Russian Ties with Azerbaijan Reach New Lows

Less than a year ago, in February 2006, Russian President Vladimir Putin traveled to Baku to launch the Year of Russia in Azerbaijan. Now, not even one year after the conclusion of this official celebration of Russian culture, both Azerbaijan and Russia find themselves in a bitter dispute over energy, labor migration, and other issues.

Most recently, Moscow has attempted to allay Azerbaijani concerns about its intentions by acting as an "honest broker" in promoting dialogue between Azerbaijan and Armenia over the breakaway territory of Nagorno-Karabakh, and pledging to become a guarantor for any peace settlement reached. Yet progress on this front has been slim. Azerbaijani Foreign Minister Elmar Mammadyarov and his Armenian counterpart Vardan Oskaryan met in Moscow on January 23, but the meeting led to no concrete results, with both sides only agreeing to continue to talk.

Meanwhile, the problem areas between Moscow and Baku continue to multiply. Energy disputes command center stage. Baku's blunt refusal in December 2006 to import Russian gas following energy giant Gazprom's decision to hike gas prices for Azerbaijan marked a sharp acceleration in the worsening of relations between the two states.

In an apparent bid to stop Azerbaijani gas exports to Russian sparring partner Georgia, Gazprom more than doubled gas prices for Azerbaijan while leaving gas prices for Armenia unchanged. Russian companies now exercise near-complete control over the Armenian energy sector. [For details, see the Eurasia Insight archive]. The Azerbaijani leadership took the move as an affront. In a December 23, 2006 interview with the Moscow radio station Ekho Moskvy, Azerbaijani President Ilham Aliyev said that Azerbaijan would not be "subject to commercial blackmail."

A pre-existing contract between Azerbaijan and Gazprom, signed in 2004, that provided for the annual sale of 4 billion cubic meters of gas to Azerbaijan until 2009 at the price of $52 per 1,000 cubic meters motivated Baku's discontent. Despite the agreement, Gazprom's asking price has climbed steadily over the past few years, to reach the current $235 per 1,000 cubic meters. On January 15, Ali Hasanov, head of the public and political department of the presidential administration, lashed out at Russia as an "unreliable" partner. By failing to uphold its contract with Azerbaijan, Hasanov said, Russia "did not act as a gentleman."

Nor are the tensions related to gas alone. Earlier in January, the State Oil Company of the Azerbaijani Republic (SOCAR) suspended pumping oil via the Baku-Novorossiisk oil pipeline for three months, arguing that the oil was needed to provide fuel for electricity plants previously powered by gas. [For details, see the Eurasia Insight archive]. (The state-run Azerbaijani International Operating Company reportedly continues to funnel crude via this pipeline, however.) Azerbaijan had earlier planned to funnel about 1.1 million tons of oil via the Baku-Novorossiisk pipeline in the first quarter of 2007, including some 240,000 tons by SOCAR.

One of the few bright spots for Russia in this area is electricity. Earlier in January, the Azerbaijani energy company Azarenerji and the Russian United Energy Systems (RAO UES) signed an agreement that kept electricity imports at 2006 levels.

The energy dispute, however, could have implications for security ties between the two countries as well – a sensitive area for Russia as Azerbaijan considers closer ties with the North Atlantic Treaty Organization. On January 19, Zahid Oruj, a member of the Azerbaijani parliament's security and defense committee, said that the legislature would reconsider Russia's lease of the Daryal radar station in Azerbaijan's Gabala region in response to the gas price hike. "Russia's energy policy makes it necessary to reconsider the issue," the Azerbaijani APA news agency reported Oruj as saying.

Russian officials, however, have indicated they are not concerned by Azerbaijani suggestions to review the Gabala agreement, saying that their lease agreement lasts until 2012.

Another issue, labor migration to Russia, could carry similarly heavy economic consequences for Azerbaijan. Baku has made little secret of its uneasiness about Russia's recent decision to ban migrant workers from being employed in marketplaces. The decision would go into effect in April 2007.

Millions of Azerbaijanis live and work in Russia, many of them employed in the sale of fruits, vegetables and various consumer items in city markets. Their money is a major source of income for their extended families in Azerbaijan.

Seizing on the issue, the opposition Yeni Musavat newspaper wrote on January 15 that the numbers of migrants returning from Russia could rival even the thousands of ethnic Azeri refugees who swarmed into Azerbaijan in the early 1990s and late 1980s, as a result of the conflict with Armenia over Nagorno-Karabakh. In a front-page commentary, the paper predicted that hundreds of thousands of illegal Azerbaijani immigrants could be deported from Russia, with as many as 50,000 to 70,000 Azerbaijanis leaving in February and March, the daily wrote.

One militant nationalist organization, the Karabakh Liberation Organization, has gone even further, accusing the Russian authorities of trying to deport all Azerbaijani nationals from Russia. The group has urged the Azerbaijani authorities to take measures to stop what it described as the "mass violation" of Azerbaijani nationals' rights in Russia.

The Russian government has not yet responded to the charge or to how its migration policy would affect Azerbaijanis working in Russia.

The Azerbaijani government, however, has already moved to stave off possible consequences of such a flood of returning migrants. On January 13, the Azerbaijani State Commission, chaired by Deputy Prime Minister Yagub Eyubov, approved financing for an action plan to assist Azerbaijani migrants.

Any attempt Russia may make to address these problem areas, however, may soon be largely dependent on Azerbaijani media outlets to reach an Azerbaijani audience. The Azerbaijani National Broadcasting Council has announced plans to cut off broadcasts of Russia's Channel One and Rossiya stations within Azerbaijan by July 2007 in response to the lack of Azerbaijani television programs broadcast in Russia.

Meanwhile, adding to the dispute, as relations sour between Baku and Moscow, Russia's traditionally strong ties with Azerbaijani arch-enemy Armenia appear to be growing still stronger. Armenia has welcomed an aggressive influx of Russian investment recently into its energy, aluminum and communication sectors. [For details, see the Eurasia Insight archive].

At a January 24 meeting in the Black Sea town of Sochi between Armenian President Robert Kocharian and Russian President Vladimir Putin, the two leaders announced plans for further investment. (The meeting came a week after a "private" visit by Kocharian for "informal" talks with Putin in Moscow.) President Putin said that Moscow hoped that Russia would become Armenia's top foreign investor by March 2007.

"There is no single issue unresolved or no pressing issue on the agenda," the state-run ITAR-TASS news agency reported Putin as saying of Moscow's ties with Armenia.

By contrast, with Azerbaijan, unresolved and pressing issues alone prevail. Moscow's attempt to secure Azerbaijani support in its campaign against Georgia proved a risky gamble. And one that, for now, at least, the Kremlin appears to have lost.