Council on Foreign Relations
BRENT SCOWCROFT: Good morning. Can you all hear me? Welcome to today’s Council on Foreign Relations meeting. Would you please turn off your cell phones, BlackBerries and other assorted electronic gadgets?
This meeting is on the record.
Our distinguished guest today is the president of the Republic of Azerbaijan, the Honorable Ilham Aliyev. It’s a great pleasure to welcome him here. This is his first event in Washington, so you get the first word from our distinguished guest.
Our procedure this morning is going to be a little different from usual, and I’ll get into that in just a moment.
Our guest became president of Azerbaijan in October of 2003. He was born in Baku. And after graduating from Azerbaijan schools, he entered the Moscow State University of International Relations. Upon graduating in 1982, he went on for a post-graduate education and received a Master’s degree and taught at that university until 1990. In May 1994, he became the first vice president of the State Oil Company of Azerbaijan, SOCAR, and he was actively involved in this period of development of the petroleum resources of Azerbaijan. From 1995 until 2003, he served as a member of the Azerbaijani parliament. In January 2003, he was elected vice president of the Parliamentary Assembly of the Council of Europe. In August, he was appointed the prime minister of the Republic and, as I say, elected as president on October 15th, 2003.
As I said, our procedure is going to be a little different this morning. The president would like to have more of a conversational format than a formal presentation with questions and answers. I will introduce the first questioning, and after maybe a little exchange between the two of us, we will go to you for questions. Please wait for the microphone, stand, state your name and your affiliation.
Azerbaijan is a very important partner of the United States, as you all know, very strategically located and rich in energy resources. It’s also in a very tough neighborhood. The Caucasus is a complicated and turbulent region. Azerbaijan has two powerful neighbors on its north and on its south, Russia and Iran, which have shown intense interest in the country. It fought a war with volunteers from Armenia, its western neighbor, which now occupies a large chunk of Azerbaijan.
Mr. President, what sorts of things keep you awake at night? (Laughter.)
PRESIDENT ILHAM ALIYEV: Thank you very much for your introduction.
First of all, I’d like to say that I’m very glad to be here. It’s a big honor for me to have an opportunity to exchange views in the Council on Foreign Relations. I started my official visit to Washington now, because it’s my first meeting. And as I’ve expressed previously, I think it can be also the last meeting—(laughter) --because I think all the issues of mutual interest can be discussed.
Azerbaijan is a country which is considered as newly independent. It’s already 15 years of the country’s independence, still the process of development is going on stages. We had difficult times in the beginning of independence. Azerbaijan’s future was under question; and civil war, aggression from Armenia and other difficult problems the country faced, including a powerful economic crisis, actually questioned the very existence of Azerbaijan as an independent state.
But today, after 15 years from that time, Azerbaijan is a country which has a very strong position in the region, has accomplished a very successful strategy concerning the attraction of foreign investment. We conducted very successful economic reforms, and today in this respect the country is moving very rapidly. Azerbaijan is now well-integrated in the international family. We are members of very important international and European organizations, and the political and democratic reforms in the country go in parallel.
We value highly our relationship with the United States. For us these relations have a strategic meaning, and I think that the further development of relations between our countries will be the major issue of my meetings and discussions. We cooperate in various areas. It started from energy in ’94 and then transformed into security issues, economic cooperation, anti-terror coalition; of course, resolution of Armenia-Azerbaijan Nagorno-Karabakh conflict; economic and political reforms in the country; and the regional problems. So this is a major area of our cooperation.
And in all of these areas, we enjoy a spirit of mutual understanding, mutual respect and mutual trust. And I hope that my visit will strengthen all these positive achievements and trends.
As far as the major problem the country faces—is, of course, the continuing occupation by Armenia of the territory of Azerbaijan.
Apart from that, we do not have serious problems in the coming year, because from the point of view of economic development, our performance is brilliant. And last year GDP in Azerbaijan grew at the level of 26 percent and this year will be even higher. During the last two and a half years of my presidency, more than 380,000 jobs were created in Azerbaijan, mostly in the non-oil sector. Our budget grew four times, and of course our transportation and energy projects will create a very solid economic ground.
