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bne:Invest in Azerbaijan 3 Top Story

5 Interview
7 Feature
9 Sector
11 Economics & finance
14 Chart
15 News in brief
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September 2014 www.bne.eu

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AZPROMO hosts business forum with Macedonia,

strengthening ties with Balkans

The Azerbaijan Export and Investment Promotion
Foundation (AZPROMO) welcomed business
delegates from Macedonia on September
9, looking to build and expand ties between
Azerbaijani and Macedonian companies. The
event is in line with previous efforts to create
relationships with other Emerging European
partners.
The Azerbaijan-Macedonia Business Forum was
held at the organization’s headquarters in Baku.
Aimed at strengthening trade and investment
between the two countries, the forum was
attended by approximately 40 delegates of both
counties, representing sectors ranging spanning
manufacturing, agriculture, construction, finance,
healthcare and consulting.
The delegates were welcomed by Azerbaijani
Minister of Economy and Industry, Shahin

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Mustafayev, who noted in his address that there
was ample room to expand cooperation between
the two countries. Trade between Macedonia and
Azerbaijan has indeed been modest so far; in
2013, the two countries exchanged $0.4m in goods
and services, down from a peak of $1.6m in 2010.
"Despite the fact that the two countries have
signed two agreements on avoidance of double
taxation and investment promotion, and set up
an appropriate legal framework, the indicators of
cooperation between Azerbaijan and Macedonia
don't correspond to the potential of the two
countries,” he said.
His Macedonian counterpart, Deputy Prime
Minister and Minister of Finance Zoran
Stavreski, highlighted investment opportunities
for Azerbaijani companies in Macedonia and
encouraged delegates to find new opportunities
to cooperate. After the event, he told journalists
that, just like neighbouring Bulgaria, Macedonia
would be interested in having access to the
Trans Adriatic Pipeline (TAP), which will carry
Azerbaijani gas to Europe, once it comes online
in 2018- 2019.
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Azerbaijan has long enjoyed good relations with
Central and Eastern Europe, particularly with
former Soviet countries like Moldova, Ukraine,
Belarus and Georgia, with which it enjoys high
levels of foreign trade and visa exemptions.
However, the rapprochement with the Balkans is
more recent, and speaks volumes for the Caspian
country’s strategic importance to the region.
The events of the past summer left Europe seeking
alternatives to Russian gas. While Western
Europe is less dependent on Gazprom, Southeast
Europe depends almost entirely on it. Particularly
vulnerable to a potential suspension of Russian
gas transit through Ukraine are Bulgaria and
Macedonia, and, to a lesser extent, Serbia. The
three countries have limited storage facilities,
and alternative domestic energy sources, and no
access to gas from North Africa or Norway.
Azerbaijan already signed off on sending 10bn
cubic meters (cm) a year of gas exports through
TAP, but the pipeline will eventually be able to
carry double that capacity. The difference would
be more than enough to cover the energy needs of
small consumers like Macedonia and Bulgaria.
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Top story
PASHA aids capital market development with first non-
financial bond issue
Azerbaijan's success in becoming an economic
and financial hub for the region depends much on
the country's ability to develop its capital market.
PASHA Bank's underwriting of Azerbaijan's first
non-financial corporate bond is a big step in that
direction.
In 2011, the President of Azerbaijan endorsed
the "State Program on the Development of the
Securities Market of the Republic of Azerbaijan for
2011-2020", which envisaged the development of
the securities market through: (i) improvement of
capital market infrastructure and the underlying
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trading architecture; (ii) stimulating supply to
enhance the range of capital market instruments
and services; (iii) encouraging demand through
corporate education and public awareness
outreach; and (iv) strengthening the legal and
regulatory framework, as well as improving the
capacity of the regulatory body.
The foundations for the development of
Azerbaijan's corporate bond market were laid
earlier this year, when in March the Azerbaijani
state issued its debut Eurobond as a benchmark.
Rated 'Baa3/BBB-', the ¤1.25bn, 10-year
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of Embawood’s first bond issue, when its PASHA

Capital subsidiary acted as the underwriter for the
Baku-based furniture manufacturer.

