Black gold brings back the glitter to old Baku

Oil dollars are flooding into Azerbaijan, writes Phil Reeves

For one who had lived almost all her life under one form of dictatorship or another, without the benefits of free speech, the old woman had a remarkably strong grasp of the appetites of the Western media. "Former millionaires become ordinary people," she said, almost as if imagining a headline. "That is very interesting, isn't it?"

Sarah Ashurbekov, 91, looks like, and lives like, millions of other elderly women who somehow weathered the drudgery of communism and now defy life- expectancy statistics by struggling on, often in even worse conditions than before.

She lives in a broken-down, nine-storey block in Baku, capital of the former Soviet republic of Azerbaijan, sharing a dark little flat with her sisters Miriam, 88, and Adela, 82, five cats and a clutter of furniture that would make a junk shop look orderly.

They are not starving, these small, stalwart spinsters, but life is scarcely comfortable. Add their pensions and other earnings together, and you might just have enough to afford lunch for three in a local Western-style restaurant. "I get 137,888 menat [pounds 20] a month," says Miriam, with a derisory cackle. The old ladies know the figure precisely.

It was not ever thus. The sisters used to be extremely rich; they are the grand-daughters of an Azerbaijani shepherd who inherited oil-rich land and saw his life transformed into that of an oil baron with a 70- room palace and social connections which included some of the planet's wealthiest dynasties.

For decades the women represented an epoch that seemed destined to survive only as yellowing images in dog-eared photographs, a giddy period in which the Nobels, Rothschilds and Royal Dutch/Shell were in town. The city, one of the birthplaces of the international oil industry, had the Islamic world's first opera house, an English golf club on the shores of the Caspian Sea, dozens of luxury stores and boulevards lined by elegant, vine-clad Italianate villas.

Today that gilded era is returning, rekindled by a headlong charge towards the Caspian to exploit regional oil deposits believed to be at least twice as large as the North Sea's. Baku has become the 1990s version of San Francisco in the middle of the last century, full of developers, speculators and spies. But the treasure is black, not gold.

Visit Sarah for tea and she will slowly unpack her memories, going back to Azerbaijan's brief but glorious independence before the Red Army arrived in 1920. "We got used to surviving in these conditions," she explained. "We never complained, even if we didn't have enough food. We got used to being hungry."

If anything she seems vaguely astonished by her past, a distant and ornamented earlier life in which the family regularly travelled to a sanatorium in Germany, ate caviare every day and were looked after by a staff of 10 people, including an Armenian chauffeur and a German governess. She shows us a picture of her father Balabek, a rotund man in a smoking jacket whose moustachioed features offer few clues to his view of his wealth, which allowed him to give his wife diamonds for her birthday and made him the first man in Baku to own a Benz motor car. "When all the other rich people saw the car, they immediately copied him," she remembers.

When the Soviets arrived they fled to Istanbul, smuggling out their jewels but leaving their money behind. Five years later, their father decided it was safe to return. "When we came back the system had changed so much. We regretted it," said Sarah, who became a language teacher under the Soviets. "We hid our feelings, because we knew that father could be jailed if anyone found out." Their discretion was in vain; he was arrested, sent to Kazakhstan and executed under Stalin in 1935.

The sisters seem unlikely to gain much by Baku's second boom. But plenty of others will. It is shaping up to be even more prosperous than its first, so much so that some compare this nation of 7.5 million people with Kuwait.

So far President Haidar Aliyev, an ex-KGB man who was Leonid Brezhnev's number two, has managed to save his small republic from being steamrollered by the predatory ambitions of the old empires that cast shadows across his turf - Russia, Iran and Turkey - by allocating them stakes in the oil business. The oil giants - Amoco, Exxon, BP, Elf-Aquitaine, Russia's LUKOil and others - have arrived with fists full of dollars.

If he carries off this perilous juggling act, and fighting does not erupt again with neighbouring Armenia, riches should flow in. That is a big "if", though; there have been two coup attempts since he took power in 1993. He is 73, with no obvious successor. And, although Russian foreign policy in the Caucasus has been more moderate of late, they have a dismal record of meddling on their old territory.

The stakes are enormous. From a single oil concession of four billion barrels awarded to the BP-led Azerbaijan International Operating Company (AIOC) the country stands to make nearly $1bn a head over the next 30 years - mind-boggling in a nation where a policeman receives $10 a month and a teacher $15.

The 12-member AIOC, which is 40 per cent American, is leading the way. Although its first oil is not expected to flow until the end of the year, the cash registers are already ringing.

Under the Soviets, Baku declined into a grey industrial city, ringed by drilling sites which spill so much oil you can smell it in the air. Now there are bars, boutiques and jazz clubs. Two British pubs, named after Churchill and Nelson, have opened. Oil workers - Scots, English, Germans, Canadians - can eat Tex-Mex, Chinese, Indian or hamburgers. Last year Azerbaijan saw $1bn of direct foreign investment.

The sisters look on with interest, but only mild approval - it is not their party. "At least, today you can be anything. You can be rich or poor," says Sarah.

There is an even chance that, in time, her countrymen will be rich - far richer than the Russians who used to colonise them are ever likely to be. Many Azerbaijanis hang a dried plant called the Camel flower on the rear view mirrors of their cars. It is meant to ward off envy.