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.

Relations with Armenia remain the central issue in foreign policy. Turkey – with its common history and culture – is a natural ally. The West, as well as neighboring Iran (with a large Azeri population) and Russia, are interested in Azeri oil fields in the Caspian Sea. Azerbaijan joined the Council of Europe in 2001.

Azerbaijan has been a member of NATO's Partnership for Peace program since 1994. Its naval forces operate under CIS control.

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.

Under the Soviet regime oil pollution devastated the Caspian Sea, and pesticides were massively overused in agriculture. Major rivers suffer heavy pollution from Georgia and Armenia. Lack of funds restricts action.

Buses provide the most efficient public transportation. Access to the Naxçivan enclave is by air or via Iran.

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.

The judicial system returned to political control in 1993. Criminality is a particular problem in camps for those displaced in the Nagorno Karabakh conflict. Elsewhere, there is a low rate of violent crime, but assaults in the street have become less rare.

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

Because of the Nagorno Karabakh conflict, and strong anti-Western feelings (Azerbaijan perceives the West as taking the Armenian side), there are few visitors, most of them on business.

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.