Azerbaijan's Lost Savings

Election promises that Soviet-era savers will at last have their accounts unblocked fail to impress disillusioned voters.

Azerbaijan's Lost Savings

Election promises that Soviet-era savers will at last have their accounts unblocked fail to impress disillusioned voters.

Not for the first time, the Azerbaijani government is promising to pay out billions of Soviet-era roubles frozen in bank accounts since the collapse of the USSR. With almost three million votes at stake, the pledge has become an important election issue for government and opposition alike.


Critics of the scheme say it is an empty electoral promise which will never be fulfilled.


On September 2, just four days before campaigning for the November parliamentary ballot officially got under way, Finance Minister Avaz Alekperov announced that 200 billion manats, about 45 million US dollars, will be set aside in next year’s government budget to begin reimbursing the two and three-quarter million Azerbaijani citizens who found their life savings frozen when the Soviet Union collapsed.


Five days later, President Ilham Aliev confirmed that repayments would begin in 2006.


After gaining independence in 1991, the governments of republics like Azerbaijan became responsible for clearing domestic debts such as the money held in personal savings accounts, while Russia assumed the USSR’s sovereign debt. In Azerbaijan, most of these funds now sit in Capital Bank, the heir to the local branch of Sberbank, the USSR-wide savings institution.


Freezing private accounts was supposed to be a temporary move while the various bank branches in the newly independent republics disentangled themselves from their former head offices in Moscow, and until systems were found for converting the old rouble into new currencies. But somehow the money remained stuck in the new banks, and over time the possibility receded that deposit-holders would receive their cash at the nominal exchange rate of Soviet times, when the rouble was pegged at one to the dollar.


In 1993, Azerbaijani banks did pay some of the money held on deposit, but savers were very dissatisfied with the deal.


Yusuf Abdulov, an Azerbaijani political émigré now living in Germany, recalled the uncertain times, “My mother saved every penny she could to provide for our future. In 1993, she was called into the bank and given 18,000 manats in exchange for the 18,000 Soviet roubles she had saved… At the point when her savings were frozen, one rouble was equivalent to just over one US dollar, but instead of getting 18,000 dollars, my mother got the equivalent of five dollars paid in manats.”


If the government does now begin paying out the money, the big question will once again be what rate is set for converting the defunct Soviet monetary unit to the Azerbaijani manat, a currency which although now stable, has seen significant depreciation since its introduction in 1993. Some savers still hope they can claim a one-to-one conversion into US dollars, but this seems unlikely – not least because the notional sum in dollars would far exceed the total assets held by Azerbaijani banks, put at 1.5 billion dollars at the end of last year.


Academy of Sciences economic analyst Allahyar Muradov is among those who believe the government now owes deposit-holders 5.46 billion Soviet roubles or the same number of dollars. That leads him to conclude that neither the 45 million dollars earmarked in the 2006 budget nor the overall allocation of one billion dollars cited in a draft law for repaying the money is anything like enough.


Former prime minister Ali Masimov, who is now one of the leaders of the opposition bloc New Policy, does not agree that the situation is hopeless. He says that with an average frozen account holding 2,000 Soviet roubles, “if you count one rouble as equivalent to one dollar, it should be possible pay back a proportion of each person’s savings. It is domestic debt, and the government has an obligation to its citizens to pay it back.”


Azerbaijan is not alone among former Soviet republics in failing to unfreeze Soviet accounts. Latvia and Lithuania have repaid savers in full, while Russia and Kazakstan have paid out some of the cash.


Masimov believes that even if it is impossible to pay the debt in full, there are lessons to be learned about how other post-Soviet states have tackled the issue. “Instead of cash, investors could be offered some property or stock in the privatised parts of state-run companies,” he said.


Ali Alirzaev, who sits on parliament’s economic commission, is optimistic that the measures will be pushed through this time, despite previous failed attempts. He told IWPR that while draft laws on compensating savers were put before previous parliaments, there were simply insufficient funds to make them happen. He believes that the new law now under discussion could be passed next year because - unlike neighbouring Armenia and Georgia which have been just as dilatory = Azerbaijan now has the oil revenues to underwrite an index-linked repayment scheme.


Opposition politicians say the government’s pledge is just an electoral gamble which cannot be taken seriously until the right mechanisms and judicial procedures are put in place.


“The ministry’s announcement is aimed at the voters,” said economist Rasmiya Ashrafova who is standing as an independent in the November ballot. “Every person who has a savings account is another vote. And even though no one really believes it any more, they can’t help showing an interest when promises are made to pay them their money.”


The head of the deposits and savings department at Capital Bank, Amina Azizova, told IWPR that the bank did not have the money to pay out rouble savings at a rate of one to the dollar, but confirmed that once parliament approves a law on index-linking such accounts, the bank will begin putting it into practice. She noted that only savings deposited before 1992 will be index-linked.


Capital Bank would not say how much it held in rouble accounts, or in the Soviet-era dollar accounts frozen at the same time. Nor would it discuss how many savers were involved, as this was classed as confidential information.


The repayment scheme, if it is implemented, will not cover Soviet-era savings held in dollars, which were also frozen after independence and now reside in the Azerbaijani International Bank as well as Capital Bank.


Technically, such accounts should be easier to unfreeze than the Soviet rouble deposits, because the savings are denominated in US currency and could simply be turned into cash without worrying about the exchange-rate fluctuations of all the intervening years.


But Azizova said her institution still did not know what to do about these accounts, and that a separate law would need to be passed to unblock them.


Sona Huseinova, now 70, has a foreign-currency account with Capital Bank, left by her late husband Enver from his days as a Soviet trade official in Istanbul in the late Eighties.


“You could only use the money to buy goods in special hard-currency shops. At the time, a Soviet person had no need for such large sums of money, so we just kept it all in this foreign-currency account,” she recalled.


After independence, the couple found they could no longer access the money.


“My husband is dead now, and I’m an old woman. There is no honest way in which I can get the money out of the bank,” said Huseinova. “How can the government speak of justice when they won’t pay back our savings?”


For many of Azerbaijan’s jaded voters, all the talk of index-linking and exchange rates rings hollow – politicians have made similar promises in the past, only to break them.


“I don’t want to vote for a candidate who repeatedly promises to do something about this, to no effect,” concluded Huseinova.


The process has taken so long that time itself may reduce the government’s obligations. “Many of these account-holders have died since the collapse of the Soviet Union, and their money has been lost irretrievably,” said Muradov.


Elderly people who spent their working lives trying to save prudently now face the prospect of ending their days in penury.


Maya Rasulova, a senior lecturer at the history department of Azerbaijan State University, recalled how she put aside a fee she received for an article published in the then West Germany as a nest-egg, “I had no idea what dollars were, really. In Moscow, they converted it into 5,000 roubles, which were deposited in my savings account. I thought my old age would be secure with that - but now I’ve no hope of ever seeing that money again.”


Now 65, Rasulova has had to go back to work to supplement her meagre pension, and she says there are many people in her position who will be unable to pay even for their own funeral. She said, “When my neighbour Vera Pavlova died, living alone, we held a collection from all the neighbours to pay for her funeral. Although she’d earned an honest wage all her life and put some aside in a savings account, she was buried on other people’s money.”


Shahla Abusattar is a correspondent for the Information Resource Centre of the Oil Industry of Azerbaijan in Baku.


Support our journalists