Azerbaijan: Recent Developments and
U.S. Interests
Jim Nichol
Specialist in Russian and Eurasian Affairs
June 3, 2010
Congressional Research Service
7-5700
www.crs.gov
97-522
CRS Report for Congress
P
repared for Members and Committees of Congress
Azerbaijan: Recent Developments and U.S. Interests
Summary
This report discusses political, economic, and security challenges facing Azerbaijan, including the
unsettled conflict in the breakaway Nagorno Karabakh region. A table provides basic facts and
biographical information. Related products include CRS Report RL33453, Armenia, Azerbaijan,
and Georgia: Political Developments and Implications for U.S. Interests, by Jim Nichol.
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Azerbaijan: Recent Developments and U.S. Interests
Contents
U.S. Relations ............................................................................................................................. 1
Contributions to Counter-Terrorism............................................................................................. 3
Foreign Policy and Defense......................................................................................................... 4
The NK Conflict ................................................................................................................... 6
Political and Economic Developments ........................................................................................ 7
Energy ............................................................................................................................ 9
Figures
Figure 1. Azerbaijan.................................................................................................................... 2
Tables
Table 1. Basic Facts .................................................................................................................... 3
Contacts
Author Contact Information ...................................................................................................... 10
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Azerbaijan: Recent Developments and U.S. Interests
U.S. Relations
On May 12, 2010, Deputy Assistant Secretary of State Tina Kaidanow visited Azerbaijan and
averred that “the United States considers Azerbaijan an essential partner. Our interests overlap in
many areas, from collaborating on strengthening energy security via Southern Corridor gas and
oil projects to our work together countering terrorism and extremism.” Under Secretary of
Defense for Policy Michele Flournoy likewise stressed during a visit to Azerbaijan in April 2010
that “the United States seeks a strong and dynamic partnership between our two nations as we
face a range of global challenges which neither of us can tackle alone. We are strong friends and
are committed to working together with the Azerbaijani government and people to support the
development of a secure, democratic, and prosperous state.”1
Despite these positive statements about bilateral relations, Azerbaijani officials have voiced
concerns about U.S. policy in recent months. Azerbaijan strongly opposed the U.S.-backed
normalization of relations between Armenia and Turkey (see below), and President Aliyev
reportedly felt slighted when he was not invited to the April 2010 U.S. nuclear security summit,
even though the two other regional leaders were invited and held meetings with President
Obama.2
Cumulative U.S. aid budgeted for Azerbaijan from FY1992 through FY2008 was $832.24 million
(“all spigot” foreign assistance). Almost one-half of the aid was humanitarian, and another one-
fifth supported democratic reforms. Budgeted aid to Azerbaijan was $24.946 million in FY2009
and an estimated $30.135 million in FY2010, and the Administration requested $29.3 million for
FY2011 (the numbers for FY2009, FY2010, and FY2011 include FREEDOM Support Act and
other foreign aid and exclude Defense and Energy Department funds). In FY2011, the
Administration plans to address the “worsening climate for democratic activists and independent
voices [by increasing] assistance to foster the public’s access to objective information and
development of a vibrant independent media,” bolster judicial independence, help non-
governmental organizations and political parties to represent citizens, strengthen legal defense,
and improve election monitoring and administration (however, the request for FY2011 is less than
for FY2010). Another major aid priority will be strengthening the interoperability of Azerbaijani
military forces with U.S. coalition forces in Afghanistan and with NATO, modernizing the armed
forces, bolstering maritime security in the Caspian Sea, and improving airspace management. The
Administration also has requested a further boost in assistance for conflict mitigation and
reconciliation efforts in the Eurasia Region, from $11.8 million in estimated funding in FY2010
to $15.6 million in FY2011, some portion of which is planned to foster settlement of the
Armenia-Azerbaijan conflict over Azerbaijan’s breakaway Nagorno Karabakh (NK) region.3
1 Embassy of the United States, Baku, Azerbaijan. State Department Envoy Exchanges Views with Azerbaijani Leaders,
May 12, 2010; U.S. Defense Official Highly Values U.S.-Azerbaijan Partnership, April 17, 2010.
