Tag Archives: economic crisis

Azerbaijan – Economic crisis and international attitude

Ilham Aliyev, the president of Azerbaijan, seems increasingly concerned about international criticism of his country. In Aliyve’s words: [International circles] are trying to present Azerbaijan as a totalitarian and authoritarian country where rights and freedoms are violated. This trend started the day I was elected President” [1].Despite the aggressive tone, this reveals that Azerbaijan is worried about its reputation. This is a change from before and results from the global drop in energy prices, which has severely hit the Azerbaijani economy and, more broadly, the Azerbaijani sense of self-reliance.

On August 24, Mehman Aliyev, head of the independent news agency ‘Turan’, was arrested by the Azerbaijani authorities. However, on September 11, he was released from pretrial custody. According to the analyst Liz Fuller, various developments may have influenced this outcome. One is pressure from international organizations, such as the ‘Council of Europe’ and ‘Reporters without Boarders’, as well as powerful countries. Notably, the US State department called for the immediate release of Mr. Aliyev. Concern was also voiced by the UK and France, while the Norwegian Foreign ministry Tweeted: “We are deeply concerned about the situation around the news agency and, in general, freedom of the press in Azerbaijan[2]“. This apparent responsiveness to international pressures represents a clear departure from the past. For instance, during the ‘European Games’ hosted by Baku in 2015, the Azerbaijani political establishment ignored international pledges to free political prisoners, and dismissed negative press reports as merely the expression of a global anti-Azerbaijani bias.

This departure does not result from a weakening of the ruling authorities. On the contrary, as analyzed in this blog, in 2016 a constitutional reform led to the massive empowerment of the presidency. The presidential mandate was extended from five to seven years, and the president acquired the right to dissolve the Parliament under certain circumstances, and to appoint a vice-President (who is, de facto, an unelected second-in-command). With reference to this latter point, in February 2016 President Aliyev chose his wife, Mrs Mehriban Aliyeva, as the vice president of Azerbaijan[3]. This move can be interpreted as an attempt to further consolidate the continuity in power of the whole Aliyev family. In this regard, it is worth mentioning that the current president, Ilham Aliyev, is the son of late president Heydar Aliyev, who ruled the country from 1993 to 2003[4].

A more convincing interpretation suggests that this more conciliatory attitude on human rights issues could be related to the unfortunate effects of the drop of energy prices. In the past decade, lucrative oil exports fuelled the economic growth of Azerbaijan. For years, the profitability of the energy sector provided few incentives to the systematic promotion of other industries. Thus, despite the president’s emphasis on the importance of the non-oil sector, actual investments in that direction remained modest. In November 2016, the Turan information agency complained about the lack of a coherent strategy to support small and medium-sized business[5]. However, the economic crisis required some proper moves in that direction, such as the promotion of tourism.  At the beginning of September 2017, President Aliyev attended the inauguration of the Khazar Palace hotel complex in the coastal city of Lankaran, which is located relatively near the Iranian border. The complex, equipped with all modern comforts, is openly targeting foreign tourists[6].

In addition, Azerbaijan has also relaxed its visa policy. In mid-2015 President Aliyev declared that: “Everyone who wants to come to Baku should be able to receive an e-visa and not have to go to the embassy or elsewhere”. The introduction of e-visas, effective as of summer 2017, is a minor revolution for a country that “was a stalwart on the ‘Hardest-visa-to-get’ list”[7]. The simplification was welcomed with enthusiasm by Arab visitors, especially from the Gulf, and contributed to the enhancement of the tourism sector. Their increasing presence is starting a debate about the appropriateness of building hotels that are compliant with Halal requirements, as a way of further attracting Muslim visitors. Additionally, the quick increase of affordable travel options is a crucial component of the national strategy of tourism promotion[8]. Since the summer of 2017, low-cost flights have operated between Baku and Moscow three times per week. Furthermore, since the end of October 2017, an equivalent air-link has been in place between Saint Petersburg and Baku.

