Azeri President Ilham Aliyev said on Dec. 23 the devaluation of the national manat currency this week had been made inevitable by a sharp decline in world oil prices.
Azerbaijan withdrew support for its currency, the manat, on Dec. 21, triggering losses of 32 percent against the dollar, after burning through over half its foreign currency reserves to defend it against the effect of falling oil prices.
Baku’s decision followed similar moves by crude exporters Russia and Kazakhstan and underscored the pressure that low prices are exerting on the public finances of oil-dependent countries in the former Soviet Union.
“The main reason for the change in the manat’s rate was a decline in oil price by three times. It means that the change was inevitable,” Aliyev said at a meeting with the oil-rich country’s prominent sportsmen.
Oil and gas account for 95 percent of Azeri exports and 75 percent of government revenues, making the Caspian Sea republic particularly vulnerable.
The price of Brent crude has fallen by more than two-thirds since mid-2014 and plumbed 11-year lows this week.
“Smaller oil revenues have affected our national currency … We had been trying to prevent it, waiting for oil price stabilization,” he said. “When it was $50 per barrel, we somewhat calmed down, but … the oil price fell to $36.”
Aliyev said such a sharp decline in oil price was abnormal.
“There is a decline in the global economy, but not to such an extent that the oil price should fall by three times. I think it’s a result of a considered policy,” he said, without elaborating.
Meanwhile, the Organization of the Petroleum Exporting Countries, which a year ago refused to cut supply to retain market share against higher-cost rivals, in its 2015 World Oil Outlook raised its global supply forecasts for tight oil, which includes shale, despite a collapse in prices.