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Azerbaijan is situated on the western coast of the Caspian Sea, occupying one of Eurasia's strategic east-west crossroads. The country was annexed by Russia twice: first in 1828, then again in 1920 when the Soviet Union occupied the Azerbaijan Democratic Republic, making it one of the 15 republics of the Soviet Union. Azerbaijan - a nation with a Turkic and majority-Muslim population - regained its independence after the collapse of the Soviet Union on 30 August 1991. Despite a 1994 cease-fire, Azerbaijan has yet to resolve its conflict with Armenia over the Azerbaijani Nagorno-Karabakh enclave (largely Armenian populated). Azerbaijan has lost 18% of its territory and must support some 1,000,000 refugees and internally displaced persons as a result of the conflict.
The country has vast oil and natural gas fields. Azerbaijan's oil production declined through 1997 but has registered an increase every year since. Negotiation of 19 production-sharing arrangements with foreign firms has led to $60 billion in commitments for oil field development, and the revenues will be invested in future industrial development. The most significant of these projects were agreed to in the 1994 “Contract of the Century” including the Baku-Tbilisi-Ceyhan Pipeline now under construction. Long-term prospects will depend on world oil prices, the location of new pipelines in the region, and Azerbaijan's ability to manage its oil wealth.