In brief, whether these mechanisms are effective or not[9], the drop in energy prices is posing a remarkable challenge to Azerbaijan. Other than being a crucial economic issue, this situation affects the way Baku perceives itself and its relative weight in the international system. “There can be no talk of political independence without economic independence. (…) [Our guiding principles are] non-interference in each other’s affairs and mutual respect”. These words, pronounced by President Aliyev in his last inauguration speech  (October 2013), seemed to imply that, by virtue of its oil-related wealth, Azerbaijan deserved immunity from international criticism. Since then, things have dramatically changed. The recent receptiveness of Baku to international pressures can be interpreted as the acknowledgement, for the time being, of the inappropriateness of a daring international attitude.

Notes

[1] Turan Information Agency. 2017. ‘Azerbaijan Not to Lose Anything from Leaving Council of Europe – Ilham Aliyev’, October 5 (Retrieved through LexisNexis).

[2] Turan Information Agency. 2017.‘Foreign Ministry of Norway Concerned about Situation around Turan News Agency’, August 30 (Retrieved through LexisNexis).

[3] Notwithstanding the empowerment of the presidential figure, journalistic investigations shed light on the presidential family offshore investments.

[4] President Ilham Aliyev was elected a few weeks after the death of his father.

[5] Turan Information Agency considers that over-dependency from the oil sector is the main feature of Azerbaijan’s macro-economic structure. That makes extremely difficult to bring about radical changes in the short-run [Turan Information Agency. 2016. ‘Unjustified tariffs and rates’, November 30 (Retrieved through LexisNexis)].

[6] BBC Monitoring Trans Caucasus Unit. 2017. ‘Azerbaijan: Southern region media highlights 28 Aug – 10 Sep 17’, October 3 (Retrieved through LexisNexis).

[7] MENA English (Middle East and North Africa Financial Network). 2017. ‘Time for obtaining evisas to Azerbaijan reduced to three hours’, September 4 (Retrieved through LexisNexis).

[8] Global English (Middle East and North Africa Financial Network). 2017. ‘Land of Fire to take new steps for tourism development’, October 25 (Retrieved through LexisNexis).

[9] Turan Information Agency. 2017. ‘Economy Does Not Come Out of Crisis’, October 14 (Retrieved through LexiNexis).

Venezuela – Crisis and Electoral Authoritarianism

This is a guest post from Maryhen Jiménez Morales, DPhil Candidate in Political Science at the Department of Politics and International Relations, Univeristy of Oxford. Maryhen’s thesis explores opposition parties and electoral authoritarianism in Latin America.

In the 1990s, Venezuela experienced a total collapse of its political and economic institutions. Poverty, macroeconomic instability, corruption scandals, and the repudiation of political elites, generated a broad discontent among the society. These traits were embodied within the two traditional political parties, AD and COPEI. The result of this dissatisfaction was the election of outsider candidate and former soldier Hugo Chávez, who promised a Bolivarian revolution, towards a socialist country and participatory democracy. Today, after 18 years of Chavismo ruling, the country is experiencing its most tragic collapse yet. Why so?

Comparing regimes has its risks. However, if we want to understand the differences between Venezuela’s first collapse during the 1990s and Venezuela’s current breakdown, we need to first explore the nature of both regimes. The Pact of Punto Fijo, signed in 1958 by Venezuela’s main political parties back then – AD, COPEI and URD –, gave the country political and economic stability. For all its flaws pointed out by recent observers, its stabilizing significance is crucial to note. Over almost four decades, Venezuela’s democracy started to flourish. The economy stabilized over the 60s and 70s, and a stable middle class emerged as a result of new inclusionary policies. The population began to participate in ways they had never done before, and the military was under civilian control. However, in the 1980s, the country’s economy began to crumble as a result of falling oil prices. By the 1990s, poverty, inflation and corruption had risen, and AD and COPEI lost the support they had built up over the past decades. Finally, in 1998, Hugo Chávez, won the presidential elections with the final goal of establishing a new political system that would erase the power of traditional economic elites and strengthen his personal hold on power. Chávez brought an end to Venezuela’s flawed, but working democracy, and replaced it by an electoral authoritarian regime. Here lies the secret of Venezuela’s second and most disastrous collapse.

