Geography and geology have brought riches to Azerbaijan. With a major gas pipeline project looming on the horizon, Peter Savodnik reports from Sangachal, where the geopolitics of global energy are anything but an abstraction. The road to Sangachal is a Potemkin motorway: four to six lanes, neatly demarcated and newly paved, with panoramic views of the Caspian Sea, the hills that rise above Baku and the Bibi Heybat Mosque, which was built in 1257, destroyed by Stalin in 1934 and rebuilt in 1998. It creates the impression that this is what all roads in Azerbaijan are like, and that is probably what the presidents, prime ministers and oil executives think as they look out the window of the black SUVs that shuttle them from Heydar Aliyev Airport to recently-constructed luxury hotels in the capital and then onward, 20 minutes farther south, to the Sangachal Terminal. The road has its imperfections: traffic jams, bad drivers, the occasional eyesore (oil derricks, Soviet-era apartment blocks). But that's not what would strike the first-time visitor sitting in the back seat of a German or Japanese or possibly American saloon car on this sleek and ribbon-like motorway, which was obviously built by a modern country that other modern countries should do business with. What is most impressive about the road to Sangachal is the money. Not just the billions for the road. The seaside dachas, the convertible Audis, the storefronts and billboards advertising every species of material excess - it all screams big, gleaming, new money. This has a soothing effect on westerners. Just off the motorway, a kilometre from the Sangachal Terminal, is the Terminal Restoran (Azerbaijani for "restaurant"). Next to an oversized car park, fit for a mall rather than an eatery, the restaurant comprises two buildings. One is red and grey with mirror panels and a red sign that says Terminal Restoran; the other, to the immediate left, looks like a very large cabana and features 15-foot ceilings, wooden tables painted rust-brown, flat-screen television sets, a compact bar, and Russian and Azerbaijani pop music that the waiters pipe through amphitheatre-style speakers. On the other side of the motorway is the Caspian, turquoise and riddled with oil platforms. The chef at the Terminal Restoran, 35-year-old Nasib Duvazov, is a former artilleryman who served in the early 1990s in the war against Armenia and is known for his lamb and chicken saj with eggplant and bell peppers. Duvazov has a succinct quality and a tired look, and he seems to smile always, just a little. He says that he will cook for anyone except Armenians ("My brother was killed in the war") and that he has been working near oil and gas pipelines and cooking (sometimes simultaneously) his entire adult life. ("I went to work at the terminal. I cooked in the cafeteria. I pumped gas at a gas station in Baku. Then I came here. That was three years ago.") "The terminal," Sangachal, is the restaurant's namesake and raison d'être. A sprawling mesh of storage tanks, pipelines and power generators, it sits about a quarter-mile back from the motorway and is protected by the presidential security guard and numerous video cameras. It is circumscribed by the sea, low-lying mountains and a field of barracks built for the small army of mechanics, technicians and engineers that operates it around the clock. Next to the little house where the security guards sit is a billboard: "We Build the Future". The terminal, however, is not where things are built so much as a hub: Underwater pipelines from energy fields deep in the Caspian converge at Sangachal, which then funnels the oil and gas north and west, across mountain ranges, rivers, cities, the occasional war zone and international borders. The terminal is the starting point of the Baku-Tbilisi-Ceyhan (BTC) pipeline, an 1800-kilometre conduit, finished in 2005, that brings the abundant crude of the Caspian Sea to the West while circumventing Iran and Russia. Now plans are afoot to build yet another pipeline, for natural gas, to link Sangachal to the controversial Nabucco pipeline. Nabucco - grandiosely named for a Verdi opera about Jewish slaves seeking freedom from bondage in ancient Babylon - will be funded by a European consortium eager to procure non-Russian sources of gas, and it has already emerged as a major flash point between West and East, a sort of hypothetical, post-cold war Checkpoint Charlie separating energy-hungry Europeans from energy-rich