President Aliyev scrambles to head off Azerbaijan protests

President Aliyev scrambles to head off Azerbaijan protests
By bne IntelliNews January 18, 2016

Azerbaijan President Ilham Aliyev has signed several decrees to ease social tensions and differences of opinion within the ruling party following a series of protests across the country that started on January 12 and are still underway.

The president increased the monthly allowance for internally displaced persons (IDPs) and for veterans and victims of the Nagorno Karabakh war by 10%, starting in February. A bloody war between Armenia and Azerbaijan in the early 1990s left 800,000 IDPs in Azerbaijan and many of them still depend on Baku for housing, utilities, tax breaks and pensions.

Furthermore, Aliyev signed a decree increasing the basic component of all pensions by 10% to AZN110 (€64.5) starting in February.

A decree on exempting flour and bread from value added tax (VAT) should result in a 10% to 20% drop in the price of these products, according to Shahin Naghiyev, head of the consumer protection department at the economy ministry. "Previously, the wholesale price of a 50-kilo sack of flour varied between AZN25.5 (€15) and AZN26.7 (€15.6), but now it will cost AZN21.5 (€12.6) to AZN22.5 (€13.2)," he told Trend news agency.

These measures are aimed at protecting vulnerable population groups against a steep increase in the price of food staples after the central bank floated the manat on December 21. The president and his government did not reveal the sources of funding for these social measures. Azerbaijan cut its budget expenditure by 22.9% y/y to AZN16.2bn (€9.5bn) for 2016.

The president also streamlined the state administration as a way to reduce public expenditure. He abolished the State Procurement Agency, the powers of which were transferred to the State Service for Antimonopoly Policy and Consumer Rights' Protection; he merged the State Flag Square Complex Department, an institution tasked solely with overseeing a large flag square plaza on Baku's Caspian Sea promenade, with the Baku Boulevard Department and dismissed the former head of the Boulevard Department, Afgan Shahmarov; and he changed the name of the Economy and Industry Ministry to that of Economy Ministry, keeping the same minister.

It is unclear how many employees these institutions had and whether they will be offered other jobs in the state administration, but an anti-crisis programme under discussion aims at reducing the number of public employees.

Some of the political changes Aliyev made, however, are more controversial. For instance, he appointed Ramin Guluzade, former deputy telecom minister as new Telecommunications Minister after his predecessor Ali Abbasov, a well-respected university professor, was fired in November without explanation. Abbasov's dismisssal is believed to be connected to former National Security Minister Eldar Mahmudov, who was fired in October for alleged corruption and his ministry was abolished.

Aliyev replaced the long-serving head of the presidential administration, Ramiz Mehdiyev, whom Azerbaijanis believe to have been one of the most powerful men in the country and to have made a fortune while serving in his position, with Oqtay Shahbazov.

Both Shahbazov and Mehdiyev are from the Azerbaijani exclave of Nakhchivan, which is also the birthplace of the president and of many powerful politicians and businesspeople in Baku.

Arastun Orujlu, head of the East West Research Centre, a Baku-based think tank, told bne IntelliNews in a January 14 interview that Mehdiyev might be replaced. He also noted that the economic crisis in the country had led to schisms within the ruling New Azerbaijan (YAP) party. "The family of the first lady [Mehriban Aliyeva] has a great deal of influence on politics," he said, "and they are very critical of the government's handling of the economic crisis." The family in question, the Pashayevs, own one of the largest holdings in Azerbaijan - Pasha Group, with operations in banking, construction, agriculture, travel, hotels, restaurants and entertainment.  

Furthermore, the office of the prime minister, which "has become more important in Azerbaijan in recent years" might be under threat, Orujlu said, citing "rumours that the [economic] crisis could lead to the prime minister's [Artur Rasizade] replacement and to a change of government".

The economic crisis, however, is unlikely to result in significant reform of the economy, Orujlu believes, as most of the changes will be cosmetic and aimed at weathering the crisis and alleviating mounting social discontent in the short term, as opposed to addressing issues such as corruption, regional development and economic diversification.