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In oil crisis, Azerbaijan leader is hostage to father's legacy
February 26, 2016 / 10:55 AM / a year ago

In oil crisis, Azerbaijan leader is hostage to father's legacy

Azerbaijan's President Ilham Aliyev attends a news briefing at the Presidential Palace in Tbilisi, Georgia, November 5, 2015.David Mdzinarishvili

MOSCOW (Reuters) - If Azerbaijan's leader Ilham Aliyev is to steer his oil exporting state out of its economic crisis, he will have to show a resolve not in evidence during his privileged upbringing or in the 13 years since he succeeded his father as president.

Aliyev, 54, is confronting the biggest crisis of his presidency after the fall in the global price of oil wiped about a third off the value of the national currency, caused a sharp economic slowdown and prompted outbreaks of civil unrest.

People who know Aliyev say he is a competent administrator who has put in place important steps to contain the crisis.

But some observers say those are sticking plaster solutions, and that the long-term answer -- real economic reform -- is blocked by a coterie of advisors and ministers Aliyev inherited from his father and whom he is reluctant to push out.

Prime Minister Artur Rasizade has been in the same job since 1998, when he served under Ilham Aliyev's father, Heydar. The influential presidential chief of staff, 77-year-old Ramiz Mehtiyev, has been in the same role since 1995.

Asked if he believed Ilham Aliyev was capable of pushing through real change, Steinar Gil, a former Norwegian ambassador to Azerbaijan, said: "I doubt that. If he really wanted that, why is he keeping all these old guard people?"

"This regime has frozen," said Gil, whose country, via state energy firm Statoil, is one of the biggest foreign investors in Azerbaijan.

Azerbaijan's ability to ride out the storm of low oil prices will provide clues as to whether other oil producers, from Russia to Algeria and Nigeria, can also survive their economic crises without slipping into chaos.

HIS FATHER'S SON

Ilham Aliyev has spent most of his life in the shadow of his father, who worked his way up from poverty to become a senior official in the Soviet Union, then set up newly-independent Azerbaijan as a thriving petro-state.

The younger Aliyev, like many offspring of leading Communist Party officials, studied at the Moscow State Institute of International Affairs. He later taught there.

After his father became Azerbaijan's president in 1993, he was appointed to a senior role in the state oil company and made president of the national Olympic committee, part of a gradual process of grooming him for the highest office.

But according to people close to government circles, Aliyev was ambivalent about the role for which he was being prepared.

One person who worked for the ruling establishment at the time when power was gradually being handed over to the son, said Ilham Aliyev lacked the charisma of his father.

"Ilham is a nice person, but not a great politician," the person said at the time.

OPPORTUNITY TO CHANGE

In the final years of his rule, Heydar Aliyev signed deals with companies such as BP and Statoil to drill for oil in Azerbaijan's sector of the Caspian Sea.

In large part because of those oil deals and subsequent revenue from energy exports, Azerbaijan's economy has grown uninterrupted since Ilham Aliyev was elected president in 2003, two months before his father's death.

In the early years of the younger Aliyev's rule, the new oil production delivered some of the fastest economic growth rates in the world. The slowdown now is therefore a jolt.

While the boom saw flame-shaped skyscrapers rise above the seaside capital housing luxury apartments and a Four Seasons hotel, many of the country's 9.5 million people remain poor. Recent months have seen riot police use tear gas, water cannon and batons to break up street demonstrations.

Matthew Bryza, U.S. ambassador to Azerbaijan until 2012, said Ilham Aliyev and his respected finance minister, Samir Sharifov, had taken some important decisions.

A $34 billion sovereign wealth fund provides a cushion for the economy, the central bank has stopped trying to prop up the manat currency and the budget is being adjusted to take into account the lower oil price.

“What militates against a smooth transition… is that there has not been sufficient macro-economic reform. There has been some but not been enough diversification of economic growth or fiscal discipline. That is the bad news."

"The good news is that those who are in favor of reform see this as an opportunity. This provides some leverage for the financial and economic ministries, the others, to advance reforms,” said Bryza.

However, Gil, the former Norwegian ambassador, said there were promises of real economic reform back when he was posted in Azerbaijan, when Aliyev senior was still president.

"It was talk then and it's talk now," he said.

"I am sure that Ilham Aliyev understands that something has to be done. I do not think he is really capable of doing it."

Editing by Peter Graff

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