Publication Name

Sharing the new oil wealth

The prospects for rapid oil wealth contrast with fast

spreading poverty following the collapse of the So-

viet economy. Although massive investment has

suddenly been channelled into the area, its effect

is still both geographically and socially very limited,

with little widespread impact on society. Nor does it

compensate for the crisis in older, more traditional

activities such as fisheries and agriculture and in the

case of former Soviet republics, the closure of inef-

ficient industrial complexes. In many countries the

benefits of oil revenue are still restricted to the ruling

elite. A few cities – Baku, and to a lesser extent Ma-

khachkala and Astrakhan – have enjoyed spectacular

growth. In the meantime much of the infrastructure

– transport, telecommunications, drinking water –

in small towns and rural areas is very run-down. The

poverty gap is widening, with much of the popula-

tion increasingly excluded from services and wealth

as privatisation of social services progresses.

In all the areas bordering on the Caspian, priority

must be given to diversifying activities and invest-

ment. Particular attention should be given to sectors

such as tourism, agriculture and food production

as well as services. Oil and gas alone cannot be ex-

pected to provide sufficient jobs for the fast-grow-

ing population. Only widespread diversification can

contain rising unemployment, which is severely af-

fecting several areas around the Caspian and forcing

many young people to find work elsewhere.

Figure: Share of food in total

household expenses.

In the 1990s,

following the collapse of the Sovi-

et regime and massive market de-

regulation, the breakdown of total

household expenditure radically

changed. Its focus shifted towards

basic human needs, such as food,

for which spending increased two

or threefold in 10 years, reducing

funds available for other essentials

such as education and health.

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