Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus [1 ed.] 9781607506843, 9781607506836

Citation preview

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

NON-TRADITIONAL SECURITY THREATS AND REGIONAL COOPERATION IN THE SOUTHERN CAUCASUS

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

NATO Science for Peace and Security Series This Series presents the results of scientific meetings supported under the NATO Programme: Science for Peace and Security (SPS). The NATO SPS Programme supports meetings in the following Key Priority areas: (1) Defence Against Terrorism; (2) Countering other Threats to Security and (3) NATO, Partner and Mediterranean Dialogue Country Priorities. The types of meeting supported are generally “Advanced Study Institutes” and “Advanced Research Workshops”. The NATO SPS Series collects together the results of these meetings. The meetings are co-organized by scientists from NATO countries and scientists from NATO’s “Partner” or “Mediterranean Dialogue” countries. The observations and recommendations made at the meetings, as well as the contents of the volumes in the Series, reflect those of participants and contributors only; they should not necessarily be regarded as reflecting NATO views or policy. Advanced Study Institutes (ASI) are high-level tutorial courses to convey the latest developments in a subject to an advanced-level audience. Advanced Research Workshops (ARW) are expert meetings where an intense but informal exchange of views at the frontiers of a subject aims at identifying directions for future action. Following a transformation of the programme in 2006 the Series has been re-named and reorganised. Recent volumes on topics not related to security, which result from meetings supported under the programme earlier, may be found in the NATO Science Series. The Series is published by IOS Press, Amsterdam, and Springer Science and Business Media, Dordrecht, in conjunction with the NATO Emerging Security Challenges Division.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Sub-Series A. B. C. D. E.

Chemistry and Biology Physics and Biophysics Environmental Security Information and Communication Security Human and Societal Dynamics

Springer Science and Business Media Springer Science and Business Media Springer Science and Business Media IOS Press IOS Press

http://www.nato.int/science http://www.springer.com http://www.iospress.nl

Sub-Series E: Human and Societal Dynamics – Vol. 77 ISSN 1874-6276 (print) ISSN 1879-8268 (online) Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus

Edited by

Mustafa Aydin

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Department of International Relations, Kadir Has University, Istanbul, Turkey

Published in cooperation with NATO Emerging Security Challenges Division Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

NATO Advanced Research Workshop on Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus Istanbul, Turkey 22-24 October 2009

© 2011 The authors and IOS Press. All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without prior written permission from the publisher. ISBN 978-1-60750-683-6 (print) ISBN 978-1-60750-684-3 (online) Library of Congress Control Number: 2010942037

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Publisher IOS Press BV Nieuwe Hemweg 6B 1013 BG Amsterdam Netherlands fax: +31 20 687 0019 e-mail: [email protected]

Distributor in the USA and Canada IOS Press, Inc. 4502 Rachael Manor Drive Fairfax, VA 22032 USA fax: +1 703 323 3668 e-mail: [email protected]

LEGAL NOTICE The publisher is not responsible for the use which might be made of the following information. PRINTED IN THE NETHERLANDS Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved.

v

Introduction

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Mustafa Aydin

During the Cold War, the main threats to security emanated from East-West rivalry and nuclear confrontations between the blocs. This did not exclude the existence of threats such as environmental hazards, terrorism, organized crime and illegal immigration, but the military issues overshadowed their importance and granted them a second-class status. It was with the end of the Cold War that these problems including environmental hazards, organized crime, terrorism, economic instabilities, illegal immigration and proliferation of weapons of mass destruction (WMDs) became articulated as main sources of concern for global security. Since then, non-traditional aspects of security have been an important area for research in social sciences, especially by International Relations scholars. Within this general framework, a workshop entitled “Non-Traditional Security Threats and Regional Cooperation in the South Caucasus” aimed at highlighting those challenges that the Southern Caucasian countries have been experiencing since the collapse of the Soviet Union, took place in Istanbul between 22-24 October 2009. With the participation of regional and international experts as well as representatives of key international actors (i.e. international governmental and non-governmental organisations), various issues including identification of problems in the fields of democratization, formation of civil society, economic re-structuring, security building and regional cooperation were discussed. This book is the end product of that workshop, which aimed at finding alternative solutions to current problems and challenges. The book identifies the role of exogenous factors including NATO, the EU, other intergovernmental and non-govermental organizations as well as the main state stake-holders in the process of political transformation, assessing their impact on security-building and regional cooperation in the region, and aims to anticipate, analyze and increase awareness on emerging non-traditional threats to Southern Caucasian security. The first part of the book provides overviews of emerging non-traditional challenges to regional security – i.e. societal, economic and political problems by focusing on the situation in Armenia, Azerbaijan and Georgia and making a regional comparison. This prepares the ground for further detailed analysis of the later chapters. The first paper in this section by Gubad Ibadoglu from Azerbaijan focuses on energy resources of the region and their effect on transformation of the regional countries. It reviews the economic situation in the Caucasus and tries to asses both economic and political transformations of the region with a view to identify the role of economic factors for regional security. He argues that the regional security might be at risk as a result of global financial crisis and therefore suggests a preventive set of actions in the Southern Caucasus. The second chapter also looks into the impact of global financial crisis on the economic transformation of the Southern Caucasus. Vladimer Papava focuses on what he calls necro-economy, which is the existence of unproductive industrial companies in the Southern Caucasus. He argues that all the regional

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

vi

countries suffer from the same basic problem as in all the other post-Communist countries, which is the threat of the zombie-ing of the economy under the conditions of a financial crisis. All the goods they produce fail to meet the high international standards as a result of their overall low quality and/or high prices; nevertheless, they continue to exist because of various non-economical, mostly political, reasons. As a result Southern Caucasian economies suffer un-proportionally under the strains created by the global financial crisis. The third chapter by Nigar Göksel focuses on the connection between rural conditions and labor migrations in the Caucasus. Although poverty has been generally dealt with by the economic growth since 2003 and life conditions have improved compared to the 1990s, its impact on the rural areas was very limited. Since all three Caucasus countries have a high rural/urban ratio as well as higher rates of poverty among their rural populations, this problem is a potential destabilizing factor and needs to be tackled before long. Drawing upon extensive field research, the chapter describes the socioeconomic conditions in the region that motivate labour migration. The general economic trends of each country are elaborated on, shedding light on how national policies have impacted rural opportunities. The focus in the case of Armenia is on the structural distortions of the economy; in Azerbaijan, on the effects of energy-related sudden growth; and in Georgia, on the policy experiments of the Rose Revolution. The last two chapters of this section look into democratization and development of civil society in the post-Soviet Southern Caucasus as well as their connection with the future of liberal state in the region. First, Ayça Ergun takes a critical look at the democratization efforts in the region and argues that the post-Soviet period in this region is shaped by the processes of nation and state-building while the rest of the former Soviet countries were engaged at attempts for democratization. However, the nature of political transformation, democratization and civil society development has been different in the Southern Caucasus, where the entire process of transition has been dominated by the co-existence of continuity and change. The patterns of continuity inherited from the Soviet past are predominantly represented and reproduced by the ruling elite while the patterns of change associated with liberalization and democratization are mainly internalized and propagated by the societal actors. However, since the transformative power of societal actors remains insufficient, the regional countries have not yet made the crucial jump from controlled states to liberal countries. A similar conclusion is reached by David Darchiashvili, who argues that the Southern Caucasus states are not consolidated liberal-democracies, though liberalization attempts are rather visible. Looking into the future, he speculates that the main challenge for the liberalization agenda in the region will arise from the complex political and ideological realities; that is the existence of resistance to modernity by pre-modern indigenous forces, actions of Russia that limit the freedom of choice in its “Near Abroad”, existence and exploitative actions of external forces, and finally post-national imperatives limiting the state’s ability to act according to security requirements. He proposes that, to succeed in the liberalization of the South Caucasus, local and global agents of change should better balance democratic and security arguments, as well as understand that while the main principles of liberal democracy are the same, the tactics and tools of the defense of liberalism in post-national, postmodern Europe might be different from those in modernizing young nation-states. The second section of the book focuses on the international dimension of identifying security policy orientations of regional and wider international actors (i.e., Russia, Turkey, the USA and the EU) and the policies implemented by international

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

vii

governmental and non-governmental organisations operating in the region. In this part, the chapters try to analyze the extent of exogenous influence in fostering regional integration in the Southern Caucasus. The first paper by Nina Caspersen looks into third party involvement in conflict resolution efforts and their record track so far. Looking into conflict areas in the Southern Caucausus, the chapter asks whether international community can create ripe conditions for solution of the so-called frozen conflicts. It focuses on the extreme cases of separatist conflicts and finds that the timing of conflict resolution interacts with the process and substance of the approach. It argues that while there is a room for creative diplomacy, a viable strategy requires a multi-level approach encompassing international and intra-communal levels, including the unrecognised entities. One way of doing this is to get intergovernmental institutions to help enhance the regional cooperation. This is what is argued by Panagiota Manoli in her paper. She claims that external players either in terms of third countries or of international organizations significantly affect dynamics in the South Caucasus. Thus her chapter considers the possible impact of international organisations on regional processes, and maps the obstacles and breakthroughs for regional cooperation. It finally concedes that while regionalism might be driven by international institutions, its success certainly rests on local countries’ initiatives and support. The next set of four papers by Neil MacFarlane, Mitat Çelikpala, Mustafa Aydn and Sinem Akgül Açkmee focus on the policies of the US, the Russian Federation, Turkey and the EU. Their common attempt is to identify main contours of the Caucasus policies of their respective actors as well as their impact on regional cooperation and existence of security threats. Neil MacFarlane traces the evolution of the US policy since the collapse of the USSR and discusses major drivers of its regional policy. He concludes with a discussion of the directions being taken by the Obama Administration. The paper argues that US policy has displayed a lack of coherence for much of the period since the end of the Cold War. While the policy towards the Caucasus is in general part of a larger effort to approach the former Soviet region as a whole, the relations with the three states in the Caucasus have been dominated in each case by a different logic: Energy, US minority politics, ideological exceptionalism, and leadership preferences. Although the lack of coherence reflects the weakness of systemic drivers, the resurgence of Russia in the region forced the significance of systemic underpinnings of the US policy and produced a more coherent American approach to the region in recent years. Russian policies on the other hand, argues Mitat Çelikpala, are dominated in the post-2000 period by energy dependence of the surrounding countries on Russia, changes in the trade patterns and the impact of globalization, the fight with terrorism, entrenched ethnic conflicts, and the enlargement of Western structures including NATO. In this framework, he argues that the Caucasus has had a special importance for Russia due to its geopolitical and strategic position at the crossroads of energy transit lines, the existence of rich energy resources and the complexity of its ethnic structure. In contrast, Turkey has been facing an increasingly diminished influence in the Caucasus in recent years. Mustafa Aydn, in his chapter, argues that the emergence of newly independent states in the Caucasus at the end of the Cold War presented challenges to Turkey, while enlarging its role. In this environment, Turkey became an important actor, while it had traditionally avoided involvement in regional politics. Although its efforts to further increase its presence in the region is severely restricted as a result of its unhealthy relationship with Armenia, in the aftermath of August 2008

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

viii

crisis, the two countries have engaged in a new process of rapprochement. Though halted at the moment for various political reasons, the process will no doubt create new networks of interdependency between Turkey and the regional countries. In this context, the impact of Turkish and Armenian societies is important. Thus Tigran Mkrtchyan looks at the role of NGOs in Turkish-Armenian rapprochement. The key question he poses and addresses is whether the civil initiatives play a role in the rapprochement. For this purpose, he studied around 50 initiatives implemented in the last decade or so, and his analysis shows that civil society initiatives and governmental actions have been mutually strengthening factors in the Turkey-Armenia rapprochement process. Armenian-Turkish NGO activities have gained much attention and coverage only when there was an explicit or even implicit interest for political normalization of relations by the governments of Armenia and Turkey. Thus, judging from Turkish-Armenian process, it would be wrong to claim that NGOs can play a pivotal role in rapprochement efforts in the Caucasus, unless they are supported by governmental action and supplement the political process. Finally in this section, Sinem Akgül Açkmee looks at the European Union’s role in the Southern Caucasus, which was thought to be a distant neighbour during the 1990s. Nevertheless, due to pressures of eastern enlargement and newly emerged challenges as a result, EU position on the Southern Caucasus has started to change gradually. After comparing the EU’s role before and after the eastern enlargement, this chapter suggests that the EU is becoming more powerful as a structural stabilizer dealing with the problems of the region at the grass-roots level, more so than as a security actor assuming direct roles in the resolution of the regional conflicts in Abkhazia and South Ossetia. The last part of the book comprises four papers, dealing with the prospects of regional cooperation with views from within the region. Stepan Grigoryan looks at the impact of changing global imperatives on regional cooperation. He argues that the events of the last 20 years have led to significant geopolitical changes in the world, creating large opportunities for newly independent countries of the Caucasus, and, at the same time, setting difficult tasks for them. Many of these events have had serious consequences for global processes, as well as for the Southern Caucasus, making the region globally important. Along similar lines, Gayane Novikova argues that one of the main conditions for the successful realization of regional cooperation is identifying threats and risks common for regional states and expressing readiness to jointly overcome existing problems for the sake of creating a favorable environment for cooperation. Yet, this remains elusive goal in the Caucasus, because, since gaining their independence, Armenia, Azerbaijan and Georgia not only have found themselves on different sides, but they also have focused on establishing relations with external actors. The interests of the latter have made searches for an acceptable means of regional cooperation even more difficult. As a result the very concept of regional cooperation remains difficult to achieve. Kornely K. Kakachia focuses more on the post-August 2008 South Caucasian geopolitics with a Georgian perspective. According to him, the August 2008 RussianGeorgian conflict and its recognition of the independence of Abkhazia and South Ossetia significantly transformed the geopolitical calculations in the Southern Caucasus. The best alternative to maintain stability here is regional integration. However, as a result of the unresolved conflicts, markedly different foreign-policy perspectives, and diverse security perceptions of the three post-Soviet states, the Southern Caucasus has come to be seen as a “broken region.” This paper deals with the

