I write this week from Azerbaijan’s capital Baku, which has witnessed the first foray of the Gulf Cooperation Council Secretariat-General (GCC) in the Caucasus, when it signed an agreement with Azerbaijan to launch regular high-level consultations and dialogue on political, economic and cultural issues.
The signing of the Memorandum of Understanding, on June 12, was preceded by meetings with Azeri senior officials, including President Ilham Aliyev and Foreign Minister Elmar Mammadyarov in Baku.
The GCC and Azerbaijan have much in common and share many concerns. They are both major oil and gas producers, enjoy significant surpluses that they try to invest at home and abroad, and are engaged in ambitious development programs to improve the quality of life for their citizens.
Similar to the GCC, Azerbaijan also lives in a rough neighborhood. It is sandwiched between three powers: Iran in the south, Russia in the north, and Turkey in the west. Also to its west lies its small neighbor Armenia, which 20 years ago carved out Nagorno-Karabakh, which constitutes about 20 percent of Azerbaijan’s territory, and made it into a puppet state. The Iran-Russia rivalry, in particular, has shaped much of Azerbaijan’s history over the past two centuries. The Treaty of Gulistan in 1812 between Iran and Russia divided the historical territory of Azerbaijan into two parts: A southern part under Iranian control and a northern part under Russian control.
Azerbaijan’s independence from Russia took another 180 years to materialize, despite many attempts to break away from Russia’s tight grip. In 1918, Azerbaijanis took advantage of the collapse of the Russian empire, revolted and declared their Azerbaijan Democratic Republic. That independent state lasted only two years, as Moscow’s new Communist masters crushed the rebellion and re-annexed Azerbaijan.
It was not until 1991, after the disintegration of the Soviet Union that Azerbaijan was able to re-gain its independence. The southern part of Azerbaijan has not been as lucky. It has remained part of Iran, despite a brief period of independence during World War II, when it established, with Soviet help, the Azerbaijan People’s Government, with Tabriz as its capital. Its independence was ended as part of the East-West understanding at the conclusion of the war. The West was keen to deny Russia a foothold in Iran and wanted instead to bolster its ally the Shah of Iran. The southern part of Azerbaijan under Iranian rule is more populous than the north; estimates run as high as thirty million Azeris in Iran, three times the population of the Republic of Azerbaijan. However, they are denied the use of their language and other expressions of their Azeri culture. Unity between north and south remains a far-away dream, but Azeris hope that Iran would at least relent in its denial of Azeri human rights, especially their right to cultural expression.
Today, Azerbaijan (the north), lives wearily of its belligerent neighbors and tries to regain its lost territory of Nagorno-Karabakh through peaceful means. The UN Security Council has affirmed Azerbaijan’s claims to that territory and called for Armenia to withdraw. However, Russia, despite its public claims of neutrality, has frustrated the implementation of the UNSC-mandated solution by siding with Armenia and arming it. Iran is also suspected of siding with Armenia in this conflict. Furthermore, Iran has been reliably accused of fomenting strife within Azerbaijan proper.
Despite its security concerns, Azerbaijan today is an open and dynamic society. It enjoys stability, social harmony and fast economic growth, making it a regional showcase for the values of liberal economic policy and free trade.
Within a decade its economy has remarkably doubled 10 times, from around $ 10 billion in 2003, to nearly $ 100 billion in 2013. While it is relatively small compared to the combined GCC GDP of $ 1.5 trillion, it is quite a significant market. Despite its Soviet-era legacies, it encourages foreign investment and looks for reliable business partners everywhere.
As such, the GCC-Azerbaijan agreement this week builds on common cultural and historical ties between the people of Azerbaijan and the GCC, as well as their shared interests. In addition to political consultations, they seek to enhance economic ties, and encourage trade and investment in both directions, as well as in other countries.
Azerbaijan’s economy provides industrial investment, especially those related.
Despite a significant potential, GCC-Azerbaijan trade has been limited. However, it is encouragingly growing fast. It climbed from merely $ 5 billion in 2000, to $ 164 billion in 2012. At this rate, it could grow to several billion within this decade. More than trade, however, is the potential for investment. Among the most promising areas are oil and gas-related industries, infrastructure development and tourism.
In addition, as both the GCC and Azerbaijan have accumulated significant financial surpluses, there is important potential to be tapped in joint investment in other countries. There have been several successful partnerships in all these areas between GCC and Azerbaijan investors, but more can and should be done.
Finally, it is important to put the GCC-Azerbaijan accord in a larger context. Both sides seek to establish more meaningful strategic ties between the GCC and the Caucasus. The objective is to strengthen economic, political and cultural bonds, enabling representatives from the two sides to consult on a regular basis and engage in an inter-regional dialogue at all levels. The accord with Azerbaijan will be followed by similar agreements with countries in the region, including Georgia and Ukraine, among others.
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