Interview of Heydar Aliyev, President of Azerbaijan, with representatives of \"institutional investor\" magazine of America - July 27, 1997

Journalist: Mr. President, thank you very much for your time to meet us. We are very happy and it is a great honor to meet you.

Heydar Aliyev: Thank you very much.

Journalist: Mr. President, with your kind permission before the interview, I will talk a little bit about myself. I have been to Baku for 10 days, a short period of time. My participation at the conference held in Washington dedicated to Banking and Financial Issues in Azerbaijan was the reason for my trip to Baku. At that conference I met people who represented Azerbaijan, and got information about the economical situation in your Republic.

We have an opportunity to inform our readers about your region and Azerbaijan. As I have previously mentioned, I have been to Baku for 10 days, and during that period of time, I met the representatives of different companies and visited some ministries. I was able to get some general information about your country.

In September, we are going to publish a report about Azerbaijan. This report will be published for the International Monetary Fund and the World Bank. We will write make other publications about financial issues. The total number of our readers is up to 140,000.

The progress of the economy in Azerbaijan creates a wonderful opportunity to make such a report. I believe our readers will be pretty much interested in it. I do not want to take too much of your time. Let us get started.

Question: Mr. President you are welcome in the United States of America! I want to ask you couple questions. This question is about economical and financial opportunities, the process of the involvement of investment in Azerbaijan.

Mr. President, my first question is: What is your main goal during your visit to the United States of America?

Answer: Thank you. I have some information about your magazine, and I also know that you have been to Azerbaijan. I believe that your magazine is very prestigious. If you want to publish the information about Azerbaijan in your magazine, I accept it with pleasure.

Answering your question, I would like to note that I have come to the United States of America on an official visit as a result of President Bill Clinton`s invitation. The meeting with you is my first one in New York.

Question: My second question is: Azerbaijan has great opportunities. Azerbaijan is rich in oil; there are many discovered oil fields. Your country has great opportunities in industry, agriculture, and energy. It is known that now Azerbaijan is attracting many investors. Your State oil company has signed a number of agreements with numerous foreign oil companies. How are you going to develop this cooperation?

Answer: We would like to develop it the way you see. That is, we use our domestic resources for ourselves. But now, we consider the flow of the foreign investment to Azerbaijan very important, since it helps to develop an economic potential. It is profitable for our Republic.

Our economy is multi-structured. A lot of these structures have already attracted foreign investors. We come up with our proposals in response to their interest. The oil and gas fields of our country have attracted even more foreign investors. As you may know, we have signed numerous production-sharing agreements with many foreign companies on the joint development of oil and gas fields.

Question: As far as I know, you have signed three agreements, have you not?

Answer: No, we have signed six big agreements. That is, these are agreements signed with consortiums of many foreign companies.

Question: Will your foreign partners invest enough capital, or you will have to find other ways out?

Answer: No, there is no need to look for the other options. Those who want to have a business with us are willing to invest in our country and are already investing. Every agreement has its own terms. The key aspect of these terms is that the foreign companies are investing and, as a result of this investment, we build our cooperation. The received profit is being distributed based on production-sharing principles. At present, a lot of investment has been made in our country. There was approximately three billion dollars invested in the agreements signed with the numerous countries of the world. 

Question: Most likely, is it only the beginning?

Answer: Yes. We signed the first agreement at the end of the 1994. It is only the beginning of that investment.

Question: Some people call your country the \"Second Kuwait.\" Is that true?

Answer: As you may know, our country has its own name. It is called Azerbaijan. In the past, during the Soviet time, Azerbaijan was the first, the only, and the biggest country in oil production. Later, in the `40s, `50s, and `60s, there were new oil fields discovered in other parts of the Soviet Union. Azerbaijan oilmen, scientists, and geologists were involved in production and development of those oil fields. They were discovered in Tataristan, Bashkiristan, later in such Russian domains as Orenburg, Siberia, and Tumen. They were called as the \"Second Baku,\" the \"Third Baku,\" the \"Fourth Baku.\" That was why the name of our country has been immortalized in other places. Being famous as an old oil-producing country, we cannot change our name to Kuwait or any other name.

I understand why you are asking this question. Probably you are saying that because of the amount of oil that will be produced. In this regard, we probably will produce oil even more that Kuwait does.

Question: Scanning the last numbers, I see there are some discussions about oil production of three billion barrels, there are even some rumors about bringing it up to four billion barrels. Are these numbers realistic?

Answer: As you know, we have enormous oil reserves. I can tell you only one fact. In the first agreement - it is also called the \"Contract of the Century\" signed in September 1994 - it is estimated we could produce 511 million tons of oil in three oil fields. But after doing some drilling, we realized we could have produced 640 million tons of oil. It is the production capacity of only one agreement. But I have told you that we had six agreements. That is why we can tell you the precise number now. But based on our observations, we estimated there would be more oil produced than the amount that has been forecasted by our geologists. In any case, we have a lot of oil in the Azerbaijan sector of the Caspian Sea. Talking about the overall Caspian Sea, the oil reserves are big. In the future, it will be one of the biggest oil production places of the world.

