Azerbaijan: A new chapter?

Photo by Adam Reichardt

However, the unexpected dismissal of Ramiz Mehdiyev, the powerful head of the presidential administration, showed that some shift – at least on the personal level – may indeed be on the horizon in the Caspian Republic. But will it matter for the country’s future direction?

Exodus of the Grey Cardinal

“For years, we have heard the same tale – the president is good and he wants to reform, but Ramiz Mehdiyev keeps throwing a wrench in the works. I wonder who they will have to blame now that Ramiz is gone,” says a journalist from Baku, an avid observer of political life in the country and who asked to remain anonymous. On October 23rd 2019 the 81-year old Mehdiyev resigned from the post he had been occupying since 1995. A few days prior, President Ilham Aliyev accepted the resignation of two other elders, deputy prime ministers, Ali Hasanov and Hajibala Abutalibov, adding that he expects officials of age to make room for the younger generation. Only then did it become clear that Mehdiyev may be next to step down.

Who is the man who stayed in power for nearly a quarter of a century? Ramiz Mehdiyev, an academic, was the shadowy force behind many decisions and policy-making not only in the government of Ilham Aliyev, but also his father’s government, the late Heydar Aliyev who passed on power to his son on his deathbed in 2003. Mehdiyev was known for his close ties to Vladimir Putin’s Russia and was thought to be the main architect of repressive policies against civil society and dissenting voices which began in 2013. Many observers long believed his position was permanent: after all, as rumour had it, he was reporting to Moscow, not Baku.

“Ever since I remember, Ramiz Mehdiyev was there in the office, toiling away, working tirelessly, though no one really knew what he was working on,” says a 46-year old exiled Azerbaijani journalist, Ismail Jalilov, who now runs an online TV show called Let’s Talk Straight in Washington DC. “People in my circles referred to him as the grey cardinal, someone who pulls the strings behind the scenes. I call him Koshchei Bezsmertny (Immortal Koshchei), after a character from a Russian fairy tale: someone who is very old but never dies. A lot of people waited for [Mehdiyev] to go away, either by death or removal from office, so that meaningful reform would finally start,” Mr. Jalilov recalls. “[He] was micro-managing everything in the government, from social policy to even textbooks for children. He resisted change with every fibre in his body.”

According to Natig Jafarli, a Baku-based economist and political analyst who is also a board member of the opposition REAL party, the end of the Mehdiyev era may have major implications for the political game in town: “His removal is one of the important elements of the preparations for the 2020 elections. Before, it was always Mehdiyev who played the key role in formulation of the parliament. Yes, Ilham Aliyev would still approve the final list, but 90 per cent of the parliament team was recruited by Ramiz. But now, he’s gone,” says Jafarli.

Without Mehdiyev, Jafarli believes all political parties should take the February parliamentary elections seriously – even though the playing field for opposition candidates is likely to remain uneven. However, not all opposition parties agree, with the Popular Front of Azerbaijan still advocating for a boycott of the vote until a transparent system is in place.

 “There is a second factor: with this move, the president in fact increased his own responsibility. Before, when arrests or other repressions would take place in the country, it was all connected to Mehdiyev who played the role of a scapegoat. If such things happen now, it would be Aliyev who would be primarily accountable. In this way, he actually complicated his own position,” Jafarli adds.

Overrated

Jalilov is more cautious. “I don’t believe the mere fact of replacing one person with another greenlights reform. There are enough vile characters in the Azerbaijani government. Not everybody who is old is bad and not everybody who is young is good. The system is the problem, not individuals,” he says.

“We already have the example of Anar Baghirov, head of Azerbaijan’s Bar Association: a well-educated, modern man who speaks foreign languages and now stands at the helm of reform. And look what he did to the college of lawyers: he completely destroyed it,” laments Jalilov, pointing to the fact that under Baghirov, the Azerbaijani Bar Association has been punishing independent lawyers for representing opposition in political trials or revealing cases of torture either by disbarring or suspending them from the structure.

Jalilov’s concerns are echoed by Leila Alieva, an Oxford-based Azerbaijani analyst and head of the Centre for National and International Studies, who believes that Mehdiyev’s departure is overrated and rather proves the system is sustainable even without the Grey Cardinal. “His dismissal was not associated with the same risk which was in place 10-15 years ago. There is a generational replacement of new managers who grew up in the system; they learnt the lessons and they will be able to run it. On the other hand, Mehdiyev may preserve some of his powers and possibly maintain some influence,” Alieva says.

The question though is whether the iron-hand traditions will be kept in the Presidential Administration. The official that replaced Mehdiyev could not represent a stronger anti-thesis for the powerful figure of the Grey Cardinal: 40-year old Samir Nuriyev, technocratic and US-educated; he is hardly considered a threat to anyone.

