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Azerbaijan oil: a mixed blessing

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"If you have this money coming in and you don't have a clear and transparent government system, you will have corruption. It means you will have a very unstable social situation," says Ingilab Ahmadov, an economist who is the director of the Baku-based Public Finance Monitoring Center.

The oil being pumped in Azerbaijan (most of which will be shipped via the BTC) comes online at a time when the country of 8 million is struggling economically.

Some 40 percent of the population lives below the poverty line. Teachers in the country earn only about $50 per month. And while the impact of the oil money can be seen in Baku - where new high-rises dot the skyline and shiny German sedans compete for road space with rusting Russian Ladas - the areas outside the capital suffer from neglect and their decaying infrastructure.

For years Azerbaijan has been ranked among the world's most corrupt countries. But the government has recently taken some steps to change that, including raising the salaries of public servants and setting up an anticorruption unit within the state prosecutor's office.

Last May the Azeri government also signed on to the British-sponsored Extractive Industries Transparency Initiative, which obligates it to publicly declare its oil revenues and submit to independent audits. But Rena Safaraliyeva, executive director of the Azerbaijan office of the corruption watchdog group Transparency International, says the country still has a long way to go.

"Corruption is widespread and not very much concealed," she says. "My view is that the government is trying to eliminate petty corruption but they are not serious about going after grand corruption."

The potential for that kind of corruption could be great. While this year $150 million will be transferred to Azerbaijan's state oil fund, that figure will reach $650 million next year. Eventually, it's expected to yield $15 billion per year.

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