Grand Strategy Along the Silk Road

The concept of “great power competition” is a focal point of all thinking about grand strategy in international pol­itics. Throughout history, the rise and fall of nations, victories and de­feats in the great internal contests, and the praise and rebuke garnered by great leaders has always been the product of what is called power competition. Great power competition is the jockeying for position, influence, advantage, and control by those states that rank high in the lists of economic, political, and mil­itary standing.

Because great power competition has always been the focal point of major shifts in global politics, it has also always been natural to think in terms of the shifts in standing among the leading powers to be the product of a combination of the power and volition of the leading states. Textbooks told the history of diplomacy in terms of the outcome of the competition of great powers but, significantly, also tended to represent the history of great power competition as though those powers were acting alone. From the eras of Cyrus the Great and Alexander of Macedon in antiquity to the days of strategic competition in the modern Westphalian na­tion‑state system, the popular view sees history as shaped exclusively by the deeds of the leaders of the most powerful and celebrated na­tion‑states—the great powers.

This popular view of international politics was never entirely accurate and is prob­ably growing less so as the world  grows ever more intricately con­nected and interdependent. To the extent that security was indivisible in the past, in today’s era of glo­balized connections, digitally em­powered mechanized warfare, and widespread mutual vulnerabilities to phenomena such as pandemics and global environmental disarray, secu­rity is less divisible than ever before.

The indivisibility of security in the present era implies that the great powers—measured by their eco­nomic standing and their force and influence in the world of advanced weaponry—wield the capacity to in­flict enormous damage. But, asymmetrically and strangely, the great powers do not appear to exercise proportional capacity to generate equal measures of consensus and deliver equal measures of benefit. This is particularly important for the many countries that fully participate in international processes but do not rank high on the list of measures of power and influence. Textbooks of international relations spend a great deal of time measuring the power and might of great nations and tend to glide over or entirely ignore the influence of those countries which are not represented at the table in the negotiating conventions of the great powers. Textbooks rarely even have a name for those other than the great powers. “Small states”? “Lesser Powers”? “Middle Powers”?

Often those states that do not seem to be determining the out­comes of interactions merely be­cause there are not the states that announce outcomes of grand‑scale negotiations are thought of as being secondary, derivative, and essentially reactive in their foreign policies. Often analysts tend to at­tribute highly constrained preroga­tives to lesser powers, arguing that the second order powers behave either as vassals of a great power (the “bandwagoners”) or exercise a swing influence by shifting their allegiances to in a way that alters a balance of power (the “balancers”).

What this mainstream approach to international politics fails to appreciate is that in critical points in history, key states among the lesser powers have made all the difference in the outcome of great power competitions. Writing in the previous issue of Baku Dialogues, Nikolas Gvosdev accu­rately and succinctly drew attention to Azerbaijan’s pivotal position in the current situation by pointing out that “the Silk Road region— with Azerbaijan at its geopolitical center—is located at the seams of the global system and is positioned to serve as a critical mediator between different major powers, acting as gateways between different blocs of states, regional associations, and civilizational groupings.”

In critical points in his­tory, key states among the lesser powers have made all the difference in the outcome of great power competitions. One such pivotal state is Azerbaijan.

As Gvosdev rightly argued, the role of keystone states is not only the function of “balancing or band‑wagoning” in the calculations of the great powers; it is also a role the includes essentially shaping the outcome of diplomatic interactions. Gvosdev draws attention to the proposition that at critical points in history, it is often the lesser states that play the most significant role in orienting the direction of diplomatic rela­tions and shaping the changes in the character of world order. The present set of cir­cumstances is just such a moment in history. Azerbaijan is just one such a state in a pivotal position that makes its policies crucial in influ­encing changes in the contempo­rary world order.

The concept of a “keystone state” has been analyzed in the pages of Baku Dialogues from a variety of methodological and policy vantage points. This discussion has begun to influence the way that others, scholars, analysts, and practitioners comprehend the present dynamic period of global order. It can be expected that the influence of this concept and the strategic leverage exercised by keystone states will increase as discussion involves an increasingly large community of scholars, analysts, and diplomats.

