Taleh Kazimov CEO of Pasha Bank, Azerbaijan’s largest bank talks about their current conflict against Armenia, and his views on global Fintech

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Ryan Morphin:

Welcome to Non-Beta Alpha. I’m Ryan Morphin. On today’s episode, we have Taleh Kazimov CEO of PASHA Bank, the largest bank in Azerbaijan, talking to us today about the current conflict with Armenia and his views on global FinTech. This is Non-Beta Alpha. Taleh, welcome to the show. Thank you for coming on today.

Taleh Kazimov:

Hello Ryan, thank you for my invitation.

Ryan Morphin:

You got it. Well, there’s been a conflict, a war that’s really started to play out over the last few weeks between Armenia and Azerbaijan and I wanted to have you come on the show to tell some of our viewers, primarily because it’s not getting any media coverage in the United States right now, given the election.

Ryan Morphin:

But I do think Azerbaijan is an important region for the world energy production as well. A lot of Americans don’t know about the conflict that’s going on, and so would you mind maybe going over a little bit about what’s going on in the Azerbaijan region right now?

Taleh Kazimov:

Currently we are faced with a situation when we call it a war, a patriotic war. Before getting into details, I would like to address some informationals which we have in the media that can cause confusion and misunderstanding among the people who are not familiar about the actual essence of the conflict.

Taleh Kazimov:

So the last conflict, back 30 years ago was started by Armenia. They used political turmoil in the Soviet Union, in particular Azerbaijan, and occupied 20% of territory of Azerbaijan.

Taleh Kazimov:

And this unlawful act, I would call it occupation, terrorism act, resultant in the death of 20,000 people, 50,000 disabled, 4,000 people were lost, we couldn’t find them until today, one million refugees, IDPs internally displaced people.

Taleh Kazimov:

And in 1993, United Nations Security Council, which I think in front of the most important organization in the world, adopted four resolutions, 822, 853, 874, and 882.

Taleh Kazimov:

These four resolutions required immediate, complete, and unconditional withdraw of Armenian forces from occupied theater of Azerbaijani.

Taleh Kazimov:

Unfortunately this resolution still remains on the paper and today our victorious army is implementing this resolution on its own, unfortunately by military way. As every year, we had a text from Armenia side. This years, three times in a row, Armenia attacks Azerbaijan on the state border.

Taleh Kazimov:

First attack was on July and we had casualties amongst civilians and military personnel. Second act in August, they have sent a sabotage group and we detained the leader of this group and he gave the evidence and confirmed that this group has been sent to attack civilians. On Saturday, the 27th of September, another attack, and we unfortunately had victims among the civilians and military personal and Armenia so that we will restrain.

Taleh Kazimov:

But unfortunately for them, we saved enough for this time and that’s how the war started. Right?

Ryan Morphin:

And so this region, it’s a mountainous region I believe, this has been an ongoing conflict for a while. And I believe Russia has got a military base in Armenia and they’ve been trying to broker, since they’re a neighbor of yours, broker some type of a ceasefire. Is there a current talks for ceasefire? Is that something that is currently going on?

Taleh Kazimov:

We had agreed on ceasefire three times during this almost 40 days. And in the next hour, after each agreement of ceasefire, Armenia by attacking our civilians and our military personal, cancels the ceasefire.

Taleh Kazimov:

The response of Azerbaijani army is just to defend our land and to liberate from enemies occupied territory.

Ryan Morphin:

I think this ongoing turmoil that’s going on… Question for you is, how is this going to play out in your view? Do you think it’s going to be a full-scale war, or do you think you’re going to have to ask maybe some regional players like Turkey, Russia, the United nations to send in peacekeepers? Because it’s been going on consistently and I’m trying to figure out how do you guys see it playing out? What is the consensus in Baku?

Taleh Kazimov:

This is conflict between countries, Azerbaijan and Armenia, and we don’t expect a certain party to help because we have been waiting for 30 years.

Taleh Kazimov:

As I said previously, since 1993, we have the UN Security Council’s resolution and [inaudible 00:06:16] group didn’t achieve any progress in this conflict.

Taleh Kazimov:

Our position is straightforward. Our president announced it from the first day that Armenia should present a reasonable schedule, how they are going to withdraw their forces from occupied territory, and we are ready to stop immediately the war.

Taleh Kazimov:

Unfortunately, till today, we receive opposite decisions from the Armenia side that they are going to fight. This is for us, as I said, this is a patriotic war and we are liberating occupied territories of Azerbaijan.

Taleh Kazimov:

We try to do it in a peaceful way for 30 years, but unfortunately we couldn’t achieve anything and help assert part is also… We don’t see. So this is conflict about Azerbaijan and Armenia, and we are not expecting that anyone will interfere.

