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The Demise of the Extractive Economic Model

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The Demise of the Extractive Economic Model AZERBAIJAN The demise of the extractive economic model One of the world’s most industrially polluted territories, the country needs to change its old resource-dependent extraction economy into a sustainable one, and also a better dialogue between Government and civil society is needed. Also, abuses against freedom of speech are frequent, as the Government systematically tries to silence political dissidents and protesters. Elections do not fully meet international standards; the Parliament is under the control of the ruling party and the courts are not independent. NGOs have been closed or denied registration. Public Finance Monitoring Centre Basic Capabilities Index (BCI) Gender Equity Index (GEI) Kenan Aslanli1 100 100 Environmental Law Centre “Ecolex” BCI = 93 GEI = 64 92 Children reaching Empowerment 2 Samir Isayev 5th grade The country faces a number of hurdles in moving 32 towards more sustainable development, none of 0 0 which are likely to be jumped soon. The country’s reliance on oil and petrochemical industries con- 64 tinues to cause grave environmental damage, 100 100 100 100 ranging from soil contamination to water and air 89 97 98 pollution. While the Government has taken some Births attended Surviving under-5 Education Economic activity positive steps to address these problems, it is not clear how long these will last in the absence is evidence that petroleum was used for trade in in order to reduce dependency on oil and gas reve- of serious regulatory measures. Other aspects of the 3rd and 4th centuries AD, and refining activities nues and to develop long-term sustainability.6 This sustainability, primarily related to human rights, in Baku are mentioned in the writings of 17th cen- conclusion was echoed by the Asian Development are more challenging since the ruling party controls tury Turkish scientist and traveller, Evilya Celebi. A Bank in its 2010 annual survey of member states7 both the Parliament and the courts, civil society is proper oil industry was established in the late 19th and also by the Executive Board of the International heavily controlled and political dissent and protest century with the emergence of the so-called “oil Monetary Fund (IMF). continue to face strong sanctions. barons,” who mastered the extraction processes According to the IMF, “given that oil produc- and contributed to the modernization and indus- tion will no longer be the main source of growth, Serious environmental challenges trialization of Baku. there is an urgent need to accelerate economic Azerbaijan also faces diverse and very serious en- Currently the petrochemical industry remains diversification.” However up to 2010 non-oil sec- vironmental challenges. In some regions, the soil the country’s most prominent although in 2010 it tors have not demonstrated significant growth. The is heavily contaminated by pesticides such as DDT had already reached its historical production peak growth rate in non-energy related sectors decrea- and defoliants used in cotton crops. Water pollu- of 1.12 million barrels per day. Some predictions sed from 16% in 2008 to 13% in 2010, and non-oil tion is very high; only one quarter of polluted water show there will be a massive drop in production exports make up only 5% of the country’s overall is being treated. Nearly half of the population has levels from 2015 to 2025 (see Figure 1). exports. To counter this trend, the IMF exhorted no access to sewer facilities. 3 The cities of Sum- Oil production, however, has proven not only President Ilham Aliyev’s administration to support gayit and the capital, Baku, are listed among the unsustainable itself but also for the environment. the private sector through trade facilitation, tax and world’s most polluted.4 Baku, particularly, ranks at Azerbaijan’s long history as an oil producer has led customs modernization and the reduction of State the world’s lowest levels for health and sanitation.5 to high levels of pollution. During the Soviet era, monopolies.8 An extractive economy is not alien to this state residential districts of Baku, for example, were built The Government’s answer was to invest in a of affairs. Being one of the birthplaces of the oil among oil fields and industrial operations located new shipbuilding plant and telecommunications industry, Azerbaijan has a long history of econo- inside the city limits with minimal or no environ- projects. It also issued a decree reducing the num- mic dependency on petroleum extraction. There mental concern. In many cases the Soviet era oil ber of inspections of private business. In July 2010, industry created huge petroleum lakes which litera- while addressing the Cabinet of Ministers, Aliyev 1 Senior economist. lly destroyed all of the surrounding biomass. In the declared that apart from the need to maintain oil last 150 years, the shores of the Caspian Sea, espe- production rates, the economy