2012-10-05 by Richard Weitz
According to the Russian media, the Azerbaijani government is about to renew Russia’s lease of a radar station at Gabala in Azerbaijan. Russia is now paying $7 million dollars annually to lease the radar. Until recently, Azerbaijan was demanding $300 million yearly rent to extend the lease beyond December 2012.
The Russian press says that the two sides will now agree to a 2-3 year renewal, which might be renewed, at the current low rate.
Azerbaijan’s decision becomes more understandable in light of the country’s history.
Azerbaijan regained its independence in 1991 after the collapse of the Soviet Union and for the first time since 1918, when a short-lived republic broke free from the Russian Empire only to be subsumed into the Soviet Union as the Azerbaijani Soviet Socialist Republic in 1921. Azerbaijan and the rest of the Caucasus region have been an object of rivalry between the Persian, Ottoman and Russian empires.
During the tenure of Ayaz Mütallibov, Azerbaijan’s last Communist first secretary and first president (1991-92), Azerbaijan followed a pro-Moscow stance. Mütallibov tried to secure his positions with Moscow’s help against the Azerbaijani Popular Front (APF) and sought Russian help against Armenia in the Nagorno-Karabakh conflict.
But his successor and first democratically elected president, Abulfaz Elcibey, led an APF government that pursued a pro-Western, pro-Turkish, and anti-Russian and anti-Iranian foreign policy line. Elcibey wanted to make Baku independent from Moscow, and intensified negotiations with Western oil companies about exploiting Azerbaijan’s Caspian oil fields, and aimed to hitch Azerbaijan to what was then prematurely seen as Turkey’s rising star in the former Soviet republics. Elcibey’s lost power to a military-backed coup due to Azerbaijan’s complete defeat in its war with Armenia, which enjoyed Russian military support, and Azerbaijan’s economic collapse.
After a military coup against Elcibey, Heydar Aliyev became Azerbaijan’s president in 1993 and pursued a balanced foreign policy toward regional and extra-regional countries. He helped stabilize Azerbaijan’s foreign relations, attract foreign direct investment to develop the country’s energy reserves, and consolidate political power in the hands of a strong presidential administration.
He also presided over the so-called “Contract of century” in 1994 with the Azerbaijani International Operating Company (AIOC).
In keeping with Aliyev’s balanced foreign policy, this was a consortium made up of eleven U.S., European, Saudi and Japanese companies, but Aliyev placated Moscow by involving Russia’s influential energy firm Lukoil in the project
His son, Ilham Aliyev, has held power since 2002 and pursued the same balanced policy of seeking good ties with Turkey, Russia, Iran, Georgia, and the West.
The May 1994 ceasefire with Armenia left 14% of the territory of Azerbaijan under Armenian occupation and some 700,000 internally displaced Azerbaijanis with unresolved status. Their presence has meant that even Azerbaijan’s strong president cannot make major territorial concessions without risking serious domestic political costs. Armenia also physically separates Azerbaijan from its exclave of Nakhchivan.
Although Azerbaijani officials have emphasized they would like to settle their territorial disputes with Armenia through peaceful means, they have indicated that they cannot accept Armenian occupation of Nagorno-Karabakh and neighboring lands indefinitely. The 2008 Georgia War shows how these supposed “frozen conflicts” in the former Soviet Union can abruptly thaw and explode. In the standoff between Armenia and Azerbaijan, the former is supported by Iran and Russia; the latter enjoys backing from Turkey, Georgia, and Israel.
Nonetheless, Russia, Iran, the United States, and European governments continue to seek to influence Azerbaijan’s foreign and often domestic policies.
Azerbaijan has sought to balance and manipulate these rivalries while pursuing its own regional objectives, which focus on recovering territories occupied by Armenia, averting a war with Iran, minimizing foreign leverage over Azerbaijan’s domestic policies, and establishing Baku, the national capital and a major port city, as a center for regional commerce.
Energy revenue constitutes a significant portion of Azerbaijan’s GDP. Until recently, Azerbaijan has had one of the world’s fastest growing economies. Azerbaijan gains diplomatic leverage from its natural energy resources as well as its pivotal geographic position for many energy transport projects. Baku also uses energy revenue to purchase weapons and develop its military. In 2011, Azerbaijan became the second highest defense spender in the Commonwealth of Independent States (CIS); only Russia has a bigger defense budget among the former Soviet republics.
In addition to its conflict with Armenia, Azerbaijan faces threats from Iran and disputes over the legal status of Caspian Sea. Conversely, U.S. oil companies have invested heavily in the country’s oil infrastructure, including the vital Baku-Tbilisi-Ceyhan (BTC) pipeline which runs from Baku, through Georgia, to the Turkish port of Ceyhan. This has become Azerbaijan’s main oil export pipeline since its opening in 2005. Azerbaijani strategists view the BTC as a guarantee of their country’s independence, as it makes it impossible for either Russia or Iran to control its top export commodity.
