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Azerbaijan: Wage Gap Becomes Sore Point

Foreign oil companies are facing increasing complaints about pay scales for local labor on Caspian projects. But governments also seem to be troubled by questions about the benefits of oil revenues. Our correspondent Michael Lelyveld reports.

Boston, 10 May 2001 (RFE/RL) -- Azerbaijan's President Heidar Aliyev is the latest leader to criticize Caspian oil companies for wages paid to workers, reflecting the pressures that have mounted since business began with the West.

At a briefing in Baku last week, Aliyev reportedly objected to figures presented by the oil consortium for Azerbaijan's offshore project, known as the "deal of the century."

David Woodward, president of the Azerbaijan International Operating Company, said the country had gained over $1.3 billion from the venture led by Britain's BP, including a bonus payment of $360 million.

Other Azeri dividends include $246 million from oil sales, $200 million from local contracting, and $108 million in salaries, Woodward said.

Azerbaijan's ANS television reported that Aliyev took exception, saying, "The manpower you brought from your country is much bigger than ours, and you pay them three times more than you do to local employees. Why do you present it as our profit? You see the cameras? If people hear that we gained $1.325 billion they will ask me, "Mr. President, where's that money?""

The incident suggests that the consequences of cameras and profits have become very different for Azerbaijani officials and foreign firms over the years. AIOC has given dozens of similar briefings since 1994, when it signed the contract for the Azeri, Chirag, and Guneshli oil fields.

The company is now proceeding toward "Phase 1" of its full-field development, with construction of the Baku-Ceyhan pipeline expected to get underway next year. As in the past, the oil giants are promoting the advantages to Azerbaijan. The problem is that the government seems to be worried that the advantages are not being felt.

While the government estimates that the economy grew by over 11 percent last year, a report this month by the United Nations Development Agency says the lives of many Azeris have not been improved. Unemployment and corruption run rampant, and some believe they were better off in the Soviet past, the agency says.

In addition, the economy remains highly dependent on oil. Despite warnings about the bad example of oil-rich countries in the Middle East, there has been little sign that the Azerbaijani economy will diversify beyond petroleum.

As years pass, the promises of broader benefits from oil have proved hard to keep. In the past, Azeri government officials spoke with pride about oil income. Now, they seem more concerned about the publicity.

The change may reflect the waning of early enthusiasm over oil projects, which take years to produce results. In the meantime, hope is hard to sustain in a country that struggles with the burdens of nearly one million war refugees.

While Aliyev has raised questions about the wage gap with foreign workers, the larger problem is also the distance between rich and poor in Azerbaijan. The question of where the money has gone is a potent one for the government, which set up a national fund for oil revenues only recently.

Azerbaijan's recent economic growth has made only a partial dent in the loss from four years of double-digit declines from 1992 through 1995.

But it is not at all clear that oil companies are to blame for the conditions in the country. Most companies are working under contracts that were signed with the same government years ago.

Jobs with foreign oil projects have been sought after because they pay more than most other domestic employment. Yet, the wage gap with foreign labor has still become a sore point, even though the companies must pay more to attract skilled workers from Western economies.

The government in Kazakhstan has raised similar issues in recent months. Following protests from workers, it has brought pressure on oil firms to increase local contracting and improve labor conditions. But as in Azerbaijan, it may be easier for officials to deflect complaints from its citizens onto foreign companies than to explain how the country's revenues have been spent.

Oil exports in Azerbaijan and Kazakhstan are set to rise sharply this year, while questions about the benefits of resources in these countries are only beginning to be asked. The oil projects have taken years to produce benefits, but economic reforms seem to be taking even longer.