Ilham Aliyev’s presidency has been marked by stabilisation of the political life of the country and economic growth driven by oil exports. This stability, however, has come with the consolidation of authoritarian rule, greater suppression of freedoms and an increased reliance by elites on corruption and patronage networks to dominate virtually all aspects of public life. With a marginalised and demoralised opposition, little independent media and rent-seeking elites who have vested interests in the preservation of his power, Ilham Aliyev has a level of control over society that his father never possessed. The international community has little leverage with which to pressure the regime, but it should do more to persuade the leadership to see that even its own self-interests lie in gradual but genuine liberalisation.

The government has developed effective methods for keeping political forces, non-partisan civil groups, media, religious communities and independent business alike from becoming self-sustainable challengers. It appears to have deliberately promoted a sense of impunity so as to ingrain self-censorship in the public and discourage any unsanctioned collective action. Due to restrictive readings of the existing laws, it denies the right to freedom of assembly. Opposition demonstrations are regularly prevented and sometimes violently broken up. Civil activists often find themselves at the mercy of local authorities and are occasionally denied the right to hold activities outside of the capital. The denial of registration for NGOs and religious communities has been used as a tool to restrict their activities. Mosques have also been shut down by the government on questionable grounds, raising the spectre of pushing them underground and stoking radical tendencies.

Although President Aliyev exerts firm control over the government, he is not all-powerful. He depends on the elite to preserve his power, and unless a direct challenge is involved, he is not interested in revising the delicate balances within the system by removing powerful subordinates, even if he is unsatisfied with performance. As a result, domestic politics are shaped less by unequal opposition-government contests than by internal dynamics and occasional power struggles within the ruling elite.

Oil revenues have further entrenched a stagnant political system, making it even more resistant to reforms. But the oil revenues are levelling off and are projected to gradually decline within a few years, which could lead to economic problems and growing public frustration. The closed political system prevents meaningful debate on Azerbaijan’s long-term challenges and stimulates a sense of apathy and distrust. To protect state stability, a start on economic and political reform is essential.

The continuation of “business as usual” runs the risk that Azerbaijan could squander an historic opportunity to use its energy resources to build a more durable state system and a prosperous nation. The growing over-reliance on the energy sector, discrepancies in wealth distribution and public disenchantment with both the government and traditional opposition parties increase the likelihood of a surge in radicalism and instability in the medium to long term. It is in the regime’s own interest to open up political space, take steps to rein in corruption and de-monopolise the economy, while it still stands on solid financial and political ground. Azerbaijan has already reached the peak of its oil-driven GDP growth rates, which ran as high as 35 per cent in 2006 but are expected to slow to about 3 per cent in 2010 and 0.6 per cent in 2011. If the authorities further delay reform, they may lose the ability to control future developments and meet growing public expectations.

President Aliyev could reinforce both his domestic and international credentials by embracing deeper structural change. Genuine steps towards reform could also engender a more sympathetic attitude from the international community towards his most important policy problem, the conflict with Armenia over Nagorno-Karabakh. In the meantime, continued backsliding on human rights, including politically motivated arrests and the persecution of government opponents, casts a shadow over Azerbaijan’s relations with important allies. International actors need to impress on the leadership that they run counter to both the country’s international commitments and the government’s own interests.

Baku/Tbilisi/Istanbul/Brussels, 3 September 2010