Azerbaijan’s election – the real politics lie ahead

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Vilnius will host the Third Eastern Partnership Summit on 28 to 29 November 2013, after Prague in 2009 and Warsaw in 2011. This blogpost is part of a series in which ECFR experts blog on the six countries in the Eastern Partnership and the key dilemmas and policy choices to be faced both before and after the summit.

A rash of PR supplements in Western papers marked Azerbaijan’s Election Day on 9 October. The actual vote contained few surprises. Exit polls, partly ordered by the pro-government APA news agency, showed President Ilham Aliyev winning around 83 percent and his main opponent Jamil Hasanli 8 percent. Official results then edged towards a 85 percent versus 5 percent split so that the president was not too far off the 88.7 percent he officially won in 2008 and 79.5 percent in 2003. Turnout was around 72 percent. The Independent American Center of Political Monitoring, a shadowy international organisation based in the well-known town of Broken Arrow, Oklahoma, “monitored” the election.

Protests against vote rigging have been called for 12 October. However, the popular appetite for protests appears lower than once seemed likely after regional unrest in Quba and Ismaily in the last two years. “Maybe next time” may be the predominant mood – though such things can flare as easily as a rig in the Caspian. The authorities have tried to take the sting out of possible confrontation after the normally fractious opposition formed the National Council of Democratic Forces this summer and chose a heavyweight candidate, the respected playwright Rustam Ibragimbekov, to challenge Aliyev. Ibragimbekov was denied registration because of his dual Azerbaijani-Russian citizenship; historian Jamil Hasanli replaced him in August. Hasanli ran a strong anti-corruption campaign, but lacked the resources to mount a more serious challenge.

Ibragimbekov’s exclusion hints at Russia’s role in the manoeuvring, the Kremlin having supposedly also backed the creation of the Union of Azerbaijani Organizations of Russia in September 2012, led by leading émigré oligarch Abbas Abbasov. Russia, however, has been able to buy its way back into influence in Baku with arms sales and by helping the state energy company SOCAR’s ambitious foreign expansion plans.

But what happens after the election will be as important as what happened during the election. Aliyev’s third term, 2013 to 2018, will be the last of the good years of easy energy money. Oil exports have already peaked, in 2010, and the planned expansion of gas sales to compensate will struggle in a weak market. If Azerbaijan spends its money more wisely in 2013 to 2018, the regime may be strong enough to face the challenges that may well mature by 2018, particularly among the growing younger generation. If not, it will be more vulnerable to both internal instability and pressure from Russia.

In Aliyev’s first two terms, 2003 to 2008 and 2008 to 2013, energy money was used for three key political functions. First, the sovereign wealth fund SOFAZ backs current as well as capital spending. It covers no less than 60 percent of the state budget. Investment projects include new infrastructure and energy supply routes, but also vanity projects, like the $100 billion offshore “Khazar Islands” complex. Current growth has already slowed, from a heady peak of 34.5 percent in 2006 to 4.5 percent in 2012 (and a similar forecast for 2013); but future growth will be even more uncertain unless the economy diversifies.

According to Ilan Greenberg, “Azerbaijan's extraction economy [energy and a smaller minerals sector] accounts for approximately 53% of GDP and 92% of exports”, quoting Transparency International and Revenue Watch. The economy must diversify and fulfil the promises of the “Azerbaijan 2020” strategy unveiled in May 2012, when the authorities were most worried about the spreading consequences of the “Arab Spring”.

Second, energy money has kept intact the elite coalition that Aliyev inherited from his father Heydar Aliyev, president from 1993 to 2003 (and boss of Soviet Azerbaijan from 1969 to 1982). That continuity is symbolised by Ramiz Mehdiyev, who has headed the Presidential Administration since 1995. Scandal briefly swirled around Mehdiyev a year ago in a controversy dubbed Gulargate (the sale of seats in parliament); but he survived. Ilham Aliyev seems too cautious to try and become his “own man” too quickly if that threatens the cosy local oligarchy. But that calculation may change if energy monies decline more sharply.

Third, defence spending continues to rise as Azerbaijan fulfils its oft-quoted promise to spend more on defence than Armenia’s entire state budget. The temptation here may be to lock in and cash in on this spending superiority while it is guaranteed. The conflict in Nagorno-Karabakh is of course far from frozen: according to one count, "since the beginning of 2011, 63 people have been killed in skirmishes between Armenia and Azerbaijan".

On the other hand, Azerbaijan is in the middle of a highly unstable region. It “is one of just four countries in the world with a Shia majority — an estimated 65% of the country”. The chaos in Syria, where the besieged Alawites are also a different branch of Shia Islam, is an argument for preserving the regime’s stability, and for maintaining the relatively good relations between local Sunni and Shia, unlike in nearby Iraq. Radical Islam has not become the local force that it might have.

Azerbaijan will not be the star of the Vilnius summit. It is a long way from the agreements that others will initial or sign. It sees itself as a power in its own right and has few service or manufacturing exports that would benefit from moving up the global value chain via adopting the acquis communautaire. Oil is oil and gas is gas. The EU’s opportunity over the next five years is different, to help Azerbaijan diversify and modernise its economy and refrain from threatening the peace of the region. The Nabucco West project may be dead, but the TAP alternative will depend on access to Balkan markets, as the final destination, Italy, seems to have plenty of gas.

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