By Yuri Glushkov exclusively for Vestnik Kavkaza
Improving Azerbaijani-Iranian relations are an overt tendency of the current political season in the South Caucasus. It has become possible with the course of openness and pacifism taken by Iranian President Hassan Rouhani elected a year ago. His policy is often compared with that of fifth President Mohammad Khatami (1997-2005). The same softness in approaches to relations with the West regarding development of the nuclear program of Tehran, an attempt to demonstrate readiness for agreements, decisiveness to protect independence of policy and refusal to submit to foreign principles.
Khatami’s “thaw” was followed by a “freeze” and crash into harsh confrontation with the U.S. during the reign of Mahmoud Ahmadinejad. Iranian diplomacy became more talkie-talkie and tartish, fitting into theses like “you are not our boss,” “we do what we think we need.” As a result, Iran was directly hit by sanctions and threatened with a military strike, a topic discussed in the past years, and economic collapses with galloping inflation.Hassan Rouhani managed to minimize the threat of war with the Americans and their allies in just a year and managed to achieve sanction relief, keeping the right to peaceful uranium enrichment for production of electricity at nuclear power plants. Iran is interested in further release from sanction isolation, and the northern path through Azerbaijan to Russia is becoming more topical. Rapprochement of Tehran and Moscow after the announced oil trade deal creates a new basis for regional cooperation. On this background, positive moves in relations with Azerbaijan are not anything sensational, though the pace deserves special consideration.
In January, the presidents of the two states Ilham Aliyev and Hassan Rouhani, met in Davos. In April the Azerbaijani president visited Tehran. In August, entrepreneurs of both countries gathered for a business forum in Baku. A new summit will start in Astrakhan on September 29, leaders of the five Caspian states plan to have a new round of talks. Hassan Rouhani may visit Baku before or after the Astrakhan summit.Since Iran is the main decelerator in finding a consensus for the legal status of the Caspian Sea, Rouhani is expected to make a breakthrough. Iran is not satisfied with the sectoral separation of the sea that Russia, Kazakhstan and Azerbaijan have already implemented. It is based on the old Caspian agreement signed in the mid-20th century, granting Iran about 13% of the sea’s territory. Iran demands an equal 20% part.
The presidents of the five countries will meet to define the current state of negotiations. It is obvious that the position of Iran has a tendency to shift towards reaching a final legal agreement on the Caspian. In its time, Iran took part in the Shah Deniz gas project in the Azerbaijani shelf of the Caspian, granted a 10% share. Iran’s NICO, representing the country, was free from U.S. sanctions.NICO loads about 230,000 tons of Shah Deniz gas condensate, worth about $170 million, from the Batumi Oil Terminal annually. The gas is sold for an average of about $200 million. These profits will rise in the future because the Shah Deniz project has entered its second phase of realization and Azerbaijani gas will be sold in Europe.
The trade turnover of Azerbaijan and Iran amounted to $300-500 million in 2013. Some financial interaction is done in the form of barter. According to a swap deal, Azerbaijani gas is pumped to the north of Iran, and Iran sends about 350-400 million cubic meters of gas to the Nakhchivan Autonomous Republic of Azerbaijan, receiving 15% of the volume as payment for pumping.After reorganizing the Caspian Maritime Shipping system in Azerbaijan, the navigation was liberalized and the number of Iranian ships entering Azerbaijani ports increased. Iran’s military threats towards Azerbaijani research ships exploring oil and gas resources in the southern part of the Caspian Sea were forgotten. Iran plans to use Azerbaijani experience and develop its own programs for exploration and extraction of Caspian hydrocarbons.In August, a delegation of Azerbaijani oil specialists headed by Khoshbakht Yusifzadeh, vice president of the State Oil Company of the Azerbaijan Republic (SOCAR), visited Tehran at the invitation of the Khazar Exploration and Production Company (KEPKO). It was received at the Iranian Petroleum Ministry, oil and gas companies. Iranians were interested in prospects of cooperation in the oil and gas sector, transportation and exports of hydrocarbons.
At a session of the State Commission for Cooperation in the Economic, Commercial and the Humanitarian Sectors of Azerbaijan and Iran in March, a decision was made to speed up construction of the Qazvin-Rasht, Astara(Iran) – Astara(Azerbaijan) Railway. Iran has accomplished 80% of construction on the Qazvin-Rasht section, the remaining 20% will be completed in an intensified regime. The construction within the framework of the North-South Transportation Corridor is supervised by a trilateral consortium created by Azerbaijan, Iran and Russia. The new transportation infrastructure will improve business opportunities in the Caspian Region: Russia and Azerbaijan will be given direct access to the ports of Iran in the Persian Gulf, Iran will be given access to Russian ports in the Black and the Baltic seas.Azerbaijan and Iran made certain political gestures to each other. The Azerbaijani side sent several dozen Iranian convicts imprisoned in Azerbaijan this summer. The sides reached an agreement on crossing television signals in neighbouring districts. The Azerbaijanis had often been accusing Iran of purposeful strengthening of TV signals to send unfriendly propaganda.
However, Azerbaijan is not ready to open its borders to Iranians by lifting the visa regime, while Iran has already done so for Azerbaijani people on a short-term basis.Baku remains cautious in rapprochement with Tehran because the times of tensions are still in the memory and existing differences cannot be wiped out in just one stroke. Azerbaijan does not approve of Iran’s position in active cooperation with Armenia, a country that continues occupation of Azerbaijani districts and Nagorno-Karabakh. Despite assurances by Iranian politicians that they have no territorial claims in the region and fully support the integrity of Azerbaijan, Iran has not taken any practical steps to end the occupation.Iran, as an Islamic state, is actively supporting various religious branches in Azerbaijan, something the secular government does not like too much.
The Iranian side shows great concerns about intensive cooperation of Azerbaijan with Israel, including in the military sector too. Deals to purchase equipment for the needs of the Azerbaijani army are worth over $1.6 billion.Baku has demonstrated many times that it has an independent foreign policy. It can distance itself from directly criticizing Israel in the conflict with Palestine and refrain from joining the anti-Israeli campaign of Turkish President Recep Tayyip Erdogan, Azerbaijan’s number one ally. But the independence has not allowed Azerbaijan to emphasize good-neighbourly relations with Iran, refusing to back the course taken by Western states taken to provoke direct armed confrontation with Iran in 2012.A common religion and a community of about 20 million ethnic Azerbaijanis in Iran make the countries closer neighbours. Neither Baku nor Tehran are interested in influence of non-regional players on their policy, especially their domination in the Caspian. The forming regional axis of cooperation and security, which includes Russia as the main component, is capable of resolving arising issues and putting an end to crises. The Caspian summit in Astrakhan will be held in new political realities. It will let countries take a new glance at the potential of the region, discarding old stereotypes and prejudices.
