Succession and the October Presidential Elections in Azerbaijan

On September 12, 2003, the Carnegie Endowment for International Peace hosted a meeting on "Succession and the October Presidential Elections in Azerbaijan" with Jayhun Mollazade, President of the U.S. - Azerbaijani Council, Carnegie Visiting Scholar Edward Chow and Senior Associate Martha Brill Olcott, who chaired the discussion.

In her introduction, Dr. Olcott noted that effectively power had already been transferred in Azerbaijan. She reflected on the influence the upcoming elections in Azerbaijan may have on development in Central Asia and elsewhere in the Caucasus. Dr. Olcott then posed a question for the audience of how the transfer of power from father to son would affect the challenges for consolidation of power.

Political Environment

Mollazade, a former Azerbaijani diplomat living in the United States since 1993, examined the dynamism of the political situation, as well as prospects for future economic developments in the context of Azerbaijan's evolving geopolitical environment. Mollazade, who has recently returned from a month in Azerbaijan, is a specialist in oil and business and the brother of a prominent opposition leader.

The political dynamism of Azerbaijan started to emerge in July of this year when President Haydar Aliyev, age 80, was hospitalized. Aliyev has been the head of state since June of 1993. He has been receiving medical treatment for heart and kidney trouble in Cleveland hospital in the U. S. since August 6. Mollazade noted that both local and foreign observers believed that, considering the president's health condition, it would be difficult for Haydar Aliyev to campaign in the October 15 presidential elections. However, President's brother, Djalal Aliyev, told journalists in Baku this week that the president would return to Azerbaijan for the October elections. According to a spokeswoman for the Cleveland Clinic, President Aliyev is currently undergoing rehabilitation and physical therapy in preparation for his return home.

According to Mollazade, many opposition newspapers in the last few years wrote that the departure of President Aliyev from power would result in a complete collapse of the government and massive defections from the ruling party to the opposition. However, contrary to such expectations, the elite and the government demonstrated complete unity, consolidation of power and readiness to continue supporting the Aliyev family. In August, the President's son, Ilham Aliyev, was elected Prime Minister by parliament and would become interim president if Aliyev senior were to die. Ilham is one of the 12 registered candidates running in October's poll.

Mollazade expects the government, business and corporate groups, along with those who prospered during the years of Haydar Aliyev's presidency, to support Aliyev junior. The speaker named four grassroots opposition parties that have plans to challenge the Aliyev family: Azerbaijan Popular Front or APF, Democratic Party of Azerbaijan or DPA, Musavat, and the Party for National Independence of Azerbaijan or PNIA. Musavat's leader Isa Gambar, who was visiting Washington D.C. last week, created Our Azerbaijan, a coalition of 25 parties. Gambar is a single opposition candidate for this block. According to Mollazade, APF and PNIA also considered creating a coalition but there is a big chance that Ilham Aliyev will win on October 15.

Economy

Next, Mollazade addressed the economic situation in Azerbaijan. From his recent trip to Baku he noticed positive changes in the country, such as a real estate boom and new energy projects. For example, he said that between 2003-06 British Petroleum planned to invest $12-15 billion to develop oil fields and build two pipelines in the region. President Aliyev started lucrative contracts to exploit the oil revenues back in 1994, and Azerbaijan State Oil Fund was created. Oil is Azerbaijan's number one export. It is expected that in 2005 Azerbaijan will make one billion dollars from the oil projects. That amount would almost double the current state budget. In this case, Azerbaijan would become the first country in the Caucasus to double its budget by 2005, and Mollazade said that under this scenario by 2008-10 Azerbaijan would export about 1 million barrels of oil per day.

The speaker stressed that it was important for Azerbaijan to liberalize its economy and provide transparency in order to use the oil revenue for the best of the nation. Mollazade favored diversification of economy, investments in education, health care, agriculture and manufacturing industry in order to avoid the "Dutch disease."

