, , , , , , , , ,

Azerbaijan means “Land of Fire” in persian. The explosion of oil’s exploitation since the 19th century is largely contributing to the current economical boom of the country.

By Rena Allahverdiyeva & Elvira Abdullayeva

The turning point on oil production appears in the middle of the 19th century. For the first time in the post-industrial revolution world, oil wells were drilled in the district of Bibiheybat, then in Balakhani. In 1901, Azerbaijan took the first place in the world by producing 11.5 millions tons of oil per year; – 9,5 millions tons in the USA-. This beginning of modern exploitation of the oil fields led to a period of unprecedented prosperity and growth in the years before World War I.

This slideshow requires JavaScript.

Such high production of oil ensured the victory of the Soviet Union in Second World War.  The regular discovery of new offshore oil fields, in the fifties and then in the 70-80’s, led the Republic of Azerbaijan and Caspian Sea in becoming the leader of world oil’s producers.

After independence

After the collapse of USSR and its independence in 1991, Azerbaijan began to look for successful projects in developing oil industry with international private companies.

11 major oil companies representing 8 countries of the world signed this so called “Contract of the Century”. To date, Azerbaijan has signed over 20 major production sharing agreements with some 30 companies from 15 countries.

In January 2011 the EU has made a “breakthrough” deal with Azerbaijan, concerning the supply of natural gas from Caucasus countries to the UE and the development of the so-called ‘Southern Gas Corridor’, uniting several major pipelines including NABUCCO.

The Southern Gas Corridor entails the construction of several pipelines, such as NABUCCO (running from Turkey to Austria and Germany via Bulgaria, Romania, and Hungary), ITGI (Interconnection Turkey-Greece-Italy), White Stream (known also as the Georgia-Ukraine-EU pipeline) and TAP (the Trans-Adriatic Pipeline), aiming to bring gas from the Caspian Sea to Europe.

The European Commission points out that NABUCCO aims to bring gas to the border of Europe with a brand new pipeline, whereas TAP and ITGI requires the strengthening of existing infrastructure in non-EU countries.

The effects of oil on Azerbaijan’s state budget

Azerbaijan is an economy in transition in which the state continues to play a dominant role. It has important oil reserves and significant agricultural potential based on a wide variety of climatic zones. During the late 1990s, in cooperation with the International Monetary Fund (IMF), Azerbaijan pursued a successful economic stabilization program, with annual growth exceeding 10% since 2000.

More infos about Azerbaijan’s budget for 2011

-1,500 billions Euros are directed in military spending.

-Social expenditures in Azerbaijan’s draft budget for 2012 are representing 27.8% of the budget -rise of 0.5% compared to 2011.

– 60 % of Azerbaijan’s 2012 budget will come from State Oil Fond of Azerbaijan Republic.