Azerbaijan, an advanced colonial post

In a press conference after the Beslan massacre, President Vladimir Putin denounced the action of a foreign power driven by a “Cold War mentality” [1]. This power tried to control the Caucasus to keep Russia out of the international matters. In fact, the “Big Game” was resumed on the banks of the Caspian Sea when the Soviet Union collapsed and new independent States emerged. As in the XIX Century, the big powers have to deal with nations standing in their way, especially in a moment in which the region is a real strategic crossroads (it is often identified as the “oil pipeijan”) which, in addition, has 5% of the world oil reserves.

The War in this Zone

As we have shown in these columns, the two Chechnya’s wars [2] were aimed at depriving Russia of its access to the Caspian Sea for its economy depends greatly on hydrocarbon exports. We have also pointed out the possible role played by oligarch Boris Berezovski (who took refuge in the United Kingdom) on the stagnation of the conflict as well as Washington’s assistance to Chechnya pro-independence movement through the bordering states.

On November 2003, Georgia, located in the very southern part of Chechnya, had a «velvet revolution» directed by the CIA. The former Soviet minister of Foreign Relations (a man close to Moscow), Eduard Chevarnadze, was removed from power so that Mijail Saakachvili could seize it. The new government then allied with Washington so much that it even sent troops to Iraq [3]. By then, we talked about the key element of the American move in the region: the Baku-Tblissi-Ceyhan (BTC) pipeline.

This pipeline, which is the most important achievement in the transportation of crude oil coming from the Caspian Sea oilfields, starts in Azerbaijan, another “piece” of Central Asia’s great game, and faces the Russian and American influences. Before 1922 and the arrival of the Red Army, Baku, its capital, was already living the oil adventure so much that Churchill said: («If oil is the king, then Baku is its throne»}.

The political instability of the region and the difficulties to take the oil of the Caspian Sea out, forced most of the foreign companies not to invest in the zone. In addition, there were problems related to the calculation of the real reserves of the Caspian Sea.
As oil extraction of the Caspian Sea developed, the old Russian devises used to transfer oil to the North through Chechnya, or to the West through the Georgian ports of Supsa and Bosforo, could no longer take all oil production to the markets. Then, the BTC took the surpluses and directed them to the West. But some serious negotiations and regime changes had to be made before having major companies investing there.

The completely political design of the BTC connection showed the influence of the two old rival powers: it surrounds Chechnya (Russian territory), Armenia (a State under the Russian influence) and Iran (an “Axis of Evil” State); going through Azerbaijan, Georgia and Turkey, where the ships of the Mediterranean Sea are fed, thus avoiding the Bosforo Strait, already saturated.
Consequently, the alliance with Turkey was not affected even though the most economic route was through Iran. But to begin with the work in 2003, the consortium in charge of the project, where BP was a majority stockholder, had to request higher governmental subventions and, above all, in 1996 the U.S. had to classify the project as “strategic”, meaning that it had to be carried out even when its profitability could not be guaranteed. The pipeline had to be operative by mid 2005, with an approximate total cost of $4 billions and it would transfer up to 800 000 oil barrels per day to the European and American markets.

BTC’s legal contract took into account the huge economic and political difficulties hampering its accomplishment- high costs. Therefore, populations living in the area would not benefit much. All future measures that could affect the project’s profitability, whether they are fares imposed by the countries where the pipeline would go through or by environmental damages, would be financed by the States. The consortium will claim compensations without hesitation. The agreements also stipulate the pipeline will not serve the public interest [4].
Recently, the short term profitability of the project has increased as well as the tensions in the region due to the failure of the Iraqi war and the problems controlling this country with the purpose of cheaply exploiting its crude to “flood the market with oil”. All this has provoked effects contrary to the expectations and the consequently price raise stimulated by an insatiable oil demand and the difficulties to produce it in other places.

“In the Name of the Father and of the Son and of the Contract of the Century”

The Azeri government was ready to celebrate the ten years of the “contract of the century” which was ratified in 1994 after a coup d’état financed by BP-Amoco against the leader of that time, Abulfaz Elchibey. This episode, which led the former local head of the KGB, Heidar Aliyev, to seize power allowed the associated oil company to double its share in the extraction, processing and transportation of the national reserves. Thus, it monopolized the economy of the country. At the same time, Great Britain and the U.S. were introducing themselves in the markets of the old Soviet empire.