Embawood issued 10,000 bonds with a par value of

AZN1000 ($1280) and a coupon of 11%. The bonds,
among the first from a non-financial Azerbaijani
company to be listed on the Baku Stock Exchange,
began trading on August 22. The funds raised by
Embawood through this bond issue will help the
company, one of the market leaders in the South
Caucasus, to implement large-scale projects.

Eurobond with a 4.75% coupon was issued into a "The first bond issue of a non-financial company
turbulent market, but it still managed to garner on the Baku Stock Exchange marks an important
huge interest from investors. The order book was milestone in the development of Azerbaijan’s
oversubscribed at nearly $4bn. capital markets, and PASHA Bank is delighted
to have been part of this process," says PASHA
The sovereign issue was followed in June with Bank’s Chief Investment Officer and member of
a $500m debut Eurobond issue due 2019 from the Board, Taleh Kazimov.
International Bank of Azerbaijan, which was
priced with a coupon of 5.625%. Azerbaijani companies are increasingly looking
towards Azerbaijan’s capital markets to raise
It's not hard to see why Azerbaijan's sovereign funds on favourable terms. And Embawood’s bond
bond issue was three-times oversubscribed. Amid issue is the latest in a series of corporate bond
a global slowdown, Azerbaijan's economy grew by issues that PASHA Capital has underwritten.
6% last year, buoyed by rising oil and gas sales,
and an economy that is rapidly diversifying into "Our success in this area has led to PASHA Bank
areas like ICT, green technology and the consumer and PASHA Capital being named ‘Best Investment
sectors. Bank’ and ‘Best Brokerage Company’ by EMEA
Finance magazine. We are therefore best placed to
These new companies require access to capital help Azerbaijani companies to raise capital on the
to grow, so PASHA Bank was delighted to be part domestic capital markets," says Kazimov.