Ryan Morphin:

Understood, you know, RT, which is a Russian television, which is a foreign agent registered in the United States, is the only media outlet talking about this right now.

Ryan Morphin:

And they’re trying to paint this as a context of a religious war and Azerbaijan is a multi-cultural, multiethnic country. Can you talk about if you view this as a religious war, why it’s not credible to say that? And also, could you mention a little bit about maybe Russia and maybe what their role is trying to instigate this as maybe a spillover from Syria or something?

Taleh Kazimov:

Ryan, of course not. It’s not a religion war. And the reason why I’m smiling is I’ve seen all these days, formation and media in the TV, in the social networks that are many trying to present this war to the world as a religion war.

Taleh Kazimov:

Actually, it’s definitely not a religion war. As you mentioned, Azerbaijan is a multi-ethnical and multicultural country. Yes, predominantly population practicing Muslim today, but we also have Christians. We have practicers of Judaism, Krishna, Baháʼí, and other religions.

Taleh Kazimov:

So if you compare it to Armenia in 19th century, there were eight mosques. Today, there is only one mosque named the Blue Mosque. And I believe they kept it for PR purposes. I don’t believe that there are visitors there.

Taleh Kazimov:

But in Azerbaijan we have 13 churches, seven synagogues, one historical Albanian church. We have in the middle of Azerbaijan an Armenian church, and you can Google the pictures. After police come and visit, you will see how beautiful they are, how well maintained the are.

Taleh Kazimov:

And you can also Google the mosques in Karbala, under occupation of Armenia. They keep pigs shapes [inaudible 00:09:46] in our mosque. So it’s definitely not religious war from Azerbaijan’s side, definitely. Maybe from Armenia side, it might, but not from Azerbaijan.

Taleh Kazimov:

We have 69 nationalities living in Azerbaijani population for centuries in peace. We have 30,000 plus Armenian people living in Azerbaijan in peace. And you can ask me how many nationalities you have on the Armenian side? No more than four.

Ryan Morphin:

Well, and a lot of people here don’t know that some of your best allies are Israel and Ukraine. What is that relationship between Azerbaijan and Israel and Azerbaijan and Ukraine?

Taleh Kazimov:

We have Jewish ethnics in Azerbaijan. We are in very good relationship with Israel. We are partners as with most of the countries in the world.

Taleh Kazimov:

So we have support and friendship, brotherhood with Turkey. We have very good partnership relationship with Russia, with Ukraine, with Belorussia.

Taleh Kazimov:

So as with many of the countries, we have very good and strong relationship with Israel, too.

Ryan Morphin:

And a lot of people don’t know this, but you guys have been part of the international community, but Armenia has been doing a lot of work and a lot of trade with Iran. Can you talk a little bit about that?

Taleh Kazimov:

Iran is a partner of… It’s a big country and partner in the region. So we have information that there are around 20 banks and Iranian branches operating in [inaudible 00:11:37].

Taleh Kazimov:

So there is definitely flow between these two countries, but as you can see from the media all these days, Iran is also supporting Azerbaijan in terms of the territorial integrity of Azerbaijan.

Ryan Morphin:

Well, this conflict has started to bring to light what I’d call the Caspian Region and the importance of it for the energy markets.

Ryan Morphin:

But from an economic standpoint, you’re also the CEO of I believe one of the largest banks, if not the largest bank, in Azerbaijan. How has this conflict been changing or impacting the local economy?

Taleh Kazimov:

It just only… Almost 40 days passed after war started. And it’s very difficult to say exact figures, but as any war, we have a positive and negative side of the war.

Taleh Kazimov:

When it comes to the negative part, war can impact on business confidence, business climate, investment on an employment level, and budget cuts. In Azerbaijan, it’s a little bit different picture. We’ve been waiting for this for 30 years, liberating our territories.

Taleh Kazimov:

The level of confidence, the level of unite, the level of determination, of the business and population is very high.

Taleh Kazimov:

As you mentioned, we are the largest commercial bank in Azerbaijan, and we are mainly focusing on servicing the real sector of the country. On a daily basis, we are in contact with our clients partners. The level of confidence is very high. There is no step back. They are seeking for expansion opportunities, growth opportunities.

Taleh Kazimov:

When it comes to the employment level, we haven’t announced the full mobilization. Azerbaijan has more than 100,000 professional army equipped with best-in-class military equipment and technology. So there is no need for a full mobilization, that’s why impact on the employment level is low.

Taleh Kazimov:

And in terms of the budget spending, we increase budget spending by keeping the budget deficits on a reasonable level to support country due to pandemic, COVID impact.

