Azerbaijan Basks in Energy Riches While Tackling Long-Standing Issues

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Azerbaijan—a bridge between Eastern Europe and Asia—is at a crossroads of its own. The oil-rich nation of 8 million people, bordered by Iran on the south and Russia to the north, is now pumping oil into the billion Baku-Tbilisi-Ceyhan (BTC) pipeline that spans 1,000 miles from the Caspian Sea to Ceyhan, a Mediterranean port in Turkey.

As one of the world’s top producers of industrial oil and gas, Azerbaijan has long benefited from its own vast mineral resources. In addition to the BTC pipeline, this summer the country will also inaugurate the Baku-Tbilisi-Erzurum gas pipeline project.

But with oil production up 65 percent in the past year, and more revenues pumping in from various pipeline leases, Azerbaijan is suddenly wealthier than ever—in fact it now boast the world’s fastest-growing economy thanks to its energy wealth. But with that wealth comes more demands as Western democracies—and the people of Azerbaijan themselves—call for investment in social programs and infrastructure.

Yashar Aliyev, Azerbaijan’s ambassador in Washington since late 2006, said in a recent interview with The Washington Diplomat that the new pipeline—widely considered a marvel of modern engineering—could not have happened without America’s political will in the region. “Without U.S. support, this project would never have been completed,” Aliyev said at the Azeri Embassy off Massachusetts Avenue near the U.S. Naval Observatory.

Aliyev explained with pride that the pipeline creates new options for countries in Asia and Europe to receive their oil. “It is exactly the idea of how to diversify energy routes from suppliers to consumers,” he said. “It is a necessary element of advancing sovereignty and independence of our countries that are newly emerged after the Soviet Union.”

And the wealth should help nurture Azerbaijan’s own young democracy, which has been criticized for a lack of press freedom and widespread public corruption.

“Economic independence gives you an opportunity to strengthen your sovereignty,” Aliyev said, noting that the revenues are helping Azerbaijan boost the salaries of government workers and soldiers. “My salary was also raised,” the ambassador pointed out with a grin.

Aliyev said he remained optimistic that Kazakhstan, another Central Asian oil giant, will send at least some of its oil through the new BTC pipeline, despite Kazakh President Nursultan Nazar-bayev’s recent pledge to funnel his country’s oil through Russia.

“We do believe it is on the table for consideration by Kazakhstan’s government. It’s a normal and healthy competition,” Aliyev said. “There is a good opportunity for Kazakhstan and Turkmenistan to participate in delivering their oil and gas to world markets through Baku.”

Although oil is driving Azerbaijan’s sizzling economy, implementing economic reforms to keep a lid on inflation and regulate Azerbaijan’s booming economy has been a priority for Azeri President Ilham Aliyev, who has been vocal about redistributing oil profits to modernize the country, especially in the area of education. In fact, 75 percent of Azerbaijan’s population is younger than 35. There are currently plans to build new schools, with 130 constructed over the last three years, and ensure one computer for every three students.

In addition, there is a greater push to train a new generation of Azeri diplomats. After opening more than 30 embassies around the world in the past two years, the government is working to address the shortage of experienced Foreign Service officers, with the ambassador’s predecessor, Hafiz Pashayev, being tapped to the run the country’s first training center for diplomats (also see July 13, 2006, news column of the Diplomatic Pouch).

According to Ambassador Aliyev, agriculture and information technology are two areas where his country is trying to diversify the oil-based economy, but as with any young democracy—and even some older ones—regulatory performance is sometimes less than optimal.

A recent report by the U.S. Business Software Alliance identified Armenia, Moldova and Azerbaijan as among the world’s worst for software theft. “We are doing our best but sometimes the pace of development and the pace of matching regulations don’t reach 100 percent collaboration,” Aliyev admitted. “But understand that we are taking necessary measures to solve some type of problems.”

He added: “There is a golden opportunity in front of us to improve the business environment in my country.”

Aliyev said he is familiar with complaints of corruption and autocratic rule in Azerbaijan, but reminded us that his democracy is still only 15 years old. “Each country has its own traditions, customs and established practices. It means we have to lead our lives and we are going through new stages of development,” Aliyev said. “What is to a certain degree usual in our quarters of the world may be unusual for you and vice versa.