Therefore, the major impediment, the major stress and problem is the conflict with Armenia, Armenia and Azerbaijan Nagorno-Karabakh conflict, which we are trying to resolve for more than a decade, unfortunately without success.
We hope that the current framework of negotiations will create opportunities for a just, long-lasting peace based on the principles of international law. And of course we hope that the United States, as a superpower, as a country who’s a co-chair of the OSCE Minsk Group, will contribute to the resolution of the conflict, and we will finally have peace in our country and in our region.
SCOWCROFT: Thank you very much, Mr. President.
Would you expand a little bit on Nagorno-Karabakh? It seems to me to almost fit the definition of intractable problem. Some progress has been made. After the Armenian incursion and the hostilities stopped, you started out with sanctions by the United States against you, not against Armenia. So we’ve come a long way since then. But in terms of the intensity of emotion on both sides, do you see any early resolution to the problem?
ALIYEV: Well, you mentioned about sanctions. And it’s really—for us, it seems a very unjust approach. But we have to remember when these sanctions were imposed. At that time, Azerbaijan was not known at all in Washington. It was just the first year of independence, and the country’s diplomacy was very weak.
On the contrary, Armenia lobby here was very active, and they managed to convene officials in Congress and in other institutions that Azerbaijan is not a victim of aggression, but is an (aggressor ?). And then, the 907 amendment to the Freedom Support Act was adopted. Of course, it’s already more than 40 years passed in that time, and it’s—but it’s time to cancel this amendment. But at the same time, we need to remember the circumstances. Negotiations, unfortunately, do not depend only on one side. It’s not the issue which Azerbaijan can resolve unilaterally. In negotiations, two sides participate. Therefore, if we are talking about a peaceful process, then on both sides have make steps towards a resolution of the conflict.
Our position is very clear, and I think it’s fair. And it’s based on the principle: every dispute, conflict or any kind of a disagreement has to be resolved in a framework. In this case, we have well-established norms of international law. Azerbaijan’s territorial integrity is the not issue of negotiation. Azerbaijan’s territorial integrity is accepted by all of the countries, including United States. The only country which does not recognize Azerbaijan’s territorial integrity is Armenia. Our territorial integrity is recognized by United Nations, and when Azerbaijan became a member of the United Nations, it became as an integral country, with Nagorno-Karabakh, which is the historical land of Azerbaijan. Therefore, these are the principles based on which the conflict can be resolved.
Armenians who live in Nagorno-Karabakh, about 60,000 people, have a right to a high level of autonomy inside the territorial integrity of Azerbaijan as we see in many other places, including in Europe. There are very good examples of economies in Europe where minorities live peacefully without any problems. There should be a very strong political guarantee that peace will preserve forever in the region, and our refugees, which are about a million people and 700,000 are internally displaced, should have a right to return to their homes. They were expelled from there as a result of the policy of ethnic cleansing conducted by Armenian government. And they live as refugees and in a difficult condition for more than a decade. It’s a huge humanitarian catastrophe, which world has to address.
We are in favor of peaceful resolution of conflict, again, based on the principles of international law, and we hope that the negotiations will continue in the constructive (pace ?). But at the same time, it’s difficult to give any prognosis because this is not a thing which depends only on our decision or our vision.
SCOWCROFT: Thank you, Mr. President.
Let’s go to questions from the floor.
Anyone? Back there.
QUESTIONER: Hope Harrison; I’m from George Washington University, previously at the National Security Council working as the White House representative to the Key West peace negotiations on Nagorno-Karabakh between your father and President Kocharian.
As you well know, in any negotiation, compromise is necessary on both sides, and I think one of the hardest things is to try to put yourself in the shoes of the other side. And I’m wondering, given that obviously your country is wealthier and has very strong long-term prospects, do you have a sense of what sort of incentives you could give to Armenia, who’s obviously in a very difficult position? They won the war and don’t want to give up what they won because they have sort of difficult, long-term prospects, I think.
So what sort of incentive—if you were in Armenia’s shoes, can you tell us what sort of incentives you think would help make a compromise and make this issue be resolved?
