I originally wrote this as a reply on another thread, but think it’s worth spinning out:
[The petrochemical industry of Azerbaijan as a percentage of their economy is] already down to 90% in 3 or so years. And [if it's set to run out in 2050, that's still] a 25-year timeline.
If you remove petrochemicals (and all sub-products worth a total of $36B/y), their remaining exports ($3B/y) are still worth over half of Armenia’s total exports ($5.9B/y). Let that sink in.
And picture what even just a small percentage of that $36B worth of only petrochemical exports (again, 6x Armenia’s total exports) over a 25-year period reinvested into other sectors will do.
All things equal (and they’re not, as they’re already starting to diversify), that’s $1 trillion vs Armenia’s $150 billion. Or in other words, an extra $850 billion that they have to play with over the course of 25 years.
To say we’re at an overwhelming economic disadvantage is an understatement. We have a lot of catching up to do…
Azerbaijan’s non-natural resource exports are also higher (~$4B) than Armenia’s (~$3.6B), so the idea that we’ll "win" due to a sudden disappearance of oil, is also a misbelief.
So what is this idea that the tides will turn when oil runs out other than wishful thinking?
I’m not saying this to be defeatist. On the contrary. I think this mindset breeds complacency. As if it’s not on us to do something, we’ll just siege-mentality wait them out. Corruption this, oil that. We need to shake free of this mindset, and sober up to the work that needs to be done to change this.
Source: All numbers were taken from OEC’s data for Armenia and Azerbaijan. But very achkachapov as I’m on my phone.
Edit to add: Please provide sources for your numbers. I’m actually curious, and want to avoid this becoming a shitshow of actual truths and just made up estimates to support your opinions.
Posted by rudetopeace
14 Comments
100% on board with you. The only thing youa are not taking into account is the fact that Europe doesn’t take such drastic measures against Az for one reason and one reason only, oil. Once that is gone, they won’t really have much use for the western world (given that they are still pro Russian and corrupt from inside out).
What is the point of this? It doesnt matter regardless since Azerbaijan has 80.000.000 state as an ally.
It is painly obvious that Armenia needs to get outside of the box in order to survive, but that means that we should not sit on one place and accept every shit coming at us either. If Israel had such attitude, it probably wouldn’t exist now.
We need to decisively choose the West as our ally without expecting them to help us out of pity. We need to get on board with our diaspora and just plainly send them home by force, like Israel did with jews. WTF are Armos doing now in fucking Syria, Lebanon and Russia? This is state policy failure. We need to liberalize our market, our taxes are insane compared to Georgia. We need to rely less on cars.
I think there are a couple problems with your analysis:
1. Armenian exports in 2023 were 8.55 billion. azeri in 2023 25 billion of which only 3 billion were non oil and gas. (2022 was a good year for gas prices).
2. azeri exports of oil are decreasing not remaining stable. So while there is a continued production of oil it will not take 25 years to run out and even if it did, it would be a nearly negligable amount in only a third of that time. I am not familiar with the source or the exact numbers (referenced at 7.4% for 2022-2023 https://www.intellinews.com/azerbaijan-s-oil-is-in-decline-but-gas-is-growing-309138/) but I have seen roughly 9-10% decline in production yoy. This suggests that the production will be half what it is today in only about 5-6 years and a quarter of that in 10-12 years. Considering that crude oil is the major funder of the azeri budget, that will be a signficant loss.
3. The question isnt about azerbaijan becoming bankrupt, they have nearly a 100 billion dollars in their reserve fund. They can last a few years even without oil and gas (government budget wise), the question is that this kind of finanical decline will ultimately mean that more people will need to access social services, azeri government and the azeri government will only be able to maintain their social supports. Their society is already feeling the impact of inflation with many feeling extremely hurt by rising fuel and transportation costs if this continues to get worse they will have to decide between maintaining an expensive army (which is their leverage) or holding control over thier society (domestic leverage)
4. Losing oil isn’t just about income, its about leverage and international influence. Oil is a large reason that azerbaijan occupies any signficant place in international politics, without it they are much more seceptible to foreign influence and will have a harder time convincing international partners to turn blind eyes.