Russians. In the middle of this divide is Azerbaijan. No country has been so transformed by the past decade's oil boom, and BTC has been central to that transformation. The pipeline, which transports about 1 million barrels of oil daily, has funded numerous highways, airports, train stations and other public-works projects. Nabucco, and the connecting pipeline beginning at Sangachal, would do for gas what BTC did for oil - provide energy to hundreds of millions of well-off Europeans by bypassing Russia - and do for Azerbaijan more of what BTC has already done, filling the treasury to the brim. In the world of power politics and international energy markets, in Moscow, Brussels, Washington, Riyadh and Caracas, BTC is an abstraction, an invisible artery through which oil supposedly flows. It is not something real and felt. At the Restoran, the opposite is true: BTC and Sangachal, far from being abstractions, are concrete, visible, with barbed-wire fences and beige and yellow buildings, and customers who come everyday for lunch or tea. The construction of the pipeline - and the waves of state-funded development it helped enable - spawned further ripples of private growth that would have been unimaginable only 10 years ago: houses, luxury condominiums, car dealerships, water parks and eateries, like the Restoran, which opened in 2004, a year before the oil started to flow. Razzag Ayvazov, 38, the Terminal Restoran's owner, recalled when BTC came on line. "This was very good," Ayvazov said. "We had all these people, British, Norwegians, Russians, Iranians, Americans, coming here, and they have their hard hats and a lot of money. They love the saj and shashlik. They sit together, at the same tables. The same tables! Everywhere else, these people hate each other. But at the Terminal Restoran, they just eat and say, 'Can you pass the eggplant?'" Ayvazov said he prays the energy barons build Nabucco: lunch business, he said, will definitely pick up.
Azerbaijan has been producing oil longer than any country in the world, and it has one of the most storied histories of any of the contemporary petrostates. Exploration dates back several centuries. But, as the journalist Steve LeVine notes in his 2007 book The Oil and the Glory, a history of the Caspian oil industry, the first major oil boom didn't take place until the 1870s; at that time, the territory of Azerbaijan was controlled by the Russian Empire. The remnants of ageing oil derricks and pipelines in and around Baku, and the lavishly appointed mansions in the centre of the city built for foreign oil barons like the Nobel brothers from Sweden and the Rothschilds from France attest to an earlier glitziness, when Azerbaijan provided half the world's oil. By the early twentieth century, Azerbaijan was producing the equivalent of 212,000 barrels of oil daily. During communist times, the Soviet Socialist Republic's oil and gas production was expanded, with Soviet geologists and engineers developing Azerbaijan's first major offshore fields. After the Soviet Union came to an end, production plummeted. But in the past 15 years, with the influx of foreign energy companies, extensive development of the Azeri-Chirag-Gunashli oilfield, the Shah Deniz gasfield, the construction of pipelines, and the dramatic rise in the price of oil - to a high of $147 per barrel in July 2008 - Azerbaijan has turned itself into a full-fledged petrostate that rises (and falls) according to the price of crude. Just as important as Azerbaijan's geology is its geography. In fact, whatever natural resources reside beneath Azerbaijan and its territorial waters are probably going to be less important in the years ahead than where Azerbaijan sits on the map. (In 2009, Azerbaijan is producing roughly 800,000 barrels of oil everyday, a fraction of Russia's 9.7 million barrels.) Consider that there is a massive reserve of oil and gas waiting to be tapped in Kazakhstan and Turkmenistan; that the Europeans want it; and that this oil and gas can be piped through three countries to get to Europe: Russia, Iran and Azerbaijan. It does not take long to realise why Azerbaijan is so important. Russia, with its spotty track record (recall Moscow's decision to cut the gas to Ukraine in January 2005, disrupting energy flows to Europe), is a less than optimal energy supplier; Iran is, well, Iran. Azerbaijan, which has neither imperial nor theocratic leanings - and wants simply to make as much money as it can - is by far the most