“But stimulation of democracy is a matter of paramount importance for us,” Aliyev continued. “Nobody in the world is perfect, but economic independence should open doors to us to provide the necessary level of democratization,” he explained. “We have to pay firm attention to the advancement of democratization, human rights and other civil freedoms…. We would invite you to try to understand.”

According to the U.S. State Depart-ment, the 2006 budget of Azerbaijan assumed a 70 percent increase in government spending, with the bulk going to the military, wages, infrastructure projects and social assistance. A major chunk of the increase in expenditures will be financed by revenues from the oil fund, which may help quell suspicions that only a select few are benefiting from the boom.

But despite increased job opportunities and good news on the economic front, the country remains vexed by a seemingly intractable and expensive conflict with Armenia over the territory of Nagorno-Karabakh, a predominantly ethnic Armenian region within Azerbaijan.

The conflict dates to 1988 when ethnic Armenians in Nagorno-Karabakh and Armenia began to loudly protest against Azeri government policy and the Nagorno-Karabakh Supreme Soviet voted to secede from Azerbaijan.

In the early 1990s, violence flared in Nagorno-Karabakh, and Moscow supported Azeri efforts to quell the unrest until 1991, when Azerbaijan declared its independence from Moscow. At that time, Armenian militants became more aggressive. More than 30,000 people were killed and hundreds of thousands of Azeris fled the conflict between 1992 and 1994, when a ceasefire—that remains fragile to this day—was declared.

Aliyev—who spent more than a decade leading Azerbaijan’s Permanent Mission to the United Nations prior to his appointment in Washington—typically conveys the diplomatic tone and language of a seasoned embassy veteran. But Azerbaijan and Armenia have no formal relations, and he does not mince words when speaking about the long-standing conflict and the status of Nagorno-Karabakh.

“There is no disputed territory between us,” Aliyev said matter-of-factly. “There is just aggression on the part of Armenia toward my country and territorial claim on the part of the south Caucasian republic. They are trying to take it from us.

“I would like to be crystal clear that this is indigenous land of Azerbaijan,” Aliyev stressed. “Nobody in Azerbaijan has any doubts about to whom Nagorno-Karabakh belongs.”

Aliyev, whose father was born in the region, added that all of his displaced countrymen who once lived there should be allowed to return. “We believe it is the only way this conflict could be resolved through a peaceful coexistence of both Azerbaijani and Armenian communities,” he said. “There should be a complete return of all refugees who used to live in the territory of Nagorno-Karabakh.”

He also cautioned that while virtually all of Azerbaijan’s neighbors will benefit from its vast mineral reserves, Armenia will remain locked out. “Nobody would demand us to cooperate and deliver oil and gas to a country who is occupying a big portion of its national territory,” the ambassador said.

Aliyev disputed the notion that Azerbaijan is beefing up its military in advance of a planned military confrontation over Nagorno-Karabakh. According to one recent estimate, Azeri military spending jumped from 5 million in 2003 to 1 million last year.

“Statistics speak for themselves,” he said. “During 13 years Azerbaijan never took any single military action, but we have continued to be seriously engaged in the negotiation process. I think it proves the genuine intention of the government of Azerbaijan to solve this conflict through peaceful means.

“We are not talking about opening our sabers and start a war with Armenia. We would like to demonstrate our goodwill and solve this question on the basis of the territorial integrity of Azerbaijan.”

And replenishing the country’s military just makes good sense. “Our whole country is developing, so shouldn’t we pay attention to our military people and most of all raise their salaries and re-equip the military,” Aliyev said. “I think it’s a natural process.”

The Minsk Group under the Organization for Security and Cooperation in Europe—spearheaded by the United States, Russia and France—has been leading the negotiations between Armenia and Azerbaijan since 1992. U.S. Deputy Assistant Secretary of State for European and Eurasian Affairs and Minsk Group Co-Chair Matthew Bryza said in a recent interview with Voice of America that negotiations were improving and making headway on the return of Kelbajar and Lachin, two Armenian-occupied regions of Azerbaijan. Bryza also said the two sides were making progress on Karabakh’s future political status.

Aliyev declined to discuss details of the negotiations, but voiced hope that progress can be made soon. “This conflict is jeopardizing normal development of not only Azerbaijan but Armenia itself, and all of our neighbors,” he said with a hint of exasperation. “Instead of paying attention to the normal demands of our lives—the development of the economy, life standards, social programs etc.—we pay a lot of our finances just to solve this conflict.

