Azerbaijan International

Winter 1998 (6.4)
Pages 80-81

SOCAR Section

State Oil Company of Azerbaijan Republic:
Current Developments

Ilham Aliyev

Left: Ilham Aliyev, Executive Vice President for SOCAR

Right: Ilham Aliyev addressing the Institute of Near Eastern Policy in Washington, D.C. on November 18, 1998.

Where We Stand Now
by Ilham Aliyev

Ilham Aliyev, Executive Vice President of the State Oil Company of Azerbaijan (SOCAR) was invited to speak at a luncheon at the Washington Institute for Near Eastern Policy in Washington, D.C., on November 17, 1998. About 70 strategists, government officials and business representatives were present.

The first part of his presentation provided an overview of the accomplishments that had taken place in Azerbaijan during the past five years, especially in the realm of oil, and in developing relationship with the United States. Aliyev also expressed the frustration that Azerbaijanis feel towards the US government because of the ill-devised and unfair legislation that the US Congress passed, in blocking direct aid to the Azerbaijan government [Section 907 of the Freedom Support Act]. This especially counters Azerbaijan's perception of justice and fairness since Armenians have clearly been the aggressors in the war over Nagorno-Karabakh yet receive about $100 million annually in US aid.

The following edited comments are excerpts from the Question and Answer Session that followed Ilham Aliyev's presentation. As the son of President Heydar Aliyev, Ilham, as is his custom, spoke frankly on both economic and political issues.

Question and Answer Session

You commented about Azerbaijan being a divided people, the implication being the large Azeri population in Iran. What is going on inside Iran? What relationships exist between your government and the population of Azeris in northern Iran? Is this going to be the next border where we can look for ethnic communities across borders seeking to reunite?

The relations between Iran and Azerbaijan are affected by several important issues. First of all, we share a long border between our two countries. Of course, that border was closed for a long time during the Soviet period. Nowadays we carry on considerable trade with Iran.

Second, we have a very large Azeri community in Iran - an estimated 20-35 million Azeris live in the northern part of Iran. After Azerbaijan became an independent country, the relations between Azeris on both sides became more active. Many people had relatives whom they had not seen. Now the barriers are removed and families can see one another.

In general, I think the relations we have with Iran are quite stable. It is clear for both of us that we are two independent countries - Azerbaijan and Iran. We try to build our relations upon that basis. We have, of course, a great concern for the large Azeri community in Iran, but at the same time we understand that these people are citizens of Iran, and we are not in a position to interfere with their internal affairs.

We seek friendly relations with Iran. Still there is considerable room for strengthening relations. Unfortunately, one of their strategies that impedes relations is their involvement with Armenia which we consider a paradox. The population of Azerbaijan is majority Shiite Muslims - exactly the same as Iran's. It is our people who are under occupation by Armenians. It is our mosques and cemeteries that are being destroyed by Armenians. Knowing this, how can they promote trade relations and political relations on all the governmental levels? This is strange for me as a Muslim. Of course, it is the prerogative of every country to establish relations with whichever country they want, but I think you'll agree with me that this is something beyond general logic and understanding.

You say that Azerbaijan does not interfere in Iran's internal politics. Can you say the same thing about Iran in terms of Azerbaijan's internal politics?

Generally, I cannot say. Iran is a large country with many forces, groups and interests. Of course, we know that some people in Iran were financing the Islamic party in Azerbaijan. First of all, we regarded this as interference in our domestic affairs, and secondly, it was an illegal act. Therefore, the leaders of the Islamic party of Azerbaijan were arrested and the Islamic party was banned. So Azerbaijan acted according to its own laws in this respect.

If a political party in Azerbaijan is financed from abroad, this party can be banned. We have heard rumors about other political parties in Azerbaijan that receive external financial aid, not from Iran, but from other countries. If proven, I think the same measures will be taken.

Don't you think that it doesn't matter which government is in power in Iran, it will always be a problem for Azerbaijan if you succeed economically?

Not only Iran, but other countries as well if we succeed. There are several reasons why. Azerbaijan has always been perceived as a very nice "piece of cake" due to its vast natural resources. We have a lot of oil and a good geographical location. In the future we believe Azerbaijan will be one of the most important countries in the region. We have a good infrastructure and a large number of highly qualified specialists. Therefore, the struggle for influence over Azerbaijan has always been strong which is why Azerbaijan was divided by Russia and Iran [1826]. This struggle for influence continues. Of course, we know that wealth often brings its own problems. We know that many countries want to have such an influence here. We lived under the rule of others for more than 200 years, and we are completely fed up with that. We do not want anyone to control or supervise us. We want to lead an independent life.

Regarding the negotiations about the Main Export Pipeline, why has AIOC delayed in giving you its recommendation and what is the status regarding the export pipeline?

The main export pipeline was part of the first production sharing agreement (PSA) between SOCAR and eleven companies of the consortium that is now known as AIOC [Azerbaijan International Operating Company]. At that time there were no clauses or provisions in our jointly signed document regarding extra volumes of oil or third-party oil. Now AIOC is saying that the Main Export Pipeline (MEP) can be built only when other projects in Azerbaijan are operating, but this is not what we agreed on initially. This is a breach of the agreement by AIOC.

