Oct 8th 2008
From
Economist.comOil, war and stirring imperial ghosts
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WednesdayMondayINTREPID travellers have long had a penchant for visiting the Caucasus. This is a land of mountains and seas, squeezed into the borders of three old empires—Persian, Ottoman and Russian. As such it has been strategically important (and remains so, as we learned again in the short war that Russia fought against Georgia in August). And it has an enticing whiff of exoticism, associated with all the old images of fierce mountain tribesmen who spent the 19th century resisting successive attacks by the Russians, always keen to incorporate the Caucasus into their empire.
The city of Baku, where I begin my trip to the three countries of the south Caucasus (Azerbaijan, Armenia and Georgia), was an important Russian base during most of those wars. The old walled town in the centre retains an appealing medieval look. But what attracts the eye more are the garish modern buildings, extravagantly large cars and jeeps, massive traffic jams and the city’s general gaudiness. For this is today an oil town: the equivalent of a Gulf emirate dumped on the shores of the Caspian.
Baku got there first, of course. Amid today’s glitz can be discerned some sturdy late 19th century mansions, many of them put up by the French, when Baku went through its first oil boom. At that time, this region was responsible for as much as half of the world’s oil output. The industry went into decline during the late 20th century under Soviet rule, but it has boomed in the past decade or so, on the back of more offshore discoveries in the Caspian and rising oil prices.
Because of its oil and, increasingly, gas, Azerbaijan has become a key country for the West. A stream of top American officials have visited. The Russians are also courting the country, hoping to persuade it to ship more of its oil and gas northwards. But the government, led by President Ilham Aliev, is wary. There are big advantages in selling energy to all comers, not just to a monolithic unfriendly company like Russia’s gas giant Gazprom. And BP, the biggest Western oil company in Baku, has been a great friend to the country for a decade and a half.
The president, who would not grant us an interview, is no democrat, even though his economic advisers insist that he has liberalised the economy and cut back on red tape. So much so, indeed, that Azerbaijan recently came top for most rapid improvement in the World Bank’s annual report “Doing Business”.
Next weekend Mr Aliev faces an election that the leading opposition candidates have boycotted. In a café, we meet one opposition leader who wanted to run, but he notes that elections are rigged, the opposition is harassed and the media is not free. Indeed, he suggests that things are a lot worse than they were in the days of Ilham’s father, Heidar, who ran the country from 1994 to 2003 before passing it on to his son like some oil-rich satrapy.
In the streets of Baku, plenty of people complain about soaring inflation, and most also suggest that the benefits of high oil prices have not trickled down to ordinary folk. Azerbaijan has a bad reputation for corruption, although BP says it has no problems. Certainly the oil money is going somewhere—the restaurant in the old town where we have dinner, and the hotel in which we stay, are both almost as expensive as in Moscow, which is now the costliest city in Europe. And, given the country’s reputation for corruption, it is no surprise to find that the cost of an entry visa at Heidar Aliev international airport has risen sharply to $100—or that an army of dubious-looking fixers swarm around the arrivals hall offering to sort out all the documents and jump the long queues. For a price, naturally.
TuesdayYOU cannot avoid BP in Baku. By some estimates the oil company accounts for around half of Azerbaijan’s GDP. So we swing by BP’s palatial headquarters to meet the top man, Bill Schrader, an engaging American who took over the job of running BP Azerbaijan from a Brit, David Woodward, in 2006. Asked how he likes Baku, which is rather a dour place, he bats back that it certainly compares favourably with his previous two postings, Luanda and Jakarta.
BP’s greatest triumph is the Baku-Tbilisi-Ceyhan pipeline, through which oil began to flow at the end of 2006, bypassing both Russia and the congested Bosporus straits. There is a also a gas pipeline to Turkey. Although there were plenty of rumours of possible Russian attacks on pipelines during the war with Georgia, nothing serious seems to have happened—negating one Russian objective, which was to convey the message that pipelines skirting Russian territory were inherently dodgy and vulnerable.
AP No oil boom here
Yet although Azerbaijan has plenty of oil and gas for now, Mr Schrader is quick to concede that hopes of giant new finds in the western Caspian have been disappointing. The real goal for the future lies in the east, in Turkmenistan. This is where the contest between Russia and the West for gas will be most intense. Turkmenistan is an even more autocratic (and less predictable) place than Azerbaijan. Gazprom desperately needs Turkmen gas just to fulfil its existing contracts. But Western companies (and political leaders) still hope one day to bring it westwards via a pipeline under the sea.
There is little sign that the oil-fed economic boom in Azerbaijan is benefiting ordinary citizens. We stop at a market outside Baku to ask some locals about their daily lives. The older shoppers are quick to say that things were better under the Soviet Union. Younger folk seem more bitter about the loss of Nagorno-Karabakh, an autonomous enclave in the mountains, to Armenia during a war in the early 1990s; several men volunteer that they are eager to fight a new war to regain their lost territory.