2 Alexander Jackson, “Behind the U.S.-Azerbaijan Row, Caucasus Update, May 6, 2010. National Security Council
official Laura Holgate explained that Azerbaijan was not invited to the nuclear security summit because “we were
intending to get a representative collection of countries. We couldn't invite every single country that has any nuclear
connectivity and so we were looking for countries that represented regional diversity where we had states that had
weapons, states that don't have weapons, states with large nuclear programs, states with small nuclear programs.” The
White House. Office of the Press Secretary. Press Briefing on the President's Bilateral Meetings and the Upcoming
Nuclear Security Summit, April 11, 2010.
3 U.S. Department of State. Congressional Budget Justification for Foreign Operations for FY2011, March 2010.
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Since FY2004, Azerbaijan has been designated as a candidate country for enhanced U.S.
development aid from the Millennium Challenge Corporation, but it has not been selected as
eligible for aid because of low scores on measures of political rights, civil liberties, control of
corruption, government effectiveness, the rule of law, accountability, and various social
indicators.
Figure 1. Azerbaijan
Source: Map Resources. Adapted by CRS.
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Table 1. Basic Facts
Congressional concerns about the ongoing NK
Area and Population: Land area is 33,774 sq. mi.;
conflict led in 1992 to Section 907 of the
about the size of Maine. The population is 8.3 million
FREEDOM Support Act (P.L. 102-511) that
(The World Factbook; mid-2010 est.). Administrative
subdivisions include the Nakhichevan Autonomous
prohibited most U.S. government-to-
Republic (NAR) and the Nagorno (“Mountainous”)
government assistance to Azerbaijan until the
Karabakh Autonomous Region (NK). NK’s autonomy
President determined that Azerbaijan had
was dissolved in 1991.
made “demonstrable steps to cease all
Ethnicity: 90.6% are Azerbaijani; 2.2% Dagestani; 1.8%
blockades and other offensive uses of force
Russian; 1.5% Armenian, and others (1999 census). An
against Armenia and Nagorno-Karabakh.”
estimated 6-12 million ethnic Azerbaijanis reside in Iran.
Congress eased many Section 907 restrictions
Gross Domestic Product: $86.0 billion; per capita
on a year-by-year basis until the terrorist
GDP is about $10,400 (World Factbook; 2009 est.,
attacks on the United States in September
purchasing power parity).
2001, after which it approved an annually
Leaders: President: Ilkham Aliyev; Chairman of the Milli
renewable presidential waiver (P.L. 107-115).
Mejlis (legislature): Oqtay Asadov; Prime Minister: Artur
The conference managers stated that the
Rasizade; Foreign Minister: Elmar Mammadyarov; Defense
waiver was conditional on Azerbaijan’s
Minister: Safar Abiyev.
cooperation with the United States in
Biography: Ilkham Aliyev, born in 1961, graduated with
combating terrorism and directed that aid
a kandidata (advanced) degree from the Moscow State
provided under the waiver not undermine the
Institute of International Relations in 1985 and then
taught history. In 1991-1994, he was in business in
peace process. Congress has called for equal
Moscow and Baku, then became head of the State Oil
funding each year for Foreign Military
Company (SOCAR). He was elected to the legislature in
Financing and International Military
1995 and 2000. In 1999, he became deputy, then first
Education and Training for Armenia and
deputy chairman, of the ruling New Azerbaijan Party. In
August 2003, he was appointed prime minister, and was
Azerbaijan. Other congressional initiatives
elected president in October 2003. He was re-elected in
have included the creation of a South
2008.
Caucasus funding category in FY1998 to
encourage an NK peace settlement, provide
for reconstruction, and facilitate regional economic integration. Congress also has called for
humanitarian aid to NK, which has amounted to $30.8 million expended from FY1998 through
FY2008. Congress passed “The Silk Road Strategy Act” in FY2000 (as part of consolidated
appropriations, P.L. 106-113) calling for enhanced policy and aid to support conflict amelioration,
humanitarian needs, democracy, economic development, transport and communications, and
border controls in the South Caucasus and Central Asia.
