AZERBAIJAN - Turkey.

Azeris are ethnic Turks and speak a Turkic language. Ankara perceives the predominantly Turkic region of Central Asia to be its natural preserve. In this sense, aside from being part of the US power bloc, Turkey has its own ambitions to revive pan-Turkism. Turkey and Azerbaijan have signed a military agreement on technical, scientific and educational co-operation. The Turkish state company TPAO is a partner in AIOC and the Shah Deniz consortium (see Gas Market Trends).

Iran, too, tries to capitalise on its cultural and religious links with Azerbaijan. But its approach so far has been largely pragmatic, with the emphasis being on business rather than religion. On the official level, Azerbaijan has not been receptive to Iran's notions of Shiite solidarity and anti-US rhetoric. Tehran has had to contend with US pressure on Baku to avoid links with Iran, which led to the exclusion of NIOC from the AIOC consortium. But through careful diplomacy Iran has managed to carve out a niche for itself in the Azeri hydrocarbon sector, with its Oil Industries Engineering & Construction Co. (OIEC), partly owned by NIOC, being a partner in the Shah Deniz and Lenkoran-Talysh Deniz projects. Mobil had to opt out of the latter project because OIEC joined. Azerbaijan, which shares a common border with Iran, does not want to antagonise the Tehran regime; ethnic Azeris in the Iranian province of East Azerbaijan far outnumber the 7.2 million population of Azerbaijan.

Companies from Britain, France, Germany, Japan and Saudi Arabia are also involved in Azerbaijan. BP Amoco leads the two top consortia, AIOC and the gas-rich Shah Deniz. Itochu of Japan is involved in AIOC as well as in the North Apsheron ridge project to develop the Dan Ulduzu and Ashrafi fields. Delta and Nimir of Saudi Arabia are partners in this venture as well. TotalFinaElf of France and Deminex of Germany are members of the consortium formed to develop the Lenkoran-Talysh Deniz offshore zone.

Aliyev is careful to maintain a good balance in satisfying the two power blocs. The country now appears more stable and the economy is recovering, whereas in 1990-1993 Azerbaijan was hit by a war with Armenia over the disputed enclave of Nagorno-Karabakh. At the same time, it was wracked by civil strife as previous Azeri leaders leaned too much in favour of one of the two blocs. Under previous presidents Ayaz Mutalibov and Abulfaz Elchibey, Baku had refused to join the Commonwealth of Independent States (CIS) set up by Russia after the collapse of the Soviet Union. Aliyev reversed this policy and ties with Moscow began to pick up.

Aliyev has not leaned too much towards either bloc. His focus is to turn Azerbaijan into a wealthy country rivalling the rich oil producing states of the Middle East. He knows this cannot be achieved without political stability. He has imposed stability by a combination of patronage, carefully nurtured nationalism, and the same tough tactics he used to apply when he was KGB chief for Baku in the 1970s.