A Social Explosion in the Pipeline

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The opening of the new oil pipeline from Azerbaijan, through Georgia, to Ceyhan in Turkey represents a triumph for U.S. imperial policy over Russian ambitions in the southern Caucasus -- and the culmination of a 13-year campaign to open up the Caspian region to Western oil multinationals.

It allows Anglo-American oil giant BP to pump as much as 1 million barrels of oil per day -- roughly 1 percent of global output -- direct to the United States and Western Europe without having to cross one kilometer of Russian soil or use any pipeline controlled by Moscow. It would also allow significant amounts of oil from Kazakhstan to travel the same route, after being shipped across the Caspian to Baku, giving the United States geopolitical leverage in Kazakhstan, a key country in the battle for Central Asian energy reserves.

Speaking at the May 25 ceremony to open the Azeri section of the pipeline, Georgian President Mikheil Saakashvili -- U.S. President George W. Bush's poster boy for neo-liberalism in Eurasia -- said the pipeline would "make the whole region, including Georgia, fully energy independent." What he meant but did not say, of course, was independent of Russia -- and dependent on a largely American-run oil industry, backed by a growing U.S. military presence in the region.

Perhaps even more clearly than Kazakhstan or Uzbekistan, Azerbaijan represents the fundamental contradiction in U.S. policy in the region. On the one hand, Bush's administration ostensibly claims to be supporting "democratic" change, while on the other, it is allied to a corrupt regime that owes its fortunes to oil.

In October 2003, one month before Georgia's Rose Revolution, Ilham Aliyev succeeded his seriously ill father, Heydar Aliyev, in an election that was hardly free or fair.

But unlike in Georgia or Ukraine, the United States did not ride to the rescue of Azeri democracy. A range of observers pointed out the election's unfair conditions: blanket pro-government media coverage, restrictions on opposition rallies, and ballot-rigging by Aliyev-dominated election commissions, not to mention the systematic, decade-long persecution of the opposition. And even as thousands of frustrated opposition protesters were clubbed by riot police on Baku's Freedom Square, the White House was phoning in its congratulations to Ilham Aliyev within hours of the polls closing.

Since then, Aliyev has been careful to follow his father's policy of wooing Washington and the Western oil majors and promising to keep the oil flowing in return for support of his clan's hold on power.

But this support, which even a few months ago looked rock solid, may be starting to erode as protests by an emboldened opposition grow against the regime.

The White House and the oil companies likely fear that a real revolution is brewing, one that may not be to their liking. If Aliyev cannot deliver oil and stability, they may try their hand at a "watermelon" revolution and replace him with someone equally pro-Western but less likely to provoke the social upheaval that could threaten their oil interests.

Four days before the pipeline ceremony, Azerbaijan's main nationalist opposition parties and youth groups -- all professing pro-pipeline and pro-American sentiments, as they auditioned for the part of the West's "democratic" model opposition -- held a rally in Baku calling for free and fair elections to parliament this November. The protest was banned and police waded in, beating and arresting hundreds of protesters.

The regime's brutal response even worried BP's top manager in the country, who described the violence as "unfortunate." Aliyev's chief of staff Ramiz Mekhtiyev was quick to reprimand him: "Foreign companies should get on with their business and not interfere in politics," he said.

Yet under Western pressure, the regime caved in last Saturday and refrained from smashing up the next opposition demonstration. It was the first to be allowed to go ahead peacefully since Aliyev came to power.

To get an idea of how dependent Aliyev's regime is on the oil industry, it is sufficient to look at the figures: Oil revenues are set to grow rapidly over the next five to seven years, bringing in $5 billion to $6 billion per year -- up to three times the state budget. GDP in Azerbaijan is expected to grow at a rate of 13 percent this year and 14 percent next year, the highest growth rates in the CIS. But the boom will be completely fueled by oil, and starting next year by gas, when a parallel gas pipeline is due to open from Baku to Turkey.

Thus, Azerbaijan has all its eggs in one basket. As long as oil prices remain high, the country stands to gain an estimated $50 billion over the next 20 years. The big multinationals working in the country -- BP, which has some 40 percent of its assets in the United States, together with U.S. oil services giants Halliburton, McDermott's and Schlumberger -- stand to make many billions of dollars, too.

Yet a chronic lack of investment outside the oil sector, combined with all-pervasive corruption, means the country is likely headed for a future closer to that of Nigeria than Norway. The country's agricultural and industrial potential has been utterly stymied by corruption and an obsessive focus on oil.

Aliyev's government has been unable to translate its oil wealth into higher living standards for the vast majority of Azeris, who subsist on an average of about $50 per month. The worst-off section of the population is the hundreds of thousands of refugees uprooted by the 1988-94 war with Armenia over Nagorny Karabakh.

As oil money rolls into state coffers, the danger arises of large-scale theft and misuse, whether Aliyev stays or the opposition comes to power. Even developed industrialized countries with publicly accountable oil funds have experienced difficulties in avoiding the "Dutch disease," when the dominance of natural resources leads to inflation and the atrophying of other sectors.

In the case of Azerbaijan, where investment outside the oil sector is already negligible and democratic control of the State Oil Fund is zero, the prospects for this wealth to be stolen, frittered away on prestige projects or put into defense spending are frightening. And when Azeris see few tangible benefits from the expected oil bonanza, a social explosion cannot be long in coming. It may take the form of a nationalist uprising, demanding that Azerbaijan restart the war with Armenia to recover Karabakh, or an upsurge of Islamic fundamentalism akin to the Iranian revolution. Or the revolt could be more class-based, calling for the expropriation of the Western-dominated oil industry.

Those who now back Aliyev's government could still switch sides in an effort to protect their oil interests. Yet whichever horse Washington backs, it should be ready for a bumpy ride ahead.