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Interview
SOFAZ bullish on opportunities in East and Southeast Asia
Azerbaijan's $37bn sovereign wealth fund is
diversifying its portfolio by making investments
around the world to reduce the risks to the
state's rainy-day fund and ensure the long-term
prosperity of the country.
The State Oil Fund of the Republic of Azerbaijan
(SOFAZ) was established by presidential decree
in December 1999 to "distribute the country’s oil
and gas wealth among the present and future
generations."
The fund introduced a new investment policy in
2012 designed to diversify its holdings: in the
latest move, a commitment was made to invest
$1.8bn in the yuan by the end of this year, the
fund's CEO Shahmar Movsumov told the Financial
Times in an interview in June, in what is being
regarded as a further indication of the Chinese
currency's rapid move toward reserve status.
China's currency will be added to the fund's
growing portfolio of currencies. SOFAZ has already
added 30 tonnes of gold to its basket over the
last two years and holds an increasingly diverse
portfolio of currencies, mostly of those countries
that Azerbaijan has business with, including:
the Australian dollar (0.5%), Turkish lira (1.2%),
Russian ruble (1.3%) and the Korean won (1.2%),
in addition to the main holdings of US dollar
(51.7%), euro (35.4%) and the British pound (5.3%).
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However, the fund is also actively seeking
investments in other countries. Its first significant
overseas investment was the purchase of several
million dollars worth of real estate in London
in 2012, to which has been added other top tier
properties in Paris, Moscow and, most recently,
Seoul.
Real estate has proven to be an attractive
investment in these times of global volatility. Worth
$447m, SOFAZ's investment in the Pine Avenue
Tower A office complex in Seoul came after a
year of weighing different options in the East and
Southeast Asian real estate markets, currently
among the most attractive real estate markets,
according to Movsumov.
Observers believe that the Korean real estate
investment could mark a new direction for
SOFAZ as it is becomes increasingly interested in
investing in East Asia and Southeast Asian assets.
SOFAZ’s eastern focus is not all that surprising.
At the moment, more than half of its assets are
in Europe, which has had a chequered economic
performance over the past six years. With the
European Central Bank forecasting growth in the
Eurozone of just 0.9% in 2014 and little sign the
economy is going to pick up any time soon, SOFAZ
has been forced to look further afield for attractive
assets.
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Russia has been another destination that has
attracted SOFAZ attention; asset prices in Russia
are at historical lows due to the political situation,
and as a sovereign wealth fund with significant
trade with Russia SOFAZ takes a long-term view
on the valuation of Russian assets.
In 2012 SOFAZ invested several billion dollars
to take a significant minority stake in Russia's
second largest state-owned bank VTB, which
was also its main private equity investment since
the 2012 overhaul in its investment strategy that
allowed it to invest directly into companies. In
2013, the fund followed up with the purchase of
another a 3% share in VTB worth $500m.
The VTB purchase aside, SOFAZ bases its equity
acquisition decisions on a “monitoring of the
MSCI World Index, a public equities index in which
SOFAZ has previously invested,” according to
Movsumov. The MSCI World lists stocks from 22
developed markets and Hong Kong, which means
that the VTB purchase could be the exception, not
the rule.
A larger part of SOFAZ's allocations are to more
traditional assets: 6.84% of its portfolio is invested expected to come online between 2018 and 2020.
in international financial institutions, for example.
In 2013, “SOFAZ made a fresh commitment
to the International Finance Corporation (IFC)
Global Infrastructure Fund, following two previous Technologies and the Ministry of Education,
commitments to the IFC Catalyst and IFC ALAC
funds,” Movsumov said in a January 2014
interview with The Business Year.
The State Oil Fund of the Republic of Azerbaijan
was established by presidential decree in
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Promotion Foundation
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December 1999 with the professed aim of
distributing the country’s oil and gas wealth
among the present and future generations
But the bulk of the fund's resources are aimed
at investments that will bolster Azerbaijan's
economic prosperity. The 28th largest sovereign
wealth fund in the world, SOFAZ has invested
heavily in Azerbaijan's infrastructure to facilitate
the country’s exports. The Baku-Tbilisi-Ceyhan
(BTC) oil pipeline, the reconstruction of the
Samur-Absheron irrigation system of the water
pipeline from Gabala to Baku, and the Baku-
Tbilisi-Kars railway are noteworthy infrastructure
projects funded by SOFAZ.
The fund also invests in the energy sector when
necessary. Recent examples of such investments
include the building a new semi-submersible rig
in the Caspian Sea in 2013 to support offshore
exploration, and the acquisition of the Azerbaijani
state’s share in the Southern Gas Corridor CJSC in
2014. SOFAZ has also financed SOCAR’s STAR oil
refinery in Turkey and a large-scale petrochemical