was developing in a 2 Senior research fellow cially on the Abershon peninsula, have been turned 3 Instituto del Tercer Mundo, Guia del mundo 2011-2012, (Madrid: 2010). into an ecological disaster with an ever-increasing amount of chemical and biological toxic waste from 4 Super Green Me, Sumgayit, Azerbaijan: The Most Polluted 6 World Bank, Country Brief 2009 Azerbaijan, (Baku: City in 2007, <www.supergreenme.com/go-green- the Volga River. November 2009), <web.worldbank.org/WBSITE/EXTERNAL/ environment-eco:1--Sumgayit--Azerbaijan--The-Most- COUNTRIES/ECAEXT/AZERBAIJANEXTN/0, menuPK:301923 ~pagePK:141132~piPK:141107~theSitePK:301914,00.html>. Polluted-City-in--2007>; Nationmaster, Environment Switching models Azerbaijan, <www.nationmaster.com/country/aj-azerbaijan/ This murky scenario has made apparent an urgent 7 News.az, Asian Bank Urges Azerbaijan to Develop the Non-oil env-environment>. Sector, (23 April 2010), <www.news.az/articles/14048>. need to protect the environment. Thus, in 2009, 5 T. Luck, “The world dirtiest cities”, Forbes, (New York: 2008), 8 S. Abbasov, “IMF: The Party’s Over for Azerbaijan’s Oil <www.forbes.com/2008/02/26/pollution-baku-oil-biz- the World Bank issued a report pointing out the Sector,” Eurasianet, (24 May 2010), <www.eurasianet.org/ logistics-cx_tl_0226dirtycities.html>. importance of diversifying the Azerbaijani economy node/61136>. National reports 66 Social Watch diversified manner and underscored that the deve- FIGURE 1 lopment of the non-oil sector was a major priority.9 Already in 2004, the Government had institu- Azerbaijan long-run Production Profiles 1870-2024 ted a programme focused on further diversifying the economy, placing the stress on sectors other 1400 Mstb/d ACG peak 2010 than oil as well as improving population living stan- (1120 Mstb/d) dards. The results up to 2011 have been positive, 1200 despite a slowdown of economic growth after the Phase 3 online start of the global crisis in 2008. For example, the 2008 1000 State Customs Committee reported in March 2011 that agricultural exports rose 1.38 points from 20.1% in 2010 to 21.38% in January-February 800 Small scale exploitation Azeri online of oil and gas seeps 2005 10 2011. since prehistoric times In fact, nowadays the Government is also 600 Chirag online showing a modest commitment towards protecting November 1997 the environment. The greatest challenge for both 1872 - First data 400 in government the Government and the private sector is to discard archives the old extractive model and favour investments 1847/8 - First well 200 and research in environmentally friendly techno- drilled in Azerbaijan logies. The Government designated 2010 as “The Future decline for other WW1 fields assumed 3% annual Year of Ecology” and launched programmes that 0 WW1 have included tree planting, water purification and the development of alternative and clean energy 1870 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 sources. Source: Wikipedia Another encouraging effort was the reshaping of refining complexes outside Baku to reduce car- bon dioxide emissions near populated areas. There more than 50 people were considered political pri- NGOs under close control.13 In April 2011, Am- has also been work on rehabilitating contaminated soners.11 nesty International exhorted the authorities to halt sites. The Government power company, Azerenerji, Violent attacks against media representatives their crackdown on freedom of assembly after the for example, has received funding from the Euro- are frequent. In 2005, the editor-in-chief of a local violent repression of protesters in Baku. The Public pean Bank for Reconstruction and Development magazine was shot dead by unidentified attackers Chamber Committee, which organized the rally, (EBRD) to rebuild the Azdres Thermal Power Plant, following the publication of several articles that hea- claimed that at least 150 people had been arrested thus allowing it to work under the Clean Develop- vily criticized the authorities. Since then, a climate on the streets as they attempted to demonstrate ment Mechanism (CDM) under the Kyoto Protocol. of violence against journalists, impunity for their against the Government. With all access leading attackers and harassment and imprisonment of to the rally site blocked, hundreds of riot police A disheartening record on human rights Government critics has emerged.12 were mobilized to stop the protest, which had been Several human rights associations warn that Azer- The use of torture and ill treatment in police organized by opposition parties through Facebook. baijan is facing important challenges regarding stations and detention facilities have also been Several journalists were forbidden to photograph or basic freedoms, human rights and democracy. reported. These incidents are not properly inves- film the events, and many activists were abducted Elections still fail to meet international standards, tigated, and law enforcement officers suspected from their homes in the aftermath of the protests.
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