In conjunction with international financial institutions, Azerbaijan has stepped up the pace and content of economic reform. It has initiated government restructuring, reform of the Cabinet of Ministers, begun a second stage privatization program, adopted a new tax code, continued reform of the banking sector, accepted transparent and sound procedures for its newly-established oil fund, and agreed to work on Customs reform.

On the basis of these and other steps, Azerbaijan concluded an economic recovery and growth program with the IMF in June 2001 and expects to reach agreement soon with the World Bank on policy issues and financial assistance.

Our work together on further reforms will help to diversify the economy, strengthen the non-oil economy and encourage optimal use of this country's growing energy export revenues. A July 2001 meeting of the American Chamber of Commerce's board of directors with President Aliyev regarding the business climate has set the stage for further cooperation in the months ahead.

Energy

The U.S.-Azerbaijan energy agenda has made great strides over the past year. As a result, billions of dollars in development decisions are expected from Azerbaijan's oil and gas industry investors in the coming months. Future Azerbaijani prosperity and global energy markets will be the beneficiaries.

Written and oral tests for judges carried out this fall constituted a significant step in raising professional standards in Azerbaijan's courts. Further advances in the rule of law are necessary to help attract investment capital.

Conclusion

Azerbaijan is on the verge of major economic strides forward that offer significant possibilities for U.S. investors and exporters. An opportunity exists for us to help achieve a lasting peace settlement between Azerbaijan and Armenia. This will open the door for hundreds of thousands of displaced Azerbaijanis to return to their homes and create further opportunities for trade, investment and rising prosperity. And with American help, democratic institutions are taking root, and the scope for individual liberty is expanding steadily. These are exciting times in U.S.-Azerbaijan relations.


U.S. - Azerbaijan Relationship
A Choice for a Strategic Partnership

His Excellency Hafiz Pashayev
Azerbaijan Ambassador in the United States

Since restoring its independence in 1991 Azerbaijan's choice in favor of partnership with the United States has been clear and unequivocal.

Following internationally recognized principles enshrined in the Helsinki Final Act and wishing to progress towards Western model of democracy and free-markets-oriented society, we have chosen full-scale economic and political interaction with the United States. Commonality of goals and interests of our nations, meetings between our Presidents and other dignitaries give us reason to believe that these relations will continue developing for the future. A very solid proof to that is also provided by the successful activity of bilateral task forces.

I would like to reflect on the achievements of those 10 years of partnership, on the difficulties we've overcome together. To do so, one has to think in several dimensions, which constitute the very core of our bilateral relations. First of all, there is the political relationship, which is being complemented by equally important economic ties and recently gaining significance military dialogue. All three together are defined by mutual interests of the parties involved and also by the goals of the American foreign policy in the region.

Allow me to address the above-mentioned three areas one by one.

Political cooperation is defined by the commonality of goals and principles between our two nations. It has been especially energized with the US assuming co-chairmanship of the OSCE Minsk Group, which seeks peaceful settlement of the Armenia-Azerbaijan conflict.

Interaction in political area is guided by the principles of freedom, independence, and sovereignty. Following those principles, in 1992 the US started its programs of assistance to the post-Soviet states, so-called Freedom Support Act, which was aimed at supporting the emerging democracies and the processes of democratic transformation and market reforms already underway at that time. The FSA has done a great deal in promoting these reforms in many of those nations. Unfortunately, in case of Azerbaijan, its effectiveness was undermined by the infamous Section 907, which considerably limited the US government-to-government assistance to my country, as well as our bilateral cooperation. The US intended to assist those of us in the post-Soviet space who have spent a long time living under the well-known ancient Roman principle of "divide and rule" and alleviate burdens of the transition to a different motto, "unite and prosper." The biggest remaining concern, without doubt, has been the fear of being turned into some sort of neo-satellites, and here the United States is the one force which can guarantee this independence. Principle of "unite and prosper" not only allows us to cooperate effectively with the West, it de-facto dictates that kind of cooperation. And, hopefully, we'll make use of this opportunity to the fullest extent.

GUUAM, the group of five, consisting of Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova, provided the United States with a good opportunity to give yet another political boost to the regional nations, this time by supporting cooperation within a genuinely voluntary structure. From the very moment of establishment of this group we viewed it as a political, security and economic alliance designed to strengthen what all of us value above all - our independence and sovereignty. All the member states have arrived to the conclusion that GUUAM can be instrumental in providing achieving this goal on the path of transition to democracy and market economy, which all of us view as indispensable.

Political progress achieved by the post-Soviet nations also necessitated adequate structural changes and in 2001 current Administration finally abandoned the Newly Independent States cliche, thus disassociating us from the past which we do not necessarily hold dear. I am even more pleased by the fact that both National Security Council and Department of State structurally seem to have joined together Europe and Eurasia.

