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Over a Barrel in Baku

As Caspian crude begins to flow through a new $4-billion pipeline, Azerbaijani President Ilham Aliyev is consolidating his grip on power. The U.S. wants both oil and democracy—but can it have both? November’s elections suggest not.

ILHAM ALIYEV DOES very little with ease. The President of Azerbaijan ambles into a receiving room in Baku giving the impression of a man always sucking in his gut, counting his steps, fiddling with the coins in his pocket. And as the change in Aliyev’s coffers grows—as it has with the opening of a 1,500-mile, $4 billion pipeline through his country this year—so do his vibrations. “People are waiting for change,” Aliyev says, sitting in front of a malachite fireplace, his eyes flitting to the Caspian Sea that’s washing blue through the tall windows of the presidential administration building. “I am confident that no matter how many hydrocarbons you have, if you don’t create a civilized society with strong democratic traditions, you will not succeed.”

But real change in Azerbaijan is not in the forecast. It’s not that Aliyev doesn’t want democracy but rather that his country has never genuinely practiced it. Case in point: This month’s parliamentary elections were roundly condemned by international observers, as all previous elections here have been. A string of arrests leading up to the Nov. 6 vote only intensified the dark outlook. Authorities detained the leader of an opposition youth organization on charges of attempting to overthrow the government. They refused to allow a key opposition figure to return from abroad. And the Minister of Economic Development found himself in jail along with his brother, a top oil executive, on suspicion of preparing a palace coup. When the ballots were counted on election day, the opposition won just six of 125 seats.

“Azerbaijan is a country in transition,” Aliyev explains, talking down expectations a few weeks before the vote. “We are now only in the beginning of our economic growth.”

With a million barrels of oil running through the new pipeline each day, that growth is coming on fast. If the price of oil remains above $45 a barrel, Azerbaijan, a country with a GDP of $8.5 billion, can expect to double its national budget next year and collect $160 billion over the next 25 years. But because that Caspian oil is being delivered directly to Western markets for the first time, Aliyev’s friends in the West want to talk democracy. Just how much can they push? Do they want to push? For those paying attention, Azerbaijan presents a test of where—stripped of all the wind-bagging over “freedom”—American and British priorities really lie. Azerbaijan would not matter so much if it were, say, Nigeria, another oil-rich nation with lots of problems. But the important thing here is location. On one border is Russia, steaming over being cut out of Azerbaijan’s oil future, thanks to the new pipeline. To the northwest is Georgia, a new darling of U.S. foreign-policy makers and a conduit for the pipeline on its way to the Mediterranean. Armenia, which fought a six-year war with Azerbaijan and still occupies the disputed territory of Nagorny-Karabakh, is to the west. And finally, there is Azerbaijan’s southern neighbor, Iran, which has a population of roughly 20 million ethnic Azeris.

The Soviet Union may have been a longtime enemy, but as far as Washington is concerned, it accomplished something good in Azerbaijan: It secularized the place. Azerbaijan remains the most secularized Muslim country in the world, more so in most respects than Turkey. Adult men in Baku wear jackets and ties, are fluent in Russian, and want to earn a good salary. The best chance of doing that is by signing up with an oil major like BP or Chevron or with an oil-services giant such as Halliburton, McDermott, or Schlumberger—all of which are entrenched here.

With the pipeline in place that connects Baku, Tbilisi, and Ceyhan, the U.S. Congress has allocated $135 million for the Caspian Guard Initiative. The money is being spent on upgrades to Azerbaijan’s maritime forces, including training and constructing sophisticated radar systems. Big-time American defense contractor Washington Group International has already helped build two radar stations in Azerbaijan, one of which is in the town of Astara, just a few miles from the Iranian border.

There is also plenty of talk about deploying American troops in Azerbaijan, especially after the recent eviction of U.S. forces from Uzbekistan. Considering the fuss such a move would cause with the neighbors, this proposal hasn’t yet graduated to official status. But the topic of an American military presence in Azerbaijan has become so hot that the president of BP’s local operation, David Woodward, professes to have heard absolutely nothing, even about the Caspian Guard.

BP is the largest investor in the pipeline and has the most at stake. Woodward, a Briton who sports a closely trimmed white beard, watches over his company’s operation from BP’s gated Villa Petrolea compound in the southern part of Baku. In contrast to the streets outside, BP’s offices are carpeted and swept clean. Posters of children and flowers line the walls, touting the firm’s commitment to the environment.

“There is a prevailing idea that oil companies are satisfied with the status quo,” Woodward says, sitting in an air-cooled corner office. “But you can’t have a shortsighted view when you’re making the kinds of investments we’re making. We have a commitment to remain here for 20 years to see a return on our investment.”