complex in Azerbaijan, which will be located at the
border of Garadag and Absheron regions and is
In other areas, SOFAZ finances projects initiated
by the Ministry of Communications and High
namely the countrywide fibre optic cable network
and the state programme for education of
Azerbaijani youth abroad. Since 2001, SOFAZ
has allocated humanitarian funds to support the
refugees and internally displaced persons (IDPs)
resulting from the Nagorno-Karabakh conflict.
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Feature
Nakhtel granted 4G license
for NAR, possibilities for
countrywide rollout
In early September, Nakhtel, the Nakhchivan
Autonomous Republic’s (NAR) CDMA mobile
operator, was awarded a license to deploy its
4G network in the region by the NAR cabinet of
ministers. The company is expected to roll out its
4G network in NAR by early 2015.
During the same week, the central Ministry
of Communications and High Technologies
announced that the operator would also be
allowed to offer internal roaming services in the
rest of Azerbaijan, but did not specify the date
when these services would be introduced. The
move could be the first step to a full-fledged
network rollout in the whole.
Nakhtel would thus become Azerbaijan’s fourth
countrywide mobile telephone operator if its bid
to acquire a license for the 1,800-2,100 MHz GSM
frequency band is approved. The other three
telecommunications companies- Azercell, Bakcell
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and Azerfon, all operate GSM networks. In a first
stage, the ministry will assist Nakhtel to offer its
services using the other operators’ base stations
throughout the country.
The entrance of a new operator is expected
to increase competition in the mobile
telecommunications market in Azerbaijan,
where the penetration has stagnated at 105/ 100
inhabitants since 2012 according to the State
Statistics Committee. A 2012 European Bank for
Reconstruction and Development (EBRD) report
notes that Azerbaijan lags behind its neighbors
when it comes to its mobile market penetration,
ranking below the poorer Ukraine, Moldova,
and Georgia. The average market penetration
in the region is, according to the EBRD’s “2012
Electronic Communication System Comparative
Assessment”, 136 per 100 inhabitants.
Incumbent Azercell dominates the Azerbaijani
telecommunications market with 4.5 million
subscribers, which translates into a market
share of 42%. Controlled by TeliaSonera, the
company has built over 1,200 base stations in
Azerbaijan and reported voice and data demand
increases of 120% in 2013. Azercell’s dominance
was somewhat eroded by Azerfon’s 2006 market
entrance, which was compounded by the fact that
the new entrant received the first 3G license in the
country in 2009. Operating under the brand name
Nar Mobile, Azerfon has secured a market share
of 23% over the last eight years. The incumbent
and Bakcell, the second largest ICT operator,
launched their 3G services in 2012, more than two
years after Azerfon.
Until now, the competition between the three
existing operators has not driven voice costs
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down, which average $0.09, higher than elsewhere (MCHT), announced that it was continuing with
in the region. Instead, the three companies have the privatization of state-owned fixed telephone
focused on value added services such as mobile operators Aztelekom and Baku Telephone
bill and public transport payment services to keep Communications Production Association (BTCPA)
competition at bay. Bakcell has positioned itself by turning them into open joint stock companies
as the mobile broadband operator of choice, with by the end of the year. Meanwhile, the MCHT is
traffic as fast as partner Manchester United’s continuing to work on the nationwide fiber optic
players, and reported a growth in data traffic of project that aims to connect the entire country to
100% in 2013. In addition to mobile broadband, the Internet.
Bakcell provides mobile Internet dongles under
the Sür@ brand name. The devices have proven to Judging by recent growth trends, however,
be very popular, reaching a market share of 45%, Azerbaijani consumers appear to value mobility
higher than Sazz, an ICT operator that focuses over fixed services. Since its introduction in 2009,
solely on such products. mobile broadband subscriptions reached 4.1
million by year-end 2013, while fixed broadband
Nakhtel’s announcement comes at a time when customers were estimated at 1.3 million in 2012.
the telecommunications sector is experiencing Meanwhile, the fixed telephone penetration rate
significant changes. After some delays, the stands at 19% and is largely accounted for by
mobile number portability (MNP) service was urban dwellers, while the mobile penetration rate
introduced in February 2014, allowing customers has exceeded 100% for years.
the flexibility to change operators, but to preserve
their telephone numbers. In a market dominated The population’s penchant for mobility,
by pre-paid services, the move grants significant combined with the symbolism that NAR holds for
freedom to customers and opens the door to Azerbaijanis, and with the autonomous region’s
increased competition among operators. limited connectivity to the rest of the country,
could turn Nakhtel into a new favorite operator,
Elsewhere in the sector, in September the Ministry particularly if its pricing is more aggressive than
of Communications and High Technologies the current operators’.

