AZERBAIJAN - Energy Base

Azerbaijan is one of the richest countries in the world in energy resources. It has vast onshore and offshore reserves of oil and gas with the Caspian Sea region rated as one of the most prolific hydrocarbon basins in the world. The country's leadership is positioning Azerbaijan to become a major player in the energy industry in the 21st century. Azeri reserves of oil and gas are more than enough to meet domestic demand in the long-term. Currently Azerbaijan is self-sufficient in oil and refined products. In late 1997 the country started exporting oil for the first time since it became an independent state. Demand for natural gas in Azerbaijan is growing faster than supply. The country now consumes all the gas that it produces (see tables overleaf). But demand outstrips supply and Baku is refusing to import gas, expecting this would add impetus to the drive towards self-sufficiency and lead to the development of Azeri gas fields. The Azeri economic base has been improving slowly but steadily over thepast three years. The economy had faced the negative fallout resulting from the collapse of the Soviet Union in 1991, the year in which Azerbaijan emerged as an independent state. In the subsequent years there was severe internal turmoil as pro- and anti-Moscow groups fought for power in the country, while at the same time a war was going on for control of the predominantly Armenian enclave of Nagorno-Karabakh. The situation began to stabilise after President Gaidar Aliyev assumed power in June 1993. He began to implement a delicate balancing act by not moving too close to either the US or Russia. This approach, combined with prudent economic policies, has begun to pay dividends. Hyper-inflation has been brought under control, the Azeri currency - called manat - is relatively stable and the country's gross domestic product (GDP) has been rising since 1996 after shrinking by two-thirds since 1989 (see the economic base following).