BAKU (Reuters) - Russia and Azerbaijan failed on Monday after protracted talks to agree on Moscow's continued use of an Azeri radar station, weakening the former Soviet master's grip on the strategically important and oil-rich country.
The Azeri Foreign Ministry said its Russian counterpart had sent a note saying it would no longer use the station.
Baku had wanted to increase the annual rent for the facility to $150 million from $7 million under the current agreement. Some media outlets said Baku had raised the price to $300 million.
The two sides negotiated for more than a year over Russia's desire to continue to rent the Gabala radar station, which was built during Soviet times. The lease expires this month.
"The sides did not reach an agreement on the rent, and the Russian Federation sent a note on December 9 (saying) that it would suspend use of the radar station on December 10," the Azeri Foreign Ministry said in a statement.
Azerbaijan said the higher rent was fair given the installation's importance.
But an Azeri official, speaking on condition of anonymity, said earlier this year that Baku wanted to limit Russia's presence on Azeri soil and that the price was being increased to discourage Moscow's from pursuing an extension of the rent.
Russia uses the radar station to monitor the Indian Ocean, where it carries out anti-piracy operations. The agreement was signed in 2002 and was valid until December 9 of this year.
Russia's Foreign Ministry was unavailable for immediate comment.
Moscow has seen its influence fade in Azerbaijan, which is nestled between Russia and Iran on the western coast of the Caspian Sea, as Baku has strengthened its ties with the West.
The dispute is a sign of how relations have soured between Moscow and its former Soviet vassal over the independent course it has taken, Azeri political analysts said.
"Russia understands that it is losing its sphere of influence in Azerbaijan. This steps confirms the irreversibility of this process," Zardusht Alizade said.
The loss of the Gabala station could be compensated for by a new radar station soon due to be completed in Armavir in Russia's south, Lieutenant General Nikolai Rodionov, the former commander of the country's ballistic missile early warning system, told Interfax-AVN.
Azerbaijan is a critical transportation transit point for NATO troops in Afghanistan. The United States has also helped Baku fortify its offshore oil installations.
Reporting By Lada Evgrashina, Writing by Thomas Grove and Alissa de Carbonnel; Editing by Michael Roddy