Thursday, 21st March 2019

Region: Azerbaijan cultivates range of relations

Azerbaijan’s capital Baku played host to another group of visiting Gulf officials on 18 March as a Saudi delegation led by energy, industry and mineral resources minister Khalid Al-Falih met their Russian counterparts to discuss oil production limits. All is not well in the alliance of convenience between members of the Organisation for Petroleum Exporting Countries (Opec) and other producers; Russia, the driving force alongside Saudi Arabia in the so far successful Opec+ initiative, has forced the cancelation of a meeting scheduled for April on whether to extend a previously-agreed deal to limit output (GSN 1,071/12).

However, the Saudi delegation was at least in familiar surroundings. Azerbaijan has figured increasingly prominently on many Gulf states’ agendas in the past year, with burgeoning economic co-operation and geo-strategic interests to the fore. The Azeris have been getting increasingly close to the Saudis in particular and have been playing up their significance as a western-friendly neighbour of Iran – which, like Oman, has good diplomatic relations with both Tehran and Tel Aviv.

For Gulf states there is much to admire about the Caucasian republic, with its substantial oil and gas reserves and autocratic ruler. Gulf-based companies are starting to take an interest in the market. Saudi companies have invested $370m in Azerbaijan, according to economic development minister Shahin Mustafayev. Ahead of the Opec+ summit, the Azeri Ministry of Energy signed a memorandum of understanding (MoU) on renewable energy with Saudi-based Acwa Power and the Agency for the Development of SMEs struck a co-operation programme with the Saudi Arabian General Investment Authority (Sagia).

Officials have been travelling on a regular basis in both directions. Former Saudi security chief Prince Turki Al-Faisal visited Azerbaijan in mid-March for the Global Baku Forum. In mid-February Azerbaijan’s defence minister Colonel-General Zakir Hasanov visited Abu Dhabi.

Gulf tourists are increasingly prominent in Baku’s hotels and restaurants, with many more encouraged to come with the relaxation of visa requirements; UAE visitors have enjoyed a visa-on-arrival service since last year. Around 73,000 Saudi tourists visited Azerbaijan last year, an almost tenfold increase on the 7,500 that came in 2016. Some of them will have been pulled in by the Formula 1 Grand Prix on the streets of Baku, which this year takes place on 29 April. The country’s hosting of the motor race points to President Ilham Aliyev’s readiness to follow the Gulf’s soft power template of using heavyweight sporting events to raise the country’s profile. Baku’s attempt last year to win the rights to host Expo 2025 (to follow Dubai in 2020 and Buenos Aires in 2023) represented a similar Gulf-style move. It eventually lost out to Osaka, Japan. (Among other competitors, France dropped out following the gilets jaunes protests.)

Though nominally a Shia Muslim country, Azerbaijan’s heavily secular culture has given it room for diplomatic manoeuvrings that other states can find hard to replicate. Baku played host in early March to a delegation of evangelical Christian leaders from the United States. Aliyev has courted close relations with Israel too – another common thread with several Gulf states, if not one most publicly acknowledge. Israeli Prime Minister Binyamin Netanyahu visited Baku in his first term in office, in 1997, and returned in December 2016. Azerbaijan has also been a regular buyer of Israeli-made weapons systems and intelligence co-operation is understood to be close.

This has not stopped Azerbaijan from sustaining close relations with Iran, whose own Azeri population is larger than the 10m people in Azerbaijani itself. Iran is too big an economic power for Azerbaijan to ignore or upset and cultural ties run deep; both Shia populations are celebrating the Persian New Year festival of Nowruz.

Iran’s ties to its northern neighbour are rooted in strategic commercial interests. The Ministry of Oil in Tehran claimed last year to have had held talks with international oil companies engaged in deep-water drilling projects with Azerbaijan. State-owned National Iranian Oil Company has a 10% holding in the second phase of Azerbaijan’s offshore Shah Deniz natural gas field in the Caspian Sea (GSN 1,065/10). Tehran’s longer-term hope is that connecting to Azerbaijan’s pipeline networks could allow it to tap into the European gas market. In March 2018, President Hassan Rohani visited Azerbaijan to sign an MoU on joint development of some Caspian Sea oil and gas blocks.

Azerbaijan’s ‘friends with everyone’ approach is also evident in its relations with Qatar. Baku has studiously adopted a neutral stance in the protracted schism between key Gulf Co-operation Council (GCC) states. In December, ambassador to Doha Rashad Ismayilov praised Qatar’s “wise approach”. Azerbaijan’s state oil fund also has a small ($10m) investment in Qatar. Given Baku’s wariness of taking sides, there may have been some embarrassment that it was a UAE front company based in Baku that was reported to have been involved in the hacking of Qatar News Agency in 2017, which marked the formal start of the trade boycott of Qatar by the GCC-3 of Bahrain, Saudi Arabia and the UAE (GSN 1,037/7).

Such difficulties are not publicly alluded to in Baku, though, where control of the media is tight. This residual sign of its Soviet heritage is yet another thing Gulf visitors will recognise.

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