“It is clearly a distraction. This conflict is more than 15 years old … nobody in Armenia and Azerbaijan can take this piece of land and put it in its pocket and go away.”

Turning the subject to Azerbaijan’s southern neighbor, Iran, Aliyev said he is “definitely concerned” about the growing tensions between the United States and Iran, but he was optimistic that an armed conflict could be avoided, especially because top U.S. diplomats have signaled a willingness to talk in recent weeks.

“It is the best way,” Aliyev said. “As an immediate neighbor of Iran … we would definitely like this particular problem to be solved peacefully and as soon as possible.”

Aliyev did not say flatly that Iran should be denied nuclear weapons, but he did remark that the international community needs to pay more attention to the Nuclear Non-Proliferation Treaty (NPT) and that Iran should “be in strict compliance with international law.”

“NPT should be seriously revitalized. It demands more robust efforts on the part of the international community,” Aliyev suggested.

Finally, Aliyev said one of his primary goals as his nation’s top diplomat in the United States is to work for the repeal of the Freedom Support Act. He argues that a “skilled and smart” Armenian lobby convinced Congress to pass the act in 1992 without Azerbaijan’s knowledge.

The Freedom Support Act was created to facilitate economic and humanitarian aid to the former republics of the Soviet Union, trusting that such assistance would help stabilize democratic forms of government and foster economic growth. All republics in the former Soviet Union receive this aid, with the exception of Azerbaijan.

President Bush has waived this ban on Azerbaijan’s behalf every year since he’s been in office, but Congress has yet to repeal it. “We certainly believe it is an obsolete, abnormal piece of legislation that does not serve the interests of both countries,” Aliyev said.

But the ambassador praised the U.S. position on Nagorno-Karabakh, pointing out that “the United States supports the territorial integrity of Azerbaijan.” And although Nagorno-Karabakh continues to be one of the most contentious and sensitive issues for his people, Aliyev said he especially hopes for a peaceful resolution before the current political leadership of Azerbaijan cedes power to the next generation.

“New generations will come and definitely the situation is going to change,” Aliyev said, alluding to the possibility of a more hard-line position on the part of either government that could result in more bloodshed. “I sincerely believe that common sense will take over. We had a really good chance to be a prosperous country with less problems, and we still have in front of us a prosperous and healthy future.”

Letter to the Editor

June 8, 2007

The Washington Diplomat P.O. Box 1345 Wheaton, MD 20915-1345

Dear Editor,

Azerbaijan should have a ‘prosperous and healthy future’ as Yashar Aliyev says (Azerbaijan Basks in Energy Riches… by Michael Coleman, June 2007), but it should also come to terms with what happened in Nagorno Karabakh in early 1990s. We just cannot ignore the reality: The force that kept Karabakh inside Azerbaijan for 70 Soviet years is long gone.

For Nagorno Karabakh to go back being part of Azerbaijan, somebody needs to bring back Joseph Stalin, who gave Karabakh to Azerbaijan in 1921 against our will, and the Soviet Union, which forcefully kept Karabakh inside Azerbaijan despite numerous popular appeals to the contrary. Azerbaijan should understand that there is no return to those times, even more so after its brutal military campaign against Nagorno Karabakh in 1991-1994.

Instead, now the time is for Azerbaijan to tone down its war rhetoric and misleading propaganda for domestic and foreign audiences (some of which appeared in Coleman’s article), embark on a series of confidence building measures (which Karabakh has been proposing for a decade) and resume a direct dialogue with Nagorno Karabakh to deal with the cause of this conflict (Karabakh’s political status) and then with consequences on both sides (controlled territories, refugees, communication, etc.).

The day that happens will mark the beginning of a new and more promising era for everybody in the South Caucasus.

Sincerely,

Vardan Barseghian Representative of the Nagorno Karabakh Republic to the U.S.

Office of the Nagorno Karabakh Republic in the United States 1140 19th Street, NW, Suite 600 Washington, DC 20036

Tel: (202) 223-4330 Fax: (202) 315-3339 Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it Web: www.nkrusa.org

About the Author

Michael Coleman is a contributing writer for The Washington Diplomat.

Last Edited on November 29, 1999