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. Last Updated: 07/27/2016

Azerbaijan Still Waiting for 'Kuwaitization'

NEFTCHALA, Azerbaijan -- Earlier this year, out in the Caspian Sea to the north of this onetime oil boomtown, ExxonMobil abandoned a well it had spent five months drilling because it turned up dry.

For this tiny former Soviet republic, it was the latest in a string of similar revelations by some of the world's largest oil companies over the past year or so, a disconcerting record that has called into question whether Azerbaijan will play as large a role as an alternative source of energy as some had forecast in the 1990s.

But in Neftchala -- the name means "oil hole'' in the Azeri language -- locals have already been disappointed by visions of wealth, judging by the words of Ibrahim Asherov, who sells food in the open-air market to supplement his teacher's pension.

"There were rumors, people saying that the people of Neftchala were walking on top of gold,'' said Asherov, citing a slogan of the first post-Soviet government, as he waited for scarce customers to appear on a recent rainy day. "In fact, people today are living in hardship.''

The United States and its energy-hungry allies have been eagerly looking to Azerbaijan and its neighbors around the Caspian Sea since the Soviet Union disintegrated a decade ago, hoping that the new nations could lessen Western dependence on oil from the Middle East.

The urgency for the United States has been highlighted by the Sep. 11 attacks and the recent violence between Israelis and Palestinians.

But each new announcement of a dry well has focused attention on domestic problems in this nation of 8 million people, where the United Nations calculated that real wages fell 64 percent from 1990 to 1999.

Azeris already live in a region marked by violence, including fighting to the north in the breakaway Russian republic of Chechnya, and about 20 percent of its western territory is occupied by Armenian forces as a result of the war in the early 1990s over the enclave of Nagorny Karabakh. The five countries that border the Caspian have yet to agree on how to divide its resources.

Observers also worry about the potential for instability when Azerbaijan's 79-year-old president, Heider Aliyev, leaves office.

In the meantime, while Azerbaijan has begun increasing the amount of oil it sends to the world market, ripple effects have not been felt by many Azeri citizens, analysts and ordinary Azeris say.

"People see that the oil dollars go straight to building villas and buying Mercedes,'' said Gasan Kuliyev, an analyst with the independent Turan news agency in Baku, the capital. In the past, he added, "You can say that 50 to 60 percent of the people believed in the 'Kuwaitization' of Azerbaijan. Now, that percentage is probably no greater than 20 percent.''

Experts also note that only about 20 percent to 30 percent of the wells drilled in the world result in significant discoveries of oil or natural gas. In February, the Energy Information Administration, which is part of the U.S. Department of Energy, estimated Azerbaijan's possible oil reserves at 32 billion barrels, a little over a third as much as nearby Kazakhstan or Turkmenistan.

Azerbaijan is still likely to be a significant source of energy in the future. It is the planned starting point for a pipeline that the United States is heavily backing to send oil from the Caspian region to Turkey, and it controls a massive offshore field of natural gas.

The Energy Information Administration has estimated Azerbaijan's net oil exports by 2010 will be a million barrels a day, a little less than Libya, Algeria and Britain in 2000.

Nonetheless, some in the oil industry had greater expectations. "It's safe to say we were a little disappointed,'' said Christine Melville, a spokesman for French oil giant TotalFinaElf, which drilled a dry well last year in Azeri waters and then dropped plans to drill a second well.

Government officials in Neftchala, said the oil industry will continue to be important to Neftchala, and Ibrahim Asherov has not abandoned hope. "I'm sure that one day it will be like Kuwait."