By Ibrahim Ismayilov, Samir Taghiyev, Olga Godunova, and Farzin Mirmotahari
In 1994 the multinational energy company BP, together with a group of other oil companies, signed a production sharing agreement with the government of Azerbaijan to develop the country’s oil and gas wealth. This agreement was officially called the Azeri-Chirag-Guneshli (ACG) oil development and Baku-Tblisi-Ceyhan (BTC) oil pipeline projects, but was widely referred to as the “Contract of the Century.” It offered Azerbaijan, an independent country following the collapse of the Soviet Union in 1991, the opportunity to use its natural resources to improve the lives of its people and ameliorate widespread poverty. The International Finance Corporation (IFC) was one of the leading financiers of this project.
During the late 1980s and early 1990s, Azerbaijan had endured the collapse of the Soviet Union, economic disintegration, and a devastating war with neighboring Armenia. The scale of economic collapse was severe even by Soviet standards: In 1995 GDP was only 42 percent of its 1990 pre-independence level. Unemployment was endemic: out of a total population of 8 million, about one million Azerbaijanis were refugees and internally displaced persons who had fled the areas occupied by Armenian forces and another 2 million Azerbaijanis had left the country, mainly for Russia to find work.