Azerbaijan has been ruled by the former Soviet Union for nearly 70 years. Azerbaijan gained its independence in October 1991 following the fall of the Soviet Union . Reestablishment of independent country has led to chaos and regression in the field of economy, education and health. In this regard, the Azerbaijani government signed the "Contract of century" and implemented reforms to develop the above-mentioned fields.
Contract of the Century
The agreement was signed on September 20, 1994 in Gulistan Palace of Baku. The importance of the agreement made sides to name it as the “Contract of the Century”. The contract was aimed at the development of “Azeri-Chirag-Guneshli” deepwater oil fields containing more than 10 billion barrels of oil reserves. These aims of the contract were reflected on 400 pages and 4 languages. Thirteen companies (Amoco, BP, McDermott, Unocal, SOCAR, LukOil, Statoil, Exxon, TPAO, Pennzoil, Itochu, Ramco Energy, Delta) from eight countries (Azerbaijan, USA, Great-Britain, Russia, Turkey, Norway, Japan, Saudi Arabia) have supported the signature of the agreement. 41 oil companies from 19 countries signed 26 other contracts focusing on the “Contract of the Century”.
The sides have established working structures such as the Steering Committee, Azerbaijan International Operating Company (AIOC) and the Consulting Council following the signature of the contract. On December 2, the parliament of the Republic of Azerbaijan approved the “Contract of the Century”. The working structures started to carry out the contract after the alignment of the legal basis. Azeri-Chirag-Guneshli (ACG) fields began to produce oil in November 1997. Since that time, it produced four billion barrels of oil.
The contract has generated conditions for further projects in Azerbaijan. Furthermore, Azerbaijan has built reliable political and economic partnerships with many countries. In addition, there was significant increase in the investments made in the field of economy in Azerbaijan. More than $30 billion investments made in ACG.
The ACG participating interests are as following: BP owns 35.78% (operator), SOCAR – 11.65%, Chevron – 11.27%, Inpex – 10.96%, ExxonMobil – 8.0006%, Statoil – 8.56%, TPAO- 6.75%, Itochu – 4.3%, ONGC Videsh Ltd - 2.72%.
Reforms
During the early 1990s, Azerbaijan experienced difficult economic transition which not only affected economy, but also the field of education and health. In order to improve the situation in the country, the Azerbaijani government pursued an active agenda of economic, educational and health reforms.
Economy
There were significant challenges in the economy of Azerbaijan, which resulted in a decrease in GDP during the early 1990s. In the years 1991-1995, there was an economy chaos and regression. However, the increase was observed in macroeconomic stability and dynamic economic development in 1996. International assistance has played an important role in facilitation of economic transition since 1992. At the same time, regional assistance also brought benefits to the economy.
The State Programme “On Business Development in Azerbaijan (1993-1995)” was adopted in 1993 to legalize economic reforms. Furthermore, Azerbaijan and the IMF reached an agreement on an economic reform programme in 1995 which restored the macroeconomic stability and progressive economic recovery. The stability of fiscal deficit was at around 4% of GDP and inflation was reduced to single figures. GDP rose by 20% between 1996 and 1998.
Azerbaijan has pursued a cohesive economic reform programme after the establishment of an independent Central Bank and introduction of a national currency. Macroeconomic stabilization, structural reform and addressing social needs were the main components of the programme .
The Azerbaijani government ratified the 1999-2000 privatization programme and discussions with the World Bank and other institutions in order to support the reorganizing and reform of public sector institutions and expenditure. During the privatization, the increase was observed in the specific weight of non-state sector in GDP from 29% in 1994 up to 81% in 2011. In addition, the flow of investment into country economy and social sectors of Azerbaijan dramatically rose by 100 billion USD from 2003 till 2011.