Azerbaijan after the Iran Nuclear DealEarly April of the current year, the news spread from Switzerland reported a long-awaited arrangement: Iran and six world powers that had negotiated for the past several years declared a deal, which would block Tehran from developing nuclear weapons in exchange for the lifting of Western sanctions. Despite some skeptical opinions, the most agreed it was a big diplomatic achievement and hoped for further warming in the relations between Iran and the Western world. While experts may endlessly speculate which side would get more benefits from the deal, one thing is certain: the nuclear deal will influence the global geopolitics, as well as Iran`s neighborhood, the Caucasus.

 

Brief background of relations

Iran has always held a special place in the foreign policy of Azerbaijan, one of the Caucasian nations. Having made a long historical way together and even been part of the same states throughout centuries, the two countries share the same religion and similar customs. In fact, the country named Azerbaijan was divided between Russia and Iran in the 1810-1820s. The northern Azerbaijan that fell under the tsarist rule later earned a brief independence (1918-1920), got incorporated into the USSR (1920-1991), and finally regained independence in 1991. The southern territories have been part of Iran ever since, with Azerbaijani residents ranging from 15 to 30 million, the largest population of ethnic Azerbaijanis.

The contemporary bilateral relations between the Republic of Azerbaijan and Islamic Republic of Iran have been uneasy and seen many ups and downs since 1991, when Azerbaijan became independent.

While Tehran feels irritated by the warm Azerbaijani-Israeli ties and fear Azerbaijani irredentism, the Azerbaijani side still considers Iran as a threat to its independence and complains about Iran`s support to Christian Armenia, with which Azerbaijan is still at the ongoing conflict. The Azerbaijan-Iran relations are further deteriorated by Tehran`s concern over 30 million Azerbaijanis living in Iran, who are deprived of basic minority rights and by the inability of the both countries to divide the Caspian Sea.

At the same time, Azerbaijan had been enjoying the advantage of being Iran`s neighbor and benefitting from cool U.S.-Iran relations. In other words, for a long period Azerbaijan`s importance for the Western powers was defined not only by its oil and gas resources, but also by its proximity to Iran. Having a pre-dominantly Shia but secular ally in Iran`s backyard had also been an attractive idea for the D.C. politicians.

What may Azerbaijan anticipate in the post-nuclear deal period? What kind of benefits and disadvantages could the arrangement create for Azerbaijan? And how could the further warming-up relationship between Iran and the West influence Azerbaijan politically and economically? 

 

Benefits

The arrangement may reduce the geopolitical tensions in the region and lift the possibility of a great war featuring Iran. During the worst periods of the U.S.-Iran relations, some American politicians lobbied the use of Azerbaijan as a platform against Iran. While the Iranian press kept alarming about the installment of U.S. military stations in Azerbaijan and Azerbaijan`s readiness to join the United States in case of war by referring to the previous experiences when Azerbaijan took part in the international coalitions during the wars in Afghanistan and Iraq, the pro-American media was actively circulating the Greater Middle East project devised during the Bush administration. According to speculations, the plan offered Northern Iran populated by ethnic Azerbaijanis (the territories, which are also referred to as South Azerbaijan) to the Republic of Azerbaijan in exchange for participation in potential military operations against Iran. Although these reports were never confirmed either by the United States or Azerbaijan, and the official Baku declared several times it would never agree to be part of any plans, such news only increased Tehran`s distrust in Baku, and Iranian military and clergy repeatedly stated they would target any country that ever lets its territory used against Iran.

The risk of such a big war had been the sword of Damocles for Azerbaijan since the latter`s independence because in that case Azerbaijan could have found itself in the middle of titanic battles and faced the flood of refugees from the south.

Plus, the Western diplomatic victory on the postponement of Iran`s nuclear program will bring some relief to the security of all regional countries, including Azerbaijan.

In a long-term prospect, by evolving this policy of détente into improving relations, the United States could also shake the Russian-Iranian relations, which usually posed a big threat to the very existence of Azerbaijan. Therefore, any cracks on this alliance, a terrible nightmare for Azerbaijanis, who have not forgotten the 200-year-old division by two large neighbors, would be welcomed in Baku.

