VZCZCXRO1028
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHKB #1338/01 3120501
ZNR UUUUU ZZH
R 080501Z NOV 07
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 4193
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2441
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKDIA/DIA WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 03 BAKU 001338 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/CARC 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
ANKARA FOR FCS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ENRG EFIN AJ
SUBJECT: AZERBAIJAN COMMERCIAL UPDATE, OCTOBER 15-30, 2007 
 
 
¶1.  SUMMARY: This information is drawn primarily from the 
Azerbaijani local press, and has not been checked for 
accuracy.  The opinions and policies expressed in this report 
are those of the authors, not the U.S. Government.  END 
SUMMARY. 
 
--NEW BAKU INTERNATIONAL SEAPORT 
--AIC EXPANDING PORTFOLIO 
--AZERBAIJAN UNAFFECTED BY GLOBAL CREDIT CRISIS 
--EBRD - UNIBANK FINANCING WORTH USD 35 MILLION 
--EBRD POWER PLANT PROJECT 
--AZERBAIJAN GDP TO INCREASE 18.2 PERCENT IN 2008 
--EBRD - UNIBANK FINANCING WORTH USD 35 MILLION 
--GOAJ EXPECTS 13 PERCENT DROP IN INVESTMENT IN 2008 
--AZERBAIJAN MANAT APPRECIATION 
--GOAJ CHANGES PROCEDURE OF STATE PROCUREMENT TENDERS 
--OIL PRODUCTION TO INCREASE 40 PERCENT 
--RUSSIA INTERRUPTED GRAIN SUPPLIES TO AZERBAIJAN 
--SOFAZ RECEIVES ZYKH AND GOVSAN BONUS 
--AIC ANNOUNCES A TENDER FOR ITS BALANCE-SHEET AUDIT 
--TENDER FOR PHARMACEUTICALS, BANDAGE AND MATERIALS 
--TENDER FOR REHABILITATION OF IRRIGATION SYSTEM 
--DEFENSE MINISTRY TENDER 
 
¶2. NEW BAKU INTERNATIONAL SEAPORT 
--------------------------------- 
 
The initial study and assessment for the new Baku 
International Trade Seaport in the Alat district has been 
completed.  The working group has already started designing a 
map of the site. The Transport Ministry announced that the 
feasibility study is expected to be completed by 
mid-December.  South Korea's GS Engineering and Construction 
sent the final draft of a new port to the Transport Ministry 
on September 3.  Relocation of the port will be implemented 
in three phases: 2008-2011, 2011-2013 and 2012-2015 and will 
cost around USD 396 million. There will be 11 berths, of 
which 6 will be constructed at the first phase.  The capacity 
of the port will be 11.6 million tons of cargo by 2015. 
There are unofficial reports that GS Engineering and 
Construction has already been awarded the construction 
contract for the new port. 
 
¶3. AIC EXPANDING PORTFOLIO 
-------------------------- 
 
Heydar Babayev, Minister of Economic Development has 
announced the GOAJ's readiness to continue supporting the 
Azerbaijan Investment Company (AIC) by providing more 
financial resources to the company.  AIC is currently looking 
into 50 different projects and plans to utilize around AZN 90 
million by the end of 2007.  AIC is preparing to be a founder 
of two investment companies with the Islamic Development Bank 
and Kuwait Financial House. 
 
¶4. AZERBAIJAN UNAFFECTED BY GLOBAL CREDIT CRISIS 
--------------------------------------------- -- 
 
The National Bank of Azerbaijan (NBA) continues to monitor 
Azerbaijan's financial stability.  The director of the NBA 
Research & Statistics Department, Emin Huseynov said 
according to the Bank's Financial Stability Committee, the 
global credit crisis has had an insignificant effect on 
Azerbaijan's financial sustainability. 
 
