For this latest instalment in our series on Russia’s relations with its neighbours, we turn to the oil-rich nation of Azerbaijan. Rovshan Ibrahimov argues that the country has rebounded from plumbing lows with Moscow in the early 1990s to carve out an independent existence.

The relationship between Russia and Azerbaijan has evolved over two centuries, during which Azerbaijan spent most of the time in the Russian Empire and then as part of the Soviet Union until it broke up in 1991 and both emerged as independent states. The two countries established diplomatic relations in April 1992 and then signed a free-trade agreement that September.

Such is the difference in power between the countries that it is Russia and not Azerbaijan that sets the tone for relations. Azerbaijan has always been interested in good relations with its northern neighbour – but has consistently stuck up for its own national interest.

Chilly 1990s

This led to problems between 1994 and 1998, when Russia closed the land border between the two countries – officially, because Russia claimed that Azerbaijan was a source of military aid to the Chechen separatists (it sealed its Georgian border too). The background was that Azerbaijan had been signing contracts with Western energy companies to develop oilfields in the Caspian Sea, against strong opposition from Russia.

To put pressure on Azerbaijan, Russia began supporting Armenia in the dispute over the Azerbaijani region of Nagorno-Karabakh. The region has a high proportion of ethnic Armenians, whose desire to join their motherland sparked war in the early 1990s, several years after Armenia declared an interest in the territory. The result of the Russian intervention was that Azerbaijan lost control of the region, whose status remains unresolved today.

In February 1992 Armenians massacred hundreds of civilians in the city of Khojaly, which promptly led to the resignation of Azerbaijan’s first president, Ayaz Mutabilov, and fundamentally damaged relations with the Russians.

Wikimedia, CC BY

When the Russia/Azerbaijan border closed in 1994, Azerbaijan lost the traditional market for exporting its industrial and agricultural products. Simultaneously it stopped using Russian raw materials for its enterprises. This caused Azerbaijani industry to come to a standstill, which brought about huge declines in GDP. Huge numbers of unemployed people went to Russia in search of work (by aircraft) – a million-strong army of expat workers whose incomes have significantly helped supplement family budgets back home. It also meant that Azerbaijan turned its attention to Western markets, which eventually helped to bring the economic downturn to an end.

The relationship between the two countries only began to improve with the coming to power of Vladimir Putin. In January 2001 Putin became the first Russian president to pay an official visit to Baku. During the visit, a number of issues concerning relations between the two countries were resolved, including agreeing a 10-year lease to Russia of the security-critical Gabala radar station in northern Azerbaijan and resolving boundary disputes in the Caspian. There was also much emphasis on developing trade relations.

Business ties

There have since been significant achievements in this area. Russia opened a trade representation office in Baku in 2006 and much effort has gone into developing cross-border co-operation between the Russian regions and Azerbaijan. The idea is that this will increase production and create new jobs, helping to reduce social tensions in the North Caucasus. As a result, Azerbaijani companies began to invest in the other republics in the region and are playing an increasingly important part in their economies.

Some heavy metal from Russia.Nick Taylor, CC BY-SA

Russia’s main exports to its southern neighbour include chemicals, food, metals, paper products, wood and engineered products – including defence, on which Azerbaijan has spent $4bn (£2.6bn) on Russian goods in recent years to become one of Russia’s main customers.

In return Russia mainly receives minerals, food, agricultural products and natural gas – in 2010 Gazprom and Azerbaijani state petroleum company SOCAR agreed a deal under which Azerbaijan would supply some 500m cubic metres of gas to the Russians each year. In 2013 alone, trade between the two countries rose over 10% to $2.6bn – some ten times greater than in the early 2000s.

Balanced foreign policy

Despite this close relationship, Azerbaijan prefers to stick to bilateral agreements and preserve its full sovereignty rather than anything that involves integrating with the Russians. That is why it has openly declared that the country has no plans to join the Eurasian Union (of Russia, Kazakhstan and Belarus). For the same reason, Azerbaijan also declined to sign the Association Agreement with the EU in the framework of the Eastern Partnership – a measure that has met with approval in Moscow. Instead it only signed an agreement to simplify the visa regime with the EU, which came into force in September.

Azerbaijan’s attempts to maintain a balanced foreign policy have been made easier by having a selection of energy pipelines coming out of the Caspian. The Baku-Tbilisi-Ceyhan crude oil pipeline between Azerbaijan and southern Turkey was completed in 2006, after which it added a gas pipeline between Baku and Erzurum in eastern Turkey. Before the end of this decade, there are plans to complete two more pipelines between Baku and western Europe – the Trans-Anatolian and Trans-Adriatic lines.

The Baku bypassWikimedia, CC BY

Unlike Georgia, Azerbaijan does not believe that the EU Eastern Partnership and Individual Partnership Action Plans will lead to participant states being invited to join the EU or NATO. This explains Azerbaijan’s more lukewarm approach to them – which satisfies Russia, since it sees the Caucasus as being in its sphere of interests and is opposed to Western incursions there. In effect, Azerbaijan’s pipeline activities are tolerated so long as it maintains its arms-length policy on EU/NATO.

Baku was rewarded in summer 2013 with another Putin visit on the eve of its presidential election, in which he offered support to controversial incumbent Ilham Aliyev. This would never have happened if Russia thought that Azerbaijan was acting against its foreign interests.

Azerbaijan has not been directly affected by the Ukraine war – except that it has confirmed what the country knew anyway: if you correctly identify Russia’s geopolitical red lines and avoid crossing them, stable and peaceful relations are perfectly possible. In return for doing so, Azerbaijan has been able to pursue its own interests, even when the Russians might have preferred a different course of action.

To read previous instalments from our Russia’s borders series, click here.

Rovshan previously worked for Center for Strategic Studies think tank under the President of Azerbaijan. He has received fudging under the US Junior Faculty Development Program.