The Voice of Mirza Xazar

Viktor Kozeny, a Czech businessman who made millions of dollars from his country's voucher privatization program in the early 1990s, in an exclusive interview with the RFE/RL Azerbaijani Service, urged Azerbaijani President Heidar Aliev to fulfill his promises made in 1997-1998 concerning the privatization program in his country. According to Kozeny, President Aliev and his son, Ilham, personally met with him and other members of Kozeny's investors group in Baku and encouraged them to buy vouchers from citizens.
Kozeny and his investors group intended to buy shares of the state oil company in course of privatization. The president's son, Ilham Aliev, is a vice president of the state oil company in Azerbaijan. "We have invested about $500 million in privatization checks in Azerbaijan," said Kozeny in his interview. But the Azerbaijani government decided in 1998 not to privatize the state oil company. Viktor Kozeny's $500 million worth of vouchers became worthless paper.
The U.S. investors have taken Kozeny to court, arguing that Kozeny deceived them about the risks of investing in Azerbaijan. Kozeny in turn claims that his partners, including former U.S. Senator George Mitchell and the U.S. insurance company AIG, knew of the risks of investing in Azerbaijan.
In an interview with RFE/RL's Azerbaijani Service, Kozeny said that not only he but some of his other partners at the time met with President Aliev and received the same assurances that the privatization program would be implemented:
" Well, we (the president and I) discussed a variety of issues. These issues all centered around privatization -- and obviously it was of great concern to us that the privatization is going to go through and that a sufficient and valuable asset will be privatized in the foreseeable future. (We were) given all the necessary assurances that this is the case. Besides myself meeting Mr. President, also one of our directors, Senator George Mitchell, met with him and confirmed the same," said Kozeny.
Shortly after the first part of the interview with Viktor Kozeny was aired, the newspaper "Alternativ," with close ties to the President's Office, reacted promptly, claiming that President Aliev or his son Ilham never met with Kozeny. The paper admitted Kozeny may have been tricked by some officials, but rejected his claim that President Aliev made any commitments to his group.
However, after the second part of the interview was aired, the same paper admitted that President Aliev meets with all foreign investors, but denied again that he made any commitment to Viktor Kozeny.
The head of the State Property Committee, Nadir Nasibov, who also was mentioned in Kozeny's interview as one of the high-ranking officials involved in the transaction in his interview with the local newspaper "Zerkalo," denied the accusations made by Kozeny. Nasibov refuted Kozeny's charges that the Azerbaijani leadership deceived him and his investors group.
Viktor Kozeny in his interview expressed optimism that he will win the court case and the Azerbaijani government will finally give up and let the privatization program go on, which means letting Kozeny use his $500 million in vouchers. It is still too early to argue whether this optimism that the vouchers bought in Azerbaijan will pay off is real, or surreal.
(Mirza Khazar, 20 July, 2001)

