There are few countries in the world that have such a glorious history and culture as Iran. However, these days, with its present leadership, Iran is far from the ideal neighbor. Tehran is paranoid and unpredictable; fixated with security -- partially a consequence of its terrible experience with the West in years gone by. Iran's ongoing battle with the West over its nuclear program has increasingly isolated the country, making this paranoia worse. Yet despite the efforts of the international community to exclude Iran, the country remains a significant regional power, not only via its proxies in the Middle East, but by utilizing the remaining windows it has open in its neighborhood to influence the region. The South Caucasus remains a theatre of influence for Iran.
Iran and Azerbaijan have had a turbulent relationship. Despite the fact that Iran was one of the first countries to recognize Azerbaijan's independence in 1991, the two countries share a common culture, history and religion and have increasingly good economic ties, their political relationship is frequently strained. While this is partially a result of Tehran meddling in Azerbaijan's domestic affairs, including by allegedly providing financial and ideological support to fundamentalist Islamic groups, it is also a consequence of Azerbaijan's relationship with the West, including Israel. Since independence, Azerbaijan has had a close relationship with Israel, making it only one of a handful of Muslim states to enjoy such warm ties. In a media interview earlier this week, Israel's ambassador to Azerbaijan underlined the strong ties, stressing they are set to strengthen "at high spirit" in 2013. With bilateral trade currently hovering around $4 billion, Azerbaijan is Israel's top trading partner among Muslim states, and the second-largest source of Israel's oil after Russia. Israel represents Azerbaijan's second-largest oil customer and via the Ashkelon-Eilat Trans-Israel Pipeline, a crucial transit point for Azerbaijani oil flowing to Asia's growing markets. These days, as Israel develops its gas sector, it wants to learn from Azerbaijan's experience in this field. For Israel, with its relationship with former ally Turkey in tatters, Azerbaijan has become an increasingly important element in its regional foreign policy outreach.
Azerbaijan also has close and important military cooperation with Israel (Israel is not bound by any embargo on arms sales to Azerbaijan). Back in the early '90s, Azerbaijan's only access to modern military technology was via Israel. Israel has also been involved in modernizing the Azerbaijani armed forces for years. Unfortunately, Iran is paranoid about these close ties, being irked in particular by the military-defense cooperation. Baku has been unable to reassure Tehran that it should not feel threatened by Baku's relationship with Israel. As an Iranian diplomat told me, “Iran feels threatened by Azerbaijan's relationship with Israel and wants Baku to change its policy.” Tehran seems convinced that Azerbaijan is being used by Israel as a base for intelligence operations, while also remaining fearful that Azerbaijan may one day allow Israel to use its airfields to launch an attack on Iran. Yet, Baku is not in a position, nor would it want to be, to provide this type of support to Israel. Under the Azerbaijani Constitution, foreign bases or forces are not allowed in Azerbaijani territory. This is backed up by a 2005 Baku-Tehran non-aggression pact, which underlines that Azerbaijan would never allow its territory to be used against its neighbors. Secondly, Iranian retaliation for an Israeli strike would probably come straight at Azerbaijan, with key targets being energy infrastructure and the Israeli and US embassies. While Iran may be under international sanctions, defense spending still accounts for some 21.7 percent of its state budget.
Clearly military action against Iran would be disastrous for Azerbaijan. A nuclear Iran would also be ruinous. With elections in Israel seemingly set to bring Benyamin Netanyahu and a hard-line coalition to power, pushing for military action on Iran, unless the new round of 5+1 talks are successful, Azerbaijan may find itself trapped in an increasingly explosive neighborhood, having to make very difficult foreign policy choices.