Publication: Eurasia Daily Monitor Volume: 3 Issue: 33

The Kremlin has been working hard to strengthen ties with Azerbaijan, and President Vladimir Putin’s upcoming trip to Baku is widely seen as a move designed to give bilateral relations yet another boost.

Officially, Putin travels to Baku on Tuesday, February 21, for talks with President Ilham Aliyev, and also to launch the “Year of Russia in Azerbaijan” celebration. A bilateral inter-governmental commission on economic cooperation will convene on the sidelines of the summit meeting.

Both countries reportedly plan to ink a number of agreements at the Russia-Azerbaijan economic forum to be held in Baku on February 22-25. The agenda includes the energy sector, Russian investment in Azerbaijan, development of the North-South transport corridor, as well as Caspian Sea resources.

In the wake of Azerbaijan’s controversial parliamentary election in November 2005, Putin congratulated Aliyev on “The successful completion of parliament elections.” Western observers said that Azerbaijan’s parliamentary elections fell far short of international standards due to widespread irregularities in voting and vote counting.

Bilateral economic ties are on the rise. Trade between Russia and Azerbaijan reached $1.06 billion in 2005, or up roughly 40% year-on-year. Russia runs a healthy surplus in trade with Azerbaijan, exporting goods totaling $858 million in 2005.

Furthermore, Moscow has renewed attempts to forge closer security ties with Baku, including the creation of a multinational rapid-deployment force (CASFOR) around the Caspian Sea. When Russian Defense Minister Sergei Ivanov visited Azerbaijan in January, he suggested that Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran should take concerted efforts to address security threats in the Caspian region. The new grouping could include defense, border control, and intelligence services, he said. His Azerbaijan counterpart, Safar Abiyev, said his country was ready to cooperate on this matter (see EDM, January 27).

In the meantime, Azerbaijan made little secret of its uneasiness about Russia’s strict rules regulating maritime and naval transit between the Caspian and the Black Seas via Russian rivers. “There were some problems in connection with the passage of vessels belonging to the Caspian states to the Black Sea,” Azerbaijan’s Deputy Foreign Minister Khalaf Khalafov told journalists on February 14. “The Caspian littoral countries are now trying to resolve the problem.”

Since the Soviet Union’s collapse in 1991, relations between Russian and Azerbaijan have been somewhat uneasy. Moscow was wary of Azerbaijan’s perceived intention to build closer ties with NATO. However, ties between Moscow and Baku have improved in recent years. On September 23, 2002, Russia and Azerbaijan signed an agreement concerning the Caspian seabed boundary that paves the way for dividing the two countries’ rights to Caspian offshore oil and gas fields.

The Kremlin even dropped some readily available means to put pressure on Baku. For example, former president Ayaz Mutalibov has lived in exile in Moscow since 1992 and observers speculated that the Kremlin considered Mutalibov as a potential Russia-friendly successor to the late president Heydar Aliyev. However, Moscow apparently dropped Mutalibov and endorsed the Aliyev dynastic succession in 2003.

Furthermore, last October the Azerbaijan Embassy in Russia voiced concern over statements by Dmitry Rogozin, leader of the Rodina party. Rogozin suggested limiting the rights of foreigners to be engaged in retail trade. He reportedly drafted a bill to ban foreign nationals from the food and consumer goods trade. The Embassy branded the bill “xenophobic” infringement on the legitimate rights of foreign citizens. The Azeri diaspora is one of the most influential and most economically developed ethnic communities in Russia.

There have been other irritants in bilateral relations as well. Azerbaijan has indicated plans to discontinue gas imports from Russia due to the soaring prices. Azerbaijan now consumes about 10 billion cubic meters (bcm) of gas annually, but produces roughly half this amount. In 2004, the Azerbaijan government and Gazprom signed a five-year contract to supply 4 bcm of Russian gas a year at $52 per 1,000 cubic meters (tcm). However, the price was later raised to $60/tcm, and then $100/tcm since the start of 2006. But Azerbaijan has a major gas field at Shah Deniz, with estimated reserves of nearly 700 bcm, and the country plans to become a gas exporter soon.

Azerbaijan is also the central player in U.S.-backed efforts to export Caspian Basin energy via the Baku-Tbilisi-Ceyhan pipeline (BTC). Moscow has been highly critical of the BTC project, viewing this pipeline as a way to circumvent Russia, even though using the existing Russian grid would be a cheaper transport method. Russian relations with Azerbaijan have also been affected by the lack of progress in reaching a settlement on separatism in Karabakh. Moscow has been keen to promote dialogue between Azerbaijan and Armenia, pledging to become a guarantor of any Karabakh settlement.

Armenia has been traditionally Russia’s closest ally in the Caucasus. In 1997, the two countries signed a far-reaching friendship treaty that provided for mutual assistance in the event of a military threat to either party. The pact also allows Russian border guards to patrol Armenia’s frontiers with Turkey and Iran.

Yet recently the Kremlin was rumored to be planning to secure territorial concessions on Karabakh from Armenia in order to please Baku. In 2004, there was media speculation that Russia could press Armenia to withdraw from Azerbaijan’s Agdam, Fizulin, Gubadlin, Dzebrail, and Zangilan districts. But no Armenian concessions ensued, thus further fuelling Baku’s discontent.

Given its extensive interests in Azerbaijan, Moscow remains keen to boost ties with the Aliyev regime. However, it remains far from certain whether President Aliyev would accept Russian backing, which could threaten his balanced dealings with the West and Moscow.

(RIA-Novosti, Itar-Tass, Baku Today, February 10-16; Russian Federal Customs Service)