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Azerbaijan is a key energy producer and has emerged as a crucial oil and gas transport hub between Central Asia and Europe, however, democratic development in the country continues to lag behind, FRIDE research center has said.
"While Azerbaijan has worked hard to raise its international profile as a reliable energy exporter and stable partner, its democratic credentials remain weak and human rights are increasingly under threat. In addition, any resurgence of the Upper (Nagorno) Garabagh conflict will have serious implications for energy supplies," FRIDE said in a new report.
Further, the report noted that only a fraction of the nation`s oil revenues trickle down to the population. The rise in energy revenues in Azerbaijan has been accompanied by a decline in democratic standards.
The paper, which explored three producer states, Nigeria, Azerbaijan and Saudi Arabia, also said that with a GDP growth rate of over 30 percent in 2007, Azerbaijan has the fastest growing economy in the world. This enormous growth rate is almost exclusively attributed to increased energy exports and high oil prices, it noted.
Each of these three producer states has benefited from massive increases in oil and gas revenues in recent years, but none is fully democratic, according to the document, entitled "The Politics of Energy: Comparing Azerbaijan, Nigeria and Saudi Arabia."
FRIDE said the Azerbaijani economy is likely to continue growing in the coming years. However, it is anticipated that the economy will peak in 2012, when Azerbaijan oil reserves are set to decline and the transport of Central Asian energy will increasingly replace income from national production.
The FRIDE report warned that the Azerbaijani economy has become ever more dependent upon energy. The state has not invested significantly in other sectors of the economy, such as agriculture, upon which a large proportion of the population is dependent. Only a small percentage of the Azerbaijani workforce is employed in the energy sector. The country has begun to demonstrate symptoms of "Dutch Disease," as sharp increases in energy revenues have pushed up the exchange rate, resulting in other industries becoming less competitive.
The Azerbaijani government, however, does not accept FRIDE`s assessment, Elnur Aslanov, head of a President`s Office department, told Radio Liberty.
"Well-known international organizations have already said their piece about Azerbaijan. These are groups like the International Monetary Fund and UN`s trade agency. They indicated that Azerbaijan is a developing and intensely modernizing country, while FRIDE does not have as much influence as they do," he said.