Azerbaijan is transforming into a mini-Russia
By Ronan Keenan
Feb. 26, 2015

The West's renewed difficulties with Russia have once again
highlighted the importance of cutting resource-dependency on
antagonistic states. No one can disagree that Europe surely must find
alternative sources of natural gas. And it is vital that the US
establish strong links with former Soviet republics. Accordingly, the
US and Europe have turned to Azerbaijan as an ideal diversifier to
Russia. The young nation has abundant energy resources and a highly
strategic geographic location'wedged between Russia and Iran.

But it turns out there are plenty of reasons to be uneasy about the
West's blossoming relationship with Azerbaijan. Political repression
and antagonism toward weaker neighbors make the nation seem like a
miniature Russia. Yet aside from empty rhetoric, there is little
evidence that the US or Europe will slow their courtship of president
Ilham Aliyev and his authoritarian regime.

Azerbaijan's aspirations for global prominence are abundantly clear.
Three flame-shaped towers dominate the skyline of the capital, Baku,
each outfitted in sparkling orange-and-blue-tinted glass. On the
highway to the airport, foreign businessmen are transported by
black-cab taxis imported from London. The nation's leadership want
Baku to be a magnet for global investment, and over its short history,
it has shown an ability to prosper in a world of decentralized global

Yet, just a couple hundred miles west of the glittering capital,
things are not so glamorous. For nearly 30 years, the mountainous
terrain of the autonomous Nagorno-Karabakh Republic has been a scene
of dire hostility. Legally part of Azerbaijan, the territory has been
governed by ethnic Armenians since a war of secession, stoked by
neighboring Armenia, broke out in the late 1980s. While a 1994
ceasefire is technically still in place, skirmishes along the border
with Azerbaijan proper are common, and tensions between the two
nations have been steadily escalating of late. In July of 2014, border
violence reached an all-time high since 1994, leaving eight
Azerbaijani and two Armenian soldiers dead, according to Reuters; and
both nations pointing fingers as to who violated the ceasefire first.

In January, the mediating Organization for Security and Co-operation
in Europe, or Minsk Group, headed by France, Russia and the United
States, called for a bilateral de-escalation and ordered Azerbaijan to
honor its commitments to a peaceful resolution of the conflict. Aliyev
bit back, demanding that `measures must be taken' by the Minsk Group
to push Armenia out of the territory'saber rattling that no doubt
irritated the Russians, who maintain a mutual defense agreement with
the Armenians.

Nagorno-Karabakh has been just one of several cases in which an
increasingly assertive Azerbaijan has upset both its neighbors and the
West. The country's burgeoning confidence and geopolitically strategic
importance means that such trends are likely to continue, with little
retort from the US or Europe.

Much of Azerbaijan's ascendance'both in concrete and self-proclaimed
terms'can be attributed to an incredibly dynamic economy. Between 2006
and 2008, it was the fastest growing in the world, expanding at an
average annual rate of 28%'inspiring massive foreign investment,
capped off by the launch of a Condé Nast glossy. Expansion has since
remained relatively robust, helped by large oil and gas reserves in
the Caspian Sea. However, with about half of the economy reliant on
oil exports, the 50% fall in prices over the past seven months will
inflict a significant drag on growth. Estimates generally indicate
that the economy increased just 4% last year, and a similar figure is
expected for 2015.

Strengthening political and economic relations with China and
increased focus on gas should help boost revenue in future years, but
the near-term sharp deterioration in growth could could provoke
disquiet in a population defined by starkly contrasting levels of
income inequality.

But Aliyev has a number of tools at his disposal for effectively
neutralizing criticism. First, there's the State Oil Fund of the
Republic of Azerbaijan (SOFAZ), which is a $40 billion
sovereign-wealth fund that the government has been using to fill gaps
in the annual budget, sometimes accounting for more than half of
government revenue. Such use of the fund should help ease the impact
of declining oil income over the short-term.

The second tool, which has been more frequently employed since
Aliyev's reelection in 2013, involves summary crackdowns on all signs
of dissent. Azerbaijan's growing middle class has become increasingly
attuned to the behavior of elected leadership, particularly signs of
corruption, and repression of political opposition. Aliyev's response
to criticism has involved arresting investigative journalists and
civil-society activists, in addition to targeting NGOs that promote
democracy, including the US-funded International Research and
Exchanges Board (IREX). The most newsworthy recent instance was the
Dec. 26 raid on the local bureau of Radio Free Europe/Radio Liberty
(RFE/RL), a US government-funded news service.

