Azerbaijan has joined a growing list of post-Soviet states where the national currency has devalued as a result of the global fall in oil prices. In a country where popular demonstrations are strictly forbidden and monitored, the resulting discontent has scared state officials in Baku. Riot police have been used to silence angered residents who have had enough of the soaring unemployment and sudden price hikes.
Azerbaijan’s manat, the official currency, dipped by a third of its value in February 2015. People’s reaction at the time was minor — only the capital city of Baku saw a riot. It was not until the second devaluation at the end of 2015 that the stage was set for growing discontent.
For the first time in its long history as a pegged currency, the manat switched to a floating exchange rate. As one Azerbaijani economist noted, nobody had yet taught it how to swim. According to Bloomberg, Azerbaijan’s national currency lost 52% of its value against the US dollar in the first three weeks of 2016. For Baku, 2016 has had a rocky start.
Desperate times call for desperate measures
Overnight, prices went up, and if they didn’t in most other cases, retailers and business owners took their time to readjust. Immediately after the second devaluation people rushed to bureaux de change to buy cash, only to be told that there was no foreign currency to be exchanged. Meanwhile, only black marketeers have benefited from unimaginable rates.
By mid-January, the Central Bank of Azerbaijan announced the closure of all its foreign currency exchange booths. “Due to a rising [number] of currency conversions, commercial banks have suspended operations at exchange offices for an efficient and timely regulation of transactions, for increased control of transactions and cost optimisation”, read the CBA’s statement.
But local authorities took further measures. On 19 January, the authorities introduced a 20% tax on taking money out of the country. The Azerbaijani manat has suffered a steep decline in value, leading to unrest, December 2016. Photo (c): Aziz Karimov / AP Press Association Images. All rights reserved.Azerbaijanis have gathered in public squares and in front of government to protest. Many asked for recalculation of mortgages and loans taken out in manats. You can find plenty of them beyond the glitzy facades of post-Eurovision and European Games Baku. They are mostly residents of rayons and kənd (Azeri: village), or Azerbaijan’s 66 districts.
Indeed, life can be much harder in the districts than in Baku. Here, poor infrastructure is rife, and neighbourhoods are left without 24-hour access to water, gas and electricity — not to mention a functioning sewage system. As factories closed and agriculture suffered following the collapse of the Soviet Union, some residents sought ways to make a better living.
Yet there is little room for entrepreneurship. Bureaucracy, corruption, illegal payments, surprise visits by Ministry of Emergency situations or Ministry of Taxes to collect that one last outstanding payment, or fix that emergency fire escape, are all too common. Business owners are left helpless.
Official data on unemployment is hard to come by, complicating estimations of the real indicators. This is particularly grim when it comes to women in Azerbaijan, who are often either housewives, self-employed or are not registered anywhere.
Against this backdrop, the first to resist the second devaluation in Azerbaijan were the residents of these areas, and growing frustrations eventually led to civil unrest in twelve such administrative districts. A map has been circulated online, with beating hearts standing for each district that stood up.
When one can no longer provide kitchen staples like bread and flour, one would expect a certain degree of anger.
A cry for help
“We are not violating laws, we just cannot survive!” yelled one resident of Fuzuli, a city in southern Azerbaijan. “It is the ministers who are breaking the law. They should get the hell out!” added another.
Neither a pension increase nor promises to “deepen structural reforms” are going to stop people taking to the streets.
In Siyazan, on the shore of the Caspian Sea, one male resident speaking to the cameras said “I do not have the stomach to return home every day when I have nothing to bring with me.”Alongside the complaints, there is a sense of shame for being unable to provide for families.
Instead of addressing these concerns in a constructive manner, though, Baku dispatched interior ministry troops and riot police to crackdown on what the authorities called “unauthorised” protests to prevent any further escalation. In Siyazan district alone, some 55 residents were arrested. In others, opposition party members were targeted. The government was quick to blame the opposition for inciting peaceful residents to cause chaos. Local residents in Siyazan, Azerbaijan, protest price hikes and face off against riot police, January 2016. Video still via YouTube (myRTVi) In Aghjabadi district, 38-year-old refugee Ramil Allahverdiyev climbed onto the top floor of a five-storey building in an act of desperation, for he was unable to provide for his family any longer. Although other residents prevented him from committing suicide, there is little he can still do.