As one of many forms of retaliation, Iran has joined with Russia in refusing to confirm the legality of the trans-Caspian pipelines that transport oil and gas through Azerbaijan to Europe and the Mediterranean. The littoral states have also not agreed on their coastal borders or how to legally define the Caspian.
The Azerbaijani government has sought to develop good ties with the West without overly antagonizing Russia.
The fact that Heydar Aliyev tempered his predecessor’s anti-Russian policies has also helped matters. Aliyev had been part of the Soviet elite but has sought to balance the country’s foreign policy in relations with West and Russia.
Russians and Azerbaijanis have good economic and social ties. Russia is Azerbaijan’s sixth largest trade partner, with annual bilateral trade approaching $500 million. Azerbaijan has recently become a major natural gas exporter to Russia with the agreement signed between the State Oil Company of Azerbaijan (SOCAR) and Gazprom, Russia’s leading energy conglomerate, in 2009. In 2010, for the first time, post-Soviet Azerbaijan exported some 0.8 billion cubic meters of gas to Russia.
Last year, gas exports to Russia rose to 1.5 billion cubic meters a year. In January of this year, the two sides signed an agreement to double gas purchases from 1.5 to 3 billion cubic meters every year. Before the most recent agreement, Russia was Azerbaijan’s third largest natural gas customer after Turkey and Georgia. After this deal between SOCAR and Gazprom, Russia has surpassed Georgia, with exports running at around 3 billion cubic meters of gas a year.
Azerbaijan has the largest Russian Diaspora in the Caucasus region. Major Russian migration into Azerbaijan started in the 19th century with the development of the petroleum industry in Azerbaijan. In 1939, Azerbaijan’s Russian population reached its highest point, with 500,000 people. Since then, the population has steadily declined. By the end of the 1990s, it amounted to 170,000 people.
Meanwhile, several hundred thousand Azerbaijanis live in Russia. Many have played a very active role in developing the Russian economy as well as economic ties between Russia and Azerbaijan. Today the owner of the Russia’s biggest oil company, Lukoil, is an ethnic Azerbaijani. These economic and social ties helped cushion the sometimes tense political ties between the two countries.
But political-military relations have been strained due to Moscow’s closer ties with Armenia as well as suspicions that the Kremlin wants to see the Nagorno-Karabakh conflict continue indefinitely as a means of ensuring Russia’s continued preeminence in the region through arms sales and diplomatic influence.
Azerbaijan is not a member of NATO, the Moscow-led Collective Security Treaty Organization (CSTO), or any other regional military alliance. Russia has made great exertions since the 2008 Georgian War to strengthen the CSTO, which includes Armenia as well as other former Soviet states. By showing how rapidly the so-called frozen conflicts in the former Soviet Union can melt, that war made Azerbaijani threats to use force to recover its lost territories more credible. However, it also made the prospect of Russian military intervention on Armenia’s behalf more probable.
Azerbaijan has also bought considerable military equipment from Russia, including T-72 tanks and S-300 air defense systems, though Moscow has consistently provided Armenia with more arms than Azerbaijan. Through bilateral and CSTO arrangements, Armenia can purchase military equipment from Russia at discounted rates. Meanwhile, various sanctions have limited Azerbaijan’s receipt of Western weapons and military assistance.
Although Armenia’s army is smaller than Azerbaijan’s, its ranks are bolstered by about 3,000 Russian-commanded troops on its territory. Russia would not find it difficult to send additional troops to Armenia in a crisis. The two countries recently signed an agreement to extend the Russian military’s lease on its Gyumri base in Armenia until 2044.
Clearly, Armenia sees Russia’s military presence as a strong deterrent to Azerbaijani aggression, especially given the Georgia War, where Russian “peacekeeping” forces in Georgia’s breakaway region of South Ossetia intervened to defend the separatists against the Tbilisi government.
Many analysts thought Azerbaijan would not renew the lease since Baku has no strong need for a Russian military presence on its territory while Russia has constructed additional radar stations in the last decade, including a more advanced radar facility in southern Russia in the Krasnodar Krai.
But Azerbaijani probably agreed to an extension simply to avoid antagonizing Moscow.
Fear of provoking unilateral Russian intervention probably also explains why Azerbaijan permits Russia to send men and supplies to its bases in Armenia.
Otherwise, Russia would have a pretext to carve out one or more transit routes through Azerbaijani or Georgian territory.
For a look at the impact of the Georgian War, see our interview with the late Ron Asmus