Out of Azerbaijan: Where BP might also stand for British Presence

BAKU - Britain's man in Baku has the kind of lonely, far-flung posting that novelists may one day write nostalgic books about. In a small first-floor office of a merchant's house in Baku's old inner city, Harold Formstone of Britain's Department of Trade and Industry represents his country to a turbulent but oil-rich former Soviet Republic on the edge of the Caspian Sea.

He is not quite Britain's only representative to Azerbaijan. In an ironic, post-imperial echo of the East India Company, the British envoy sits in the midst of the busy offices of British Petroleum, his outpost distinguished only by a picture of the Queen.

Mr Formstone bristles at any suggestion that it might be BP that pushed the cash-strapped Foreign Office to reverse a decision that would have deprived Britain of any direct representation in a key country in which France, Germany and the United States already have embassies or ambassadors. But despite frequent visits from the British ambassador to Moscow, BP has taken over most of the functions normally associated with an embassy.

As BP's local public relations man, Aydin Nurizadeh, coyly puts it: 'People appreciate it.' Mr Nurizadeh said he had helped organise art competitions, activities for invalid children, joint scholarships with the British government for oil industry specialists and a tour of Britain for a dozen Azeri journalists. Long features about BP and North Sea oil rigs grace Azerbaijan's state television channel.

BP has even opened a prominent shop on the Caspian seafront boulevard, selling engine oil and obscure motor spares. Spartan by British standards, the place seems to Azeris like a Parisian perfume boutique, with prices to match. It is an ingenious public relations strategy.

'Everywhere I look, I see the green and yellow for BP. It already feels like an old friend,' said an Azeri Foreign Ministry official. 'They brought Mrs Thatcher and Mr Heseltine here. Britain was the only one to write a letter defending our territorial integrity (against Armenian attack). I'm sure this is all because of BP.'

The attention, of course, is not for love of Azerbaijan. BP and its partner, Statoil, the Norwegian state oil company, are in a neck-and-neck race with the US oil company Amoco to sign the first production-sharing agreement to exploit oil fields in the Caspian Sea. It has even been arranged for John Major to invite the Azeri President, Abulfez Elchibey, to Britain in June. The Azeri leader faces mounting domestic problems because of his indecisive style, failures in the war with Armenia and the usual post-Soviet economic dislocation.

BP's official proposals for developing the big offshore Chiragh oil field are almost schoolmasterly in tone. The inexperienced Azeris, who are still trying to shake off Russia as big brother, do not want to fall into any traps, and are suspicious of production-sharing. But BP pointedly notes that if Azerbaijan wants oil revenue and pounds 1.6bn in capital investment to start soon, it is 'essential' that an agreement be signed before the middle of 1993. BP has already paid pounds 20m to the government in a goodwill gesture. If Azerbaijan signs, the company promises it will spend nearly pounds 70m before the end of the year.

With few guarantees or investment laws in evidence, foreign oil companies can sometimes also spend fortunes on other sweeteners in the former Soviet Union, particularly if the officials who approved the first agreement fall from power.

But BP's policy to integrate itself broadly into the country before anything is settled seems to be the best insurance policy. If any Western country - other than Turkey - has a special relationship with Azerbaijan, it is Britain, which is now perhaps Azerbaijan's second biggest trading partner.

Nothing is certain, of course. But with any luck - and with the pioneering work of BP and men like Mr Formstone - things could be well in hand by the time the three Foreign Office diplomats arrive to set up their embassy later this year.