But for Aghdjabadi MP Agil Abbas, Allahverdiyev man never intended to commit suicide in the first place. In an interview with Azadliq Radiosu (Radio Free Europeʼs Azerbaijan service) Abbas said, “I talked with people there. No one tried committing suicide. This is how they showed their unhappiness. Where do you think he was going? […] You know how many professions are needed in Aghjabadi? Everyone is building a house but cannot find a single worker. Everyone says they just want to be bosses.”
“Do you think everyone in America is employed?” continued Abbas. “What about England, France or our brother Turkey? If the government is not offering you a service, its gives you land. Go and grow onions, take care of your family.”
Despite their dismissals, the unrest did make the authorities somewhat nervous. Four days after the first events, the authorities announced its decision to remove tax on flour and bread. The next move was a 10% increase in pensions. But neither a pension increase, nor promises to “deepen structural reforms” in the economy are going to stop people taking to the streets.
This situation, which is likely to happen more often in the near future, could have been avoided had the government started working on diversifying the economy, the development of non-oil sectors, earlier.
Many have called on the authorities to diversify Azerbaijan’s oil- and gas- dependent economy, dispose of monopolies and support small businesses rather than increasing tax rates. Had they done so, the picture since 12 January could have been very different.
“The oligarchs, high ranking officials, the ruling family will never agree to tighten their belts, even though the volume of revenues will continue to drop,” says political scientist Zardush Alizade. “Given this context I am sure the civil unrest will continue in Azerbaijan.”
“The oligarchs, high ranking officials, the ruling family will never agree to tighten their belts”
In his most recent analysis, Tom de Waal writes that “the presence of oil in a country can have major benefits — and it does not automatically lead to the oil curse. But if not managed properly or efficiently by the host government, the massive influx of oil revenues can distort a country’s economic fundamentals, fuel corruption, and create conditions that trigger conflict. Countries with oil are twice as likely to experience civil war as those without.”
Find a scapegoat
Azerbaijan is, of course, not alone in facing the impact of falling oil prices. Take, for instance, Kazakhstan, where the tenge has recently been devalued twice — in February 2014 and in August 2015. The Kazakhstani currency also transitioned to a floating exchange rate, and fell in value by 26%.
As people in Almaty gathered outside the offices of two banks on 12 January asking for a recalculation of mortgages, Azerbaijanis also took to the streets. The parallels don’t stop there, though, as several post-Soviet regimes have taken the bankers in their sights. 'We face tomorrow with confidence and enthusiasm'. Billboard depicting former president Heydar Aliyev with current president and son Ilham. Photo, 2006: almasudi / Flickr. Some rights reserved.In early 2015, the head of the International Bank of Azerbaijan Jahangir Hajiyev suddenly resigned due to “health related issues”, and was later arrested on suspicion of fraud and misappropriation of public funds. Following the tumble of the tenge, president Nazarbayev harshly criticised and then dismissed the head of the Kazakh Central Bank. In Turkmenistan, the Central Bank chief was also sacked last December after president Gurbanguly Berdymukhamedov reprimanded him for “unsatisfactory performance of his duties”.
In Azerbaijan, this has led to some official belt-tightening, at least on the level of rhetoric. On 12 January, Sharifov spoke about “strengthening financial discipline and order” for the economic use of public resources, prevent waste and unnecessary costs.
The state budget too saw some recalculations. Although originally the budget for 2016 was calculated based on $50 a barrel on January 28, it was revised based on the oil price of $25 a barrel. In a press statement, finance minister Samir Sharifov stated that the 2016 budget will be based on an oil price of $25 per barrel — this is the lowest the oil will drop, assured Sharifov.
Sacking of central bank chiefs or long-time loyal ministers, or holding cabinet reshuffles are no quick fix for Azerbaijan’s concerned population. Many of the measures stated in statements of Sharifov alike will take much time, time ordinary Azerbaijanis do not have. They are hungry and want jobs while majority of their problems, remain unresolved.
But above all, it is Aliyev’s reputation that is on the line. The president’s diatribes of stability and prosperity are proving to be untrue — especially as there is nothing to prove that the president is right.
While the protests across the country subsided for now, stories of suicides and self-immolation as a result of economic pressures, small-scale protests at shopping malls with shop owners complaining about high rents, and on-going complaints of residents attest to the lack of immediate measures to ease the pressure of the crisis on the people.