Ominously enough, the government has used a chunk of its oil wealth to splurge on military spending. But there is little enthusiasm among the public for Mr Aliev’s government, and no expectation at all of any change after this weekend’s presidential election.
The atmosphere is quite different in Tbilisi, where we fly to in the afternoon. There is surprisingly little evidence in the Georgian capital that the country was only recently at war with Russia, and indeed that in mid-August there were fears that the city might be overrun. Restaurants and bars are full, roads are choked with cars and ordinary Georgians seem, as usual, to be out having a good time. It is commonplace in Tbilisi to stay up drinking and eating until one or two in the morning. Unlike Azerbaijan or Armenia, there are few signs that this place was part of the Soviet Union only two decades ago.
The same is true of Georgia’s political scene. Russia’s bugbear, President Mikheil Saakashvili, is criticised by some for his authoritarian instincts—and by many more for apparently (and very unwisely) starting the August war with his decision to shell the South Ossetian capital, Tskhinvali, on the night of August 7th.
But he remains highly popular among voters, he won a presidential election earlier this year and his party has a large majority in parliament. Despite Russia’s trade embargo on Georgia, the economy is growing fast. This is, in short, a place that feels as if it is rapidly breaking away from its Soviet past and becoming part of the liberal, democratic West—something that is much less certain in the rest of the Caucasus.
WednesdayWITH few signs of the war in Tbilisi, it is time to head to the front. We drive out to Gori, which the Russians occupied in mid-August (and where they dropped a cluster bomb that killed, among others, a Dutch journalist). The clearest evidence of recent conflict along the way is from the fires that Russian forces set to destroy trees and crops, but we also pass a Georgian armoured column gingerly exercising on a side-road.
In Gori the market is functioning much as usual, and acres of shattered glass have mostly been repaired. Parked in the central square behind the statue of the town’s most famous son, Joseph Stalin, is a clutch of modern trucks, several of them from the Italian Red Cross. Not far away, hard by another statue of Stalin, is a refugee camp, where Georgian families driven out of South Ossetia are living in tents that look worryingly ill-equipped to face a Georgian winter. Yet building proper accommodation for the refugees will take time (and money); the government says there are as many as 60,000 of them in all (on top of those left after the wars of the 1990s).
Reuters Stranded in Gori
Our driver then takes us north, as close to the “border” with South Ossetia as he can get. At a Russian checkpoint we find an impressive-looking military helicopter. We talk to a scruffy Russian soldier, who is happily waving through Ossetian and Georgian traders. His commanding officer comes over to shoo us away. These soldiers are clearly not going to let the European Union observers, who have just arrived to monitor the ceasefire and Russian withdrawal, into the disputed enclaves, which Moscow has now recognised as independent countries.
Back in Tbilisi, we get caught up in everybody’s favourite argument: what really started the war? The Russians and Ossetian militias say it was an unprovoked attack on the South Ossetian capital, Tskhinvali, ordered at around 11 pm on August 7th by the Georgian president, Mikheil Saakashvili. But Georgia’s interior minister, Vano Merabishvili, produces radio intercepts to show Russian forces entering the Roki tunnel and pouring into South Ossetia long before. The government’s line is, in short, that they were responding to a Russian invasion. Mr Merabishvili also plays us hilarious video footage showing one drunken Russian soldier smashing up a Georgian barracks and another offering to sell his weapons and hand grenades for cash.
Certainly Georgian voters seem to be behind their leader—one poll recently gave Mr Saakashvili a 76% approval rating. Yet beneath the surface there lurks plenty of discontent, as was reflected in the street protests last November that the government suppressed. One of the president’s closest former allies, Nino Burjanadze, a former speaker of parliament, is now a critic both of his authoritarian ways and of the war. She tells us that she plans to form a new opposition party; perhaps she will join forces with others over the coming year or two.
None of this, however, seems to faze the president himself. Late in the evening, we go to see him high above the river in his presidential compound, which looks like nothing so much as a scaled-down version of Berlin’s Reichstag. He has already given several interviews during the day but he remains calmly and courteously insistent that, if he had to do it again, he would take the same decisions. The Russians were itching for war on any pretext. He also suggests that they will not stop at South Ossetia and Abkhazia—the history of the 1930s suggests that there will be more examples of Russian aggression, either in Georgia or elsewhere.
With his command of English (and other languages) and his forceful manner, it is hard not to be impressed by Misha Saakashvili. He has undoubtedly done many good things for his country, starting by firing almost the entire corrupt traffic-police force. He even makes jokes about his hot-headed reputation. But it is hard to leave him without wondering if his personal crusade against the Russians and his insistence on restoring Georgia’s territorial integrity have always been entirely wise.
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