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I am pleased to report that since 1994 the United States and Azerbaijan have developed a strong, bilateral economic relationship. Over 60 U.S. companies maintain a commercial presence in Azerbaijan. Among them are some of the most prominent names in U.S. business, including Exxon-Mobil, Chevron, Coca-Cola, Caterpillar, Procter & Gamble, Halliburton, Hyatt, and McDonald’s. Azerbaijan is growing market for exports of U.S. goods and services. In .1999,. Azerbaijan. imported .$75. million (11-month figure) of. U.S.-origin .products and exported products to the U.S. valued at $12 million. These figures represent an annual increase of 8,1% for U.S. exports and 1,9% for U.S. imports, respectively. We expect this positive trend in trade to continue.
Investments in Azerbaijan’s energy sector and nation’s growing oil receipts have resulted in a strengthening economy that will be an increasingly important market for U.S. goods and services. Our companies want to grow with Azerbaijan and in that regard U.S. oil companies have invested over $1 billion here. In the non-oil sector, which is increasingly important to Azerbaijan’s long-term economic development, U.S. companies have invested over $200 million.
However, in many respects Azerbaijan remains a difficult country in which to do business. Many Soviet era laws and regulations are still in force. The state bureaucracy has to more quickly to meet the demands of a market economy. Intellectual property rights need to be enforced effectively. There are inherent conflicts of interest in government agencies that are equity participants in industries that by low they must regulate. While much work need to be done, U.S. firms report that the recent trend toward greater transparency among government agencies is encouraging. The U.S. supports reform efforts of the IMF and the World Bank and has sponsored an expanded dialogue between the American business community and government of Azebaijan. We believe that greater cooperation between the private sector and the government will further strengthen relations between the U.S. and Azerbaijan.
Important Bilateral Events
Several events deserve special notice for their contributions to U.S.-Azeabaijan relations. Over the past year, President Aliyev has met with President Clinton on four occasions: the April 1999 NATO Summit in Washington; the signing of the Istanbul Declaration of November 18, 1999; the Davos Economic Forum in January 2000; and a February 15 working visit to the White House. These events gave unparalleled visibility to the increasing closeness of our two nations. In addition, Secretary of Energy Richardson’s August visit to Baku underscored the importance of our growing energy relations with Azerbaijan. Richardson’s visit was an opportunity to show U.S. support for a Baku-Ceyhan major export pipeline and a Trans-Caspian gas pipeline. Roth projects are fundamental to U.S. diplomatic efforts to promote the development of Caspian Sea energy resources along cast-west lines and enhance the sovereignty and independence of new states of the Caucasus region and Central Asia.
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The most recent event was a bilateral agreement, signed January 18 by Finance Minister Avaz Alekperov and U.S. Ambassador for Economic Assistance to the CIS William Taylor, to create a new forum for economic assistance. The forum will meet periodically to explore ways in which the U.S. government can assist the government of Azerbaijan’s transition to a balanced and fully sustainable market economy.
Immediate Plans for Development of Cooperation
Aside from our ongoing efforts to support the development of regional oil and gas infrastructural projects, such as Baku-Ceyhan and the Trans-Caspian Pipeline, we are supporting an expanded dialogue between the American Chamber of Commerce and the government of Azerabaijan. The AmCham has established working groups with the new Ministries of State Property and Taxation, and with the Customs Authority. These working groups provide opportunities for business and government officials to consider
And to resolve issues of critical importance. They have already made progress on such controversial issues as tax penalties, temporary imports and have begun to address issues of privatization. We have been exceptionally pleased by the openness of the new generation of government authorities in these agencies and ministries. Their seriousness and enthusiasm makes as optimistic that our efforts will result in a better business climate for all.
USG involvement in the MEP
The U.S. government has played an extremely active role in the major export pipeline project. We are firm supporters of the Baku-Tbilisi-Ceyhan route and I have no doubt that with the negotiations currently underway will lead to a commercially viable pipeline. The Special Advisor for Caspian Basin Energy Diplomacy John Wolf is a frequent visitor to Azerbaijan and a tireless advocate for Baku-Tbilisi-Ceyhan. In fact, as we are discussing this on February 16, Ambassador Wolf is engaged in intensive negotiations with the Azerbaijani and Georgian working groups at the Hyatt Hotel. At issue is the Georgian Host Government Agreement (HGA.)
Because of the strategic importance of the peaceful development in the Caucasus region, the MEP issue has also drawn the attention of President Clinton. At the OSCE summit in Istanbul in November 18, 1999, he was a signatory to the Istanbul Declaration, joining the Presidents of Azerbaijan, Turkey, Georgia, and Kazakhstan in support of Baku-Tbilisy- Ceyhan. President Clinton has since declared the Istanbul Summit to be among the most important international events of 1999.
What share of MEP financial risk can USG agencies assume?
U.S. government agencies established to support business development overseas—the Trade and Development Agency, the Export- Import Bank, and the Overseas Private Investment Corporation--are fully committed to the MEP. These agencies have established a joint office, the Caspian Finance Center, in Ankara specifically to coordinate our guarantee support for the MEP. The U.S. government itself will not be financing the MEP. That responsibility will fall on the private sector and international financial institutions. However, we will play a leading role in providing financing and insurance guarantees in order to make the Baku-Tbilisi-Ceyhan pipeline a success.
How is the USG involved in the MEP sponsors group scheduled for 1Q 2000?
The U.S. government has proposed that a MEP project financing symposium take place early this year. We believe that the potential MEP investors--private sector lending institutions, oil companies from both sides of the Caspian Sea , international financial institutions, and credit agencies-should be brought into the process early. It is important to establish a network of interested and informed experts within these institutions so that they understand the overall project. Financing the MEP will be a complicated and perhaps lengthy process. Potential obstacles need to be identified and overcome. All parties need to educate themselves on the financing options available.
Discriminatory Section 907 of FSA
Section 907 of the Freedom Support Act prevents the U.S. Government from providing assistance to the Government of Azerbaijan with the exceptions of humanitarian aid, democratization programs, and assistance to prevent the proliferation of Weapons of Mass Destruction and sensitive dual-use equipment. Section 907 was originally passed by the Congress in 1992. It was very nearly defeated on Capitol Hill in 1998 and again in 1999. But, it seems unlikely to be repealed this year since this is a general election year in the United States.
Which conditions must be created for complete resolution of the conflict
We are hopeful that the conflict over Nagorno Karabakh can be settled quickly. Until a settlement a is reached, the economic development and improvement in the standard of living of all the people in the Caucasus region will continue to languish. The United States, through the Minsc Group, will do everything within its power to facilitate the search for a settlement by the parties to the conflict.
Complete resolution of the conflict over Nagorno Karabakh depends on the willingness and ability of all parties to the conflict to compromise and reach agreement. The exact details of the compromises must be agreed to by the parties to the conflict, not imposed by some outside power. Once an agreement is reached, the United States, and other nations, are prepared to help finance the resettlement of Internally Displaced Persons and reconstruction of the areas devastated by the fighting.
What is your prognosis for the development of Azeri-American relations for the year 2000
Our two nations share a common interest in the development of a strong, independent, democratic, stable, and economically prosperous Azerbaijan. I believe our relationship will continue to develop in the security area through Azerbaijan’s participation in NATO’s Partnership for Peace program and various bilateral cooperative programs. Our economic relationship will become closer as more U.S. businesses invest in Azerbaijan. I believe that President Aliyev’s current and very successful visit to the U.S. has set the tone for a productive year which should see the further expansion of our already close and cooperative relationship.