Asked to envision a city that is a Soviet bloc survivor, surrounded by crude oil fields, with a name that rhymes with remote Timbuktu, it’s unlikely you’d picture a cosmopolitan metropolis of gleaming sandstone with a wide, leafy promenade stretching along the sparkling sea. But all those contrasting features describe Baku, the capital and largest city of Azerbaijan. Situated on the Absheron Peninsula projecting into the western edge of the Caspian Sea, with wide boulevards and distinctive new buildings housing around 2 million residents (a quarter of the country’s population), Baku is a dynamically developing city with recent gross domestic product figures ranking it one of the world’s fastest-growing economies.

The driving force is energy, for this “Houston on the Caspian” is a birthplace of the oil industry. As early as the eighth century, oil for lamps was extracted from hand-dug surface wells. In the 1870s, large-scale exploration brought in Rothschilds and the Nobel brothers. By the beginning of the 20th century, Baku’s oil fields were the largest in the world, producing almost half the world’s supply.

Later, drilling was extended to the deepwater oil fields offshore. The Baku-Tbilisi-Ceyhan pipeline — completed in 2006 to transport Caspian oil through Azerbaijan, across Georgia to the port in Turkey — is expected to generate revenues of $160 billion in the next three decades. Development of the massive Azeri-Chirag-Guneshli and Shah Deniz oil and gas fields in Baku show promise for the future.

After 1991 independence and under the presidency of Heydar Aliyev, who took office two years later, the country initiated the slow process of economic reform. Soviet housing blocks were demolished and Russian place names changed. The city embarked on a mammoth restructuring project with new construction wrapping around the historic Old City, which was renovated and preserved. Streets were widened; landfills created space for parks and gardens. A metro system now crosses beneath the city. Progress in maintenance and trash collection services improved the city’s health and sanitation ratings. With façades transposed over older buildings, some of the work is criticized as superficial. Indeed, one recent Sunday morning, city workers were industriously covering an old stone wall with gleaming sandstone tiles. But renovation and new museums and institutions reinforced Baku’s position as the industrial, scientific and cultural capital of the country.

With mining and hydrocarbon industries generating more than 95 percent of Azerbaijan’s economy, diversification is a long-term issue, and the government is investing in non-oil alternatives offering potential for growth: agriculture, manufacturing, telecommunications and tourism.

After oil, agriculture is the second-largest economic sector. The varied climate allows cultivation of a wide variety of crops — principally grapes, cotton, wheat and tobacco — with 40 percent of the total working population and 52 percent of land use devoted to farming. Soviet collectivization, low prices and an outdated irrigation system discouraged production, and aggressive Soviet cotton production left the soil contaminated with DDT and toxic defoliants. Over-fishing by poachers threatens the survival of Caspian sturgeon stocks, the source of most of the world’s supply of caviar. Agrarian reforms instituted as a priority in the last 10 years increased yields and reduced poverty levels, but the agricultural sector’s current share in gross domestic product remains around 5 percent.

Also in post-Soviet catch-up mode, the banking industry has shown some success in achieving privatization and market-oriented reform. Restructuring has begun to show results, and competition among the leading banks is increasing, but the banking sector hasn’t realized the growth potential that should reflect the high degree of economic growth.

Baku is one of the most important tourist destinations in the Caucasus, and religious, spa and health care visits are a growing segment of the economy. While obtaining a visa is costly and time-consuming, visitors find an abundance of accommodations in local and international hotels and important tourist sites to view. Familiar chain stores are represented in the city center malls, and elegant Nizami Street with the shops of Valentino, Armani, Tiffany and Dior is considered one of the most expensive streets in the world. Having hosted 2012’s 57th Eurovision Song Contest and preparing for the 2015 European Games, the city has added signs and museum captions and prepared a proliferation of English-language tourist brochures and booklets.

Economically, the government has taken steps to streamline the process of doing business. The time, cost and number of procedures to start a business were halved and the minimum load cut-off of $1,100 more than doubled. A system was established for taxpayers to file and pay online, and the country moved up from 97th to 33rd in overall ease of doing business. As recently as 2008, a World Bank Doing Business report cited Azerbaijan as the top reformer with improvements on seven of 10 indicators of regulatory reform.

Criticized by some for authoritarian rule, Heydar’s successor and son, Ilham Aliyev, who came to power in 2003, has juggled to manage the country’s precarious international position. Situated in “the devil’s playground” — at the crucial crossroads where the semi-East meets the semi-West, where Russia meets Iran and Turkey, where Christianity confronts Islam — Azerbaijan sits in a pivotal spot on the world’s stage.