From my perspective, the role of Azerbaijan as a keystone state in in­fluencing the international commu­nity is amplified by three important factors. First, the current climate of political change and the search for new forms of political equi­libria—meaning a “new world order.” Second, new trade and transport in­tegration efforts such as Beijing’s Belt and Road Initiative—meaning a “grand inversion.” And third, the impact of the transition to fixed‑system infrastructures for transport and communication particularly in the period of the information stage of the industrial revolution— meaning something very different than the ancient Silk Road. Each will be examined in turn.

New Equilibria

The concept of “great power competition” had been ab­sent in much of the literature and dialogue of international discussion in recent decades, reemerging only recently as a central focal point in thinking and discussion about international relations. The U.S. National Security Strategy an­nounced in December 2017 and soon followed by the U.S. National Defense Strategy in 2018 explic­itly articulated the competition among the world’s contending great powers, namely China, Russia, and the United States.

The recalibration of America’s foreign policy posture is a re­sponse above all to two recent trends. First, it represents a response to Moscow’s invasion (Georgia), annexation (Crimea), and clandestine occupation (east Ukraine) of neighboring countries. Moscow’s revisionist policies toward the prevailing European security order pro­voked a reassessment of the east‑west balance of power. Moreover, Moscow’s efforts to use increased economic integration throughout the former Soviet space to provide a justification for the re‑creation of a politico‑military bloc called into question the assumption that the resolution of Cold War ideological competition would be followed by an enduring peace and stability.

Second, the change of American foreign policy is a result in Beijing’s shift from the principle of “peaceful rise” to the elaboration of a new, extended prosperity sphere, driven by financial investment and gain. The Belt and Road Initiative is rhe­torically presented as a policy plat­form designed to advance mutual economic interests and but also features a grand geostrategic pro­gram designed to fuse the economic interests with the political ones of a network of states across East Asia, Southeast Asia, the Silk Road region (Eurasia), East‑Central Europe, and the Middle East.

The stakes are high in great power competition. In the midst of today’s disputatious dis­cussions of international politics, one of the few things that seem to unite everyone is the recognition that the prevailing world order lacks the consensus support it has enjoyed for the last seven decades. We may not all agree on the ratio­nale, grounds, or justification of the international disagreements in which we find ourselves, but we can at least all agree that the level of disagreement is unprecedented in recent decades.

What, then, explains the failure of security institutions, multilateral economic institutions, and the for­eign policy postures of the world’s great powers to forge and sustain a stabilizing and forward‑oriented consensus on a global level?

The spectrum of views is broad. Similar to many historical periods of power transitions, there are status quo powers and revisionists. There are those who favor strengthening existing international institutions, and those who favor completely abandoning those same institutions or replacing them with entirely new institutions. There are proponents of enhanced hegemonic stability and binding international agree­ments, and proponents of multi­lateral balances of power, multipolarism, and self‑reliance. And there are proponents of the introduction of new competing or even con­testing leading institutions with the idea of shifting the focus of interna­tional negotiation to new forms of activism on subjects ranging from distributive politics to global envi­ronmental issues.

All of these debates over security, equity, representation, the envi­ronment, and now, given the most pressing immediate challenges of the modern era—responding to pandemic disease—raise questions about why the institutions of the past have lost the ability to resolve the problems of the present.

Have the major institutions of in­ternational cooperation of the past become merely fatigued, or has the contemporary world itself changed in such a way that these institutions are no longer capable of ensuring stability and promoting peace and prosperity? If indeed structural adjustment is a necessity, why has world order not simply reestab­lished itself?

One school of modern thought maintains that the so‑called liberal international order that crystallized at the end of World War II and was buttressed for the past 75 years by the major Western states under the de facto leadership of the United States is best understood in historical con­text and a broad, global perspec­tive. This school of thought runs roughly along the following lines. In the pivotal period of 1945‑1949, the United States took steps which led it to assume an international role of guarantor‑of‑last‑resort for international stability. The United Nations and the family of eco­nomic, political, and cultural institutions associated with the UN became the basic structural foundation for the postwar order. The United States was not acting alone, but America did bear most of the direct cost burden for this role for decades. To the extent that the United States grew into the role of supplying hegemonic sta­bility, this was seen as being less a product of an international design of America’s political system than the fact that the United States was swept into this role by the con­sequences of the actions of other states.