Contributions to Counter-Terrorism
After the terrorist attacks on the United States on September 11, 2001, Azerbaijan “granted
blanket overflight clearance, engaged in information sharing and law-enforcement cooperation,
and approved numerous landings and refueling operations at Baku's civilian airport in support of
U.S. and Coalition military operations” in Afghanistan.4 Azerbaijan has participated in
International Security Assistance Force (ISAF) operations in Afghanistan since 2003. It increased
its contingent from 45 to 90 personnel in 2009, including medical and civil affairs specialists.
After August 2003, about 150 Azerbaijani troops participated in the coalition stabilization force
4 U.S. Department of State. Country Reports on Terrorism 2008, April 30, 2009.
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for Iraq. These troops withdrew from Iraq in late 2008. During her April 2010 visit to Azerbaijan,
Under Secretary of Defense Flournoy voiced deep appreciation for
Azerbaijan’s critical contributions to the international effort in Afghanistan, to countering
violent extremism, and to regional and global security. Azerbaijan's strategic location at the
crossroads of Eurasia has made it a vital partner of the United States.... Azerbaijan is a key
node in the global air and ground network that resupplies [the International Security
Assistance Force] and Afghan security personnel.5
Foreign Policy and Defense
President Ilkham Aliyev has emphasized good relations with the neighboring states of Georgia
and Turkey, but relations with these and other countries have often been guided by their stance
regarding the NK conflict. Azerbaijan has viewed Turkey as a major ally to balance Russian and
Iranian influence, and Armenia’s ties with Russia. Relations with Turkmenistan are strained by
competing claims over offshore oil and gas fields (see below). Azerbaijan is a member of the
OSCE, Black Sea Economic Cooperation group, Council of Europe (COE), Economic
Cooperation Organization, and Organization of the Islamic Conference.
Ethnic consciousness among some “Southern Azerbaijanis” in Iran has grown, which Iran has
countered through increasingly repressive actions. Azerbaijani elites fear Iranian-supported
Islamic fundamentalism and question the degree of Iran’s support for an independent Azerbaijan.
Frictions in Azerbaijani-Russian relations have included Azerbaijan’s allegations of a Russian
“tilt” toward Armenia in NK peace talks. In 1997, Russia admitted that large amounts of Russian
weaponry had been quietly transferred to Armenia, and in 2000 and 2005-2007, Russia
transferred heavy weaponry from Georgia to Armenia, fueling Azerbaijan’s view that Russia
supports Armenia in the NK conflict. Azerbaijani-Russian relations appeared to improve in 2002
when the two states agreed on a Russian lease for the Soviet-era Gabala early warning radar
station in Azerbaijan and reached accord on delineating Caspian Sea borders. Perhaps seeking
Russian support for his new rule, Ilkham Aliyev in March 2004 reaffirmed the 1997 Azerbaijani-
Russian Friendship Treaty. In late 2006, Russia’s demands for Azerbaijan and Georgia to pay
substantially higher gas prices appeared to contribute to the cooling of Azerbaijani-Russian
relations. After the August 2008 Russia-Georgia conflict, Azerbaijan appeared to move toward
better relations with Russia. During Russian President Medvedev’s late June 2009 visit to Baku,
Azerbaijan agreed to send small amounts of gas to Russia (see below). Azerbaijan’s relations with
Russia appeared even closer in 2010 as a reaction against the Turkish initiative to improve
relations with Armenia and U.S. Administration backing for this effort.
According to former Armenian Foreign Minister Vartan Oskanyan, Article 4 of the
Commonwealth of Independent States’ Collective Security Treaty (signatories including Russia,
Armenia, Belarus, and all the Central Asian states except Turkmenistan) pertains to aggression
from outside the commonwealth, so does not pertain to the NK conflict (since Azerbaijan is a
member of the commonwealth).6 After the CST Organization agreed to form large rapid response
5 Embassy of the United States, Baku, Azerbaijan. U.S. Defense Official Highly Values U.S.-Azerbaijan Partnership,
April 17, 2010.
