Fuel Price Hikes Stun Azerbaijan

A government move to double the cost of a number of fuels has led to a chain-reaction of price rises across Azerbaijan, angering the majority who get by on low salaries.



On the evening of January 5, the government’s price-setting body decided to raise the retail prices of certain commonly-used fuels from the next day. The cost of diesel doubled, as did that of kerosene, while that of heating oil more than trebled.



The government argues that the hikes are necessary to bring domestic fuel prices into line with the rest of the world and end hidden energy subsidies, as recommended by the International Monetary Fund and World Bank. The oil products affected now cost around 40 cents a litre, which still makes them cheaper than in neighbouring countries.



In an official statement, the state oil company SOCAR said the price shift was intended to stop it being profitably to buy up cheap fuel and sell it abroad at a premium while still undercutting world prices. SOCAR said it and the government are both losing out because of the trade, which it estimates leads to some 15,000 tonnes of oil products leaving the country every month.



SOCAR insisted that vulnerable members of society would not suffer because of the price rises, and refugees and internally displaced persons would continue to receive subsidised kerosene for lamps.



That has not mollified members of the public, who say their energy-rich government is hitting them with big price rises but giving them nothing as compensation.



“Most urban transport vehicles and trucks run on diesel,” complained Safira Gulieva, a pensioner in Baku. “Naturally, prices immediately rose for everything – no one is going to work at a loss. But my pension has not changed, it’s still 45 [US] dollars a month. As always, our government is thinking only about its own profits.”



On January 6, almost all minibus and bus drivers in Baku doubled their fares. When the city transport department threatened to shut down their routes if they did return to the old fares, the drivers refused to work, saying the old prices were untenable.



“With the current tiny cost of tickets, it’s simply not profitable to work in public transport and until the government puts up prices, we won’t work,” one striking driver told IWPR.



Economic development minister Heidar Babayev, who has spearheaded the policy, dismissed the strike, calling it “an initial reaction to the fuel price rises”.



“There are no grounds for the [transport] price rises,” said Babayev. “One part of the transport system uses diesel and the other uses petrol. The former were getting bigger profits than the latter. One of the reasons for raising diesel prices was to do away with this difference and to increase competition.”



One immediate effect of the dispute has been a dramatic decline in the number of buses on routes between Baku and the rest of the country.



“I travel from Sumgait to Baku [about 30 kilometres away] every day for work,” said 24-year-old Nigar Ismailova. “The journey usually takes me an hour and a half. Now I have to spend almost half an hour waiting for a bus, when there was no such problem before and buses left every two minutes.”



The mayor’s office in Baku has now proposed doubling transport prices within the city. Drivers have agreed to return, to work on condition that the fares are indeed put up.



The news has further depressed city residents who are already forking out extra money for fuel.



“I used to spend ten dollars a month on transport and now it will be 20,” said Tofik, who works at Azerbaijan’s Academy of Sciences. “And my salary is currently 100 dollars a month. I demand that the government compensate us for the price rises and increase our salaries immediately!”



Minister Babayev has admitted that the fuel price hikes will cause a spike in the inflation rate, including food prices as farmers are heavily reliant on diesel.



Sadykh Murtuzayev, head of the union of farmers of Azerbaijan, said farmers were being badly hit by the new cost of diesel as they got ready for the spring sowing. He said productivity could decline by a third as a result.



On January 10, as Azerbaijan celebrated the Kurban Bairam religious holiday which generally involves plenty of eating, there was a sharp rise in the price of meat.



“The price of lamb rose to six to eight dollars a kilo, even though I used to buy it for no more than four dollars,” said Gulnara Husseinova, a nurse. “On my [monthly] salary of 90 dollars, I decided to go without meat on this holiday.”

“We bring in lamb from the Hajikabul region,” explained trader Arzu Mamedov. “We used to up the retail price by two dollars a kilo because of transport costs. Now that has gone up to four dollars because the deliverymen are asking for twice as much.”



A government-employed economist who in principle backs the need for a rise in energy prices told IWPR that the change had been brought in too hastily. Agakerim Hajiev, who works for the Centre of Economic Research in the economic development ministry, said that the government had been discussing the idea of a phased price rise with international financial organisations for more than two years.



“First of all it was held up by the presidential election of October 2003, and then by the political developments in [other former Soviet] countries, in particular the orange revolutions, which deterred the country’s leadership from taking this step because they feared a rise in tension,” said Hajiev. “Then came the parliamentary election of 2005.”



Hajiev argues that it would have been better to bring in the price rises gradually as part of a cohesive programme for economic growth.



Fatima Mamedova is a freelance journalist in Baku.