The liberal international order based on the nation‑state system and market‑oriented commercial relations was challenged by the communist system based on the elimination of the Westphalian nation‑state and relied upon Communist Party‑directed interna­tional commerce. The great bulk of the globe’s population—what came to be known as the developing countries or the Third World—was not explicitly counted as belonging either to the “first world” of the ad­vanced Western industrial coun­tries or the “second world” of the communist countries. When the Soviet Union fell in 1991, the bi­polar system came to an end and the “first world” (increasingly termed the “developed world”), with the United States as its de facto leader, gained a new posi­tion of prominence. The idea of the “unipolar moment” drew at­tention to the unusual historical circumstances. Now, three decades later, the international situation is very different. If the United States is no longer willing or able to pro­vide that stabilizing role of a guar­antor, should not some other in­strument or mechanism of world order simply be substituted to re‑establish world order?

Scholars and diplomats in tra­ditional schools of thought tend to look to the lessons of his­tory in coming to terms with the challenges of the future. To the ex­tent that a unipolar moment existed at all, it was fleeting. Natural eco­nomic, social, and political changes make unipolar moments unlikely and not long‑lasting. The globe is by nature spherical and the world’s politics are by nature multifaceted. A multipolar system of politics of the global community is inevitable. This has brought many people to argue that we should look back into history to find examples of suc­cessful formulas.

Can we expect that a multipolar balance of power is the most stable and equitable formula for the new international order? Can we not simply return to the noble agree­ments of the balance of power pe­riod that established a “concert of nations” with stability and equity to the states which adopted them?

Some strategists argue that we will mislead ourselves if we exag­gerate romanticized versions of the stability of the past. In his compact and yet encyclopedic one‑volume analysis of international politics entitled World Order (2014), Henry Kissinger offers a wealth of infor­mation and insight on the idea of global order in the past. Two positions stand out in the book that are crucial in helping us to com­prehend today’s world. One simple but particularly important thesis of the book concerns the very idea of world order. Kissinger notes that scholars and practitioners speak comfortably about the structure of the global community as referring to a set of rules and responsibilities that created a stable relationship among countries that we regard as “world order.”

Kissinger sees this as an over­simplification of the past, pointing out that, in reality, “there never has been a real world order.” Kissinger asserts that what was often con­strued as the vaunted architec­ture of enduring stability was in little more than a de facto patch­work of limited agreements. Those agreements might have promised Valhalla, but in fact offered only limited, practical, and specific solu­tions to a concrete set of urgent problems. To the extent that such institutional arrangements were effective, they succeeded by re­straining overweening powers and propping up the defense of basically defenseless societies. These de facto arrangements served general goals even if they did not derive from the universal acknowledgement of natural law. Kissinger’s argument is that the “balance of power” among the European great powers was more of a series of temporary fixes than the creation of a concert of great powers.

Kissinger argues that what passes for world order today day is derived from an arrangement devised in Western Europe nearly four cen­turies ago at a peace conference in the German region of Westphalia and conducted without the involvement or even awareness of most other continents or civilizations. The Peace of Westphalia reflected a practical accommodation to reality, not a unique moral insight. The stability of the system relied on a network of independent states mu­tually agreeing to refrain from in­terference in each other’s domestic affairs and checking each other’s ambitions through a general equi­librium of power. The Westphalian system endured, despite its many flaws, to become the foundation for many of the assumptions of the in­ternational system that were exem­plified by the principles of the UN Charter, institutions of global gov­ernance, and in general the idea of a liberal international order.

A second important thesis that Kissinger puts forward is that world order was never well‑fitted to the political expectations of the Westphalian logic—not then, and even less now. At the time the West­phalian principles were first articulated, not all societies around the globe shared these same assumptions, or at least did not interpret them in the same way. The Westphalian system worked to the extent that it did in Europe. But at the opposite end of the Eurasian landmass from Europe, China was the center of its own hier­archical and theoretically universal concept of order. This system had op­erated for millennia—it had been in place when the Roman Empire gov­erned Europe as a unity—and based itself not on the sovereign equality of states but on the presumed bound­lessness of the emperor’s reach. In this Eastern concept, national sover­eignty in the European sense did not exist, because the emperor held sway over “all under Heaven.” Moreover, in much of the geography between Europe and China, Islam’s different universal concept of world order held sway, with its own vision of a single divinely sanctioned sphere of gov­ernance uniting and pacifying the world. Meanwhile, the emergence of the New World in the eighteenth cen­tury added a new set of civilizational principles in which the American vi­sion rested not on an embrace of the European balance‑of‑power system but on the achievement of peace through the spread of democratic principles.