Question: Honorable President, your answer leads me to another question about division of the Caspian Sea. There are some debates that the Caspian Sea is a lake. How will these misunderstandings and contradictions be solved between these countries?

Answer: It is true, there are some debates about it. The thing is that, in the past, the Caspian Sea belonged to the Soviet Union. Except Iran, all pre-Caspian countries were Republics of the Soviet Union. But you should know that, in spite of the fact that back then we were within one country, and that the oil production was widely spread all over the Caspian Sea. In 1970, the government of the Soviet Union divided the Caspian Sea to sectors for oil production. In general, back then the only organization that dealt with the oil production was located in Azerbaijan. Besides the oil production in the Azerbaijan sector of the Caspian Sea, the oil was also produced in the Turkmenistan sector. It was controlled by the organization that belonged to Azerbaijan. But due to the fact that the Caspian Sea was divided into sectors, the oil produced in the Azerbaijan sector was debited to Azerbaijan, and the oil produced in Turkmenistan sector was debited to Turkmenistan.

This principle was followed until recent years. None of the pre-Caspian countries doubted it or expressed their displeasure. In September 1994, after Azerbaijan had signed a production-sharing agreement about the joined development of the oil fields on its own sector with the world biggest oil companies, some debates started about the status of the Caspian Sea.

In the past, nobody asked if the Caspian was a lake, sea or another water basin. But after we got started in this process, some of them realized this principle might not suit them. That is why this issue is being discussed. The representatives and experts of the pre-Caspian countries often meet and negotiate. They have different opinions on this issue. We think that mineral resources of the Caspian Sea - that is the resources under the sea - should be used based on the sectarian division. Kazakhstan shares our opinion. But Russia and Iran think differently. Turkmenistan shares the opinion of Russia and Iran. That is why this issue will be solved in future discussions. But for now we are taking advantage of the existing priority, enjoying the world experience. That is, as I have told you before, we use our sector of the Caspian Sea which was determined about 30 years ago.

Question: Mr. President would you please tell me, to whom does this oil belong? Which sector is it in?

Answer: I am telling you, the oil in our sector belongs to us. So far it has belonged to us. I do believe that it should be the same today and will be in the future.

Question: It should be noted that all the world companies are showing a great interest to the oil industry. How about the situation in other industries? Is the interest in them growing? Are the companies of the United States of America showing their interest in other industries? Are there any other countries that show their interest?

Answer: Yes, they are, they really are. Now we have other natural resources. We have natural gold reserves. The American companies are also interested in Azerbaijan`s gold reserves. We had discussions with them, and it is possible we might sign a contract with them in the near future.

Question: What are the other opportunities in different industries? Answer: Industries related to the production of agricultural goods. There are a lot of opportunities in chemistry and metallurgy.

Question: A general question: How can your country attract American investment?

Answer: What industry are you talking about? We have a lot of things that might attract the investment. First of all, mineral resources, many spheres of the industry - television and communication, infrastructure and many other spheres.

Question: How do you attract the investors from the United States? What makes it different from other countries? Is the taxation system better there? Are the tax reforms being better implemented? Why are the investors more likely to come to Azerbaijan than to any other countries?

Answer: You know, I cannot tell you what makes us different from other countries. Every country has its own peculiar opportunities. But I can tell you one thing. Azerbaijan has advantageous factors. That is, it has natural resources, opportunities for economical potential and utilization of these opportunities. Another factor is the implementation of economic reforms, the fact that we`re open to all the world investment, the suitability of a taxation system. For example, to give a special opportunity to foreign investors, there is a provision in our law that says \"If a foreign investor invests in Azerbaijan and should there be any amendments to the Azerbaijan laws on investment that would hurt the investor, these amendments will not be applied to the investor for the next 10 years.\"

There are some special provisions for repatriation of the investors` income. For example, we have a very low custom tax. The tax on all goods is not more than 15 percent.

There are some other provisions. Privatization is being implemented in Azerbaijan. Every foreign company can participate in this privatization process; it can take over the Azerbaijan industrial enterprises. For example, we turned a clay-sand factory over to a company from Great Britain, and a big tobacco- producing plant was turned over to an American company.

Question: Mr. President, you talked about privatization. It is known that, along with local companies, foreign companies can also participate in privatization. How important can be the participation of large and small U.S. companies in privatization?

Answer: As much as they want it to be. We are privatizing them, selling them, and those who meet these requirements of purchasing can purchase it.

Question: Will this implementation of privatization be on the basis of \"Production Services Limited?\"

Answer: If the companies buy big enterprise, plant, factory, production institution, they will be their private properties.

Question: Is it going to happen in an auction?

Answer: Yes, the auctions are being held now. The companies can come and participate.

Question: Can any company participate?

Answer: Yes.