Promising to generate true participation and real development, Chávez began to transform the political, economic and social sectors. However, the result of his reforms, alongside his mandate, (1999-2013) had one main goal: to ensure his political power. Step by step, he increased the powers of the president, controlled all state institutions, including the judiciary, parliament, and electoral bodies, and began to actively curb the opposition’s performance by disqualifying popular leaders, imposing sanctions, changing electoral rules or cutting their access to material and non-material resources. He replaced the old political elite, with a loyal civilian and military one. On the social level, he increased social spending to create patron-clientelistic networks organized around his radical leftist ideology that could defend and ensure his revolution. To guarantee the project’s continuity, he named Nicolás Maduro as his successor, who, in April 2013, won the elections with a 1% margin.

Ever since, Venezuela has been advancing towards total collapse. Sector after sector has been breaking down. The main motor of Venezuela’s economy, the oil industry, has suffered large mismanagement and corruption scandals, which has resulted in the loss of one million barrels in production since 1999. The government politicized the company by firing 20 thousand skilled and professional workers in 2002 and replacing them by loyal party supporters. Ever since, Chavismo has been packing the company with allies and military members, thus almost quintupling the payroll from 43.000 workers in 2002 to 170.000 in 2016. Today, the lack of professionalism and maintenance of PDVSA’s facilities results in accidents almost every day. In 2012, a pump collapse in Amuay led to one of the world’s worst refinery disasters in decades, causing at the death of 47 people. The tragedy of PDVSA’s maladministration forces Venezuela – the country with the largest proven oil reserves – to import gasoline for its daily consumption. Corruption has also penetrated the electricity sector. As a consequence of PDVSA’s collapse, the electricity lacks access to fuel to run its thermoelectric plants and to generate power. Once again, the lack of maintenance, and the effects of El Niño, are leading the country’s largest hydroelectric dam Guri to its virtual collapse. For Venezuelans, this translates into blackouts for up to 6-8 hours a day. No electricity also means no water for the same amount of time.

The state’s absolute control, and the catastrophically corrupt management of the economy, has caused the world’s highest inflation predicted to surpass the 500% mark this year and staggering the 1600% threshold next year, according to the IMF. Chavismo imposed a multiple tier exchange rate system which has only increased corruption, boosted the size of the black market, and devalued Venezuela’s currency. In today’s black market, Venezuelans get one dollar for 996 bolivars. A year ago, one dollar equaled 258 bolivars. Although the government praises its control over the economy and especially its fixed price policies, the truth is that Venezuelans cannot find regulated goods in the supermarkets anymore. And if they do, they have to queue for hours to buy them. Poverty has reached 75% this year. This adds 25% to the poverty records of the 1990s, which reached around 49% of the population. Continuing with the maths, the basic food basket has increased by 574,8 % over the past year, and by 25,6% from March to April 2016. A Venezuelan household of five people would need at least 22 times a minimum wage to afford it, according to Cendas-FMV. The state is also neglecting basic health care for its population. Chronic shortages of medical supplies, such as antibiotics or intravenous solutions, food and hygiene are common use in Venezuela’s hospitals. Most recently, however, doctors deal with dead newborns almost every day. On May 15 only, seven newborns died as a result of a blackout that caused the shutdown of the respirators in the maternity ward. Chavismo’s dream of public health care for Venezuelans has turned into a nightmare. Waiting lists for treatment are endless and, if patients want to be seen, they will need to bring the required tools and medicines – all goods they may not afford to buy or even find at the chemist’s.

