Power Play in Azerbaijan

The Azerbaijani authorities have swooped on the Azerbaijani-Turkish company Barmek Azerbaijan that has run electricity supplies in the capital Baku for years, in what some predict is the prelude to a transfer of the power system to the Russian energy company UES.



Three high-ranking Barmek executives were arrested on corruption charges on March 13 - among them vice president Amer Gunel and technical director Vafa Agayev - and President Ilham Aliev has publicly lambasted the company for failing the population.



Barmek, which took over Baku’s electricity supply system four years ago, was set to stay in the country for 25 years, and residents originally had high hopes for the Turkish company.



“We were hoping the electricity supply would improve, but that never happened,” said Khuraman Kerimova, 25, a resident of Mardakian near Baku. “Suburban communities get electricity with big interruptions. Locals have publicly protested many times about power failures and problems with installing electricity meters.”



Barmek’s Azerbaijan management currently stands accused under three provisions of the criminal code: abuse of office, fraud and grand embezzlement.



Former economic development minister Farhad Aliev, who spectacularly fell from grace last year and is in custody on charges of an attempted coup, is accused of conspiring with Barmek president Huseyn Arabul to cook the company’s financial records.



Arabul is charged with abuse of office, but has not been detained.



Barmek took over power distribution in Baku, Sumgait and a few other areas of northern Azerbaijan in 2001 in controversial circumstances. Initially the German company Siemens was declared the winner of the tender but this was then overruled and Barmek was awarded a 25-year contract, in an act seen as underlining the then president Heidar Aliev’s closeness to his Turkish counterpart Suleiman Demirel. Barmek pledged 51 million US dollars in investment over the first five years.



The reality was different, said a statement to the press by Azerbaijan’s prosecutor’s office, which claimed, “ No foreign investment activity has actually been carried out, investment financing has been entirely carried out with money that Barmek has collected from consumers.”



The prosecutor general’s office went public with its claims against Barmek a few days after a meeting convened by President Aliev, where Etibar Pirverdiev, president of Azerbaijan’s energy production company Azerenergy, strongly criticised Barmek.



“Barmek is not paying for the electricity we supply,” claimed Pirverdiev. “As of February, they owed us 92 billion manats [around 20 million dollars] in arrears. Because Barmek is not paying, we are unable to repay our loans. Azerenergy is in crisis, and so is Azerbaijan’s electric power system overall.”



Azerenergy owes millions to international banks in loans taken out to finance new power plants and substations. It has now fallen foul of its creditors, who threaten to penalise it, and it risks being unable to find international investors in the future.



President Aliev has an ordered an audit of Barmek’s business. “If Barmek is defaulting, go ahead and do what’s necessary,” he told a government meeting. “Why should we tolerate this state of affairs? There have been a lot of complaints.”



Just a few days before the president’s meeting, Barmek and a few other international companies were declared “good taxpayers” at meeting of TUSIAB, the Azerbaijan International Society of Turkish Industrialists and Businessmen. At the event, Arabul said he was planning to meet President Aliev to tell him the names of government officials he claimed were obstructing his business - but he was never granted an appointment.



According to Arabul, the president was simply too busy to meet him. He also said he only found out about the criminal proceedings against his company from the press. He claimed that incorrect information had been passed to the authorities, although he admitted to the Turan news agency that “this is not to say that my company is 100 per cent perfect. But if we make mistakes, we always correct them.”



Barmek has not commented on the detail of the charges against its staff, but Arabul warns, “If we feel there is any damage to the image of our company, then we in turn are ready to defend it at all levels.”



In his company’s defence, Arabul claims that it has invested 27 per cent more than it had pledged over the past four years, and that it was prepared to fulfil its ten-year investment plan in just two years.



Arabul has filed a 40-page report with the Azerbaijani government setting our contractual violations that he alleges the authorities have committed.



Barmek has already suffered losses in the wake of the criminal investigation. Following the arrests of its employees, it lost control of the company Baky Electroavtomat after the authorities terminated the contract, signed in 2004, to sell Barmek 99 per cent of the firm’s stock.



Officials said the contract had been terminated early due to the Turkish company’s failure to comply with its investment commitments despite repeated warnings from the government.



It is not yet clear who will take over Baku’s electric distribution network if Barmek pulls out. There has been intense media speculation – but little public comment – about the prospect of a takeover by the Russian electricity giant UES. The Russian-language Ekho newspaper reported that UES is a major contender. Arabul admitted that the Russian monopoly had shown “a great deal” of interest in the Baku network.



A switch from a Turkish to a Russian company would be of great political significance. Relations between Russia and Azerbaijan have generally been thawing, and last month President Vladimir Putin paid his third visit to Azerbaijan since taking office in 2000. UES recently opened an office in Baku.



These reports worry some observers in Baku. Hikmet Hajizade, an opposition political analyst, told IWPR, “Russia has always tried to control our country’s economy, in particular Caspian oil. Azerbaijan has always collaborated actively with its northern neighbour and so it is quite possible that UES is interested in our electricity system.”



Ordinary people care less about who runs their electricity network than about how well it works.



“We will welcome any changes,” said Khuraman Kerimova, speaking for many. “We are sick of having to burn candles every evening. That’s what people do high in the mountains. But we live right next to Baku. We shouldn’t be having any problems with electricity.”



Leila Amirova is a freelance journalist based in Baku.