Shunning Russia, Azerbaijan turned toward alliances with Turkey and countries of the European Union. While the country is almost 95 percent Muslim, it has strong ties to Israel, its second-largest oil customer. This is a sore point with Iran, along with a population conflict resulting from the 19th-century partitioning between Imperial Russia and the Persian Empire which left 20 million residents who consider themselves Azeris within the borders of Iran, compared to 8 million native Azeris. Proposals for secession have been a sore point.

Potentially most explosive is residual friction with next-door Armenia. The bitter war between the two countries resulted in a fragile 1994 ceasefire that left Armenia to occupy the disputed territory of Nagorno-Karabakh, a remote mountainous region that lies within the territory of the two countries. Attempts to solve the territorial dispute have failed, raising concerns that escalation could draw in great powers, resulting in an armed conflict between Armenia’s staunch ally, Russia, and Turkey, on the side of Azerbaijan.

Despite claims made by former Secretary of State Hillary Clinton that the United States is committed to working with the government and people of Azerbaijan, some parties suggest America should take stronger steps to bring the country closer to the West by expanding aid and incentives, establishing a small security ground presence and working with the European Union to secure the strategic Nabucco West natural gas pipeline.

For the future, trade with Russia and the other former Soviet republics is declining in importance while trade is building up with Turkey, Iran, the United Arab Emirates and E.U. countries.

Azerbaijan joined the E.U. in 2001 and is a member of the Economic Cooperation Organization. In 2011 the country was voted one of five to serve as a non-permanent member of the United Nations Security Council. Long-term prospects will depend on world oil prices and the location of new pipelines in the region.

Things to Do in Baku

With long hours of sunshine and a dry, healthy climate, Baku has long enjoyed the reputation of a vacation destination where visitors enjoy beaches and spa complexes overlooking the Caspian Sea. Today the older establishments have been outpaced by hotel spas such as the Hilton’s eforea, Fairmont’s ESPA and Jaleh at the Four Seasons, but sightseeing opportunities are numerous.

To explore the region’s rich history, start about a half-hour drive south of town at UNESCO World Heritage site Gobustan, where Neolithic artists engraved more than 4,000 petroglyphs of people and animals on rock walls. An excellent museum illuminates these people and displays archaeological objects.

Stone carvings in Gobustan © Tõnis Valing | Dreamstime.com

After driving back into town, past the sprawling terminal of the great pipeline that runs off toward Turkey, “proceed” to the Middle Ages with a stop at the 12th-century stone Maiden’s Tower, now a symbol of the city; a nearby booth offers a free audio tour that guides one through the historic UNESCO World Heritage Old Town, pointing out the 30-foot-high round stone towers of the fortress walls, the sprawling multilevel Shirvanshahs’ Palace and the courtyards of the caravansary inns which once housed camel caravans passing through.

For access to some of the 19th-century oil barons’ mansions, visit the side-by-side palaces that have been converted to the R. Mustafayev State Museum of Art, showing works from the Old Russian School, a few European pieces by Andrea del Sarto and Franz Hals, and some dramatic contemporary paintings of oil rigs. In the comprehensive Museum of History, 22,000 items of clothes, crafts, jewelry and portraits are displayed in the mansion that was home to Zeynalabdin Taghiyev, a shoemaker’s son who struck oil and became one of the richest men in the world.

Strolling along the wide green boulevard which stretches along the sea, encounter the brand-new Azerbaijan Carpet Museum. Built under the patronage of First Lady Mehriban Aliyeva, its roof extends outward in a swirl, evoking an unfolding carpet. Farther along, past the bandstands, playgrounds and Ferris wheel and slightly inland, lies another of the first lady’s projects, the ultracontemporary, open-plan Baku Museum of Modern Art designed by Jean Nouvel, where paintings and statues by Dalí, Picasso and Chagall are displayed alongside the works of local artists.

Baku ranks among the top cities in the world for nightlife. Clubs, many in the vicinity around Fountains Square, stay open until dawn and range from those with an Eastern flavor and local cuisine to Western-style discos with younger crowds. One popular disco, located on the 11th floor of the Park Inn, right behind the Hilton, serves sushi and snacks with views overlooking the city and sea.

Mud volcanoes of Azerbaijan © Pkrysa | Dreamstime.com

Above all, don’t miss the mud volcanoes and fire temples. Almost half of the world’s mud volcanoes are found here. South of the city near Gobustan, mounds of squishy dirt burp, belch and bubble, erupting methane and slurry. North of the city, naturally escaping gases burn continuously at sacred sites. The castle-like UNESCO World Heritage Ateshgah, or Fire Temple, is a former monastery that may have been a shrine for fire-worshipping Zoroastrians. Today, its “eternal flame” is stoked by charcoal and natural gas within the structure preserved as a museum.

