The Caspian Sea has the geographical characteristics of the world's largest inland lake. After cold war came to an end, neighboring countries in the Caspian Sea achieved independence with collapse of the former Soviet Union. They appeared in global oil and natural gas markets as new export countries of oil and natural gas. However, neighboring countries in the Caspian Sea were only to use oil pipeline and natural gas pipeline which were constructed in the time of the Soviet Union for purpose of exporting oil and natural gas to global oil and natural gas markets. As the result of those neighboring countries in the Caspian Sea conflicted with Russia in the interest related to oil and natural gas exporting, they have actively promoted oil and the natural gas pipeline project through non-Russian territory. Azerbaijan is one of those countries which have a positive significance for oil and the natural gas pipeline project through non-Russian territory.
The other countries, major trading company and international organizations (hereinafter called “Development Factors”) have the primary concern for making enormous profits by newly constructing oil and natural gas pipeline for large-scale transportation through non-Russian territory. The strategy of exporting oil and natural gas of Azerbaijan mainly promoted oil and natural gas exporting to European market by constructing oil and natural gas pipeline through non-Russian territory.
In the sight of European countries, they are not only willing to reduce dependency of oil and natural gas import from Russia, but also acquire new oil and natural gas import from Azerbaijan and other countries.
However, the amount of oil and natural gas for reserve is small in Azerbaijan. This means exporting oil and natural gas sustainably in Azerbaijan is limited. Therefore it is necessary for Azerbaijan to tackle the transportation of oil and natural gas to Development Factors in order to make oil and natural gas pipeline work stably.
On the other hand, oil and natural gas revenue has a tremendous influence on the national economic activity. In fact the production and export of oil and natural gas are mainly carried out by state-owned enterprises. The benefits obtained from oil and natural gas exports would be directly brought into public treasury of Azerbaijan government. In result of that their income is enormous; Azerbaijan government can carry out any policy for public service without relying on tax revenue from citizens.
In other words, Azerbaijan becomes a rentier state whose natural gas and oil revenue has been taken as the main element of rent revenue.
The percentage of rent revenue of Azerbaijan in 2012 is about 63%. The numerical value is extremely high percentage of rent revenue. Such high percentage of rent revenue not only contributes to provide public service to citizens of the state by Azerbaijan government, but also reduces the job opportunity for them due to strengthening worship to Ilham Aliyev who is President of Azerbaijan.
But this will has hindered development of domestic industry of Azerbaijan.
View full abstract