Recent Energy Price Increases in Azerbaijan Staff concerns

Re: Recent Energy Price Increases in Azerbaijan Staff concerns


Dear ALT members

The intent of this letter is to make BP senior management team aware of local staff concerns in good faith and enquire for potential options to compensate for financial losses caused by the recent Tariff Committee decision to increase energy prices in the country.

On January 8th 2007, Azerbaijan Republic Tariff Committee announced the increase in the prices for gasoline, electricity, water and other utilities. Specifically, price for the gasoline was raised by 50\%, electricity 212\% and water by 100\%. The decision taken by the state authorities caused a consequential increase in prices for most of the consumption goods.

Immediately after the Tariff Committee decision, cost of the basket of food products in the country went up by an average of 10-15\%. Coupled with 2006 official inflation rate of 9\% (source National Bank of Azerbaijan), increases in prices put significant pressure on all consumers in the country and adversely affected the purchasing power of local staff salaries. Azerbaijan government also recognized the adverse impact of tariff changes on household incomes and announced salary increases of an average of 25\% for state entity employees.

We fully appreciate that it is a big challenge to estimate mid-term inflation accurately at this point in time. However, we strongly believe that high-inflation environment in the country and the dramatic drop in purchasing power of national salaries is causing discontent and financial uncertainty among the employees. Potential solution to this problem would be to make a separate one-off salary adjustment and communicate BPs position in this regard to all national employees.

We trust that BP will take appropriate actions to address these issues in the near future to mitigate worries of local staff and maintain its positive image as a lead employer in the country.

Best Regards
BP Local Staff