The leading institutions of the international security architec­ture in present circumstances—the UN, the World Bank, the IMF, the IAEA, and countless other regional security institutions—derive their legitimacy from the basic legalistic principles set forth by Dutch ju­rist and philosopher Hugo Grotius that serve as the “axioms” of the post‑Westphalian system. The urgent problems of world order today, if one follows this realistic inter­pretation of international politics, are related to challenges that arise from competing visions of how the world can and should be governed and how disputes can be resolved. In the logic of the situation of to­day’s world, the states and regions that are situated territorially or con­ceptually between the competing visions of world order are of pivotal significance. Keystones states are significant for this reason.

The Grand Inversion

In the days before the Peace of Westphalia—from the point of view of the necessities of trade and movement from place to place— the world did appear to be flat for most people. Long‑distance enter­prises involving cooperation and conflict were conducted on what appeared in those day to be essen­tially a plane. In antiquity, the Silk Road gained its name from the trade of silk from China to points west, north, and south. As early as ­the days of Han dynasty in China (approximately 200 BCE) long‑distance commercial trade was based on silk but also included many other scarce and valuable commodities such as paper, gun­powder, and spices. The Silk Road grew to become a channel of cul­tural, political, and military expan­sion as well. With its publication in 1300, Marco Polo’s book Marvels of the World brought cross‑land trade routes to the attention of the Med­iterranean basin. The growth of east‑west trade along the Silk Road greatly spurred economic and po­litical development along various east‑west corridors leading through Central Asia and the Caucasus— what is now termed by some as Eurasia and others as the Silk Road region.

The shift to maritime traffic, which started the “Age of Discovery,” disproportionately re­duced dependence upon cross‑land trade routes. A “great transition” took place with the advent of mar­itime traffic for commercial devel­opment and imperialist expansion. Bartolomeu Dias’ travel to the Indian Ocean in 1488 was followed by Ferdinand Magellan’s circumnavigation of the world in 1522. As the cost advantage of maritime trade over cross‑land trade grew, the incentive for military extension of power proportionally increased as well. Land traffic was easily con­tested by brigands and local com­peting political forces. Maritime passage was less easily contested and became the domain of major European powers. The principle of freedom of the seas was based on the idea that national sovereignty only applies to a geographical ter­ritory located on the land surface and the bodies of water which are within the bounds of the territory. The concept of the freedom of the seas, or Mare Liberum, was first ar­ticulated by Grotius in 1609. This remarkable Dutchman argued that the use of the seas as a matter of first principles was a common space which could be enjoyed by all.

For the past four centuries countries have interpreted the principle of freedom of the seas in various ways, often coming into disagreement regarding the use of waterways adjoining sov­ereign land, the right to the use of resources, the use of fisheries and minerals, the use of underground watercourse traversing sovereign land, and the right to innocent pas­sage for commercial or other pur­poses through physically restricted and heavily used passageways such as the Bosporus. Since its inception, the principle of freedom of the seas has led to contestation among great powers, which have sought to use sea lanes for military and strategic goals. Great powers have sought to exert dominance over portions of the sea by encouraging priva­teers and even pirates to corner or block trade markets. Innocent passage through highly congested and contested chokepoints such as the Strait of Hormuz and the Strait of Malacca or the so‑called South China Sea grew to be more con­tested as the shift from land to sea routes became more significant.

For a little more than four decades, a historically unparalleled transition in global trade patterns has been taking place in the context of the emergence of China as a major and rapidly climbing power.

For a little more than four decades, a historically un­paralleled transi­tion in global trade patterns has been taking place in the context of the emer­gence of China as a major and rapidly climbing power. In a little more than a generation, China has transformed itself from a backward economy into one of the world’s largest, most competitive, and most for­ward‑looking industrial economies. China’s initial advantage in east‑west trade was based largely on the cost advantages of Chinese imports made possible by three factors: first, extensive state‑financed support for export‑oriented industrial goods; second, the cost‑advantage of mar­itime freight over land freight; and third, significantly lower labor costs.