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Sector
EU visa scheme takes effect,
boosting tourism hopes
With less than 270 days left until the European
Olympic Games, changes in the visa agreement
between Azerbaijan and the EU will make it
easier for Azerbaijanis to travel to Europe, and
for Europeans to visit the country, boosting hope
that the country could see a surge in visitor
numbers.
As residents of the capital count down the days to
the European Olympic Games, or Baku 2015, the
first day of September brought the much-awaited
news that the visa facilitation agreement between
Azerbaijan and the EU, signed in November 2013,
had taken effect. The agreement, which slashes
application fees and eases the processing and
granting of visas, is expected to boost tourism
flows between Europe and Azerbaijan. The
news comes after August’s decree issued by the There are no shortage of sites and activities
Azerbaijani Presidency regarding the granting of for business and leisure tourism in Azerbaijan.
visa-free entrance to accredited participants in
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the Games, and visas-upon-arrival for foreigners
holding tickets to Olympic competitions.
In recent years, foreign travel, both inbound and
outbound, has been on the rise in Azerbaijan.
According to the State Statistics Committee,
the number of incoming visitors almost
doubled between 2007 and 2013, from 1.3m to
2.5m. During the period, the average tourist
expenditure quadrupled, up to $591 last year.
Russia, Georgia, Turkey and Iran account for
the lion’s share of travelers to Azerbaijan, with
Russia alone contributing to over a quarter of the
2.5m visitors. With the exception of Iran, all these
countries enjoy visa-free or visa-upon-arrival
regimes with Azerbaijan. Ukraine, Kazakhstan
and Uzbekistan, which enjoy the same visa-free
regime, are also among the top ten countries of
origin for inbound tourism, which is rounded out
by the UK, the US and Germany.
Visas may have been a deterrent to traveling to
Azerbaijan until now, but things are looking up.
Authorities in Baku have made no secret of their
commitment to promote Azerbaijan as a tourist
destination in Europe. From the hosting of the
Eurovision Song Contest in 2012 to sponsoring
Atletico Madrid, this year’s champion of the
Spanish La Liga, Azerbaijan has made successful
efforts to promote itself as a brand and a tourist
destination in Europe. What better branding
campaign could there be than sponsoring a
football club that's t-shirts boast the country’s
national slogan, “Azerbaijan, Land of Fire”.
The world-class exhibition center in Baku,
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host to major business and industry fairs in
the Caucasus like BakuBuild and BakuTel, is
complemented by the event-hosting capabilities
of the various four and five star hotels in town.
Many internationally recognized hotel chains
have a presence in the Azerbaijani capital,
including Hyatt Regency, JW Marriott, Hilton,
Fairmont, Four Seasons, Jumeirah and Ramada.
Located in the capital’s new landmark, the Flame
Towers, Fairmont boasts the largest conference
halls in town, which can accommodate over a
thousand people.
There is a growing number of local luxury hotels,
such as Qafqaz Hotels & Resorts, a chain that
operates 10 hotels in Baku and the regions.
Qafqaz General Manager Halil Duru confesses
that Baku’s hosting of large-scale events is
beneficial for the hotel business. “Our average
occupancy rate across all of our hotels in
Lankaran, Gabala and Baku is 48%," says Duru.
"But in early 2014, we met with the Committee
of the European Olympic Games and we reached
an agreement to host athletes and visitors, which
will guarantee us an occupancy rate of 70%
during the Games in 2015.”
Baku 2015 is building an Olympic Village that
will host the majority of athletes and their
delegations, but the ripple effect of the event is
sure to be felt across the hospitality sector, as
the number of visitors is forecast to be as high as
2m.
Aside from skyscrapers, business venues and
a spectacular seaside boardwalk with musical
fountains reminiscent of Dubai and Las Vegas,
the Azerbaijani capital has something for
cultural travelers as well. Within the confines
of sturdy, medieval walls is the well-preserved
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Old City, with its winding streets, antique and
souvenir shops, and a Unesco Heritage complex
comprising of the Maiden Tower and the Palace
of the Shirvanshahs. Baku is also home to some
quirky museums like that of miniature books and
the newly renovated carpet museum. For those
on the lookout for day trips, the muddy volcanoes
in Gobustan, the petroglyphs in the Gobustan
National Park, Azerbaijan’s second Unesco World
Heritage site, and the Temple of Fire in Ateshgah,
ancient home to fire-worshipping Zoroastrians,
are all good options.
While Baku remains the destination of choice
for travelers to Azerbaijan, many, including the
Qafqaz chain, are betting on the development of
regional tourism. Owned by one of the country’s
largest holdings, Gilan, Qafqaz operates six
hotels in Gabala, 220km northwest of Baku.
“Gilan Tourism makes efforts to bring groups of
tourists from other countries in order to raise the
interest in and awareness about Azerbaijan, says
Duru, the general manager. "In order to make
their stay more pleasant, we have to build the
necessary infrastructure first. We are working
on it. In Gabala, we built Azerbaijan’s second sky
resort, Tufandag, an amusement park, and are
now building an aqua park. Gabala has a rich
history and beautiful nature. More infrastructure
is needed to make it into an attractive tourist
destination, but there is great potential there.”
Visa facilitation schemes, hosting of large-scale
events, restoring historical sites, and building
modern entertainment and business venues,
are all measures that point to Azerbaijan’s
growing appetite for tourism. The regions might
take longer to catch up to the capital, but the
Caucasian country speaks with one voice in
welcoming visitors to its shores.
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Economics & finance