ALIYEV: First of all, I’d like to say that I don’t think that Armenia won the war. Armenia maybe had some advantages in the first battle with strong assistance of the other countries. Everybody knows that without strong support of the Russian army, Armenia would never be able to capture our territory. And that assistance played a crucial role at that time.
Therefore, war is not over. So—and I think in international relations, it is not common to have real negotiations, constructive negotiations based on the “fait accompli” principle. If we are talking about international process, we are talking about finding a peaceful solution based on the certain principles, the temporary advantage of one side should not be taken into account.
I think that for Armenian leadership, now is the time of making a decision. We all have to think about the future. And the difference between politician and statesman is that politicians think only about their political destiny; statesmen think about the future of the nation.
I think it’s time for Armenia’s leadership to behave like a statesman, to think, “What will happen in five years, in 10 years, in 15 years if the conflict will not be resolved?” Patience of the Azerbaijani people has limits. We do not demand something extraordinary. We do not demand the land which does not belong to us. Our demand is for Armenians voluntarily, peacefully to return the region they occupy, so that Azerbaijanis can go back to their land and continue to live in their land. And this is how the negotiations should proceed. They should be normal behavior with the respect of the internationally recognized principle.
What will happen, for instance, if we find a peaceful—(inaudible word)? I think that the whole situation in the region may change.
First of all, all the communications will be open, and Armenia will have an exit from the railroad to Russia and—which for them is very important.
Then in future, Armenia may join various projects of regional development. Today they are completely beyond this framework because we will never cooperate with a country which occupies our land, and without Azerbaijan, none of the regional projects is possible.
Armenians of Nagorno-Karabakh will have a right to live peacefully without fear and to live legally. Today Nagorno-Karabakh is an illegal entity. It’s—(inaudible). It is non-recognized, self-proclaimed, criminal regime. That’s what Nagorno-Karabakh is, and there is no difference between Nagorno-Karabakh and other similar non-recognized republics, so-called, of the former Soviet Union. As you know, Abkhazia, Transnistria, South Ossetia, Nagorno-Karabakh are four non-recognized so-called republics in the area of former Soviet Union. And all of the four, they have the same origin of the conflict—separatism; same result—violation of territorial integrity of the country; same ideas—separatism; and same policy of ethnic cleansing. Therefore, everybody will gain if we have peace in the Caucasus—regional development programs, economic development. Armenia may join a more actively then the integration process with the Euroatlantic community, which today other (true ?) South Caucasian countries successfully promote. Now, it’s difficult to predict, but it is obvious that they will benefit from that. And, of course, I think that Azerbaijan’s future is pretty clear. Azerbaijan will become a strong, prosperous country with strong economy, with strong society. And it is better to be friends with such a neighbor rather than not.
QUESTIONER: Hi, I’m Vladimir Kara-Murza with RTVi Television. Mr. President, there’s been some press speculation about your visit on the issue of Iran, and some press here are saying that you will discuss with President Bush the possibility of assisting a potential U.S. operation against Iran. Could you comment on that, please? Is that going to be an issue that you’ll be discussing in the White House?
ALIYEV: In my short introduction, I outlined the major elements of our cooperation, and the reason of my visit here is to address these issues, mainly bilateral relations, the situation in the Caucasus, energy, security, and others which I mentioned before.
If the question of the regional security will arise, of course we will discuss it and—as any other question.
So, I read the press, I saw a big attention paid to this subject. But I don’t think that it will be a major element of our cooperation and discussion.
SCOWCROFT: Yes? No, no, microphone.
QUESTIONER: I’m Fred Starr. In the early ’90s and mid-90s, Azerbaijan worked very closely with the United States and with Europeans to open the—to conceive and develop the Baku-Ceyhan pipeline and then the TRANSECA Project, both of which emphasized communication and transport from Azerbaijan to the West. I’m wondering what you see as the prospects now for extending both of those initiatives eastward, across the Caspian and beyond. And what will Azerbaijan be prepared to do in the way of leadership of such an effort?