At present, all three of these factors are changing sig­nificantly and rapidly. Economic growth in China has lowered the difference in labor costs between China and other countries and, even more importantly, the labor component is diminishing in rela­tion to other components in produc­tion costs. Technological changes are increasing energy efficiency and the digitization of manufac­turing is reducing the advantage of large, centralized production facil­ities. At the same time, advances in transportation are reducing the cost‑advantage of maritime freight over land freight. These factors— in combination with great power efforts to nation­alize maritime trade routes—are combing to have the effect of re­ducing the advantages of the mar­itime trade routes first established in the Age of Discovery over older, more traditional land trade routes.

China’s turn to economic reform began in 1978 under the leadership of Deng Xiaoping. A recalibration of China’s foreign policy soon after the turn of the century was exem­plified by the concept of China’s “peaceful rise.” Policies predicated on this concept became the driving force behind the rising tide of the “Asian Century,” with China be­coming once again the engine of development for much of Asia. China’s economic change brought hundreds of millions of people out of dire poverty in a single genera­tion. During the early stages of this economic transformation, immense infrastructure development trans­formed transportation, energy, and communication systems in China and across Asia. The world’s leading public international financial insti­tutions—the World Bank, the Inter­national Monetary Fund, the Asian Development Bank, and others— have sought to mobilize capital for development throughout the Asian region and, at the same time, estab­lish a virtuous circle of economic change promoting good governance, fiscal accountability, environmental protection, human rights, and social equity. Despite progress, the leading international institutions were criticized for not working boldly and swiftly enough to meet Asia’s mounting development challenges.

Under the leadership of Jiang Zemin and Hu Jintao, China’s infrastructure develop­ment projects extended throughout the Asian region and beyond. China’s rapidly growing foreign infrastructure projects in highways, rail, energy systems, and communi­cation infrastructure were financed through China’s government con­trolled financial institutions such as the China Development Bank and the China EXIM Bank. The agree­ments behind these investment mechanisms was almost exclusively framed in terms of China’s bilateral agreements with partner countries.

Since 2013, China’s leadership under Xi Jinping has greatly wid­ened and deepened the foreign eco­nomic influence of China through multilateral foreign projects. China’s leading role in establishing the Asian Infrastructure Invest­ment Bank (AIIB) signaled a new era in this dynamic transformation. China’s proposal to extend its in­fluence through an unprecedented and massive foreign development framework, initially referred to as One Belt, One Road, was unveiled to finance and politically endorse development projects to recreate a modern form of east‑west commerce along what was often described of as the ancient Silk Road trading routes between China and Europe.

This strategic infrastructure ini­tiative—later renamed the Belt and Road Initiative—sought to ex­pand to include a large number of “special economic zones” and stra­tegic cooperation agreements in an effort to link the economies of Europe, Russia and its former‑ Soviet periphery, the Middle East, and Africa to China and much of the rest of Asia into a massive single, coordinated Eurasia‑centered sup­ply‑chain network—hence the re­vival of the term Silk Road region. Once the new trade network is in place, its planners envision that the Chinese national currency, the RMB, will rise in importance to become a major reserve currency in international trade.

BRI implies a set of economic activities that also suggest a geostrategic importance in terms of recalibrating relations among the great powers. As Dean of the George C. Marshall European Center for Security Studies Andrew Michta has argued, BRI is essen­tially drafting a new set of policies and practices that amounts to a “grand inversion.” Just as the shift to maritime trade routes in the Age of Discovery transformed the land trade routes shifting from land to sea, BRI is envisioned to result in an “inverted” transformation to a new framework that amounts to a restoration of the significance of the Eurasian land bridge and a reduc­tion in the importance of maritime traffic and sea‑based trade flows.

If fewer countries are directly reliant on maritime traffic, they may grow less concerned about the principle of the freedom of the seas and more willing to accept Chinese overtures to privatize stra­tegic bodies of water like straits or whole portions of various seas and oceans. In referring to a “grand in­version,” Michta has argued that Beijing is calculating on replacing the maritime supremacy in favor of the land domain that for four centuries favored the interests of the Western world. In such a sce­nario, Michta states, the European Rimland would cease to be the transatlantic gateway to Eurasia, becoming instead the terminal end­point of a China‑dominated Eur­asian empire.

