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Azerbaijan: Former Minister's Book Examines Oil And Energy Policies

By David Nissman

Washington, 26 March 1997 (RFE/RL) - Azerbaijan's former deputy prime minister Rasul Guliyev's book, "Oil and Politics: New Relations Among the Oil-Producing States: Azerbaijan, Russia, Kazakhstan and the West" recently was published in New York.

The book is significant for Guliyev's insights alone. He was a leading official in the Soviet energy industry and, later, Azerbaijan's oil industry, with unmatched experience in oil policy. As Azerbaijan's former deputy prime minister and parliament chairman, he had a special perspective on national economic problems. But the book is even more important for his potential than for his past. Guliyev's political future is uncertain. He could rise once again to a high post in Azerbaijan after the presidential elections in 1998. His book, then, could indicate the policies and approaches he prefers.

Guliyev's book traces how oil and energy were used to further Soviet ambitions in the period after World War II. Essentially, the Soviet fraternal states in Eastern Europe and Soviet client states in Asia, Africa and Latin America enjoyed free access to Soviet energy, primarily oil. The Soviets passed their oil on to Eastern Europe, for example, and received consumer goods in return.

For the energy-producing republics of the Soviet Union, this system produced benefits. It developed a raw materials base and a highly technical transportation infrastructure in Russia, Kazakhstan and Azerbaijan. But, the writer asserts, the oil factor had a negative influence on the socio-economic development of oil centers and the USSR as a whole. In Azerbaijan, for example, intensive growth in the extraction-and-export of oil led to an unjustifiable growth in capital investments in the oil sector at the expense of investment in other industries.

An imbalance in the development of various branches of the economy, and also between the economic and social spheres, resulted.

Gouliyev writes that when the Soviet Union collapsed, Azerbaijan found itself vulnerable. Not only did it lack a diverse modern economy, but it now was confronted with the serious problem of the negative ecological consequences of the overdevelopment of the oil industry. The collapse of the USSR led also to the disorganization and collapse of the fuel-energy complex. Each of the oil-rich newly independent states of Russia, Kazakhstan and Azerbaijan took steps to correct and redirect the situation.

Russia -- for which the energy industry provides 30 percent of the value of industrial production, 40 percent of budget income and about 50 percent of hard-currency export earnings -- decided that creating an adequate demand was the best remedy. It focused the economy on energy conservation, improved price-setting and a taxation system in the oil sphere. It restructured the fuel-energy complex, improved the export structure, and activated international cooperation in the oil business.

Kazakhstan, at the time of the collapse, was locked into the Russian oil-transport infrastructure. It still is. Its lack of direct pipelines to the world petroleum markets limits its exporting potential to the amount of oil that Russian businesses are willing to transport through their pipelines. The Kazakh export potential is not determined by what could be, or is produced -- but by the politics of Transneft, which transports oil through the Russian system.

Guliyev recommends a three-part strategy for Kazakhstan to achieve energy security. First, he asserts, Almaty must attract investment and increase the oil obtained from new and existing fields. Second, it should obtain an independent conduit to the world markets. And, third, it needs to overcome its dependence on Russia in getting its oil to refineries in Pavlodar and Shymkent.

If Guliyev is coldly analytical when it comes to Russia and Kazakhstan as oil powers, his approach to Azerbaijan is much more personal, more a mixture of political agenda and personal belief.

He says that political and economic planners, and the society as a whole, should establish certain goals. Azerbaijan needs a flexible policy of balancing itself between the power centers in the West-Eurasian-Middle East triangle in which the country is situated. Azerbaijan must strive to be integrated internationally. Guliyev wants to revive a past in which Baku was internationally recognized, both intellectually and industrially. In practical terms, he calls for diversification, away from narrow reliance on an oil-based economy.

Of course, no country exists in a vacuum. Azerbaijan is considered generally to be in Russia's sphere of interest. Guliyev notes, in his words, that "Azerbaijani oil is a major element in Russia's oil geopolitics."

Guliyev identifies three trends which influence Russian policy toward Azerbaijan.

One is a neo-imperial trend which reflects the interests of great-power movements and nationalist parties. He says Russia considers itself to be the main support of the former Soviet Union. It promulgates anti-United States, anti-NATO and anti-Western views. It seeks to maintain Azerbaijan, its resources and conflicts (with Armenia, for example) within the Russian sphere of influence and to resist competitive influence from the United States, Turkey, and the West generally.

The second, conservative, trend is close to the neo-imperialist trend. Guliyev says its adherents would prefer that Russia renew a military presence in Azerbaijan, and that the Russian military share in patrolling the Azerbaijan-Iran and Azerbaijan-Turkey borders in order to protect Russian hegemony over the Transcaucasus. They also want to attempt to control the export of Azerbaijan's resources.

The third trend, the pragmatic one, is represented by the Russian oil companies, the leaders of some Russian ministries and the Russian business community. The supporters of the pragmatic line believe, he says, that relations based on mutual respect and the acknowledgement of legitimate interests will lead not only to preservation, but even to expansion of Russian positions in Azerbaijan, and spread throughout the entire Caucasus region. Currently, the pragmatic group appears to have the upper hand, Guliyev observes.

Guliyev himself supports this pragmatic view. He proceeds from the premise that not only is Azerbaijan vital to Russia's interests, but Russia is vital to the interests of Azerbaijan.

David Nissman is a Washington-based analyst who contributes regularly to Radio Free Europe/Radio Liberty.