Historial Overview

Azerbaijan is one of the oldest sites of modern human habitation in the world, as evidenced by ancient settlements and petroglyphs dating back 20,000 years. In the 12th century, Azerbaijan served as the crossroads of commerce and culture when it became an important link along the Silk Road that moved silk, precious stones, metal and spices between Asia and Europe.

In 1846, Baku drilled the world’s first oil well, more than a decade before America’s first well was drilled in Pennsylvania. By the late 19th century, Azerbaijan was home to the world’s first oil boom.

Azerbaijan enjoyed a brief period of independence from Russia, lasting from 1918 with the creation of the Azerbaijan Democratic Republic, until Baku was invaded by the Red Army in 1920. For the next seven decades, Azerbaijan was a vital energy producer for the Soviet Union.

Azerbaijan declared independence from the Soviet Union in August 1991. Early independence was marked by Armenian military attacks against Azerbaijan’s Nagorno-Karabakh region, tremendous economic distress, and internal struggles for power.

Heydar Aliyev, elected president in 1993, brought stability to the country, created conditions that allowed a cease-fire with Armenia to be signed, and opened Caspian energy reserves to world markets by inviting foreign companies to prospect for oil and gas in what is now called “The Contract of the Century.” Today, Azerbaijan provides more than one percent of the world’s daily demand for oil through the Baku-Tbilisi-Ceyhan pipeline. In addition, the Baku-Tbilisi-Erzerum gas pipeline has made Azerbaijan a key transit country to move major volumes of gas to European markets in the quest for energy security.

Azerbaijan’s energy boom has allowed for the funding of major infrastructure, transportation links and education projects, which are key investments in the country’s plan to stimulate the non-energy sector and achieve long-term sustained growth and economic stability.

Azerbaijan’s strategic location has also made it a key Western ally in regional security and stability operations. Azerbaijan is of geostrategic importance to the U.S., as it provides a crucial air corridor to move supplies to Afghanistan.

2011 Highlights

Azerbaijan had a number of notable events and milestones in 2011. Of particular
interest was:

• Azerbaijan became a non-permanent member ofthe UN Security Council
• A new giant offshore gas field was discovered under the Caspian Sea containing gas and gas condensate reserves of billions, and possibly trillions, of cubic meters
• The country’s currency reserves grew to over $40 billion
• The poverty level continued to fall, ending the year at below 8 percent
• Azerbaijan’s GDP growth grew to 3.7 percent despite the global economic downturn
• Unemployment remained low at 5.5 percent
• Azerbaijan’s non-oil sector grew 9 percent
• Military expenditure exceeded $3 billion
• Exports in Azerbaijan rose by more than 50 percent
• Azerbaijan’s currency, the manat, remained stableagainst the US dollar
• BP announced it will construct a 400-kilometer pipeline to boost the capacity of the South Caucasus gas pipeline to 24 billion cubic meters
• Turkmenistan indicated it favors working with Azerbaijan on a Trans-Caspian pipeline
• Azerbaijan submitted a bid to host the 2020 Summer Olympics in Baku

• Azerbaijan plans to increase supplies of crude oil to European and Asian markets to diversify its energy exports
• Azerbaijan is expected to launch its first telecommunications satellite
• The economy will grow at about 4.3 percent
• Inflation will remain in single digits, although growth in consumer demand will exert inflationary pressures
• Oil prices are expected to hover around $81 per barrel
• The manat is expected to remain stable against the US dollar
• High oil exports will continue to be the main driver of Azerbaijan’s substantial trade surplus
• Azerbaijan will host the Eurovision song contest, atelevised event that garners hundreds of millions of viewers from around the world.

(SOURCE: Economist Intelligence Unit and USACC)

economic growth »