Rede auf der 46. Münchner Sicherheitskonferenz - 06.02.2010

Dear ladies and gentlemen,

First of all I would like to thank the organizers of the conference for invitation. It is a big honor to be here and to participate in today's event.

Issues of energy security now become more and more important for global world security. And Azerbaijan as an ancient oil producing country plays its role in providing energy security in our region. I’d like to mention that Azerbaijan is a place where the first oil in the world was produced. So we have a great history of oil production and for many years and decades Azerbaijani oil was used in order to provide substantial supplies to satisfy the world demands.

But when the country became independent in the beginning of 90s, most of our oil reserves were exhausted. We inherited polluted territory and the rapid decline in oil production created a lot of problems for the country. So, we needed a new stage of development of oil business in Azerbaijan. But, how to do it? Because when Soviet Union collapsed all the newly emerged countries suffered a lot of economic and political difficulties. So, the only way for us to restore our pride was to invite to the Caspian sector of Azerbaijan international oil companies. So that's how our cooperation with international oil companies started.

In 1994 one of the biggest fields in the world – Azeri – Chirag oil field was ready for exploration and the Contract of the Century was signed in 1994 which opened the door for multibillion investments to Azerbaijan and to our oil and gas reserves. Since that time we managed to continue our successful energy strategy, established very good and very friendly relations between the government and our investors, created very good investment climate and managed to restore our oil heritage.

So, today the country is fully provided with major energy sources. Our production of oil increased several times and today we are talking about the million barrel of oil a day and investments in production and infrastructure allowed us to diversify the supply of energy resources. We built three pipelines which transport Azerbaijani oil to Black Sea and Mediterranean Sea. And today's level of production, we hope, will continue for decades ahead. That helped us to accumulate the substantial financial resources and to redirect the revenues from oil to the non-energy sector of our economy, education, social sector, healthcare, infrastructure and that is why even in 2009, the year of economic crisis and when oil prices dropped rapidly, Azerbaijan’s economy continued to develop successfully and in 2009 our economy grew more than 9%.

Diversification was one of the priorities for us because we could not afford to be linked to only one route of supply. Now we have three routes of supply for oil and actually that created completely new situation in the region because for the first time the Caspian Sea was, if I may say so, was opened for foreign oil companies. For the first time oil from Caspian Sea was started to be transported to international markets through pipelines and today these pipelines are also used by other suppliers from Eastern shore of the Caspian.

So what has been done in a country created completely new situation. Today we are talking about Southern corridor, projects like Nabucco and other projects to transport natural gas. But it is clear that without infrastructure which was built in Azerbaijan in recent years all these discussions would have been groundless. We opened the door and also managed to create a very good investment climate so that we now have a situation where there is a high level of trust between the investors and the government.

Also, one of the important elements, I would like to mention is that all the major oil contracts in our country are ratified by our parliament and they become law so that no one can change any word. That creates additional confidence with investors and they are absolutely sure that the government even if it wants, it has no right to renegotiate and to get some additional advantage just because of their strong position.

What has been done in energy diversification today creates good opportunities for further development. Before 2007, Azerbaijan was importing natural gas. But we have a huge gas reserve which we started to develop. And, now Azerbaijan is not only satisfying its own needs, but also is the exporter of gas to various directions. And, the level of gas production in our country is growing. This year we hope to have a production close to 30 billion cubic meters of gas and domestic production is roughly just about the third of what will be produced. That means that will have substantial volumes of gas for export. And we know that our gas is needed in Europe and we are working with our European partners on issues of energy security, energy diversification. As I mentioned before we have already existing infrastructure for oil and gas. We have created the corridor which in the future can be used in order to expand production because the reserves of gas in Azerbaijan, minimum estimated reserves are two trillion cubic meters, but it can go up to five trillion cubic meters. So, in other words, it will be enough for at least 100 years to supply not only ourselves and the regional consumers, but also to supply our European partners.

We are working on these issues and Azerbaijan has always been very constructive. We supported all the initiatives of diversification. Today we fully diversified our supply routes. We have three pipelines for oil and four pipelines for gas in any direction. So, any of these directions can be expanded and we are just waiting to resolve all the necessary issues related to agreements between consumers, transitors and producers and to start a new stage of major investments which will be close to $20 billion in order to produce additionally close to 20 billion cubic meters of gas. And, that, of course, will be available for our consumers. And, I think in order to achieve success in the new stage which we are now trying to enter we need to resolve several important issues.

First, there should be a balance of interests between producers, transitors and consumers. If this balance is not achieved then it will be very difficult to move these projects forward. Second important issue is to have a substantial financial package. For any kind of additional pipeline project, there should be a lot of investments. Azerbaijan is ready together with its partners - international oil companies to invest billions of dollars in production of our gas. But in order to bring it to the European market, there should be major investments to the pipeline infrastructure. We can provide technical assistance, our experience, technical experience and experience in negotiating the transit arrangements with transitors. And at the same time, we need to have a fair market price for our resources.

Today’s situation is satisfactory for us because we have now resolved all the major financial problems of our country. We have a full diversification of energy supplies. We managed to diversify the economy. And, in 2009, as I mentioned, economic growth was more than 9%, industrial production growth was 8.6%, inflation rate was 1.5%. Azerbaijan continues the policy of economic and political reforms. And, the World Bank ranked Azerbaijan in 2008 number one reformer in the world. So, liberal economy, market economy and political reforms in combination created a very good climate in our country. We managed to accumulate substantial financial resources. In 2009, despite of the oil prices’ drop, our financial resources were increased and today, it’s more than twenty billion dollars which for a country of nine million is quite enough.

Taking into account that the production profile of oil for decades ahead will be at the level of at least 1 million barrel of oil a day, that means that we will not be, you know, in need for any kind of financial assistance in the future.

One of the major problems which we have and which must resolved as soon as possible in order to be able to implement all the projects which we have in mind is, of course, establishment of peace in the region. For many years, Azerbaijani territories are under occupation by Armenia. For almost 20 years this occupation continues and as a result of this occupation and ethnic cleansing policy, one million Azerbaijanis still live as refugees and internally displaced persons. We want as soon as possible to find a solution to Armenian-Azerbaijani conflict and to restore territorial integrity of Azerbaijan which is recognized by the whole world, by United Nations and all the decisions of international organizations fully support territorial integrity of Azerbaijan. This issue creates substantial threat to regional stability, regional development. Of course, it impedes the full-range regional cooperation and can damage all our plans.

We are fully committed to our co-operation with our partners. We treat all the energy projects from commercial point of view. There should be a substantial commercial element in these projects. At the same time, diversification must be achieved because reliance on only one source of supply can create problems for us in the future. And, I think that the attention which is paid to energy security in the world and particularly in this conference shows how important these issues are. They must be treated with strong commitment, strong political will and the full understanding of regional problems because in our region, in the Caucasus and in the Caspian, issues of political development and economic cooperation are strongly linked.

Now I see the red lamp here and I conclude my introductory remarks.

Thank you very much.