The Caspian Basin's abundant energy potential has been the subject of intense geopolitical wrangling over the past decade. Of the three Caucasus states, Azerbaijan has been the most successful nation in striking a balance in relations with the two chief competitors – Russia and the United States – for regional influence.

Treading the delicate diplomatic line between Washington's and Moscow's clashing interests has not always been easy for Azerbaijani President Heidar Aliyev. But at the moment Baku enjoys cordial relations with both Russia and the United States. Aliyev's cagey diplomacy has been on display over the past week.

On September 18, the Azerbaijani leader hosted a ceremony marking the start of construction on the Baku-Tbilisi-Ceyhan pipeline, a project long championed by US leaders and viewed with suspicion by Russian officials. [For background see the EurasiaNet Business and Economics archive]. Just five days later, however, Aliyev received a warm welcome in Moscow, where he signed a bilateral deal on the division of the Caspian Sea and held informal talks with Russian President Vladimir Putin. The deal may play a pivotal role in breaking the existing deadlock among the five Caspian littoral states over establishing sea boundaries. [See accompanying EurasiaNet story].

Aliyev also signed agreements in Moscow designed to expand educational, scientific and commercial contacts, praising Azerbaijan's "intensifying" relationship with Russia. "Trade between the two countries has increased by 60 percent in recent years," the Azerbaijani president noted.

Azerbaijan's current diplomatic position starkly contrasts with neighboring Georgia's. Since the collapse of the Soviet Union, Baku and Tbilisi have sought stronger ties with the West, especially the United States. Both, to a large extent, have been successful in at least gaining Western diplomatic favor. But Georgia now finds itself embroiled in a confrontation with Russia over alleged support for Chechen separatists. [For background see the Eurasia Insight archive]. Azerbaijan, on the other hand, has managed to reverse negative trends in its relations with Russia.

Of course, Azerbaijan has an asset that Georgia does not possess – namely oil – that increases Baku's diplomatic leverage, especially in dealings with the United States. US Energy Secretary Spencer Abraham, who attended the September 18 pipeline groundbreaking, touted the potential of energy development to promote regional stability. "Our common security interests, our commercial interests and our interests in peace and prosperity will strengthen with each length of pipe laid along this line," Abraham said in comments broadcast on Azerbaijani state television.

Azerbaijan has additionally secured US favor by staunchly backing Washington's campaign against terrorism, for which Baku was rewarded with the suspension of US economic sanctions, imposed under section 907 of the Freedom Support Act.

At the same time, Aliyev has made a determined effort since 2000 to foster warmer ties with Moscow. Achieving this aim has involved some difficult choices, in particular Azerbaijan's decision to renew Russia's lease to the Gabala radar facility. [For background see the Eurasia Insight archive]. Meanwhile, there are also domestic political factors, including Aliyev's reported desire to see his son Ilham succeed him as president, that encourage the Azerbaijani leader to seek common ground with Russian officials.

According to Azerbaijani political analysts, President Putin's visit to Baku in January 2001 prompted Azerbaijani leaders to abandon largely pro-Western policies, as well as to moderate their support for Chechen fighters. At the time, Western criticism over Azerbaijani human rights abuses was on the rise. [For background see the EurasiaNet Human Rights archive]. Meanwhile, Tbilisi did not seize upon similar Russian overtures to Georgia during the same period.

Prior to late 2000, Azerbaijani-Russian relations were often strained. [For background see the Eurasia Insight archive]. Political observers say that pragmatism demonstrated by both Aliyev and Putin made the rapprochement possible. In return for recognition of Russia's regional interests, Aliyev ensured that Azerbaijanis would continue to enjoy access to Russia's labor market. About 2 million Azeris live and work in Russia, sending money to family members in Azerbaijan. Many are dependent on these remittances, thus any cutoff in the ability of Azeris to find work in Russia could upset the delicate socio-economic balance in Azerbaijan.

Another incentive for Aliyev to cooperate with Russia concerns the search for peace in Nagorno-Karabakh. Azerbaijan and Armenia find themselves stalemated in their effort to agree on a political settlement. Armenia is Russia's closest ally in the Caucasus and has enjoyed Moscow's tacit support for its Karabakh stance. In forging closer relations with Russia, Aliyev may be looking for Moscow to use its influence to broker a deal more to Baku's liking. Aliyev reported that he discussed a Karabakh settlement during talks with Putin on September 24, adding that there had been no new developments that would improve prospects for an agreement.

In addition, some political analysts say Aliyev may see Russia as a potential guarantor of a dynastic succession process in Baku. Citing Azerbaijan's recent constitutional referendum, many observers believe that Aliyev is trying to put a mechanism into place that would allow his son, Ilham, to assume the reins of power. [For background see the Eurasia Insight archive]. However, the younger Aliyev lacks the charismatic qualities and the political connections of his father, analysts say. In the event of a dynastic succession attempt, Russian support for Ilham would likely be crucial in determining whether he could survive domestic political challenges and consolidate his authority, observers believe.

It remains to be seen whether any or all of Aliyev's plans will succeed. Nevertheless, local analysts say Aliyev's diplomatic balancing puts Azerbaijan in good position to benefit from future geopolitical twists in the turbulent Caucasus.