A NEW VERSION OF MULTI-VECTOR POLICY

President Ilham Aliyev paid a working visit to Moscow in mid-April, which was a surprise to many observers whereas, according to official sources, it was planned back at the beginning of the year. This event also attracted attention, probably because it was preceded by the refusal of the Azerbaijani president to participate in the international forum "Alliance of civilizations" in Istanbul, to which not only the Turkish leadership, but also US Secretary of State Hillary Clinton, had insistently invited him. However, even the opportunity to meet US President Barack Obama did not alter Ilham Aliyev's decision; he convened a Security Council meeting and effectively declared that the opening of Turkey's borders with Armenia without consideration of Baku's opinion and, most importantly, without progress in the settlement of the Karabakh conflict, might cause a change in the direction of Azerbaijan's geopolitical orientation.

Overall, the Azerbaijani leadership is seen to be delivering an untypically tough response to actions which are of central concern to our national interests, regardless of whence they come. Thus, Baku was not satisfied with Moscow's explanations for, and denial of, the transfer to Armenia of a huge quantity of arms removed during the evacuation of Russian military bases from Georgia. The response was a declaration of not just support, but also a readiness to supply gas from the Sah Daniz field to Phase 1 of the Nabucco gas pipeline project, for which the West had lobbied. Now, in response to Washington and Brussels pushing Turkey towards opening its border with Armenia, Baku is demonstrating a readiness to take a U-turn in its policy; undesirable for the West, primarily in the energy sphere. The talk is not of grievance or lack of understanding. The opening of Turkey's border with Armenia caused an apparently extreme reaction because it was perceived as a demonstration that the West does not intend to exert even the slightest pressure on Yerevan to withdraw troops from the occupied Azerbaijani territories. In which case, is it not better to try and reach agreement with the patron of the "Armenian outpost", i.e. Moscow? Which is what President Aliyev actually did in April.

There is a significant basis for mutual relations with Moscow and Baku holds valuable trump cards. Azerbaijan is the most capacious and solvent market in the South Caucasus. Despite unfavourable global economic conditions, trade between our countries increased by 40 per cent last year, crossing the 2bn-dollar mark. What is more, such growth was not achieved at the expense of energy resources. Plans to increase mutual trade to 3bn dollars seem quite realistic, which means that about two thirds of Russia's trade with regional countries will be with Azerbaijan alone.

Cooperation between our countries in the humanitarian sphere is also developing. Of all the South Caucasus republics, it is in Azerbaijan that the Russian language has retained its firmest position following independence. Russian is the language of instruction in almost a quarter of schools and universities in our country. Dozens of newspapers and magazines are published and popular internet websites operate in this language. The building housing the Russian Drama Theatre was recently substantially renovated and modernized. A Russian information centre opened in Baku at the start of the year, as well as a branch of Moscow State University. However, the energy sector and security issues still remain the most important factors in bilateral relations. Here, along with remaining disagreements, there is also a wide range of matching interests.

After the August war with Georgia and recognition of the "independence" of South Ossetia and Abkhazia, Moscow's relations with this country were completely broken off. As a result, Armenia, too, lost its communications links to Russia. Even air travel between them now uses Turkish and Azerbaijani airspace. It is clear that military transportation via these countries is impossible, and should military action resume in the Nagornyy Karabakh conflict zone, civilian communications will also be broken.

Many authoritative Russian analysts believe that the preservation and even strengthening of Moscow's influence in the region imply a strengthening of ties with Azerbaijan. Stalemate in the settlement of the Karabakh conflict is the only impediment.

Taking account of the fact that Russia is a co-chair of the Minsk Group and could persuade Yerevan to a compromise acceptable to Azerbaijan, President Ilham Aliyev called on the Kremlin to use its influence to this end. During his visit to Moscow, he said: "Azerbaijan will never participate in processes implying a mechanism for Nagornyy Karabakh's legal separation from Azerbaijan. This is our unequivocal position. The consequences of the conflict need to be eliminated and the Armenian occupying troops in the territory around the administrative border of the former Nagornyy Karabakh autonomous area need to be withdrawn. But stage-by-stage…" In turn, President Dmitriy Medvedev noted that "… Russia is ready to fulfil its own mandate. We have already tried to facilitate this process and if these kinds of contacts are continued - and there is no alternative - I am confident that this problem can be settled proceeding from the interests of the two peoples, taking into account the proposals prepared." In his opinion, the Nagornyy Karabakh conflict is a serious but still solvable problem. The Russian president called for the norms of international law and resolutions passed by the UN and the OSCE to be adhered to in the settlement process. And these resolutions directly demand the withdrawal of Armenian troops from the territory of six districts around Nagornyy Karabakh.

Such an approach by the Kremlin to the Karabakh settlement caused displeasure and obvious alarm to Armenians, as was apparent in the very first phrases uttered by Serzh Sargsyan during his meeting with Dmitriy Medvedev in Moscow, where the Armenian president was invited immediately after the talks with Ilham Aliyev were completed. However, discussions about a settlement of the Armenian-Azerbaijani conflict have reached a phase in which either a long-awaited breakthrough will be made, and a difficult but positive process of establishing peaceful life will start, or the efforts of the Minsk Group will suffer another failure with an inevitable strengthening of confrontation, arms race and danger of a resumption of military action. Neither the USA nor the EU wants this.

