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AFTER AZERBAIJAN'S PRESIDENTIAL ELECTION: THE LOOK AHEAD (PART ONE)
By Vladimir Socor
The Jamestown Foundation
Tuesday, October 28, 2008
Azerbaijan's reelected president Ilham Aliyev was inaugurated on
October 24 for a second five-year term (www.day.az, October 24,
25). As had been expected, voters gave Aliyev a strong mandate for
continuing his policies.
International observers noted clear improvements in the electoral
process and practice on this occasion, compared with previous electoral
cycles (see EDM, September 23, October 20).
If it were situated in a less dangerous neighborhood, Azerbaijan
would undoubtedly be firmly set on the road to success as a rapidly
modernizing Muslim society. Political ingredients of success--internal
stability and security, statesmanship at the top, a secular path of
development, and external orientation toward the West as matters of
national consensus--were already in place before the country's oil
revenues started flowing in. With its oil-driven economic growth
averaging a world-record of 30 percent annually in the last three
years, some 700,000 jobs created, a rapidly growing oil fund open
to international auditing, vast reserves of gas just barely tapped,
a key location on intercontinental transit routes, and new investment
priorities in non-oil sectors planned for Aliyev's second presidential
term (www.day.az, October 13, 25), Azerbaijan is rapidly moving from
inherited structural poverty to modernization, while contributing to
the West's energy security. The basis is also now in place for more
effective institution-building during the second presidential term.
Azerbaijan`s prospects for further advances, however, look suddenly
fragile in the wake of Russia's aggressive resurgence and invasion of
Georgia, the consequences of which are casting shadows on Azerbaijan
at the start of Aliyev's second presidential term. That invasion
exposed a vacuum of Western power and political presence in the
South Caucasus generally. Few international observers had noticed and
warned against that developing vacuum, and those who did were scarcely
heeded. The United States essentially disengaged itself strategically
from the region after 2005, with medium-level officials and rhetorical
flourishes substituting for high-level strategic policy. The European
Union never engaged seriously with Azerbaijan, nor could Brussels
have done so in the absence of EU common policies on Caspian energy
and the South Caucasus conflicts.
However neglected, Western energy security policy remains a common
agenda with Azerbaijan and Georgia, its prospects linked to these
countries` national independence and security. Azerbaijan`s potential
as a producer of gas-- the commodity more critical than any other to
Euro-Atlantic energy security--is materializing slowly, however. The
reasons behind this include the paralysis of the Nabucco pipeline
project; lagging development of the Shah-Deniz offshore gas field
(in turn delaying capacity expansion of the Baku-Tbilisi-Erzurum
pipeline); and Turkey's ambitions to take a portion of Azerbaijani
gas for possible resale at a profit to itself, instead of providing
transit service for that Azerbaijani gas via Turkey to Europe.
Exploiting this situation, Russia is offering to buy the entire volume
of gas available for export from Azerbaijan at European netback
prices. Russian President Dmitry Medvedev and the Gazprom monopoly
have both made that attractive proposal to Baku. The government there,
as well as the BP and Statoil companies, may soon find themselves
facing the choice of either selling their gas export volumes to
Gazprom or delaying a production ramp-up at Shah-Deniz while waiting
for a non-Russian outlet to become available.
Azerbaijan`s EU and U.S. partners must therefore try seriously to
kick-start Nabucco and work politically with Turkey to remove its
obstacles to the transit of Azerbaijani gas.
Meanwhile, portraying Azerbaijan as capable of supplying Nabucco's
first phase by itself is unconvincing to investors (in view of
Azerbaijan`s other, already existing commitments), and it exposes
Azerbaijan to Russian pressures, instead of sharing that burden among
several potential supplier countries. For its part, Azerbaijan is
actively engaged in political bridge-building with Turkmenistan,
encouraged by Baku's Western partners. But only the formation
of a Western consortium, with an attractive commercial offer to
Turkmenistan, could open access to that country's gas supplies for
the planned trans-Caspian pipeline that would connect with Nabucco
through the Baku-Erzurum link.
Continuing internal debates within the EU reflect an incipient
understanding that Brussels needs to subsidize pipeline projects for
supply diversification. At present, however, the EU has only limited
tools available and even fewer resources earmarked for this. Unless
it moves quickly, EU policy will miss an opportunity yet again to
take full advantage of Azerbaijan's potential as a gas producer and
transit country.
Baku feels surprised and puzzled by the idea of replacing Georgia
with Armenia as a transit route for Nabucco gas. Under this option,
gas earmarked for Nabucco would be pumped from Azerbaijan to Turkey
through a pipeline to be built via Armenia, instead of Georgia. This
suggestion has recently emerged in the context of a possible package
deal in the Karabakh conflict.
The position of Azerbaijan's government, however--as summed up in
Brussels by Deputy Minister of Foreign Affairs Araz Azimov--is that it
would make no sense to bypass the already existing Baku-Tbilisi-Erzurum
pipeline, the designated conduit for Caspian gas via Georgia and
Turkey to Europe (EUobserver, October 8).
