the challenges facing landlocked developing countries: a case study ...

met and promised to seek greater political and economic cooperation. Both countries have
been cooperating on the construction of the new Baku-Ceyhan pipeline.
Unfortunately, Azerbaijan’s recent political history has otherwise been marked by domestic
instability and regional boundary conflicts. Since independence, Azerbaijan has suffered
several coups and attempted coups, many of which have related directly to the current level
of success of the Azerbaijani war against Armenia over Nagorny Karabakh. The ongoing
struggle with Armenia over this enclave, situated between the two Azerbaijani territories,
continues to dominate Azerbaijan’s political scene. Dating back to the 1920s, the conflict’s
roots lie in a debated Soviet boundary demarcation. It was not, however, until the late 1980s
that the conflict exploded into a full scale military conflict and the resulting border closure.
The dispute has left the country of Azerbaijan divided into two disjoint sections, severely
complicating transport to and from the western enclave.
Boundary disputes over the Caspian Sea and its rich natural resources have further weakened
Azerbaijan’s regional relations. The most notable of these disputes has been with
Azerbaijan’s southern neighbor Iran. Tensions escalated in July 2001 when two Azerbaijani
ships surveying the Caspian Sea were confronted by an Iranian gunboat and forced to turn
back. Azerbaijan’s economic ties to the US and Israel and the presence of separatist
Azerbaijani groups in Iran have further weakened relations between the two countries.
Paralleling the deteriorating relations, Azerbaijan’s exports to Iran have fallen from 24% of
total exports in 1997 to less than 0.5% in 2001.
Azerbaijan’s relations with Russia have shown recent signs of improvement, but have
traditionally been uneasy as a result of Azerbaijan’s support for Chechnya. During the first
Chechen conflict in 1994, Russia imposed a complete transport blockade of Azerbaijan,
closing both its maritime and overland borders. At that time, Russia was a vital trading
partner of Azerbaijan accounting for 70% of its exports (Hadjy-zadeh 2000). Russia’s close
ties and military support for Armenia, as well as property right disputes on the Caspian Sea
have further contributed to the strained relations. Current Russian President Vladimir Putin,
however, has demonstrated a new resolve to strengthen relations with Azerbaijan, including a
proposed settlement over the disputed areas of the Caspian Sea.
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