Azerbaijani banking sector "The banks face emerging capital constraints
due to lack of scale, fast loan growth, limited new
remains stable but NPLs rising equity injections from banks' private shareholders
and only moderate profitability. The latter is
somewhat stronger at the banks that focus on
Azerbaijan's banking sector remains stable as the retail, micro and SME lending, due to higher
economy enjoys an upswing thanks to high world margins and lower impairment charges," Fitch
oil prices and conservative government spending, said.
according to the rating agency Fitch in a report
released in August. Many banks are re-focusing on consumer lending
as a middle-class begins to emerge in Azerbaijan.
However, Fitch warned that the banking sector's Consumer loans now account for 40.7%, or
asset quality and performance remains vulnerable AZN6,819m as of July 1, up from 37.7% a year
to volatility due to the country's over-dependence earlier. However, worried about an emerging
on cyclical commodity exports. bubble the central bank of Azerbaijan has already
tightens restrictions on consumables to slow
"Asset quality is the major risk, given growing retail growth. Banks issued consumer loans worth
credit risks (although these have been managed AZN605.2m in the first six months of 2014 down
fairly well to date due to the only moderate from AZN882.3m over the same period a year
consumer indebtedness) and mostly long-term earlier.
corporate lending, which is significantly exposed
to project finance and construction activities, often The credit terms on auto-loans has also been
with bullet repayments," Fitch said in a report. tightened due to the deterioration of the banking
sector's portfolio quality in this type of lending.
Azerbaijan is home to 44 banks, with the state and
market leader International Bank of Azerbaijan Currently the sectors non-performing loans
accounting for almost half the sector's entire (NPLs) are running at 5.24% of the total loan
assets. Banks increased lending to the economy portfolio or AZN877.6m, up from AZN781.8m
by 21.64% to AZN16.754m in January-June 2014 (5.67%) in the same period in year earlier. That is
compared with the same period a year earlier. equivalent to an increase of 12.2% in NPLs over
Consumer lending rose even faster up by 31% in the last year.
the same period.