6 CRS interview, October 26, 2006.
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forces in February 2009, however, some policymakers in Armenia claimed the forces could be a
deterrent to possible Azerbaijani aggression.7 Some policymakers in Azerbaijan likewise viewed
the formation of the forces as a threat.8 The Secretary-General of the Collective Security Treaty
Organization (CSTO), Nikolai Bordyuzha, has proclaimed that the CSTO would never intervene
in the NK conflict, but also has stressed that Armenia and Russia have close bilateral military
ties.9
In September 2008, Turkey’s President Abdullah Gül visited Armenia, ostensibly to see a soccer
game, and this thaw contributed to the two countries reaching agreement in April 2009 on a “road
map” for normalizing ties, including the establishment of full diplomatic relations and the
opening of borders. After further negotiations, Turkish Foreign Minister Ahmet Davutoglu and
Armenian Foreign Minister Edvard Nalbandian initialed two protocols “On Establishing
Diplomatic Relations,” and “On Development of Bilateral Relations” on August 31, 2009, and
formally signed them on October 10, 2009. Azerbaijan strongly criticized Turkey for moving
toward normalizing relations with Armenia without formally linking such a move to a peace
settlement of the NK conflict. This criticism quickly elicited pledges by Turkey’s leaders that the
Turkish legislature would not approve the protocols until there was progress in settling the NK
conflict. On April 22, 2010, the ruling Armenian party coalition issued a statement that
“considering the Turkish side’s refusal to fulfill the requirement to ratify the accord without
preconditions in a reasonable time, making the continuation of the ratification process in the
national parliament pointless, we consider it necessary to suspend this process.”10
The United States reportedly actively supported Switzerland in mediating the talks that led to the
signing of the protocols. On April 14, 2010, President Aliyev warned that the Obama
Administration’s backing of the protocols threatened U.S. interests in Azerbaijan, stating that
“how can we defend and support the interests of someone who is acting against our interests?”11
The next day, Azerbaijani presidential administration official Ali Hasanov asserted that “we are
not happy with the activities the United States demonstrates within the Minsk Group towards the
settlement of the Armenian-Azerbaijani conflict over NK…. If the United States continues to
demonstrate a biased position on the NK issue, Azerbaijan may reconsider its strategic
partnership ties with the United States.”12 The U.S. State Department responded that the United
States remains evenhanded in its mediation efforts. A few days later, Azerbaijan cancelled a
military exercise scheduled with the United States for May 2010.
Azerbaijani armed forces consist of 66,940 army, air force, air defense, and navy troops. There
also are about 5,000 border guards and more than 10,000 Interior (police) Ministry troops.13 The
military budget was about $800 million in 2007 and $2 billion in 2008. The legislature approved
a $1.5 billion military budget for 2009 (about 10% of all budget expenditures), but President
7 CEDR, February 5, 2009, Doc. No. CEP-950302.
8 CEDR, February 8, 2009, Doc. No. CEP-950079. The head of Azerbaijan’s presidential foreign relations department,
Novruz Mammadov, however, stated that he did not view the creation of the forces as a threat, because Azerbaijan has
good relations with all the CSTO members except Armenia. CEDR, February 5, 2009, Doc. No. CEP-950290.
9 CEDR, March 20, 2009, Doc. No. CEP-950105; June 1, 2009, Doc. No. CEP-358003.
10 “Armenia Suspends Normalization of Ties with Turkey,” BBC News, April 22, 2010.
11 Open Source Center. “Azerbaijan Rebukes US Stance on Turkey-Armenia Relations,” OSC Feature, May 20, 2010,
Doc. No. FEA-5172.
