President of the Republic of Azerbaijan Ilham Aliyev, who is on a working visit to the Federal Republic of Germany, has attended the Energy Security Roundtable on the Geopolitics of Low Oil Prices as part of the Munich Security Conference.

Moderator of the event David Sanger, chief Washington correspondent for The New York Times, said guests from different countries are attending the round table, adding they will share their views on the current situation and prospects of the oil market.

David Sanger put a question to President Ilham Aliyev.

David Sanger: You are living in a region that has been, if anything, overly dependent on oil for its economy. There were many calls over the past decade, decade and a half, for the entire region to diversify more, starting with Russia and also other nations in the region. And I am wondering now what you believe the political effects are going to be of this level of oil price, if it remains sustained for an unlikely period?

President Ilham Aliyev: Thank you very much. You are absolutely right, the countries of our region are oil producers and as far as Azerbaijan is concerned, for us as an independent country, oil development and investments in oil and gas were vital in the early years of our independence. When Azerbaijan became independent economy was almost destroyed, there was stagnation, economic, financial crisis. Therefore, inviting major oil companies to invest in Azerbaijan’s oil and gas sector for us was not only attracting investments. For us it was strengthening our independence and finding the ways for ourselves to succeed. Since that time twenty years have passed, and we managed not only to attract large investments in oil and gas and become an important producer and exporter of oil and soon of natural gas. But, at the same time, we invested largely what we earned from oil and gas into non-oil sector, particularly in infrastructure. Therefore, our dependence on oil factor reduced dramatically during last five-ten years. Oil is only thirty percent of our GDP. We want to have the same picture in our exports. So it’s not the case. More than ninety percent of our export is oil and gas. Therefore, the task in the coming years will be to diversify our export potential, and here, of course, we come to the point of necessity to continue economic reforms, create even better conditions for private sector, attract more investments and start a large-scale privatization program. All of these elements have already been declared as our state policy, and I am sure that we will succeed. As far as the political risks which you are talking about are concerned, it depends on countries. Every country has its own political situation, its own difficulties and, of course, economic situation and day-to-day life of the people influences the political stability and the political development, but I think the most important is the understanding of the society of this cyclic character of oil prices. We lived at a time of high oil prices, now we live at a time of low oil prices, and the most important for us will be when the price of oil goes up again to continue these reforms and reduce the dependence on oil and gas as much as we can.

David Sanger: Can you tell us, as you move to an attempted privatization, was it easier to do that and a lot more attractive when oil price was hundred than when it was thirty? So tell us whether or not you’re finding that it is affecting interest in investment, and whether or not it is slowing down any of other reforms.

President Ilham Aliyev: Actually, I think that when the oil price is high the government, of course, would do everything in order to keep the most important and attractive segments of economy in their hands. When the price is thirty dollars, the government is more ready to privatize largely. Therefore, I think for foreign investors today’s situation with the oil price is more attractive. Today we need privatization more than investors to privatize our assets. And, of course, we need to find the balance in this area, so that the government gets its share, and investors, and here we come to an important point of economic reforms, improvement of business climate and, you know, continuation of this path of privatization, and reduction of dependence on oil.

Frankly speaking, we were trying to foresee the situation, which we are facing now, maybe in 15-20 years from now when oil production will start to reduce. We were not prepared for this period. Actually we were planning to start to prepare for post-oil period after 2030. But as I said recently at the Cabinet of Ministers meeting for us the post-oil period already started. And it was a surprise. Frankly speaking, no one I think could imagine that price of oil will go down four times. We were not ready. Nobody was ready. Therefore, we had a very short, you know, time frame to find a way how to balance the budget, how to continue the social programs, and which investments to cut. It was not easy because we were used to price higher than hundred dollars and we had, of course, development plan for many years. We have a concept of development “Azerbaijan-2020” based on high oil price. Now oil price is low.

So it was a real challenge. But again, due to the policy of diversification and investments in infrastructure, we, I think, managed to find a way out from this situation with minimum losses.