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The hydrocarbon wealth had allowed President Aliyev to turn his capital into a model city. It also allowed him to expand his defense budget. Military spending went from $175 million in 2004 to an estimated $3.1 billion in 2011, exceeding Armenia’s entire national budget.64 Even with the decrease in oil revenues, the defense budget for 2019 was still almost $2 billion, representing 13.4% of all state budgetary expenditures.65

Since the military expenditures were paid by the money earned from energy exports, the Baku-Ceyhan pipeline became an Armenian strategic target. Nagorno-Karabakh’s “minister” of war, Levon Mnatsakanyan, said that in a new war the pipeline would be one of the first targets. “This is a very serious financial resource for Azerbaijan and we need to deprive them of these means,” he said. “If we’d known the situation would be like this today, we’d never have signed that truce 20 years ago.”66 During the 2020 6 week war, the pipeline came under Armenian fire.

Post-petroleum Azerbaijan

The drop in the world’s oil prices, and the subsequent drop in its GDP, was a wake-up call to Azerbaijan. The government realized it needed to begin planning for a post-petroleum economy. Baku began to look for other projects, and to capitalize on its location in the middle of the Eurasian continent. They decided to develop the country into a transportation hub. Some of the projects had been on the board since the early days of independence; economics now dictated they be implemented.

While pipeline politics in Azerbaijan was focused on the west (Turkey and Europe) or north (Russia), there was still another major player in the South Caucasus, China. Beijing carved a niche for itself in Azerbaijan’s oil

64German, Tracey. “The Nagorno-Karabakh Conflict between Azerbaijan and Armenia: Security Issues in the Caucasus,” Journal of Muslim Minority Affairs 32/2, June 2012,

65Mendiyev, Mushwig. “Azerbaijan Announces All Time High Defense Budget for 2019,” Caspian News, 22 January 2019. Web. Retrieved 26 June 2019. https://cas piannews.com/news-detail/azerbaijan-announces-all-time-high-defense-budget-for-2019- 2019-1-22-18/.

66 Khojoyan, Sara and Anthony Halpin. “Frozen War Thaws in Russian Backyard as Karabakh Flares,” Bloomberg, 22 October 2015. Web. Retrieved 26 June 2019. https://www.bloomberg.com/news/articles/2015-10-22/frozen-war-thaws-in-rus sian-backyard-as-nagorno-karabakh-flares.

112 J. J. COYLE

sector. China’s energy giant, Sinopec, had a stake in two projects—K&K and Gobustan—with investment of more than $250 million.

China was building infrastructure in Azerbaijan and was actively helping Azerbaijan reconstruct and repair thermoelectric and hydropower plants. The China National Electric Equipment Corporation, or CNEEC, is the top performer in this area. In 2007, this corporation won a tender to rebuild the Azerbaijani Thermoelectric Power Station and modernize its seven power-generating units. This thermoelectric power station accounts for 45% of all the electric power generated in the country. In 2013, the Azerbaijani Thermoelectric Power Station generated 7.63 billion kilowatt-hours of electricity. In 2010, CNEEC also acquired the right to repair the Mingechevir cascade of a hydropower plant comprised of the Mingechevir and Varvara hydropower stations.67

In 2013, Azerbaijani Deputy Prime Minister Abid Sharifov and Chinese ambassador to Azerbaijan Hong Jiuyin signed an agreement on economic and technological cooperation. Under the agreement, China agreed to provide Azerbaijan with grant aid worth $4.89 million to promote bilateral economic and technological cooperation. In return, Azerbaijan agreed to import various Chinese products.68 By 2018, officials from the two countries were discussing the creation of the Trans-Caspian International Transport Route (TCITR), a corridor of 6500 kilometers linking Asia with Europe. A major link in this transportation corridor was the Baku-Tbilisi-Kars Railway. This rail line was originally proposed in 1993, after Turkey closed its border to a railroad that traversed Armenia. In 2007, leaders of Azerbaijan, Georgia, and Turkey agreed to construct the line. The planning was stimulated when the US and EU sanctioned Russia over its occupation of Crimea and the Kremlin responded by banning the shipment of EUorigin foodstuffs through Russia. This new, southern rail route would not cross Russian territory. Under pressure from Armenian diaspora groups, Western powers refused to provide financing. They hoped to force the planners to incorporate the older, Armenian line into the new route. (This

67Babayan, David, ibid.

68“China, Azerbaijan Sign Deal on Economic Co-Op,” China Invests Overseas, 2013-12-09. Web. Internet. Retrieved 26 June 2019. http://www.china-invests.net/201 31209/32048.aspx.

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would have reopened a portion of the Turkish border with Armenia.) Instead, Azerbaijan and Turkey quickly agreed to finance their portions of the project, but impoverished Georgia was unable to do so. The State Oil Fund of Azerbaijan agreed to lend Georgia the money needed to construct its portion of the line.69 As of July 2019, the Azerbaijan Railways CJSC was ready to begin passenger transportation once customs issues were resolved.70 The first cargo was delivered from Turkey to Georgia on 23 July 2019.71

Once completed, the TCITR would cut the transportation time of freight from Urumqi in China to Europe from about 60 days by sea to 14 days by train, and at one-fourth the cost of air freight. “Cooperation with China in the transit sector is one of our priority areas,” said Azerbaijan’s Minister of the Economy Shahin Mustafayev. “In 2017, the trade turnover between Azerbaijan and China increased by 43%, amounting to $1.2 billion. Exports to this country grew 2.1 times.”72

The International North-South Transit Corridor is another transportation project. Once completed, it has the possibility of bringing Armenian allies Iran and Russia closer to Azerbaijan. A few days after the April 2016 “Four Day War” in Karabakh, Russian Foreign Minister Sergey Lavrov met with his Iranian and Azerbaijani counterparts in Baku. The three agreed to integrate their transportation infrastructure to create a land corridor uniting India with the European Union.73 The first step in

69 Shepard, Wade. “Reconnecting Asia: The Story Behind the Emerging Baku- Tbilisi-Kars Rail Line,” Forbes, 15 December 2016. Web. Retrieved 30 July 2019. https://www.forbes.com/sites/wadeshepard/2016/12/15/reconnecting-asia-the- story-behind-the-emerging-baku-tbilisi-kars-rail-line/#d9c60b239785.

70Mammadli, Kamala. “Azerbaijan Ready to Launch Passenger Transportation via Baku- Tbilisi-Kars Route,” Trend, 29 July 2019. https://menafn.com/1098816871/Azerbaijan- ready-to-launch-passenger-transportation-via-BakuTbilisiKars-route.

71Mammadova, Tamilla. “First Cargo Delivered via Baku-Tbilisi-Kars Railway from Turkey to Georgia,” Trend, 24 July 2019. Web. Retrieved 31 July 2019. https://www. azernews.az/business/154002.html.

72Shahbazov, Fuad. “China to Europe by Way of Azerbaijan’s Trans-Caspian Gateway,” The Diplomat, 16 February 2018. Web. Retrieved 29 July 2019. https://thediplomat. com/2018/02/china-to-europe-by-way-of-azerbaijans-trans-caspian-gateway/.

73Korybko, Andrew. “Russia’s New Thinking Towards Armenia and Azerbaijan: An ‘Obstructionist’ vs. an ‘Integrationist,’” Global Research, 16 September 2017. Web. Retrieved 23 July 2019. http://www.globalresearch.ca/russias-new-thinking-towards-arm enia-and-azerbaijan-an-obstructionist-vs-an-integrationist/5609262.