Institute for War and Peace Reporting | Giving Voice, Driving Change

Azerbaijani Power Showdown Looms

Tens of thousands of refugees could be the first to suffer if a row between the government and a Turkish electricity firm over unpaid debts is not resolved.
By Nurlana Gulieva

Barmek, the Turkish company running the electricity network in the Azerbaijani capital Baku, is locked in an acrimonious row with the government that could lead to an early termination of its contract and plunge the city's power system into crisis.


On November 15, Huseyn Arabul, the president of Barmek, which has been in charge of Baku's power network since January and that in the city of Sumgait since the summer, accused the government of amassing a mountain of unpaid debt.


Arabul said that while customers had failed to pay almost a third of their bills, the authorities had barely reduced any of their debts. On a number of occasions this year, Barmek has exerted pressure on non-paying customers by turning off their electricity supply, depriving colleges and hospitals of power.


Now the state committee for refugees and internally displaced persons, IDPs, which owes Arabul's firm more than four million US dollars, is facing power cuts.


Up to 200,000 refugees from the war with Armenia, who live in what are called "places of compact habitation" - in other words student hostels, hotels and makeshift housing - could be affected.


"People use electricity to cook their meals and to heat their rooms," said Shamil Mekhtiev, deputy chairman of the Organization for the Liberation of Karabakh, which works closely with the IDPs. "We have already been getting reports that electricity is systematically being turned off in some buildings. A cut in supply could trigger a serious social explosion among these refugees."


Mekhtiev said he blamed the government, rather than the Turkish company, for the growing electricity crisis.


However, the Azerbaijani authorities say Barmek is at fault. Earlier this month, finance minister Avaz Alekperov said the Turkish firm had simply proved not up to the job of actually collecting payments for electricity consumed. The minister said the government was considering reviewing several points in the contract it had signed with Barmek.


The latter bought a 25-year lease on the Baku electricity system last December and began operating it on January 1 this year.


An earlier tender was won by Siemens, which estimated the investment needs of the project as being worth 770 million dollars. However, the German company asked for precise government guarantees before it took on the network. "Our managers and experts came to the conclusion that this project would not be profitable without additional guarantees," local Siemens representative Hans Jurgen Betke declared.


After the German firm and the government failed to strike a deal, Barmek entered the game. It signed a contract in just two and a half months and received no extra guarantees from the authorities. In the summer, Barmek took over the electricity network of the large city of Sumgait, 30 km north of Baku.


The Turkish firm promised to spend 300 million dollars in investments and pledged in return not to ask the government to raise electricity prices until 2005.


So far, Arabul said, his company has put vast amounts of resources into Azerbaijan and got little in return. He said that under the contract, his company had committed itself to buying electricity off the state energy company Azerenergy at expensive rates.


In order to manage to do this, he said, Barmek was forced to borrow 65 million dollars at a 14 per cent rate of interest over ten months. But so far, it has paid back only 150,000 dollars of the loans. "I did not think it would be so difficult to work in Azerbaijan," Arabul told IWPR. "It is a very specific country, which is like no other."


Finance minister Alekperov has brushed aside the company's complaints and labelled the methods it was using to improve revenue collection "absurd".


"The company must fulfil its obligations, revenues must be increased and order must be imposed," the minister declared, adding that the economic development minister and prime minister were now reviewing the problem.


When it comes to electricity bills, most Baku residents are generally on the government's side. According to surveys, many people complain that they are being billed for more money than the power they have actually used.


Moreover, the new owner of the grid has taken to fining its customers for the smallest offence. For example, if a householder is not home when the Barmek collectors come round, he or she can be liable to a fine of 20-30 dollars - an enormous sum for a country, where many people earn just five to eight dollars a month.


The head of Barmek does not accept these criticisms. "Many people are trying to 'turn back' the numbers on the meters," Arabul said. "But they forget that a computer is now watching their activities, which compares their past and present figures and gives an extremely accurate reading of the energy they use."


Arabul advised Baku consumers "not to make provocative actions, since they end up only harming themselves".


The company and government have also clashed over the refugees' power problems. Barmek says it has more than 18,000 refugee customers than the government has on its lists and these families are using up much more electricity than the state committee is prepared to admit.


"The government is giving the refugees just three dollars a month for all their utilities, but Barmek calculates that they need four dollars just to pay for their electricity," said Arabul.


The Turkish company chairman threatened he would take the refugee committee to court if it did not pay its debts. He also warned that his company would deduct the amount it was owed by the state from the sum it was due to pay Azerenergy for electricity.


If Barmek and the government do tear up their contract, the consequences for ordinary people could be drastic. Two other foreign investors have revoked contracts to buy the Garadag Cement and Azerallyuminy factories in Azerbaijan in the past three years.


But the Baku electricity network is a far bigger enterprise and Barmek has already invested 6.8 million dollars in modernising it. If the Turkish firm pulls out of either of the cities it is operating, it could plunge Azerbaijani into a serious power crisis.


Nurlana Gulieva is a correspondent with Echo newspaper in Baku. Leila Amirova is a freelance journalist in Baku.


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