Oil 1 Peak Oil 21
Mead, 1992( Walter Russell, NPQ’S Board of advisors, New perspectives quarterly, summer 1992, page 30 )
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- Oil K2 Azerbaijan Econ
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Mead, 1992( Walter Russell, NPQ’S Board of advisors, New perspectives quarterly, summer 1992, page 30 )Hundreds of millions - billions - of people have pinned their hopes on the international market economy. They and their leaders have embraced market principles -- and drawn closer to the west – because they believe that our system can work for them. But what if it can't? What if the global economy stagnates - or even shrinks? In that case, we will face a new period of international conflict: South against North, rich against poor. Russia, China, India - These countries with their billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and Japan did in the 30s. Oil K2 Azerbaijan EconOil is the only thing sustaining Azerbaijan’s economy—decline in oil production means a crash Menas, independent British consulting firm,2007. “Azerbaijan- economy & notes” http://www.iranstrategicfocus.com/lc.aspx?country=79&tab=econ Azerbaijan's economy remains heavily dependent on oil revenues for growth. Approximately 33% of tax revenue is derived from SOCAR and as such the oil production boom has generated remarkably high overall growth rates, concurrently strengthening of Azerbaijan's external position. Overall real GDP grew by a staggering 31% in 2007. However, non-oil real GDP only grew by about 8% in 2007 and this is set to decline. The manufacturing and construction sector has collapsed to just over 10% of its 1990 levels. Agriculture also disintegrated through the nineties due to a lack of inputs and available markets arising from the war with Armenia. Credit availability is very tight and income distribution is massively skewed – over 55% of the population lives in either poverty or extreme poverty, according to the IMF in 2005. These symptoms point to a classic case of the Dutch Disease. The exchange rate is appreciating and inflation has jumped from 5.5% in December 2005 to 16.4% in March 2007. The economy has become less diverse since 1990 and although fiscal policy appeared restrained through much of the past decade, 2006 saw massive spending increases, further encouraging inflation and crowding out small businesses. All this means that Azerbaijan's economy, although looking rosy now is still built upon shaky foundations – should oil revenues decline precipitously, there is as not yet sufficient support in other sectors of the economy to cushion the blow. If prices change significantly, the economy is hurt--the poor lose out and dept accumulates Svetlana Tsalik, director, Caspian Revenue Watch, Central Eurasia Project, Open Society Institute, 2003 “Caspian Oil Windfalls: Who will benefit?” http://archive.revenuewatch.org/reports/051203.pdf When oil prices are high, leaders face expectations of increased spending and find it harder to justify saving for a rainy day. They typically launch ambitious multiyear capital-intensive spending projects in an effort to absorb the windfall. But budgets based on a certain oil price have to be slashed if prices change significantly. Cutting expenditures hurts the poor and others who depend on the state for jobs or the provision of services. Because roller-coaster budgeting is so damaging and unpopular, leaders often turn to borrowing as a way to finance commitments made in boom times. When oil prices are low, they must borrow at unfavorable rates and accumulate sizeable debt. Even during the boom years, “capital-deficient oil exporters” (oil exporters with large populations and relatively small oil reserves) were spending and borrowing so much that their debt service ratio was nearly twice that of oil-importing countries.9 By 1983, the debt burden of capital-deficient oil-exporting countries exceeded that of all less-developed countries combined.10 Even oil exporters with large reserves and small populations, such as Saudi Arabia and Kuwait, are deeply in debt. Drop in oil prices kills oil-producing economies by driving up dept Svetlana Tsalik, director, Caspian Revenue Watch, Central Eurasia Project, Open Society Institute, 2003 “Caspian Oil Windfalls: Who will benefit?” http://archive.revenuewatch.org/reports/051203.pdf With the drop in oil prices in the latter half of the 1980s, Saudi oil earnings plummeted to less than a fifth of their 1970s’ peak, quickly exposing the limitations of a rentier distributive state. Efforts to begin taxing companies were