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

ix

political and security issues that significantly overshadow sub-regional, regional and inter-regional relations and examines the key obstacles to forging closer relations with regional players. Leila Alieva, on the other hand, from an Azerbaijani perspective, argues that unresolved conflict regarding Nagorno Karabagh has been constantly defining Azerbaijan’s view on regional cooperation. Facing the necessity to resolve its major security issue, while at the same time sustain its independence and build strategic alliances, Azerbaijan developed a multilayered foreign policy. As there was little progress in terms of resolution of the conflict, Azerbaijan remained devoted to the alliances and strategic direction of its integration. The geopolitical changes, which started after the Russia-Georgia war, such as Turkish-Armenia rapprochement, will have little effect on the nature of regional cooperation, if and while the major conflict preventing the states from comprehensive economic cooperation is separated from the process of reconciliation. The common conclusions of the book appear to be two-pronged. In order to overcome obstacles in front of regional cooperation, a set of possible solutions to prevail over the burdens of the transition in the Southern Caucasus need to be identified. Within this framework, knowledge on emerging threats other than military issues in South Caucasus need to be expanded; the relationship between domestic and international actors need to be analyzed; and the impact of this relationship on democratization, security-building and regional cooperation need to be highlighted. The original workshop and the resulting book aim at just that.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Istanbul, September 2010

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

This page intentionally left blank

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

xi

Contents Introduction Mustafa Aydin

v

Non-Traditional Challenges to Regional Security; Political and Economic Issues Economics of Natural Resources and Transition in Southern Caucasus Gubad Ibadoglu Economic Transformation and the Impacts of the Global Financial Crisis in the Southern Caucasus Vladimer Papava

17

Rural Conditions in the Caucasus and Labour Migration Nigar Göksel

30

Democratization and Civil Society in the Post-Soviet South Caucasus Ayça Ergun

47

Prospects for Liberal State in the South Caucasus (Interplay of Principles and Security Considerations) David Darchiashvili

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3

57

Non-Conventional Threats and International Involvement in Southern Caucasus Third Party Conflict Resolution in the Caucasus Nina Caspersen

79

The Role of Intergovernmental Institutions in Regional Cooperation Panagiota Manoli

90

The Evolution of US Policy towards the Southern Caucasus S. Neil Macfarlane

107

The Russian Policies in the South Caucasus Mitat Çelikpala

125

Turkey’s Caucasus Policies Mustafa Aydin

139

The Role of NGOs in Turkey-Armenia Rapprochement Tigran Mkrtchyan

154

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

xii

The European Union’s Role in the South Caucasus Sinem Akgül Açikmee

163

Regional Cooperation and Integration; Views from the Region The Post-conflict South Caucasus within New Geopolitical Framework - View from Georgia Kornely K. Kakachia

183

197

The Fast Changing World and the South Caucasus Stepan Grigoryan

208

Illusive Regional Cooperation: The Case of the South Caucasus Gayane Novikova

237

Subject Index

249

Author Index

251

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Regional Cooperation in the South Caucasus: The Azerbaijan Perspective Leila Alieva

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Non-Traditional Challenges to Regional Security; Political and Economic Issues

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

This page intentionally left blank

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-3

3

Economics of Natural Resources and Transition in Southern Caucasus Gubad IBADOGLU 1 Economic Research Centre, Azerbaijan

Abstract. This review paper will first explore the overall contemporary state of developments in South Caucasus countries. Providing the overall assessment of both economic and political transformations on the basis of cross-country situation analysis, it serves the need to identify the role of economic factors with regard to security in the South Caucasus. The security might be at risk of being further undermined in response to the continued global financial crisis and therefore, the paper is an attempt to foresee the potential threats and suggest a relevant course of actions in the South Caucasus. Keywords. GDP, global financial crisis, foreign trade turnover, state external debt, inflation rate, transition indicators.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction Studying the transformational trends in economies of South Caucasus Countries on the eve of the 20th anniversary of the collapse of Soviet system and amid the wreckage of the global financial downturn is of great interest. In this way, economic transformations are no less important than security, integration and geostrategic affairs in the Southern Caucasus. The appraisal of regional security in light of the economic context will be key to uncovering currently existing perspectives and policy directions regarding the future path of the region. Given the diverse policy responses to the global financial crisis noticeable in the countries of the region, the economic and social welfare aspects of security are becoming even more crucially serious matters. Opportunities are limited in the region to operate in a mutually collaborative economic environment through a single market arrangement as a result of all three states being somehow involved in various conflicts. Consequently, the economic transformation and development indicators of the three states, which are integrating into the global economy with different pathways, appear to be drastically unlike each other as a result of different political and geostrategic conditions.

1

Chairman of the Economic Research Centre, Azerbaijan. E-mail: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

4

1. Contemporary State of Economies of South Caucasus Countries 1.1. Azerbaijan Under the global financial crisis, only Azerbaijan among the South Caucasus countries has posted positive economic growth according to 2009 full-year figures. The official statistics show that GDP growth was 6.1%, including 9.6% in the oil sector and 4.8% in the non-oil sector in the first nine months of 2009 [1]. The oil sector accounted for 54.4% of the annual GDP. Another noteworthy point is the fact that since the GDP was mainly sustained by trade, it has had a negative impact on the growth rate in the non-oil sector. As a result of restrained aggregate demand, the non-trade sector recorded growth only by 1.8% thus comprising 0.5% of the total annual GDP growth. Despite the positive trends as a result of the recovering economic activity in the global financial markets in the latter part of the previous year, increasing global economic activity index and growing oil prices in the world markets, the non-oil sector in Azerbaijan was not positively affected by these developments and ultimately the non-oil GDP growth showed contraction by over 15 percentage points in year-on-year terms in the first nine months of this year. In spite of the drastic slump in the non-oil GDP growth rate, the IMF’s most recent forecasts indicate that the annual GDP growth in Azerbaijan will be 7.5% as a result of keeping the oil GDP growth rate at the same level as in the previous year [2].

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Table 1. Main economic indicators related to oil wealth in Azerbaijan Years

2002

2003

2004

2005

2006

GDP growth (%)

10.6

11.2

10.2

26.4

34.5

25.4

10.8

Inflation rate (%)

3.3

2.2

6.7

9.7

8.3

16.7

21.2

Budget income (mln.AZN)

910.2

1225.5

1481.2

2055.2

3881.2

6006.6

10763

Budget expenses (mln.AZN)

931.7

1234.0

1501.0

2140.7

3789.7

6086.2

10774

SOFAZ

income

176

244

185.8

215.6

986

1886

10144.7

expenses

30.8

243.6

168.7

214.6

981.4

1061.2

4380.9

-

100

130

150

585

585

3800

Oil revenues (bln.$)

-

-

-

-

2.97

5.36

11.3

Poverty rate (%)

46.7

44.7

40.2

29.3

20.8

15.8

13.8

budget

2007

2008

(mln.AZN) SOFAZ

budget

(mln.AZN) Transfers from SOFAZ to state budget (mln.AZN)

Source: Central Bank of Azerbaijan Republic, Ministry of Finance of Azerbaijan Republic and State Statistical Committee of the Republic of Azerbaijan

The year 2009 was outstanding not only in terms of more interesting developments as compared to previous years, but also in terms of being very challenging. After regular economic growth over many years, Azerbaijan’s economy has struggled very hard for the first time since 1996. Influenced by the global financial crisis and price fluctuations in the world’s goods markets, Azerbaijan’s economy recorded a recession reflected in volatility in goods and financial markets as a result of the fourfold export

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

5

falls caused by lower world oil prices in the first half of the year, in the declining of nominal GDP down to 4 billion AZN, twofold slumps in payment balance accounts surplus, restriction of foreign credit flows into country’s bank system, tightening funding sources to stir up aggregate demand, contracted investments in the basic capital, and people’s lower nominal monetary incomes. The macroeconomic performance of country’s economy in the first part of the year was worse compared to prior and later periods, with the oil processing, oil chemicals, furniture, and metallurgical sectors foundering severely and the economy losing tens of thousands of jobs due to the challenges businesses were faced with. Banking and financial sectors were the most heavily hit sectors by the global financial crisis in 2009. Though the banking sector, working under tougher macroeconomic conditions, managed to post generally positive financial results thanks to the Central Bank’s anti-crisis intervention, it could not resolve the problems in full. Despite the tightened funding sources, rapid withdrawal of deposits in the early months of the year and higher risks associated with credit investments, the banking sector was able to repay 1.6 billion foreign credit debts in 2009 thanks to the Central Bank’s assistance [3]. Thus the banking system experienced large losses as a result of the global financial crisis. It should now be a priority issue to resolve capital investments and pluralizing activities in the post-crisis period to create additional resources for sustaining the bank system in the short- and mid-term. Otherwise, businesses and households are bound to face difficulties in the continuous payment system during the next year as the access of businesses and households remains restricted to credits in spite of positive patterns in the recent years. Therefore, economic activity and stimulation of aggregate demand have been delayed, especially in the nontrade sector. According to the 9-month end figures for 2009, even though production saw credits expand in this direction, credits fell by 13.9 % in trade and services, and 29% in transport and communication. In the same way, construction and property credits were down by 4%. The credit portfolio of households noted spending on consumption (77 %), entrepreneurship activities (8%), and property purchases (10%) [3]. However, despite all of these challenges and a 3 billion dollar debt, Azerbaijan’s economy ended the year with 20 billion currency reserves [4]. 1.2. Armenia According to forecasts, Armenia will see a recession in 2009. Armenian experts’ baseline forecasts indicate that the full-year GDP would reach 3.1 trillion AMD by the end of the year, a 15% decrease compared to the previous year. Experts also predict that 2009 will be the worst year for Armenia in economic terms over the last 20 years of independence. While the GDP in Armenia was 12 billion dollars in 2008, it is expected to be slightly more than 8 billion dollars in 2009, a 33% lower GDP expressed in dollar terms [5]. Armenia last experienced such a similar situation in 1992 during the time of war. Despite the slowing down of the economic recession in the third quarter of the previous year, with such speed it seems very unlikely that the Armenian economy will emerge from stagnation in 2010 either. As indicated, GDP growth was 5.9% in the first quarter, 10% in the second, and 1.3% in the third quarter [6].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

6

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Table 2. Recently main economic indicators of Armenia (2009 January-November) [7] Indicator

Figures

Economic growth,%

82.5

GBP, billion AMD

2466.3

Inflation, %

103.2

Budget deficit (proficit), bln. AMD

108.7

Trade deficit, mln. USD

-2018.4

Foreign trade turnover, mln USD

3121.6

Foreign trade turnover, %

69

Gross External Reserves, mln. USD

2144.6

The share of remittances and grants from abroad still remains very high. Asian Development Bank estimations show that Armenia was ahead of other countries by these indicators in the Southern Caucasus last year. These remittances account for 10% of the overall annual GDP [8]. Yet, the Armenian economy experienced a decline in remittances, which are considered to be a “fairy stick”[9]. The lowering of remittances, either because of political or economic reasons, decreased the stabilizing role of this source for the country which is suffering from the impact of the financial crisis. Moreover, the decreasing amount of income from such a strategic source as of 2008 and an even greater tendency towards a decreasing of remittances in 2009 provoked by the global financial crisis was reflected not only in social indicators, but also in macroeconomic performance figures. Recent statistics show that the poverty rate has soared to 30 per cent in Armenia. This issue was raised by Lire Erkado, senior economist at the World Bank, in his presentation titled “Poverty in Armenia and social implications of global financial crisis.” According to his estimations, poverty will increase in Armenia by 7.6 percentage points in 2009. For comparison’s sake, poverty was 56.1% in 1988 through 1999 and went down to 23.5% in 2008 [10]. Poverty is even a greater concern under the current circumstances of limited budget and funding resources in the fight against poverty. Despite the same projected level of expenditures in the 2010 budget as in the 2009 budget, this looks utterly untenable as the Armenian government underperformed its social expenditure liabilities in 2009 and, as a result, had to turn to international financial and credit institutions such as the IMF, WB and ADB for massive borrowings to finance the high budget deficit and meet other financial needs. As a result, compared to the beginning of 2009, foreign debts doubled, exceeding 3 billion dollars. According to estimations, foreign debts of Armenia will reach 4 billion dollars. The overall debt in the 2010 budget of Armenia will make up 46.3% of the expected GDP in 2010, and 89% of them will be foreign debts [10]. Foreign debts will be more than half of the GDP in 2011 at this pace. According to projections, state budget incomes will comprise 742 billion AMD in 2010, 570 billion of which will be tax inflows. The tax inflows are predicted to go up from the current year 16.6% to 17.7 in 2010. When it comes to state budget expenses, they are expected to increase by 75 billion AMD next year, up to 935 billion AMD. 85.7% of the projected 2010 budget expenditures will be current expenses and 14.3% capital

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

7

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

expenses [11]. Challenged by the crisis, some of the budget expenditures including defense expenses will be cut. Defense expenditures were 112 billion AMD (about 300 million dollars) in the 2009 state budget. Last year, 131 billion AMD were allocated from the state budget for security and army purposes. Next year they are projected to be at 93 billion AMD. Social sphere expenditures will compromise 45.7% of the 2010 year budget. Nevertheless, expenditures for social benefits, education and health care next year will be down to 240 billion AMD, 95 billion AMD and 54 billion AMD respectively. The share of the state budget deficit will be 183 billion AMD, 5.7% of the GDP. The foreign trade element of the Armenian economy has recently experienced changes that are also worthy of analysis. In January to September of 2009, the foreign trade turnover of Armenia with its key partner Russia declined by 15.5%, down to 533.9 million US dollars. The overall trade turnover faced a 30% contraction in the same period. Since the overall decline rate in foreign trade turnover was twice as high as with Russia, the share of trade with Russia will go up to 22.6% by 3.8 percentage points. That is, the official statistics indicate that the contraction in the foreign trade turnover of Armenia was because of falls in exports, which will be twice as low in 2009 as in 2008. The production of alcoholic beverages, which holds a substantial share in exports, has gone down by 50 percentage points [12]. Russia is not Armenia’s key partner in just foreign trade, but also in the field of investment cooperation. In the first nine months of 2009, Russian investments in the Armenian economy was $3168 million (US dollars), $2312.6 million of which were foreign direct investments. From January to June of 2009, Russian investments in the Armenian economy totaled $122.2 million, $98.9 million of which were foreign direct investments. The number of enterprises established with Russian investments was 1,116 in 2009, and 32 of them were founded in 2008. The North-South road corridor, the Armenia-Iran railway, the idea of building a techno-city in Gyumru, the development plan for the city of Jermuk, the founding of free economic zones and IT are the areas of interest for investment [13]. 1.3. Georgia The International Monetary Fund also forecasts economic recession for Georgia in 2009. Over the last year, Georgia saw a 4% economic decline against the expected 9% growth. Therefore, the next year 2010 Georgian state budget is forecast to shrink in size. The National Statistics Department reports that in January-September of this year, foreign direct investments into the Georgian economy amounted to 505.2 million dollars, 143.9 million of which went to industry, 103.6 million to real estate property, 65.7 million to construction, 30 million to energy, and the final 29.3 million to the transportation and communication sectors [14].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

8

Table 3. Foreign direct investment in Georgia (2004-2009yy).

