The Pandemic Depression
The Global Economy Will Never Be the Same
The Ukraine crisis has presented other post-Soviet countries with stark foreign policy choices. In a recent article in Foreign Affairs, University College of London’s James Yan makes a provocative argument based on a questionable premise. Yan claims that Azerbaijan faces a choice: “to scale back its support for the Western-led liberal order, thereby cozying up to Iran and Russia; or to fully embrace the West and risk regional backlash.” This analysis proceeds from the assumption that Baku is genuinely interested in embracing the West’s idea of liberal order.
The evidence, however, suggests something different: Azerbaijan, bolstered by energy wealth, now deems itself powerful enough to chart a third way, in which it adopts a Russia-style authoritarian model, while positioning itself as a so-called “strategic partner” with the West on energy issues and security. The bet is that by not having to choose between Russia and the West, Azerbaijan can have it both ways. The country’s elites hope that a transactional relationship with the United States and Europe will allow them to increase their wealth without threatening Azerbaijan’s oligarchic political system.
That plan is now being put to the test. In recent months, Azerbaijan’s leaders have embarked on the biggest human rights crackdown in wider Europe and have taken a more bellicose line on their number-one domestic and foreign policy issue: the protracted conflict with their country’s long-time foe, Armenia. Western policymakers need to pay more attention and ask themselves what this new hard line means for both Azerbaijan and its neighborhood.
WAR AND OIL
Azerbaijan is perhaps the former Soviet Union’s most complex and interesting country, with its Shia, Turkic, and secular traditions, and historic habits of both democracy and authoritarian rule. Two factors have shaped its trajectory since it achieved independence in 1991. The first is the brutal war with Armenia over the disputed highland territory of Nagorno–Karabakh. Both sides suffered terrible losses on the battlefield before Armenia won a military victory in 1994. Azerbaijan paid dearly for the conflict: 20,000 people died and one-tenth of its population, more than 700,000 Azerbaijanis, became refugees. Azerbaijan not only lost control of Nagorno–Karabakh but also, partially or wholly, that of seven surrounding regions with no significant Armenian population -- in all, nearly 14 percent of its internationally recognized territory. The trauma of that conflict and defeat has haunted the country ever since, as it has dealt with the refugee burden and defined itself in bitter rivalry to the Armenians.
The second factor that has shaped Azerbaijani politics is the country’s second oil boom (the first occurred at the end of the nineteenth century). Twenty years ago this month, the discovery of new oil reserves in the Caspian Sea made the country an attractive destination for international investors. Heidar Aliev, who was president at the time, invited oil companies from around the world to bid for projects as part of what he called the “Contract of the Century.” The lucrative deal to emerge from this policy -- overseen by Aliev’s son, Ilham, who succeeded him as president in 2003 -- was the Baku–Tbilisi–Ceyhan pipeline. Since 2006, the British oil company BP has used the pipeline to send oil from the Caspian Sea to the Mediterranean; at its peak, it exported one million barrels of oil a day.
Azerbaijan’s oil boom utterly transformed the country’s economy. Throughout the 2000s, Azerbaijan enjoyed the world’s highest economic growth rate. The boom eliminated the worst of post-independence poverty and enabled the government to re-house the refugees who had fled the territories it lost in the 1990s. It also bought international clout in various forms: a long line of new embassies; a seat on the UN Security Council; glitzy prestige projects such as playing host to the Eurovision Song Contest.
It also created a new class of oligarchs. Azerbaijan’s newly wealthy elites have been conspicuous in their consumption -- they purchased private planes, houses in London and southern France, even major European soccer clubs. To the extent that they engage in politics, the elites’ main goal is to maintain the political and economic hierarchy that has served them so well. Oligarchic politicians -- such as Kemaladdin Heydarov, the minister of emergency situations, Zia Mamedov, the transport minister, and Ramil Usubov, the interior minister -- use their political influence to protect their wealth. The president sits in a privileged spot atop the state, but even he is not fully in control of everyone underneath him. Some of these ministers have created legally-sanctioned de facto militias whose loyalties are both to the state and to their individual patrons.
THE WEST AT ARMS-LENGTH
Azerbaijan’s foreign policy should be understood in this context. The country’s elites are interested in building ties with outside powers, but only if they don’t conflict with their larger goal of preserving Azerbaijan’s autarky. Baku, in other words, wants to be close to the West, but not too close. The United States, from this perspective, is attractive but dangerous. The elder Aliev, who served in Leonid Brezhnev’s Politburo, is famously said to have had the epiphany in the early 1990s that “Washington is the new Kremlin” -- a new guiding hegemon to be both courted and taken advantage of.
Azerbaijan’s current pitch to Western officials emphasizes three points: the country’s status as a transit point for troops returning home from Afghanistan; its close relationship with Israel and its role in enforcing sanctions against Iran; and its promise as an alternative to Russia as a gas supplier for Europe via the projected Southern Gas Corridor. All of these have certain merits, but they are also being oversold. The withdrawal from Afghanistan should be complete in a year’s time. Washington is currently in nuclear negotiations with Tehran that would render moot Baku’s contributions on sanctions enforcement. The once-ambitious Southern Corridor project has been scaled down: The current plan is that, in five or six years’ time, southern Europe will receive roughly 10 billion cubic meters of Azerbaijani gas annually. That is important for Greece and Italy, but will comprise only about two percent of Europe’s overall gas needs.
Azerbaijan’s honeymoon period with Western oil majors also appears to be ending. The French energy firm Total has sold its stake in the gas project and the Norwegian company Statoil has reduced its contribution. Baku is now looking for new options. A sign of the future may be a memorandum of understanding struck on September 12 between the Azerbaijani state-owned oil company SOCAR and its Malaysian counterpart Petronas.
