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Economic transition in Azerbaijan and relations with Italy

29/05/2012, Rome

Azerbaijan confirms a potential possession of Nabucco, a gas pipeline which carries 31 billion cubic meters of methane from Asia to Europe. During a round table discussion held by IAI and Unicredit in Rome, some experts and Italian investor representatives within Azerbaijani territory spoke about the economic transition in Azerbaijan and its foreign relationships, particularly with Italy.

The Azerbaijani economy has shown signs of growth for some years. It’s possible to attribute that to the increasing importance of the oil exportation sector, but it could also be due to direct foreign investments that have given a positive revival to the country since its 1991 independence. In that period, the state faced a dilemma: it could either be a satellite nation of some big countries, or it could create its own independent economic system based on market relations to possess its own natural resources. Azerbaijan chose the latter. And so, since 1995, it started to attract remarkable investments in different areas besides oil and natural gas, which are the principal ones.

Nevertheless, the current financial crisis has stressed all the risks that come from an overdependence of Azerbaijani economy on oil exportations. As the speaker underlined, the country’s aim now must be to diversify the economic sector in order to develop the investment sectors both abroad and domestically. Fikrat M. Pashayev, professor at Baku University, said that Azerbaijan could be hot for the formation of a new economy that is not only based on oil. This opinion matches with Italian companies most committed to these areas.

Unicredit, Saipem and IRD Engineering are some Italian companies that invested in Azerbaijani territory. Some of their representatives describe the developing projects in Azerbaijan as being about specific adjustments in the infrastructure’s sector as well as being about developing partnerships or financial joint ventures with local companies by involving them directly in projects. This is an essential element of the present strategy on territory of all Italian firms.

However, there is a problematic sociopolitical contest due to the current human rights situation in the country. Professor Jens Hölscher from Brighton University said that, at this moment, it’s really worrying. According to Amnesty International, there have been 17 political prisoners in jail since April of 2011. Pacific protest demonstrations are still forbidden or broken up with violence. Freedom of press is another controversial issue: Azerbaijan is ranked at place 162 (out of 179) - behind Pakistan, Afghanistan and Iraq - in the Press Freedom Index compiled by Reporters without Borders. According to Transparency International corruption is prevalent, with a 2.4 score on a scale of 0 (highly corrupt) to 10 (very clean).

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