favoured partner. This fortuitous combination of resource deposits, geographic configuration and business-friendly leadership has made Azerbaijan into perhaps the greatest prize in the struggle for control of global energy flows. Not surprisingly, it has also greatly empowered the ruling regime, led by President Heydar Aliyev from 1993 until 2003 and, since then, by his son, President Ilham Aliyev. Heydar Aliyev was a one-time head of the KGB in Azerbaijan who made a fortune from illegal caviar, cotton and customs proceeds and eventually ascended to First Deputy Prime Minister of the Soviet Union under Yuri Andropov, in the early 1980s. Today, billboards of the elder Aliyev, usually depicting him in a tuxedo or a suit with a checker tie, dot the countryside, creating the impression that the former president, who has been dead for six years, is very much alive. Boulevards, airports, squares, schools and trains stations are named after him. He is consistently portrayed as kind, stately, stronger and wiser than Ilham Aliyev, and still very much in control - a benevolent demigod in the mould of Lenin or Stalin keeping watch over the kingdom that his son inherited. Washington and Moscow vie for influence in Baku, and almost everyone does business with the regime - Western governments, energy conglomerates, the Iranians, the Israelis. Only the Armenians have no relationship with Azerbaijan. Azerbaijan's importance to Western governments extends far beyond oil. Indeed, there are few countries today that are directly or indirectly linked to so many key US and European interests. A western official in Baku said he'd heard from a senior US State Department official that at least four of Secretary of State Hillary Clinton's "top 10 concerns" had some connection to Azerbaijan: Iranian nuclear ambitions, a resurgent Russia, energy security and overflight privileges for the war in Afghanistan. (Azerbaijan sent a small contingent of troops to Iraq, too, making it a member of the "coalition of the willing.") Less urgent US interests are also at stake, from drug trafficking (via Afghanistan and Iran) to arms proliferation to America's image in the Muslim world. In short, this seemingly out of the way country with a mere 8.8 million inhabitants and a per capita yearly income of less than $9,000 plays a critical role for American policy in Central Asia and the Middle East. This may explain why Washington has refrained from publicly chiding the Aliyev regime for its crackdown on dissidents and the free press, even as the democratic opposition has splintered - until recently, there were five opposition parties; now there are more than fifty - and the regime has used its energy revenues to raise living standards across the country and placate the masses. Ilgar Mammadov, an Azerbaijani democratic activist and the director of the Council of Europe's political studies programme in Baku, said US officials were too quick to back Ilham Aliyev, a former history professor who studied at the prestigious Moscow State Institute of International Relations, in 2003. "I had visits to Washington in 2000, 2001, 2002, and I visited the State Department, Pentagon, wherever, and they were optimistic about Ilham, and when I visited Washington again in May, they asked for my advice, and I said, 'Don't buy this English-speaking reformer image.' Now they've given up." The Russians also consider Azerbaijan important to their long-term interests. Some of these are clear strategic imperatives, including controlling the flow of oil and gas, and combating Islamic extremists in the North Caucasus, for instance. But for Moscow, there also is the ever-present psychological need to reassert authority over the territories that many Russians still regard as part of their country. Like Belarus, Ukraine, Georgia, Armenia and the Baltic states, Azerbaijan doesn't quite seem like a real country to Russians. But Russia must balance this psychological yearning to be the country it once was against its desire to control the flow of oil and gas in the post-Soviet space. These two interests may seem causally related - by obtaining control over the flow of oil and gas out of the former Soviet Union, Russia would appear to be seeking to reacquire its control over the former Soviet republics - but they are not. It would be more correct to say that the more Azerbaijan feels the brunt of Russia's imperialistic stirrings, the likelier it is to limit Russian access to its natural resources.