5. The question isnt just about how long they will last without oil and gas, the question is also how will they replace the oil and gas market with something else? There is literally nothing that can grow within a decade to replace oil and gas in their market even with billions of funding (which they dont really have, their huge income goes to a number of places already, its not like they have billions they can spend, it has to come from somewhere and its gets smaller and smaller each year, keep in mind they are also supposed to be reconstructing NK ie. billions of dollars yearly for ghost towns).
I agree that the Armenian authorities should be weary of relying on the oil collapse of azerbaijan, but the truth is that they are in a much more dire situation than is appearant. The reality is that in 5 years they could discover more oil, and in 5 years, they could be broke, in 5 years we could be the richest in the region after several large investments and technological breakthroughs. 5 years 10 years, its a long time, we will have to wait and see.
Any heavy commodity exporter experiences what is known as “Dutch disease”, where most of the sectors of the economy are depressed at the expense of exporting commodities. When commodities run out, the countries usually experience reverse Dutch disease, which results in rapid development of non-commodity sectors. There are countless examples of this, Netherlands being a good example after which the Dutch disease is named.
Another good example is California. Originally the economy of California was based on exporting gold during the Gold rush in Silicon Valley. However, when gold ran out, other capital intensive areas started developing rapidly such as railroads, or Hollywood. Later on, during World War 2, defense industry became a big theme, after the war ended a lot of those companies repurposed themselves into tech producing companies, which is the current Silicon Valley as we know it.
Capital generated from commodity exports played a crucial role in this transformation.
In summary, when and if oil runs out in Azerbaijan, it will result in a massive transformation and flourishing of their economy via the reverse Dutch disease effect.
>I’m not saying this to be defeatist. On the contrary. I think this mindset breeds complacency. As if it’s not on us to do something, we’ll just siege-mentality wait them out. Corruption this, oil that. We need to shake free of this mindset, and sober up to the work that needs to be done to change this.
Assuming you are right, what work do you think should or even could be done to change the status quo?
If the tech sector keeps growing our exports can also exponentially grow
Don’t care, won’t read!
Their oil will run out and Godzilla will come out of the Caspian around the same time and eat the Aliyevs!
Greater Armenia will be resorted shortly after.
The issue here is that people conflate us doing shit to help ourselves with Azerbaijan’s fossil fuel boom coming to a natural end. They are independent of each other.
We need to do what we can to attain the highest possible level of economic and social efficiency. To this end we must change as a nation. We need to do this irrespective of how much wealth Azerbaijan has.
We don’t have corrupt and inefficient institutions because they have been forced upon us. We have them because we are corrupt and inefficient people.
Being limpdick undisciplined հաստավիզ is detrimental Aliyev or no Aliyev.
Even if we put the numbers aside, relying on this to happen based on a few people’s comments would be sheer incompetence, it’s exactly how you get defeated.
“oh Russia will always protect us”
“oh they will run out of gas”
They don’t look much different, one has to assume it will stay like this, maybe even double, so you prepare for the worst, not the best…
Sorry, but who gives a 💩??
The sooner Armenians and Azerbaijanis stop comparing themselves to one another, and stop hating and loathing their neighbors, the better.
The only thing that matters is border demarcation and delimitation and the signing of a South Caucasus non-aggression pact between Armenia, Azerbaijan, Turkey, Iran and Russia.
Every other topic is just white noise when the Republic of Armenia is concerned.
The infamous “Dutch disease”, political importamce of oil (which in our case is more important than monetary benefits) and upcoming social disaster in azeri society were already mentioned by other commentators.
The only thing I would add, that the enormous corruption that makes everything more costly and less efficient for Azerbaijan won’t make their investment in diversification (even if they could afford it) give any results in feasible time.
For the Dutch themselves, being more efficient and transparent country, it took 30 years to fully recover and some even argue they never recovered. Azerbaijan is has a way worse governance.
The money coming from oil can be turned into investment abroad, like the Arabs. Even though the Arabs run out of oil, they are partners in many businesses in the West, from football clubs to television sets, from real estate management companies to banks. For example, Socar invested in Turkey.
I see that their oil is going to run out soon but they have a ton of gas left, so they’ll still be raking it in for a while. And as others have said, we cannot just hold out for their demise. We need focus on ourselves and growing and diversifying our economy.
Our people need to be building more high tech industry… say arms maybe