Oil prices’ decline to have crucial impact on Azerbaijan – Armenian economist

The decline in the international oil prices may be crucial for Azerbaijan which develops 90% of its budget from the proceeds received from oil sale, an Armenian economist said, commenting on the recent developments on the international oil market.

“While in 2014, Azerbaijan’s budget was US $23 billion, the decline in the prices this year may reduce it to US $11 billion. That’s going to have a crucial impact on Azerbaijan’s economy,” Mesrop Arakelyan told Tert.am.

The per barrel price for Brent oil dropped below $28  on the London Stock Exchange earlier this week.

Agreeing that that the recent developments will inevitably deteriorate the socio-economic situation in the country, the economist said he expects also political problems linked to military expenditures.

“Their military expenditures of the past years top the income of Armenia’s State Budget. And if they cannot afford solving social problems today, new military expenditures are out of the question. So the developments in Azerbaijan’s economy are going to be rather serious. Obviously, they will not make investments for military expenditures in the coming years,” the economist commented.

But he did not rule out the ruling regime’s possible move to launch also military operations in an attempt to distract the society’s attention from social difficulties.

As for the impact on Russia and the possible trends in the Armenia (whose economy is in direct dependence on that country), Arakelyan said he expects the continuing depreciation of the Ruble to inevitably affect also Armenia where a large part of the population relies on money transfers from Russia.

“This will influence our population’s income and hence – the economy, reducing the consumption volumes and making the economy passive. We should bear in mind that Russia is Armenia’s key ally, so against backdrop of the depreciating Ruble, it isn’t any longer advantageous to our exporters to export their goods to Russia. And the 20% decline in the foreign turnover was what reflected the situation,” he added.