Aliyev showed little regard for ensuing international criticism. In
September, the European Parliament adopted a resolution condemning
human-rights offenses in the country. Azerbaijan responded that, `if
this attitude continues, Azerbaijan will be forced to once again
discuss cooperation with the European Parliament.' Perhaps most
egregious, the raid on RFE/RL came several days after John Kerry spoke
with Aliyev by telephone, beseeching the leader to ease his
suppressive tactics. Clearly, Kerry's words went unheeded.

In recent weeks, there have been more calls from within the EU and US
for sanctions against Aliyev and his regime. But the likelihood of any
actual reprisals is remote.

This is because condemnation from the US and Europe carries little
weight in Baku. Azerbaijani leadership knows it has something
Europeans need. Gas imports from Azerbaijan took on new significance
in 2014 as Europe sought to dampen reliance on Russia. A $45 billion
Shah Deniz II gas field project will allow Azerbaijan to at least
double gas exports by 2020, and correspondingly increase its role in
European markets by a substantial margin. While Azerbaijani gas will
probably meet only 2% of European demand over the next several years,
a further deterioration in relations with the Kremlin could see a
swift escalation in dependence on Azerbaijan's resources. Moreover,
the US will be reliant on Azerbaijan as a key transit point when it
transports troops out of Afghanistan.

Notably, Azerbaijan has been unafraid of rankling its more powerful
neighbors'Russia and Iran; a trend that has proven attractive to
Western interests for obvious reasons. The country has angered Iran by
allegedly allowing Israel access to bases near the Iranian border.
Additionally, along with Kazakhstan and Turkmenistan, it has been in
dispute with Russia and Iran for more than 20 years over maritime
boundaries in the Caspian Sea. And when it came to a 2012 United
Nations resolution condemning the actions of the Assad regime against
Syrian revolutionaries, Azerbaijan sided with the US, and against a
vocally pro-Assad Russia and Iran.

But a special affinity for taking jabs at Putin or the Ayatollah does
not make Azerbaijan an unquestioning doormat to Western interest. In a
short letter to The Wall Street Journal published in early January,
the Azerbaijani ambassador to the US, Elin Suleymanov, claimed that
criticism of the country's handling of the RFE/RL case was an
`ideological misinformation campaign.' He added that `financial
mismanagement' spurred an investigation into RFE/RL, but did not say
why that somehow warranted a raid. The letter also denied that
world-renowned Azerbaijani human-rights activist, Leyla Yunus, was
suffering from ill health while governmental detention, and did not
explain why she was arrested in the first place.

Other methods to deflect negative attention have been more subtle, but
nonetheless disreputable. Last September, The New York Times revealed
that, in 2012, Azerbaijan's government hired a Washington, DC-based
public relations and lobbying firm with the purpose of expanding its
relationships with US thinktanks'an effort to bolster public opinion
of the republic and highlight its important role as a security partner
in a notoriously fraught region. Former British prime minister Tony
Blair has led a highly criticized public-relations campaign on behalf
of the country.

Such audacity has so far been tacitly encouraged. On January 20,
Germany welcomed Aliyev for a two-day visit that concluded with a
meeting with chancellor Angela Merkel. Issues of human rights and
Nagorno-Karabakh were treated with benign, almost sympathetic
language, and the German leader instead focused on the practicalities
of energy security. Merkel noted the growing role that Azerbaijan
plays in Europe's energy-sourcing, and added that Germany intends to
further develop relations between the two nations. Merkel cannot be
blamed for focusing on the German national interest. In a world where
Western influence is in decline, domestic issues take precedence.

Azerbaijan's ability to profit from a growing uncertainty of global
order looks set to continue for now. However, relying
disproportionately on the energy sector for economic growth, stifling
the middle class, and behaving like an indiscriminate gadfly toward
large powers are not viable strategies for long-term stability. It
seems that Aliyev is modeling himself on Vladimir Putin, despite
frequently butting heads with the Russian leader. One would think
that, should it continue to mirror the repressive policies of its
bearish neighbor, Baku would be subject to the same level of
international pushback as Moscow. But, for the time being, Mr. Aliyev
will get away with what he can.