ALIYEV: As you know, Azerbaijan was a pioneer in inviting major foreign companies to work together with us on the Caspian oil and gas fields. Before that, there were no other countries—companies there or—the oil strategy of my late father, President Heydar Aliyev, proved to be successful, and today we enjoy the results of the implementation of this strategy.
We had various stages of development of oil and gas projects, starting from exploration, production, to transportation. And we thought—many of us thought that by accomplishing the biggest energy project, which are pipeline through Ceyhan and gas pipeline to Erzurum, we will have to say—in the future only work on how to continue in this direction.
But today there are new challenges, new demands, a new situation in Europe with respect to the European consumer, new development in the Caspian. Therefore, Azerbaijan is ready to work very actively and maybe, as it was in the past, to lead this process and to create a kind of a new dimension for our energy cooperation and projects.
Eastern Caspian countries, if they choose to join our infrastructure, of course we would welcome that. And that may create a completely new situation in the region.
No matter how important Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum oil and gas pipelines are, they still mainly have a regional dimension. So it’s the issue of regional cooperation between three countries, Azerbaijan, Georgia and Turkey, with strong support and assistance of U.S. government—and I’d like to mention once again that without strong U.S. support, none of these projects would have been a reality—and the opportunity for Azerbaijan to bring its natural resources to markets of the region and Mediterranean.
Now, with the new situation of the oil and gas development, we need to address these issues accordingly. So now it seems to me that it can be a project of a world importance, European importance. And if it is so, then all the corresponding parties have to participate very actively—Azerbaijan, companies who work with us, Europe, European Union, United States and, of course, our neighboring countries—who have to examine the new situation very thoroughly and make the right decision.
QUESTIONER: (Off mike)—last year, and some in the international press seemed to want it to have another color revolution, like in Ukraine and Georgia. But today, looking at your ministers and seeing all the young faces, it seems to me that you have a different domestic strategy. And if you could please explain what is Ilham Aliyev’s—President Aliyev’s domestic strategy. What’s your vision for the non-oil sector? And can you explain to us a little about what your thoughts are on this?
ALIYEV: Of course, you cannot separate domestic strategy from external or foreign policies; they’re all interrelated. And of course, every leader, every politician tries first of all to concentrate on the domestic issues. But in order to achieve our goals, in order to implement all our projects, we need to have peace in the region. We need to have good relations with our neighbors and with our partners. d
And I think Azerbaijan’s experience shows that it’s possible. It’s possible to create such relations that will be comfortable for your country, for your neighbor, that will, to the maximum possible extent, protect your national interests, and at the same time lead to a very broad cooperation of the countries and companies who we consider as partners and friends.
Azerbaijan, and I mentioned that from the very beginning of my presidency, we will not become an area of confrontation, it will become the area of cooperation. And today’s experience of last two and a half years show that we are moving towards these goals. We are well established inside the country. Economic performance is very positive. We have very strong policy aimed at the resolution of the social problems, unemployment reduction. I already mentioned the figure of almost 400,000 jobs during two and a half years is extraordinary. The level of poverty in Azerbaijan went down from 49 percent to 29 percent in two years, and probably this year it will go rapidly down more.
We have peace, social peace in the country. Azerbaijan is a multinational country, unlike Armenia, by the way, which is a mono-ethnic, maybe the only mono-ethnic country in the world, apart from—(inaudible). We have various nationalities, various religions represented, the highest degree of religious and ethnic tolerance. Azerbaijan is a secular country, and not only by its constitution, but by way of life. Therefore, my—all my aspirations aim at how to make life of the people better, how to make Azerbaijan more established, how to achieve better positions in the region, and to preserve peace, stability, security in the difficult neighborhood, because it was mentioned before, if you look at the map and see where we are situated, you will see wherever you look from Baku you will see hostility, war, conflicts—existing and potential. In these circumstances, Azerbaijan is an island of stability and development. It is our achievements, it is our value; we have to do all our best to preserve it and to strengthen it.
