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BTC Pipeline Changes the Economic Landscape
By Fariz Ismailzade, Azerbaijan
July marked a very historic milestone in the modern, post-Soviet history of Azerbaijan. A Baku-Tbilisi-Ceyhan (BTC) oil pipeline running for 1,000 miles through three countries between the Caspian and Mediterranean seas was finally completed and officially inaugurated by the Presidents of Azerbaijan, Georgia, Turkey as well as high ranking officials and dignitaries from international organizations and multinational companies.
"It is very important to invest oil revenues into non-oil sectors - create jobs for a growing population of youth, build schools and hospitals, train human workforce, build up the potential of the agriculture, tourism and other industries." -Fariz Ismailzade
The pipeline cost more than $4 billion, making it one of the most expensive infrastructure projects in the world built in the past decade. Beginning in Azerbaijan on the coast of the Caspian Sea, BTC passes through Georgia ending at the Mediterranean port of Ceyhan (Turkey), ready to deliver more than one million barrels of Azerbaijani crude oil a day to the world markets. By-passing Russia and Iran (regional energy monopolists) the pipeline provides easy access for oil from the land-locked Caspian sea to the world markets. Kazakhstan has also pledged to join the pipeline.
Local and foreign politicians, analysts and economists had debated the benefits and disadvantages of this pipeline for many years. Clearly a win-win situation for the host countries that will reap the benefits of transit fees and gain access to alternative energy sources in the region that had previously been dominated by the Russian monopolies. Further, the pipeline strengthens security ties between Azerbaijan, Georgia and NATO-member Turkey as it also creates economic independence from their northern neighbor. Russia and Iran are the clear losers, as their fierce opposition to the construction of the pipeline did not produce any results.
As the geopolitical games around the pipeline calm down and the project becomes operational, the key question will be what impact the pipeline will ultimately have. Azerbaijan is expected to gain close to $200 billion in revenues from the export of oil. With the current annual budget of $4 billion, the revenues seem like a gigantic sum. The Azerbaijani capital, Baku is already feeling the influx of oil revenues. Construction is booming, new fashion stores are opening, and there's a spike in the purchase of foreign cars. The GDP growth rate has reached almost 30% a year, the highest in the world.
Yet, it is vital to remember that most of this growth is temporary. The oil fields are expected to dry up by the year of 2025. Thus, it is very important to invest oil revenues into non-oil sectors, create jobs for a growing population of youth, build schools and hospitals, train human workforce, build up the potential of the agriculture, tourism and other industries. Only by doing so, can Azerbaijan ensure a bright future for generations to come. But will it be able to cope with this challenge? It is a historic moment. Will Azerbaijani people be able to pass this test? Speaking at the opening of BTC, Azerbaijani President Ilham Aliyev said that the pipeline would bring prosperity into the region. Time will show.
