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The standoff between Iran and the West has moved into the Caucasus, where both the Islamic Republic and Israel are trying to woo Azerbaijan -- a country with firm historical connections to Iran but whose interests have overlapped with those of Israel. The dynamic is upsetting the regional balance of power and threatening to overturn nearly two decades of uneasy peace.
The United States may have reset its Russia policy, but the U.S. approach to the other states in the region is in dire need of a conceptual revolution.
The next great oil boom is on: four former Soviet republics on the Caspian Sea are sitting atop an economic bonanza. But they should remember the fate of OPEC, whose members squandered their 1970s windfall. Where did all the money go? The state took on too dominant an economic role and wasted the wealth at home in a rash of boondoggle projects and military buildups. All OPEC members came down with "quick-money fever." They became addicted to supposedly limitless oil revenues even as boom turned to bust. The Caspian states, too, risk going from riches to rags if they do not resist the temptations of petromania.
Like Bosnia, Nagorno-Karabakh, an Armenian-majority enclave deep in Azerbaijan, has seen civil war, ethnic cleansing, and a million people made refugees. Living without a peace agreement, this statelet no one recognizes is mired in communal grievances and nationalism, as is the entire region. One almost longs for a return of the Soviet Union and its rhetoric of friendship between peoples. Karabakhis are discovering that nationalism cannot power an economy and that ethnic identity is a poor foundation for a state.