Politically, as the government has lost power, it has increased repression. Since 2014, it brutally dissolved protests, jailed opposition leaders, and vehemently provoked the shutdown of the parliament, which is controlled by the opposition since December 2015. Currently, it is delaying the possibility of a referendum, knowing that it will lose if it takes place. More than 75% of the population wants Maduro to abandon his office, and even the military – an otherwise unconditional ally of the regime- is beginning to question its support. International actors have distanced themselves from Venezuela. Former regional allies, such as Argentina, Brazil, Colombia or Uruguay have expressed their concerns over the current situation. The OEA, otherwise inactive as to Chávez and Maduro’s regime, activated the democratic charter to investigate the happenings in the country.

How was this all possible during the country’s largest oil bonanza? The answer is not as simple but may bear some leads. The authoritarian nature of the regime has allowed for unlimited control in all state affairs. It is precisely the lack of democraticness and transparency in government spending and further economic activities that has boosted corruption. A small, so-called Bolivarian elite, has disposed over the country’s largest oil income, filling up their pockets, and emptying the state’s treasury.

Although Venezuela is experiencing its largest collapse, some hope for transformation remains. Despite the authoritarian environment, opposition parties have emerged and strengthened their structures. Opponents have understood that only together, they will be able to transition towards democracy. Notwithstanding internal disagreements, a common fact in democratic systems, opposition parties are cooperating under the MUD and have not abandoned the democratic path for political change. Chávez’s populist seduction posed a threat in the past, but it will serve as an important democratic lesson for the future. Venezuela will have to enter a second Pact of Punto Fijo, that leaders ought to keep it place to prevent a third breakdown.

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3ECFF702-EC8C-407F-B32E-324FFDBD549DMaryhen Jiménez Morales is a DPhil student at the Department of Political Science and International Relations. Her research looks at opposition parties in authoritarian regimes in Latin America. She completed an MPhil in Latin American Studies at St. Antony’s College, Oxford. Maryhen holds a BA in Political Science from the Goethe University Frankfurt and has worked for the German development cooperation, the Inter-American Court of Human Rights and the Americas Division of Human Rights Watch in Washington DC.

Kazakhstan – Explaining the early presidential election

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In mid-February, the Assembly of the People of Kazakhstan, a constitutional body chaired by the 74-year-old Kazakh president Nursultan Nazarbayev, aired the idea of an early presidential election. The election, originally scheduled for the end of 2016, will now take place on the 26th April 2015. Under constitutional law, which allows Nazarbayev to seek re-election however many times he wants, an early presidential election is set by the decision of the acting president. It needs to be held within two months of such a decision. In addition, the Constitution requires holding separate presidential and parliamentary elections, which according to the previous calendar, could have ended up scheduled at the end of 2016.

Support for the initiative has been voiced throughout the country by all institutions, with different reasons being cited. Experts widely agree on the fact that a general concern with stability is at the core of the change of date of the presidential election.

‘Snowballing’ support

The Assembly of the People of Kazakhstan (APK) was the first institutional body to call for early elections. The institution, representing more than 800 ethnic associations throughout the country, cited ‘numerous appeals of citizens,’ and the need to give the president ‘a new mandate’ to implement his economic programme. The council then called on MPs in the Majles, the lower chamber of the Parliament, to take on and support an early presidential election. Indeed, nine out of the 107 members of the Majles are elected by the APK, according to national law. The lower house of the parliament backed the proposal with 107 votes in favour, while the ruling party Nur Otan also echoed the call. In an interview with national TV Khabar on February 14th, the poet Olzhas Suleimenov declared that ‘in these difficult times, the leader bears special responsibility. It is then important to support Nursultan Nazarbayev now … Kazakhstan needs to go through several very tough years. We will preserve the country, preserve the people, and develop. .. I am confident our people will support this proposal.’