Iran`s return to the global oil and gas market after the nuclear deal may create a big economic disadvantage for Azerbaijan (see below). However, Iran`s connection to TANAP (the Trans-Anatolian Natural Gas Pipeline, a natural gas pipeline from Azerbaijan through Georgia and Turkey to Europe) and TAP (the Trans-Adriatic Pipeline, a projected extension of TANAP to export Azerbaijani gas from Greece via Albania and the Adriatic Sea to Italy and further to Western Europe), as some forecast, could provide a better scenario for Azerbaijan. The Iranian ambassador to Azerbaijan already noted his country may hold talks and consider joining TANAP. Thus, Azerbaijan should mobilize its diplomatic efforts to persuade Iranian officials to connect to TANAP and TAP, both of which are to be completed by 2018.

Some Azerbaijani experts even look forward and consider that the progress in the Iran-West relations can accelerate the democratizations processes and positively influence the social welfare within Iran, which may also serve the very interests of Azerbaijan: 30 million Iranians of Azerbaijani origin may benefit from democratization, gain more rights and better their welfare.

Moreover, the removal of the sanctions that had impeded full-scale economic ties between the two neighboring nations in the past can improve the mutual trade and encourage joint ventures and investments.

 

Disadvantages

Based on its balanced foreign policy, Azerbaijan had been properly taking advantage of its geopolitical position: being sandwiched in between Russia and Iran would make Azerbaijan an important ally for the United States. Direct contacts and warming mutual relations with Iran following the nuclear deal will reduce space of maneuvers for Azerbaijan. This may shrink the value of Azerbaijan`s position for the Western powers.

Lifting the sanctions will enable Iran to return to the international oil and gas market. The huge resources and export ability of Iran may further decrease global oil prices. The nation produced 2.85 million barrels a day in March 2015, according to data compiled by Bloomberg. The U.S. Energy Information Administration reports that Iran could boost output by at least 700,000 barrels a day by the end of 2016. According to a pessimistic forecast, the prices could tumble US$15 a barrel next year if sanctions are lifted following the final nuclear deal. In that case, Azerbaijan`s economy that is vastly relying on the world oil prices can receive a harder blow – the nation has already been desperate in coping with US$50 a barrel to continue huge infrastructure projects.

For the past several years, especially when the concerns of the Western nations over dependence on Russian gas were growing, Azerbaijan has been declaring its readiness to serve as an alternative and stable energy supply and transport corridor for Europe. The return of a great energy source to the regional and global market may change the situation for Azerbaijan negatively as the European nations will receive a bigger alternative to Russia. Iran is the fifth largest oil producer and has the second largest gas reserves in the world. Naturally, Iran is going to grab an emerged opportunity to carry out westward export of its oil and gas reserves. The Iranian president told already in September 2014 that “Iran can be a secure energy center for Europe.” It is obvious that Azerbaijan cannot compete Iran in this gas race and Azerbaijan`s expected 20 billion cubic meters seem quite low comparing to Iran`s possible offer of 60 billion. However, Azerbaijan could turn this disadvantage into a benefit as noted above: cooperation with Iran in international gas projects could become mutually advantageous.

The removal of the sanctions will open the big Iranian market for Western businesses. Apart from oil and gas sector, which the oil giants are keen to enter, almost all spheres of Iran`s economy could attract outside companies. Cheap prices and labor force, plus the direct access to the ocean may certainly make Iran more attractive than Azerbaijan for foreign businesses.

 

Conclusion

In conclusion, it is obvious that Iran`s comeback to global energy market and big politics may diminish Azerbaijan`s geopolitical and economic importance. Expected decline in oil prices with this re-entry could also hit Azerbaijani economy.

Therefore, foreign policy makers in Baku should set up a new strategy not only to compensate this diminution, but also to get dividends from the development of Iran-West arrangements. In the meantime, internal reforms aimed at strengthening non-oil sector and putting an end to the dependence on oil export should be elaborated in Azerbaijan.

 

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