Secondly, when we decided to construct two pipelines, one to Novorossiysk [Russia] and the other to Supsa [Georgia], we knew these two pipelines would not be sufficient because we anticipated that 40-50 million tons of oil would be produced annually. At that time, it was very clear that we would need a Main Export Pipeline and that the most productive route would be Jeyhan.

But still we continue negotiations because our goal is to achieve this pipeline. Now AIOC is speaking in favor of Baku-Supsa and not Baku-Jeyhan [Turkey]. According to them, the cost of Baku-Jeyhan would be more than $4 billion.

But we do not understand the basis for this calculation. The cost of the project was originally assumed to be $2.3 billion and in a week's time AIOC claimed it would cost $4 billion. How did the figure suddenly become so inflated?

Besides, the cost cannot be determined before we know the conditions of the transit passage. We do not yet know the transit fees through Turkey or the transportation costs, land fees and so forth. Also another problem is that if Baku-Supsa were to become the Main Export Pipeline, the Bosphorus would not be able to handle the volume through these straits and Turkey has already stated that they will not agree to a bypass, so that leaves us with the only option as Baku-Jeyhan.

We have had the first round of negotiations with Turkish officials in Istanbul. Soon there will be a second round. The AIOC, SOCAR and Turkish officials should work together to make Baku-Jeyhan a reality. If Turkey gives us favorable conditions, then Baku-Jeyhan can happen.

How seriously would you characterize American efforts to support the Baku-Jeyhan route?

We have discussed this issue many times with officials in the State Department, Congress and Department of Energy. They are very supportive and support us in our views. We must convert this political will into financial support.

There seems to be a major disconnect with Washington's thinking. On the one hand, the U.S. is pushing very hard for the Baku-Jeyhan pipeline route; on the other hand, it is failing to resolve the festering problem of the Nagorno-Karabakh conflict. For the past five years we have heard lip service from the U.S. Administration. We don't see any vision, courage, or desire, frankly, to resolve this conflict. Every time we raise this issue with a State Department official or the White House, they reply that we can't upset the Russians. They are always deferring to the Russians. What more can the U.S. do to resolve this issue?

We had great expectations that the United States would take a very decisive and active role as co-chair of the Minsk Group of the OSCE (Organization for the Security and Cooperation of Europe). Armenia insisted on Russia and France as co-chairs, but we opposed that arrangement because we felt that both Russia and France favored Armenia. At the time the co-chairs were being named, Azerbaijan was against France, but now we see that the French President Jacques Chirac is very positive and helpful. Unfortunately, we have not felt the same support from the United States.

We have said many times that we want to resolve the Nagorno-Karabakh conflict peacefully, but this seems to be very difficult to do. So what other choice is left for us? Can you imagine what would happen, for instance, if a foreign country occupied 20 percent of the territory of the United States and for five years international organizations have come and gone carrying on negotiations. Essentially they've done nothing except to tell us to wait. Would you wait? I doubt it.

We wait, and we are ready to wait, but only if we know there is a strong interest and determination to resolve this problem. It needs a strong will from the United States.

What is the probability of AIOC deferring the decision regarding the pipeline indefinitely? What if they say they cannot make up their minds and say they will let you know later on?

If there is a delay in the decision about Baku-Jeyhan, and if we determine that it is a deliberate attempt to stall, of course we will have strong opinions about that. We're already negotiating with oil companies that are not a part of AIOC as well as financial institutions regarding this project. If AIOC thinks this project is too expensive for them, we will form a pipeline company with other oil companies.

You mention that you are willing to cooperate on the Trans-Caspian pipeline for Shah Daniz oil and gas. Can you tell us what the current situation is in Azerbaijan in terms of Turkmenistan?

We have been talking about the Trans-Caspian pipeline for a long time. Already we are transporting oil from Kazakhstan and Turkmenistan to Azerbaijan by barges. From there we put the oil into our pipeline system and transport it by railroad to the Black Sea. We started with a very small amount-an agreement with Chevron. Next year, we will transport 5 million tons of oil that way which is a very significant amount for us. In several years, we anticipate a contract from Kazakhstan to increase that amount to 10 million tons. Afterwards, the Trans-Caspian oil pipeline will become a reality. As far as a gas pipeline, we support the agreement between Turkey and Turkmenistan and are willing to create all possibilities for it to transit Azerbaijan on its way to Turkey.

Can you elaborate on your relations with Israel?

Our relations with Israel are developing in a very positive way. This should not be surprising because we have a long history of relations. Many centuries ago, a Jewish community settled in Azerbaijan. Among all the former Soviet republics, Azerbaijan was among the least nationalistically minded. During the worst days of anti-Semitism in the Soviet Union, the Jewish community led a normal life in Azerbaijan.

There was a period after the collapse of the Soviet Union (1991) when nationalist forces came into power and started to ban everything that was not Azeri. That is, they even started to shut down faculties in the universities which were taught in the Russian language. Of course, this was of great concern to the Jewish community. But now I think everything is back to normal. They have an embassy in Baku that was established several years ago. We have numerous cultural ties. Many former citizens of Baku who now live in Israel come back to visit us.

Azerbaijan International (6.4) Winter 1998.
© Azerbaijan International 1998. All rights reserved.

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