On February 25, Nazarbayev accepted the invitation and set the date for the early election. During a televised address to the nation, he announced that ‘In the interests of the people… and for the sake of the general and strict implementation of the law, I have taken a decision and signed a decree calling an early presidential elections for April 26’.

Nazarbayev said that he had received numerous messages from citizens expressing their anxiety about the country’s future in light of growing instability and escalating conflicts in the region. The incumbent president quoted a letter from Nina Misochenko, a resident of one of the country’s central provinces. She wrote to the President that she ‘prays daily for our children, for peace and concord in our country, so that no confrontation and no war will come to our home.’ The woman said she cherished the fact that the people of Kazakhstan live quiet and confident lives, dedicating themselves to hard work and raising their children in an atmosphere of peace and stability. Also, citing national security concerns in light of current geopolitical tensions, the president said he felt there is a growing demand among his compatriots for a ‘continuation of balanced domestic and foreign policies.’

Addressing the other concern of the Kazakh population and of the elite as well, Nazarbayev also mentioned the negative effect that political stability might have on the national economy. With the negative consequence that the global economic crisis and falling oil prices are having on Kazakhstan’s economy, the people of Kazakhstan, the president said, need ‘confidence in their future … maintaining jobs, stability, welfare benefits, salaries, scholarships.’

A few days later, on February 28, the country’s Foreign Ministry invited the Office for Democratic Institutions and Human Rights (ODIHR) and the Parliamentary Assembly of OSCE to observe the early presidential election in Kazakhstan.

Explaining early election: economic and regional stability

Stability is at the core of growing political concerns in Kazakhstan. From geo-political and strategic points of view, the Ukrainian crisis has re-ignited anxiety in Central Asia, where significant Russian minorities are present and where the national populations are very diversified with the possibility of ethnic conflict; the discord between Moscow and other Central Asian capitals, among which is Astana, over the Eurasian Economic Union and sanctions against Western produces; and the recent eruption of the jihadi threat in Central Asia – an area in which, however, Astana and all of the other Central Asian capitals are heavily dependent on Moscow when it comes to anti-terrorism measures, make the general regional context far from being stable and safe.

However, it is mainly economic stability that motivates the call for an early election in Kazakhstan. On February 11, in a speech to the government, Nazabayev admitted that the republic was facing economic difficulties and that the government would need to cut spending for 2015-2017. In addition, in the recent months, the oil-exporting country has been heavily affected by falling oil prices, which have lowered from around $120 per barrel in June 2014 to $50 – $60 per barrel currently, and also from the unstable economic situation in Russia, itself hit by lower oil prices and the West’s sanctions over the conflict in Ukraine. Nazarbayev said that he did not plan to devaluate the national currency again, as he did in February 2014, causing protests all over the country. However growth forecasts are not encouraging, with Kazakhstan downgraded to 1.5% growth this year, from a 5.1% forecast in September by the European Bank for Reconstruction and Development. In such a context, the ambitious economic strategy developed by the government called ‘Nurly Zhol’ seems to set unreachable targets. Precisely because of this, ‘we fully support the initiative to hold early elections and we hope that Head of State will continue the fruitful work in the best interests of our people,” said the head of Almaty Association of Entrepreneurs Viktor Yambayev talking about the necessity of implementing the Nurly Zhol – Path to the Future new economic programme and the long-term Kazakhstan 2050 Strategy’ despite uncertainties.

Considering the relevance of economic stability, Dosym Satpayev, director of the Kazakhstan Risks Assessment Group, declared that it is likely that the decision to call for an early vote had been building for some time. After an assessment of the unpopular economic measures to be taken, it is likely that the elite and Nazarbayev himself decided to implement them after an election to counteract the likely loss of support for the government. Similarly, Yang Jin of the Chinese Academy of Social Sciences declared that ‘Nazarbayev wants to reduce uncertainties by winning presidency again, and to ensure the consistency of his policies’.

Whatever the reason, no one really doubts that Nazarbayev will be re-elected.