2004

2005

2006

2007

2008

Turnover

2492.5

3355.4

4613.9

6447.3

7800.6

2009 JanuaryNovember 4946.5

Registered Exports (FOB)

646.9

865.5

936.2

1232.4

1496.1

1028.0

Registered Imports (CIF)

1845.6

2490.0

3677.7

5214.9

6304.6

3918.5

-1624.5

-2741.5

-3982.5

-4808.5

-2890.5

449.8

1190.4

2014.8

1564.0

505.2*

Balance of Merchandise -1198.7 Trade Foreign Direct Investments 499.1 In Georgia *In the I - III quarter of 2009

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Source: http://www.statistics.ge.

According to the table, the year 2009 recorded lower FDIs into the economy, which are of significant role for the Georgian economy, and increased foreign debts. As compared to 2004 (499.1 million dollars) foreign direct investments slightly weakened to 449.8 million dollars in 2005. The faster economic growth as of 2006, mostly driven by FDIs, played a key role in economic development and the modernization of Georgia. Foreign direct investments into the Georgian economy in 2007 totaled 2014.8 million dollars and slowed to 1564 million dollars in 2008. During the first three quarters of 2009, this indicator was significantly down to 505.2 million dollars. Foreign debts were 3 billion 397.2 million dollars in 2009, which is 901.6 million dollars in year-on-year terms. The greater part of them is IMF and World Bank debts. From this year, a new international creditor, the Asian Development Bank, started to loan to Georgia; the ADB has allocated 181.1 million dollars in loans in 2009 to the Georgian economy. Georgia’s debts to bilateral credit institutions were up by 45.5 million dollars and reached 562.5 million dollars. In the meantime, Georgia’s debts to Turkey decreased by 5.8 million dollars to 36 million dollars, while debts to Germany soared by 46.8 million dollars and amounted to 202.5 million dollars. Georgia’s debts to Russia were 118.8 million dollars, and 36.8 million dollars were owed to the US. Debts related to the issuance of public securities make up 500 million dollars. For the first nine months of 2009, Georgia’s foreign trade turnover comprised 4,946.5 million dollars, exports 1,028 million dollars and imports 3,918.5 million dollars. Turkey remained the major trade partner of Georgia for this period and the trade turnover between these two states totaled 394.7 billion dollars and Turkey’s share in Georgian foreign trade turnover was 13.7 per cent. Among the CIS countries, Azerbaijan is the key trading partner of Georgia. The trade partnership carried on this year between Azerbaijan and Georgia grew, in spite of the global financial crisis. In January-October of 2009, the size of Georgia’s trade turnover with Azerbaijan equaled 452.9 million dollars, 64.5% more in year-on-year terms. Goods with significant shares in Georgia’s exports to Azerbaijan are automobiles (33.2 million dollars) and cement (20.3 million dollars). The largest export goods from Azerbaijan to Georgia comprise 207.6 million dollars, a 59.1% year-on-year decrease.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

9

The foreign trade turnover of Georgia was slightly more than 2 billion dollars in the first half of 2009 (1.6 billion dollar imports and 408.3 million dollar exports), which is 37.3 per cent less than in the same period of the last year. The state budget expenditures of Georgia will be 6,773 billion GEL, 437 million GEL less than the previous year. Revenues from taxation, customs and grants in Georgia’s state will be 42%, 26% and 4% respectively [15]. As regards expenditures, the Georgian government identified health, education and road infrastructure as the priority expenditure directions for 2010. Meanwhile, the government has decided to reduce administrative costs, especially law-enforcement maintenance expenses and military costs. According to the approved estimations, Georgia’s defense budget will be cut doubly in 2010 compared to 2008 and the Interior Ministry’s expenditures will decrease 1.5 times [16].

2. Cross-comparative Analysis of Economies in the Southern Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2.1. GDP Despite the fact that economic growth carried on in Azerbaijan, a growth which occurred in all three countries in the Southern Caucasus since 2002, Armenia and Georgia recorded an economic slowdown in 2009. According to IMF forecasts, there will be 2%, 1.2% and 7.4% economic growth in actual terms in Georgia, Armenia and Azerbaijan respectively in 2010. The estimations reveal that GDP in 2008 expanded by 177%, 153% and 62 % in Azerbaijan, Armenia and Georgia as compared to the GDP in 1989. Over the last 20 years, the Armenian GDP reached its peak in 2005 (14%), Azerbaijan’s GDP in 2006 (30.5%), and the Georgian GDP in 2007 (12.4%). Azerbaijan has remained the leader in the Southern Caucasus in terms of the GDP growth rate since 2006, which is primarily driven by enhanced oil production, as a result of higher world oil prices and the start of full-power operation of the major oil export pipeline Baku-Tbilisi-Ceyhan. As a result of these economic developments, Azerbaijan’s exports grew more than ten times in the past 4 years (2005-2008) which led to the increased portion of exports in the overall GDP. The chart below shows the growth change patterns in the GDP, covering the years 1993-2009 in the South Caucasus states. Figure 1. GDP growth pattern in South Caucasus states (1993-2009yy)

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

10

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

Despite the recent declining trend in remittances in all three countries of the Southern Caucasus, this source still holds a significant share in the GDP, especially in Armenia. Until recently in 2008, ten percent of the Armenian GDP was derived from this source. As per ADB estimates, it was 8.9% in 2008, a drop explained by the very negative impact of the global financial crisis on Russia, where Armenians mostly migrate to earn money. Given the prolonged continuation of the crisis in 2009, remittances dropped even lower in the South Caucasus countries. The Central Bank of Azerbaijan reported declines of 29.1% and 43.3% in the amount of cash foreign currencies moved into the economy in the second and third quarters of the year respectively as compared to the same periods in the past year. Armenia and Georgia experienced the same trend in 2009. The table below depicts the remittances to South Caucasus states in 2008 and their share in the overall GDP.

Table 4. Remittances to South Caucasus states in 2008 and their share in the overall GDP Armenia

Azerbaijan

Georgia

Amount of transferred money (in billion US dollars)

1.621

1.554

0.732

Share in GDP, in per cent

8.9

3.4

5.7

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Source: Asian Development Bank.

It should be noted that according to the report of the Asian Development Bank, Azerbaijan is the least dependent country in the South Caucasus on money transfers. As seen in the table, money transfers to Azerbaijan and remuneration from abroad amounted to 1,554.300 USD, or 3.4 percent of the GDP. In Georgia the same showings were respectively 732,100.000 USD (5.7 percent) and in Armenia, 1,621.000 USD (8.9 percent). The decrease of money transfers as a result of global financial crisis has been felt in Azerbaijan too. A significant portion of the Azerbaijani population working in foreign countries is in Russia, and the number of Azerbaijanis living in Russia is considerable. Since the crisis in Russia has been so profound, this impact has also been reflected in money transfers, as Azerbaijanis have had to reduce the amounts of money transferred to their families. Even if Armenia has the smallest population in the South Caucasus, remittances appeared still higher than in neighboring countries even during the crisis period. Official estimations have calculated personal money transfers to Armenia in 2008 at $2 billion, whereas unofficial sources reported them to be at $4 billion. This indicates that 15% of the Armenian GDP has been derived from that source. The structural analysis of the GDP by its components (C+I+G + X) for the South Caucasus countries in 2007 reveal that the GDP was mainly derived from net exports and consumption in Azerbaijan, from consumption and government spending in Armenia, and from government spending and consumption in Georgia. A significant role of oil exports and revenues in the GDP of Azerbaijan has been the result of operations of the major oil-exporting Azerbaijan International Operating Company (AIOC). More than 80% of oil is produced and exported by AIOC. In view of the fact that AIOC was co-founded by numerous foreign oil and gas companies, it is possible to

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

11

notice a drastic divergence between Azerbaijan’s GDP and GNP. 2007 estimations demonstrate that the GNP comprised 83% of the GDP as compared to the divergence ratio of 103% in Armenia and 102% in Georgia, which is, in both cases, in favor of GNP [17]. The structural discrepancy of the GDP in South Caucasus countries are a consequence of different government policies and differing economic planning in these countries. The macroeconomic indicators of Azerbaijan look utterly different from those of the other two South Caucasus states as a result of the dominating role of oil in the economy of Azerbaijan and the majority of revenues coming from oil sales. Hence, not only the size, but also the structural composition of the GDP in Azerbaijan is an adequate reflection of the fact that economic development is driven by one source only. The chart below represents this relationship in a more precise and visual manner. Figure 2. Oil dependence and GDP growth correlation in Azerbaijan Oil dependance and GDP growth correlation in Azerbaijan 97%

50000 45000 40000

84% 78%

90%

81%

76%

80%

35000

70%

30000

60%

25000

46300

20000

10000 5000

50% 40%

33050

15000

30% 20%

20983 8680

13238

10%

0

0%

2004 Copyright © 2011. IOS Press, Incorporated. All rights reserved.

100%

2005 GDP (mln.$)

2006

2007

2008

Oil share in export (%)

Source: SOFAZ, State Statistical Committee of the Republic of Azerbaijan Republic, State Customs Committee of Azerbaijan Republic Though the Armenian economy was mainly built upon remittances, direct investments and the mining industry, the GDP is currently relying on the constructionproperty sector, financed at the cost of foreign capital. Shrinking remittances and falling metal prices in world markets as a result of the global financial crisis brought about negative effects for Armenia, which has an undiversified export market. According to 2008 year-end figures, Azerbaijan is ahead of its neighbors in terms of the per capita GDP indicator; the per capita GDP is $5476 in Azerbaijan, $3718 in Armenia and $2371 in Georgia. Hence, Azerbaijan performed much better in terms of not only its own GDP indicators, but also in the formation of the South Caucasus GDP, which the chart below illustrates.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

12

Figure 3. Share of GDP by countries in the Southern Caucasus.

Displaying high growth patterns over the recent years, Azerbaijan also went in advance of other South Caucasus states in terms of the inflation rate indicator. Prices were much higher than in Armenia and Georgia as a result of double-digit inflation in 2007-2008. Table 5. Inflation rates across 2002-2008 years in South Caucasus

. 2002

2003

2004

2005

2006

2007

2008

2009

Armenia

1,1

4,7

7,0

0,6

2,9

4,4

9,0

3,0

Azerbaijan

2,8

2,2

6,7

9,6

8,3

16,7

20,8

2,5

Georgia

5,7

4,9

5,7

8,4

9,2

9,3

10,0

13,2

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Source: The Central Bank of Azerbaijan, Central Bank of Armenia, Central Bank of Georgia

One of the noteworthy aspects of the economies in the South Caucasus states is that of borrowing policy through state guidance and support. Although the rapid increase over the last two years in the dynamic of borrowings in Armenia and Georgia was associated with anti-crisis measures, this happened, in effect, as a result of the shortage of currency reserves in both countries. As an example, Armenia obtained $500 million in credits from Russia to stabilize its economy. During the same period, the IMF and World Bank expressed their intent to assign $828.7 million and 545 million respectively for 2009-2012. Table 6. GDP share of state external debt in South Caucasus states. 2008

2009

2010

Azerbaijan

5,3

9,1

11,9

Armenia

13

38

46

Georgia

21

42

58

Source: The Central Bank of Azerbaijan, Central Bank of Armenia, Central Bank of Georgia. Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

13

As seen in the table, Georgia has the highest state external debt amongst the South Caucasus states, which was 42% in 2009, and this percentage is expected to rise to 58% to finance planned projects in 2010. With the growth dynamic of credits in the economy, Armenia is pretty much ahead of other regional states. Having had foreign credits which equaled to 13% in terms of the GDP share until the global financial crisis broke out, Armenia was at a critical level in terms of the share of foreign borrowings in its GDP (40 per cent) in the last one year as a result of the diminishing economy and rapidly increasing debts in 2009. Foreign borrowings are anticipated to comprise 46% of the GDP. When it comes to Azerbaijan, it is doing much better in the management of foreign credits thanks to considerable currency reserves and sustainable oil revenues.