Taleh Kazimov:

And in positive side, I think that a lot of big opportunities, a lot of opportunities come to our economy after the liberation of the territory.

Taleh Kazimov:

You can imagine that there are the 1.7 million hectares of land for full, with mineral deposits of 155 types of deposits like gold, copper, mercury, coal mines, and others that are big water reserves. And we are going to use it to irrigate 100,000 hectare of land for agricultural purposes.

Taleh Kazimov:

Tourism is another story. This region, I believe is one of the beautiful regions first of all, by nature, second, by historical cultural heritage. We see a big opportunity in terms of tourism. It will require definitely a lot of investment because as we see, after liberating several regions last month, we see that Armenia destroyed everything, everything. There is not even a roof to place the flag after liberalization.

Taleh Kazimov:

And it will require an investment, but I believe as a nation, we have been waiting for this for a long time, and I believe every other Azerbaijani citizen is ready to invest his last dollar, last manat to rebuild this territory. And in midterm and longterm, I believe this region will boost Azerbaijan economy.

Ryan Morphin:

And I guess an economic question for you, it’s my understanding that a lot of the energy that flows through Azerbaijan, does most of the pipelines, do they go through Armenia or do they go through other pathways?

Taleh Kazimov:

All goes through Georgia.

Ryan Morphin:

Oh.

Taleh Kazimov:

Yeah, main pipelines goes to Georgia and our main is locked, let’s say. They lost this opportunity because that can be beneficial for them, also, those pipelines passed through their territory.

Taleh Kazimov:

But unfortunately, they’re not in negotiation mode. By the way, these pipelines are very important for Europe for all energy security of Europe. And this pipeline has been attacked by Armenia. And thanks to our army, we defended that. We have in Mingelchaur, which is the fourth largest city in Azerbaijan, we have one of the biggest hydroelectric power plants, and it has been attacked, too.

Taleh Kazimov:

So you can imagine the ecological and economical consequences if they would achieve their aim. So again, thanks to the army and defense, we managed to push back.

Ryan Morphin:

Yep. No, it’s, it’s been very interesting to see what you know happened between Saudi Arabia and I guess Iran, right? The attack on the pipelines, and Azerbaijan has a lot of critical pipelines, especially for Europe, as you mentioned.

Ryan Morphin:

How is low energy prices, how is that affecting the economy of Azerbaijan today? And what is your view of energy prices today?

Taleh Kazimov:

One of the hits which Azerbaijan economy faced this year was low oil prices at the first quarter, mainly first quarter of 2020.

Taleh Kazimov:

And it definitely hits the economy and brings depression on the local currency. But due to proper monetary fiscal policy of the country, we’ve managed to keep stable our local currency and preserve our foreign currency reserves for all kinds of state oil funds that remain for the three billion.

Taleh Kazimov:

We managed to increase our central banks foreign currency reserves by 4% and 6.5 billion. That was a really tough period for us, but as I said, due to proper monetary fiscal policy, we managed to avoid negative consequences of oil price decreased.

Ryan Morphin:

You know, I did speak to some friends of mine in DC about the conflict and they said that they were very impressed by the use of drones and the modernization of the Azerbaijani military.

Ryan Morphin:

Do you guys buy most of your weapons from Turkey or are they bought from China? Do you guys produce your military weapons domestically? I was told that the Azerbaijani army is very strong.

Taleh Kazimov:

It’s one of the strongest armies in CIS in terms of the technology, equipment, professionalism of the military personnel, and of course, in terms of the budget.

Taleh Kazimov:

We don’t owe, we don’t borrow drones or any other military equipment as our neighbor Armenia is doing. We buy this equipment, these weapons and equipment, drones particularly from Turkey and other military equipment we buy from Russia, Israel.

Taleh Kazimov:

I mean from all our partners. It’s not only drones, by the way, acting in the world.

Ryan Morphin:

Yep. No, there’s artillery and tanks and such. I think it’s the first kind of, I’d say, usage of drone warfare that’s playing out.

Ryan Morphin:

I know Armenia doesn’t have drones, or at least they don’t have this type of drones that you guys have, so I think they’re at a severe disadvantage. Which is, you know, an interesting kind of view of the future of warfare coming out.

Ryan Morphin:

As it relates to COVID, how is COVID being handled in Azerbaijan and how has that impacted the economy? How is that changing international banking from your perspective?

Taleh Kazimov:

It’s not secret and a surprise to anyone that the negative impact of COVID to world’s economy is tremendous, and Azerbaijan economy is not exception.

