Situated on the western coast of the Caspian Sea, Azerbaijan was the first Soviet republic to declare independence. The issue of the disputed enclave of Nagorno Karabakh, whose Armenian population seeks secession, led to full-scale war (1988–1994) and is still a dominant concern. Over 200,000 refugees, and more than twice as many internally displaced, added to the problems of the troubled economy. Azerbaijan's oil wealth, however, gives it long-term potential.

Before independence Armenians and Russians accounted for 11% of the population. The violence of the early 1990s and the accompanying rise in Azeri nationalism caused thousands to flee. Racial hostility against those who remain is increasing.

Women, once prominent in the ruling party, have lost their political status and their general status is declining.

The once effective social security system is under great strain.

Strengths

Extensive oil and natural gas reserves starting to come on stream. Iron, copper, lead, and salt deposits. Cotton and silk.

Weaknesses

Antiquated Soviet-era industry. Poor infrastructure and corruption threaten development. Oil pipeline to Turkey not yet built. Fallout from war in Nagorno Karabakh still drains state resources.

The determination of the Nagorno Karabakh enclave to secede from Azerbaijan led to war from 1988 to 1994, with Armenian forces gaining control over 20% of Azeri territory. Peace talks have yet to reach an accord.

The YAP replaced the communists in 1995 and again dominated elections in 2000, which observers criticized as seriously flawed. It supports President Heydar Aliyev, first elected in 1993 (at the age of 70) and reelected in 1998.

Relatively neglected in the Soviet period, Azerbaijan's Caspian Sea oil fields have attracted international interest. The shallowwater Guneshli field alone has over four million barrels of reserves. Offshore natural gas is also plentiful.

The already poor health care system effectively collapsed as a result of war and the transition to a market economy.

When it came to power in the mid-1990s, the YAP began to reverse communist control over education policy, which had been particularly noticeable in the teaching of history. Baku State, the largest of eight universities, is investing in modernizing its facilities.

New oil revenues are threatening to create a nouveau riche elite without reaching the 60% of Azerbaijan's population currently living in poverty.

Under consecutive Persian, Ottoman, and Russian influences, Azerbaijan, one of the world's major oil producers in 1900, attained independence in 1918.

• 1920 Red Army invades. Soviet republic established.
• 1922 Incorporated in Transcaucasian Soviet Federative Socialist Republic (TSFSR).
• 1930 Forced collectivization of agriculture.
• 1936 TSFSR disbanded; Azerbaijan a full union republic (ASSR).
• 1945 Attempted annexation of Azeri region of Iran.
• 1985 Gorbachev tackles corruption in Communist Party of Azerbaijan.
• 1988 Nagorno Karabakh seeks unification with Armenia.
• 1990 Nagorno Karabakh attempts secession. Soviet troops move in.
• 1991 Independence.
• 1993 Heydar Aliyev president; reelected in 1998.
• 1994 Cease-fire in war with Armenia over Nagorno Karabakh.
• 1995, 1999 General elections. Non-communist YAP in power.