12 CEDR, April 16, 2010, Doc. No. CEP-950076; April 15, 2010, Doc. No. CEP-950119.
13 International Institute of Strategic Studies. The Military Balance, February 3, 2010.
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Aliyev stated in January 2009 that military spending would be $2.3 billion. Under a 10-year lease
agreement, about 1,400-1,500 Russian troops are deployed at Gabala. Azerbaijan reportedly
received foreign-made weapons of uncertain origin and armed volunteers from various Islamic
nations to assist its early 1990s struggle to retain NK. In 1994, Azerbaijan joined NATO’s
Partnership for Peace (PFP) and began an Individual Partnership Action Plan (IPAP) in 2005, but
President Aliyev has not stated that the country seeks to join NATO. Some Azerbaijani troops
have participated in NATO peacekeeping in Kosovo since 1997 and operations in Afghanistan
since 2003. The bulk of Azerbaijani weapons reportedly come from Russia, Ukraine, and Belarus,
although some NATO-compatible communications and other equipment have been received.14
The NK Conflict
In 1988, NK petitioned to become part of Armenia, sparking ethnic conflict. In December 1991,
an NK referendum (boycotted by local Azerbaijanis) approved NK’s independence and a
Supreme Soviet was elected, which in January 1992 futilely appealed for world recognition. The
conflict over the status of NK resulted in about 30,000 casualties and over 1 million Azerbaijani
and Armenian refugees and displaced persons. The non-governmental International Crisis Group
(ICG) estimates that about 13%-14% of Azerbaijan’s territory, including NK, is controlled by NK
Armenian forces (the Central Intelligence Agency estimates about 16%).15 A ceasefire agreement
was signed in July 1994 and the sides pledged to work toward a peace settlement. The “Minsk
Group” of concerned member-states of the Organization for Security and Cooperation in Europe
(OSCE) facilitates peace talks. The United States, France, and Russia co-chair the Minsk Group.
On November 29, 2007, then-Undersecretary of State Nicholas Burns, Russian Foreign Minister
Sergey Lavrov, and French Foreign Minister Bernard Kouchner presented the Foreign Ministers
of Armenia and Azerbaijan with a draft text—Basic Principles for the Peaceful Settlement of the
Nagorno-Karabakh Conflict—for transmission to their presidents. These officials urged the two
sides to accept the Basic Principles (also termed the Madrid proposals, after the location where
the draft text was presented) that had resulted from three years of talks and to begin “a new phase
of talks” on a comprehensive peace settlement.16 The Basic Principles call for the phased return
of the territories surrounding NK to Azerbaijani control; an interim status for NK providing
guarantees for security and self-governance; a corridor linking Armenia to NK; future
determination of the final legal status of NK through a legally binding expression of will; the
right of all internally displaced persons and refugees to return to their former places of residence;
and international security guarantees that would include a peacekeeping operation.17
In the wake of the Russia-Georgia conflict in early August 2008, Armenian President Sarkisyan
asserted that “the tragic events in [Georgia’s breakaway South Ossetia region] confirm that every
14 Shahin Abbasov, “Azerbaijan Mum About Israeli Spy Plane, Satellite Projects,” Eurasia Insight, August 17, 2009.
15 ICG. Nagorno-Karabakh: Viewing the Conflict from the Ground, September 14, 2005. CIA. The World Factbook,
http://www.cia.gov. The casualty estimate is from the State Department, Background Note: Azerbaijan, May 2008.
16 U.S. Department of State. Office of the Spokesman. Media Note: Support for Basic Principles for Peaceful
Settlement of the Nagorno-Karabakh Conflict, November 29, 2007.
17 The White House. Joint Statement on the Nagorno-Karabakh Conflict by U.S. President Obama, Russian President
Medvedev, and French President Sarkozy at the L’Aquila Summit of the Eight, July 10, 2009.
