The collapse of the oil prices is causing high tensions across the globe. Oil prices reached a dramatic height in 2008 and again in 2014, after which they collapsed. On January 23 a barrel was being sold for as low as $27, and the lifting of sanctions on Iran could put yet another 600’000 barrels of oil per day on saturated markets. Regimes totally addicted to petrodollars are feeling the heat. From Russia to Venezuela, from Saudi Arabia to Kazakstan state budgets that calculated the barrel at $50 or so have no alternative but to cut spending. Among all these regimes the highest dependency on oil and therefore the most endangered is Azerbaijan.
Azerbaijan and oil is a very old story: Baku produced half the global oil in the year 1900. Over exploitation exhausted the reserves, and by the time Azerbaijan separated from the Soviet Union the great promise was off-shore reserves, costly to exploit. It was the extensive exploitation of this oil that gave the country its stability in the last decade, since Azerbaijan emerged from the USSR with profound problems: one was the question how to legitimize the new political power after the collapse of socialism, which created tensions between the new Turkic nationalist identity on the one hand, and ethnic groups on the other. The best-known case is the centrifugal trend of Karabakh Armenians. While the Karabakh conflict was the most violent, leading to a war that caused 35’000 victims, hundreds of thousands of refugees and continued antagonism between the two neighbours, there were similar centrifugal trends among other ethnic groups such as the Lezgins in the north and the Talish in the south.
While the Karabakh conflict was on the margin of Azerbaijan both geographically, the end of the Soviet Union caused a deep conflict within the political elite of Azerbaijan. The Soviet nomenklatura fell from power by a nationalist revolt led by Abulfaz Elchibey, who in turn was overthrown by a military coup after which the Soviet era strongman Heidar Aliyev came back to power. The ailing Aliyev constructed an authoritarian regime, and then passed power to his son Ilham in 2003, establishing the first post-Soviet republican dynasty, the second such rule if we consider the Asad dynasty in Syria.
The inexperienced Ilham Aliev came to power at happy times. The Baku-Ceyhan pipeline was constructed in 2005, and oil started being exported in 2006. In 2008 oil prices reached a record peak of $143 a barrel. Azerbaijan received billions of dollars every year since. Did the regime of Ilham Aliev solve any of Azerbaijan’s problems?
Baku purchased weapons for huge sums: the military budget in 2003, when Ilham Aliev inherited the state, was only $175 million; in 2015 it was officially an astronomic $4.8 billion. In spite of massive arms purchase, the Karabakh problem did not see any progress. Azerbaijani position on Karabakh became maximalist, and diplomatic negotiations reached a dead-end. The situation on the front-line has degraded, where regularly clashes kill young recruits from both sides.
Ilham Aliev’s internal policy is equally a disaster. He initiated a number of extravagances such as having the Eurovision song festival in Baku, or the European Games sports events – during which 6’000 people were invited to Baku on state budget. Billions were thrown on such events, and construction of office-buildings and public monuments. These absurd projects can only be understood as corruption schemes, where state money is used to buy the loyalty of the elite.
Critics had no place in this big fiesta: Journalists who investigating the deep corruption of Aliev family ended up either being assassinated such as the talented Elmar Husseinov, or in prison such as Khadija Ismailova. So did sociologists like Arif Yunusov, and human rights lawyers such as Intiqam Aliev. So many intellectuals ended up in prison that Kurdakhani prison was called in dry irony the best university of Azerbaijan.
A decade of limitless cash flow Ilham Aliev did not bring any positive change to Azerbaijan: tensions with Karabakh Armenians are worse than ever; political freedoms are worse than in the 1990’s; the economic situation is worse than before: the inflow of oil money killed local initiatives, especially in the industrial sector. After the recent devaluation of the manat – the Azerbaijani national currency – average monthly salaries are only $287, which is lower than energy poor, landlocked and blockaded Armenia.
The foreign power that shares much responsibility for the situation in Azerbaijan is Turkey of Erdogan. Ankara gave unconditional political and diplomatic support to Aliev regime, thus supporting its corrupt practices and wasteful policies. Azerbaijan’s best strategic moment to cut a deal with Armenia over Karabakh was when its financial strength and international prestige was at its highest. Yet, Ankara’s unconditional support only hardened Aliev’s maximalist positions. Ankara also collaborated in chasing critical Azerbaijani journalists and intellectuals established ion Turkey, like Rauf Mirgadirov, who was deported to Azerbaijan (2014) and immediately arrested.
The central bank spent billions to preserve the national currency, but in December the government abandoned this policy, leading to immediate devaluation of the currency, and banks stopped selling dollars. Prices of basic commodities and foodstuff exploded, causing a series of demonstrations in a number of cities.
Ilham Aliev is facing his first serious crisis. It is yet to be seen whether he is qualified to the job he inherited from his father.