DO AS I SAY, PLEASE
Matthew Swibel, 04.26.06, 3:00 PM ET
Forbes
April 26 2006
WASHINGTON, D.C. – The president of Azerbaijan, home to the world’s
fastest-growing economy and $10 billion in investments from leading
oil companies, including BP, worries that a military confrontation
between its southern neighbor, Iran, and the U.S. will destabilize
his country’s fast-growing energy sector.
Marking his first official visit to Washington D.C., on Wednesday,
Ilham Aliyev, an ally who has sent soldiers to assist the U.S. in Iraq,
is warning the White House in blunt terms that escalating rhetoric with
Iran will lead to “hurtful consequences” for the Caspian Sea region, an
increasingly important oil source for Europe and other Western markets.
Rather tough talk from a guy in charge of a place with only 8 million
people and a military that has yet to overcome its painful loss
in battle to tiny Armenia. Here’s why Aliyev can get away with it:
The twin pressures of $72 per barrel oil prices and Iran’s unabashed
nuclear ambitions make him a key player in high-stakes energy and
security policy issues.
Aliyev’s comments during his maiden voyage inside the Beltway as a
head of state also underscore an uncomfortable truth within U.S.
foreign policy. The U.S. faces an uphill battle in rallying support
against Iran’s nuclear plans so long as Azerbaijan and other
often-ignored countries nearby currently developing their natural
resources–and in the process adding to the coffers of U.S. oil
firms–transform into proverbial Slurpee cups quenching America’s
insatiable thirst for oil.
Azerbaijan’s world-record 25% gross domestic product growth last
year will be matched again this year, predict government officials
and World Bank economists (this rate of growth is a multiple of the
performance of even such notables as China and Dubai). Bordering
Russia to the north and Iran to the south and with an energy sector
developed by American and European companies, Aliyev jokes that his
country is a model of “energy internationalism.”
Azerbaijan oil revenues will hit $42 billion by 2010, ushering vast
wealth into an economy ranked No. 137 out of 158 countries listed in
Transparency International’s Corruption Perceptions Index.
A bevy of well-known companies have taken the plunge into this murky
market, which is dominated by state monopolies and the president’s
well-placed friends. Aside from BP (nyse: BP – news – people ), which
owns a 30% stake in the newly opened Baku-Tbilisi-Ceyhan pipeline that
sends up to 1 million barrels of oil per day to the Mediterranean port
of Ceyhan, Turkey, Chevron (nyse: CVX – news – people ) and ExxonMobil
(nyse: XOM – news – people ) both own minority stakes in Azerbaijan’s
largest single oil production site, the Azeri-Chirag-Guneshli field,
or ACG. Even Citigroup (nyse: C – news – people ) got a piece of
the action, helping arrange a $56 million, 12-month loan for the
International Bank of Azerbaijan, last summer.
The American people are investors too through taxpayer-funded USAID
programs in Azerbaijan’s energy and food processing sectors, notes Reno
Harnish, who steps down as U.S. ambassador to Azerbaijan on April 24.
Aliyev, keenly aware of the business interests in his country, told
an audience at the Council on Foreign Relations this morning that his
administration will spend hundreds of millions of dollars on new roads,
power stations, schools and hospitals.
But Aliyev rejected the notion that his country’s air bases could
be used for U.S. surveillance or combat missions against Iran. Nor
does he envision his government, based in Baku, cooperating with
intelligence-gathering efforts against Iran.
“Azerbaijan will become a prosperous economy,” Aliyev said. “It’s
better to be friends with us than not.”
Spot on, if you’ve visited a gas station recently.