TAMIL NADU

Oil smoothens a dynasty's rule

TOMORROW AZERBAIJAN will become the first former Soviet republic to hand over power from father to son. The dynastic transfer of power from the 80-year-old Azeri President, Heidar Aliyev, to his 41-year-old son, Ilham, in the October 15 presidential elections may have direct bearing on the ongoing rivalry between Russia and the United States for control of the strategic Caspian Sea region and its oil and gas riches.

The stakes are enormous. Azerbaijan, a Muslim republic in the Caucasus with a population of 8.2 million, sits on an estimated 45 billion barrels of oil and one trillion cubic metres of gas, and holds the key to the Caspian Sea and Central Asia with their still richer hydrocarbon resources. Following the collapse of the Soviet Union, the U.S. established a strong foothold in the region. American and British companies today control 27 per cent of the Caspian's oil reserves and 40 per cent of the gas reserves and have launched the construction of an oil pipeline from Azerbaijan to Turkey via Georgia and bypassing Russia. The Baku-Tbilisi-Ceyhan (BTC) pipeline, scheduled for completion in 2005, has strategic importance for the U.S. as an alternative source of oil outside the control of OPEC and Russia.

However, after the Russian President, Vladimir Putin, succeeded Boris Yeltsin three years ago, Russia has regained some of the lost ground. Russia has reasserted its military dominance in the Caspian Sea, improved relations with Azerbaijan, and signed bilateral accords with it and Kazakhstan on the division of the Caspian seabed.

When Mr. Heidar Aliyev, who ruled Azerbaijan for two decades before the break-up of the Soviet Union, returned to power in 1993, his country was devastated economically and traumatised morally by the loss of the Christian Armenian enclave of Nagorny-Karabakh to neighbouring Armenia in a bloody war that claimed 30,000 lives on both sides. Mr. Aliyev stopped the war and succeeded in partially restoring the production of oil, the main wealth of Azerbaijan. He has paved the way for international consortiums led by British Petroleum and Exxon Mobil to invest billions of dollars in Azerbaijani oil and gas projects. The capital, Baku, is bristling with newly built houses, foreign cars, five-star hotels and expensive restaurants.

Outside the glittering capital, however, economic dislocation strikes the eye. Major industrial plants built under the planned socialist economy stand idle as economic ties with other newly independent states have been disrupted. About 30 km from Baku rusted steel structures of the sprawling petrochemical works in Sumgait stretch out for miles along the road as a grim reminder of the post-Soviet chaos. One in three Azerbaijanis today earns a living in Russia, sending money back home to support their families. The Government also has to cope with one million refugees from Nagorny-Karabakh and Armenia. Acute social problems and glaring contrasts between widespread poverty and the lavish lifestyles of the ruling elite make the situation explosive in Azerbaijan which is still reeling from the loss of 20 per cent of its territory to Armenia.

Any political discussion in Azerbaijan begins and ends with the problem of Nagorny-Karabakh. International efforts to resolve the dispute with the help of the specially instituted Minsk Group co-chaired by the U.S., Russia and France under the auspices of the Organisation for Security and Cooperation in Europe (OSCE) have failed. Azerbaijan sticks to its demand that the Armenian "aggressor" vacate the "occupied" territory, while Armenia treats it as a case of self-determination by ethnic Armenians who declared independence from Azerbaijan after the anti-Armenian pogroms in the late 1980s. Predictably, the issue has conditioned Azerbaijan's foreign policy preferences. It has built close relations with Pakistan, which supports it on Nagorny-Karabakh. The relationship is lukewarm with India, which resents Azerbaijan's pro-Pakistan stand on Kashmir.

Any Azerbaijani tends to see any Armenian as a personal enemy. Azerbaijan's Deputy Prime Minister in charge of refugees, Ali Gasanov, was on record recently that Armenians are "ethnically inclined" towards aggression. Azerbaijani politicians and scholars warn that "Armenian terrorism" will soon pose a global threat if not curbed by international effort.

Armenians are just as prickly. The former President, Levon Ter-Petrosyan, was forced from office in 1998 for proposing to drop Armenia's long-held position that Nagorny-Karabakh must be made independent from Azerbaijan or be allowed to join Armenia. When a year later his successor, Robert Kocheryan, agreed to discuss a U.S.-proposed settlement plan, nationalists staged a shooting carnage in Parliament, killing the Prime Minister, the Speaker and several deputies.

The Aliyevs, father and son, have taken the line that Azerbaijan will win back Nagorny-Karabakh peacefully. But in the no-war-no-peace situation any instability in either Azerbaijan or Armenia may provoke renewed fighting for the enclave.

Given the recent history of turbulence and violence in the region, both Russia and the U.S. decided that dynastic succession was the best option in Azerbaijan, and have thrown their support behind Mr. Ilham Aliyev, closing their eyes to the regime's questionable democratic credentials. For most of the election campaign, both father and son ran as candidates of the ruling New Azerbaijan Party. As his health rapidly deteriorated and he was not seen in public for months, the senior Aliyev appointed his son Prime Minister in August and finally withdrew from the presidential race in his favour in early October. Election posters of the Aliyevs standing shoulder to shoulder hammered home the message. Aliyev senior conveyed in a farewell address to the nation from his hospital bed in Cleveland, U.S.: "Ilham Aliyev will be able to carry through the ambitious endeavours I have launched but could not complete."

Aliyev junior is assured of victory in the election, with the Government apparatus firmly behind him, and the Opposition weak and fragmented. OSCE observers have registered numerous irregularities in the election campaign and accused the authorities of violence against Opposition. But the main reason for the Opposition's inevitable defeat has been its inability to unite and field one candidate rather than 10. Also, rampant corruption has made voters rather cynical about their election preferences; many said they would support Aliyev junior for the simple reason that "being Heidar's son, he has everything and would feel no need to steal, whereas other candidates are too hungry to think of anything except lining their pockets."

The main question today is whether Aliyev junior, who has little political experience (his last job was as vice-president of the state oil company, SOCAR), can consolidate his authority, hold together rival factions within the Government, and steer a balanced policy in the complex web of interests and influences in the Caucasus.

The U.S. is keen to seal the alliance of Azerbaijan with Georgia, Turkey and NATO with the help of the $2.9-billion BTC oil pipeline and a parallel gas pipeline to the northern Turkish city of Erzurum. Washington is also out to exploit tense relations between Baku and Teheran over disputed oil fields in the Caspian to set up Turkish and NATO military bases in Azerbaijan that can be used in a possible confrontation with Iran.

For its part, Russia is trying to route as much Caspian oil as it can through the existing pipeline linking Azerbaijan's and Kazakhstan's oil fields with the Russian port of Novorossiisk on the Black Sea. Russia's LUKOIL is increasing involvement in Azerbaijan's oil exploration to ensure its continued flow across Russian territory. Kazakhstan last month indicated readiness to join a Russian-backed project to build a $700-million oil pipeline from the Black Sea to Greece's Mediterranean coast. This would be a big setback for the U.S.-pushed BTC pipeline, which may not be profitable without Kazakh oil. Russia is also wooing Azerbaijan to pump gas from its massive Shah Deniz field in the Caspian Sea through the Blue Stream undersea pipeline linking Russia and Turkey. Russia also plans to expand the North-South transport corridor linking Iran and Russia across the Caspian Sea by adding a road link via Azerbaijan.

With so many clashing interests at play the big game in the Caucasus is bound to gain momentum after the presidential elections in Azerbaijan.

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