BAKU, 13 March 2007 — At Baku’s Caravansarai restaurant, once a rest stop on the Silk Road between Asia and Europe, a flickering blue gas flame symbolizes a new shift in 21st century geopolitics.
These are heady days for Azerbaijan. Lynchpin of Western ambitions to break the Russian grip on Europe’s energy resources, the ex-Soviet republic oozes confidence and petrodollars.
Critics believe corruption, poverty, and stifling of political dissent could yet undermine President Ilham Aliyev’s ambitions.
But Ali Hassanov, a senior advisor to Aliyev, lays out a vision in which this secular Muslim country of eight million people will connect Europe to huge quantities of oil and gas right across Central Asia.
“Europe must not only rely on Russian energy,” he told AFP at the presidency in Baku. “We are offering this new route linking Azerbaijan, Kazakhstan, Turkmenistan.”
For EU governments and their US ally, the attraction in this hydrocarbon version of the Silk Road is the ability to bypass an increasingly assertive Russia, and ultimately to create a new trade route between China and Europe.
Azerbaijan is also in the spotlight as a US-friendly Muslim state on Iran’s northern border, although with some 26 million ethnic-Azeris in the Islamic republic, Baku is keen to maintain neutrality.
Amid shifting loyalties, a Western strategist might look with satisfaction at the flames darting from a decorative heater in the Caravansarai’s old camel stable.
Like many ex-Soviet republics, Azerbaijan had until this year been heavily reliant on natural gas from Russian behemoth Gazprom. One third of supplies were imported.
But when faced with a New Year’s demand for a two-fold price increase, Baku decided to show Gazprom the door. Now all gas — except a small amount sent from Iran to the isolated Nakhichvan province — is locally produced.
Analysts say the bold move was as much political as economic, revealing a steady weakening of Russian domination over the strategic Caucasus.
“It was a very clear signal that they’ve given up on Big Brother,” a Western diplomat in neighboring Georgia said.
Azerbaijan is underscoring this challenge by increasing gas exports to Georgia, whose strongly pro-Western leadership hopes by the end of the year to phase out all Gazprom imports.
That cements an alliance at the heart of the Western-backed corridor for oil and gas pipelines built in the last two years from Baku through Georgia to Turkey and on to world markets.
“I think there is a very good understanding between Georgia and Azerbaijan. They both need each other to build the energy corridor and to increase transit and commerce,” another Western diplomat in Tbilisi said. Last month, Azerbaijan, Georgia and Turkey agreed to build a new train link that ultimately could bring goods from China to the European Union in direct competition to the Russian route. Azerbaijan is helping to finance Georgia’s share.
Longer term, the hope in Azerbaijan is for a gas pipeline under the Caspian Sea that would bring Turkmenistan’s and even Uzbekistan’s huge gas fields directly online. “There will be competition,” Hassanov said, “and then Russia would have to lower its prices.”
That project remains a long way off. But the flood of petrodollars from Azerbaijan’s own reserves is driving wild economic growth — gross domestic product rose 34.5 percent last year — and equally giddy nationalist enthusiasm.
“Azerbaijan will be the envy of the world. You’ve seen nothing yet,” predicted Shakir Bagirov, 48, a manager at the Caravansarai restaurant, a regular lunch spot for British Petroleum employees.
Yet enormous pitfalls lie ahead for Azerbaijan, not least income inequality, government corruption and rumbling anger over the occupation of Azeri territories by neighboring Armenia.
The government also claims it faces a threat from radical Islamic groups — “not just internally, but from abroad,” as Hassanov said, in a thinly veiled reference to fellow-Shiite Iran.
The more immediate problem, critics say, is the disconnect between those enjoying the oil boom and those left behind.
Baku, centered on an ancient neighborhood of stone alleys and mosques, is frantically being transformed. Jarring sounds of construction work mingle seven days a week with the hum of traffic jams.
But while such expansion has created many jobs, as many as a third of Azeris remain in poverty, economists say.