Question: Mr. President, it is known that, as a result of the signed oil agreements and based on the production-sharing concept, Azerbaijan`s income will enormously increase during the next five years. How are you going to use the received income?

Answer: If there is an income, it is not difficult to use it. In this area, there are no problems.

Question: Which industries are you going to allocate more income to? Answer: Without any doubt, some of this income will be allocated to establish new production. Now we are attracting foreign investments. But in the future when we will have plenty of income, most likely we will not need foreign investment. At the same time, it will be used for the progress of our economy and improving the lifestyle level of our population.

Question: This question is about your trip. It is known that this is your first official visit to the White House. The question is about the Section 907. It is known that Section 907 had a negative impact on the investments of the United States. If this amendment is eliminated, how will the situation be different?

Answer: You know, it is our biggest request from the United States. Section 907 was passed against Azerbaijan in 1992. It shows an unfair attitude of Congress of the United States toward Azerbaijan. If Section 907 had not been in existence, our economic relations would have developed better, and U.S. companies and government would have received more profit from these economic relations. But recently the U.S. people, especially in the government and Congress itself, realized that Section 907 was unfair. In the United States, they made some proposals to eliminate this amendment. A couple of days ago, Congressman King presented a special draft on the elimination of Section 907. I extend my deep gratitude to Mr. King.

This issue will be the focus of attention at all forthcoming meetings, both in Congress and White House.

Question: It is known that you arrived in America on an official visit. You will have official meetings in Washington. You will visit Chicago and Houston - two cities that have good relations with Azerbaijan. You will have discussions about the other industries you have previously mentioned.

Answer: We are not going to talk only about the oil industry. We will have discussions about the other industries as well.

Question: Besides the oil industry, where would you like to allocate more investments?

Answer: You know, we would like to attract the investors to industries related to the production of agricultural goods. There are a lot of opportunities in chemistry and metallurgy.

Question: As you know, the Soumgait project will be implemented in the near future.

Answer: Probably you are talking about the creation of the free economic zone in Soumgait. Yes, we consider it very important. We believe that is very realistic, and that it is possible to implement. Soumgait is a young city established 45 years ago. Constructing the big industrial enterprises was the reason for its foundation. There is a huge pipeline plant that produces pipes for the oil industry. The process of the plant`s modernization and improvement of the production principles are very important. In particular, it is closely related to the fast development of the oil industry.

There is a big aluminum plant in Soumgait. Its development is also important. There is a big complex of refinery of the oil and gas products. In addition to that, we have a chemical complex of producing chemical products. The reconstruction and modernization of these plants are of great importance for us. We also have weaving plants in Soumgait.

As you may see, there are many different industries in this city. We think that establishment of the free economic zone in Soumgait will create great opportunities for the development of these plants and factories. I also invite American companies to Soumgait. The companies from the different countries, in particular Japanese companies, are very much interested in this city. As you know, Japan is one of America`s biggest competitors. Japanese companies are interested in our oil fields and other industries. They are making very good proposals. If American companies act too late, the Japanese companies will be the first to get the deal.

Journalist: You are right. American companies should be aware of this.

Heydar Aliyev: I am telling you and you may want to publish it in your magazine.

Question: Mr. President, I know that we took too much of your time. But I would like to ask you one more sensitive question. What do you think: will the Armenian-Azerbaijan conflict distract the stability, or will there be a peaceful solution?

Answer: I assume you know the history of this conflict. Nine years ago, Armenia started military aggression against Azerbaijan. Armenia wanted to occupy the area that was called Mountainous Garabagh (Nagorno Garabagh). As a result of this military aggression, the Armenian army occupied both Mountainous Garabagh (Nagorno Garabagh)and the area around it. I am talking about 20 percent of the Azerbaijan territory. More than one million Azerbaijan citizens were forced to leave their homes. Now they live in tents in a very extreme situation.

As you may know, we had large natural resources, fertile land and industrial enterprises on those occupied territories. They all have been destroyed. Huge financial damage was inflicted.

But in spite of all this we do not want to fight. We started a cease-fire three years ago. There is no shooting now. We want peace and want to get our occupied territory back. . Our goal is to obtain the territorial integrity of Azerbaijan.

As you know, this issue has already been discussed in many international organizations. OSCE Minsk Group is in charge of the peaceful solution of this conflict. The United States of America is one of the co-chairmen of the Minsk group. The peaceful solution of this conflict will be the focus of our discussions at all meetings that will be held in the White House and in the United States in general.

I hope the United States of America will help us solve the Armenian-Azerbaijan conflict peacefully. We are all for peace.

Question: What incentives make you feel confident that the United States will be involved in this issue?

Answer: President Clinton told me that he would personally consider this issue. He made this statement on July 8-9 in Madrid during our meeting with him.

Journalist: Mr. President, thank you very much. And have a great trip.

Mr. Aliyev: Thank you very much. 

The document was taken from the edition of \"Together towards the New Century\"