The geostrategic significance of BRI is already illustrated in terms of its effects. China’s as­sertion of sovereign control over maritime trade routes in the South China Sea—a major trade channel between East and West—created great consternation in government chancelleries throughout Southeast Asia. After China seized a strategic reef off its coast, the government of the Philippines appealed for remedy to the Permanent Court of Arbitration in The Hague. In April 2016 the court found in favor of the Philippines. But its ruling came at roughly the same time that presi­dential elections in the Philippines brought in new political leader­ship under Rodrigo Duterte. The new Philippine administration recalibrated, indicating its accep­tance of the terms of China’s claims over sovereign control of the South China Sea.

A principal goal of the Belt and Road Initiative is certainly to bring about the restoration of the cross‑land transit corridors. To the ex­tent that technology, finance, and international politics all trend in that direction, the states located at the seams of shifts in the global system are positioned to serve as critical mediators between dif­ferent major powers. These states are of increasing importance, and Azerbaijan is just such a state.

Road and Regimes

Logic—no matter how clear and how compelling—does not always guide politics. In pol­itics, sometimes matters of principle and logic are important, but calculations of self‑interest get in the way. The early stages of devel­opment in the post‑Soviet space after the disintegration of the Soviet Union provides a good example. When the founding meeting of the Commonwealth of Indepen­dent States took place in Alma‑Ata, Kazakhstan, in December 1991, one of the few things that all the po­litical leaders could agree upon was the idea of maintaining a “common economic space” throughout their geography. To all of those present at the first post‑Soviet negotiations, the perpetuation of cooperation in economic and commercial relations was uniformly desired because ex­isting economic relationships were seen to be practical and the idea of maintaining a “single economic space” was expected to be easily achievable. But, in fact, the collapse of the Soviet Union was not fol­lowed by the emergence of graceful economic cooperation. Instead, the period was characterized by a great deal of economic one‑upmanship and protectionism driven by narrow interpretations of self‑interest.

In the immediate years following the Soviet collapse, dedicated ef­forts by the negotiators repre­senting post‑Soviet countries to co­ordinate currency, customs, trade, and investment policies produced far more cooperation on paper than in practice; an enduring diversity and incompatibility of standards, policies, and practices slowed in­tegration and harmed trade within the entire Eurasian region. Suc­cessful agreements to negotiate even limited cooperative economic relationships among the post‑ Soviet states took more than a de­cade. These economic integration efforts in Eurasia should draw at­tention to the dialectical tension between national sovereignty and trans‑national cooperation.

Many large BRI infrastruc­ture projects are now in their first stages of implementation throughout the Silk Road region. The coordination of the “software” of government policies with the “hardware” of a fixed systems—e.g. the interconnections of rail, road, port facilities; power grids and airspace control; fixed electronic communication systems including transmitters, relay towers, and re­ceivers—are projected for devel­opment throughout the entire Silk Road region, overcoming geog­raphy and drawing East and West together in an intricate network of linkages.

These projects raise two ques­tions. Can the construction of the new BRI “hardware” of infrastruc­ture projects in transportation, en­ergy, and telecommunication create a new framework for cooperation in the greater Silk Road region? Will the “software” of government policies and practices sync with this “hardware,” or will government policies lead to inefficiencies and even conflicts? To the extent that these fixed infrastructure projects can offer greater operational efficiencies, will these also introduce inflexible geostrategic implica­tions? Will an enlarged prosperity zone also result in a parallel secu­rity sphere?

Fixed physical distribution sys­tems such as roads, railways, oil and gas pipelines, water distri­bution systems, irrigation systems, electrical distribution grids, and fixed telecommunication networks often come with the features of a natural monopoly. Commodity markets are economically most ef­ficient where there are many pro­ducers and many consumers, and when competitive pricing prin­ciples determine the terms of ex­change. These features describe the standard market model. Natural monopolies do not share all these market features. Fixed distribution systems tend to fail in conforming to efficient market conditions, par­ticularly if there is low diversity of producers and consumers.

The case of a single oil pipe­line between the producer and the consumer illustrates the problem of a natural monopoly. If the con­sumer side is offered only a limited number of suppliers—as is usually the case with pipelines—the price of the commodity will tend to be determined not by a market equi­librium but by the supplier’s de­termination of what constitutes a “fair” price. Oil and gas consumers served by transport pipelines with a limited number of alternative sources or substitute energy fuels are familiar with the problems of energy dependence and the results of price gouging, shortages, and dis­ruption. The energy dependence of consumers is a common complaint. Consumer energy dependence fre­quently is drawn to people’s atten­tion because it is often a public con­cern. Producer energy dependence, in contrast, is less often discussed. But producer dependence is also a major factor in shaping the na­tional policies of energy producers and the governments that rely or even depend upon them as a major source of state revenue.

