Impact of Conflict in Georgia on Azerbaijan’s Economy: Views of Experts

Business Materials 25 August 2008 18:33 (UTC +04:00)
Impact of Conflict in Georgia on Azerbaijan’s Economy: Views of Experts

Azerbaijan, Baku, 25 August/ Trend , corr U. Ismayilova/ The Georgian-Ossetian conflict had a direct impact on Azerbaijan's economy, Inqilab Ahmadov, head of the Center for Monitoring of Public Finances said.

"The most important and significant impact of the conflict on Azerbaijani economy is the cut off in the transport communication [communication with the Black Sea ports of Georgia]," Ahmadov said.

According to expert, the conflict had an impact on the work of Baku-Supsa oil pipeline which still stands idle and on the railway transit which stopped after blast in the bridge near Kaspi town of Georgia. Georgia's Poti port which operated with intervals because of the conflict is also important for Azerbaijan. Cars are imported to Azerbaijan through this port. The unstable work of the port will lead to the rise in car prices in market of Baku in September.

"The situation in Georgia will lead to the price rise in import goods dispatched to Azerbaijan through Georgia," Ahmadov said.

Besides, the Georgian-Ossetian conflict will have a psychological impact and it can change the attitude of foreign investors that Georgia is a direct access of Azerbaijan for world markets.

Sabit Bagirov, former president of State Oil Company of Azerbaijan and current head of Fund for Assistance to Entrepreneurship and Market Economy, believes that the Azerbaijani economy will incur big losses. According to official reports, the Georgian economy lost $1bln as a result of the conflict.

Azerbaijan will incur losses in its revenues from export of oil and gas and from automobile and railway transit. Insurance agencies working in the region will also experience losses, Bagirov said.

Azer Amiraslanov, President of Economic Reforms Fund and member of Azerbaijani parliament also believes that the economy of the country will suffer from the conflict in Georgia especially from the instable transportation of oil products.

Qubad Ibadoglu, head of the Economic Studies Center said the Georgian-Ossetian conflict showed the dependence of Azerbaijani economy on foreign factors. The situation in Georgia will not allow Azerbaijan to earn the planned $1bln from the transit of energy resources.

Former Head of Economics, Finance and Loan policy Department of the Cabinet of Ministers of Azerbaijan Oktay Haqverdiyev believes that Azerbaijan will not suffer from Georgia-Ossetia conflict much.

The losses will be small as all energy projects have been insured and the insurance deal includes an article about "force majeur", he said.

Concerning the losses of the state budget, Haqverdiyev said that the budget will not suffer much as well, as the oil prices have been fixed at $70 a barrel in the public budget, but oil is sold at $110-$120 a barrel.

At the night of 8 August, large-scale military operations were launched in the self-declared South Ossetia republic. The Georgian troops entered Tskhinvali. Later the Russian troops entered the city and drove the Georgian forces back to the Georgian territory.

On 12 August, Russian President Dmitry Medvedev announced that he has decided to end operations to compel Georgia to peace.

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