Select Committee on Foreign Affairs Appendices to the Minutes of Evidence - Sixth Report


Memorandum submitted by the Anglo Azeri Society


  The Society was established in November 1997 to support Azerbaijan-British relationships in all spheres and to assist charitable endeavours in Azerbaijan; to keep members closely informed on developments in Azerbaijan and to increase awareness of Azerbaijan in British eyes.

  We have widespread corporate and individual membership. Last year we raised almost £24,000 for charitable causes in Azerbaijan. This year we have a full programme of meetings and events including a major participation in British Week in Baku.


  Ever since 1992 the FCO, the Department of Trade and Industry and British business, led by BP, have worked very closely together to further British national and commercial interests and promote diplomatic and political ties in Azerbaijan. The UK was one of the first EU countries to appoint an Ambassador to Baku. The then Offshore Supplies Office of the DTI was the first Governmental agency from any country to mount a presence at the important oil and gas exhibition in Azerbaijan. Since that time, successive British Energy Ministers have attended that conference and exhibition, a record unmatched by any other country and UK supply companies form the largest overseas group at the exhibition. The commitment by the British Government and commercial companies has shown through very clearly in orders placed by the Azerbaijan International Operating Company during the period 1995 to June 1998 where UK owned and based companies received nearly 35 per cent of all overseas orders (see Annex 1). Over 100 British companies have registered offices in Baku. The UK can justly feel proud of the co-operation between the public and private sector in Azerbaijan. We believe is the best example of such co-operation around the world.


  The effort so far has been supported by a very dedicated Ambassador and small staff operating from inadequate buildings. We very much support the Government's decision to enhance staffing and to improve the office accommodation. This new staff level should be maintained despite the current economic slowdown in Azerbaijan. We hope that the Committee will feel able to recommend that the Embassy should build an appropriate Chancery in a suitable location in Baku. The importance of an appropriate Embassy building should not be underestimated.

  The economy of Azerbaijan is largely dependent on the domestic oil industry and on the level of Western investment—again predominantly in the oil and gas industry. The recent 40 per cent decrease in the oil price has led to a difficult economic situation in Azerbaijan and a less favourable climate for both oil companies and oil supply companies. This in turn leads to fewer service and infrastructure company opportunities. However, despite this, the level of exploration activity will remain high because of existing contractual obligations and Baku continues to be the obvious regional hub for businesses seeking to operate throughout the Caspian Region. Now more than ever there is a need for political and economic stability within Azerbaijan; and the UK Government must play a role in helping ensure that stability. Stability is critical for the development of thriving business relationships.

  The Society believes that the UK Government should play a higher profile role in Azerbaijan and would make the following recommendations:

1.   Aid

  The Society is not in a position to judge whether the current level of bilateral and EU aid is appropriate in the overall context of the available budgets. Our members have, however, been impressed by the openness of the EU aid mission in Baku.

2.   Scholarships and Training

  There is a very high level of education within Azerbaijan. However, there is a need for greater understanding of Western business practices and economic systems. We believe that the current level of scholarships and training grants is inadequate.

3.   Cultural

  There is a huge demand for English language training and for a greater understanding of Western popular music and fashion. At the present time the British Council funding for Azerbaijan is extremely limited. We hope the Committee could give consideration to a recommendation that this is significantly enhanced.

4.   E.C.G.D

  The facility, unlike others in the Region, has been well utilised. The current low oil prices have led to deterioration in Azerbaijan's financial situation, despite an impressive macro-economic policy. It is important to British business that E.C.G.D. assistance continues to be available.

5.   Political

    (a)  The major issue facing Azerbaijan in the Armenian-Azerbaijani conflict. As a result of this conflict 20 per cent of the territory of Azerbaijan is, in effect, occupied by the Armenian Armed Forces. There are more than 1 million internally displaced Azerbaijanis and it is estimated that 50,000 Azerbaijanis were killed and 100,000 injured; economic damage is estimated in billions of pounds.

    A ceasefire was established in May 1994. Negotiations for finding the settlement to the Armenian-Azerbaijani conflict are going on under the auspices of the OSCE. A Special OSCE Minsk Group with three Co-chairs, the U.S.A., Russia and France, was established for this purpose. The progress made by the Minsk Group is not impressive.

    In addition, supplies of arms by the Russian Federation to Armenia in 1997; the permanent presence of Russian military bases on the territory of Armenia and recent supplies of MIG-29 fighter aircraft and S-300 anti-aircraft missile complexes to Armenia have made the situation more dangerous. There is, understandably, concern in Azerbaijan about the impartiality of Russia as one of the Co-chairs of the OSCE Minsk Group.

    As a permanent member of the U.N. Security Council and leading OSCE member, the Society believes that the UK should be more actively engaged in the process of finding the solution to the Armenian-Azerbaijani conflict.

    (b)  Azerbaijan is facing issues surrounding delimitation of the Caspian Sea. These issues affect the littoral states—Azerbaijan, Turkmenistan, Kazahstan, Russia and Iran. Oil company developments benefit enormously from certainty on international boundary issues and the UK has extensive experience in such issues. As we understand it the UK policy has been that Caspian delimitation matters are the responsibility of the littoral states.

    However, the United States has taken a very high profile offering, in effect, to broker an agreement. Additionally the U.S. Government has involved itself, particularly in the case of Azerbaijan and Turkmenistan, in issues relating to regional pipelines. The UK Government has not taken an active role in these issues. We understand that the Azeri Government would welcome a more active stance from the UK. We hope that the Committee will consider whether the UK Government should play a more active role in the Caspian delimitation issue.

    (c)  Azerbaijan is keen to become a member of the Council of Europe. There was considerable disappointment that when Georgia was "admitted", Azerbaijan was not admitted simultaneously. Membership of the Council of Europe is important as a sign of integration and political progress towards democracy within Azerbaijan. We would like to see the UK Government supporting membership more vigorously.

March 1999

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