Iran’s Azerbaijani Question in Evolution
55
instructed by Iranian operatives to assassinate Gaby Ashkenazi, chief of the Israeli
defense forces, who was expected to visit the Azerbaijani capital in a few months.
122
Tehran clearly feared the increasingly cordial relationship between Baku and Tel-
Aviv, with Azerbaijan, as one Israeli intelligence agent put it, becoming a “ground
zero for Israeli intelligence work. Our presence here is quiet, but substantial. We
have increased our presence in the past year, and it gets us very close to Iran. This
is a wonderfully porous country.”
123
In addition, in early 2012, Azerbaijani
authorities arrested 22 Azerbaijani citizens and accused them of spying for Iran, a
move that soon led to a parallel reaction from Iran. In mid-2012, Iranian media
reported they had interrogated and were holding two Azerbaijan nationals on
charges of espionage. According to the Iranian media, using the cover of cultural
activities, Azerbaijani nationals traveled to Iran‘s Azerbaijani-majority provinces
to recruit Iranians – in fact, ethnic Azerbaijanis – to promote separatism.
124
In the
midst of heated debates in the West over the necessity to strike at Iran over its
nuclear program, what appeared to be Azerbaijan‘s flirtation with Israel and the
United States over providing its soil to intelligence operations made Iranian
officials nervous. At the peak of the crisis, Azerbaijani parliamentarians suggested
changing the name of their country to Northern Azerbaijan, reviving Tehran‘s
paranoia of Baku seeking – possibly in tandem with Iran‘s age-old enemies – to
disintegrate the Islamic Republic from within.
125
The crisis took on a financial
dimension following the stiffening of Western sanctions against Iran that took
place over this period. In fact, for the internationally isolated Iran, Azerbaijan had
represented an important trade partner and an intermediary for access to Western
and global markets. After Iran was cut off from the worldwide electronic banking
system, SWIFT, in early 2012, the importance of the Azerbaijani banking system
became fully apparent. Until then, Azerbaijan had been serving as an important
site for carrying out international banking operations that could not be conducted
in the Islamic Republic, and for conducting international trade in general. Yet in
122
Emil Souleimanov, “Is Azerbaijan Becoming an Area of Confrontation between Iran and Israel?” Central
Asia-Caucasus Analyst, February 8, 2012, http://old.cacianalyst.org/?q=node/5711.
123
Elad Benari, “Azerbaijan Considering Helping Israel in Iran,“
Israel National News, September 30, 2012,
http://www.israelnationalnews.com/News/News.aspx/160429#.V0785ksgdbg.
124
“Iran Questioning Azerbaijani Nationals on Espionage Charges,“ Radio Free Europe/Radio Liberty, July
4, 2012, http://www.rferl.org/content/iran-report-says-two-azerbaijan-nationals-questioned-espionage-
charges/24634989.html.
125
Joshua Keating, “Azerbaijan to Change Name to ‘Northern Azerbaijan’ to Annoy Iran?“, Foreign Policy,
February 2, 2012, http://foreignpolicy.com/2012/02/02/azerbaijan-to-change-name-to-northern-azerbaijan-to-
annoy-iran/.
Souleimanov & Kraus
56
2012, triggered by the mounting crisis between the two neighboring states, the
Central Bank of Azerbaijan (CBA) deprived Royal Bank, owned in large part by Ali
Jam, an American citizen of Iranian origin, of its license to conduct banking
activities in Azerbaijan.
126
In addition, the CBA effectively halted all of Royal
Bank’s transactions, as well as activities carried out on behalf of Iranian
businessmen, who were accused of money laundering. A number of Iranian
businessmen were deported – and the flow of funds from Iran into Azerbaijan
restricted. The bank finally had its license revoked by the CBA.
127
Similarly,
companies and businesses on Azerbaijani territory owned by Iranians were closed
and their assets were transferred from Iranian to Azerbaijani control. This
happened, for instance, with one of Baku’s largest and most important hotels –
Hotel Europa, which had been owned by Iranian businessmen. The hotel was
transferred to Azerbaijani owners, and many employees of Iranian origin were
dismissed. Back then, despite its formal distancing from the Western-Iranian
standoff, Azerbaijan tended to side with the West in financial terms.
By and large, in comparison to the 1990s and early 2000s, the government in Tehran
tends to take Azerbaijani statehood more seriously today.
128
This is caused mainly
by the growing economic power of post-Soviet Azerbaijan along with its increasing
military and diplomatic strength, cemented by its established relations with key
Western nations in the field of oil and natural gas exports. Importantly, since 2014
and especially since 2015, there has been a substantial warming of Iranian-
Azerbaijani relations as both countries, are hungry for foreign investment and
increased regional cooperation, following the striking of the nuclear deal with Iran
in early 2015 and the global fall of oil prices,. As Fariz Ismailzade has summarized,
with oil prices “hit[ting] low levels, Azerbaijan and Iran are looking for ways to
develop their non-oil economy, integrate regional transport networks and boost
mutually advantageous business projects. In that respect, thorny political issues
126
Common knowledge had it that Royal Bank was involved in money laundering for Iranian citizens and
it may ties to Tehran.
127
“Central Bank of Azerbaijan annulled the license of Royal Bank,” Contact.az, June 13, 2012.,
http://www.contact.az/docs/2012/Economics&Finance/071300005337en.htm#.V2ftg2iLSHs
128
Interviews by Josef Kraus with representatives of Azerbaijani and Iranian political circles, whose names
are withheld at their request.