Some 23 production sharing agreements have been issued, including the first and largest with the BP-led AIOC in 1994. Reports show that commercial contracts are enforceable with delays and costs typical for Europe. In November 2004, Fitch Ratings have upgraded the Azerbaijani long-term debt to a BB rating or "Stable". This is a higher current rating than Brazil, Venezuela or Turkey and equal to Peru.

A new president, the son of the previous president, was elected in October 2003 by a large majority. The country is peaceful, without apparent security problems, apart from the occupation by the Armenian military of a significant section of the country including Nagorno Karabakh, which is populated by Armenians. A cease-fire has been in place for eleven years.