Caspian Watch # 9: Emboldened By Iraq ‘Victory,’ Russia Intensifies Effort To Undermine Azerbaijan

(Washington, D.C.): The direct effects of the Clinton Administration’s strategic error in
contracting-out responsibility for finding a “solution” to Russia are now pretty obvious: an
emboldened Saddam; a renewed lease on life for Iraq’s weapons of mass destruction program; a
further discrediting of American leadership and credibility; and untold opportunities for the
KGB’s Foreign Minister, Yevgeny Primakov, to subvert U.S. interests in the Persian Gulf.⁽¹⁾

Less obvious is the trickle-down effect of this multi-dimensional debacle that Moscow is
exploiting in the potentially pivotal Caspian Basin. Of particular concern is the opening thus
presented to outflank the U.S. and its allies in the southern Caucasus by undermining the former
Soviet republic — Azerbaijan — that has most successfully resisted Kremlin efforts to secure
control of some $4 trillion in estimated Caspian hydrocarbon reserves.

Worse yet, should Moscow be successful in its operations against Azerbaijan, it would secure a
still greater ability to interfere with efforts being made by other countries of Central Asia to
export their oil and natural gas to the West. In this fashion, Primakov’s Iraqi gambit threatens to
restore much of the Kremlin’s erstwhile leverage and control over this vast region.

The First Step

The first priority in the Russian strategy for undermining Azerbaijan, as the Center has long
argued,⁽²⁾ remains the fostering of regional political upheaval designed to destabilize the southern
Caucasus and to impede the Azerbaijani leadership’s ability to consolidate its nation’s
independence from Moscow. So transparent has this campaign become that Azerbaijan’s Minister
of National Security was obliged in a recent meeting with Russia’s Federal Security Service (read
KGB), to make a formal demarche. According to the Azerbaijani newspaper Baku Zerkalo⁽³⁾:

“The Azerbaijan side is concerned about information that armed groups [the Lezgin nationalist
movement Sadval and the Union of Muslims of Russia] are undergoing special training in the
woodland areas [surrounding Azerbaijan]. It was noted that it was necessary to find and hand
over those who were conducting the training of leadership of the Armenian secret services and
those who were committing the crimes.”

By promoting uncertainty and turmoil in the region — a prime purpose of Russia’s transfer of a
reported $1 billion in arms in recent years to Armenia for use against Azerbaijan — Moscow is
able to advance three priority goals:

• Instability forces the Azerbaijani leadership to focus on military concerns rather than
  addressing socio-economic challenges and barriers to the efficient and secure transportation of
  its oil and gas reserves.
• Russia is afforded an excuse to increase its military deployments to the region. And
• Moscow’s claim to a role in the resolution of “regional conflicts” — another pretext for
  asserting its influence and legitimating its “peacekeeping” presence in the Transcaucasus — is
  enhanced.

Enter Iraq

Russia may not have dreamed it would be so successful when Iraq brazenly made its latest move
to break out of the UN sanction regime — a move many believe was pre-cooked with Primakov
(who previously served as Saddam Hussein’s KGB handler). Far from precipitating actions that
would seal Saddam’s fate, and thereby jeopardize the prospective reconstitution of one of the
Kremlin’s most valuable client relationships,⁽⁴⁾ the Clinton Administration made a minimal
response. Better yet, from Moscow’s perspective, Washington actually made Primakov its
mediator.

The KGB operative promptly declared that he had a mandate to identify a “compromise” to end
the stand-off, on terms acceptable to Moscow and Baghdad (and Paris and Beijing) and presented
more-or-less as a fait accompli to the United States, Britain and the rest of the international
community. On 20 November, the pro-democracy Russian newspaper Moscow Novaya Izvestiya
published an article offering penetrating insights into Russian thinking about the strategic windfall
President Clinton has handed the Kremlin:

“The United States is turning for assistance to the very countries which united with
Hussein in the Security Council. They are signing major trade deals with Iraq and
seeking the lifting of sanctions, so that these deals can be implemented. The
‘Primakov peace plan’ came into being following an exchange of private messages
between Yeltsin and Saddam. People have started talking about a complete success
for Russian diplomacy, the coming settlement of the Iraq crisis, and even the final
peacemaking between Baghdad and the United Nations.

“By all outward signs, this is almost tantamount to a victory over the laws of
physics. Moscow whistles and world leaders fly to an extraordinary meeting from
all parts of the planet. No one had succeeded, but we have done it – we have
talked Saddam round.” (Emphasis added.)

Naturally, the realization of the Russian and Iraqi gambit to bring about the loosening or
elimination of international sanctions would result in huge financial benefits for countries like
Russia, France and China. They stand to profit handsomely from myriad arms-supply and energy-related opportunities similar to the Total/Gazprom project in Iran’s South Pars offshore gas
fields.⁽⁵⁾ Russia also longs to score substantial political gains in terms of international prestige vis
á vis a United States increasingly regarded as feckless and ineffectual.

The geopolitical consequences of the current standoff with Iraq cross-cut the entire region and
multiple interests, as Moscow’s Novaya Izvestiya went on to point out:

“Tremendous benefits are looming for Russia: the repayment of Iraqi debts from Soviet
times; riches resulting from new oil extraction. Also, how much Russian weaponry
will be required to rebuild the local army, which has fallen to pieces during the
seven-year blockade? It is, in total, a sizable package, worth tens of billions [of
dollars].” (Emphasis added.)