3. Transformational Challenges in South Caucasus States and Reform Perspectives

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3.1. Economic Transformation in South Caucasus States The estimations made by the European Bank for Reconstruction and Development (EBRD) rank Azerbaijan quite below other region countries Armenia and Georgia in terms of the economic transformation indicator. Armenia was positioned higher and did better as compared to other two states in small and big-scale privatization ranking. Evidently, the scale of privatization was central to calculating this index. The transformational privatization of properties in Armenia has left behind Azerbaijan and Georgia in the measure of both timing and scale. Despite the simultaneous start of massive privatization in all three countries of the South Caucasus in 1996, both Armenia and Georgia finalized this stage of privatization back in the previous century whereas this process has not yet come to an end in Azerbaijan. Privatization shares distributed to people since 1997 will still be in circulation, at least, until 2011. Regarding price liberalizations, the prices of some goods and services are still established in an administrative manner by the Tariff Council under the Cabinet of Ministers of the Azerbaijan Republic, though the changes for property liberalization were started even earlier than property transformation. The Tariff Council regulates prices for 39 goods and services which were identified on the list of state-regulated goods and services approved by decree 178 of Cabinet of Ministers dated September 28, 2005 [18]. Armenia and Georgia have a lot more goods and services that are regulated by market operations rather than by the state. Therefore, Azerbaijan is in a weaker position as compared to its neighbors in relation to this index of EBRD. In terms of indexes for enterprise reform and competition policy, Armenia and Georgia are performing almost equally, whereas Azerbaijan still holds a weaker position, which can be explained by the shortage of resources in other sectors as a result of the drain of the best capital, labor and material resources from other sectors into the oil sector and their inadequate development level and weaker competitiveness. Another indicator prepared by EBRD by which Azerbaijan is found to perform rather poorly in comparison with its neighbors is that of trade liberalization. Such a poor position by this indicator is associated with non-membership in the World Trade Organization (WTO). Despite continued negotiations since 1997 [19], there is no membership yet to the organization to which both Armenia and Georgia appear to be. As far as reforms in the banking

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

14

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

sector are concerned, again Azerbaijan is well below Georgia and Armenia by the relevant indicator of EBRD. This is because the banking sector in Azerbaijan is less globally-linked and bank sector privatization has not been completed yet (e.g. the biggest bank, the International Bank of Azerbaijan, is still state-owned) and there are limitations for banks with foreign investments to exist and operate. Though in terms of the indicator of banking reforms, Armenian and Georgian banks are much more open and in both countries there are banks with foreign investments and due to greater exposure to the global financial system, they suffered from the effects of the recent financial crisis more than Azerbaijan. By another EBRD indicator of non-bank institution reforms, Armenia is much ahead of both Georgia and Azerbaijan. Nevertheless, the average index across the South Caucasus is well below what EBRD has discovered in other countries under study. As a last point on these issues, by the indicator of infrastructure reforms that are currently of significant importance, Georgia is doing better than Azerbaijan and Armenia is doing better than Georgia. As for the transition score of the countries, Georgia is doing best in the region and leading the other two countries in terms of faster transitional reforms. The fact that these reforms have been delayed in Azerbaijan proves the enormous potential for reforms. Although the middle position of Armenia is at odds with its macroeconomic performance, there is a need to reinforce the economic transition in this country.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Table 7. Transition indicators by country in South Caucasus states (2008 year-end figures) ARMENIA

AZERBAIJAN

GEORGIA

Small- scale privatization

4.0

3.7

4.0

Large - scale privatization

3.7

2.0

4.0

Enterprise reform

2.3

2.0

2.3

Price liberalization

4.3

4.0

4.3

Trade liberalization

4.3

4.0

4.3

Competition policy

2.3

2.0

2.3

Banking sector reform

2.7

2.3

2.7

Reform of non-bank financial reform

2.3

1.7

1.7

Infrastructure reform

2.7

2.0

2.3

Average transition score

3.11

2.63

3.18

Source: EBRD transition indicators by country [20].

3.2. Quality Indicators of Reforms in South Caucasus There is a divergence of the situation as regards the extent of corruption, economic freedoms, the business environment and competitiveness among South Caucasus countries. Georgia is a leader for governance and political system reforms in the South Caucasus, yet has a weaker position in economic growth and development indicators as compared to Azerbaijan. As regards Armenia’s ranking via this index, it is in mid-

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

15

position just as in the transitional indexes. The economic freedom index of 2009 ranks Azerbaijan below Armenia and Georgia, but Azerbaijan nevertheless outstripped Armenia and Georgia by 46 rungs and 39 rungs respectively in the international competitiveness report, thus pointing out a much greater economic development potential in comparison with its neighbors. The 2009 World Bank studies carried out in 183 countries across the world reveal that one of the most favorable environments for starting up a business is in Georgia, followed by Azerbaijan. Armenia has the worst environment for starting a business. As regards the level of corruption, the most recent report of Transparency International describes the economies of Azerbaijan and Armenia as still suffering from this problem, whereas Georgia is reported to have resolved it much earlier. Table 8. The table below presents some ranking indicators characterizing South Caucasus states. Azerbaijan

Armenia

Georgia

99

32

31

38

43

11

51

97

90

143

120

66

2

Economic Freedom Source: Heritage Foundation Doing Business 3 Source: World Bank Institute Global Competitiveness Report 4 Source: World Economic Forum Corruption Perceptions Index 5 Source: Transparency International

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Conclusion In conclusion, it should be mentioned that Azerbaijan lags behind both Georgia and Armenia in the rates of transformation into a market system and in terms of reforms. Azerbaijan was least hit by the recent financial crisis in the region and concluded the 2009 year with positive economic growth. Economic analysis and appraisals identify the undiversified economy and absence of sustainable economic development strategy as the major challenges for Azerbaijan. If these problems are not resolved soon, IMF experts warn that the real GDP will be 20% below its level in 2010 in 2024. This requires designing a long-term economic security strategy and improving security parameters by emphasizing reforms. In Armenia, the major challenge is to manage the economic recession in compliance with other parameters, which seems rather unrealistic given the increasing 2 The Index of Economic Freedom measures the economic freedom of 183 countries based on trade freedom, business freedom, investment freedom, and property rights. 3 Doing Business covers 183 economies — including small economies and some of the poorest countries, for which little or no data are available in other data sets. 4 The rankings are calculated from both publicly available data and the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes in the countries covered by the Report. This year, over 13,000 business leaders were polled in 133 economies. 5 The annual TI Corruption Perceptions Index (CPI), first released in 1995, is the best known of TI’s tools. The CPI ranks more than 150 countries in terms of perceived levels of corruption, as determined by expert assessments and opinion surveys.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

16

G. Ibadoglu / Economics of Natural Resources and Transition in Southern Caucasus

poverty, unemployment, shrinking revenues and remittances. The most recessive economy of Armenia in CIS in 2009 (more than double) will push it, over the shortand mid-term, to strengthen its efforts to restore its losses from the previous year. Since an expected 1.2% growth rate in 2010 won’t be able to compensate for at least 10% of the current losses, Armenia has to substantially alter its economic and political course towards a higher growth rate. However, limited financial resources, weak communications and a smaller internal market, all of which are considered to be necessary resources and preconditions for achieving higher growth, remain as challenges. The potential opening of the Armenian-Turkish border might be helpful to some extent in overcoming these problems, yet it will need to explore new alternatives to bring real changes in the economic indicators. That will depend on relations with Georgia and Russia and Armenian-Azerbaijan negotiations. The major challenge of Georgia is to reconcile consumer demands with the aggregate and individual supply in the economy once investments are over in the coming future and foreign debts start to go up. Since the challenges can hardly be defeated through domestic resources, a lot more depends on the end of the global financial crisis and continued investment inflows. The increasing political tension and drop in financial resources could exacerbate the current situation of Georgia. That the 2009 economic recession of 4% will be replaced by 2% economic growth in 2010 can be thought of as the logical end-product of recent policies conducted in this country. Hence, Georgia will be obliged to deepen political and economic reforms for the short and mid-term.

References [1]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20]

GDP Growth Rates, Central Bank of Azerbaijan Republic. Available at: http://www.cbar.az/assets/92/1.pdf. IMF forecasts four-percent-growth of Azerbaijani non-oil sector in 2009, Trend, 12 October 2009. Available at: http://en.trend.az/capital/macro/1557128.html. Central Bank’s Assistance, see http://www.cbar.az/assets/1104/fsr.pdf. State External Debt, Ministry of Republic of Azerbaijan, see http://www.finance.gov.az/index_en.jsp?mod=article&article=15. http://www.arka.am/rus/economy/2009/12/10/17976.html. http://bizzone.info/government/2009/1261521765.php. “Armenian Government to Allocate 8.3 Billion Drams to Fund Scientific Research in 2010”, Arka News Agency, Available at: http://www.arka.am/eng/science/2009/11/05/17494.html. Global Economic Crisis and ADB’s Response: An Update, Asian Development Bank, December 2009. Available at: http://www.adb.org/Documents/Policies/Global-Economic-Crisis/in430-09.pdf. www.ane.ru/conference/armenia.ppt. http://www.express.am/43_09/korotko.html. http://www.panarmenian.net/news/rus/?nid=40278. http://www.kavkaz-uzel.ru/articles/160151. http://www.zarubezhexpo.ru/rechEric/. http://bizzone.info/stats/EkypllZyll.php. http://www.nregion.com/news.php?i=34639. http://www.apsny.ge/2009/eco/1260036074.php. http://pwt.econ.upenn.edu/php_site/pwt_index.php. Tariff (Price) Council of Azerbaijan Republic, see http://www.tariff.gov.az/?/az/faq/answer/. Azerbaijan and World Trade Organization, see http://www.wto.az/indexENG.htm. Transition indicators by country, European Bank for Reconstruction and Development, 2008. Available at: http://www.ebrd.com/country/sector/econo/stats/tic.xls.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-17

17

Economic Transformation and the Impacts of the Global Financial Crisis in the Southern Caucasus Vladimer PAPAVA 1 Dr., Senior Fellow, Georgian Foundation for Strategic and International Studies, Georgia

Abstract. The South Caucasian economies suffer from the same basic problems as all the other post-Communist countries with the global financial crisis having created some general threats for all of the post-Communist countries of the world. Unlike developed economies, which are exposed to the threat of the zombie-ing of the economy under the conditions of a financial crisis, this threat is even greater for the post-Communist countries owing also to their exposure to the necroeconomy. Under the financial crisis, in all South Caucasian economies there is a paradoxical situation: Armenia has a “Paradox of a Diaspora,” Azerbaijan, a “Paradox of a Closed Economy,” and Georgia, a “Paradox of War.” Keywords. The South Caucasus, global financial crisis, necroeconomy, zombieeconomy.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction The first signs of the crisis appeared in the US financial system in the summer of 2007. Later it expanded to Western Europe and Japan and reached all developing countries and economies in transition by the end of 2008. Although financial markets are not well-developed in the countries of the South Caucasus—Armenia, Azerbaijan and Georgia 2—it was also expected that even these countries could not escape any negative implications of the global financial crisis. Further, this is not at all unusual if one bears in mind the fact that the South Caucasian economies depend largely upon economic situations in Russia, the EU and the USA (for example, [4]). According to the International Monetary Fund (IMF), whilst the economic growth rate across the countries of the South Caucasus and the Central Asia amounted to 12 percent a year in 2007, up from 6 percent in 2006, this indicator is 1 Senior Fellow at Georgian Foundation for Strategic and International Studies, Georgia. E-mail: [email protected]. 2 Generally, I am a proponent of such a concept of the Caucasus which embraces the South Caucasus, consisting of Armenia, Azerbaijan and Georgia; the South Caucasus, consisting of the northern provinces of Turkey and Iran, inhabited by Caucasian ethnic groups; and the North Caucasus, which is located in the south of Russia and is also inhabited by Caucasian ethnic groups [1] [2] [3]. Nevertheless, in this chapter, in order not to deviate from the entire context of this book, I will adhere to the traditional division of the Caucasus into the Northern and the Southern parts only.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

18

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

expected to drop to less than 2 percent in 2009 (for example, [5]). Compared to other nations of the region, this economic decline is observed to be particularly drastic in Armenia, Georgia and Kazakhstan [6]. Unsurprisingly, the IMF has closely cooperated with various post-Communist countries [7] including those of the South Caucasus [8] [9] [10]. The impact of the global economic crisis upon the countries of the South Caucasus is not homogeneous at all. There is much in common between Armenia and Georgia, both of which are open economies 3 having no significant deposits of hydrocarbon resources. The key differences between the two are associated with the RussianGeorgian war of August 2008 (for example, [11]) which had specific consequences for Georgia’s economy. As for Azerbaijan, its revenues from oil and gas make for a rather different economic picture. Before embarking upon a direct analysis of the economic problems which Southern Caucasian countries have come to face as a result of the global financial crisis, it would be prudent to touch upon some general trends and threats which may be observed in practically all post-Communist countries.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1. The General Economic Problems of the Post-Communist Countries under the Financial Crisis After the collapse of the Communist regimes and their command economies, the countries of the former Soviet Union found themselves with only a very small amount of goods to supply to the global market. With few exceptions, such as some hydro energy outputs, oil and gas extraction and the primary processing of raw materials, the goods they manufactured failed to meet the high international standards as a result of their overall low quality and or high prices. In fact, no markets existed for these particular products. Moreover, in principle, there was no way that they could have existed, in that an economy of this type is nothing more than a corpse or a so-called “necroeconomy” [12] [13]. If any segment of an economy is “dead,” then theoretically there should be no problems within. This explains the limited focus from the side of economic theory upon the problems of such a post-Communist market economy in which necrocompanies exist. Specifically, in post-Communist countries, a necroeconomy has developed from the roots of the command economy’s technical bases. As international experience shows, dead firms do exist and “successfully” function in the most developed of economies, with Japan being the most obvious example [14]. These insolvent and, in fact, bankrupt firms which continue to operate despite their “mortality” are commonly referred to as “zombie-firms.” A system of continued lending is the key source of the sustainability of these zombie-firms [15] [16], with loans granted by so-called “zombie-banks” which extend beneficial credits to the firms (in particular, interest rates for such loans are lower than average rates at the market level) [16]. At the risk of stating the obvious, these unreasonable loans can only lead these banks to direct and inevitable losses [17]. As a 3 Georgia and Armenia have been members of the World Trade Organisation (WTO) since 14 June 2000 and 5 February 2003 respectively. Azerbaijan is negotiating its WTO membership.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