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Azerbaijan to invest $20bn in Azerbaijan's economy grows

Turkey 4.3% in the first half

Azerbaijan is already one of the biggest foreign
investors in Turkey and it plans to expand its
commitment with another $20bn invested over
the next eight years, according to Faig Baghirov,
Azerbaijan's ambassador to Turkey.
Turkey is rapidly emerging as Azerbaijan's most
important partner. A "golden triangle" is being
built between Turkey, Azerbaijan and Georgia on
the basis of mutual cooperation.
Baghirov reemphasised that Turkey "ranks first in
foreign economic relations of Azerbaijan," he told
a conference, according to reports.
The trade turnover between Azerbaijan and Turkey (45.5%), followed by services (31.14%), agriculture
stood at $3.3bn last year and Baku has hopes of
increasing this figure up to $15bn by 2022.
"Azerbaijan will invest $20bn in Turkey in the
next eight years. This will become Azerbaijan's
largest investment abroad. The majority of this
investment will be made in the Izmir region,"
Baghirov said, adding the government is looking at AZN3,621.3 ($4,617.3), the report said.
investment in the energy sector in particular.
Azerbaijan's GDP expanded by 4.3% over the first
half of this year from the year-earlier period,
according to a report by the State Statistics
Committee.
The non-oil the economy continued to grow more
quickly than the rest, up by 6.8% over the period,
to account for 56.8% of the total economy. At
the same time, the raw materials production
growth and its share of the overall economy both
continued to shrink: the volume of production of
value added in mining and processing of oil and
gas decreased by 3.1% over the same period.
The biggest contributions to GDP were: industry
(11.4%), and trade and repair of vehicles (7.6%).
Despite a big push by the government, information
and communication services accounted for just
1.7% of GDP.
The GDP per capita also grew, rising by 1.1%
on year over the same period to amount to

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Azerbaijan's oil sector receives
30% more investment in H1
Investment into Azerbaijan's oil sector was up by
nearly a third (30.4%) in the first half of this year
to AZN3.45bn, according to the State Statistics
Committee.
Investment into the sector has been rising
steadily in recent years. In 2013 investments of
AZN4.82bn were made in the sector over the
whole year, an increase of 24.2% on year.
However, investments into the industrial sector
outstripped those into the oil sector: a total of
AZN4.17bn was invested into industry over the
same period, an increase of 5.4% year-on-year.
Of this total AZN3.44bn was invested into the
mining industry, an increase of 29.5% year-on-
year.
In addition, another $10.5bn of foreign
investment was attracted to Azerbaijan's
economy last year.
Azerbaijani foreign trade
turnover falls 10% to $18bn in
for seven months of this year
Azerbaijan's foreign-trade turnover dropped by just
under 10% in the first seven-year months of this
year compared with the same period a year earlier,
to a total of $18.13bn, according to the State
Customs Committee.
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The country's foreign trade surplus also fell from
$7.68bn in the same period last year to $1.25bn as
of July 2014.
Exports were down 4.4% year-on-year to $13.25bn
in January-July, with the state companies
accounting for $12.47bn of the total and the private
sector accounting for another $659.57m.
Imports fell even harder, dropping 20.97% to
$4.88bn over the first seven months of this year
compared with the same period year earlier, with
state-owned companies accounting for $1.22bn of
the total and the private sector another $3.47bn.
Azerbaijani exports to Georgia
increased by 7% in the first
seven months
Trade relations between Azerbaijan and Georgia
continue to flourish as exports from Azerbaijan
increased by 6.97% of the first seven months of
this year to $347.28m, according to the National
Statistical Service of Georgia.
Azerbaijan remains the third largest exporter to
Georgia and currently accounts for 7.2% of the
country's total imports. Turkey is in first place
with $968.4m, or 20.1% of Georgia's total imports.
China is second with $420.68m, or 8.7% of the
total.
Georgia's main import products from Azerbaijan
include gasoline, oil, building materials, electricity,
glass, and the latest edition margarine among
other products.
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Chart
Azerbaijan looking to boost alternative energy sources
Oil is both a blessing and a curse for Azerbaijan.
It provides the money that allows economic
development but the country is still desperately trying
to wean itself off its addiction to hydrocarbons.
In recent years the government has invested
some AZM300m ($380m) into developing
renewable energy sources. The government
has an ambitious program that runs to 2020
when it hopes that 20% of Azerbaijan's energy
consumption will come from renewable sources,
according to the head of the State Agency for
Alternative Energy Sources Akim Badalov.
A start has been made, but renewables is still only
account for and a 1% of the total.