Woodward isn’t just making sounds: He was critical of government tactics leading up to the election. In May, a few days before the opening of the pipeline, an event that attracted top foreign dignitaries including U.S. Energy Secretary Samuel Bodman, police waded into an opposition march. In a rare move for someone in his position, Woodward spoke out against the violence. That prompted President Aliyev’s chief of staff, Ramiz Mekhtiyev, to say that “foreign companies should get on with their business and not interfere in politics.” It must have slipped Mekhtiyev’s mind that foreign capital investment accounts for half of Azerbaijan’s GDP.

“When you talk about stability,” Woodward says, “it has to be long-term stability, so that the desires of the people are realized, and prosperity is not confined to a small elite. There are some people in government who are not enthusiastic about this and will resist change.”

ONE PROBLEM IS corruption. Transparency International, the watchdog group, ranks Azerbaijan the sixth-worst on its list of corrupt countries, between Myanmar and Angola. According to some estimates, 60% of the Azerbaijani economy is off the books. A local newsmagazine, Hesebat, recently published a list of the country’s richest people; eight of the top ten worked in government.

But to effect change, there needs to be a viable option. And one of the main problems of the political opposition—aside from official harassment and electoral irregularities—is that it doesn’t appear to have anything creative to say. The main figures are Isa Gambar, leader of the Equality Party, and Ali Kerimli, head of the Popular Front. Those two parties, along with several smaller groups, joined together for the elections to form the Freedom coalition. That was a productive step, but visits to Gambar and Kerimli at their respective party headquarters leave the impression that the leaders have good clothes and newish furniture but that their followers spend their days loitering at the entrance, on guard for the next Turkish coffee.

The battles here are still being fought on rather low ground. Leading up to the elections, the government TV stations spent considerable effort trying to paint Kerimli as a homosexual. Married with three children, Kerimli shrugged it off with class. He sits behind a large desk in a shiny new suit and speaks broadly of the need for democracy in Azerbaijan. “Stability is a relative concept,” he says. “In Azerbaijan today, it can be violated at any point by any means. I believe in a radical strategic reform of the entire state system and economy, and this will not be possible under the current regime.”

Kerimli wears an orange tie, the color of Ukraine’s revolution under Viktor Yushchenko and the preferred hue of reformers in the post-Soviet space. It’s a miracle that he has even this, as Aliyev’s police raided Baku stores over the summer and confiscated all orange articles of clothing. Practically the only orange garments left in Baku are worn by the workers who assemble the giant oil rigs on McDermott’s seaside lot.

While Yushchenko’s movement received strong backing from the West, as did Mikhail Saakashvili’s Rose Revolution in Georgia, it’s still up for grabs just how vigorously Washington wants to ride with the opposition. There is a feeling that, keeping in mind any risk of disrupting the oil business in Baku, it’s just not ready for that level of support.

“If democracy triumphs in Azerbaijan, it’s not a threat to U.S. interests,” Kerimli says, adjusting his orange tie. “The oil will flow, just as it flows now. And the U.S. can take credit for another success, another revolution, and in a Muslim country. It’s essential that Azerbaijan become a part of the Western family of nations and become an example for other Muslim nations.”

BUT AZERBAIJAN HAS a lot of cleaning up to do before Western governments can safely embrace it. And that may never happen. President Aliyev inherited the post from his father, Heydar Aliyev, a former Politburo member, who more than anyone else created the image and idea of an independent Azerbaijan. As President for a decade, he ended the war with Armenia, brought in the Western oil companies, and sat atop a Mafia-style pyramid structure where no one in government did anything without his affectionate nod.

He died in 2003, shortly after his son succeeded him as President. Now, however, the tables appear to have turned. It is the ministers and the moneyed class that control the 44-year-old President. “The President has no normal parliament,” says Aslan Ismailov, a prominent Baku attorney with ties to Aliyev. “He knows that at any moment the parliament could go against him. He wants a normal parliament. After that, he can get rid of people in the ministries.”

That helps explain Aliyev’s nerves. Were he to wish for fairer practices, as he hints he does, Aliyev could hardly make them come about. And so the U.S. is left wondering how to play its hand. “Our relationship could be very good,” says Reno Harnish III, U.S. ambassador to Azerbaijan. “We could have a very strong relationship.”

The diplomas and citations look down from Harnish’s walls in the leafy American embassy enclave in Baku, a world away from the crumbling apartment blocks just past its gate. “How much can you tie your wagon to Azerbaijan if over the long term it’s going to be unstable?” Harnish asks. “The leadership of Azerbaijan has to realize that it has to change the way it does things here. We’re never going to get down the road to a closer relationship unless they make specific changes. You can’t just throw seeds on barren ground.”

But you also have to reconcile your need for Caspian oil with your talk about global democracy. Or do you? Instead of becoming a Muslim exemplar of U.S. foreign policy, Azerbaijan just may come to represent the fundamental contradiction in U.S. foreign policy—an economic success and a political failure that you’re just going to have to live with.