This study examines the developments in privatisation in Azerbaijan, one of the last republics of the FSU to embark upon the road of privatisation. The aim of research was to obtain first hand information on the privatisation process and to construct a qualitative, contextual picture of the power struggle over property rights. Part one establishes a theoretical framework under which privatisation in PCPEs can be evaluated. It establishes that privatisation can be seen as an instrument to build up a sound system of enterprise control and initiate industrial restructuring, and thus enhance static and dynamic efficiency. By applying the theories of privatisation in PCPEs developed in the first part, the second provides an account of the Azeri privatisation process and its likely effect on static and dynamic efficiency placing special emphasis on institutional preconditions.