And then there is the country’s most complex relationship with a foreign power, that with Russia. Suspicion of the former colonial power is at the center of Azerbaijan’s national ideology. Nonetheless, ties with Moscow are much closer than Azerbaijani officials ever suggest in their conversations with the West. Russian President Vladimir Putin visited Baku last August with a long agenda that included combatting Islamic militancy in the North Caucasus, increased trade (including the sale of Russian weapons), and defense of the Russian language in Azerbaijan.
There may be no trust between Azerbaijan and Russia, but there is an implicit understanding. After all the two countries share basically the same political model: national wealth is channeled through the state on the basis of energy revenues, and the small elite that pool most of the income also control the media, and intimidate and oppress the opposition. Legislation, such as new laws restricting the rights of non-governmental organizations, has the habit of being enacted in Russia first and then passed in Azerbaijan in an almost exact carbon-copy a few months later. (President Obama singled out Azerbaijan as an oppressor of NGOs in his speech at the Clinton Global Initiative on September 23.)
In that spirit, even as Azerbaijan was opposing Russia and supporting Ukraine’s territorial integrity at the United Nations, officials in Baku were endorsing Moscow’s narrative about the reason for the uprising in Ukraine, saying it was planned and funded by the West and that it constitutes a threat to all post-Soviet regimes. One presidential official called Euromaidan the “project of certain international forces,” which had caused “civil strife, chaos, and anarchy” in Ukraine and would do so again in Azerbaijan.
Baku has organized a crackdown against any citizens thought capable of even contemplating a Maidan-style protest in Azerbaijan. Azerbaijan’s jails now hold an estimated 98 political prisoners, many of them the country’s bravest pro-Western activists. They include Ilgar Mammadov, an opposition politician and former presidential candidate; Anar Mammadli, who ran an organization exposing electoral fraud; Rauf Mirkadirov, a well-known journalist who had been working in Turkey; Intigam Aliev, a respected lawyer who had been taking prisoners’ cases to the European Court of Human Rights; Rasul Jafarov, a well-known youth activist, who turned 30 in jail this summer; Leyla Yunus, a veteran of the independence struggle of the late-1980s who subsequently became the country’s best-known human rights defender; and Arif Yunus, husband of Leyla, a scholar and writer. The dubious charges against them range from tax evasion to espionage. The local pro-government media has already declared the detainees guilty and government officials scarcely bother to conceal that these are people they personally detest and want to get rid of.
At the same time, the government in Baku has moved to close down or harass Western funders and institutions that have promoted democracy. Western organizations such as the nonprofit educational organization IREX, the National Democratic Institute, and even the charity Oxfam have been harassed: their bank accounts have been frozen or they have been forced to leave the country.
Westerners who dare to criticize Azerbaijan -- even people who have helped it in the past, such as recently departed U.S. Ambassador Richard Morningstar or Swedish Foreign Minister Carl Bildt -- are attacked by Azerbaijani officials and media for “gross interference” or for being “self-satisfied and ambitious.” Naturally, Russian officials, who refrain from mentioning democracy as a matter of course, face no such criticism.
BACK TO THE BATTLEFIELD
The increasingly aggressive posture of the Azerbaijani government has the potential to destabilize not just the country itself, but also its wider neighborhood. In part this is because the assault on the pro-Western opposition has ceded ground to adversaries of a more militant variety. There are reported to be several hundred Azerbaijani radical Sunnis fighting with ISIS who can be expected to return home at some point.
In part this is because Azerbaijan is ever more aggressively provoking its unresolved conflict with Armenia over Nagorno–Karabakh. Baku has used its oil wealth to fund a massive re-armament drive. Over the past five years, Azerbaijan has bought offensive weapons -- attack aircraft, artillery systems, surface-to-air missiles, and drones -- from Israel, Pakistan, and Russia. Its military budget now stands at $4 billion a year, a figure equal to rest of the Armenian state budget.
There has also been an escalation of rhetoric. The Azerbaijani leadership has officially declared Armenia an enemy. In August, Aliev took to Twitter to issue a barrage of 57 bellicose tweets, telling the Armenians, “The flag of Azerbaijan will fly in all the occupied territories.”
Azerbaijan’s frustration is understandable. More than 20 years on, no one has crafted a solution that will return it its lost territories. And Armenia is a difficult adversary, which is slowly rewriting the facts on the ground as it maintains its hold over the Azerbaijani territories around Nagorno–Karabakh.
But frustration is not a policy. Azerbaijan bears as much responsibility for the Karabakh conflict as the Armenians and there is no alternative to a peaceful settlement with the enemy. Frustration is also costing lives. An exchange of provocations along the long ceasefire line this summer resulted in the most dangerous flare-up of violence there in 20 years, with at least 30 soldiers dying on both sides. Conspiracy theorists on both sides have blamed the Russians, but the evidence suggests that it was a pure Armenian–Azerbaijani war of bluff that got out of hand.
This is a dangerous dynamic. It seems only a matter of time until a combination of Azerbaijan’s domestic insecurity, its military build-up, and the instability on the ceasefire line push Baku to abandon peace talks and embark on a campaign to reconquer Karabakh by force -- a move that all outside experts on the conflict predict would end in a catastrophe for all sides.
Azerbaijan has objective reasons to feel insecure in its neighborhood. But Western interlocutors should not be flattered by its overtures about strategic cooperation. If Baku was serious about partnership, then it would cease persecuting its pro-Western critics and engage more intensively in the Nagorno–Karabakh peace process. Western politicians should deal with the Azerbaijan that is before them, rather than the fanciful one that Azerbaijani officials have become accustomed to selling.