The Russian leadership is beginning to realize that it will be difficult and perhaps even impossible to maintain the Karabakh conflict in its frozen state and retain the status quo. In which case why should Russia not persuade Yerevan to a compromise that would be acceptable to Azerbaijan and why not present the latter with the bill, simultaneously improving its own international image, much blemished following the August war with Georgia? Especially as Washington and Brussels are increasing their efforts to lead the Karabakh peace process out of stalemate. The US co-chair of the Minsk Group, Matthew Bryza, said recently that Presidents Obama, Medvedev and Sarkozy may have a special meeting precisely on this issue in the summer.

Nonetheless, many analysts and politicians, both in Russia and Azerbaijan, assert in their comments that Moscow is not, in reality, going to move the Karabakh settlement forward, as it is not interested in doing this or does not have the means to do it. But, firstly, the talk is not about a full settlement, but only about leading it out of stalemate, and the vacating by the Armenians of all or most of the territories outside the boundaries of Nagornyy Karabakh. This will make it possible to at least reduce to the lowest level possible the risks of a resumption of war, if not to lift it altogether, and this is in the interests of certain sections of the Russian establishment, the latter being connected not only to the energy sector, but also to the military-industrial complex.

I should remind you that Russia's counter-proposals to get the Americans to reverse their plans to deploy missile defence in Europe are built on the possibility of joint use of the Qabala radar station. The lease on the radar station expires in 2012. Without progress in the Karabakh settlement, Baku is unlikely to consent to further use of this radar station by Russia.

Amid acute competition on the arms market, the Russian military-industrial complex has long been eyeing Azerbaijan. Vyacheslav Davidenko, official representative of Rosoboronexport, has told the newspaper Kommersant that they are considering military-technical cooperation with all CIS countries, including Azerbaijan, as a priority. However, unlike other countries, Azerbaijan is not asking for free or cheap weapons, but is ready to pay the full price for modern models. The problem is that, given that the Karabakh conflict has not been resolved, Azerbaijan fears restricting itself to arms supplies from Russia, a strategic partner of Armenia. Moscow, in turn, does not risk supplying Baku with a large quantity of modern arms, as this may change the current military balance between the conflicting sides, and should military action resume, Russian arms will be aimed at Moscow's strategic ally - Armenia. Progress towards a settlement and a reduction in the direct risks of war would remove obstacles preventing the Russian military-industrial complex from accessing the Azerbaijani market. And this may bring not only considerable financial benefits, but would also make it possible to expand Russian-Azerbaijani strategic partnership into the fields of military cooperation and security.

Interest here is shown at the very highest level. Both presidents noted that "personal friendly relations" influence the positive development of bilateral relations. Ilham Aliyev found it important to say before TV cameras at the very start of his conversation with Dmitriy Medvedev that "Russia is a friend of Azerbaijan, a neighbour and a strategic partner, and we will develop our relations on this basis."

In conclusion, about cooperation in the energy sphere. Before and during President Ilham Aliyev's visit to Moscow, there was a lot of media speculation about a "gas for Karabakh" deal. The issue is not so cynical, of course. But it is also a fact that in all previous years it was leaders of the energy sector who lobbied for an improvement in Azerbaijani-Russian relations. I should remind you that before his election to the post of Russian president, Dmitriy Medvedev had long been at the head of Gazprom's supervisory council.

Everybody knows that the Russian gas giant and Azerbaijan's State Oil Company agreed in March to embark on talks about the conditions for gas supplies from January 2010. The talk is not about the purchase by Gazprom of all gas from Phase 2 of the Sah Daniz field, but about supply, for the time being, of 1.5-2bn cu.m. via the Baku - Novo-Filya gas pipeline which dates from Soviet times. The sides agreed to inspect it and carry out any necessary modernization. This is just the start, and the volumes could be increased to 5bn cu.m., including that from the Sah Daniz field. I should remind you that, in the shape of LUKoil, Russia is a 10-per-cent shareholder in this project.

President Ilham Aliyev said in Moscow: "For Azerbaijan, cooperation in this direction also serves as an element of diversification of gas supplies, because today Azerbaijani gas is transported to the West. Certainly, diversification of supplies, and access to new markets, are of great interest to us, as for any other country. Cooperation in the energy sphere, in particular in the gas sector, will take place, I hope, on mutually beneficial terms and in the spirit of good neighbourliness, especially as we are neighbours, there are no transit countries between us, and there is a sufficiently effective transport infrastructure and no need for additional investment to build pipelines."

Russia's direct benefit from this cooperation already lies in the fact that Dagestan and other adjoining areas could be supplied with gas from Azerbaijan, without having to transport gas from the shores of the Arctic Ocean or Orenburg. In the long term, a more significant coordination of the policies of Gazprom and SOCAR could be achieved, so that competition does not result in gas prices in third countries' markets being beaten down and so as not to show excessive insistence in promoting projects that may infringe their partners' interests.

However, it is premature to assert on the basis of all the foregoing (as some media outlets do) that Azerbaijan is preparing to re-orientate towards Moscow. Baku has, on more than one occasion, stated its interest in participating in the system of alliances set up under the leadership of Russia (CSTO, EurAsEC, etc) and has not rejected a strategic alliance with Turkey or partnership relations with GUAM countries, NATO and the EU. Within the framework of the multi-vector and balanced policy that it is implementing, the Azerbaijani leadership is only putting its policy of cooperation with Russia onto a firmer basis, based on interests that are real and significant for both sides. Baku aspires to persuade Moscow that it is better to cooperate with Azerbaijan than to try to subdue it by means of prolonging the Karabakh conflict. At present we are strong enough not to give anyone the illusion that Azerbaijan can be persuaded to make humiliating decisions incompatible with its independence and sovereignty.