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News in brief
Azerbaijan almost doubles "The funds will be used for on-lending to qualifying
corporate and individual customers for industrial
electricity exports and residential energy efficiency projects and
equipment," EBRD said in a press release.
Azerbaijan has almost doubled the volume of
electricity exports year-on-year to 134kW/h, The loan is part of the EBRD's Caucasus Energy
according to the state Customs Committee. Efficiency Program (CEEP), which provides loans
to local partner institutions for financing industrial
"Compared with the same period in 2013, the export and residential energy efficiency improvements,
of electricity has increased by more than 1.83 times," promoting energy savings and helping to reduce
the committee said, according to local reports. greenhouse gas emissions.

Azerbaijan plans to export electricity to

Afghanistan and Iraq through Iran, and already
has an agreement to synchronize its energy
system with the systems of Russia and Iran.
Azerbaijan's major electricity producer Azerenergy The British company BP has invested just under
produced more than 13 billion kilowatt-hours of
electricity in January-July.
EBRD finances Azerbaijani
energy efficiency projects
The European Bank for Reconstruction and
Development (EBRD) has committed $5m to
finance energy efficient see improvement projects
in Azerbaijan.
The funds will be distributed by domestic bank
Demirbank to entrepreneurs and households to
buy more efficient equipment that will reduce
energy consumption, as well as products like
insulation, solar water heaters, double glazing and
other energy-saving devices.
BP invests $1bn in Azerbaijan
in first half of this year
$1bn in the first half of this year and maintains
its position as the biggest commercial investor
in Azerbaijan, according to the companies and
financial reports.
The company spent a total of $969m in January-
June, slightly down on the $1.02bn it spent in the
same period a year earlier.
The lion's share of the contracts ($378m) went on
the services and products of small and medium-
sized enterprises, while another $240m was spent
on the company's 13 joint-ventures.
Spending on state-owned companies was a mere
$65m, and most of the remainder was spent on
product and services supplied by international
companies.

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Sanctions on Russia won't Azerbaijan's state oil company

affect operations in Azerbaijan, drills a new Caspian Sea gas
VTB says well
Sanctions slapped on Russia by America and the The State Oil Company of Azerbaijan (SOCAR) is
European Union earlier this year will not affect the drilling a new well in the Guneshli gasfield in the
Azerbaijani subsidiary of Russian state and bank Azerbaijani sector of the Caspian Sea, SOCAR said
VTB, VTB Senior Vice President Mikhail Yakunin in a statement in the middle of August.
told Interfax in August.
The 3,500-metre deep well will tap 150,000
VTB was specifically singled out in the last round cubic metres of gas reserves and 15 tonnes
of sanctions, but as the local subsidiary in Baku of condensate, according to the company's
does not tap the US or European capital markets it geologists.
will not affect the bank's operations, he said.
The field is part of a larger complex and is
"VTB Bank (Azerbaijan) does not use this located in the shallow part of the Azerbaijani
financing tool in its activities. Clients of VTB Bank sector, allowing it to be developed without
(Azerbaijan) will not sense any changes in the the participation of foreign partners and their
bank's work because of sanctions, and the bank sophisticated technology.
will continue providing its full range of services
and meeting its obligations in full," he said. Altogether the company is planning to drill 20 new
wells as well as renovate some old wells in the
While most of the rest of the Commonwealth of field.
Independent States (CIS) countries have fallen
into an economic mire caused by the global
slowdown, Azerbaijan has remained the exception.
The economy is still expanding strongly and its
macroeconomic fundamentals remain extremely
robust, which has underpinned the strength of the
country's financial sector. Banking sector assets
are growing by about 10%, a year and currency
exchange rates have remained stable.

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