Azerbaijan's Prospects in Nagorno-Karabakh with the End of Oil Boom

In: Iran and the Caucasus

Abstract

Modern Azerbaijan is a typical Middle-Eastern petrostate ruled by a classical Middle-Eastern despotia, where political (and economic) power is concentrated and inherited within the ruling Family. Since the death of Heydar Aliev in 2003, tensions between Armenia and Azerbaijan took a turn for the worse when his son, the new Azeri president Ilham Aliev, threatened to resort to force to take Nagorno-Karabakh back. Azerbaijan's recent military compact with Turkey, signed on 17 August 2010, also suggests that Baku is preparing for war. These preparations escalated in 2008 with Kosovo's declaration of independence from Serbia, recognised by the West, and Abkhazia's from Georgia, recognised by Russia, which led to fears in Baku that an unwanted precedent has been set. Azerbaijan completely depends on oil revenue in its standoff against Armenia. However, the second Baku oil boom of 2005-2013 is doomed to end in a few years without any significant economic achievement, as all the petrodollar revenue is being squandered in a construction frenzy. In these circumstances, due to its impending economic and strategic insignificance to the West after the peak of oil production in 2010, Azerbaijan needs to become more realistic in its claim to Nagorno-Karabakh as its ability to persuade the great powers is set to dwindle synchronously with the depletion of oil reserves in 2011-2019.

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