"Azerbaijan has a light at the end of the tunnel in terms of its economic future. Azerbaijani people are very entrepreneurial and can build a new economy that is not only based on oil," Mollazade said. Developing the non-oil sector of the economy will be one of the challenges for the next Azerbaijani president. Another challenge for the elected head of the state will be finding a peaceful solution to the on-going Nagorno-Karabakh conflict.

Geopolitics

A continuing conflict with Armenia over the Nagorno-Karabakh region has been an obstacle to economic progress, and Mollazade sees that the different positions that the U. S. and Russia have on the future of the region as one of the main reasons for the lack of a peace settlement. The U.S. sees economic regional cooperation, independence for the South Caucasus republics from their neighbors and their integration in the Euro-Atlantic community as a solution to this conflict. Russia, on the other hand, is concerned with American influence in the region, and according to Mollazade there is still "paranoia in Moscow about American hegemony in that part of the world." Russia has significant influence over Yerevan, and Baku has not been able to accept Moscow-Yerevan proposals on Nagorno-Karabakh.

Armenia does not recognize Nagorno-Karabakh as part of Azerbaijan and supports ethnic Armenian secessionists in the regions, occupying about one sixth of Azerbaijan. Mollazade believes that Azerbaijan has a legitimate right to consider the Nagorno-Karabakh region as part of the country. He said Baku already made compromises to give security guaranties to minorities. Mollazade sees peace negotiations, regional cooperation, economic ties and pragmatism as the solution to the conflict. After the presidential elections, Nagorno-Karabakh will be one of the major issues for stability in Azerbaijan and the inability to resolve this conflict will harm the legitimacy of the next president.

Mollazade concluded his formal remarks by expressing his hope for a democratic future in Azerbaijan that would bring market reform and economic prosperity to the country. Much will depend on Western assistance and the political will of a new president to build democracy.

Oil Industry

Ed Chow addressed the implications of possible political unrest in Azerbaijan on the global oil industry. He explained that the oil industry leaders had long expected Ilham Aliyev to succeed his father. Usually, oil companies are happy to deal with "the devil they know rather than with the devil they do not know," said Chow, and Ilham has been involved in the State Oil Co. of Azerbaijan Republic (Socar) for a long time. Aliyev junior is believed to have behind-the-scene influence on Socar oil negotiations. Western oil companies are not concerned about the immediate political succession and are not likely to support the change of status quo. Rather they would be concerned with the unknown risks and instability that might rise if Ilham Aliyev does not get the office.

According to Chow, most Azerbaijan oil fields were defined during the Soviet era but the Soviets did not have the technology to develop them because they were primarily offshore. Over the last few years, Azerbaijan has been an exploration disappointment for Western oil companies because almost all exploration prospects turned out to be dry. The oil potential for Azerbaijan is only about 1 million barrels per day compared to 3 to 5 million barrels per day in Kazakstan. Chow concluded that the breakup of Socar would help the oil sector, economic growth and democratic reform of Azerbaijan.

Succession

Martha Olcott argued that Azerbaijan should be considered a special case with regard to a transfer of authority. Ilham Aliyev, if elected president, will face the challenge of consolidating power. Returning to the question she posed earlier, Dr. Olcott argued that this first transfer of power from father to son in the region would not trigger similar transfers in other countries, and that for family members to come to power in other states would require complex negotiations among key members of the ruling elite. Furthermore, she argued that the transfer of power from father to son would not lead to monarchy in Azerbaijan, because it would only give limited legitimacy to Ilham.

"Ilham starts with the minimum amount of legitimacy to secure office," Dr. Olcott added. She said that "the U.S. should be aggressive in putting pressure on Ilham Aliyev" to proceed with economic reform, to create political institutions that would guarantee a democratic transfer of power after his term in office, and to respect civil rights of the political opposition with progressive leaders.

Dr. Olcott concluded that even with Ilham Aliyev as president Azerbaijan has a chance for long-term constitutional development.

Summary prepared by Kate Vlachtchenko, Junior Fellow with the Russian and Eurasian Program at the Carnegie Endowment for International Peace