Issue 3, 2014. June-July



The confrontation between Russia and Ukraine over Crimea has cast a shadow over stability in the former Soviet Union, but some countries in the region - like energy-rich Azerbaijan - could eventually benefit from the new reality.

Shahin Abbasov

The Caspian Sea

As the crisis over Russia's actions in Ukraine and Crimea continues, the implications of Moscow's new, bold policy for its near abroad are resonating across the West. For countries in the South Caucasus, that could mean more attention from the US, the European Union and NATO as they seek alternatives to Russian gas - and Russian transit links to Afghanistan.

In particular, a shift in the West's strategy in the region could benefit Azerbaijan and its role in US policy in the South Caucasus, political analysts like Vafa Guluzade believe: suspended US-Russia military cooperation could increase Azerbaijan's role in the US's vision for the region since Baku offers the only reliable transit route for NATO troops, personnel, and weaponry leaving Afghanistan.

New Crisis, New Role for Azerbaijan

Guluzade, a Baku-based analyst and one-time top foreign policy aide to former president Heydar Aliyev, said that "generally the Ukrainian crisis will have a positive effect on US policy in the post-Soviet region, including the South Caucasus." He noted that Moscow's aggressive behavior will push Washington to support Georgian and Azerbaijani independence more vigorously.

Jasur Sumarinli, a Baku-based military expert and the head of Doctrine, a military think-tank, also believes that due to the souring relations between Russia and the US, the volume of cargo shipped from Afghanistan via Azerbaijan will increase, as will Azerbaijan's importance in this issue. "Actually, transit through Russian territory was always problematic for NATO. Moscow has been creating problems and this route was considered to be an auxiliary [route] aimed more to attract Russia to ensuring stability in Afghanistan, than actual transit," Sumarinli said.

An Alternative to Russian Gas Supplies

Jumeirah Bilgah Beach Hotel in Baku, one of the many five star hotels that have popped up in the capital since the oil and gas projects started.

It is still uncertain how committed the EU is to shifting its gas consumption away from Russian supplies. But if the political will to wean the EU off Gazprom exists, Azerbaijan offers a viable option.

There are already signs of increased attention to Azerbaijan. In early April, the US Secretary of State John Kerry, whose visit to Baku and Tbilisi is expected this year, said that "getting more gas from Azerbaijan to Europe is on today's agenda." Kerry added that the US and the EU have a lot of work to do in order to diversify their energy supplies, and supplies from Azerbaijan are the major point of this process.

Based on current plans, Azerbaijan is expected to supply about 10 billion cubic meters of gas from Shah Deniz-2 project to Southern European countries of Greece, Albania and Italy in 2019 when the Trans-Anadolu Pipeline (TANAP) and Trans Adriatic Pipeline (TAP) pipelines are scheduled to go online.

Baku-based energy expert Ilham Shaban said there is no need to wait until 2019 to begin major shipments of gas to Europe from Azerbaijan, however.

"If the EU will finance the construction of a short, 180 km interconnector between the gas distribution networks of Turkey and Bulgaria, which could take few months and would not require a large investment; Azerbaijan could start supplies of up to 2 billion cubic meters of gas to Bulgaria even this year," he said.

Shaban noted this move would damage Russian Gazprom's interests: Bulgaria is one of four European countries that are 100 percent dependent on Russian gas.

The Shah Deniz-2 deal is not the only possible option for Baku to help the EU ease its dependence on Gazprom. Azerbaijan has also been increasing gas production recently so it could send more gas to Bulgaria and neighboring Romania and Slovakia - and even Ukraine - by reversing the Slovakia-Ukraine gas pipeline.

In addition, pumping Turkmen gas to Europe is only possible via Azerbaijan. Large volumes of Iraqi and, in the future, Iranian gas could potentially be delivered to European markets through a pipeline in Turkey controlled by Azerbaijan as well.

There is also an AGRI (Azerbaijan-Georgia-Romania-Interconnector) project to pump liquefied natural gas (LNG) to Romania and Ukraine. This idea has been largely ignored due to high cost and lack of investors but if priorities shift away from Russian gas, it could play a role in diversifying Europe's energy supplies.

Caution in Baku

The uptick in relations with the West, however, could come at a cost to Azerbaijan. Like most post-Soviet countries, Azerbaijan is still grappling with a legacy of problems brought about by the breakup of the USSR.

Experts in Baku believe that the government will be careful as it increases cooperation with the West in an effort to avoid confrontation with the Kremlin.

