The amount of proven oil and gas reserves of Azerbaijan is enough for reviving the shattered socio-economic infrastructure of the country. The government has used regularly the income generated from the energy resources to ease the sufferings of. the displaced Azerbaijanis, to improve overall life standards of the people and to reduce the environmental pollution in the country. Yet it is clear that there is still a long way to go in the development of almost all sphere of life in Azerbaijan. The role of energy resources on the external security and internal political process of Azerbaijan is much more important than it has played in the economic sphere. For Ebulfez Elchibey and Haydar Aliyev, regardless of their differences in policy preferences, energy contracts and pipelines were the most important diplomatic means to prevent Russia from gaining further military and political control over the country, and to restore the losses against Armenia in the Nagorno-Karabakh war. Though they were to some extent successful in stopping Russia, the same cannot be said on the NK issue against Armenia. Energy contracts of Azerbaijan have remained ineffective to induce either the West, the US in particular, or Russia to resolve the NK dispute. On the other hand, in the domestic arena, energy resources of the country have become the main tool in the hands of Aliyev family first to maintain and then to strengthen their political positions. Today development of Azerbaijan's Caspian energy resources has only maintained the regional status quo established in 1994 on the external security matters, and yet failed to boost socio¬economic and political transformation in the country.