Therefore, I think that—and you also mentioned about the color revolution—I was asked many times on the eve of parliamentary elections about that, and I was very sincere, very frank, saying that in Azerbaijan, it will not happen because there are no grounds for that to happen. It happens when people are not happy with the government. It happens if there is a big gap between government and the people. It happens where there is a big disproportion and very unfair distribution of wealth. It happens where there is economic decline.
In all these areas, we have achievements. So I think that we have good achievements. We have problems, and we are not hiding them. We’re trying to address them, to resolve them in a normal situation. We do not make very loud statements. We do not—we always measure our opportunities with the reality and try to make a right choice.
QUESTIONER: Mr. President, Stephen Flanagan, National Defense University.
There is, of course, a growing web of cooperation among the states, the literal states of the Black Sea Region—environmental, economic and even some limited security cooperation on some transnational security concerns—and I wonder how do you see this evolving over time? What are the, you think, the key challenges are to developing this concept of a greater Black Sea Region of furthering cooperation? And how do you see this fitting into your strategy for further integration into the Euroatlantic community?
ALIYEV: Yes, we are participating—we are active in this process. And the idea of more active cooperation between the region of Black Sea and the Caspian is supported by us. Azerbaijan is a co-founder of the Guam Organization, which unites us and other—and three Black Sea countries. Therefore, we have also very good relations with all the Black Sea countries on bilateral level. And I made visits to the countries of the Black Sea region and received heads of state of government from that region.
We are moving on a very successful—with a very good speed. And our policy of Euroatlantic integration is very clear; was declared and unchanged. We are working with NATO on the individual partnership action plan. We hope that the new neighborhood policy of EU will soon be presented, and Azerbaijan is a part of this new neighborhood strategy because the doors—the borders of EU are coming closer to our border; therefore, soon we will become neighbors, and we have to elaborate the good norms of cooperation, of a good neighborhood. Therefore, in all these directions, we are moving very successfully with good level of cooperation, and hope to continue that.
QUESTIONER: The White House is saying in advance of your talks—
QUESTIONER: Oh, excuse me. Barry Schweid, Associated Press. Should Iran come up—and it’s likely to in your meetings—do you have a position—I realize you want to keep the emphasis on bilateral issues—but do you have a position on Iran’s nuclear program? Are you concerned the U.S. is moving toward confrontation in your neighborhood?
ALIYEV: Well, for many years, for more than a decade, coming back to our domestic problems, we hear with respect to Armenian-Azerbaijan conflict, we hear strong voices, appeals to resolve it peacefully, because everybody understands that if fragile peace in the region is damaged, there will be a lot of suffering and there’ll be unpredictable consequences. Therefore—and we are committed to a peaceful settlement, though for more than a decade we don’t have our land back.
Therefore, I think that in dealing with important issues of regional security, we need to try to preserve peace and stability and security. I think that diplomatic efforts are the best possible solution for trying to find out resolution to the issues which create concern.
We are situated in the region. For us, this issue is not remote issue which you see on TV and switch off to another channel. For us it’s an issue of our security. Therefore, of course we are concerned. I think it would be naive to say that we are not. Therefore, we have to—but what can we do? We have to observe and to see what happens. If our involvement is needed at any stage, it can be discussed. But at this time, at this moment, I think the best is to concentrate on the possible negotiating solutions of the nuclear program of Iran so that the threats which may be created by this program can be diminished and to find a diplomatic solution.
QUESTIONER: Mike Haltzel, DLA Piper. Mr. President, I’d like to return to the domestic agenda you outlined. You’ve stressed repeatedly peace and security and economic development. Unless I’m mistaken, one word that you have not used this morning in talking about your domestic agenda is “democracy.” Your regime has been criticized internationally for the conduct of its elections and for its behavior subsequent to the elections toward opposition groups.
I wonder if you could tell us—if you could elaborate on your concept of democracy in Azerbaijan and how it fits into the overall plan of peace and security and stability.
ALIYEV: As you remember, the format of our meeting was proposed to be more question and answers format. Therefore, I answer only those questions which I’m asked. (Laughter.) This is first.