¶5. EBRD POWER PLANT PROJECT 
--------------------------- 
 
The European Bank of Reconstruction and Development (EBRD) 
and the Government of Azerbaijan have signed an agreement to 
provide a USD 92 million loan to the Azerbaijan power 
generation company, Azerenerji, to finance the rehabilitation 
of the AzDRES thermal power plant, the largest power plant in 
Azerbaijan with a capacity of 2,400 MW.  The loan will be 
used to finance a recently signed contract between the 
state-owned power company Azerenerji and China National 
Electric Equipment Corporation (CNEEC) to improve the plant's 
reliability, efficiency, health and safety conditions and to 
reduce carbon dioxide emissions. The financing complements an 
initial USD 115 million loan by the EBRD signed in November 
¶2006. 
 
BAKU 00001338  002 OF 003 
 
 
 
¶6. AZERBAIJAN GDP TO INCREASE 18.2 PERCENT IN 2008 
--------------------------------------------- ----- 
 
Heydar Babayev, Minister of Economic Development, has 
announced that due to the increase in the world oil prices, 
Azerbaijan's real GDP growth for 2008 will make increase 18.2 
percent.  Azerbaijan's GDP grew at 36 percent in 2006 and the 
latest expectation is 29 percent for 2007. 
 
¶7. EBRD - UNIBANK FINANCING WORTH USD 35 MILLION 
--------------------------------------------- --- 
 
The European Bank for Reconstruction and Development (EBRD) 
and Azerbaijan's Unibank have signed an agreement for a 
syndicated loan worth USD 35 million.  The syndicate includes 
Anglo-Romanian Bank Limited, RZB Group, State 
Bank of India, VTB Bank Europe, Indover Bank, Wachovia Bank, 
Chinatrust Commercial Bank, Land Bank of Taiwan, Offshore 
Banking Branch, National City Bank, Banco Efisa, Banque de 
Commerce et de Placements, DHB Bank, Hipoteku 
Banka, and Credit Europe Bank (Suisse). This is the third 
loan the EBRD has organized for Unibank. 
 
¶8. GOAJ EXPECTS 13 PERCENT DROP IN INVESTMENT IN 2008 
--------------------------------------------- -------- 
 
The GOAJ forecasts a 12.9 percent drop in investment next 
year to USD 7 billion.  Domestic investment is forecasted to 
total USD 5 billion, up 6.1 percent, and foreign investment 
is forecast to drop to USD 2.1 billion, a decrease of 38.9 
percent.  Total investment for 2007 is forecast at USD 8.2 
billion, up 14.9 percent from 2006. 
 
¶9. AZERBAIJAN MANAT APPRECIATION 
-------------------------------- 
 
The Government of Azerbaijan expects the Azerbaijani manat to 
appreciate of 5 percent per year until 2012.  In 2005, the 
manat appreciated 4.3 percent and in 2006 it appreciated 2006 
versus the U.S. dollar.  The government expects the manat to 
gain 5 percent in 2007. 
 
¶10. GOAJ CHANGES PROCEDURE OF STATE PROCUREMENT TENDERS 
--------------------------------------------- ---------- 
 
The Azerbaijan State Procurement Agency (ASPA) plans to amend 
legislation on tender procedures.  The initiative is linked 
with introduction of a pilot computerized procurement system 
to operate through the ASPA website www.tender.gov.az.  The 
system of e-purchases will make the selection of contractors 
on goods, works and services more efficient and transparent. 
Annually, the country conducts about 6,000 state purchases. 
In 2006, overall amount of the signed contracts for purchases 
reached USD 2.24 billion. 
 
¶11. OIL PRODUCTION TO INCREASE 40 PERCENT BY 2011 
--------------------------------------------- ---- 
 
GOAJ forecasts oil production in Azerbaijan to total 62.8 
million tons in 2011, up 40 percent from 2007 production 
estimates.  Oil production by the State Oil Company of the 
Azerbaijani Republic (SOCAR) in 2011 is forecasted at 8.6 
million tons, down 2.3 percent from 2007. Azerbaijan 
International Operating Company (AIOC), the operator for the 
Azeri-Chirag-Gunashli project, will increase production by 
55.2 percent to 54.204 million tons in 2011. The government 
said oil production in 2008 would total 52.131 million tons, 
61.011 million tons in 2009, and 63.395 million tons in 2010. 
AIOC will account for the growth, producing 43.381 million 
tons in 2008, 52.311 million tons in 2009, and 54.745 million 
tons in 2010. SOCAR production will begin to drop in 2008 and 
will total 8.75 million tons, 8.7 million tons in 2009, and 
8.65 million tons in 2010. 
 
