The Republic of Azerbaijan and the post-Soviet status quo
The dissolution of the USSR in 1991 led to the independence of three former Soviet republics in the South Caucasus – Azerbaijan, Georgia, and Armenia, which had separated from the Russian Empire in 1918 and were incorporated into the Soviet Union in 1920–1922. The process of acquiring independence was accompanied by a military conflict with neighboring Armenia, which began in 1988, and armed clashes with ethnic minorities within Azerbaijan. The new Azerbaijani state enshrined in its constitution that it was a restoration in a contemporary form of the Azerbaijan Democratic Republic (1918-1920).
In 1992, after four years of military conflict in Nagorno-Karabakh where, in addition to Azerbaijani and Armenian forces, proxy forces from Russia, Iran, and the Afghan Mujahideen units participated, the post-Soviet communist leadership was overthrown by an ultra-nationalist government that professed the ideology of pan-Turkism and called for an alliance with Türkiye and the separation of southern Azerbaijan from Iran.
At that stage, Azerbaijan’s economy was already in deep crisis. Between 1991 and 1995, the country’s GDP contracted by more than 60%. The budget deficit widened to 10% of GDP. The national currency depreciated by 1,300% by 1994, and consumer prices rose by 24,000% by 1995.
Although much foreshadowed a repeat of the experience of the early 20th century, events this time took a different turn.
In 1993, following a series of defeats at the front and a military insurrection, Heydar Aliyev, a former member of the Soviet Politburo, came to power, bringing about political stabilization on the basis of building a secular nation state in Azerbaijan while maintaining a neutral multi-vector foreign policy that took into account the geopolitical interests of the collective West and its regional ally Türkiye, as well as Russia and Iran.
The stabilization of the situation in Azerbaijan took place in parallel with the freezing of the war with Armenia. The cease fire agreement was reached between Azerbaijan and Armenia in July 1994. The main external arbiters of the ceasefire were the Russian Federation, the United States and France, as co-chairs of the OSCE Minsk Group.
The country’s economic future depended on the development of its oil resources. Azerbaijan still possessed significant oil and gas resource potential. It had long ceased to be the USSR’s primary source of oil production, but its discovered and undeveloped offshore fields in the Caspian Sea, as well as its geographic proximity to the resources of neighboring Central Asian states, Kazakhstan, and Turkmenistan, represented great value for the international oil and gas companies.
In September 1994, the agreement was signed between the State Oil Company of Azerbaijan Republic and a BP-led consortium of 11 foreign oil companies from six nations, in which companies from the US, the UK and Russia were three top foreign shareholders, for the development of the Azeri, Chirag and Gunashli field (ACG), named the “Contract of the Century”.
The traditional view in the established theoretical literature is that the behavior of “small states” in the international system is decisively influenced by the international distribution of power. In line with this approach, any attempt to understand what allowed Azerbaijan to maintain its independence and over time increase its political autonomy should preferably start with an analysis of the interests of the great powers – the collective West, Russia and Iran – in order to then draw conclusions about how Azerbaijan positioned itself in the international system in which it had to operate.
Western policy in the post-Soviet space
The end of the Cold War and the disaggregation of the USSR led to a situation where the only rival bloc still standing was the West headed by the US as its undisputed leader. In this unique phase, which in political science literature was described as the “end of history” or the “America’s unipolar moment”, the objective of building a new world order based on liberal democratic institutions and values professed by the collective West was determined.
With respect to the post-Soviet states, a policy was adopted to strengthen their independence in order to prevent the re-emergence of Russia as a regional hegemon capable of competing with the US and its allies and obstructing the advance of the liberal order. The means for achieving this were the same for Russia and other post-Soviet countries and included efforts to strengthen the institutions of democratic governance, participation in the OSCE, the Council of Europe, cooperation in programs led by NATO and the EU, training for government officials, civil society and NGO activists, and, in the case of Russia, infusions of foreign loans from the IMF, the WB and major bilateral creditors. The geographical remoteness of the South Caucasus slowed down the application of this policy towards the states of this region compared to the pace of their implementation in Russia.
The far more pressing need to advance a liberal agenda in relations with Russia meant that US-led policy in the South Caucasus had to be calibrated to minimize its antagonism toward Russia. The priority for European states during that phase was the integration of the former Yugoslavia and Warsaw Pact countries into the framework of the EU and NATO, and the development of relations with Russia, rather than with the countries of the South Caucasus. Türkiye embarked on a similar approach, seeking to deepen engagement with Azerbaijan while developing extensive economic ties with Russia in trade, construction, nuclear energy, oil and natural gas.
In summary, the West’s interests were to ensure that Azerbaijan remained independent, stable, but not overtly hostile to Russia. The policy of carefully calibrating the pace and intensity of engagement in the post-Soviet space was adopted by all key players in the collective West.
Russia’s hierarchy of priorities in the 1990s – early 2000s
The late Soviet Union and, since its inception, the Russian Federation, had a ruling class that was divided in its approaches to the foreign policy direction of the state.
One line of reasoning was that Russia should concentrate on building a national state integrated into the institutional framework of the West under the terms that the international community was prepared to offer, granted the prevalent doctrine at the time was liberal internationalism. The ruling elite factions that proposed this approach emphasized the priority of achieving economic development over other national interests, arguing that the convergence of systems would yield dividends that would by far outweigh the benefits in other areas. Russia’s highly unstable economic situation, the technological backlog and reliance on external borrowing served as powerful justifications for this policy.
