Azerbaijan International

Spring 1996 (4.1)
Page 70


Russia's Foreign Policy Towards Azerbaijan
Money vs. Military Might

by Elmira Amrahqizi

As Azerbaijan begins to emerge as one of the oil giants of the 21st century, there seems to be evidence that Russia is beginning to rethink and rebuild political relationships with Baku based on economic considerations rather than military threats. Some of the issues that were so high on their priority list as regards Azerbaijan seem to be easing. For example, up until recently, Russia has been very insistent upon establishing Russian military bases on our soil (troops are already stationed in Georgia and Armenia), and in sending Russian troops to protect our border with Iran. Even issues surrounding the status of the Caspian seem to be less problematic than before.

Of course, the Chechnya situation still remains sensitive. The Azerbaijani-Russian border which Russia closed many months ago has not yet reopened, resulting in considerable loss of trade for Azerbaijan. Accusations still appear in the Russian media or are made by Moscow officials which charge Azerbaijanis of sending arms and military forces to Chechnya.

The recent three-day visit (January 25) of Major-General Kozhevnikov, Deputy Director of the Russian Border Service, to Baku proved to be very revealing. Why? Since the Chechnya crisis began, Azerbaijani officials have continuously denied accusations that they were sending arms to Chechnya and have demanded that Russia come and verify that they were not true. For more than a year, Azerbaijan's demands have been ignored.

But the visit of Azerbaijan's President, Heydar Aliyev, to Moscow on January 18-20 seems to have made a difference. Aliyev met with Russian state leaders and signed important documents including one with officials of AIOC (Azerbaijan International Operating Company) for an export pipeline route through Russia for Azerbaijan's "early oil" (a second alternative route west through Georgia will also end at a port on the Black Sea).

After Aliyev's return, Kozhevnikov immediately flew to Baku to investigate whether weapons for Chechnya were being manufactured or stored in Baku and its suburbs, whether hangars existed in Sumgayit and Nasosni, and whether Chechnyan soldiers were being treated in Baku hospitals. There was no evidence of any of these allegations and a protocol was signed between the President of Azerbaijan and the Deputy Director of the Russian Border Service clearing Azerbaijan from any such blame. Such a rapid resolution to such serious allegations is extremely unusual.

Oil Involvement
At the Official Signing Ceremony in February of the Karabakh field in which Russia's LUKoil is involved, Russian Minister of Energy and Fuel, Y. Shafrannikov observed, "We used to move towards economy via politics. But today, I think, it's possible to solve political problems through economics. Perhaps problems that can't be solved by politicians can be solved by economists."

Most-Bank, Russia's most influential bank has just established a branch in Baku in December with $1 million capital. In late November 1995, at an Adam Smith Institute Economic Conference in London which focused on "Investment Potentials in Azerbaijan," three of Russia's large financial institutions took part-Most Bank, Russian Credit Bank and Oniskem Bank. Many of the conference participants represented Russian business circles. Valery Perepelenko, of the Russian Credit Bank indicated that Russia's largest banks plan to invest in Azerbaijan's economy.

Efforts by Russia to get involved economically are not based on happenstance but rather on the consolidation of Azerbaijan's sovereignty and recognition by the world community and international organizations.

Today, Russian businesses are ready to invest in the economy of Azerbaijan. Russia's largest oil company, LUKoil is expanding its activity in Azerbaijan more and more. In the "Contract of the Century" (referring to SOCAR's contract with the Western Consortium of 11 foreign companies and six foreign countries for the offshore fields of Azeri, Chirag and deep-water Gunashli) LUKoil's interest is 10% of the profit sharing agreement (PSA). Recently, LUKoil's President Alakbarov confirmed that LUKoil's participation with the Western Consortium, signified the legitimacy of the contract by the Russian government which owns a share of the company.

This February, LUKoil again signed into the contract for the Karabakh field with an effective share of 32.5% in the project. Agip and Pennzoil are also involved. LUKoil is also hoping for a share of the offshore development of Shah Deniz which is soon to be signed.

Alakbarov has indicated that the Caspian region has a very high priority for LUKoil. In addition, LUKoil intends to get involved onshore on the Absheron peninsula (near Baku), to carry out a geological search in two areas in the Caspian, to set up a joint venture with the Azerbaijan Oil and Chemistry Association and to build a second gas station in Baku.

This significant involvement by Russia would seem to indicate that new relationships are being forged via economic rather than military clout. It's good news for Azerbaijan.

Elmira Amiraqizi is a correspondent for AI in Baku.

Azerbaijan International (4.1) Spring 1996.
© Azerbaijan International 1996. All rights reserved.

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