The National Interest. Tough Year Looms for Azerbaijan

Hosting the 2012 Eurovision Song Contest did not contribute to a lot of good press for the government of Azerbaijan. European media in particular vacillated between derision over ostentatious spectacle and outrage over authoritarian fiats.

But 2013 may get a lot worse for Baku. A troubled oil sector, an upcoming presidential election, and the potential for rising tensions with archenemy Armenia portend a challenging year for Azerbaijan’s ruling class.

The country’s uncertain oil output is a singular worry. Azerbaijan, a major oil producer in the former Soviet Union, produced 39.3 million metric tons in 2012, down 7.35 percent from a year earlier, according to Socar, the national oil company. Azerbaijan's extraction economy accounts for approximately 53 percent of GDP and 92 percent of exports, according to Transparency International. Meanwhile, the United States imported thirteen million barrels from Azerbaijan in 2011, compared to more than twenty million barrels in 2010.

And this year, Azerbaijan’s sovereign oil-wealth fund will run a deficit in the billions of dollars—a severe problem for a government that depends on the fund for almost 60 percent of its total budget.

But oil revenue woes come as the country prepares for an election. To the shock of no one, Aliev, whose talented father was the last Soviet-era president of the republic and widely thought to be the successor to Mikhail Gorbachev, will run for a third term.Previous parliamentary and presidential elections have seen the ruling Yeni Azerbaijan Party roll over, at times brutally, fractured and flawed opposition parties, and could do so again.

But that Eurovision Song Contest could mean the 2013 presidential election will receive more sustained press coverage than in the past. Popular consternation about oil revenue and pent up frustration over corruption and public sector mismanagement combined with an uncharacteristically unified opposition could create, however unlikely, a more combustible election outlook.

Political instability is not an encouraging ingredient for quieting Azerbaijan’s intensifying cold war with neighboring Armenia (nor, actually, is political stability, which fuels militant rhetoric as a mechanism to maintain a bilateral political status quo). Armenia is also holding a presidential election this year, probably precluding any high-level negotiations between the two sides and adding more worry to a distressing conflict.