Throughout the 1990s and into the mid-2000s, this approach had a decisive influence on Russia’s domestic and foreign policies. A clear manifestation of this was the sharp reduction in spending on the military and defense infrastructure in Russia and abroad. The application of this approach to post-Soviet states involved Russia withdrawing its military infrastructure and sharply reducing troop contingents, which led to the almost complete withdrawal of troops from Azerbaijan in 1993, the reorientation of economic flows and humanitarian contacts to the countries of the collective West.
Another part of the Russian ruling class asserted that the development of relations with the West had to take place along with maintaining military, economic and cultural influence in the post-Soviet space, which was designated by the term “near abroad”, as well as in those states that still retained close interaction with Russia. It was deemed possible to follow the example of France, Great Britain and the United States, which did not voluntarily give up privileged relations with their client states and continued to maintain influence on them while being the main beneficiaries and architects of the liberal international system. Russia had to be accepted into this system as an equal sovereign partner.
In the second half of the 1990s, the first and second Chechen wars and the Islamic terrorist activities that accompanied these conflicts highlighted the shortcomings associated with the reduced role of the army and played into the hands of the ruling elite that warned of the dangers of the growing Western influence in the post-Soviet space as a result of Russia’s adoption of a liberal convergence agenda. Another episode that was instrumental in promoting this policy line, was the conflicts that erupted during the breakup of Yugoslavia.
As a result, Russia opted to retain a certain level of influence in the South Caucasus. The frozen conflict between Azerbaijan and Armenia allowed Russia to create a pattern in which Armenia’s dependence on military protection and trade with Russia served as leverage on Azerbaijan, Azerbaijan’s dependence on Russian arms supplies and its economic presence in Russia became a lever of influence on Armenia, and Russia’s role as a moderator in the Nagorno-Karabakh conflict resolution process served as leverage over both countries.
Analysis of national interests of the Islamic Republic of Iran
The foreign policy crisis that accompanied the Islamic Revolution in 1979, the international sanctions that followed, and the subsequent war between Iran and Iraq seriously worsened Iran’s relations with the West. With the end of the Cold War, Iran intended to resume cooperation with the US, the UK and the states of continental Europe, which it had under Reza Shah Pahlavi before World War II, and then during the reign of Mohammad Reza Pahlavi.
The Islamic Republic was looking for a formula that would allow it to return to international markets, but would not threaten the existence of the regime. However, each round of searching for compromise was followed by a phase of tension and led to greater securitization of Iran’s policy:
- 1992: Launch of “critical dialogue” with the EU under Hashemi Rafsanjani, then of “comprehensive dialogue” under Mohammad Khatami. Negotiations with the EU-3. Lack of support for this policy from the US, Israel and China.
- 2001–2003: US military operations in Afghanistan and Iraq. Tensions over undisclosed uranium enrichment program in Iran.
- 2005: Mahmoud Ahmadinejad came to power. Expansion of paramilitary proxy operations in Iraq.
- 2009–2010: Iranian Green Movement protests.
- 2011–2013: Arab Spring protests escalated into civil war in Syria and rise of ISIS. “Shiite Crescent” strategy.
As long as Azerbaijan was part of the USSR, it did not pose any threat in terms of influencing the Azerbaijani population of Iran. The emergence of an independent Republic of Azerbaijan and the gradual strengthening of its ties with the West could entail the risk of ethnic separatism in Iran’s northwestern provinces, especially if Iran managed to reach an agreement with the collective West and partially liberalized its political system. In 1994, nationalist movements emerged in Iran that organized demonstrations demanding the recognition of the linguistic autonomy of the Azeri minority.
Thus, the Azerbaijani factor, although secondary, was still significant when assessing the risks of regime destabilization in the event of political reform. The interests of Russia and Iran also coincided on the issue of delimitation of borders in the Caspian Sea. Both countries were not interested in the transit of natural gas from Turkmenistan to Türkiye and then to Europe, and were interested in acquiring shares in Azerbaijan’s offshore fields. As a result, Iran adopted a position toward Azerbaijan similar to that of Russia.
Conclusions
The foreign policy paradigm, oriented toward neutrality and non-alignment with the NATO and the EU, which Azerbaijan adopted, was result of an accurate assessment of the distribution of power and the hierarchy of interests of the main geopolitical players in the region and in the international system.
This position met the requirements of the nationalist ideology of the new independent state, and, at the same time, did not contradict the strategic priority of the West to promote liberalism in Russia (and to a lesser extent in Iran) and avoid crossing the red lines in the post-Soviet states unless absolutely necessary.
An uncompromising pursuit of pan-Turkism, and a military alliance with Türkiye made practical sense only in the event of political upheaval in Russia and Iran, a Turkish policy oriented toward expansion into the Caspian region, and the willingness of extra-regional great powers to provide firm military guarantees in support of such a rigid policy line.
The geographical proximity, the presence of a frozen conflict with Armenia, and the remaining military infrastructure in the Caucasus gave Russia and Iran sufficient means to restrain Azerbaijan from pursuing a policy of balancing their influence. At the same time, there was no consensus within the Russian ruling class on augmenting political, military and economic pressure so as to compel Azerbaijan into adopting a policy of bandwagoning with Russia either.
Antagonizing Russia and Iran could lead to a closer alliance between the two countries, and Azerbaijan, caught between the neighboring powers, would likely have to side with them, acquiescing to their combined power.
Azerbaijan correctly assessed that the best alternative available to it was to adhere to a policy similar to that pursued by Sweden and Finland during the Cold War, which maintained neutrality and enjoyed decades of peace and stability, while seeking to mitigate the security dilemma by strengthening institutional and economic ties with the West.
The central role in strengthening Azerbaijan’s ties with the West was assigned to the oil and gas sector, with the intent to leverage it as a form of “attractive power” that would foster rapprochement with extra-regional players. [2 – end. The 1st part was published here]