And I thank you that you remind us of the very important element of our domestic policy. I mentioned, though, in the beginning that in our country, political and economic reforms are being held in parallel. This is my strong belief and I am very convinced that without parallel economic and political development, economic reforms and the process of democratization, we will not be able to achieve success.
Political reforms without economic reforms will lead to a failure. And if we look at the history of Soviet Union and other countries, we’ll see that. All economic reforms without political reforms and democratization of society will lead to serious problems in the future. Therefore, I think in Azerbaijan we are moving very successfully in both directions.
I think that for the last two and a half years, a lot has been achieved in making the country more open, more democratic and free. Many issues which created concern with international organizations have been addressed and resolved, such as, for instance, issues of political prisoners. We don’t have any of them. We have all the major freedoms—freedom of speech, freedom of expression. We have political institutions. They are weak, but that’s not our fault. That’s not the fault of our government that political institutions are weak, that political parties are weak. This is probably the result of the transition period the country is now on.
But we try to create a normal political environment. I think that political relations in Azerbaijan should be based on the normal basis. Radicalism is not supported by the people. And the parties which are very radical and very aggressive, they lose their popularity; and the last parliamentary elections actually show that.
With respect to parliamentary elections, as you probably know, there were a lot of speculations, rumors, some hopes that maybe Azerbaijan will be next stop for “Orange Revolution.” But that did not work. And that’s not because there was a kind of very suppressive steps made by the government. No; the people did not support. If people do not support this or that political party or idea, then it will not work.
You called Azerbaijan “regime.” I don’t agree with you. Maybe you called it just to show your attitude to us. But Azerbaijan is a country and I am a democratically elected president. And I think that it’s not a good—how to say—move to separate countries by words like “regime” or not. And who measures where is democracy, where is not democracy? Look at the neighborhood. I don’t think that the level of democracy in Azerbaijan is lower than in any other neighboring country.
There is a reality and there is a perception. When you concentrate on perception and some information, not quite reflecting the reality, then you have one impression. When you look what the country is, how it develops, what people think, then maybe you have another.
I am a president who is supported by absolute majority of the population. And I remember one of my interviews on the eve of parliament election. I said if that’s the case, that means that I’m right, and my opponents are wrong.
SCOWCROFT: That was very impressive, Mr. President.
SCOWCROFT: Way in the back.
QUESTIONER: Hasan Hazar, Turkish daily Turkiye. Mr. President, you know, there are more than 20 million Azeris living in Iran. So my question is about that. What is Azerbaijan’s policy toward south Azerbaijan?
ALIYEV: Azerbaijanis live in many countries. Recently we had the Second Congress of World Azerbaijanis. And according to our estimations, there are more than 50 million Azerbaijanis who live around the world, and about 30 million of them live in Iran.
And of course all of them—their destiny for us is very important. When I visit other countries, I always meet representatives of the Azerbaijani community, because really Azerbaijanis live, as I mentioned, in many countries. We try to be helpful to their needs. We try to maintain good relations with the countries where Azerbaijanis live, so that their lives become better.
And also with respect—with Azerbaijanis who live in Iran, I visited Iran—it was official visit—last year. And during that visit, the consular department of Azerbaijan was opened in Tabriz. That was a very important step and a very important element of bilateral relations between Iran and Azerbaijan.
And I think that every nation, every country takes care about their people round the world, and Azerbaijan is not exclusion. Therefore, the better life of Azerbaijanis who live outside Azerbaijan, for us, is one of the top priorities.
QUESTIONER: Andrei Sitov from TASS, from Russia. Thank you, sir, for recognizing it. Some people would say that one of the easiest ways of gaining favor in Washington is turning a cold shoulder to Russia, that there is some sort of a new competition between Russia and the U.S. in the post-Soviet era. What is your attitude to that, sir?
Thank you. (Laughter.)
ALIYEV: (Laughs.) I think that our policy is very clear and it speaks for itself. And it is aimed at the creation of mutually beneficial good relations with our friends and partners—relations based on the principles of mutual respect, non-interference into each other’s affairs and promotion of a political dialogue and economic cooperation.
