Wednesday, 08 March 2006

BAKU SEEMS DETERMINED TO TRADE TURKISH BUSINESS INTO RUSSIAN

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By Fariz Ismailzade (3/8/2006 issue of the CACI Analyst)

It was specifically noted by the General Prosecutor’s office that the company is also accused of being tied to the former Minister of Economic Development Farhad Aliyev, who was arrested in last October on charges of coup attempt.

In 2000 Barmek was granted a 25-year long permission to manage the electricity distribution system of Baku, Sumgait (a major industrial town in the north of Baku) and the whole northern part of Azerbaijan. Reportedly, Barmek was chosen in the tender process over the German company Siemens, after the personal lobbying of then Turkish President Suleyman Demirel.

It was specifically noted by the General Prosecutor’s office that the company is also accused of being tied to the former Minister of Economic Development Farhad Aliyev, who was arrested in last October on charges of coup attempt.

In 2000 Barmek was granted a 25-year long permission to manage the electricity distribution system of Baku, Sumgait (a major industrial town in the north of Baku) and the whole northern part of Azerbaijan. Reportedly, Barmek was chosen in the tender process over the German company Siemens, after the personal lobbying of then Turkish President Suleyman Demirel.

For the past two years, Barmek has been in the headlines, as the company started coming under the intense pressure of state officials, more specifically the head of the “Azerenergy” state electricity monopoly Etibar Piriverdiyev. Local private TV stations, such as ATV and a number of Parliamentarians have also regularly attacked Barmek for failing to fulfill its contractual obligations and for failing to provide adequate electricity supply to Baku and the regions.

Local analysts and opposition parties suspect that some members of the government intentionally criticize Barmek in order to break the contract with the company and kick it out of Azerbaijan, and instead invite the Russian electricity monopoly RAO-UES into Azerbaijan. The use of energy tools by the Kremlin to dominate the politics of the post-Soviet space has been a widely used strategy in the past several years and regular visits by RAO-UES President Anatoly Chubais to Baku are part of that strategy. It is also not a coincidence that the attacks on Barmek and the launch of the criminal case took place immediately after Russian President Vladimir Putin’s visit to Baku in early February. Some worry that President Aliyev has given some secret promises to Putin during that visit. There are also analysts who believe that the attacks on Barmek are organized by state oligarchs and “Azerenegy” itself, so that to re-nationalize the distribution network and enjoy its financial benefits.

Meanwhile, Barmek’s head, Huseyin Arabul, has repeatedly denied any accusations and stated that the company has invested into Azerbaijan more than it had contracted to. Yet the tone of denials had changed somewhat this time. If before Arabul absolutely rejected all accusations and threatened to sue the government in the international court if the contract is broken, he is now more apologetic. “Everybody makes mistakes. I also have some mistakes. I am ready to leave the country if I am told so. I am even ready to serve in prison in the country in which I have invested so much,” he said at a press conference, immediately following the state accusations.

ANS TV reported on March 6 that Barmek has agreed to hand back to the government the plant which produces electric meters, the source of the latest dispute and accusations. It seems that indeed, Barmek had privatized it under some shady agreement with the former minister of economy.

Yet it is not clear if this plant alone will save Barmek’s fate in Azerbaijan. The launch of the criminal case has been definitely pre-agreed and approved by President Aliyev himself, and this means that the process has taken an irreversible course. At a session of the Cabinet of Ministers in mid-February, Aliyev openly suggested to investigate the performance of Barmek and if needed to “take urgent measures.”

Perhaps some magic support from Turkey can once again save Barmek, however it looks more and more unlikely. The possible future departure of Barmek and the possible arrival of RAO-UES into Azerbaijan would mean a lot for regional politics. RAO-UES already dominates the electricity networks of Georgia and Armenia and by taking over Azerbaijan it will complete the regional domination and thus significantly increase its political influence over Caucasus. This, in turn, will have negative consequences for Baku’s pro-Western policies.

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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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