Debt-Troubled Azerbaijan Spending Big on Islamic Games, Formula 1 and Mariah Carey
Just as its largest, government-owned bank defaults on its liabilities, Azerbaijan is shelling out on grand, lavishly mounted sports events and international celebrities, with no end in sight.
The Islamic Solidarity Games, a ten-day, multi-sport competition fashioned as the Olympics of the Muslim world, kicked off in Baku on May 12. It was a glamorous opening, complete with singing, dancing, fireworks, horses, camels and donkeys. A day earlier, it transpired that the International Bank of Azerbaijan (IBA), kept on life support by the Azerbaijani government, could not meet payments on dollar-denominated debt.
The IBA, the nation’s largest lender, asked foreign creditors to accept its plan to restructure $3.3-billion in debt, and sought US court protection from creditors while it tries to work its way out of debt.
Earlier this year, the Azerbaijani government increased its stake in the struggling bank from roughly 82 percent to just over 91 percent, after the finance ministry paid 600 million manats ($353 million) to expand its own holding.
The bank’s proposed debt-restructuring plan appears to involve the state itself picking up its foreign-currency obligations.
That raises questions about other burdens the state is carrying. And how it’s spending its money.
2015 was the year when oil prices took a dive and the country’s hydrocarbons-based economy began to contract. From January through April this year, its GDP growth rate stood at a negative 1.2 percent.
Oil prices have rebounded slightly since 2015, but the country still struggles with a depreciated national currency, reduced state spending and bad debt.
These factors, though, have not affected President Ilham Aliyev ’s enthusiasm for Azerbaijan playing the generous host to international sports events.
Before the Islamic Games, there were the European Games and a Formula 1 race in between. All of them cost top manat to Azerbaijani taxpayers, who saw much of their savings wiped out by the 2015 collapse in the manat’s value.
The “Islamic Olympics” cost Azerbaijan $100 million; Formula 1 less than $150 million; and the “European Olympics” $600 million in 2015, according to Sports Minister Azad Rahimov.
So far, the return on investment appears to be calculated primarily in PR.
For past events, to help that along, Baku booked global celebrities like Lady Gaga, Pharrell Williams and Enrique Iglesias. Mariah Carey is set to headline the next, another Formula 1 race in Baku this June.
The cost for Carey’s performance has not been announced, but past media reports have put the estimated price tag for her appearances at around $3 million.
What Carey or Formula 1 can do to boost confidence in Azerbaijan’s banking sector is not clear.
Within Azerbaijan there is very little room left for voicing criticism of state-financed showbiz and sports arrangements, but many Azerbaijanis complain privately or in online forums about their government’s fixation on extravaganzas amidst an economic slump.
In one online debate about the expediency of such spending, users sarcastically suggested looking on the bright side: “But think of all the selfies, check-ins, hashtags, the glamor.”
None of this criticism is reflected in Azerbaijan’s mostly state-controlled or allied media. It opts instead to focus on the success of Azerbaijani athletes – as of now, 50 gold medals at the Islamic Games, and counting.