When Russia attacked Georgia in August 2008, it was ostensibly to defend the quasi-independent republic of South Ossetia from Georgian rockets. But the real reason, many energy analysts believe, was to dissuade oil majors like BP (formerly British Petroleum), Total, Statoil and ExxonMobil from backing Nabucco - and to thereby protect Russian hegemony in the Caucasus. Nabucco, after all, would require a connecting pipeline from Sangachal into Georgia and from there to Turkey, and the Russians, some suggest, were jacking up the risk factor of pouring billions into a pipeline that would intentionally sidestep Russia. They seemed to be saying: Your pipeline might survive another land and air assault, but then again, it might not. Accidents happen. But the Russian invasion of Georgia appears not to have stymied construction of Nabucco. In January of this year, President Aliyev said Azerbaijan would double its output of natural gas by further developing the Shah Deniz field, with an eye toward providing Nabucco with the gas needed to make it financially viable. Many Russian officials have noted, correctly, that pipelines are usually built after oil and gas reserves are discovered. In the case of Nabucco, US and European officials have decided to build the pipeline first and find the gas for it later - a reminder that its purpose is political as much as economic. In July, the prime ministers of Turkey, Bulgaria, Romania, Hungary and Austria, where Nabucco would end, signed an agreement signalling support for the pipeline. Construction is expected to begin next year. If anything, the war has alienated both Azerbaijan and Armenia. Steven Pifer, a former US ambassador to Ukraine who is a fellow at the Brookings Institute, noted that neither country had followed Moscow in recognising the independence of South Ossetia or the other breakaway province in Georgia, Abkhazia. Now, said Fariz Ismailzade, a lecturer at the Azerbaijan Diplomatic Academy, the official school of the Ministry of Foreign Affairs, he's detects a slight shift in Russian attitudes toward Azerbaijan. Moscow still has hopes that it might convince Azerbaijan not to pump gas through, rather than around, Russia. "They want to keep Azerbaijan," Ismailzade said. "They have to show a little compromise."
Of course, this is exactly what the regime in Baku wants. Unlike Georgia, which has allied itself squarely with the United States, and Armenia, which has been reduced to Russian foster care, Azerbaijan, empowered by its natural resources, has been free to chart an independent course that is focused, first and foremost, on Azerbaijan. This means Baku is neither for nor against Nabucco: it just wants to extract as much oil and gas as possible and to sell that oil and gas to the highest bidder. How it gets there means little, if anything, to President Aliyev. Azerbaijani officials are reluctant to speak openly about their dealings with Moscow or Washington - a spokeswoman at the Ministry of Economic Development spokeswoman curtly informed me that not a single ministry official, including official spokesmen, had time to discuss Azerbaijan's energy policy - but that does not prevent oil executives, whose interests are intertwined with those of Aliyev, from talking. "Nabucco is one of the options," Seymour Khalilov, a senior spokesman for BP's Baku operations, said flatly. "Our business is really the development" of oil and gasfields. "BP's incentive is economic. We cannot have a political preference." In other words, BP, like the Aliyev regime, cares very little about how it transports its energy resources and a great deal about making as much money as possible from selling those resources, whatever route that entails. Still, BP is not the state, and it cannot afford to ignore the powers that be. In fact, the company spends a good bit of money installing water-purification systems, paving roads and building medical clinics, among other projects, in areas that are bisected by its pipelines. "The point is to give themselves an insurance policy, to make sure the regime knows they're doing things for the country, in the event SOCAR [the state oil and gas company] or one of their rivals tries to cut into their business," the western official in Baku said. But it's sometimes difficult to disentangle the two. In just one sign of how close the oil major is with the state, BP maintains its own, spruced-up wagon on the train that connects Baku and Ganja, the country's second largest city, six hours to the west. This arrangement serves both camps: Besides shuttling its own employees back and forth in relative comfort, BP uses the train to show off its "social development projects," as one BP community-outreach official put it, to journalists, who then report on all the good things that BP is doing and that are happening in Azerbaijan. In one stop along the BP-Aliyev dog-and-pony show - Garabork, in the Ujar region, four-and-a-half hours east of Baku - I was introduced to Ali Agayev, 58, a subsistence farmer who also runs a shop that sells spare parts. Garabork is