Spring 1996 (4.1)
Investing for the 21st Century
Is Azerbaijan the Place?
by Betty Blair
"What the Persian Gulf was to the 20th Century may be what the Caspian Sea is for the 21st! The oil reserves there are enormous," observed Bert Denton, when asked why he and a group of private investors from the United States were getting involved with projects in Azerbaijan.
Denton is quick to point out that Azerbaijan is by far the best choice for Western investment when it comes to newly developing oil projects. "The point could be made that Azerbaijan is one of the very few places left in the world, friendly to the West, which has the potential to produce one million barrels a day of oil. Given the present-day, geo-political complexities, most Western investors are hesitating to get involved with the other countries that would have similar capability-Iran, Iraq, Russia or even Saudi Arabia. That makes Azerbaijan obviously the best place to be."
Denton belongs to a group of private investors who are shareholders in Ramco Energy, a member of the Western Consortium, which is developing the gigantic Chirag, Azeri and deep-water Gunashli oil fields in the Azerbaijani sector of the Caspian.
Some of the members of this investment group-Sam Zell, Harvey Eisen, Stuart Sloan and Bert Cohen-accompanied Steve Remp, Ramco's Founder and CEO, to Baku this past January to assess the situation for themselves-to check out Ramco's projects and to determine if there were other kinds of investments they wanted to get involved with.
The investors each hold impressive portfolios, but Zell as Chairman of Equity Group Investments (EGI), is best known, because his company is the largest property owner in the United States. EGI controls more than 375 real estate projects national wide, employs 65,000 people and in 1994 had revenues totally more than $10 Billion.
Though extremely well traveled, the group had not been to any of the former Republics of the Soviet Union since its dissolution and weren't quite sure what to expect.
They came back duly impressed. "If Azerbaijan continues to privatize, it will unlock the historical vibrancy and entrepreneurial spirit of these people," observed Bert Cohen upon returning home to Los Angeles. Just two years ago, there were hardly any privately owned shops on the streets corners. Now businesses are sprouting up all over Baku.
Of course there are risks, given the neighborhood that Azerbaijan lives in. And the war between Armenians and Azerbaijanis certainly complicates investment and requires resolution. But other factors enter into the equation when assessing "Risk-Reward Ratios."
"First of all, we're looking for a government that provides what we call 'a wind to your back'-in other words, that supports and protects foreign investments. We don't want to have to deal with a lot of frivolous rules and unreasonable regulations."
The group met with Azerbaijan's President, Heydar Aliyev, whom Cohen described as having a "steel trap mind which comprehends everything."
They found the President of SOCAR, Natig Aliyev, to be very familiar with Western business practices. "He was very direct with us. We found him more like an experienced Western CEO (Chief Executive Officer) than a political appointee. He knew what had to be done and how to do it."
A visit to Baku's Mayor, Rafael Allahverdiyev, convinced them that Azerbaijanis are serious about social welfare and infrastructure in the city. "Now that Baku's water project has been funded," observed Cohen, "the city wants to provide adequate housing and develop medical facilities such as maternity clinics and the Opthalmological Center.
We were impressed that none of the projects on their priority list were monuments to someone's name but that they were concentrating on infrastructure that would benefit the people. "If these leaders can make the major leap to take their country from a centralized government to a market economy, they'll reap a bonanza over the next 20 years, and they won't need any monuments to themselves. History will be their best epitaph," Cohen remarked.
One of the most significant discoveries was the religious freedom that exists in Azerbaijan, especially given that the USSR was officially atheist and Azerbaijan's own roots are traditionally Muslim. The new Constitution which was ratified this past November fosters the spirit of cosmopolitanism and diversity, and guarantees religious freedom for all-Muslim, Russian Orthodox, Evangelical Christian, Jewish and others. Azerbaijan has no official State Religion. Church and State are separate entities.
"A major issue for us is religious freedom," admitted Cohen. "I don't know of any other country in the former Soviet Union that has the religious freedom that Azerbaijan does. We made it a point to visit members of the Jewish community, who confirmed that religious freedom is a reality in Azerbaijan. We found the community happy to be living in Baku."
"I think the prospects for the future are enormously promising in Azerbaijan. All they have to do is 'tend to their knitting,' as we say. In other words, concentrate on developing and helping their own people by taking care of the infrastructure-housing, education, transportation, medical care, culture, and the like-and things should go immensely well for them." Cohen concluded. "And also," he should have added, "immensely well for those who get involved to make these dreams reality."
From Azerbaijan International (4.1) Spring 1996.
© Azerbaijan International 1996. All rights reserved.