Taleh Kazimov:

Our GDP as of September decreased 4%, 3.9, to be more precise. We managed to keep our inflation at 2.6%. As of July, our government debt was 9.8 billion and it’s around 24.5% to our GDP.

Taleh Kazimov:

As I mentioned before, national wells, a state oil funds reserve. We kept it more or less stable at 43 billion and we have 4% increase in central bank reserves.

Taleh Kazimov:

Yes, trade total export decreased by 28%, mainly due to oil price, decreased sharp oil price decrease. As you know, 75% of total export is crude oil. Input decreased 5%, but we managed to keep trade balance and surplus 3 billion surplus. Now we have other industries like construction, 9.6%, and obviously tourism and hospitality, 55.5%.

Taleh Kazimov:

But we also have, overperformance like agriculture. We see a 1.5% growth ICT. Now 2.7% manufacturing, 6.5%. But generally speaking, I would like to pay attention that it’s not only COVID impacting our economy this year, it’s also global oil price decrease. We are an oil dependent country and COVID, which consequences of COVID will increase in budget expenditures, in health care infrastructure, and support business and population.

Taleh Kazimov:

We manage very successfully, I believe, and a certain issue this year in our economy is war, actual war. So if you combine all these three aspects, I think we manage very good in terms of when you look at 4% GDP decline. And in comparison to other countries, I think we have lower decline in GDP growth.

Taleh Kazimov:

And this is mainly because government now started very proactively implementing initiatives in diversification of the economy and rapidly respond to the crisis this year. And by 2020 results, I believe Azerbaijan will be in the list of less affected by COVID economies.

Ryan Morphin:

And you’re the CEO of a bank, so what are your thoughts on FinTech? I know you guys have a digital laboratory. How is FinTech changing banking in the future?

Taleh Kazimov:

FinTech? I think it’s yesterday. It’s not tomorrow over there. And we as a bank in 2018 to develop the digital [inaudible 00:24:19], and we brought the best in class consultants and also we were able to build, I think, a very good team, which is very important, I think most important thing.

Taleh Kazimov:

And today, 99%, 99.7% of PASHA banks customers, legal entities, and intrepreneurs interact with the banks through digital channels. All the payments, currency conversionS, statements, all the transactional business goes through the digital channels.

Taleh Kazimov:

And I think with this indicator, we can be called the first digital bank in the region. All customers interact, 89% of all customer interactions today goes through digital and digital channels. We were the first bank in the region who offered to the client a remote onboarding KYC compliance process and account opening.

Taleh Kazimov:

That was accepted by clients very well. Today, 99% of new customers and new accounts are opened online. I would like to underline once again that we are the largest commercial bank in Azerbaijan.

Taleh Kazimov:

So tthe volume of turnover of our clients through accounts and PASHA bank, almost 30% of GDP, in amount of 30% of GDP.

Ryan Morphin:

Wow.

Taleh Kazimov:

So we see as a future, and we still continue to invest in digitalization, but our next strategy, which is ’21, ’23, we will mostly focus on that data-driven business strategy.

Taleh Kazimov:

It will be more data-driven strategy and we will invest in the data and in cyber security.

Ryan Morphin:

Yeah, Taleh, you have a very cosmopolitan educational background, London, Harvard, Georgia, Azerbaijan. Who is doing FinTech the best? Is it China? Is it Germany? Is it the US?

Ryan Morphin:

Is it just totally a diversified approach? Is there one region that you think is doing FinTech for banking the right way?

Taleh Kazimov:

China is a total different story because of the scale, first of all. There are a lot of bright minds there and I think they are doing very good.

Taleh Kazimov:

What I would like to mention is also the Silicon Valley, US. So having these knowledge houses around and also the infrastructure, I think in terms of the FinTech, they are also at this stage the most leading part of the world in terms of the FinTech.

Taleh Kazimov:

But I see other countries also coming up, like Turkey, Russia, it’s the same, Germany, Israel is also very good. Yeah. UK is taking over, also. So FinTech is something that everyone is interested and keen to invest and to expand.

Ryan Morphin:

It’s a big growth area for our industry as well and for our country. Changing a little bit, maybe your perspective on what’s going on on this side of the camera, what are people in Azerbaijan saying about the US election now that it’s past and what I’ll call the choppy waves or dislocation? What are your thoughts on what’s going on from the view outside looking in?

Taleh Kazimov:

Well as Azerbaijan, we are interested in what a conscious nation is deciding on. I mean, we support what you as a country will decide about the election. And honestly, we are currently busy resolving our issues here in Azerbaijan, so that’s why I mainly focus on liberating, how the land [inaudible 00:28:52].