By Vladimir Socor
The Jamestown Foundation
Tuesday, October 28, 2008
Azerbaijan's reelected president Ilham Aliyev was inaugurated on
October 24 for a second five-year term (www.day.az, October 24,
25). As had been expected, voters gave Aliyev a strong mandate for
continuing his policies.
International observers noted clear improvements in the electoral
process and practice on this occasion, compared with previous electoral
cycles (see EDM, September 23, October 20).
If it were situated in a less dangerous neighborhood, Azerbaijan
would undoubtedly be firmly set on the road to success as a rapidly
modernizing Muslim society. Political ingredients of success--internal
stability and security, statesmanship at the top, a secular path of
development, and external orientation toward the West as matters of
national consensus--were already in place before the country's oil
revenues started flowing in. With its oil-driven economic growth
averaging a world-record of 30 percent annually in the last three
years, some 700,000 jobs created, a rapidly growing oil fund open
to international auditing, vast reserves of gas just barely tapped,
a key location on intercontinental transit routes, and new investment
priorities in non-oil sectors planned for Aliyev's second presidential
term (www.day.az, October 13, 25), Azerbaijan is rapidly moving from
inherited structural poverty to modernization, while contributing to
the West's energy security. The basis is also now in place for more
effective institution-building during the second presidential term.
Azerbaijan`s prospects for further advances, however, look suddenly
fragile in the wake of Russia's aggressive resurgence and invasion of
Georgia, the consequences of which are casting shadows on Azerbaijan
at the start of Aliyev's second presidential term. That invasion
exposed a vacuum of Western power and political presence in the
South Caucasus generally. Few international observers had noticed and
warned against that developing vacuum, and those who did were scarcely
heeded. The United States essentially disengaged itself strategically
from the region after 2005, with medium-level officials and rhetorical
flourishes substituting for high-level strategic policy. The European
Union never engaged seriously with Azerbaijan, nor could Brussels
have done so in the absence of EU common policies on Caspian energy
and the South Caucasus conflicts.
However neglected, Western energy security policy remains a common
agenda with Azerbaijan and Georgia, its prospects linked to these
countries` national independence and security. Azerbaijan`s potential
as a producer of gas-- the commodity more critical than any other to
Euro-Atlantic energy security--is materializing slowly, however. The
reasons behind this include the paralysis of the Nabucco pipeline
project; lagging development of the Shah-Deniz offshore gas field
(in turn delaying capacity expansion of the Baku-Tbilisi-Erzurum
pipeline); and Turkey's ambitions to take a portion of Azerbaijani
gas for possible resale at a profit to itself, instead of providing
transit service for that Azerbaijani gas via Turkey to Europe.
Exploiting this situation, Russia is offering to buy the entire volume
of gas available for export from Azerbaijan at European netback
prices. Russian President Dmitry Medvedev and the Gazprom monopoly
have both made that attractive proposal to Baku. The government there,
as well as the BP and Statoil companies, may soon find themselves
facing the choice of either selling their gas export volumes to
Gazprom or delaying a production ramp-up at Shah-Deniz while waiting
for a non-Russian outlet to become available.
Azerbaijan`s EU and U.S. partners must therefore try seriously to
kick-start Nabucco and work politically with Turkey to remove its
obstacles to the transit of Azerbaijani gas.
Meanwhile, portraying Azerbaijan as capable of supplying Nabucco's
first phase by itself is unconvincing to investors (in view of
Azerbaijan`s other, already existing commitments), and it exposes
Azerbaijan to Russian pressures, instead of sharing that burden among
several potential supplier countries. For its part, Azerbaijan is
actively engaged in political bridge-building with Turkmenistan,
encouraged by Baku's Western partners. But only the formation
of a Western consortium, with an attractive commercial offer to
Turkmenistan, could open access to that country's gas supplies for
the planned trans-Caspian pipeline that would connect with Nabucco
through the Baku-Erzurum link.
Continuing internal debates within the EU reflect an incipient
understanding that Brussels needs to subsidize pipeline projects for
supply diversification. At present, however, the EU has only limited
tools available and even fewer resources earmarked for this. Unless
it moves quickly, EU policy will miss an opportunity yet again to
take full advantage of Azerbaijan's potential as a gas producer and
transit country.
Baku feels surprised and puzzled by the idea of replacing Georgia
with Armenia as a transit route for Nabucco gas. Under this option,
gas earmarked for Nabucco would be pumped from Azerbaijan to Turkey
through a pipeline to be built via Armenia, instead of Georgia. This
suggestion has recently emerged in the context of a possible package
deal in the Karabakh conflict.
The position of Azerbaijan's government, however--as summed up in
Brussels by Deputy Minister of Foreign Affairs Araz Azimov--is that it
would make no sense to bypass the already existing Baku-Tbilisi-Erzurum
pipeline, the designated conduit for Caspian gas via Georgia and
Turkey to Europe (EUobserver, October 8).