¶12. RUSSIA INTERRUPTED GRAIN SUPPLIES TO AZERBAIJAN 
--------------------------------------------- ------ 
 
Russian producers have interrupted grain supplies to 
Azerbaijan, according to Minister of Economic Development 
Heydar Babayev.  This is due to Russia's plans to introduce 
 
BAKU 00001338  003 OF 003 
 
 
export dues for grain at the amount of EUR 22 per ton. 
Azerbaijan currently purchases the bulk of its grain from 
Kazakhstan. 
 
¶13. SOFAZ RECEIVES ZYKH AND GOVSAN BONUS 
---------------------------------------- 
 
On November 6 The Azerbaijani State Oil Fund received a bonus 
payment of USD 2 million from RUSSNEFT Apsheron Investments 
Limited in accordance with the Agreement signed between 
Azerbaijan Government and extractive company on the 
rehabilitation, development and production sharing for the 
block including the Zykh and Govsany oil fields. 
 
¶14. AIC ANNOUNCES A TENDER FOR ITS BALANCE-SHEET AUDIT 
--------------------------------------------- --------- 
 
The Azerbaijan Investment Company plans to announce a tender 
for its first financial statement audit.  The audit will 
cover AIC activity from October to December 2006 and entire 
¶2007.  The auditor is also to analyze Company's investment 
portfolio. 
 
¶15. TENDER FOR PHARMACEUTICALS, BANDAGE AND MATERIALS 
--------------------------------------------- -------- 
 
The Center for Innovation and Equipment of the Ministry of 
Health of Azerbaijan) has announced a tender for the 
procurement of pharmaceuticals, bandage and materials for 
medical institutions under the Health Ministry. The tender 
consists of 12 lots as follows: drugs for patients with 
kidney problems; medication for hemophilia thalassemia 
patients; pharmaceuticals for blood donation and blood 
components; medicines for diabetes patients; drugs and serum 
for immunoprophylaxis of infectious diseases; chemical 
agents, nutrients, laboratory and diagnostic appliances, 
means for disinfection, disinfestations and deratization; 
drugs for concession group patients; the most required 
medicines for treatment and preventive treatment; narcotic 
analgesics for anaesthesia, neuromuscular relaxants, 
psychotropic drugs; medical oxygen and liquid nitrogen.  For 
additional details see www.tender.gov.az. 
 
¶16. TENDER FOR REHABILITATION OF IRRIGATION SYSTEM 
--------------------------------------------- ------ 
 
The State Melioration and Water Economy Agency of Azerbaijan 
has announced a tender for the rehabilitation of an 
irrigation system along Mil-Mughan, one of the major 
collectors in mid-Azerbaijan, as specified in a credit 
agreement between the Government of Azerbaijan and the World 
Bank.  The Bank has lent USD 42 million loan for the project, 
which covers 86,000 hectares of irrigated area along 
Samur-Absheron canal and 36,500 hectares along Mil-Mugan 
collector.  For additional details see www.tender.gov.az. 
 
¶17. DEFENSE MINISTRY TENDER 
--------------------------- 
 
Defense Ministry has announced a tender for the design and 
construction of two eight-story buildings.  Applicants must 
submit their proposals in writing and other required 
documents.  The participation fee is USD 1,200 (1,000 AZN). 
Deadline for submitting proposals is November 8, 2007, 3 p.m. 
Address: Baku, Bayil settlement, F. Khoshginabi Street. Work 
schedule, tender offers, and bank guarantee will be submitted 
by November 21, 2007, 3 p.m. The selection procedure will 
take place on November 22, 2007. Contact persons: 
S.Bakhshiyev, V.Nagiyev (994-12 439-49-43).  For additional 
details see www.tender.gov.az. 
DERSE