19

rule, such banks are backed by their country’s governments [18] which grant them all kinds of guarantees and assure their deposits, amongst other things, which eventually means that zombie-banks exist at the expense of taxpayers [19]. To a certain degree, such a financial system even encourages “healthy” firms to turn into zombies [14]. As a result of the aforementioned relationships between zombie-firms, zombiebanks and their governments, a “zombie-economy,” then, develops which becomes a heavy burden for the “healthy” segments of the economy. A zombie-economy takes its roots in times of a financial crisis [17]. Under the conditions of stagnation, the economy becomes characterised by a stoppage of production and trade for a relatively long period of time which, in turn, gives rise to unemployment, a reduction in wages and salaries, and the overall decline of the standard of living. During these times, governments, as a rule, are called upon to help the economy overcome such difficult conditions through the provision of bailouts and other attempts at keeping the banking sector (to avoid a banking crisis) and the entire economy afloat. After the end of a financial crisis, the economy receives its own lifeless portion as a legacy of the difficulties and continues to try to preserve the old system of the government’s financial aid which was readily available to it during the crisis. A zombie-economy, therefore, can be viewed as a legacy of a financial crisis. A necroeconomy and a zombie-economy both developed in essentially different economic systems. The necroeconomy grew forth from a command economy whilst the zombie-economy is the offspring of a market economy. Further, a necroecoomy, in fact, has nothing to do with a financial crisis whereas a zombie-economy is the immediate end result thereof. A necroeconomy, therefore, generally expands to large- and medium-size manufacturing industries as opposed to zombie-firms which show no traces of existence therein as evidenced by the situation in Japan’s economy [14]. Moreover, the large manufacturing enterprises in a post-Communist country have the greater probability of becoming a part of a necroeconomy. On the other hand, as the same Japanese experience demonstrates, most large-size firms, due to their great financial powers, are not zombie-firms but may also often be encountered in those so-called small businesses which are relatively “larger” than others [14]. One may arrive at the conclusion, therefore, that necroeconomies and zombieeconomies are related to each other but still differ to a great degree from each other as individual economic phenomena. Theoretically, it must be made clear that the effective elimination of a necroeconomy is unthinkable without an effective bankruptcy law. As the experience of many post-Communist countries has shown, most of the past attempts at formally adopting bankruptcy laws have unfortunately produced only “stillborn babies” [20]. An effective bankruptcy law is an effective tool in the fight against zombie-firms and zombie-banks as well. It is precisely within the context of the current crisis that the subject of the attack of zombie-firms upon the global economy has become so topical [21] [22]. It is an established fact that many developed post-Communist countries have resorted to certain special governmental bailout programmes in support of their financial institutions and real estate businesses [23] which creates a threat for the development of a new zombie-economic routine. This threat may become quite real if the financial crisis continues long enough to enable the zombie-economic routine to take solid root.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

20

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

Unlike developed economies, which are exposed to the threat of the zombie-ing of the economy under the conditions of a financial crisis, this threat is even greater for the post-Communist countries owing also to their exposure to necroeconomy. In view of the fact that it is precisely the financial crisis which creates the favourable conditions for the establishment of zombie-economy foundations—that is, the zombie-ing of an economy—the zombie-ing of a necroeconomy is what happens in the post-Communist countries which, in fact, is even worse than the simple economic zombie-ing which takes place in developed economies. If in Japan, for example, the zombie-economy never affected processing industries, as we have seen, then one of the qualities of the necroeconomy is that it concentrates precisely upon this sector of the economy.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2. On the Economy of the Soviet South Caucasus The South Caucasus is distinguished by its extremely diverse landscape and naturalgeographical conditions. This, as well as the interests of territorial distribution of production in the former U.S.S.R., helped to form the special features of economic development in the South Caucasian countries [24] [25]. The economy of Soviet Armenia was characterized by the products of the chemical industry, ferrous metals, machine-tools, precision tools, textiles, clothing, leather footwear, and so on. Particular mention should be made of electric power generation and of the atomic power station, which was and still is the only one in the entire South Caucasus. Cognac production in the food industry still occupies a special place in the Armenian economy. The economy of Soviet Azerbaijan was characterized by a sufficiently developed industrial base. This primarily applies to oil production and oil refinery, while metallurgy and the production of mineral fertilizers, fuels, lubricants, herbicides, and synthetic rubber were also of great importance. Cotton-, wool-, and footwearmanufacturing plants should be singled out among the enterprises of the light industry. As for agriculture, its produce was consumed not only in Azerbaijan, but also in other regions of the former U.S.S.R. A sufficiently developed industrial base was also characteristic of the economy of Soviet Georgia—metallurgy, the production of ferrous alloys, machine-building (agricultural machinery industry, aeronautical engineering, shipbuilding) and machinetool industry, and the chemical industry. The agricultural produce and foodstuffs (primarily wine, mineral water, tea, and citrus fruit) were mainly exported beyond Georgia and was in demand essentially throughout the former U.S.S.R. The collapse of the communist system in the Soviet society and the disintegration of the U.S.S.R. led to a breakdown in cooperative relations among the enterprises of the former U.S.S.R. and the disappearance of the system for supporting the consumption of these enterprises’ products. The question of reorienting foreign trade became urgent. Most industrial enterprises of the South Caucasian countries (as of the whole of the former U.S.S.R.) were incapable of meeting the demands of international competition, so they constituted the network of a necroeconomy.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

21

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3. Concerning the Impact of the Global Financial Crisis on Armenia’s Economy or “The Paradox of a Diaspora” In 2008, under the conditions of an annual inflation rate of 9.0 percent, the GDP growth rate in Armenia amounted to 6.8 percent [26, p. 49]. In the absence of any serious deposits of natural resources, the global financial crisis had a very serious impact upon Armenia. This country was also gravely affected by the Russian-Georgian war. In particular, according to official sources, the direct and indirect damage caused to Armenia by the war is estimated to amount to USD 700 million [26]. For the first ten months of 2009, the GDP accounted for just 82.5 percent of its amount for the same period of last year [27]. National budget revenues in the first quarter of 2009 fell almost 10 percent against the level of the previous year [28]. Pursuant forecasts made by the Central Bank and the government, the country will face some 6-8 percent decline of its economy in 2009 [29] [30]. As was expected, the crisis hit the country’s industrial sector first, wherein the enterprises of necroeconomy are concentrated. In 2008, the production rate in metallurgical and chemical industries fell to 9.6 and 14.8 percent, respectively, as compared to 2007 [26]. In this regard, it must be noted that only 98.7 percent of the total industrial production volume was sold in 2008 and, more remarkably, some 70 percent of those sales took place in the domestic market [26] which is a clear indication of the necroeconomic nature of some key sectors of the Armenian economy. So, the main problems in the Armenian economy are concentrated in the real sector [30]. In November 2008, the Armenian Government came up with an anti-crisis programme which, inter alia, provides for the support of local industries by means of subsidising or issuing governmental guarantees to companies experiencing certain difficulties and even taking a stake in some of them [28]. Under the framework of this approach, more than twenty companies have already received governmental assistance in the aggregate amount of USD 67 million [28]. The significant role played by the Armenian Diaspora in essentially all spheres of Armenia’s development should be particularly emphasized, primarily in its rendering of economic aid and in investments in the national economy [31]. The main goal of the anti-crisis programme is to attract the funds of non-residents, particularly Diaspora Armenians, into Armenian banking and, in the end, the launching of the All-Armenian bank by the government which will also act as a major shareholder (aimed at attracting the funds of Diaspora Armenians for investments in Armenia) [28]. As more than 70 percent of Armenian migrant workers are in Russia, the crisis might force some of the Armenians living abroad (mostly in Russia) to return home which might cause an even higher rate of unemployment and, correspondingly, more of a burden on the national budget [28]. In summary, it may be stated that Armenia is a country where the “Paradox of a Diaspora” has been manifested very clearly: even though the high level of Diaspora inclusion into the economy pushes the country’s economic development ahead, the global financial crisis may force many migrants—mostly in Russia—to return to Armenia which can promote a higher rate of unemployment and, correspondingly, a greater burden upon the national budget.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

22

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

4. Concerning the Impact of the Global Financial Crisis on Azerbaijan’s Economy or “The Paradox of a Closed Economy” Presently, there is broad consensus over the fact that Azerbaijan has suffered the least damage from the global financial crisis as compared to other countries of the postSoviet world (for example, [32]). In 2008, under the conditions of an annual inflation rate of 20.8 percent, the GDP growth rate in Azerbaijan amounted to 10.8 percent [33]. In this regard, it must be noted that the economic growth in Azerbaijan in 2008 was basically conditioned by a 7 percent growth of the oil sector and a 15.7 percent growth of the non-oil sector [33]. The national economy’s domination by the oil and gas extracting industries is translated into the following figures: the share of those sectors in Azerbaijan’s GDP exceeded 60 percent in 2008 which made up 60 percent of all state revenues and almost 100 percent of all exports [32]. Azerbaijan’s ability to cope with the global financial crisis easier than any other post-Soviet country is fuelled by the following two factors: the underdevelopment of its financial sector and the domination of the oil and gas sector in the national economy (for example, [32]). The underdevelopment of the financial sector is typical for practically all postSoviet countries. The problem, however, is that Azerbaijan is distinguished by an even greater underdevelopment of this sector than countries like Russia, Ukraine and even its neighbours in the South Caucasus [32]. In other words, the deficiency of a developed financial sector turned into an “advantage” for Azerbaijan under the conditions of the global financial crisis which lessened the negative impact of the crisis on its economy. At the same time, it is noteworthy that the loans attracted from foreign financial markets did not exceed 25 percent of all banking liabilities in Azerbaijan’s banking sector [34]. This explains the fact that Azerbaijan’s relatively underdeveloped banking sector (like those of Armenia and Georgia) did not suffer much damage from the global financial crisis [32]. Although the price of oil has significantly dropped under the conditions of the global financial crisis, the country’s foreign currency reserves make it possible to alleviate the negative impacts of the crisis. It is important to note that the amount of Azerbaijan’s existing strategic currency reserves is enough to finance the country’s imports for 27 consecutive months [33]. In summary, it may be stated that Azerbaijan is a country where the “Paradox of a Closed Economy” has been manifested very clearly: even though, on the one hand, the high level of the economy’s “closedness” slows down the country’s economic development, under the conditions of the global financial crisis, on the other hand, it is this “closedness” which diminishes the negative impact of the crisis. Despite the abovementioned “paradox of a closed economy,” it would be a mistake to think that the global financial crisis had no impact at all upon Azerbaijan’s economy. In late 2008, Azerbaijani banks had to pay off approximately USD 1 billion of external debt [33]. Furthermore, due to the scarcity of lending resources in world markets, all of those banks reduced their lending programmes and some of them completely stopped providing loans to Azerbaijani households and enterprises [32]. To maintain the stability of the exchange rate of the national currency, the National Bank of

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

23

Azerbaijan, as the country’s central bank, spent some USD 1.2 billion to buy manats in the first four months of 2009 [32]. As was to be expected, particular hardships have been suffered by necroeconomic enterprises; specifically, the steel, aluminium and chemical industries [32]. Pursuant to official statistics, whilst the overall growth of industrial output in Azerbaijan was at 103.9 percent during the eight months of 2009 as compared to the same period in 2008, the non-oil sector has demonstrated some decline; that is, the production rate for the same period of 2009 comprised only 94.3 percent of the similar indicator for the same period in 2008 [35]. The City of Sumgayit, which is Azerbaijan’s third largest city by population and was famous in the Soviet period for its military-industrial complex, presently represents a classic example of a necroeconomic centre. Almost all of its enterprises—namely the state-owned chemical company Azerkimya plants, the stateowned Azerboru pipe factory and Azeraluminum—remain either completely idle or work at extremely low capacities [36]. Also inoperative (or close to that status) are all steel and metal-rolling factories which were created in the years of Azerbaijan’s independence; namely, the Baku Steel Company, Baki Poladtekme JSC, and DHT Metal JSC [37]. One has to bear in mind the fact that the system of Azerbaijan’s economic management still retains some of the old-fashioned institutional schemes such as the independent disposition by almost all state-owned large industrial and infrastructure companies of their material and financial resources, the availability for many of those companies of some large budget assignations and their privilege of enjoying some “tax holidays” [38]. In early 2009, the Government of Azerbaijan came up with a package of anti-crisis measures [39]. It includes some preventive steps against the artificial growth of prices on the consumer market, the depositing of foreign currency reserves which are kept abroad in the most reliable of local banks and ensuring reliable governmental control over the investing of these resources in the real sector of economy, enhancing assistance to export-oriented enterprises, increasing the volume of privileged loans to businessmen and intensifying the government’s support of agriculture, and so on. [34]. The existence of the large necroeconomic sector, as well as the practice of financing businesses from public resources as one of the methods of combating the crisis, is a clear indication of exposure of the economy of Azerbaijan (including necroeconomy) to the danger of zombie-ing which was discussed above in the general context of post-Communist countries.