Electrical power transmission pro­vides another important example of the distorting effects of natural mo­nopolies on prices. One of the tradi­tional constraints of electric power systems is that production needed to be closely linked to consumption. New electric storage capabilities are rapidly expanding with technolog­ical changes and large‑scale electric storage costs are coming down rap­idly. Traditionally, however, elec­tricity has not been storable in large volumes. Consequently, production needed to be flexibly scaled in order to meet fluctuation in demand. This has been a source of great difficulties for large regional electric transmis­sion projects. Due to these market features, electricity distribution systems tended not to be organized in terms of supply and demand but rather organized in terms of the engineering aspects of the facilities for production, transmission, and distribution.

The inflexibilities of fixed trans­portation, energy, and communi­cation systems require, for all these reasons, a high level of regulation. A high level of regulation, in turn, re­quires a high level of political over­sight and the political control that this implies. Fixed infrastructure fa­cilities create a framework that may be seen as the “hardware” of inter­national affairs. For the hardware to work effectively, it requires the “software” of government regulatory policies. Large public infrastructure projects are designed to improve the prosperity and stability of all ac­tors, but those that are located in the nexus points in the physical infra­structure network are likely to play a pivotal role in the functioning of the systems. Again, Azerbaijan is located in just such a nexus point.

Competition Along the Silk Road

The idea of the restoration of the ancient Silk Road in the present set of circumstances is in­deed a beguiling idea. It seems to champion the great advances in civ­ilization that were prominent along the routes of the Silk Road ages ago but were displaced by the Age of Discovery and were lost to animos­ities which swept over the Silk Road region hundreds of years ago.

The contemporary quest to restore the ancient Silk Road is inaccurate and even distorting when under­stood out of its historical context and without proper attention being paid to the differences inherent in our con­temporary situation. The Silk Road that linked east and west in the days of Marco Polo was not a road at all. Trade routes throughout Central Asia the Caucasus and what is today called the Middle East were not roads in any modern sense of the word. There were mountain passes; there were fertile oases; and there was busy maritime traffic along the Caspian to be sure. But the area be­tween the many stopping points along the Silk Road typically involved a great expanse of desert and difficult natural terrain, not fixed by any fac­tors other than the shifting fortunes of the natural elements.

Tomorrow’s fixed infrastruc­ture systems of highways, railways, electric grids, and tele­communication relay facilities constitute a new level of intricate linkages, implying a new level of coordination and a new format of political deliberation, consultation, and decisionmaking. This is fast be­coming a Silk Road of a type vastly different than the transportation routes of antiquity.

Today’s Silk Road is immeasur­ably more efficient and effective than the desert trails of the past. It is also subject to control and ma­nipulation for political objectives in a way that the ancient Silk Road never was and could never be. The Silk Road of the past was suc­cessful to the extent that it constituted a rationale for local political leaders to cooperate so as provide protection against me­dieval brigands and highwaymen who sought to plunder trade and transportation corridors.

In other words, the ancient Silk Road only functioned effectively because it was supported by what we would today call a collective security community. The classical Silk Road was not a road: it was, rather, what political economists today would call a “regime.” More precisely, it was a set of political arrangements among local leaders that created a mutual protection community, freeing commerce from manipulation by brigandage and plunder.

Today’s Silk Road is a fixed in­frastructure network that requires a complex system of state‑to‑state political relationships to prevent natural monopoly features from overwhelming the technical and operational efficiencies of modern technology.

All along today’s Silk Road region signs of significant change are on the hori­zon. This is nowhere more apparent than in Baku.

All along today’s Silk Road region signs of significant change are on the horizon. This is nowhere more apparent than in Baku. Baku is located at the geo­graphical center of the twenty‑first‑century Silk Road, linking East and West and North and South. Baku, in other words, is a strategic hub by virtue of being situated at a critical geographical fulcrum point of rapidly expanding transport and communication infrastructure.

Competition, as sages tell us, cre­ates dynamics that lead to oppor­tunities and threats. Opportunities and threats are two aspects of the same thing; which of these two aspects prevails depends above all else on how diplomats negotiate and maneuver the dynamic factors inherent in all competition.