Secondly, economic relations. I would like to start with the energy development. There are not many areas where the commonality of approaches is as obvious as in the field of production and transportation of the Caspian energy resources. Unlike the political cooperation, where our ties were impeded by Section 907, economic interaction between Azerbaijan and the US has been extremely successful from the very beginning. From the early stages of energy development in the basin Azerbaijan tried to raise, through President Aliyev's energy strategy, its visibility on the world energy map, and was intent, despite considerable pressure it experienced, on bringing the American oil producers into this region. Establishing a climate favorable for foreign investments was a crucial element of this strategy.

I believe, we can say that we succeeded in both endeavors. After initial discoveries in Azerbaijan's off-shore sector of the Caspian Sea, which in 1994 led to signing of the "Contract of the Century," huge amounts of hydrocarbons were also found in Kazakhstan, turning the Caspian into the potential major non-OPEC source of hydrocarbons.

Now, Azerbaijan has signed numerous production sharing agreements with foreign energy companies. With that, the idea of the East-West energy transportation corridor will become a reality soon. Emerging pipelines, both Aktau - Baku - Tbilisi - Ceyhan and the one from Baku to Erzerum, will serve as a backbone of this corridor. The corridor will serve as both means of diversification of the transportation options, and as another route for additional transportation volumes, which will become a necessity in further development of the Caspian energy. It also becomes yet another channel of political unification in the region, bringing Caspian energy-producing states closer to the Western consumers of energy. Revival of the ancient Silk Road, including technologically innovative SilkSat project, will undoubtedly play a big role in this process of renewing existing and establishing new ties.

Besides that, direction and tempo of reforming Azerbaijan's economy remain crucial conditions of attracting the American companies beyond the energy-related business. The non-oil sector attracts constantly growing foreign investments, which in 1998 represented just below 40% of total investments, but now has exceeded the 50% level. We hope that recent steps undertaken by my Government, including creation of the oil fund and restructuring of the Cabinet of the Ministers, will lead, along with continued activity of the Bilateral Economic Task Force, to making Azerbaijan even more attractive to foreign investors. With Azerbaijan's financial sector growing steadily and IMF and the World Bank rating my country high as far as its compliance with the requirements of the international agencies is concerned, there are reasons for considerable optimism.

With all the above-mentioned, my country continues to develop successfully, with annual GDP growth of over 10%.

The GUUAM, which I have already mentioned, also has a vital economic role to play. The 2001 seminars of the GUUAM Chambers of Commerce and transportation security experts show that this group has enormous potential and is an effective tool in our efforts aimed at intensifying our multilateral cooperation, as well each member country's ties with the United States.

The last but not least. Military and security- related contacts. This area of interaction, always extremely important, especially in the volatile area of the world where we live, has acquired enormous additional significance after the recent tragic events and the heinous acts of terror against the US. We are with the United States in this international campaign against terrorism, unequivocally and unconditionally, and it brings us even closer together as two allies.

Joint efforts by our two nations in this area lead us to thinking more and more about regional stability and security, be it in the form of a pan-regional structure or individual arrangements.

Azerbaijan, with no foreign military bases or troops on its soil, pursues a policy of integration into European and global security architecture. Our co-operation with the West within the framework of NATO's Partnership for Peace program, as well as bilateral contacts with individual European nations and the U.S. is aimed at strengthening international climate of peace.

We view future development of the region as a process that should move along the lines of creating nuclear-free zone centered around demilitarized Caspian Sea. The need for achieving that status for the Caspian was further demonstrated by the actions of Iran in late July 2001, as was the importance of coordinated steps by the U.S. and Azerbaijan.

Stepping up our cooperation is dictated by common needs in facing the most acute threats of modern age. Visit of Secretary Rumsfeld to Azerbaijan not only became first of its kind, but also underscored the realities, which make our cooperation in this field absolutely essential if we want not merely to survive but to achieve success.

My country welcomes interest of the US Administration and stands ready to further join forces on these issues.

Conclusion

One of the key conditions for the above-mentioned to become fully possible is the necessity to find the peaceful solution to the Armenia-Azerbaijan, Nagorno-Karabakh conflict. Peace settlement of this problem, which upsets regional stability for over a decade now, accelerated after the new U.S. Administration committed growing efforts to this process. The Key West summit with the participation of Secretary Powell, as well as numerous statements of high-level American officials, and especially engagement of President Bush give us hope that the United States is stepping up its activity as a Minsk Group co-chair.

At last, after ten years of unjustifiable existence of the Section 907, the 107th Congress proceeded to eliminate its burden through granting the President of the United States waiver authority. To get rid of 907 is a wise decision, which will greatly catalyze further development of bilateral relations in all of the above-mentioned spheres, also speeding up the peace process. These sanctions made parties to the conflict believe that the US will be stepping up pressure on one side, while the second can proceed, relatively unhampered, with its original policy. Now this false impression is changing.