The Caucasus
Hanging together

Feb 8th 2007 | BAKU
>From The Economist print edition

The implications of a diplomatic shift in an important oil-rich region

WHEN God was parcelling out land to the peoples of the earth, the Georgians
arrived late. But their explanation-that they had been drinking in his
honour-so delighted God that, according to a Georgian creation myth, he
granted them the world’s choicest spot. The gods have indeed favoured
Georgia this winter, bestowing a mild one when a harsh one might have been
disastrous. But the Georgians owe thanks also to an earthly benefactor:
their neighbour Azerbaijan, whose oil-fuelled foreign policy is transforming
the volatile but vital Caucasus.

Since the revolution of 2003 that swept Mikhail Saakashvili to Georgia’s
presidency, his yen to join NATO and the European Union has infuriated the
Kremlin. Last autumn, the Russians imposed postal and aviation blockades,
alongside the existing embargoes on Georgia’s water, wine and fruit. Then,
with winter approaching, they doubled the price for Russian gas-in theory
for commercial reasons, but with the real aim of taming Mr Saakashvili.

Yet, for all Mr Saakashvili’s high-profile rambunctiousness, the most
important country in the Caucasus is Azerbaijan. With around 8m people, most
of them Shia Muslims, it has the biggest population. It also has oil and
gas, which a consortium led by BP is extracting from the Caspian Sea and
pumping through new pipelines across Georgia to Turkey and beyond. All the
Caucasian economies are now picking up, after collapsing with the Soviet
Union-even corrupt Armenia’s, dependent though it mostly is on remittances.
But the growth created by Azerbaijan’s second oil boom (the first was 100
years ago) was the highest in the world last year: 34.5%, says the finance
minister.

Azerbaijan’s president is Ilham Aliev, who inherited the job from Heidar,
his strongman father. The younger Aliev seemed also to have inherited the
Caucasian skill of diplomatic balance, eschewing Georgian-style
pyrotechnics. But that careful equilibrium appeared to change in December,
when the Russians tried to hike the price of the gas that, despite its own
reserves, Azerbaijan was itself still importing. The idea was apparently to
stop Azerbaijan helping the Georgians with cheaper supplies.

"Commercial blackmail," said Mr Aliev. Azerbaijan stopped importing Russian
gas altogether-and, thanks to the warm weather, gas from Azerbaijan seems
set to help Georgia through the winter. Elmar Mammadyarov, Azerbaijan’s
foreign minister, says his country is merely "taking responsibility as a
regional leader." Mr Saakashvili is more exuberant: "a geopolitical coup",
he says of the new gas arrangements. The truth is, Mr Aliev now needs Mr
Saakashvili too. Azerbaijan’s future, and Mr Aliev’s power, rest on the new
pipelines, which have bound their two countries together, and bound both of
them to the West. In a few years they may also carry Kazakh oil from the
other side of Caspian, and-perhaps-gas from Turkmenistan. That would undo
Russia’s grip on the supply of Central Asian gas to Europe, and is as
unpopular an idea in Moscow as it is welcome elsewhere.

Two things undermine the hope that the fractious Caucasians have finally
learned to hang together, to their own benefit and that of Western energy
consumers.

One is domestic politics. Russia’s diplomatic power may be waning, but its
political model remains popular. Armen Darbinian, a former Armenian prime
minister, quips that his and other post-Soviet countries have become
"one-and-a-half party states": a party of power, plus others that are
basically decorative. In Azerbaijan, opposition activists are regularly
harassed and locked up. Like Russia, Georgia, Armenia and Azerbaijan will
all hold presidential polls next year. Mr Aliev will surely win his; the
whisper in Baku is that his wife will take over next. But another whisper is
that, in the absence of democracy, Islamism is on the rise-encouraged, say
some, by Iran to the south.

The Islamists, says Ali Kerimli, a disgruntled oppositionist, curry favour
with their complaint that "the West sells democracy for oil." Others say the
threat is fanciful. The call to prayer rings across the boutiques and
restaurants of downtown Baku, but there are actually more hijabs on the
streets of London, says Ilgar Ibrahimoglu, an imam. All the same, things may
change if too much of the oil money goes into nepotistic contracts and
vanity projects, and too little on diversifying the economy and easing the
grinding poverty in which many Azerbaijanis still live.

The other big Caucasian danger is war. Russian support for South Ossetia and
Abkhazia, two enclaves that broke away from Georgia in the 1990s (see map),
is one of Mr Saakashvili’s main gripes. Azerbaijan also lost a secessionist
conflict over Nagorno Karabakh, a part of Soviet Azerbaijan mostly populated
by Armenians. Mr Aliev periodically makes dark threats about retaking
Azerbaijan’s lost territory by force, though a flare-up in Georgia currently
looks likelier.

Mr Saakashvili says Russia’s economic embargo "achieved the opposite of what
was intended", and that Georgia has found new markets. Suitably cheered, he
this week hosted Mr Aliev and Turkey’s Recep Tayyip Erdogan, shaking hands
on a new railway that will link the Caucasus to Europe-but miss out Armenia.
Vartan Oskanian, Armenia’s foreign minister, complains that there is an
existing railway across Armenian-controlled territory that could be used
instead. The railway, like the pipelines, symbolises what the countries of
the Caucasus can achieve together, but also how far apart they remain.

From: Emil Lazarian | Ararat NewsPress