5. Concerning the Impact of the Global Financial Crisis upon Georgia’s Economy or “The Paradox of War” Generally speaking, the Georgian economy stood the test of the five-day RussianGeorgian war in August 2008 [11] even though it has had to deal with a number of considerable difficulties in the aftermath of the conflict [40] [41] [42]. In the course of 2008, all doubts regarding the negative impact of the global financial crisis on Georgia’s economy disappeared. It must be noted that the summary economic indicators for 2008 clearly reflect the implications of both the global financial crisis and the Russian military aggression against Georgia.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

24

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

According to the official statistics, the economic growth rate in Georgia amounted to as little as 2.1 percent in 2008, (it was 9.6 percent in 2005, 9.4 percent in 2006 and 12.3 percent in 2007) [43]. The annual inflation rate amounted to 5.5 percent [44]. It must be noted in this context that the apparent deficiency of Georgia’s GDP resides in the fact that the public administration represents the biggest segment of economy whose share in the GDP accounts for 17 percent [45]. As far as Georgia’s economic crisis is concerned, it must be noted that the crisis also has its own domestic roots. These latter consist in the economic policy mistakes that the post-revolution government has made in the aftermath of the Rose Revolution [46] [47]. Other factors which have contributed directly to the rise of the economic crisis in Georgia should also be mentioned as follows: 1. Huge amounts of FDI streamed into privatisations and acquisitions of real estate which led to an obvious misbalance in which the inflow of financial resources into the country substantially exceeded the real sector’s growth rates. 2. With the government’s lesser control of the developments in the construction sector, the industry became dominated by “financial pyramids.” 3. Banks incremented their lending resources basically by accumulating cheap resources from European financial markets with the majority of such resources having been lent for construction and acquisition of consumer goods of which 100 percent are imported in Georgia. Almost all of the imported lending resources, therefore, were used to finance the construction businesses infected by “financial pyramids” and the import of consumer goods. Obviously, such developments could not positively influence the country’s economy. In reply to the Russian aggression, the international community extended significant financial assistance to Georgia as a victim of the aggression. At the conference held in Brussels under the aegis of the World Bank in October 2008, it was decided to allocate USD 4.55 billion in financial aid for post-war Georgia of which USD 2 billion is a grant and the remainder a loan [48]. Georgia will receive these funds during 2008-2010 and a major part of it will be spent for the liquidation of economic damage caused to Georgia by the Russian military aggression. After the war with Russia (on September 15, 2008), the IMF, acting within the scope of its Stand-By Arrangement (SBA), extended Georgia USD 750 million in support of the country’s macroeconomic stability of which USD 250 had already been transferred to the NBG reserves in the fall of 2008. On August 6, 2009, the IMF’s Executive Board approved an increase in the credit available under the SBA of about US$420 million, as well as the SBA’s extension to June 14, 2011 [10]. The crisis has also badly affected the national budget. In June 2009, the Parliament of Georgia approved a USD 300 million cutting of tax revenues of the national budget which accounts for 10.5 percent of all tax revenues previously planned for the fiscal year of 2009. At the same time, the national budget grew with the lion’s share belonging to the abovementioned international donor assistance [49]. The negative effects of the Georgian economic crisis might have been far more distressing had the international community not extended a helping hand in response to the Russian military aggression. In other words, although war by essence is a negative phenomenon, it had a positive implication for Georgia, to a certain degree, to the extent that the country received an enormous amount of international financial assistance. This creates, therefore, a so-called “Paradox of War” or a situation wherein aggressive entails not only negative consequences but some positive ones, too.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

25

2009 has hitherto been marked with an apparent decline in the Georgian economy. The year’s first quarter GDP rate accounted for only 94.9 percent of what it was in 2008, and the second and third quarters were at 89.9 percent and 98.8 percent, respectively [43]. According to the rather accurate calculations of the IMF, the economic decline in Georgia will amount to 4 percent at the end of 2009 [50]. Under such circumstances, the ten largest companies in Georgia significantly reduced their production capacities and some stopped operating entirely [51] thereby creating favourable conditions for the succession of a necroeconomy. Although the government periodically buys large amounts of fertiliser from Georgia’s largest chemical factory, Azot, even this enterprise has had to stop its production [51]. Most surprisingly, however, these enterprises continued producing their products for the first months of 2009, in the “best” tradition of a necroeconomy, and in spite of the obvious crisis in the Georgian economy, even though there was no demand for their output. They simply stopped their activities in April and May when the warehouses were completely filled with unwanted products [51]. To help the country overcome the economic crisis, the Government of Georgia developed a so-called “new financial package” which is basically targeted to strengthen the banking and construction sectors [52]. Specifically, the government is planning to issue some treasury bills with an aggregate value of GEL 260 million which will be invested in infrastructure projects. The government, thereby, aims to provide some assistance to commercial banks which are going to be the key recipients of those treasury bills. In times of economic crisis, the treasury bills will enable the banks to raise some assured income from national budget funds. In addition, the package provides for the weakening of the governmental regulation of banks. As a result, the government hopes that the banks will be able to attract some additional GEL 700 million of lending resources. Further, the package envisages the issuance by the Tbilisi City Hall of some financial guarantees to construction companies as a means of encouraging banks to lend money to the construction companies which will then be spent for the renovation of the old sections of the capital. As one can see, although the problem of necroeconomy in times of an economic crisis is still a very timely one, fortunately, the government’s anti-crisis plans have hitherto not given any indication that the government is going to finance necroeconomic facilities. On the other hand, it must be remembered that no official bankruptcy proceedings have been initiated to this point with respect to any of the necroeconomic enterprises of Georgia. Furthermore, as was noted above, the government of Georgia is going to provide financial assistance to the construction companies many of which represent “financial pyramids.” This is nothing else but a step towards the zombie-ing of those construction companies and also of those banks which will be extending loans to such construction companies owing to the financial guarantees from Tbilisi’s City Hall.

Conclusions The heritage of the command economy is a “necroeconomy”—dead industrial companies. The goods they manufactured failed to meet the high international standards as a result of their overall low quality and or high prices.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

26

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

International experience shows, dead firms do exist and “successfully” function in the most developed of economies. These insolvent and, in fact, bankrupt firms which continue to operate despite their “mortality” are commonly referred to as “zombiefirms.” A zombie-economy takes its roots in times of a financial crisis. During these times, governments, as a rule, are called to help the economy to overcome such difficult conditions through the provision of bailouts and other attempts at keeping the banking sector and the entire economy alive. After the end of a financial crisis, the economy receives its own lifeless portion as a legacy of the difficulties and continues to try to preserve the old system of the government’s financial aid which was readily available to it during the crisis. Unlike developed economies, which are exposed to the threat of the zombie-ing of the economy under the conditions of a financial crisis, this threat is even greater for the post-Communist countries owing also to their exposure to necroeconomy. The only effective mechanism to get rid of both a necroeconomy and a zombie-economy is to adopt a sound bankruptcy law which, in turn, requires the strong political will of the ruling elite. The South Caucasian economies suffer from the same basic problems as all the other post-Communist countries with the global financial crisis having created some general threats for all of the post-Communist countries of the world. In the absence of any serious deposits of natural resources, the global financial crisis had a very serious impact upon Armenia. As was to be expected, the crisis hit the country’s industrial sector first and, primarily, metallurgical and chemical industries wherein the enterprises of a necroeconomy are concentrated. The Armenian government came up with an anti-crisis programme which, inter alia, provides for the support of local industries by means of subsidising or issuing governmental guarantees to companies experiencing certain difficulties and even taking a stake in some of them. Obviously, the Armenian economy is exposed to a critical danger of zombie-ing under the conditions of the global financial crisis. Armenia is a country where the “Paradox of a Diaspora” has been manifested very clearly: even though the high level of Diaspora inclusion into the economy pushes the country’s economic development ahead, the global financial crisis may force many migrants—mostly in Russia—to return to Armenia which can promote a higher rate of unemployment and, correspondingly, a greater burden upon the national budget. Azerbaijan’s ability to cope with the global financial crisis easier than any other post-Soviet country is fuelled by the following two factors: the underdevelopment of the financial sector and the domination of the oil and gas sector within the national economy. As was to be expected, particular hardships have been suffered by necroeconomic enterprises such as, specifically, the steel, aluminium and chemical industries. The existence of a necroeconomic sector, as well as the practice of financing businesses from public resources as one of the methods of combating the crisis, is a clear indication of the exposure of the economy of Azerbaijan (including necroeconomy) to the danger of zombie-ing. Azerbaijan is a country where the “Paradox of a Closed Economy” has been manifested very clearly: even though, on the one hand, the high level of the economy’s “closedness” slows down the country’s economic development, under the conditions of the global financial crisis, on the other hand, it is this “closedness” which diminishes the negative impact of the crisis.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

27

The summary economic indicators for 2008 clearly reflect the implications of both the global financial crisis and the Russian military aggression against Georgia. In Georgia, the economic crisis also has its own domestic roots. Under such circumstances, the ten largest companies in Georgia have significantly reduced their production capacities with some of them having stopped operating entirely and, therefore, creating favourable conditions for the succession of a necroeconomy. Although the problem of a necroeconomy in times of an economic crisis is still very timely, fortunately, the government’s anti-crisis plans have hitherto not given any indication that the government is going to finance necroeconomic facilities. Furthermore, the government of Georgia is going to provide financial assistance to construction companies, many of which represent “financial pyramids.” This is nothing else but a step towards the zombie-ing of those construction companies and also of those banks which will be extending loans to such construction companies. The negative effects of the Georgian economic crisis might have been far more distressing had the international community not extended a helping hand in response to the Russian military aggression. Although war by essence is a negative phenomenon, it had a positive implication for Georgia, to a certain degree, to the extent that the country received an enormous amount of international financial assistance. This creates, therefore, a so-called “Paradox of War” or a situation wherein aggressive entails not only negative consequences but some positive ones, too.

References E. Ismailov and Z. Kengerli, The Caucasus in the globalizing world: A new integration model, Central Asia and the Caucasus 2 (2003), 135-144. [2] E. Ismailov and V. Papava, A new concept for the Caucasus, Southeast European and Black Sea Studies 8 (2008), 283-298. [3] E. Ismailov, and V. Papava, The Central Caucasus: Problems of Geopolitical Economy, Nova Science Publishers, New York, 2008. [4] V. Oskanian, The South Caucasus: Rethinking development and democracy, Caucasus Analytical Digest: The Caucasus in the Global Financial Crisis 6 (21 May 2009), 2-4. Available at: http://www.hertie-school.org/binaries/addon/1282_caucasus_economic_report.pdf. [5] D. Jardaneh, Crisis brings reversal of fortune to Caucasus and Central Asia, IMF survey magazine: Countries & regions, 10 March 2009. Available at: http://www.imf.org/external/pubs/ft/survey/so/2009/car030909c.htm. [6] Regional Economic Outlook: Middle East and Central Asia, International Monetary Fund, Washington, D.C., 2009. [7] A. Aslund, Implications of the global financial crisis for Eastern Europe, Development & Transition, 13 July 2009. Available at: http://www.developmentandtransition.net/uploads/issuesAttachments/25/DT.13_English_FINAL.pdf. [8] M. Burke, IMF lends Armenia $540 million to counter crisis impact, IMF survey magazine: Countries & regions, 10 March 2009. Available at: http://www.imf.org/external/pubs/ft/survey/so/2009/CAR030909B.htm. [9] Azerbaijan—aide mémoire for the 2008 IMF staff visit discussions, 10-17 December 2008, Baku, IMF External Relations Department, 16 December 2008. Available at: http://www.imf.org/external/np/ms/2008/121608b.htm. [10] Current IMF-supported program, Program note: Georgia, 17 August 2009. Available at: http://www.imf.org/external/np/country/notes/pdf/georgia.pdf. [11] S.E. Cornell and S.F. Starr (eds.), The guns of august 2008: Russia’s war in Georgia, M.E. Sharpe, Armonk, 2009. [12] V. Papava, Necroeconomics—the Theory of Post-Communist Transformation of an Economy, International Journal of Social Economics 29 (2002), 796-805.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[1]