Our relations with Russia do not depend on any external factors. And Azerbaijan’s policy is, I think, very clear in this sense. We have a very high level of political dialogue between Russia and Azerbaijan. I made several visits, including one official, to Russia. President Putin was recently in Azerbaijan. We meet on a regular basis and discuss various issues of our bilateral relations.
By the way, trade relations between Russia and Azerbaijan during the time of my presidency was doubled. It shows that—rather a good level of cooperation and understanding. Economic development is also following in that.
Therefore, our relations is our relations; they don’t have any other format, any other framework, and they do not depend on our good relations with United States.
By the way, I mentioned that—already that Azerbaijan is not a place for confrontation. If, for instance, countries—and you mentioned, like, Russia and the United States, who have to decide some of their problems—there are many other countries of the world; they can choose another one—(laughter)—in Azerbaijan, let’s be friendly to each other.
SCOWCROFT: Thank you.
QUESTIONER: Good morning, Mr. President. I’m Sam Wyman from Jefferson Waterman International.
I note your earlier comment about developing the non-oil sector. I would appreciate it if you could give us some thoughts on your prioritization of the development within the non-oil sector. Where would you like to see—start? How would you like to see it proceed?
ALIYEV: There are many opportunities, and we have a little plans in this respect. Recently, an investment company was created in Azerbaijan with a capital of $100 million, which will mainly deal with the development of the non-oil sector. We will try to use these assets in order to attract potential investors, so that, you know, be able to create new areas of industry in Azerbaijan. Also, in our budget we provide about a hundred million dollars loans to private sector, to businessmen, and on very preferential terms, to invest mainly in non-oil sector.
So these are two major elements how to stimulate non-oil sector, because we need investment. And if—talk about priorities, they can be various, but for us it’s important to combine economic development and social, taking into account that half of the population of Azerbaijan live in the rural area. For us, of course, priority is agriculture. We have a very good climate. We have nine of 11 climatic zones existing in the world in Azerbaijan. We have very good soil. We grow almost all the agricultural products. And half of the population lives in the rural areas. Therefore, agriculture has a very strong potential. We still depend on imports on the main consumer groups of agriculture products. So we want to create such industries which will—(word inaudible)—the imports.
And apart from that is, of course, construction, tourism, petrochemicals, and other sectors. But if you ask me what is number one now, I will say agriculture.
SCOWCROFT: Yes, sir?
QUESTIONER: Michael Gillette, World Bank retired. Mr. President, sudden increases in income can be a curse as well as a blessing. What measures are you taking in Azerbaijan to prevent the sudden increases in oil income from killing your precious agriculture sector through cheap imports coming into the country and provoking domestic inflation?
ALIYEV: This is one of the major concerns for us, because before this year, our major concern was how to quickly engage all our energy projects and to receive, you know, money from oil sales. Today the major concern is how to maintain the macroeconomic stability, because for the first time in many years, last year we had inflation about 9 percent, and this year maybe around the same figure. Though the income of the people increased almost 30 percent, still it’s a big difference between inflation and income.
But nevertheless, we have to be very accurate in spending. Sometimes we have to deter the spending in order not to undermine the macroeconomic stability. One of the elements which can help us to do so is the fact that we have—we accumulate all the oil revenues in the oil fund, which is a very transparent structure and it’s well respected in international community, and is audited by international organization. And it works closely with IMF, World Bank and other international institutions.
All the revenues from oil are being accumulated there, and every citizen in Azerbaijan knows how much money there is there. And plus all the expenditures from the fund are being made only through the consolidated budget. In other words, every citizen of the country, through his representatives in parliament, can participate in the distribution.
But in the coming years, of course the amount of money Azerbaijan will receive will increase significantly, and there is a big demand in the country. We need to upgrade our infrastructure. We need new roads, new water pipelines, we need gas distribution systems, power stations, we need schools, hospitals. All these are needs of the country. But at the same time, we have to be very accurate how not to overheat the economy, because if we enter hyperinflation, all of our economic achievements will be under (big question ?).
SCOWCROFT: Way in the back.
