Russian President Vladimir Putin, right, walks with Azerbaijan's President Ilham Aliyev, on Aug. 13, 2013.

Russian President Vladimir Putin, right, walks with Azerbaijan's President Ilham Aliyev, on Aug. 13, 2013. AP Photo/RIA Novosti Kremlin, Mikhail Klimentyev, Presidential Press Service

Azerbaijan Is Behaving Like a Mini Russia

Azerbaijan's geography and natural resources make it a convenient US and EU ally. But the mercurial behavior of this pint-sized petrostate is creating some geopolitical problems.

The West’s renewed difficulties with Russia have once again highlighted the importance of cutting resource-dependency on antagonistic states. No one can disagree that Europe surely must find alternative sources of natural gas. And it is vital that the US establish strong links with former Soviet republics. Accordingly, the US and Europe have turned to Azerbaijan as an ideal diversifier to Russia. The young nation has abundant energy resources and a highly strategic geographic location—wedged between Russia and Iran.

But it turns out there are plenty of reasons to be uneasy about the West’s blossoming relationship with Azerbaijan. Political repression and antagonism toward weaker neighbors make the nation seem like a miniature Russia. Yet aside from empty rhetoric, there is little evidence that the US or Europe will slow their courtship of president Ilham Aliyev and his authoritarian regime.

Azerbaijan’s aspirations for global prominence are abundantly clear. Three flame-shaped towers dominate the skyline of the capital, Baku, each outfitted in sparkling orange-and-blue-tinted glass. On the highway to the airport, foreign businessmen are transported by black-cab taxis imported from London. The nation’s leadership want Baku to be a magnet for global investment, and over its short history, it has shown an ability to prosper in a world of decentralized global order.

Yet, just a couple hundred miles west of the glittering capital, things are not so glamorous. For nearly 30 years, the mountainous terrain of the autonomous Nagorno-Karabakh Republic has been a scene of dire hostility. Legally part of Azerbaijan, the territory has been governed by ethnic Armenians since a war of secession, stoked by neighboring Armenia, broke out in the late 1980s. While a 1994 ceasefire is technically still in place, skirmishes along the border with Azerbaijan proper are common, and tensions between the two nations have been steadily escalating of late. In July of 2014, border violence reached an all-time high since 1994, leaving eight Azerbaijani and two Armenian soldiers dead, according to Reuters; and both nations pointing fingers as to who violated the ceasefire first.

In January, the mediating Organization for Security and Co-operation in Europe, or Minsk Group, headed by France, Russia and the United States, called for a bilateral de-escalation and ordered Azerbaijan to honor its commitments to a peaceful resolution of the conflict. Aliyev bit back, demanding that “measures must be taken” by the Minsk Group to push Armenia out of the territory—saber rattling that no doubt irritated the Russians, who maintain a mutual defense agreement with the Armenians.

Nagorno-Karabakh has been just one of several cases in which an increasingly assertive Azerbaijan has upset both its neighbors and the West. The country’s burgeoning confidence and geopolitically strategic importance means that such trends are likely to continue, with little retort from the US or Europe.

Much of Azerbaijan’s ascendance—both in concrete and self-proclaimed terms—can be attributed to an incredibly dynamic economy. Between 2006 and 2008, it was the fastest growing in the world, expanding at an average annual rate of 28%—inspiring massive foreign investment, capped off by the launch of a Condé Nast glossy. Expansion has since remained relatively robust, helped by large oil and gas reserves in the Caspian Sea. However, with about half of the economy reliant on oil exports, the 50% fall in prices over the past seven months will inflict a significant drag on growth. Estimates generally indicate that the economy increased just 4% last year, and a similar figure is expected for 2015.

Strengthening political and economic relations with China and increased focus on gas should help boost revenue in future years, but the near-term sharp deterioration in growth could could provoke disquiet in a population defined by starkly contrasting levels of income inequality.

But Aliyev has a number of tools at his disposal for effectively neutralizing criticism. First, there’s the State Oil Fund of the Republic of Azerbaijan (SOFAZ), which is a $40 billion sovereign-wealth fund that the government has been using to fill gaps in the annual budget, sometimes accounting for more than half of government revenue. Such use of the fund should help ease the impact of declining oil income over the short-term.