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attempt in the South Caucasus to look for a military answer in the struggle for the right to self-
determination has far-reaching military and geopolitical consequences.”18
On October 9, 2009, Presidents Sargisyan and Aliyev held talks at the residence of the U.S.
ambassador in Chisinau, Moldova, on the sidelines of a summit of the Commonwealth of
Independent States. The Minsk Group co-chairs participated after one-on-one talks by the two
leaders. New U.S. co-chair Robert Bradtke reported that the two presidents discussed line-by-line
details of a possible settlement. The co-chairs presented “renovated” Madrid principles to
President Aliyev in Baku in December 2009 and to President Sarkisyan in Yerevan in January
2010. President Medvedev hosted Aliyev and Sargisyan in Sochi, Russia, in late January 2010,
and the two sides reportedly agreed on many parts of a preamble to an agreement. In mid-
February 2010, Azerbaijani Foreign Minister Mamedyarov announced that Baku accepted many
of the elements of the “renovated” Madrid principles presented in late 2009. The Minsk Group
co-chairs met with Armenian Foreign Minister Eduard Nalbandian in Brussels on May 12, 2010,
and plan to meet with Azerbaijani Foreign Minister Elmar Mamedyarov in early June.
Azerbaijan’s Deputy Foreign Minister Araz Azimov claimed in mid-May 2010 that the Minsk
Group talks had stagnated since the Sochi meeting.19
Political and Economic Developments
The Azerbaijani constitution, approved by a popular referendum in November 1995, strengthened
presidential power and established an 125-member legislature (Milli Mejlis) with a five-year term
for deputies. The president appoints and removes cabinet ministers (the Milli Mejlis consents to
his choice of prime minister), submits budgetary and other legislation that cannot be amended but
only approved or rejected within 56 days, and appoints local officials. The U.S. State Department
viewed an August 2002 constitutional referendum as flawed and as doing “very little to advance
democratization.”
In October 2003, Ilkham Aliyev handily won a presidential election, beating seven other
candidates with about 77% of the vote. Protests alleging a rigged vote resulted in violence, and
spurred reported government detentions of more than 700 opposition party “instigators.” Trials
reportedly resulted in several dozen prison sentences. In early 2005, the OSCE issued a report
that raised concerns about credible allegations of use in the trials of evidence derived through
torture. Aliyev in March 2005 pardoned 114 prisoners, including many termed political prisoners
by the OSCE.
Changes to the election law were approved by the legislature in June 2005, including some
making it easier for people to become candidates for a November 2005 legislative election.
Azerbaijan’s Central Electoral Commission (CEC) declared that the ruling Yeni Azerbaijan Party
won 54 seats and independents, 40 seats. Opposition party candidates were declared the winners
in a handful of constituencies. The U.S. Embassy in Azerbaijan issued a statement urging the
government to investigate and rectify some voting irregularities but also praised the election as
evidence of democratization progress. The CEC and courts eventually ruled that 625 (12.2%) of
precinct vote counts were suspect, and repeat races were held in May 2006 in ten constituencies.
The opposition Azadliq electoral bloc refused to field candidates in what it claimed were “rigged”
18 Open Source Center. Europe: Daily Report, August 27, 2008, Doc. No. EUP-085016.
19 Azeri Press Agency, May 14, 2010.
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elections. OSCE monitors judged the repeat race as an improvement over the November election
but stated that irregularities still occurred. The next legislative election is scheduled to be held on
November 7, 2010.
A presidential election was held on October 15, 2008. In early June 2008, the legislature approved
changes to the electoral code. Some of the changes had been recommended by the Venice
Commission, an advisory body of the Council of Europe. However, other recommendations of the
Venice Commission were not considered, including those on eliminating the dominance of
government representatives on election commissions.20 The opposition Azadliq (Freedom) party
bloc decided on July 20 that it would boycott the election on the grounds that the election laws
were not fair, their parties faced harassment, and media were constrained.21 Incumbent President
Aliyev won a resounding victory, gaining nearly 89% of the vote against six other candidates.
