Revista CIDOB d'Afers Internacionals (Dec 2001)
The effect of the rise of petroleum in Azerbaijan: diagnosis and policies
Abstract
The Republic of Azerbaijan must face up to a double challenge: to go from being a centrally planned economy to being a market economy and managing productively the significant hydrocarbon resources found in the Caspian Sea. Some International Monetary Fund experts feel that the most plausible hypothesis regarding the Azeri economy’s futureis that it will behave in a way similar to the OPEC countries. Specifically, they argue that Azerbaijan may suffer a contraction of manufacturing production as a result of the boom in the hydrocarbons sector –the so-called “Dutch syndrome”– and that the phenomenonmay be aggravated by a undervaluation of the currency typical of economies in transition. This study sets out to determine whether this diagnosis is accurate and whether the series of political economics measures they propose for remedying the situation is appropriate for putting the country on the path of balanced growth. In both cases the answer is no, given that it appears unlikely that in the short term Dutch syndrome effects will be generated in this economy and that the most probable result of the policies proposedwould be the creation of a petroleum enclave which, in the context of globalization, would encourage a new “petro-dollarization” of international financial markets.