Personnel revolution

With or without Ramiz Mehdiyev, the upper echelons of power have been undergoing a real shake-up for some time; and in most cases, in a rather swift, unpredictable manner. In the early summer of 2019, for instance, Ramil Usubov, a powerful minister of interior since 1994, was demoted to a newly created post in the presidential security council. The move was followed by the unexpected dismissal of two vice prime ministers and the head of the Presidential Administration. Finally, in late November, President Aliyev fired another powerful and highly unpopular official, namely, Ali Hasanov, who was an assistant to the president for public and political issues since 2015 [no relation to the vice prime minister who had been dismissed earlier – editor’s note]. Dubbed a “chief censor” and “father of trolls,” he run his own troll factory and was believed to be behind the repressive policies against independent journalists and media outlets.

Many in Azerbaijan are still trying to grasp the depth of changes and its implications for domestic policy-making. But one of the main questions is why the president decided to accelerate the reshuffle at the top, and what the real end goal might be.

“Ilham Aliyev is creating a new government inside the old government to strengthen Mehriban Aliyeva (the wife of President Aliyev and first vice president, editor’s note) and get ready for the transfer of power,” says Gubad Ibadoglu, a visiting professor at Rutgers University in the United States and Senior Researcher at the Baku-based Economic Research Centre. Ibadoglu speculates that the real long-term goal for Aliyev is to prepare his wife to replace him as president. Aliyeva’s November trip to Moscow, where she met with Vladimir Putin, was seen by many analysts as consolidating her position as a key political player in Azerbaijan and a trust-building exercise towards Russia.

Apart from political incentives, the ruling family may also have a strong economic rationale to change the rules of the game within the system. Natiq Jafarli points out that the transition from the oligarchic structure to a more managerial one (with technocrats joining the government) already began in 2016. One of the reasons is money. The old elite have simply become too costly for the ruling family.

“Over the past five years, Azerbaijan’s budget has decreased in dollar terms by more than two times, down by almost 12.5 billion US dollars. In 2014, it was 25.5 billion, and in 2018, 11.7 billion,” Jafarli explains in a recent policy paper. With the shrinking budgetary pie, the incentive to cut loyalty costs has become more pronounced. The move also helps the ruling family kill two birds with one stone: savings are being made and at the same time, the government’s image is being revamped. In 2015, the average age of government officials was 58 (with the prime minister topping the club at 80), now it is 54. The ministerial teams are also increasingly western, not Soviet-educated.

New faces, new change?

However, can a generational change herald in new, more liberal, policy-making?  There is a lot of doubt, especially from civil society organisations which look at the government with a sceptical eye since the sector was decimated by the 2014 legal changes, making it almost impossible to receive foreign grants or register as an NGO.

“Real reforms should change the system and our president does not have the political intention to do that. That’s why I do not believe these changes will take our country forward,” says Zaur Gurbanly, a Baku-based youth activist and former political prisoner who spent one year and nine months in jail on bogus charges between 2013 and 2014.

Leila Alieva, the Oxford-based analyst, also thinks that the rejuvenation of the cadres is not enough to be considered a reform process. “So far, I see a consolidation of power by the president and his family by appointing people who have proved to be loyal to the president. It does not mean he is prepared to do reform. Whether he’s doing it to have a free hand to start diversification, it remains to be seen,” she says. “If one wants to run reforms in a country like Azerbaijan, even with the help of technocrats, it would make sense to take experts from NGO circles, at least for the position of deputy ministers. And we don’t see this. These are people from the same circles. The elite remain the same and they are connected to each to other.”

Her views are echoed by Ibadoglu, who does not believe new faces in the government will be a major breakthrough for the country. “The current government system in Azerbaijan undermines the role of a person and that’s why personnel changes do not lead to systemic change.”

Ibadoglu cites the case of Mikkayil Jabbarov, a rising technocratic star in Azerbaijan. Formerly a minister of education and tax, the 43-year old Sacramento graduate has been recently appointed as minister of the economy, a new government body that absorbed the ministry of taxes, among others. Jabbarov also comes from the inner circles. As minister of education and tax, Jabbarov was fairly respected for his work. Now he is given significantly more prerogatives and is entrusted with major structural reforms.

“Why did Jabbarov become minister of the economy? This is one of the shining examples how structural change is targeted towards individuals. He is reliable and faithful to the ruling family. He’s also a man of integrity and is not corrupt. But Jabbarov is not an independent decision-maker; he’s a manager. And for the reform process, it is very important for someone to take on responsibility. For example, in Poland, it was Leszek Balcerowicz, in Russia it was Yegor Gaidar, in the Czech Republic, Vaclav Klaus. And the problem in Azerbaijan is that we don’t have our own Balcerowicz, Gaidar or Klaus,” Ibadoglu concludes.

