AZERBAIJAN - Profile - Gaidar Aliyev.

Also called Haydar and in power since June 1993, President Aliyev controls Azerbaijan. He tries to decide all things, big and small. This slows decision making as some ministers only get to see him once every few months. When he is out of the country, "everything stops", says a foreign ambassador in Baku. "People hardly even dare to fix a toilet without his approval". But Eldar Namazov, one of his close aides, says: "People gravitate towards him because he has such a huge personality".

Aged 77, Aliyev is vigorous and has few thoughts about his mortality, bristling at any discussion of who his successor might be. He was re-elected to a second five-year term on Oct. 11, 1998. Soon thereafter Elgar Kerimov, head of the new AzerShah political party, told reporters in Baku that Aliyev was so vital to Azerbaijan's stability that he should be made monarch under the constitution. Aliyev is grooming his only son, Ilham, to succeed him. Ilham is the first vice president of Socar and deputy chairman of the ruling Eni Azerbaijan (new Azerbaijan) Party.

Aliyev uses tactics he applied as KGB chief of Baku in the 1970s. While harsh, these tactics have managed to create some degree of stability - the last failed coup attempt was in March 1995 - compared to the chaotic situation before. Between 1991 and June 1993, the country had four changes of government amid much bloodshed. Aliyev has consolidated his hold on power since that ceasefire. The key opposition figures are either in exile or in prison. Demonstrations by the tolerated opposition in May 2000 were broken up and were followed by a systematic crack down on their leaders. The demonstrators wanted electoral reforms and better human rights policy.

Azerbaijan fought a war with Armenia sporadically from 1989, ending in a ceasefire on May 12, 1994. The conflict still causes Baku big problems because of a related US congressional ban on American aid to Azerbaijan. Pro-Armenia activists in Washington have since 1992 kept Baku on a US government blacklist - the only former Soviet republic to be punished in this way. Aliyev has proposed "a peace treaty can only be concluded after Armenia frees occupied territories and recognises Azerbaijan's borders". Armenia still occupies about 20% of Azerbaijan's territory. Aliyev has even urged the US to have military base facilities in Azerbaijan, to tilt the balance in favour of Baku as well as keep Russia and Iran on their guard. But the request was promptly turned down.

Aliyev's focus is to turn Azerbaijan into a wealthy country rivalling the rich Arab Gulf oil states. Under him, Azerbaijan has the greatest number of E&P deals of any Caspian country. On July 3, 2000, Fitch IBCA gave Azerbaijan its first international credit rating, B+, two notches higher than Russia's B-. It said it had good economic prospects.

In dealing with the big powers, companies and the country's neighbours, Aliyev keeps in mind that petroleum and geo-politics have always been inter-related in Azerbaijan. Petroleum has been produced since 1870, with Baku then known as "the world's oil capital".

Oil consortia lined up in Baku, which is isolated from the major markets, reflect a balance between two blocs competing for influence in the Caspian: the US/Europe and Turkey on one hand, and Russia and Iran on the other. Aliyev is trying to keep good relations with all sides, while the Baku governments between 1991 and June 1993 were viewed as being either pro-US/Turkey or pro-Russia/Iran. Aliyev has had mixed success in trying to please everybody.

The biggest consortium groups companies from several countries, including the US, called Azerbaijan International Operating Co. (AIOC) and led by BP Amoco. AIOC has the blessings of Washington, the West European powers, Ankara and Moscow. Initially, Aliyev had intended to give Iran a 5% share out of Socar's 20% stake in AIOC. But US pressure forced Baku to abandon that plan, according to Aliyev in an interview with London's 'Financial Times' of June 8, 1995. He added in the interview that "the Iranians were very offended...but we do not want to complicate our relations with Iran, because we have a common border and we are joint users of the Caspian".

The second consortium, for Shah Deniz, excludes US companies because it has an Iranian partner - Oil Industries Engineering & Construction Company (OIEC) - which is vetoed by Washington (see brief profiles of the main E&P consortia in Gas Market Trends Nos. 1 & 2).

Another challenge for Aliyev is exporting the oil and gas to be produced by the consortia. Various pipeline routes have been considered, again reflecting the interests of the two main power blocs. Russia wants all Azeri exports to be routed through its own territory.

The US prefers the Turkish route. Either side can block proposals by different means: the US/Europe/Turkey bloc controls the financing end, while Russia can undermine Baku's efforts to become the hub for Caspian energy supplies to the West by vetoing undersea oil and gas pipeline projects bound for Ceyhan, passing from Kazakhstan and Turkmenistan via Azerbaijan. Iran can challenge Azerbaijan's right to develop offshore petroleum because the legal status of the southern Caspian Sea is undecided. Key players on the Azeri side in this matter are Shahin Aliyev, the president's legal advisor, and Vafa Goulizadeh, his advisor on geo-politics.

In trying to overcome the challenges Aliyev would use his vast web of Russian, Azeri and ex-Soviet connections - including LUKoil President Vagit Alekperov who is Azeri, and Azeri businessman Marat Manafov whom he appointed as chief negotiator for E&P deals after taking power in 1993.

Under Aliyev, Baku and AIOC have made an extraordinary effort to promote Western investment in Azerbaijan. Aliyev often leads delegations to the West to attract foreign companies, and is usually accompanied by a number of ministers involved directly or indirectly in the petroleum sector. London is a location of choice for the Azeris. On Nov. 29-30, 1995, for example, Aliyev was accompanied by key cabinet members at an event in London where Azeri officials and Western investors met to discuss "practical opportunities".

Such gatherings are arranged by Mahmud Mamed-Kuliyev, Baku's ambassador to London and deputy foreign minister, who also arranges meetings between Socar and foreign oil firms. One such gathering took place on Nov. 4-6, 1998 during a Caspian oil and gas conference in London. In June 2000 Aliyev opened the 7th Caspian oil and gas conference and exhibition with a lengthy speech, in which he reiterated that Azerbaijan had very large petroleum reserves to be discovered.