According to a report by election monitors from the OSCE, the Parliamentary Assembly of the
Council of Europe (PACE), and the European Parliament (EP), the voting process was peaceful,
well organized, and efficient, but there was a “lack of robust competition” and there appeared to
be “significant procedural shortcomings [in vote counting] in many cases, and manipulation in
some instances.”22
Proposed amendments to the constitution were overwhelmingly approved by citizens in a
referendum held on March 18, 2009. According to a small delegation from PACE, the voting
“was transparent, well organized, and held in a peaceful atmosphere.” They criticized the dearth
of discussion in the media of the merits of the constitutional amendments and voiced regret that
some changes to the amendments proposed by the Venice Commission were not made before they
were voted on. Some opposition parties had in particular objected to an amendment lifting term
limits on the presidency during a “state of war,” and had called for a boycott of the referendum.23
On December 23, 2009, municipal elections were held throughout the country. Opposition parties
and local election monitors reported interference in the candidate registration process. A Council
of Europe delegation alleged that there were shortcomings in the counting of voters in the polling
stations, the legibility of ballot papers, and the reliability of the vote count.
According to the U.S. State Department’s Country Reports on Human Rights Practices for 2009,
the human rights situation in Azerbaijan continued to be poor and worsened in some areas during
2009. The Human Rights Center of Azerbaijan, an NGO, reported that the number of persons
tortured by security forces increased from 81 in 2008 to 131 during 2009, of which at least four
subsequently died. The judiciary remained corrupt and inefficient. Neither the judiciary nor the
legislature functioned independently of the executive branch. There was no evidence of direct and
witting official complicity in trafficking, but corruption reportedly created opportunities for
evasion of the law. Restrictions on the media worsened. The international NGO Committee to
Protect Journalista reported that there were 51 verbal or physical assaults on journalists in 2009,
compared to 49 in 2008. Although some imprisoned journalists received amnesties, several
20 European Commission for Democracy Through Law (Venice Commission). Joint Interim Opinion on the Draft
Amendments to the Electoral Code of the Republic of Azerbaijan. 74th Plenary Session, March 14-15, 2008, Opinion
no. 390/2006, CDL-AD(2008)003, March 18, 2008.
21 Open Source Center. Central Eurasia: Daily Report (hereafter CEDR), April 24, 2008, Doc. No. CEP-950216.
22 OSCE/PACE/EP. Republic of Azerbaijan Presidential Election, 15 October 2008: Statement of Preliminary Findings
and Conclusions, October 16, 2008.
23 CEDR, January 23, 2009, Doc. No. CEP-950024 and Doc. No. CEP-950276; February 23, 2009, Doc. No. CEP-
950103; March 19, 2009, Doc. No. CEP-950277.
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remained incarcerated, and others were newly jailed for libel or other charges. All broadcast
media adhered to a pro-government stance. At the beginning of 2009, the government banned
Voice of America, Radio Free Europe/Radio Liberty, and the BBC from broadcasting on national
television or FM radio. There were no restrictions on systems to receive satellite broadcasts.
Despite a 2008 law, the government continued to require all rallies to be preapproved and held far
from the center of Baku. Changes to the law on NGOs in July 2009 included requirements that
NGOs provide membership lists to the government and that foreign-based NGOs sign agreements
with the government on allowable operations. Amendments in May 2009 to the law on religion
reportedly decreased religious freedom. By May 2010, only one-half of previously registered
religious groups had been re-registered, and several groups had been denied registration.
Religious Muslims faced discrimination, including the closing of several mosques. Members of
the opposition continued to experience more official harassment and arbitrary arrest than other
citizens, and these problems contributed to a continued decline of opposition party activities.
NGOs variously calculated that there were 23-45 political prisoners. Since 2006, the government
has prevented Popular Front Party chairman Ali Kerimli from travelling abroad. Akifa Aliyeva,
the head of the Helsinki Citizens' Assembly, a human rights NGO, fled the country after reporting
repeated harassment.24
The collapse of the Soviet Union and the NK conflict in the early 1990s contributed to the decline
of Azerbaijan’s GDP by over 60% by 1995. The economy began to turn around in 1996-1997.
GDP growth in 2006-2007 was estimated at more than 25% per year, which contributed to a rise
in consumer price inflation to double digits. Rising oil and gas exports (and rising world prices
for oil) fueled GDP growth, along with the expansion of the construction, banking, and real estate
sectors. The global economic downturn and the decline in oil prices contributed to a slowdown of
GDP growth to about 11% in 2008 and 9.3% in 2009. The slowdown reduced inflation from
20.8% in 2008 to 1.5% in 2009.