Moscow Strikes at Azerbaijan’s Lifeblood — Hydrocarbons

In addition to these relatively obvious geopolitical and financial gains for Moscow, Primakov’s
“solution” of the Iraq crisis affords the Kremlin another critical benefit: an opportunity to
influence the world oil market to Azerbaijan’s detriment. Oil prices currently stand at roughly
$20 per barrel, yet the Azerbaijani asking price is some $22 per barrel. While a two-dollar
difference may appear modest to the layman, that spread translates into a multi-billion-dollar
impact given the enormous quantities of oil at issue.

If Russia and Iraq succeed in having the Iraqi sanctions substantially eased (to say nothing of
getting them lifted altogether), the end-result would probably be a significant drop in world oil
prices. Such a decline would broaden the existing gap between Azerbaijani and Middle Eastern
oil prices, the effect of which could seriously complicate an already fragile Azeri economy.⁽⁶⁾
Here again Novaya Izvestiya discerned Moscow’s ulterior motives:

“If it were really possible to free Iraq from the yoke of sanctions in a very short space
of time and to bring this mighty flow of oil to market, it would not be at all pleasant for
our southern friends in the Commonwealth of Independent States. Prices would
collapse still further. The gap would increase to a disastrous one. Given such a
development, the Azerbaijani project as such would be called into question.”

The Great Game

It goes without saying that this outcome could be a most debilitating one, not only for Azerbaijan
but for the West’s future energy security, as well. That would be the practical effect were the
Kremlin to succeed in its efforts to impede the development of a secure, main export pipeline to
transport oil from Azerbaijan to international markets. Here again, Russia’s latest play in “the
Great Game” is illuminated by Novaya Izvestiya:

“Whatever people there may say, the opinion of Azerbaijan and/or President Aliyev
personally in determining the route of the of the main export pipeline is of interest to
few people. Everything will be decided by the operators involved in constructing
and servicing the main company pipeline. Economic considerations are most
important to them.“

In other words, if Azerbaijan were faced with a new round of economic and political
hardships, Russia would enjoy increased leverage in forcing Azerbaijan’s government to accept
pipeline routes squarely within Moscow’s sphere of influence.

The Bottom Line

The arguments for the United States to take military and other actions necessary to remove
Saddam Hussein from power are compelling, even if the implications beyond the Persian Gulf of
doing otherwise are not taken into account.⁽⁷⁾ When they are — notably, with respect to the
myriad strategic repercussions in the Caspian Basin — the case is that much more conclusive.
Ample notice has been served, if not by Yevgeny Primakov’s machinations then by the play-by-play depiction of those maneuvers offered by Novaya Izvestiya:

“Two new players are to appear approximately simultaneously in the world market in
the very near historical future: Baghdad, when the sanctions are ultimately lifted; and
Baku, which is experiencing serious problems with technical support for its own
project. Two natural competitors, the outcome of whose confrontation could well
be decided by Moscow by taking advantage of the present situation.”

As Washington Post columnist Jim Hoagland observed in a trenchant column last week
concerning the Clinton Administration’s hapless mishandling of the Iraqi crisis, President Clinton
has a personal aversion to “balance-of-power” calculations and dismisses the possibility that
others — especially the Russians — may not share his view as “Old Think.”⁽⁸⁾ Such an attitude on
the part of the President of the United States translates into what might be called “Unthink”; it
engenders a posture that is as out of touch with reality as it is inconsistent with long-term U.S.
national interests in an increasingly dangerous world.

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1. See the Center’s Decision Briefs entitled Take Out Saddam (No. 97-D 168, 10 November
1997) and ‘Iraqi Roulette’: Dodging a Bullet Must Not Be Confused with Ending the Threat
Posed By Saddam (No. 97-D 171, 17 November 1997).

2. See the Perspective by the Casey Institute of the Center for Security Policy entitled Sen. D’Amato’s Committee Serves Notice On
Those Who Aid And Abet U.S. Adversaries: No Fund-Raising On American Markets (No. 97-C 161, 30 October 1997).

3. See “Azerbaijan, Russia Discuss Security Issues,” Baku Zerkalo, 8 November 1997.

4. Iraq currently owes Russia as much as $10 billion in outstanding loans, not to mention
contingency contracts for oil development worth billions of dollars more.

5. See the Casey Institute’s Perspectives entitled Sen. D’Amato’s Committee Serves Notice On
Those Who Aid And Abet U.S. Adversaries: No Fund-Raising On American Markets (No. 97-C 161, 30 October 1997), Russian Bonds Rocked By Second Senate Hearing in a Week
Focusing on Undesirable Foreign Penetration of U.S. Markets (No. 97-C 169, 10 November
1997) and The French and Russians Certainly ‘Don’t Get It’ on Iran — The Question Is:
Does the Clinton-Gore Team? (No. 97-C 148, 2 October 1997).

6. Azerbaijan’s economy is struggling to cope with the burden of caring for some one million
refugees from the Nagorno-Karabakh conflict with Armenia.

7. See the Center’s Decision Briefs entitled Clinton Legacy Watch # 10: Administration
Ineptitude, Appeasement Put Saddam, Primakov Back in Driver’s Seat (No. 97-D 173, 20
November 1997) and Clinton Legacy Watch #11: Dangerous Absurdities on Iraq (No. 97-D
176, 24 November 1997).

8. See “Russia Into the Vacuum,” Washington Post, 21 November 1997.