oil angle

Ian Murray seamus2001 at home.com
Wed Nov 7 12:26:31 PST 2001

< http://www.eurasianet.org > BUSINESS & ECONOMICS November 7, 2001


In the Caucasus' new geopolitical environment, Azerbaijan is hoping to take advantage of new opportunities for cooperation with the United States. At the same time, Azerbaijani leaders are wary that Russia may be intent on reasserting its influence in the Caucasus while the United States is preoccupied with its anti-terrorism campaign. As a result, Baku is engaged in a delicate diplomatic balancing act, which could have profound ramifications for the development of Caspian Basin natural resources.

Azerbaijan has been an enthusiastic backer of the US-led anti-terrorism campaign, sharing intelligence and granting fly-over rights. US lawmakers have reciprocated by bolstering support for President Heidar Aliyev's government, in particular voting to lift trade sanctions imposed during the height of the Nagorno-Karabakh conflict in 1992. The lifting of sanctions, which is dependent on White House approval, would facilitate aid and trade, as well as potentially boost Azerbaijani efforts to develop its oil and gas sector.

While Azerbaijani leaders seem anxious to align themselves with the West in the hopes of reaping enormous oil and gas profits, they are taking care to placate Russian security concerns, seeking to reassure Moscow that Baku's strategic cooperation with Washington is not a zero-sum gambit. Aliyev and other officials know Russia retains powerful economic and political weapons that, if deployed, could hinder - even upend - Azerbaijan's development plans. For example, Russia could impose visa requirements for Azerbaijanis. An estimated 1 million Azerbaijanis live and work in Russia, and the imposition of visa requirements on them would have profound economic implications for Azerbaijan.

Baku's tactics seem dedicated to addressing Moscow's immediate strategic interests. Moscow in recent weeks has stepped up efforts to resolve its Chechnya conundrum, and to this end Baku has appeared more responsive to Russian demands concerning Chechen refugees in Azerbaijan.

During a late October visit to Azerbaijan, Russian Interior Minister Boris Gryzlov called on the Azerbaijani government not to accept Chechen refugees, and to repatriate those already in Azerbaijan. In pressing his case, Gryzlov asserted that Chechens were terrorists, with close links to Islamic radicals in Afghanistan. Gryzlov added that Chechen terrorists utilized Azerbaijan to engage in drug trafficking, and warned Azerbaijani officials about a risk of terrorist incidents being organized by Chechens residing in Azerbaijan.

While there are no official statistics, some experts estimate that there are about 9,000 Chechen refugees, mainly women and children, in Azerbaijan. Even before the September 11 terrorist attacks in the United States dramatically altered geopolitical conditions in the Caucasus, Baku had extradited dozens of Chechens to Russia. Local observers say that Baku is now increasingly willing to consider the large-scale repatriation of Chechen refugees. In addition, Azerbaijani authorities are lending preliminary support to a proposal by the pro-Moscow Chechen Authority of Akhmad Kadyrov to open a representative office in Baku, the Ekho newspaper reported October 30.

Meanwhile, President Aliyev, accommodating a longstanding Russian demand, has signaled his willingness to lease the Gabala early-warning radar station to Russia. The station was built by Moscow in 1984, and is Russia's only military facility in Azerbaijan. Russia and Azerbaijan had been haggling over a lease extension for several years. Azerbaijani government sources say a deal on the radar station could be signed during Aliyev's next trip to Moscow, which is scheduled for early 2002.

Azerbaijan's newfound readiness to accommodate Russia on Chechnya and the Gabala facility is more than just a geopolitical balancing act; it is a direct response to what Baku perceives as a national security threat. Azerbaijani officials are alarmed by the simmering tension between Russia and Georgia, as well as the political turmoil now gripping Tbilisi. [For background see the Eurasia Insight archives]. Azerbaijani politicians believe that Russia is responsible for foment the ongoing unrest in Georgia.

A big motive for Russia, as Azerbaijani leaders see it, is a desire to retain a controlling influence in the competition to develop Caspian Basin natural resources. Georgia figures prominently in the potential construction of a pipeline, known as Baku-Ceyhan, which would break Russia's stranglehold on Caspian export routes. The pipeline as envisioned would take Caspian resources from Azerbaijan, via Georgia, to Turkey, bypassing Russia altogether.

Prior to September 11, Russia had been a steadfast opponent of Baku-Ceyhan. But the Russian stance on construction of the pipeline seems to have softened in recent weeks. The reason may be that Azerbaijan, along with the United States, may now be more willing to share the wealth. Indeed, Baku-Ceyhan's best chance for realization may depend on the participation of Russian companies in the construction consortium. Local observers believe that Russian energy giant Lukoil could become a participant. The company and its president, Vagit Alekperov, enjoy the high esteem of Baku's leadership. Recently, Aliyev awarded Alekperov one of Azerbaijan's highest honors.

During recent congressional testimony, Brenda Shaffer, the research director of the Caspian Studies Program at Harvard University, said that incorporating Russian interests into projects such as Baku-Ceyhan increase "the likelihood of these projects' realization." She added: "Actions resulting from US-Russian rivalry can be very destabilizing to the region and, as a result, contrary to US goals."

Editor's Note: Kenan Aliev is a journalist based in Washington, DC.

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