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Historical Relationship

With the collapse of the Soviet Union in 1991, Tehran was threatened by the rise of an independent Azerbaijan. Given the 30 million ethnic Azerbaijanis living in Iran, constituting approximately 16 percent of Iran's population separatist nationalism was a realistic concern. However, Iran officially recognised the independent state of Azerbaijan despite the existence of two provinces with the same name within Iranian borders.[1]

Iran, in response to lingering hostility from Baku, made an effort to strengthen ties with Christian Armenia, the ‘bitter rival of Azerbaijan.’[1] Furthermore in the 1990s, Azerbaijan acceded to US wishes that Iran be excluded from regional pipeline plans.[1]

Pipeline politics

As of August 2012, Azerbaijan planned to exclude Iranian oil contractor Naftiran Intertrade Company (NICO) from a pipeline project extending from the Caspian region to Europe. [2]

Energy analyst at Bloomberg Philip Chladek argued in mid-2012 that it was unlikely that any company from Iran would be able to participate in international projects given tensions at the time. [3] There was speculation as to whether NICO would be able to remain in the Shah Deniz consortium, a BP-led natural gas development, in which NICO held a 10 percent stake as of August 2012.[4]

Nuclear Issue and Sanctions in Iran

According to Al-Arabiya’s Amanda Paul, in the event of a nuclear strike against Iran, Azerbaijan could be attacked in retaliation by Iran. She cited prime targets in Azerbaijan would likely be the Israeli and American embassy. [5] This belief is supported by the discontent Iran displays for the close ties between Azerbaijan and Iran’s enemies. In particular, Baku’s close military ties with Israel represent a threat to Tehran.[1]

A Reuters report notes that as of 16 July 2012, India’s biggest buyer of Iranian oil, MRPL, bought Azeri as well as Saudi and Emirati oil in the face of tighter sanctions. [6] As an alternative, MRPL signed a two-month (renewable) deal with Azerbaijan to replace the sanctioned Iranian exports. Moreover, as of August 2012 the Indian Oil Corp, the biggest oil refiner in India, was set to buy 10,000 barrels per day from SOCAR, the Azerbaijani national oil company.

Disputed oil discoveries

In July 2001, Azerbaijani and Iranian ships had a small confrontation across their maritime border, at a disputed oil field in the Southern Caspian. Since then, both sides worked to establish the maritime border diplomatically. .[7]

According to a WikiLeak-ed cable from May 2009, in 2001 an agreement was made between Iran and Ali Asadov, senior energy advisor to Azerbaijan’s President Aliyev. [8] Under the terms of the status quo' agreement, neither country would exploit the resources found in a particular disputed region of the Caspian. However there were reported movements by an Iran drilling rig in the direction of Baku’s territorial waters. Pointing out to Iranian provocations, Asadov claimed, “with even the smallest conflict in the region, all energy activity in the Caspian Sea will be stopped.” He further added that it was not in Azerbaijan’s interests to escalate the tensions, saying, “you carry a gun so that others will think twice”.[8]

Reported in June 2012 in Eurasianet, Iran’s first discovery of oil in the Caspian Sea in over a hundred years could lie in Azerbaijan’s territory. [9] No details as to the precise location were made available, however regional analyst Alex Jackson pointed out that increasing maritime tensions and border disputes could result in further militarisation in Baku and Tehran, and potentially preclude Russian involvement in attempts to resolve the dispute.[9]


  1. 1.0 1.1 1.2 1.3 "Baku-Tehran Tension Useful for Elites on Both Sides" Eurasianet, 31 July 2012.
  2. "Azerbaijan to exclude Iran from gas pipeline to Europe" Bloomberg, 1 August 2012.
  3. "Azerbaijan to exclude Iran from gas pipeline to Europe" Bloomberg, 1 August 2012.
  4. "Azerbaijan to exclude Iran from gas pipeline to Europe" Bloomberg, 1 August 2012.
  5. "The Iran dilemma: between a rock and a hard place" Al-Arabiya, 5 August 2012.
  6. "India's top buyer of Iran oil turns to Azeri, Saudi" Reuters, 16 July 2012.
  7. "Azerbaijan-Iran Foreign Relations" Iran Tracker, 8 April 2010.
  8. 8.0 8.1 "Presidential Advisor Predicts That Tensions Over The Iranian Drilling Rig Will Escalate" WikiLeaks, 17 November 2009.
  9. 9.0 9.1 "Iran's New Oil Discovery May Be In Azerbaijan's Waters" Eurasianet, 19 June 2012.