important because it sits six feet above the country's three most important pipelines, including BTC, and the company had awarded the village of 800 families a water-purification facility and a ten-foot-wide lane that wove, ribbon-like, through the countryside. When I asked Agayev if he liked living on top of the pipelines, which often attract scavengers trying to steal oil, he replied instantly: "I feel a great difference in the social development of Garabork." And then we were off to village number two. If BP's interests are aligned with those of the regime, those of mom and pop operations like the Terminal Restoran are not. Small businesses, which lack the money or clout to buy ministries or presidents, depend on the rule of law. But there is no rule of law in Azerbaijan, and the political space allotted to independent parties, media or religious organisations, is small and shrinking; the odds that any liberal party will win even a single seat in next year's parliamentary elections are slim. Ayvazov, the Restoran's owner, said his wife worried when he opened the restaurant whether they would have enough money to raise a family. But he knew better; there was an oil boom going on, and building a restaurant between the biggest oil and gas terminal on the Caspian and a clutch of brand new subdivisions was an obviously good idea. Now they have three children: two boys and a girl. The youngest was three months, and Ayvazov sounded concerned. "My wife doesn't work," he said. "She's with the children. We live in the city. It was better three years ago, two years ago." Ayvazov spoke in a soft voice. He had very short hair, almost military-style, and he wore a short-sleeve Polo shirt, light blue, and he nodded at a table of old men smoking cigarettes. The old men had just ordered tea, which seemed to please Ayvazov. Even though it was the weekend, he said, the restaurant shouldn't be this quiet. He wasn't scared about the future, but he wasn't confident either. "We're used to all the families who travel from Georgia down here before they head into Russia," he said. (The Georgian-Russian border is closed, so travellers en route from Tbilisi, the Georgian capital, to Makhachkala, in Russia, have to veer south through Azerbaijan.) "But today there are no Georgians or Turks or Russians." (Haiyam Mamedov, a bartender, said, after his boss had left, that the absent Russians were a particularly sensitive issue. "The Russians are, you know, f***ing crazy and spend money and wear crazy sunglasses, and when they're not here it's like we're dead.") Ayvazov, glancing at the empty tables, stood up to ask the old men if they'd like anything to eat. Then he yelled at one of the waiters to change the television channel so his customers could watch the football game. Fuad Aliyev, a former analyst at the Center of Economic Reforms, which is housed in the Ministry of Economic Development, suggested that the regime did not intend to make small businessmen anxious; rather, he said, it was a byproduct of a system that had failed to make room for a more dynamic political and economic order. "The government strives not to lose control over any sphere of political, economic, social or public life," Aliyev, who is unrelated to the president, said in an e-mail. "Indeed, it looks like the government wants to get rid of any foreign influence, too. There is a great deal of oil money flowing into the government's coffers right now, and the government feels strong." Mammadov, the democratic activist, said the state routinely harasses small and medium-size businesses tied to dissident figures. He noted that several firms owned by political allies of Huseyn Abdullayev, a member of parliament who had a falling out with the president in 2007, were shut down for six months for a "government check up".
Many political scientists believe that oil wealth stymies liberal reform and limits further economic development. The logic is simple: autocratic, oil-rich states can pay off their citizens with substantially improved living standards without imposing taxes, deflating any enthusiasm for reform. The result is a population that is richer and more complacent. This complacency enables the state to shield itself from external attack by squashing independent media and democratic parties, politicising the judiciary, and co-opting the business class. The business class, the so-called private sector, inhabits narrow parameters: businesses retain some semblance of freedom from outside interference (from the mafia or any number of corrupt government officials) so long as they remain very small. Once revenues rise to a certain level, they necessarily attract unwanted attention. This ensures not only that the mafia and corrupt government officials get their share of the proverbial pie. It also guarantees that small businesses stay small, fearful, always at the mercy of larger forces and never powerful enough to muster any political strength. All the Terminal Restorans combined in Azerbaijan will never have anywhere close to the political influence enjoyed by BP.
