1. Letter from Baku: the City of Winds in the Land of Fire
APRIL 1, 2014
By Tim Stanley, Market Director, Control Risks Russia
There’s something slightly unreal about arriving in Baku. The trip from the airport sets the scene. For starters,
there’s the taxi fleet – London-style cabs painted regal purple, by decree of the First Lady. Faux medieval
crenellations line the velvet-smooth airport highway; closer to town they yield to the fluid lines and gleaming white
tiles of what looks like an Azerbaijani space centre but is, in fact, the Heydar Aliev Centre, a cultural complex
designed by celebrity architect Zaha Hadid.
Surveying it all from posters and statues across the land is the silent-movie star visage of Aliev himself, the
former President and founder of the modern state. This is Alice in Wonderland meets Ali Baba.
Baku – Faux Medieval meets the space age
The final descent into town deposits you onto an elegant, six kilometre embankment, framed on one end by an
industrial port, railway terminus and luxury apartments and on the other by the medieval Old Town (a Unesco
World Heritage Site). Fire-worshipping Zoroastrians and Arab princes built its Palace of Shirvanshars,
caravanserais and hammams while Europe was still in the Dark Ages.
The embankment starts as Nobel Avenue, named after the family who made its fortune here in the 19
th
century.
Half-way along, the road suffers a democratic revolution and becomes Oil Workers’ Avenue. This grand
promenade is lined with Belle Époque palaces trimmed in Moorish whimsy, built by the same Nobels,
Rothschilds, oil traders and merchants who made and lost fortunes during the first great oil boom. Many of these
ornate palaces are now home to a different aristocracy: Harry Winston, Tiffany, Armani, Gucci and Dior have all
taken up residence.
The embankment’s real business is to hold back the choppy, oil-streaked waters of the Caspian Sea. A sea in
name only, it is in fact the world’s largest enclosed body of water, fed by rivers navigable just six months of the
year. Its winds are legendary, and give the city its name. Deep below its waters is the source of all the above-
ground wealth: hydrocarbon reserves in fields bearing names both exotic and optimistic, like the Umid (‘hope’)
field.
For centuries, inhabitants knew this land of eternal fires and mud volcanoes had something special – the name
Azerbaijan means ‘Land of Fire’. Commercial development began in the 19
th
century and was swift and sudden.
Wrenching social changes resulted for many, and untold wealth for the few with access to resources, capital and
technology.
By the end of the century, according to one recent account, Baku was equal parts ‘Dodge City, mediaeval
Baghdad, industrial Pittsburgh, and 19
th
century Paris’. Anyone interested in a fictional account of Baku in the

2. early 20
th
century must read Ali and Nino, a love story between an Azerbaijani Muslim boy and Georgian
Christian girl steeped in the contradictions of the time – ethnicity, religion and language.
The inequalities created by Baku’s sudden wealth resulted in militant labour disputes and, ultimately, revolution
against the tsars in distant Moscow. Former resident Iosef Dzhugashvili, – better known as Stalin – was a product
of this environment. He cut his revolutionary teeth here.
The Soviets understood the value of these resources. Stalingrad was such an epic battle in part because if that
city fell, the Nazis could next take Baku in a matter of days. Soviet collapse led to war with neighboring Armenia
and a period of at times bloody instability. By the early 1990s, oil production had seen several booms and busts,
but was open to restructuring and capital investment. Enter global oil giant BP at the head of a global consortium
which developed three offshore fields, bringing forth a massive revenue stream and western-backed stability.
Analysts predict that ‘peak oil’ may be upon us, but December 2013’s signing of the Shah Deniz II gas supply
contract with BP and its partners should guarantee several decades of resource dollars. This could be extended,
if territorial maritime disputes with Iran and Turkmenistan can be resolved.
Heydar Aliev Centre – a sign of Baku’s prosperous future?
Azerbaijan’s future, then, appears stable and prosperous, and the government’s investment in infrastructure is
paying off. Profile-boosting events such as the inaugural 2015 European Olympics, an annual Tour d’Azerbaidjan
cycle race and UEFA’s Euro 2020 (candidate city) are all on the nation’s sporting calendar. A repeat bid for the
summer Olympics (bids for 2016 and 2020 were unsuccessful) is likely. Low-level corruption is disappearing, the
civil service is becoming more professional, and human capital now boasts the return of western-trained ‘re-pats’
to positions of responsibility in both public and private sectors.
Challenges remain. Critics point to the authoritarian nature of the current administration, stage-managed
elections, accusations of massive graft, and a drop in transparency. Whether the threat is an ‘unfreezing’ of the
conflict with Armenia over Nagorno-Karabakh, the rise of militant Islam, demand for social change in an
‘Azerbaijani spring’ or a sudden economic collapse spurred by ‘Dutch disease’, multilateral organizations counsel
pluralistic democratic practices and a diversified economy.

3. Occasionally, the contradictions between the traditional and the reformed are evident: national oil company
SOCAR and sovereign wealth fund SOFAZ publish their books, only to reveal transfers of some $15 billion
annually to the state budget.
Baku may someday be home to the Olympics. For now, it is home to a series of contradictions. The city is
consumed with ultra-modern ambitions but undermined by a centuries-old ethnic conflict. Baku is, after all, the
capital of a nation in which some 60% of its ethnic population holds citizenship in a neighbouring country – Iran.
The streets of this quietly conservative Islamic society are lined with British and Irish pubs.
At one point in Ali and Nino, a teacher tells his class: “It can therefore be said, my children, that it is partly your
responsibility as to whether our town [Baku] should belong to progressive Europe or to reactionary Asia”. After a
century of upheavals, the residents of Baku are still, it seems, trying to decide.