Patrick Schwerdtfeger is a motivational speaker who can speak about the strategic importance of Turkey and Azerbaijan at your next business event. Contact us to check availability. The full transcript of the above video is included below.


Full Video Transcript:

Hi, and welcome to another edition of Strategic Business Insights. Today we’re going to talk about the strategic importance of Azerbaijan to United States, and also Turkey. So go to Google Maps in a separate browser and search for Azerbaijan and see where it’s located. Right below Azerbaijan is Iran, which is a Shia Muslim environment and a significant power player in the Middle East. To the north, you have Russia, and on the southern end of Russia you’ve got a predominantly Sunni Muslim environment down there.

And Russia, actually their economy is not doing particularly well, but their energy sector is exploding. Their population is shrinking, so there are a lot of demographic-rooted economic problems in Russia. Their population is expected to shrink by 12% between 2010 and 2050. So that’s a significant reduction. There’s only one developed country, and Russia arguably is not that developed, but there’s only one other country which is in the developed world which is in worse shape, and that’s Japan. Their population is expected to shrink by 17% between 2010 and 2050. Real big problems for Japan.

But Russia’s got some demographic problems as well, but they’ve got a ton of oil. And before, when the Soviet Union was at its height, in the eighties, let’s say, seventies and eighties, Azerbaijan was part of the Soviet Union at that time. And what’s in the center of Azerbaijan? Baku. Baku is a huge source of oil. Tons of oil in Baku. Now, that was a major source of Russian oil during the Cold War. Also, by the way, it was what Hitler was after in World War II. He fought like crazy to try and get the oil in Baku. He never got that far. But Baku is a huge prize because it’s got a ton of oil.

Now, Russia still has a lot of oil without Baku. There are a lot of oil fields northeast of Moscow. Russia has a huge land mass, they’ve got plenty of oil, and their energy sector is saving their economy. But it also allows a lot of the revenue…like, for example, United States economy is reasonably healthy. It’s struggling a little bit, but it’s reasonably healthy. But the money comes into the businesses, and then businesses pay tax to the government, and that’s what gives the government the money that they can use to pay for whatever it wants to pay.

It’s different in Russia. In Russia, that money goes to the oil trade, and the oil trade to a large extent is going directly to the government, whether it’s through licensing fees or agreements that they have with the primary oil producers in the country. Either way, revenue is going right to the government, which is why the Russian government, why Vladimir Putin, is so powerful, because he’s got a lot of resources that are going directly into the Kremlin, into the government. They can use it in whatever way they see fit.

So you’ve got Russia to the north of Azerbaijan, you’ve got Iran to the south, and you’ve got Turkey to the west in between Azerbaijan and Europe. Now, the euro zone is struggling like crazy, and unfortunately it’s not going to get better for a long, long time, because their population is stagnant as well. It’s not growing.

The biggest contributor to economic growth, generally speaking, is the population of the country. The two biggest exceptions are exports, obviously—so if you’re selling a lot to other countries, then you benefit a lot by that, like Japan, for example, has a fairly strong export sector—and the other is energy, which is also export; you’re exporting energy. So those two situations can affect GDP without the population growing, but generally speaking, like here in the United States, consumer spending, which is the amount of money that the population spends—on clothing, housing, food, and energy—is 71% of our gross domestic product here locally in the United States, which is higher than most—in most European countries it’s closer to 60—but it’s still the largest single component. European population is stagnant, it’s not growing, which means their economy is not growing. And then they’ve got this debt crisis. It’s going to go on for years.

So historically, like say for the last 15 years, Turkey had a lot of incentive to play by the euro rules, significant requirements to join the euro in terms of democracy and all kinds of institutions that have to be in place and so on. So Turkey had a lot of incentive to go in that direction and become part of the euro zone. But in the last few years when this debt crisis has been spiraling out for Europe, and the problems don’t seem any closer to being resolved today than they were two, three years ago, in fact it’s almost getting worse, Turkey’s incentive to join the euro has gone down quite a bit.

At the same time, right below Turkey is obviously Syria, the Middle East, but you go a little bit further right into the Persian Gulf region, you get places like Dubai, United Arab Emirates; Abu Dhabi; Doha, Qatar; Manama, Bahrain. Obviously, Saudi Arabia’s down there, Kuwait, Kuwait City. These places all have huge oil wealth, and quite recently, last 20, 25 years, have started developing at record pace. Go to YouTube and search for “megastructures Dubai” or “megastructures Abu Dhabi” and you’ll see unbelievable things. The infrastructure that they’re building in cities like Dubai and Doha, Doha’s got FIFA coming, the soccer federation, that’s going to be an enormous event for them in 2020, I believe, Abu Dhabi is exploding, and of course Riyadh, Saudi Arabia is developing very, very quickly.

So there are all kinds of economic activity and influence and power coming from the Persian Gulf region, what they call the GCC region—stands for Gulf Countries Cooperative I think, I’m not sure—six countries. Very, very quick development happening in those areas and a lot of economic influence. The Muslim world is gravitating to these central players. A lot of economic activity, tourism, and so on taking place in those places.

So for Turkey, they have the choice. They can either align with Europe, which is to their west, or they can align with the Middle East, the Persian Gulf region, which is directly beneath them, or they can play a power play between those two and China in the east, and even India. Turkey and Azerbaijan are critical. All the economic power is shifting from the Western nations over to India, China, what they call the ASEAN group, which are some of the other Asian nations that are aligned with each other and have a very strong economic coordination policy between them. A lot of power is going to those areas, and who is right in the center of that shift? Turkey and Azerbaijan.

The United States needs to engage more proactively with Turkey and Azerbaijan, and it’s going to be difficult because the United States does not have a good, well-thought-out policy, foreign policy, in my opinion, with respect to the Muslim world, and in particular Shia versus Sunni, because those sectarian differences, in so many different ways across the region, you really have to have a sophisticated policy to really understand who are you supporting and in what case. But we have to engage. We have to engage with Turkey and we have to engage with Azerbaijan in particular, and start getting alliances so the United States can have a presence between Russia and Iran to the south. Very, very important that Azerbaijan stays neutral, and hopefully secular, doesn’t become a religious state. That’s going to make it much easier to deal with that region in the future, is if we have a player that is allied or at least friendly to the United States going forward that’s going to be a very, very interesting part of the world in the next 10, 20 years.

Anyway, keep your eyes open. This is a fascinating time. There’s a lot of power shifting. All the power we’re seeing in the West, Europe and North America, in particular, and Japan, a little bit Australia but mainly North America and Europe, the power was there for such a long time, but now all these other countries are creeping up and they’re creeping up in a hurry, and some are extraordinarily savvy. China is very, very savvy. India is developing not nearly…doesn’t have the sophistication level that China has, but it’s coming as well but it’s a slower pace. But China is very, very sophisticated, and there’s going to be a lot of power shifting to that region, and Turkey and Azerbaijan are right in the center of it, in terms of the balance between the two.

Thanks for watching this video. This is Patrick, reminding you once again to think bigger about your business, think bigger about your life.

Patrick Schwerdtfeger is a keynote speaker who has spoken at business conferences in North America, South America, Europe, Africa, the Middle East and Asia.