BAKU (Reuters)–Foreign investment in oil-producing Azerbaijan has fallen sharply this year and is predicted to be only about $500 million by the end of 2000–deputy Economy Minister Oktai Akhverdiyev said on Friday.
“Unfortunately foreign investment has almost halved in the past seven months compared to last year and it is unlikely the situation will change before the end of the year,” Akhverdiyev told Reuters in an interview.
Earlier this year he had predicted foreign investment for 2000 would be around $1.68 billion–including $930 million in the Caspian Sea state’s key oil sector.
But it is more likely to be a third of that amount with only $250 million invested in the oil sector for the whole year.
“Many investors still haven’t overcome the 1998 global financial crisis and still aren’t in a position to finance projects here,” Akhverdiyev said.
The financial crisis is not the only reason for slowing investment in the ex-Soviet republic.
Investment in Azerbaijan’s energy sector has been slow this year. Two big projects worth over $4 billion in investment over the next four years–which were slated to begin sometime this year–have been delayed.
A $3 billion plan to triple oil production at a concession run by a foreign consortium led by BP Amoco (BPA.L) has been on hold until an export solution for the crude is agreed on.
And a $1.3 billion gas project–also led by BP Amoco–will not be able to kick in until a gas sales agreement is signed between Azerbaijan and Turkey.
“We’re working on a forecast now for 2001–but we expect things to turnaround because there are lots of concrete projects which should start up next year,” Akhverdiyev said.
Direct foreign investment–which does not include credits–fell in the oil-producing republic in 1999 by 35 percent to a total of $937 million.
In 1998 investment hit a peak of $1.5 billion. It was a year when confidence in the Caspian’s potential was high and investors went to any lengths to get a stake in Azerbaijan.
Even though high oil prices have not positively affected investment in Azerbaijan–they have boosted state coffers–Akhverdiyev said.
Azerbaijan’s budget revenues have increased this year by 14 percent to 890 billion manats ($200 million) from 780 billion thanks to sales of crude and a price that has hovered around $30 for most of the year.