You're reading: Problems pile up for Azerbaijan as oil price tumbles

Azerbaijan’s economic woes looked set to get worse on Jan. 18 as the price of oil fell to its lowest level since 2003.

Brent crude sank below $28 per barrel on news that Iran, newly released from Western sanctions over its nuclear program, was planning to significantly increase its oil exports, adding to the global glut of supplies.

The fall in oil prices increases the economic pressures on Azerbaijan, which has seen waves of public protest over price rises and unemployment.

The oil-rich Caspian nation’s currency, the manat, has taken a hammering since mid-December, when the government unpegged it from the dollar. Set free to float, the currency immediately lost 32 percent of its value, and it has been losing ground slowly since.

The exchange rate lost 1.04 percent on Jan. 18, rising to AZN 1.5870 to the dollar.

Azerbaijani economic expert Zohrab Ismayil, writing on Facebook on Jan. 18 warned that the continued fall in the oil price would deepen the country’s problems.

“The Central Bank’s reserves will run out in two to three months, and the local currency will lose value very sharply,” Ismayil wrote. “There will be price hikes of from 30 percent to 50 percent again.”

“The crisis is deepening in the banking sector, and the construction, real estate and automobile markets are completely collapsing.”

Ismayil also said Azerbaijan’s credit rating was falling, which he warned would make it more difficult for the country to raise loans from international financial institutions and foreign banks.

Meanwhile, public protests in Azerbaijan against the effects of the economic crisis continue. In the latest demonstration, traders in the Bina Trade Center in the Garadagh district of the Azeri capital Baku held a peaceful rally calling for a decrease in rents, the independent online television channel Meydan TV reported. Traders said all the stores in center had been closed as part of the protest.

The government has responded to the wave of public protests in the country’s regions with a crackdown, deploying riot police and using tear gas and water cannons to disperse demonstrators.

In another pubic protest, this time in the Jalilabad and Astara districts of Lankaran region in the southeast of the country, local people rallied in front of the regional headquarters of the social protection agency to protest against price hikes, unemployment, problems with bank loans and receiving social aid payments, the Azeri service of Radio Free Europe/Radio Liberty reported.

Azeribaijani President Ilham Aliyev has called a government meeting to discuss the country’s socio-economic problems, but Azerbaijani economic expert, Natig Jafarly, writing on Facebook on Jan. 18, said nothing much was likely to be achieved there.

“They’ll probably just change the state budget,” Jafarly wrote. “The state budget is based on an oil price of $50 a barrel – they’ll probably drop that to $40.”

“But that will just cause more job cuts and a reduction in the state’s economic activity.”

Jafarly said the best way of saving budget funds would be to cancel this year’s Baku European Grand Prix motor racing event and the Islamic Games.

Kyiv Post intern Gulnar Salimova can be reached at [email protected]