A remote corner of the former Soviet Union, famed for its oil, celebrated by the Russian communist regime for its wine, is about to be the toast of the Euromarkets. Azerbaijan is issuing a Eurobond in the autumn to announce to the world that its economy is powering ahead, and the markets should stand up and take notice. In the wake of the sovereign issue, markets will also be introduced to Azerbaijan’s banks, the larger of which are planning bond issues over the next year.
Markets will learn for the first time that this little known country that borders the Caspian Sea on one side, Iran on another and Georgia on a third is enjoying an oil bonanza the like of which has not been seen outside the Gulf. Contracts led by BP and other oil majors will ensure that oil and gas are extracted from Azerbaijan’s Caspian Sea fields for a minimum of 15 years. These will put between $140bn and $200bn (depending on estimates of oil production and the oil price) at the disposal of a government whose current gross domestic product stands at $7bn. It is of little surprise that Azerbaijan’s 36% annual GDP growth outpaces that of any other country. GDP per capita has reached $1900.