Can the economy be reformed?

Indeed, the state of Azerbaijan’s economy may require a larger intervention. “After the 2015 devaluation of the currency, social conditions are getting worse year by year,” Ibadoglu says. Although state statistics may not reflect the scale of the problem, inflation is believed to be on the rise, along with unemployment. That was one of the reasons why the government twice announced an increase of the minimum wage in 2019. However, an increase in social spending also means there is more of a burden on the state budget and expenditures cuts – mainly in the domestic investment.

“According to draft budget projections for this year, the deficit will be around 2.8 billion manats (1.47 billion euros): the highest in 10 years, amounting to 3.3 per cent of GDP,” Ibadoglu says. According to the analyst, another major issue the domestic economy is facing is a slow-down in growth. The tax and customs reform initiated by Mikkayil Jabbarov aimed to increase transparency, tackle corruption and bring more money into the budget.  Despite good intentions, not everything worked out as planned. It is one of the reasons why in the World Bank’s Doing Business ranking, Azerbaijan dropped from 25th in 2019 to 34th in 2020.

From the perspective of medium-sized business owners, the main issue with the new tax regulations is a lack of communication. When asked about how the new policies affected small and medium size business owners, an entrepreneur from western Azerbaijan, who owns a few markets and a restaurant, complained that not enough information about the new rules had been provided and, as a result, many business owners were fined for failing to comply with the new requirements. The authorities eventually reversed some problematic rules, but the fines remained in place.

“Taxes have increased more than in the previous periods. For example, a businessman who has to pay up to 1,000 manat (520 euros) now is paying more tax without knowing the reason,” says an entrepreneur who asked to remain anonymous. However, the major reason why the overall tax reform could not be fully implemented was because of resistance from some oligarchs.

“The tax reform failed, because in Azerbaijan, there is no border between the political and economic power. It creates a conflict of interest. If they are going to reform the economy, they will lose their profit from the business sectors,” Ibadoglu says. He adds this factor makes a potential large-scale overhaul of the economy a very difficult task. 

So if the authorities were serious about reform, where should they start? Both analysts, Gubad Ibadoglu and Natif Jafarli, immediately point out to the inefficient and corrupt courts that remain under heavy political control: “We are tired of repeating that there can be no real economic reform without courts. They won’t be effective,” says Jafarli.

There seems to be an understanding among government officials that in order to bring foreign investment into the country, they need to guarantee property rights. However, from their perspective, providing independent courts is a politically risky move that could pave the way to the end of their rule. That is why an alternative proposal is considered: the creation of special economic courts, like in Singapore or Kazakhstan. It could work for foreign investors, though it would have little relevance for protecting the property rights of local actors. 

“Economic courts would look into issues between economic actors. One firm could sue another firm. Businesses in Azerbaijan mainly have problems with state agencies and local authorities, so how would an economic court help in such cases? They would be completely ineffective in our situation. So here, we really need serious political will to reform the court system and to take away some prerogatives from ministries that can interfere in business,” Jafarli argues.

Analysts also point to the urgent need to provide further measures to de-monopolise the economy and decentralise power: “most of Azerbaijani business and investment is concentrated in Baku, but still, Baku remains the only capital city among the members of the Council of Europe where the mayor is appointed by the president, not elected,” argues Ibadoglu, who believes that a more transparent system of electing city mayors could help increase the transparency and effectiveness of state investment.

Any hope for change?

The final question is whether the ongoing personnel changes and attempts to transform the economy will have any impact on the political processes in the country. Most observers agree that the change is not designed to open up the political landscape, but rather to cement the rule of the ruling family and prepare the authorities for the inevitable arrival of the post-oil era, in which petro-dollars will not be so easily available due to declining crude oil production and potential volatility in the oil-price market. The latter may give incentives for the government to gradually liberalise the economy, but it holds little hope for loosening the screws on government critics.

The October demonstration of opposition in Baku’s city centre (unsanctioned by the authorities) which was brutally dispersed by the police and special forces, and during which several of its members, including the Popular Front Party leader Ali Kerimli, were reportedly subject to torture, shows, once again, that despite the changing image, business as usual continues in the government’s approach to political opponents.

Meanwhile, in an interesting twist of narrative, in the late autumn of 2019, President Aliyev himself started criticising his own government for… obstructing the process of change, and “casting a shadow over the reform”.

 “There was recently an article saying that the things president mentions now I had been writing about and got jailed for in August 2016. And here we have the head of state talk about corruption in the country, systemic problems, and officials who are working badly. So he’s now becoming a leader of the opposition! A president and opposition in one,” Jafarli concludes.

Anna Zamejc is a Prague-based freelance journalist and writer, specialising in Azerbaijan and the politics of conflict.

Azerbaijan, corruption, reforms, South Caucasus