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

28

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

[13] V. Papava, Necroeconomics: The Political Economy of Post-Communist Capitalism, iUniverse, New York, 2005. [14] T. Hoshi, Economics of the Living Dead, The Japanese Economic Review 57 (2006), 30-49. [15] R. J. Caballero, T. Hoshi and A.K. Kashyap, Zombie Lending and Depressed Restructuring in Japan, American Economic Review 98 (2008), 1943–1977. [16] D.C. Smith, Loans to Japanese Borrowers, Japanese International Economies 17 (2003), 283-304. [17] A.G. Ahearne and N. Shinada, Zombie Firms and Economic Stagnation in Japan, International Economics and Economic Policy 2 (2005), 363-381. [18] E.J. Kane, The Dialectical Role of Information and Disinformation in Regulation-Induced Banking Crises, Pacific-Basin Finance Journal 8 (2000), 285-308. [19] E.J. Kane, Capital Movements, Banking Insolvency, and Silent Runs in the Asian Financial Crisis, Pacific-Basin Finance Journal 8 (2000), 153-175. [20] A. Sánchez-Andrés and J.M. March-Poquet, The Construction of Market Institutions in Russia: A View from the Institutionalism of Polanyi, Journal of Economic Issues XXXVI (2002), 1-16. [21] P. Krugman, Wall Street Voodoo, The New York Times, 18 January 2009. Available at: http://www.nytimes.com/2009/01/19/opinion/19krugman.html?_r=2&partner=rssnyt&emc=rss. [22] P. Krugman, The Big Dither, The New York Times, 05 March 2009. Available at: http://www.nytimes.com/2009/03/06/opinion/06krugman.html. [23] V. Mau, Drama 2008 goda: ot ekonomicheskogo chyda k ekonomicheskomu krizisu (2008 Drama: From the Economic Miracle to the Economic Crisis), Voprosy ekonomiki (Economic Issues) 2 (2009), 4-23. (In Russian). [24] R.G. Gachechiladze, M.A. Nadzhafaliyev and A.D. Rondeli, The Regional Development Problems of Transcaucasia, Geoforum 15 (1984), 65-73. [25] E. Herzig, The New Caucasus. Armenia, Azerbaijan and Georgia, Royal Institute of International Affairs, London, 1999. [26] H. Khachatrian, “Republic of Armenia: Economy” in Central Eurasia 2008, CA&CC Press, Luleå, 2009. [27] Main Statisical Data, National Statistical Service of the Republic of Armenia, 2009. Available at: http://www.armstat.am/en/. [28] H. Khachatrian, Armenia: How a small country counters the global crisis, Caucasus Analytical Digest: The Caucasus in the Global Financial Crisis 6 (21 May 2009), 5-7. Available at: http://www.hertieschool.org/binaries/addon/1282_caucasus_economic_report.pdf. [29] B. Aris, Crisis Vindicates Central Bank’s Conservative Policy, bne—businessneweurope, August 2009. [30] B. Aris, Armenian Banks Suffer at Hands of Real Economy, bne—businessneweurope, September 2009. [31] V. Minoian and L. Freinkman, Diaspora’s Contribution to Armenia’s Economic Development: What Drives the First Movers and How Their Efforts Could Be Scaled Up?, Knowledge for Development Program, The World Bank, 2003. Available at: http://info.worldbank.org/etools/docs/library/152388/victoriaminoian.pdf. [32] G. Hübner and M. Jainzik, Splendid Isolation? Azerbaijan’s Economy Between Crisis Resistance and Debased Performance, Caucasus Analytical Digest: The Caucasus in the Global Financial Crisis 6 (21 May 2009), 12-15. Available at: http://www.hertie-school.org/binaries/addon/1282_caucasus_economic_report.pdf. [33] R. Hasanov, “Azerbaijan Republic: Economy”, in Central Eurasia 2008, CA&CC Press, Luleå, 2009. [34] A. Masimli, Azerbaijan and the world financial crisis, The Caucasus & Globalization 3 (2009), 68-83. [35] Macroeconomic Indicators, The State Statistical Committee of the Republic of Azerbaijan, 14 September 2009. Available at: http://www.azstat.org/macroeconomy/indexen.php?page=3&estat=archive&topic=30. [36] S. Abbasov, Beyond Energy Exports, the Global Downturn is Battering Local Industry, Eurasia Insight, 27 April 2009. Available at: http://www.eurasianet.org/departments/insightb/articles/eav042709.shtml. [37] S. Abbasov, Azerbaijan: Global Crisis Hits Baku Banks and Real Estate Sector, Eurasia Insight, 01 December 2008. Available at: http://www.eurasianet.org/departments/insightb/articles/eav120108a.shtml. [38] R. Hasanov, Management in Transition Economies: An Azerbaijan Republic Case Study, The Caucasus & Globalization 3 (2009), 84-91. [39] A. Masimli, Azerbaijan and the world financial crisis, The Caucasus & globalization 3 (2009), 68-83. [40] V. Papava, Post-War Georgia’s Economic Challenges, Central Asia-Caucasus Analyst 10 (26 November 2008. Available at: http://www.cacianalyst.org/?q=node/4991.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

V. Papava / Economic Transformation and the Impacts of the Global Financial Crisis

29

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[41] M. Kakulia, Mitigating Post-War Economic Threats in Georgia, Georgian Economic Trends, October 2008. Available at: http://www.geplac.org/newfiles/GeorgianEconomicTrends/2008/October%202008%20(eng).pdf . [42] V. Papava, Georgia’s Economy: Post-revolutionary Development and Post-War Difficulties, Central Asian Survey 28 (2009), 199-213. [43] National Accounts, Department of Statistics Under Ministry of Economic Development of Georgia, 2009. Available at: http://www.statistics.ge/main.php?pform=54&plang=1. [44] Prices, Department of Statistics Under Ministry of Economic Development of Georgia, 2009. Available at: http://www.statistics.ge/main.php?pform=61&plang=1. [45] N. Khaduri, “Georgia: Economy”, in Central Eurasia 2008, CA&CC Press, Luleå, 2009. [46] V. Papava, Anatomical Pathology of Georgia’s Rose Revolution, Current Politics and Economics of the Caucasus Region 2 (2009), 1-18. [47] I. Rukhadze and M. Hauf, The Georgian Economy Under Saakashvili, The Financial, 21 April 2009. Available at: http://www.finchannel.com/index.php?option=com_content&task=view&id=35088&Itemid=13. [48] Georgia Joint Needs Assessment. Donor Funding in Support of Post-Conflict Recovery and Reconstruction. Progress Report. The United Nations, The World Bank, 30 June 2009. Available at: http://www.mof.ge/common/get_doc.aspx?doc_id=5994. [49] Budgetary Amendments Unveiled, Civil.Ge, Daily News Online, 17 June 2009. Available at: http://www.civil.ge/eng/article.php?id=21128&search=budget. [50] Georgia: Third Review Under the Stand-By Arrangement and Requests for Augmentation, Extension of the Arrangement, Rephasing of Purchases, and Modification of Performance Criteria – Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Georgia, Georgia and the IMF, 21 August 2009. Available at: http://www.imf.org/external/pubs/ft/scr/2009/cr09267.pdf. [51] B. Aris, Donor Money Keeps Georgia Afloat, bne—businessneweurope, August 2009. [52] Government Offers New Plan to Boost Economy, Civil.Ge, Daily News Online, 30 June 2009. Available at: http://www.civil.ge/eng/article.php?id=21180.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

30

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-30

Rural Conditions in the Caucasus and Labour Migration

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Nigar GÖKSEL 1 Senior Analyst and Caucasus Coordinator, European Stability Initiative and Editor in Chief, Turkish Policy Quarterly

Abstract. Economic growth particularly between 2003 and 2008 in the Caucasus has generally reduced poverty and improved life conditions significantly compared to the 90s. However, this growth has impacted the opportunities of the rural populations only to a limited extent. All three Caucasus countries have a high rural/urban ratio as well as higher rates of poverty among their rural populations. Drawing upon field research, this essay describes the socioeconomic conditions in the South Caucasus republics (Armenia, Azerbaijan, Georgia) that motivate labour migration. In the first section, the trends of post-Soviet transition which brought about common challenges to inhabitants of the rural areas are described. Consequently, the general economic trends of each country is elaborated on, shedding light on how national policies have impacted rural opportunities. Given the Soviet legacy of guaranteed employment regardless of commercial viability and the linking of markets though a command economy, the employment rates of that era may not be expected however there is room, and need for more attention from state institutions and more targeted policies towards the countryside. The focus in the case of Armenia is on the structural distortions of the economy that lead to strong dependence on contributions from abroad to sustain the livelihood of rural families. In Azerbaijan, the effect of recent years’ striking economic development on rural conditions is zoomed into. And in Georgia, how the policy experiments of the Rose Revolution influenced the opportunities and challenges of rural residents, and the political consequences thereof is examined. Keywords. Caucasus; Rural development; Remittance; Post-Soviet transition; Corruption; Azerbaijan.

Introduction: Post-Soviet transition of the Rural Caucasus In the Soviet system, there was an integrated state system wherein collectors would come take produce to market, there were facilities for storage and tractors for common usage. With the collapse of the Soviet system, a dramatic shift from the collective farm (Kolkhoz and Soklhoz) based agriculture to individualized agriculture was experienced. Many more people joined the agricultural workforce due to the closure of Soviet industries across the region. Privatization of land, livestock and machinery in the early to mid 90s brought about small land plots for rural households, in many cases hardly big enough for subsistence agriculture. Most farmers could not own their own tractors 1 Senior Analyst at the European Stability Initiative and Editor in Chief of Turkish Policy Quarterly. Email: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

31

and faced problems reaching markets on their own means. Life quality in the countryside was also affected by weaker social services in education, health, and social security. Agricultural production yields fell dramatically in the first few years of independence but were largely restored after the initial adaptation phase. However, the collapse of food processing industries and the problem of reaching markets to sell produce has not been reversed. Farming machinery and equipment is insufficient and outdated. State agricultural services have been weak, and techniques to increase crop yields have not been sufficiently tapped into. In the 90s, gas/electricity, road quality, irrigation systems and the like negatively effected the living conditions and potential for economic growth in rural areas. Across the Caucasus, there has been improvement in this sense, to differing degrees. The general investment climate of the economies as well as financing opportunities, state accountability, data collection and other public services naturally effected rural development as well however it has become obvious that waiting for growth to “trickle down” to the villages is not enough to trigger profit-making trends in rural areas. This pattern of “lower responsiveness to growth in rural areas” has been a common trait of the transition experienced in Eastern Europe and Central Asia as well [1]. Though the contribution of agriculture to the state budget or overall GDP may be limited, the social and political consequences of neglecting the countryside is high, due to the big proportion of the population living in rural areas. In all three countries, rural poverty and relatively few opportunities to improve life quality has led to high rates of migration to the capitals and abroad. Dependence on remittances from labour migrants is a reality of the countryside of the Caucasus. The destination of labour migration is most often Russia, with seasonal work in the construction sector or selling produce in markets being the most common vocations of migrant men. 2 For those in the Caucasus, Russia is the most popular destination because of proximity, linguistic and logistical convenience, the higher rate of relatives already being present there, and the need for construction workers to supply the construction boom in Russia (until recently), as well as higher pay for such jobs than in the Caucasus. 3 Infact, “Russia is the host of the world's second largest number of migrants, after the United States, according to the United Nations International Organization for Migration.” The global economic crisis has left many Caucasian construction workers jobless as demand for Russia's energy exports dropped, stock exchanges plunged, the ruble depreciated, and construction companies cut jobs. Concern has been voiced particularly in Armenia about the social and economic challenges that could be caused by the return of workers from Russia. Labour migration is not necessarily a bad thing and in some cases it is the only way for a family or a village to break out of poverty [2]. Remittances can also serve as an informal social safety net in cases where the state welfare falls short. A closer examination of the dynamics of change in rural settings across the region suggests that without remittances, the possibility of many families to break out of the trap of poverty would be weaker.

2 Not included in the scope of this essay is the migration caused by conflict displacement and the “brain drain” of the highly qualified segments of the societies in the Caucasus – which are ordinarily destined for Europe and the US. 3 With an exception of Georgia.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

32

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

1. Armenia

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1.1. The Role of Diaspora, Donors and Migrants in the Economy of Armenia The Armenian economy relies heavily on remittances, donors, foreign direct investment, and diaspora contributions. 4 An overview of the evolution of the economy since independence can demonstrate how this reliance came about. The upturn since the early 2000s has been interrupted recently by the global economic crisis and the Georgia-Russia war. The lack of opportunity particularly in rural areas has led to massive labour migration from this already small country. More attention from the central state to lift the obstacles to rural development would be merited. In the late 80s, Armenia was hit with, besides the crumbling of the Soviet system and the war with Azerbaijan, a devastating earthquake in the winter of 1988 which killed 25.000 [3] and left 500.000 homeless. Aid poured in from around the world for humanitarian assistance and reconstruction. The response to this disaster in Yerevan, capital of the then-Soviet Socialist Republic, was inadequate. The earthquake marked the beginning of a continuing reliance on aid from Western donors in propping up the country’s economy. Independence in fall 1991 did not bring relief. The state was too weak and too preoccupied with the Karabagh war to deal with the situation effectively. The rate of labour migration resembled an exodus, particularly from Gyumri. 1994 was the first turning point in economic recovery, due to the Karabagh war ceasefire brokered by Moscow, the reopening of the Medzamor nuclear plant – the closure of which, in 1988, had caused massive electricity shortages. In addition, the end of the Abkhaz war enabled the route to Russia to open. For Gyumri’s reconstruction, in 1994 the World Bank and in 1998 USAID launched comprehensive multi-year development programs. The Armenian Earthquake Zone Alliance was set up to pool resources from abroad. The Hayastan All Armenian Fund, founded in 1992 by Presidential Decree, to “enable every Armenian to personally contribute and get involved in the revival of Armenia and Artsakh” [4] contributed 11 million USD in total to Gyumri reconstruction. All Armenia Fund holds a “telethon” annually for the past 11 years, “uniting every Armenian, wherever they are, around a common cause” over satellite via live connection from Yerevan and Los Angeles, California – collecting donations. The famous California born ArmenianAmerican Kerk Kerkorian through his Lincy Foundation, contributed 45 million USD alone, housing up to 4000 families- through construction of new apartments or rehabilitation of existing apartments [5]. In fact, Kerkorian made a serious impact on the construction sector of Armenia in general, “expanding it 55% year on year in the first half of 2003, up from 32% growth in the same period of 2002”[6]. In 2006, the Lincy Foundation donated $60 million to the Armenian Government directed for three purposes – road construction, improvements for the city of Yerevan, and school repairs. Since 1988 Kerkorian’s support to Armenia has exceeded $250 million [7]. The construction sector created employment and boosted growth figures. This reality holds throughout Armenia. The village of Karahunj in the south of the country has also been rebuilt with foreign funds. 5 This small village 252 km south of Yerevan, famous for its mulberry vodka, near the border with Azerbaijan (now under 4 “1.4 billion dollars long term debt and 193.3 million official development assistance as of 2005 according to the World Bank Group Data.” 5 A portrait of Karahunj follows below in this chapter.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

