The Oil and the Glory

The danger of miscalculation in the forgotten war over Nagorno-Karabakh

Since the beginning of the year, events have rocked places that seemed locked in time. One outcome has been utterly unpredictable oil prices — $114 a barrel one month, and the low $90s for a barrel of crude that we see now. Shorn mainly of the Arab Spring, oil prices would be somewhere in the ...

AFP / Getty Images
AFP / Getty Images

Since the beginning of the year, events have rocked places that seemed locked in time. One outcome has been utterly unpredictable oil prices — $114 a barrel one month, and the low $90s for a barrel of crude that we see now. Shorn mainly of the Arab Spring, oil prices would be somewhere in the $60-$80 range per barrel, according to market watchers such as ExxonMobil CEO Rex Tillerson and Saudi Prince Al Waleed bin Talal. Traders say the Middle East trouble poses risks to the world oil supply, especially if another big oil producer goes off the market, such as Saudi Arabia.

One place the market is excluding from its calculus is Azerbaijan, 1,400 miles further east, which has been shipping between 800,000 and 1 million barrels of high-quality oil into the global market for the last five years. As we’ve discussed, I myself don’t usually think about Azerbaijan in terms of market-shaking instability. Yet, no one expected what we are currently observing in the Middle East, either. As we know from history, including the start of World War I, loose tongues, swollen heads, and distracted minds can lead inadvertently to war.  Hence, Azerbaijan merits a look.

Tomorrow, the leaders of this Caspian Sea nation and its blood enemy, neighboring Armenia, are to meet in the Russian region of Tatarstan in an attempt finally to begin to bury their 23-year-long, on-and-off violence (Azerbaijan President Ilham Aliyev and Armenian President Serge Sarkissian pictured above, respectively, with Russia’s Dmitry Medvedev). When the countries fought in actual combat — from 1988 to 1994 — Azerbaijan lost badly. Armenia captured about a fifth of its territory, including the disputed enclave of Nagorno-Karabakh. Armenia continues to hold this turf, from which all Azeris have long fled or been expelled.

Yet, for at least the last couple of years, Azeri President Ilham Aliyev and some of his ministers have engaged in a loud-mouth, trash-talking contest with Armenia. Earlier this month, a spokesman for the Azerbaijan Ministry of Defense said that ultimately his country would "meet the expectations of the people, the government, and the supreme commander-in- chief and will liberate the occupied land from the enemy." Here is a collection of such statements from both sides. In a piece this month, the New York Times’ Ellen Barry said she found an antsy, pro-war mood in Baku.

Azerbaijan has spent the last several years rearming, spending more than the entire national budget of Armenia on its military. Thomas de Waal of Carnegie has written compellingly of the chance that one side or the other could miscalculate and trigger a resumption of combat. Seventeen years after the initiation of the current ceasefire, it is at least conceivable that time has softened Aliyev’s memory of the mauling that Azerbaijan’s soldiers suffered. It is also in the range of possibilities that Armenian President Serge Sarkissian could perceive the imminence of an Azerbaijan attack, and decided to pre-empt.

In either case, global oil prices would run amok. Considering what happened last time, I also personally think that Azerbaijan could be overrun. De Waal says the outcome locally would be a "catastrophe."

In the talks tomorrow, I was told by diplomats that both sides are likelier than ever to close an initial deal, which would lead to a much longer period of talks. Friends tell me to temper the optimism. It is worth listening to them if only to be braced.

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