The second tool, which has been more frequently employed since Aliyev’s reelection in 2013, involves summary crackdowns on all signs of dissent. Azerbaijan’s growing middle class has become increasingly attuned to the behavior of elected leadership, particularly signs of corruption, and repression of political opposition. Aliyev’s response to criticism has involved arresting investigative journalists and civil-society activists, in addition to targeting NGOs that promote democracy, including the US-funded International Research and Exchanges Board (IREX). The most newsworthy recent instance was the Dec. 26 raid on the local bureau of Radio Free Europe/Radio Liberty (RFE/RL), a US government-funded news service.

Aliyev showed little regard for ensuing international criticism. In September, the European Parliament adopted a resolution condemning human-rights offenses in the country. Azerbaijan responded that, “if this attitude continues, Azerbaijan will be forced to once again discuss cooperation with the European Parliament.” Perhaps most egregious, the raid on RFE/RL came several days after John Kerry spoke with Aliyev by telephone, beseeching the leader to ease his suppressive tactics. Clearly, Kerry’s words went unheeded.

In recent weeks, there have been more calls from within the EU and US for sanctions against Aliyev and his regime. But the likelihood of any actual reprisals is remote.

This is because condemnation from the US and Europe carries little weight in Baku. Azerbaijani leadership knows it has something Europeans need. Gas imports from Azerbaijan took on new significance in 2014 as Europe sought to dampen reliance on Russia. A $45 billion Shah Deniz II gas field project will allow Azerbaijan to at least doublegas exports by 2020, and correspondingly increase its role in European markets by a substantial margin. While Azerbaijani gas will probably meet only 2% of European demand over the next several years, a further deterioration in relations with the Kremlin could see a swift escalation in dependence on Azerbaijan’s resources. Moreover, the US will be reliant on Azerbaijan as a key transit point when it transports troops out of Afghanistan.

Notably, Azerbaijan has been unafraid of rankling its more powerful neighbors—Russia and Iran; a trend that has proven attractive to Western interests for obvious reasons. The country has angered Iran by allegedly allowing Israel access to bases near the Iranian border. Additionally, along with Kazakhstan and Turkmenistan, it has been in dispute with Russia and Iran for more than 20 years over maritime boundaries in the Caspian Sea. And when it came to a 2012 United Nations resolution condemning the actions of the Assad regime against Syrian revolutionaries, Azerbaijan sided with the US, and against a vocally pro-Assad Russia and Iran.

But a special affinity for taking jabs at Putin or the Ayatollah does not make Azerbaijan an unquestioning doormat to Western interest. In a short letter to The Wall Street Journal published in early January, the Azerbaijani ambassador to the US, Elin Suleymanov, claimed that criticism of the country’s handling of the RFE/RL case was an “ideological misinformation campaign.” He added that “financial mismanagement” spurred an investigation into RFE/RL, but did not say why that somehow warranted a raid. The letter also denied that world-renowned Azerbaijani human-rights activist, Leyla Yunus, was suffering from ill health while governmental detention, and did not explain why she was arrested in the first place.

Other methods to deflect negative attention have been more subtle, but nonetheless disreputable. Last September, The New York Times revealed that, in 2012, Azerbaijan’s government hired a Washington, DC-based public relations and lobbying firm with the purpose of expanding its relationships with US thinktanks—an effort to bolster public opinion of the republic and highlight its important role as a security partner in a notoriously fraught region. Former British prime minister Tony Blair has led a highly criticized public-relations campaign on behalf of the country.

Such audacity has so far been tacitly encouraged. On January 20, Germany welcomed Aliyev for a two-day visit that concluded with a meeting with chancellor Angela Merkel. Issues of human rights and Nagorno-Karabakh were treated with benign, almost sympathetic language, and the German leader instead focused on the practicalities of energy security. Merkel noted the growing role that Azerbaijan plays in Europe’s energy-sourcing, and added that Germany intends to further develop relations between the two nations. Merkel cannot be blamed for focusing on the German national interest. In a world where Western influence is in decline, domestic issues take precedence.

Azerbaijan’s ability to profit from a growing uncertainty of global order looks set to continue for now. However, relying disproportionately on the energy sector for economic growth, stifling the middle class, and behaving like an indiscriminate gadfly toward large powers are not viable strategies for long-term stability. It seems that Aliyev is modeling himself on Vladimir Putin, despite frequently butting heads with the Russian leader. One would think that, should it continue to mirror the repressive policies of its bearish neighbor, Baku would be subject to the same level of international pushback as Moscow. But, for the time being, Mr. Aliyev will get away with what he can.