The Caspian Sea is not a sea, it is a lake. You constantly have to remind yourself of that fact as you walk along the waterfront at Baku, capital of Azerbaijan, on its western shore. Salty waves lap against the concrete wall of the promenade. The water stretches to the horizon, its surface interrupted only by rusty ferries chugging across the bay and impassive clusters of skeletal oil derricks.

This vista is inherently deceptive. It offers the promise of far-flung places, but the Caspian has no outlet. And so Baku, which has the feel of a seaside city, is effectively land-locked. This geographic handicap is offset by geologic good fortune. Early settlers dug wells in search of water and found oil.

For centuries they scooped it out in leather buckets and used it to fuel the flames of their fire-worshiping religion.

Even after the arrival of Islam, oil remained central to the city’s existence, but it wasn’t until the 19th century, that oil extraction in Baku evolved from a local cottage industry into a lucrative international business. By 1898, Baku’s oil production overtook that of the United States, and at the beginning of the 20th century Baku was the source of 51 percent of the world’s oil.

During those early boom years, tycoons such as the Nobel brothers and John D. Rockefeller took a slice of Baku’s most valuable asset, but there was plenty to go around. The wealth generated by the city’s first oil boom was celebrated in architecture. Oil barons constructed dazzlingly ornate mansions along the waterfront, drawing inspiration from Venetian and Moorish palaces, as well as from Gothic and Art Deco styles. With these fabulous buildings, the magnates proclaimed their faith in Baku’s future.

But in 1920, the Red Army invaded Azerbaijan and the country became part of the Soviet Union. The Communists seized private property and subdivided mansions into apartment blocks. Baku’s nationalized oil industry continued production, supplying more than threequarters of the U.S.S.R.’s consumption, but the oil fields suffered from a lack of investment. Pollution turned parts of the surrounding countryside into an acrid wasteland, and the vast Caspian — which, at approximately the size of Montana, is the largest lake in the world — swilled with poisonous slicks.

After regaining independence in 1991, Azerbaijan soon was sidetracked by a vicious war with neighboring Armenia over the disputed territory of Nagorno Karabakh. Today, many of Baku’s 2 million inhabitants are refugees from that conflict. In the first five years after independence, Azerbaijan’s economy shrank by 60 percent, creating deep social problems that persist today. Unemployment remains high, and up to 40 percent of Baku residents live in poverty.

Fledgling Azerbaijan faced a unique problem. It was blessed with huge energy reserves, but it had no independent means of export. Almost all of the oil and gas had to flow through Russia’s antiquated infrastructure. That has changed with the inauguration of a new $4 billion, 1,100-mile-long pipeline that passes through Georgia and Turkey, linking Baku’s Sangachal Terminal with the Mediterranean port of Ceyhan. The taps were turned on in Baku on May 10, 2006, and 18 days later the first oil reached Ceyhan, creating a supply that bypasses the Middle East and Russia. The United States has been one of the keenest supporters of the project, and much of the funding has been provided by the British company BP.

Soon the pipeline will be pumping 1 million barrels a day and a parallel pipeline transporting gas along the same route recently came on stream. By 2010, thanks to these new exports, the Azeri government’s revenue is predicted to increase tenfold. Baku’s second oil boom has arrived. In anticipation of the good times ahead, confidence in the future is again being proclaimed architecturally, but this time without the pretensions of style or sophistication. More than 500 highrise blocks have gone up in the past five years, often on the sites of demolished oil baron mansions. Baku’s construction industry is in the midst of a blind feeding frenzy that is rapidly transforming the fabric of the city, to the regret of some inhabitants.

The existing infrastructure is struggling to cope. The roads are choked with traffic, and many new apartment blocks make no provision for parking. Electrical outages are common, and the drainage system overflows in heavy rain. Worse still, local campaigners are concerned that not all of the latest buildings are fully earthquake resistant — a major worry in this seismically volatile region.

Even the most historic part of Baku is under threat from the current breakneck expansion. The 12th century walled city, which is designated as a UNESCO World Heritage Site, was officially classified in 2003 as being in danger due to the “pressure of urban development” and “dubious restoration efforts.” The problems are plain to see. Yet in the old city, you still can lose yourself within the maze of crooked lanes between ancient buildings, soaking up a unique ambience that is the result of waves of migration and invasion from India, Persia, Arabia, Turkey and Russia.

Despite the apparent insularity of its geography, and the years it languished behind the Iron Curtain, Baku has traditionally been a crossroads between Europe and Asia. In the recent plethora of luxury hotels and trendy bars, there are signs that the city’s cosmopolitan character is re-emerging. The oil and gas pipelines are physical symbols of Azerbaijan’s desire to connect with the rest of the world. There are already plans to extend the pipelines across the Caspian to tap into Kazakhstan’s natural resources. And a $400 million railway connecting Baku to Kars in Turkey, via Georgia, is being planned.

Amid it all, the Baku waterfront has remained constant: a broad promenade curving around the bay. The roar of traffic may be louder, the evening shadows of the downtown buildings may be longer, but families still come here to stroll and to look out at the Caspian. Even that view is beginning to change. Baku is looking to new horizons.

Entry Requirements

American nationals doing business in Azerbaijan require a business visa for which an invitation from a company or business partner in Azerbaijan must be submitted to the Foreign Ministry in Baku on your behalf in advance of your application. A double entry 90-day visa costs $80, while a multiple-entry one-year visa costs $250.

More Information

The Embassy of the Republic of Azerbaijan
2741 34th St., N.W.
Washington, D.C. 20008
tel 202 337 5912, fax 202 337 5913
http://www.azembassy.us

United States-Azerbaijan Chamber of Commerce
212 Potomac Street, N.W.
Washington, D.C. 20007
tel 202 333 8702, fax 202 333 8703
http://www.usacc.org