The only way for an oil-rich state to transcend the "resource curse," the thinking goes, is to become less oil-rich, say, by dint of plummeting energy prices. (This is what happened, more or less, in Nigeria in the late 1990s.) Less oil revenue means the state, unable to rely on the energy sector to pay for it, must levy taxes. "When people are taxed, they demand some accountability from their governments," said Michael Ross, a political scientist at UCLA who has studied the relation between oil and democracy. Otherwise, Ross said, change is very unlikely. "You have to go back to the case of Venezuela in 1958 to find a country that had a lot of oil wells that transitioned to democracy." But Stephen Haber, a political scientist at Stanford, argues that there are, in fact, oil-rich countries that are also democratic: the United States, Canada, Great Britain and Norway. And he argued that there are developing countries that have evolved in a democratic direction during oil booms: Mexico and Ecuador. "The claim that oil undermines democratisation contains an implicit counterfactual," Haber said, since it presumes that "in the absence of oil, countries like Nigeria, Saudi Arabia and Azerbaijan would have become democratic. Sustaining that argument requires that a researcher demonstrate that countries that resembled 'cursed' countries before the cursed country found oil subsequently democratised. Now think about a case like Saudi Arabia for a minute. What would Saudi Arabia without oil look like? I would say the best fit is Yemen. Yemen is poor, backward and not democratic." This is good news and bad news for Azerbaijanis who would prefer to govern themselves. It suggests that the country may not be locked in an oil-fuelled vice. But it also suggests that other forces - cultural, political, historical - may, in fact, be responsible for their imprisonment. "One can think of a whole host of reasons why Azerbaijan is a corrupt autocracy," Haber said. "For starters, it was born out of the Soviet Union, which was itself a corrupt autocracy - and was a corrupt autocracy, incidentally, long before oil."
Ayvazov was circling cities on a large map of Azerbaijan that blanketed one of the wooden tables. The map was held down by an empty bottle of mineral water, two ashtrays and a large platter half-filled with grilled chicken, eggplant and tomatoes. The waiters played pop music from Tbilisi, and a little boy, Ayvazov's son, crawled around the bar while the bartender poured Russian vodka into a decanter. "Here," he said, sketching his plans for expansion on the table. "We will go here, and here and here and here." Masali and Lankoran, in the south, Ismayili in the north, the lovely, little towns outside Quba, the old settlements that had been enveloped by forest, near the Caspian - all of them were fertile territory for future Terminal Restorans. "But we won't call them Terminal Restoran," Ayvazov said, "since there's no terminal in those places." The football game was on, and the old men had finally ordered lunch. Ayvazov was cautiously optimistic that good things awaited him. The price of oil took a big hit last year, he said, but it's been rising this year, and now it looks like they may finally build Nabucco. Also, he said, construction along the motorway north of the restaurant and Sangachal had picked up: Condominiums with wrap-around balconies and wrought-iron gates were ubiquitous up and down the coast just south of Baku. And there were mansions - huge dachas with black-bottom pools and 180-degree views of the Caspian and the city and the red-beige swatch of desert, villages and oil platforms below - going up in the hills to the west. Ayvazov was sure this was a good sign. But most of all he didn't know what to think. "Everything is in flux," he said. "It's very hard to say what will happen. Everyday, everything changes. Of course, we're always, always thinking about the price of oil, gas. More business will come if there's more oil, and if oil's more expensive." But this is something over which he has no control. In fact, this is something over which Ilham Aliyev has no control either. Like other rich and inward-looking petrostates, Azerbaijan is at the mercy of innumerable external forces: global markets, trade flows, burgeoning technologies and alternative energy sources. Everyone, in the end, is at the mercy of someone or somewhere else. "In ten years," Ayvazov said, "everything will be different. Baku will be completely different. We won't recognise it. In Soviet times, it was different, too. I was exactly like my neighbour, and my neighbour was exactly like his neighbour. Now there's money, and when there's money, relations between people change." Unexpectedly, he mentioned that he liked detective novels, which he used to read when he was based with the Soviet Army in Dresden, in East Germany. "It is like a mystery, this country," he said. "We do not know what will happen to us. We do not know what is happening right now."
Peter Savodnik, a regular contributor to The Review, has written for GQ, Harper's Magazine, The New York Review of Books and Time.