ineffective, because the state did not have the administrative apparatus to assess or collect taxes, and because many companies, not used to being taxed, did not keep formal accounts. Nearly all attempts to prune back subsidies to the affluent class (the core of the Saudi royal family’s support) brought protests and had to be withdrawn. And because the government was the country’s largest generator of employment, cutting back on spending risked dislocating large portions of the workforce. Having failed at trying to extract resources from its population, the government instead spent nearly $120 billion of its financial reserves, while also growing a budget deficit close to 10 percent of GDP. To finance its persistent fiscal deficit, the Saudi government began borrowing domestically in 1988 and its debt now exceeds its reserves.20 Similar stories can be told about Kuwait, Libya, Qatar, the United Arab Emirates (UAE), and other OPEC member countries. Between 1974 and 1979 the five Middle East OPEC producers (Iran, Iraq, UAE, Saudi Arabia, Kuwait) expanded domestic spending by 48 percent per year. Venezuela’s government expenditures increased by nearly 75 percent in one year.21 Iran had 108 projects averaging over a billion dollars each in the 1970s.22 The massive expansion in government spending caused inflation, wiping away the value of people’s savings. In the Middle East OPEC countries, inflation was about 15 percent per year during the 1970s’ spending boom, and in Mexico, Indonesia, and Nigeria, inflation exceeded 25 percent per year during this period. Oil k2 Azerbaijan EconomyDrop in oil prices causes political instability and crisis Svetlana Tsalik, director, Caspian Revenue Watch, Central Eurasia Project, Open Society Institute, 2003 “Caspian Oil Windfalls: Who will benefit?” http://archive.revenuewatch.org/reports/051203.pdf
Svetlana Tsalik, director, Caspian Revenue Watch, Central Eurasia Project, Open Society Institute, 2003 “Caspian Oil Windfalls: Who will benefit?” http://archive.revenuewatch.org/reports/051203.pdf
Jayhun Molla-Zade, (president of the US-Azerbaijan Council in Washington, DC. He is also the editor-in-chief of Caspian Crossroads), 2006 (NO date given, year derived from hyperlink), Azerbaijan and the Caspian Basin: Pipelines and Geopolitics, www.demokratizatsiya.org/Dem%20Archives/DEM%2006-01%20molla-zade.pdf The government of Azerbaijan has also signed some other agreements. A new consortium has been established to develop the Karabakh oil fields, where again LUKoil was invited and received quite a substantial percentage in that field, as did the Italian company, Agip, and America’s Pennzoil. So oil and transportation are extremely strategic and important for Azerbaijan’s independence, both politically and economically. If a second oil boom occurs in Azerbaijan, it will really help people to look positively on market reforms, democracy, and Azerbaijan itself, with all of its problems—the refugee problem, the humanitarian disaster, and the economic decline. Seventy percent of the main manufacturers are currently shut down because of the disruption of economic ties with the former Soviet republics and the blockade imposed by Russia during the war in Chechnya on Azerbaijan, as well as some blockades that have been imposed on Azerbaijan by Iran from time to time, especially when Iran was pushed out of contention for participation in the AIOC consortium by the U.S. government (under U.S. government pressure, Azerbai jan denied Iranian participation). In addition, of course, Azerbaijan is, as we say here in America, in a bad neighborhood, and whether Azerbaijan will be able to survive as an independent state, keep its secular pattern in the society, and build a real multiparty democracy will largely depend on the presence of the West in Azerbaijan, the support of Turkey, and the support of other countries that look favorably on Azerbaijan. Although they are distant, they have enormous power and a big say in world politics (I mean the United States, of course). The oil money inevitably will let Azerbaijan rebuild its economy, bring in new technology, and send its young people to study abroad, as the case was at the beginning of the century, and bring new, progressive ideas back. This is kind of a “good case” scenario. There are several other scenarios, including the “bad case” scenarios, and on such a lovely spring day I don’t want to talk about bad scenarios. But I hope there will be questions Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 9.54 Mb. Share with your friends:
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