But the details of this change of regime were not known until year 2000 when an indiscretion made by the Turkish secret services was published by British diary Sunday Times [5]. But in June 1993, a military chief closed to the opposition led a military column, tanks and heavy weapons to Baku and forced President Elchibey to resign. On June 24, 1993, Heidar Aliyev was proclaimed President and in October that year he was «elected».

Accused of financing and providing weapons through intermediaries in exchange of a renegotiation promise, BP-Amoco had to admit it gave $360 millions to Marat Manafov, a man closed to Aliyev. Nevertheless, the Turkish report published by the Sunday Times included the detailed testimony of a former Turkish agent present at the weapons’ negotiations. Therefore, Manatov disappeared after denouncing “the secret agreements between Aliyev’s family and the oil companies”.

Several months after the operation, during the spring of 1994, the “contract of the century” was signed with a 35% for BP-Amoco which actually had more control due to the fact that it owned approximately 80% of the oil infrastructure of the country. The contract, which amounted to more than $5 billions, was discredited in Azerbaijan as clearly unfavorable to the Azeri government which had to refund BP-Amoco’s growth too for several years and would only get a significant part of the profits when the production would be about to finish. Even when the standard of living of the average Azeri citizens has never been the same, it had before 1991 (collapse of the Soviet Union), the Aliyev dynasty has been doing fine. Some time before dying at the end of year 2003, the father, Heidar Aliyev, delegated power to his son Ilham, who usually frequented the capital’s casinos where it’s been rumored he has lost as much as $6 millions a night [6]. Before that, the country was ruled by an “automatic pilot” thanks to oil profits and Heidar Aliyev had appointed members of his clan to important posts.

Like Karimov in Uzbekistan, the Aliyev regime did not tolerate rallies and had to resort to the “war against terror” rhetoric to imprison the religious leaders that criticized him [7]. The freedom of press was not enforced either; for instance, journalist Elmar Huseynov, who criticized Aliyev’s government several times was the target of legal and financial pressures that forced him to close his Monitor magazine [8].

The way things developed encouraged local actors

The Russian reaction to the Azeri show of strength was not immediate. Once again, while oil prices were down Russia was focusing on the profitability that held the American expansion back. But things changed significantly due, probably, to the “velvet revolution” in Georgia, a former Soviet republic too. With the purpose of dealing with the deep concerns of those in Turkey who favored the BTC to relieve the Bosforo Strait, Russian company Transneft signed an agreement with a Turkish partner to build a low-cost pipeline of 193 kilometers (against BTC’s 1760 Km) which will make BTC’s senseless [9]. On the other hand, agreements with Iran have increased: the amount of oil to be transferred during the year from Russian port of Astrakhan, in the Caspian Sea, to Iran should double, especially when the construction of a new Iranian oil pipeline will facilitate oil transportation to the south and the Persian Gulf. With the discovery of the mega deposit of Kashagan several years ago, Kazakhstan has become a local oil power.

There have been recent arguments on the signature of a military association between Azerbaijan and the U.S. General Charles F. Wald, second in command of the American forces in Europe, visited Baku in June 2004 to discuss the terms of a training program for the Azeri troops and the possibilities the American forces could have of using military bases in this country [10]. Then, the Pentagon said its objective was to help Azerbaijan protect its deposits.

During the last years, Azerbaijan and Iran have had a conflict regarding the waters of the Caspian Sea and, therefore, the distribution of its deposits. In July 2001, an Iranian warship ordered a BP-Amoco prospecting ship to get away from Iran territorial waters and threatened to shoot, an incident that almost cause a major diplomatic dispute [11].
China has shown a real interest for the oil of the Caspian Sea and has thought of establishing associations with Russia to get supplies. Last year, the Russian and the Chinese governments decided to jointly design a $3 billion pipeline project from Angarsk city, in the southeast of Russia, to Daqing, northwest of China.

Moscow’s purpose is to maintain its bastion in Chechnya and survive the American tempest. The Anglo-Saxon organization and funding of two political armed conflicts in its immediate borders, in a highly strategic zone, to build a project to overshadow its main industry, is something Moscow has not liked at all. If proven that the riots in Osetia were directed by a foreign power to force Russia to focus on its domestic problems and discredit Putin’s policy, new shows of strength could be expected, to the detriment of the populations.