Azerbaijan is less vulnerable to Russian pressure and influence than many other CIS countries, i.e. Armenia (which depends on Russia economically and security-wise - Russian troops are based in Armenia and protect its borders); Ukraine and Kazakhstan (which has a large and organized Russian minority); Kyrgyzstan (which depends on Russian investments and has a Russian military base); Moldova (where Russian troops are based in breakaway Transnistria) and Tajikistan (which also depends on Russia in many areas).

In contrast, Azerbaijan does not have any Russian troops stationed in its territory, its Russian minority is small and largely unorganized, and Baku has limited trade with Russia. The country also does not depend on Russian loans, investment or remittances coming from Azeri nationals working in Russia.

This independence gives Baku a lot more freedom in its domestic and foreign policy - freedom which President Ilham Aliyev is using. For example, after Crimea was annexed by Russia, Azerbaijan was among three CIS countries (together with Georgia and Moldova) which voted in favor of pro-Ukrainian resolution in the UN.

Also, Aliyev has started very active regional diplomacy - Turkish Prime Minister Erdogan visited Baku at the height of the crisis, followed by the visit of Turkish high-ranking military officials. In addition, Aliyev and then Defense Minister Zakir Hasanov recently visited Iran, reportedly to discuss military cooperation.

Other recent diplomatic activity also points to an increased effort by Baku to build up support as Moscow ramps up pressure on former Soviet republics: Turkmen Foreign Minister Rashit Meredov visited Baku for the first time in years and the State Oil Company of Azerbaijan (SOCAR) President Rovnag Abdullayev traveled to Ashgabat. Israeli Foreign Minister Avigdor Lieberman arrived to Baku in late April while the US Secretary of State John Kerry is said to be planning a trip to both Baku and Tbilisi this year.

Russian Levers on Azerbaijan

Unlike its Armenian neighbor, Baku is considerably more secure in its relations with Moscow. There are, however, issues that Russia could exploit if it wants to exert more pressure on Azerbaijan.

1. The Nagorno-Karabakh conflict. Russia enjoys huge influence in areas concerning the conflict - as well as on Armenia - and could provoke new war in Karabakh. Despite Baku's military strength, Azerbaijan could lose a new war due to Moscow's support for Yerevan. However it is unlikely that Moscow will use this lever in the short term because such scenario could pose risks for Moscow itself and its position in the South Caucasus. If the military conflict in Nagorno-Karabakh heats up, Turkey could also interfere, bolstering Azerbaijan's chances. The West is also engaged in conflict settlement over Nagorno-Karabakh so Russia would face a strong backlash if it overplays its hand.

2. The unresolved legal status of the Caspian Sea. Russia could use this factor to justify its military actions in the Caspian Sea against Azerbaijani or Turkmen assets (oil and gas rigs) if Baku and Ashgabat finally agree on a Trans-Caspian pipeline to deliver Turkmen gas to European markets via Azerbaijan. It is a very strong lever, creating concern in both Baku and Ashgabat, so it is unlikely that a decision to build the proposed pipeline will be made anytime soon.

3. Inciting separatism among ethnic minorities (mainly Lezgis) in northern Azerbaijan along the border with Russian Dagestan. Allegedly, Russian security services have a strong influence on these minorities and potentially could provoke a serious conflict in this area. However, Russia will likely avoid this scenario because such a separatist movement could provoke further security troubles for Russia in its own volatile Northern Caucasus region, mainly in Dagestan.

The Dark Side of Closer Azerbaijan-West Relations

Azerbaijan's growing importance for the West could be bad news for local civil society and opposition activists who currently face harsh repressions and government pressure. If Washington and Brussels require more support from President Ilham Aliyev and his government on issues concerning energy and security, they will have fewer levers to push for better human rights and stronger democratic reforms in Azerbaijan.

Elhan Shahinoglu, the head of Atlas, a Baku-based think tank, believes that "the Ilham Aliyev administration would expect compromises from Washington and Brussels on the issues of democracy in Azerbaijan in exchange for support in Afghanistan, transit and gas supplies."

Evidence of the dangers for civil society in Azerbaijan is not hard to find: the recent long prison terms for NIDA youth group's activists; the arrest of prominent Azeri journalist Rauf Mirkadirov; and pressure on the well-known human rights defender Leyla Yunus underscore how vulnerable critics to the Azerbaijani government are. "From what we see before, i.e. the pragmatic position of the West in such issues, the Ukrainian crisis could become bad news for civil society and the opposition in Azerbaijan," Shahinoglu said.