Taleh Kazimov:

But definitely we believe in democracy and whatever will be the election results, so this is what US citizen choose.

Ryan Morphin:

And Taleh have you guys had access to Russian vaccines? I have had some friends who’ve taken it for the coronavirus. Is that available, or what’s going on on the vaccine front in the region?

Taleh Kazimov:

We have, I believe… I don’t know. I don’t have an exact answer to that because maybe I’m not too informed about this, but being a good partner with Russia, I believe we will also consider this opportunity. But this is more healthcare systems decision and I’m not [inaudible 00:29:46].

Ryan Morphin:

I’m not either, but I’m letting Google become my doctorate in medicine, I guess.

Ryan Morphin:

So in this season, season two, we asked kind of the same six questions to all of our guests at the end of each episode, and they’re usually yes or no kind of questions.

Ryan Morphin:

And if you want to add more context, please feel free. But so here we go. The first question is if there was a COVID vaccine available, would you take it today? Yes or no?

Taleh Kazimov:

Personally?

Ryan Morphin:

Yeah, personally.

Taleh Kazimov:

No, I guess.

Ryan Morphin:

Yep. Well, who wins the election is the second question, but nobody knows. I know you guys are dealing with more pressing matters in Azerbaijan.

Ryan Morphin:

What type of shape of an economic recovery do you think we’re in a globally [crosstalk 00:30:40] Is it an V shape, is it a W? Yeah. What are we in a recovery, and if so, is it a V or is it a sideways L? A U?

Taleh Kazimov:

At the beginning of the pandemic, we all, at least in Azerbaijan, we all saw that it will take couple of months, three to six months, and that’s it.

Taleh Kazimov:

But as what we see is coming back, and I think it will be more W shape.

Ryan Morphin:

W shape. Is there anything that you’re particularly proud of this summer? Anything that you did like read books, created new projects while over the summer?

Taleh Kazimov:

Over the summer, at least we managed to protect ourselves from COVID. In the summer period, we have a peak for this virus in Azerbaijan, and we managed what I think for the summer, the most important thing to keep safe, our team as a bank team, which is very important to us.

Taleh Kazimov:

We managed to support our clients in this very tough period of lockdown, and we keep our financial sustainability of the organization. That was very critical, systemically important for the organization. I think all the focus all the summer was in this direction.

Ryan Morphin:

And questions for you. Did you have a lot of your employees working from home or were they just socially distance at the office? How are people handling commercial activities during the pandemic in Azerbaijan?

Taleh Kazimov:

All the digitalization which we’re doing for the last two and a half years helped us a lot in the peak of pandemic in the summer. Only 4% of employees from the headquarter was at work, yes, and all our branch network employees came to work only 42%.

Taleh Kazimov:

So we think we manage very well. So in overall, it’s never been more than 20% of those working at the premises. Remaining 80 was [crosstalk 00:33:09]

Ryan Morphin:

Are there any reasons to be optimistic for the 2021 global economy?

Taleh Kazimov:

Really the situation which we face this year, the pandemic situation which is like Pandora’s box and it’s [inaudible 00:33:32]. And everything depends on how long it lasts. Everything really depends on how long it lasts.

Taleh Kazimov:

I really expect that a vaccine will be in place next year, and we’ll recover from the global lockdown environment and industries will recover.

Ryan Morphin:

Is there anything that you’re watching or reading or listening to that you’d like to share with our audience? Any books or podcasts?

Taleh Kazimov:

Currently, the only there are only two things which we are following, is US elections and our current situation conflict zone.

Ryan Morphin:

Well, I understand. Is there any last comments you’d like to share with our viewers about the current situation and about the US Azerbaijani relationship?

Taleh Kazimov:

About US Azerbaijan relationship?

Ryan Morphin:

Mm-hmm (affirmative).

Taleh Kazimov:

From the first day of our independence, we have very good relationship and a partnering relationship. We believe that for a fruitful prosperous future this relationship should be strengthened both on political and economical level, and I think this is the only way for us.

Ryan Morphin:

Well, we appreciate the US Azerbaijani relationship. We appreciate you coming on the show and sharing your thoughts. And we pray that your current conflict ends in amicable terms and we hope that we can see you soon in the US or in Baku. So God bless and please be safe.

Taleh Kazimov:

Ryan, thank you very much for this opportunity to talk to you and your audience. I want to once again underline that this is not a regions war. This is a patriotic war to liberate our land. Nothing more and nothing less.

Taleh Kazimov:

So thank you very much, again. Hope to see you soon in Azerbaijan or in US. And good luck with your election.

Ryan Morphin:

Thanks for watching Non-Beta Alpha, and before we go, please remember to like and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now, you know.

 

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