But still authentic is Yanar Dag, a natural gas fire blazing continuously from a thin layer of sandstone on a hillside near Mamedli village. Twenty-four hours a day, rain or shine, never extinguished, natural fumes from the earth flicker and burn as if the stones themselves are on fire, a visible symbol of the force that is generating the economy of the major city of the “Land of Fire.”

Baku Info to Go

Brand new this year are the two renovated terminals of Heydar Aliyev International Airport (GYD), located 12 miles northeast of the city center, a half-hour drive away. Taxi fare to the city is around $40. Alternatively, direct express minibus route No. 116 operates from the airport to Baku City center, running every 30 minutes from early morning until late night. Departing from outside the terminal across from the parking area, the service terminates at Samad Vurgun’s Park on 28 May Street.

Baku: Just the Facts

Time Zone: GMT + 5
Phone Code: Country code: 994 City code: 12
Entry/Exit Requirements: Visitors are required to have a certified letter of invitation from an acceptable Azeri entity. Visas are obtained online.
Official Language: Azerbaijaini is spoken by 96 percent of the population.
Key Industries: Oil production, some agriculture and tourism

Checking in with Robert Couturier

New York-Based International Interior Designer

FOR ALMOST SIX YEARS, YOU HAVE BEEN DESIGNING A HOUSE ON BAKU’S ABSHERON PENINSULA. TELL US ABOUT THE COMMISSION.
The secretary [of a Russian industrialist] called my office, saying a rich woman wanted to hire me to build a very large house. It’s turned out to be 100,000 square feet. My friend says it’s the size of a high school.

It’s outside the city, on the coast — all limestone, Moorish in character. There are lots of architectural details I picked from the historic Shirvanshahs’ Palace in Baku: very tall walls, smallish windows, arches that come to points. It’s massive and blocky with beautiful proportions.

WHAT WAS YOUR REACTION WHEN YOU HEARD YOU WERE GOING TO AZERBAIJAN?
I thought it was wonderful. It’s the center of the Caucasus Mountains, the center of Europe, all the history of the Nobel Prize and the 19th-century fortunes and religious tolerance. No one had ever been there; the only person I knew was a rug expert. She told me about it, and I found it exciting.

WHAT WAS YOUR FIRST IMPRESSION OF BAKU, AND HOW HAS IT CHANGED?
It was in really bad shape, a dilapidated communist country. The buildings were decrepit and old, and it wasn’t antique — just old. There were sheep and donkeys in the middle of the road and a cloud of pollution over the city. The first night I was there, I couldn’t sleep and called my office and told them to please re-book me in the best room in the best hotel, and they said, “You are there, that’s where we’ve put you.” Now the hotels have service and comfort, and it’s a completely different place.

My clients had a home in the Old City that was beautiful. They gave a huge party with dancers and singers and mountains of caviar. Every year, Baku became more and more luxurious — done over and refurbished and cleaned up — and now it is an incredible city. Working there isn’t that different at all. The people are incredibly good craftsmen.

WHAT ADVICE DO YOU GIVE VISITORS TO BAKU?
Be sure to tour the Old City; it’s completely fascinating — the Shirvanshahs’ Palace, the seventh-century caravansary, the Carpet Museum. But you shouldn’t come for the food, which I think is below average, and the climate is the hardest thing — incredibly hot in summer and quite dry and very, very cold in winter. And it’s always windy. But there’s incredible energy, and I find the history and location in the center of Asia fascinating and poetic.

Where to Stay in Baku

Fairmont Baku The brand-new property in the city’s iconic Flame Towers building boasts a seven-story lobby, 300-plus guestrooms, an ESPA spa, five cinemas and indoor and outdoor pools. Flame Towers, 1A Mehdi Huseyn $$$

Four Seasons Baku A gleaming palace facing the esplanade and just below the president’s palace, the Four Seasons is decorated with arched windows and an onyx floor. Many rooms have balconies overlooking the sea. 1 Neftchilar Ave. $$$

Hilton Baku Conveniently located on Freedom Square, the comfortable Hilton offers the best views in town from its 25th-floor bar that revolves 360 degrees. Accommodating staff provide tour brochures and guide arrangements. 1B Azadlig Ave. $$$

Restaurants in Baku

Karvansara Restaurant While the native music and food may be touristy, the setting in an old caravan inn, an arched colonnade and domed stone walls create a Silk Route atmosphere. 11 Böyűk Qala küç $$$

Old City Restaurant Taxi drivers recommend the pancakes and bite-size sturgeon rolls stuffed with fruit and walnut paste in this cozy city classic fitted out with kilim carpets and traditional arts and crafts. 24 Mammadov St. $$

Zeytun Restaurant Located on the top floor of the posh Park Bulvar mall, this is nevertheless a perennial favorite, with tables overlooking the sea, traditional national dishes and live local music. Park Bulvar, Seafront Boulevard $$$

Read more about Baku’s rock drawings.