The Economist Intelligence Unit (EIU) estimates that GDP growth will be 8.9% in 2010 and that
inflation will be 6%. Budget revenues fell off in 2009, including as a result of tax cuts introduced
by President Aliyev to stimulate the economy. Some of the budget shortfall was alleviated by
withdrawals from the State Oil Fund, which permitted stepped-up government spending for social
programs and continued infrastructure projects.25 According to the International Monetary Fund,
Azerbaijan needs to facilitate the growth of other sectors of the economy within the next few
years if it is to sustain economic development, since oil and gas revenues may begin to decline.26
Up to one-fourth of the population lives and works abroad because of high levels of
unemployment in Azerbaijan.
Energy
The U.S. Energy Department in December 2007 reported estimates of 7-13 billion barrels of
proven oil reserves, and estimates of 30-48 trillion cubic feet of proven natural gas reserves in
Azerbaijan. U.S. companies are shareholders in three international production-sharing
consortiums that have been formed to exploit Azerbaijan’s Caspian Sea oil and gas fields,
24 U.S. Department of State. Country Reports on Human Rights Practices for 2009, March 11, 2010.
25 Economist Intelligence Unit. Country Report: Azerbaijan, May 2010.
26 International Monetary Fund. World Economic and Financial Surveys: Regional Economic Outlook, Middle East
and Central Asia, May 2010.
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including the Azerbaijan International Operating Company or AIOC, led by British Petroleum
(developing the Azeri, Chirag, and Gunashli fields). The United States backed the construction of
a large (1 million barrels per day capacity) oil pipeline from Azerbaijan through Georgia to
Turkey’s Ceyhan seaport on the Mediterranean (the Baku-Tbilisi-Ceyhan or BTC pipeline) as part
of Azerbaijan’s economic development, and because this route neither allows Russia to gain
undue control over Azerbaijan’s resources nor forces Azerbaijan to seek export routes through
Iran. Construction began in 2003 and the first tanker was filled in Ceyhan in mid-2006. A gas
pipeline from Azerbaijan’s offshore Shah Deniz field to Turkey was completed in March 2007. In
mid-November 2007, Greece and Turkey inaugurated a gas pipeline connecting the two countries
that permits some Azerbaijani gas to flow to an EU member-state. An extension is planned to be
built to Italy to complete this Turkey-Greece-Italy (TGI) pipeline project.
At a meeting in early May 2009 in Prague, the EU, Azerbaijan, Georgia, Turkey, and Egypt
signed a declaration on a “Southern [energy] Corridor” to bolster east-west energy transport. The
declaration called for cooperation among supplier, transit, and consumer countries in building the
proposed Nabucco gas pipeline from Turkey to Austria, finishing the Italian section of the TGI
pipeline, and other projects. Richard Morningstar, the U.S. Special Envoy for Eurasian Energy,
stated that the Obama Administration supported the “Southern Corridor” program and considered
“Eurasian energy issues to be of the highest importance.”27
Azerbaijan’s State Oil Company (SOCAR) and Russia’s Gazprom gas firm agreed in July 2009
that SOCAR would send 1.7 billion cubic feet of gas per year to Russia beginning in 2010. The
gas would be transported by a 140-mile gas pipeline from Baku to Russia’s Dagestan Republic
that was used until 2007 to supply Azerbaijan with up to 282.5 billion cubic feet of gas per year.
SOCAR indicated that the volume of gas transported to Russia could increase in future years.
Azerbaijan also supplies some gas to northern Iran. Azerbaijan is not projected to have enough
gas to fill the Nabucco pipeline, so other gas suppliers such as Turkmenistan are needed.
Author Contact Information
Jim Nichol
Specialist in Russian and Eurasian Affairs
jnichol@crs.loc.gov, 7-2289
27 U.S. Department of State. Press Release: Remarks at the EU Summit “Southern Corridor-New Silk Road,” May 8,
2009.
Congressional Research Service
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