EXPERT Joshua Kucera: 9/22/06 Those Playing Caspian Basin Energy Game May Suffer from “Irrational Exuberance” -- Expert Policymakers are suffering from “irrational exuberance” when it comes to Caspian Basin energy issues, a US expert on the region says. The Caspian Basin is now the scene of intense competition among the United States, Russia and China, which are all battling for control over natural resources and export routes. [For background see the Eurasia Insight archive]. Maureen Crandall, an economics professor at the Industrial College of the Armed Forces at the National Defense University, said during a September 20 appearance in Washington that the Caspian Basin’s profit potential is probably exaggerated. To support her contention she pointed to questions about the region’s reserves of oil and gas. According to her own estimates, the entire region will be producing 3.6 million barrels of oil per day by 2015, and 3.36 million in 2020. Of that, Kazakhstan will be the largest supplier, and its production is projected to peak at about 2.5 million barrels per day. Her figures are significantly lower than official Kazakhstani estimates, which peg peak production at roughly 3.5 million barrels per day. “Saying it does not make it happen,” Crandall said. Turkmenistan is another country where reserves and production capacity are coming under question. The country currently produces about 60 billion cubic meters (bcm) of natural gas annually, of which roughly 75 percent is exported. Turkmen leader Saparmurat Niyazov has deals in place to ship 130 bcm of gas to China, Russia and elsewhere by 2009. Many experts believe Turkmenistan’s reserves are not sufficient to meet these export commitments. [For background see the Eurasia Insight archive]. Turkmenistan has not released the results of an independent audit of its energy reserves. From a financial perspective, oil and gas extraction is not going to be as good a business proposition as some might have earlier expected, Crandall said. “I’m suggesting that because the investment climate has changed, this hype is unwarranted,” she said. “Reality has caught up to the oil companies.” She was a featured speaker in a discussion -- titled "Caspian Energy: Over Hyped and Under Risked?" -- jointly sponsored by the Central Asia-Caucasus Institute and the International Energy and Environment Program, both at the Johns Hopkins School for Advanced International Studies. Crandall also has recently written a book on the same topic, Energy, Economics, and Politics in the Caspian Region: Dreams and Realities. Her presentation was followed by a rebuttal by S. Frederick Starr, the chair of the Central Asia-Caucasus Institute. Starr generally agreed with the premise of Crandall’s presentation and book. “Was this [energy speculation] over-hyped? I think that’s fair to say,” he said. But he went on to criticize her focus on the region’s negative aspects. He argued that the oil-and-gas industry has brought benefits to the Caspian Basin. He lauded Washington for always providing strong backing for construction of the Baku-Tbilisi-Ceyhan (BTC) pipeline. The so-called “deal of the century” that created the BTC option was signed in 1994 during the Clinton administration. [For background see the Eurasia Insight archive]. Starr focused on Azerbaijan, saying the country’s leadership deserves plaudits for using petro-profits to build housing for internally displaced persons, and for other infrastructure initiatives. Azerbaijan’s State Oil Fund, according to official statistics, had over $288 million in expenditures during the first six months of 2006, of which $29.8 million, or just over 10 percent of the overall funds, was earmarked for infrastructure projects. “I think this is a responsible use of money,” he said. He also noted that in Kazakhstan a middle class is rapidly developing, and poverty is falling as a result of oil and gas revenues. “This is transforming the region [the Caspian Basin] … their prospects have been transformed by the BTC pipeline already, and it’s just begun,” Starr said. “This is an extremely important development and it bodes extremely well for the prospects of stability and security in the region,” he said. Starr did not mention that corruption, fueled in large part by the oil-and-gas sector, remains a significant problem in the region -- something that could seriously undermine stability if left unchecked. According to the watchdog group Transparency International, Azerbaijan stands alongside Uzbekistan as among the most corrupt governments in the world. The corruption situation is even worse in Turkmenistan and slightly better in Kazakhstan. [For additional information click here]. Concerning Kazakhstan, the federal trial of an oil consultant accused of funneling millions of dollars to top Kazakhstani officials is scheduled to start this fall in New York. [For background see the Eurasia Insight archive]. Several experts have also expressed concern that Azerbaijan does not possess a strategic plan on how to use its windfall oil profits to promote stable long-term growth. [For background see the Eurasia Insight archive]. Lacking a plan, Azerbaijan is vulnerable to Dutch disease, in which immense profits generated by the energy sector causes the collapse of a country’s other economic sectors. According to several articles published by Harper’s Magazine earlier in 2006, the Central Asia-Caucasus Institute has received considerable funding from energy companies. [For additional information click here]. Editor’s Note: Joshua Kucera is a Washington, DC,-based freelance writer who specializes in security issues in Central Asia, the Caucasus and the Middle East.

All employees of Iran newspaper, who depicted Azerbaijanis as cockroaches, have been released; APA Agency informs, referring to editor of Yarpag newspaper, published in Iran, Said Muganly. According to him, editorial stuff of Iran newspaper, which is official periodical in the country, was provided with new building in Tehran; it has been already decided to recommence its publishing since October. Also, Mr. Mungaly informed that the editor-in-chief of the Iran newspaper, which outraged Azerbaijanis and caused rallies, as a result of which tens of protesters were killed, was released too. “At present, martial law is imposed de facto in cities of South Azerbaijan. Activists of restoration of Azerbaijanis’ rights are being repressed. Majority of Azeri journalists is at prisons now,” Mr. Muganly stressed, pointing out that “such situation will not last for long and Azerbaijani Turks will start a new movement of resistance.” IA REGNUM