QUESTIONER: Guy Dinmore of the Financial Times. Mr. President, could you elaborate on the extent of your country’s military relationship with the United States? To what extent are U.S. forces transiting Azerbaijan to—using Azerbaijan as a transit point for Afghanistan? Has that increased substantially since the closure of the U.S. military base in Uzbekistan? Is it possible that U.S. forces are using Azerbaijan as a base for surveillance of Iran, either through flights or land missions?
Thank you very much.
ALIYEV: From the very beginning, Azerbaijan joined anti-terror coalition and opened its air space, and since that time, we have cooperated actively with United States on the issues of security and anti-terror operations in the region. We have troops in Kosovo and Afghanistan, in Iraq from the very beginning, and again, unlike Armenia, we have soldiers, not drivers, in Iraq. And we’ve sent them just from the very beginning and not one year later only, you know, to show that they’re also present there. I’m sorry to come back always to this question because is number one, as I mentioned, for us.
In our relations with United States, we have a very high level of mutual confidence and trust, and we continue our military cooperation because it is a benefit of both countries. At the same time, Azerbaijan, of course, will not be engaged in any kind of potential operations against Iran, and our official made it very clear, including myself in the past, that if I think that it’s not—it’s time to stop speculating on this issue. We have a bilateral agreement with Iran, which clearly says that the territories of our countries cannot be used for any danger towards each other. So it’s very clear, and therefore, our relations are regulated by international treaty.
But at the same time, if additional steps are needed to be taken in order to achieve peace in Afghanistan or strengthen peace in Iraq, of course Azerbaijan will do all its best in order to be with the United States shoulder to shoulder, as we have been from the very beginning.
QUESTIONER: Mr. President, Georgie Anne Geyer, Universal Press Syndicate. There’s a phrase going around, “energy nationalism,” i.e., some countries, particularly Russia, Mexico, for instance, in which the new nationalism is based completely on energy supplies, and these countries are doing very little, unlike you, I believe, to develop non-energy sources. Do you have any idea—philosophical ideas on this phrase that’s kind of floating around, “energy nationalism,” a new nationalism based on energy?
ALIYEV: For me it’s something new. I never heard about that before. (Laughter.) In Azerbaijan we have energy internationalism—(laughter)—because we have all the representatives from countries—from United States, from Britain, from other European countries—who worked with us since 1994 in a spirit of friendship and goodwill. And due to this cooperation, we managed to attract $70 billion in oil and gas sector, and in total about $28 billion as an investment for the last 12 years. And of course, investments in oil and gas help to attract investments in other sectors—in services, in infrastructure, in education and other sectors.
And we enjoy very much our cooperation. We have tens of thousands of foreigners who live in Azerbaijan, who work in Azerbaijan for various companies, and who feel themselves very comfortable because Azerbaijan is a very hospitable place. There’s a very good spirit in the country, and attitude towards representatives of other countries is always positive.
But with respect to some gas issues in Europe, again want to comment on that. When we started our gas project, our market was considered to be Turkey. And we have a (corresponding ?) agreement with Turkey and also Georgia. We never considered Europe as a potential market for our gas, and we planned our gas production in such a way that will supply our needs, Turkish needs and needs of Georgia.
Now we are approached by representatives of European Union with respect to future cooperation in gas supplies to Europe, but for us it’s new. We never seriously considered that issue. We never planned that. Therefore, if that’s what we’ll have to address in the future, we will have to treat it, all of us, Azerbaijan, the companies who work in gas production, European Union—we’d be very glad if United States also participates, because United States leading role in BTC and Shah Deniz project was crucial—and we will have to make adjustment to our development program and production program with additional investments, additional effort. Therefore, it seems that for Europe it becomes very urgent. If that’s the case, then we’ll have to start talking about that as soon as possible. We are ready to do that, if it is needed. If we are approached, of course we will cooperate as we did in the past.
SCOWCROFT: Mr. President, I want to thank you for being with us today. Your frankness and comprehensiveness was most refreshing, and we are very appreciative. We wish you well in your meetings here in Washington, and for your administration—not regime!—in Azerbaijan. (Laughter, applause.)
SCOWCROFT: Thank you.
ALIYEV: Thank you very much.
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