As Soviet-era strongmen fade, Caspian unrest grows

It was here, amid offshore oil rigs and the snow-capped Caucasus mountains, that superspy James Bond once battled an evil conspiracy to save a vital Western-sponsored oil pipeline.

The plot may have been fictional, but the pipeline, slated to begin carrying oil to global markets in 2005, is real. So is the strategic importance of the Caspian basin, home to about 3 percent of the world's proven petroleum reserves.

Marring the picture is the menace of instability, as authoritarian Soviet-era strongmen fade from the stage.

That danger loomed large last week as thousands of opposition supporters battled police here, after international observers alleged fraud and vote-rigging in the presidential elections, which accomplished the first dynastic power transfer in the former Soviet Union. The violence, which led to a police crackdown in which hundreds of dissidents were arrested, was in response to a strongarm campaign by Azerbaijan's longtime leader, Geidar Aliyev, to pass the presidency to his inexperienced son, Ilham.

Official tallies gave the younger Mr. Aliyev almost 80 percent of the vote, but some 600 observers noted irregularities, from police harassment to ballot-box stuffing. One independent exit poll found opposition candidate Isa Gambar leading with 46 percent to Ilham Aliyev's 24 percent.

"This election has been a missed opportunity for a genuinely democratic election process," says Peter Eicher, who led observers from the Organization for Security and Cooperation in Europe.

In neighboring Georgia, opposition leaders are also charging state interference as the republic braces for parliamentary elections on Nov. 5. Like the elder Aliyev, Georgia's President Eduard Shevardnadze is a former local KGB chief and Communist Party kingpin who has said he will step down in 2005.

The similarities between the two men are striking. Both returned to lead their strife-ridden countries after the Soviet Union's fall. Each imposed order by authoritarian means, forged truces with victorious Russian-backed separatist move- ments, and charted pro-Western foreign policies. And both leaders backed a plan by a consortium led by British Petroleum to build a 1,000-mile, $3-billion oil pipeline from Baku, through Azerbaijan and Georgia, to the Turkish Mediterranean port of Ceyhan.

"The Baku-Ceyhan pipeline will give us direct access to the European market and the world beyond," says Natiq Aliyev, president of SOCAR, Azerbaijan's state oil company, a participant in the pipeline coalition. "Azerbaijan is on its way to becoming one of the world's key oil producers."

But many experts worry that Azerbaijan may fall prey to further unrest, including renewal of war with neighboring Armenia over the ethnic Armenian enclave of Nagorno Karabakh. In Georgia, there are fears that power struggles among opposition leaders could reignite civil war or fighting with the separatist regions of Abkhazia and South Ossetia.

Russian President Vladimir Putin endorsed Aliyev's candidacy and welcomed his election last week. The United States has refrained from strong statements about reports of electoral irregularities.

"Everyone just wants stability in the region," says Sergei Kazyennov of the Institute of National Security and Strategic Research in Moscow. "The US is tied down with Iraq. The region is too fragile, and it would be a bad idea to make waves there."

No one is sure how much oil there is in the Caspian basin, now uneasily divided among four post-Soviet states - Russia, Azerbaijan, Turkmenistan, and Kazakhstan - and Iran. Bloated estimates in the 1990s fueled enthusiasm that the region could become a "second Persian Gulf."

But Azerbaijan, where onshore reserves have been tapped since the 19th century, appears to have far less than hoped. Experts now say the entire Caspian basin holds a maximum of 30 billion barrels of crude, comparable to Libya or Nigeria. Still, as the US seeks to diversify its energy sources, Caspian oil may acquire strategic value.

"There is a much more sober view of what this region can produce, and there are many unsettled problems to contend with," says Valery Nesterov of Troika Dialogue, a Moscow brokerage house. "But still, the Caspian will be a very important place in 10 years' time."

One positive development is that Russia appears to have abandoned its hostility to the presence of Western interests. Moscow opposed the Baku-Ceyhan pipeline, fearing that it might eclipse its own, which runs from Baku through Chechnya to the Black Sea. During the 1990s, some experts said that Russia might be stirring up separatist insurrections in Georgia and backing Armenia against Azerbaijan, in order to deter Western oil companies.

"In the past decade, Russia perceived the Baku-Ceyhan pipeline as a real and dangerous threat," says Alexander Iskanderyan, head of the independent Institute for Caucasian Studies in Armenia. "But ... relations between Russia and Azerbaijan have improved, and growing American influence has become a general tendency throughout the former USSR."

Some experts warn that bad times could return if the outside world doesn't act to ensure smoother political transitions in Azerbaijan and Georgia.

"There are signs of potential instability in the region," says Mr. Nesterov. "That's why it's very important that Russia and the US learn to work out their geopolitical differences and let their competition express itself mainly through the marketplace. There is no good alternative."