33

Armenian control), almost every renovation or reconstruction is the doing of a foreign donor organization. The roof of the house of culture, which was built by the Soviets in 1959, has been repaired with financial support of Oxfam GB (England-based member of Oxfam international, working in Armenia since 1994, to fight poverty, help small scale producers, provide health services to rural communities) The roof of the library was repaired by World Vision (an international aid Christian humanitarian organization working in places with poverty and disaster). The library itself has been repaired with support of Oxfam GB Armenia as well. Oxfam GB Armenia has also renovated the game room. The kindergarten was renovated and reopened with support from World Vision, after being closed for several years because of lack of money for upkeep. World Vision also provided chickens and seeds for feed to be grown to the kindergarten administration, the profit was meant to help sustain the kindergarten. A similar arrangement was set up for the school with beehives but it requires to much work and is not really profitable. The secondary school in the village was built in 1974. The roof of the school and sanitary arrangements were repaired with support from GTZ (which has been working in Armenia since the early 1990s on behalf of the German Federal Ministry for Economic Cooperation and Development). There is a first-aid post in the village which has been renovated and provided with some equipment again with financial assistance from Oxfam GB. All these grants were released in the past 5 or 6 years. Today, 20 years after the 1988 earthquake, there are still very few industrial jobs available in Gyumri. Beer and dairy products are the two goods Gyumri is known for. There remains a small production of knitwear from what was in the Soviet times a regional center of textile. Most of the factories that were reconstructed with World Bank support after the earthquake, have not survived the breakdown of the centrally planned Soviet economy. Like in the rest of the country, most had to shut down because their products were outmoded, they were inefficient, they had lost their market links (that had been based on the USSR system), and commercial experience was lacking [8]. Between 2002 and 2008, economic growth was double digit. Overall poverty fell from half the population to one third of the population between 1998 and 2003 [9]. The World Bank termed Armenia a "Caucasian Tiger" in a 2006 report [10]. Since the beginning of the 2000s, this growth has reflected in the center of Yerevan in the form of increased construction, rise of real estate prices, visibly more consumption, shops and hotels. Moreover, electricity and water cuts no longer take place in the city center, and many new roads have been constructed. Infrastructure and industrial assets have been bought up largely by Russian business elite. Russian railways has the exclusive right to manage Armenian Railways for 30 years Russian companies own controlling shares in key strategic sectors including energy/electricity, mining, telecommunication, banking. In construction and real estate, Russian elites have also taken the lead. Some of the assets were handed over to Russia in return for debt relief or lower gas prices. . In February 2009, Russia gave a 500 Million USD stabilization loan to Armenia. Naturally, the high level of economic dependence has significant political and strategic implications for Armenia. Relative to its importance, agriculture has not received the attention it merits from policymakers. Like in the rest of the region, the post-Soviet collapse of non-agricultural income sources led many people to rely on land to make a living. Rural inhabitants are heavily dependent on farming for subsistence, consuming a majority of the crops produced, and marketing less than half of the output [9]. Agriculture has been the

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

34

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

single biggest contributor to GDP growth over the years. Whereas between 1998-2003 rural areas benefited least from the overall economic growth of the country [9]. The main problems cited in this sector are deterioration of rural infrastructure, decline of irrigated area, inadequate credit opportunities, logistical and structural difficulties in getting products to markets and weak state institutions to provide training and other services to increase productivity. Due to the central problem of jobs not having been created despite economic growth, remittances have played an important role particularly for the countryside. Armenia's population is officially 3.2 million however the estimated number of labour migrants in Russia, most still registered as resident in Armenia is anywhere between 600.000 and 800.000. 6 The choice of Russia is explained by factors such as Russia being seen as a “friendly country”, offering visa-free border entry to Armenians, being close, and economically growing [11]. The overwhelming reason for migration, stated in opinion polls, is the unavailability of jobs or of the ability to make enough money to sustain the family in Armenia. Remittances account for 20 percent of GDP. More than 25% of households received remittances in 2007. More than 80% of Armenia’s labour migrants (seasonal and long-term) have been in Russia. 7 The first study of Armenian migrants living in Turkey was released in fall 2009 by the Eurasia Partnership Foundation [12]. Though they constitute a small percentage of migrants from Armenia (the total number is not known but various sources estimate 50.000 to 70.000 while the Eurasia Foundation study reveals a much lower figure), the research is of social, political and economic interest. Approximately 95 percent of the migrants from Armenia to Turkey are women. According to the surveys conducted, these Armenian women work mostly in Istanbul, as housewives or baby-sitters.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1.2. The Politics of the Economic Problems Besides geographical and resource-related reasons, governance and policy reasons perpetuate this economic dependence. Armenia’s border with Azerbaijan stopped functioning in 1991 as a result of the conflict over Karabaghi Armenians’ demand to secede from Soviet Azerbaijan.. The route to Russia, which ran through Georgia, stopped functioning in 1992 because of the Abkhaz conflict. In Spring 1993, triggered by Armenian military forces taking Kelbajar, which lies outside the boundaries of the Nagorno Karabagh region, Turkey put an end to the once a week train connection between Gyumri and Kars, that had also been the only link between the two countries throughout the Soviet era, The 268 km long border with Turkey has been in effect sealed since this time. Access to Russia has since been interrupted from time to time over the years due to Georgia-Russia conflicts. Roads via Iran are long and winding however have been developing to include railway and pipeline links. 8 Opening of the border with Turkey – currently hinged on progress

6 These figures may not include the estimated 200.000 that left after the Spitak earthquake, before Armenia’s independence. In general, migration figures derive from household surveys, the aviation agency, border checks, and statistics from Russian sources. 7 Returns have been taking place since the global financial crisis. According to official statistics, remittances dropped by one-third in the first quarter of 2009 compared with one year earlier because many construction workers lost their jobs. 8 In April 2009 Armenian President Serzh Sarkisian signed an agreement with Iran towards a railway between the two countries that will run from northern Armenia to northern Iran.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

35

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

on the resolution of the Nagorno Karabagh conflict, would have a positive effect on Armenia’s economy however it would not solve all the problems. Despite the physical/geographical challenges, Armenia could realize more of its potential than it does. In other words, there are structural deficiencies in even the management of existing resources and outlets to the world, such as the oligarchic structure in which political and economic power overlap. With few exceptions, economic enterprises are owned by names holding significant political positions – or the relatives thereof. Informal monopolization and “commodity based cartels” have led to hiked up prices for imported basic goods such as sugar, gasoline, tobacco, oil. Particularly given the landlocked and “blockaded” condition of the country, particularly detrimental is monopolization in airplane fuel and airport services, which makes air transport artificially expensive. The World Bank describes these problems as follows: “Potential competitors are being harassed at the borders by customs, which has employed many nontariff restrictions (such as health standards, quality standards, and valuation prices) in order to delay imports to the point where costs arising from dealing with the delay erode any potential profit”. (WB pg 304) “Corruption and rent sharing with state officials are a pervasive reality of doing business in Armenia. These practices affect the competitive environment in many ways. Market incumbents make illicit payments to or enter into collusion with governmental officials, agreeing to share rents, which are generated as a result of collusion. There are reports of state officials being given shares in the incumbent companies, which distort the incentives associated with increasing public welfare through greater competition. The incentive for officials who are also shareholders in the incumbent companies is to maintain the status quo. As a result, the abuse of the state power is used as a tool for maintaining monopolies in the market. Although illicit and sometimes violent “private methods” have been used to maintain a dominant position in one specific market, the abuse of state power remains the most effective and widespread method of maintaining monopoly power”[10]. The combination of wealth and political power is a shared problem in many of the post-Soviet countries, bringing about what Richard Giragosian explains as a “paradox whereby essential political and economic reforms are susceptible to being thwarted by the very same wealthy elite that they seek to curb and control”[13]. Giragosian further points out the threat posed by the fact that oligarchs hold parliamentary seats and can formulate policy on the basis of their business interests. The government has nevertheless recently made some improvements in tax and customs administration. Reforms related to Armenia joining the WTO in January 2003 have also been useful. While public frustration grows with the economic hardships, fighting corruption and monopolization is pressing also requires strong political capital – thus a vicious cycle. Some recent developments have compounded economic problems in Armenia. The outlets to the outer world were further threated by the war in Georgia in August and the global financial crisis threatened the already problematic employment market. The 2008 Georgia-Russia war reminded Armenians of the temporary closure of the route through Georgia because of the August 1992 Georgian-Abkhaz War. In 1992, the railway from Baku was closed and the gas pipeline from Kazakhstan was not

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

36

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

functioning because of the Nagorno Karabagh conflict. “Without deliveries of a small amount of grain through Turkey in the winter of 1992 -3, there would have been starvation in Armenia” [14]. Still in 2008, for most (anywhere from 70 to 95 percent) of its import and export, Armenia is dependent on the 700 km route from Yerevan through Gori (near South Ossettia) to Georgia’s Poti and Batumi ports on the Black Sea. During the 5 day war in August in Georgia with South Ossettia, access through this highway was interrupted. And more recently the financial crisis has been a reminder of the vulnerability of the Armenian economy. 9 Remittances from workers in Russia fell (or workers returned), prices hiked because of the currency depriciation and high dependence on imports, and layoffs began in the most important sectors such as mining. (Non-ferrous metals are the country’s single largest export item). The 3rd of March 2009 was called “Black Tuesday” in mass media in Armenia, when the currency, the dram, abruptly depreciated 20 percent, panic set in, lines formed in front of banks of people looking to buy dollars, some shops temporarily closed down, the prices of many goods went up… The IMF approved an emergency loan package. Prime-minister Tigran Sarkissian listed the risks for the upcoming year: “reduction of remittances from abroad; provisional freezing of mining industry until a new rise in the cost of raw materials; postponing of specific construction projects and investment programs in the building sector” [15]. The global financial crisis has dealt a severe blow to the Armenian economy – exports nearly halved, the industrial sector shrunk and GDP decreased. People living in rural areas at higher altitudes– where productivity of small-scale farmers is even less – were hit even harder because of the fall in seasonal labour migration opportunities. There has been selling of livestock in order to get cash, which will in the long term mean they have even less productive assets left [16]. Some members of the diaspora have invested in training and credit providing local development agencies however in general the intellectual and financial resources of the diaspora could be much more instrumental in developing policies to address these realities. It has been argued that open borders with Turkey would diversify the economic actors and weaken the oligarchic structure which feeds on the control of flow of goods, curbing the hold of the oligarchs. Others challenge this theory. There are many divergent opinions on other impacts of a potential border opening too, with some pointing out that without developing the manufacturing sector, having new routes for export will not lead to dramatically change. 10 What is certain though is if Armenia and Azerbaijan reach a settlement over Nagorno Karabagh, Armenia will be able to attract more investment not only because commercial viability of reaching markets will increase but also because risk ratings will be adjusted positively. Moreover, with an open border with Turkey, Armenia would still be a “dead-end,” whereas if the Armenia-Azerbaijan border were to also open (ie the conflict resolved), Armenia could be a transit state from Europe to Central Asia.

9 Recent articles detailing the impact of the financial crisis on the Armenian economy are available in the Summer 2009 issue of Turkish Policy Quarterly, www.turkishpolicy.com. 10 Leading Armenian exports are ferrous waste, stone, and scrap meral, copper ores, aluminium, fruit, beer, and cognac.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

37

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2. Azerbaijan The 8.2 million population of Azerbaijan experienced rapid decline of living conditions with independence. Besides the classical post-Soviet collapse of the economy, the conflict with Armenia over Nagorno-Karabakh dealt a severe blow to the state budget and life quality of many Azerbaijanis. Nearly 700,000 were internally displaced (IDPs) and 250,000 Azeri refugees arrived from Armenia, besides Baku losing control of approximately 20 percent of the country’s territory, and the disruption of transport links due to closed borders with Armenia that still continues [17]. This overall collapse, alongside the new oil production in Russia to supply the needs of the former Soviet Union territories, resulted in a significant decline in Azerbaijan's oil production. Coupled with the collapse of all other industry with Soviet disintegration and the breakdown of social assistance, health and education systems, living standards of Azerbaijani's plunged. GDP contracted by almost 60 percent from 1990 to 1995 [18]. (In the first half of the 90s, Azerbaijan’s GDP growth was negative, -23 % in 1993, -19 % in 1994, - 13 % in 1995). In 1994, an agreement was signed in Baku, geared at developing oil deposits in the Caspian Sea and transporting it westwards, known today as the 'Contract of the Century'. The contract resulted in an investment worth $7.5 billion. With the end of the NK war and the stability brought about by Heydar Aliyev’s rule, from 1996 onwards, positive growth was experienced, between 6-11 % until 2004. In 2001 the estimated overall poverty incidence in Azerbaijan still stood at 50 percent and the extreme poverty rate was over 17 percent [19]. The Baku-Tbilisi-Ceyhan pipeline has been pumping oil since 2005, leading to a world record high GDP growth in Azerbaijan in 2006 (34.5 percent) and 2007 (25 percent). The Shah-Deniz gas pipeline has also been instrumental in this growth figure. The country’s exports increased from -23.5% in 2003 to 41.8% in 2007 [20]. SOFAZ, the state oil fund established in 1999 to save resources for future generations and channel the spending of oil-related revenues, started functioning in 2001 and finances much of the state spending on social and infrastructural projects, and has contributed to poverty reduction. The Heydar Aliyev Fund has also been instrumental in social development – building schools, supporting culture and sports, modernizing hospitals etc. Hiring of young, western educated youth in state institutions is also a positive trend which in the mid to long term can impact governance quality. The country’s growth has relied heavily on exports of oil and gas and the oil boom has trickled over into other sectors, mainly services (construction, transportation, communication etc). The service and construction sector particularly in Baku has boomed. The entire city is in a frenzy of construction. While construction is a means for “sharing oil revenues,” it has also contributed to the economic distortion towards non-tradable sector, and arguably further enabled corruption [21]. The development of institutional capacity not catching up with the resource growth, coupled with the intertwined nature of the political and economic power-holders led some of the initial wave of construction to suffer in quality. Poverty and unemployment continue to be pervasive problems [18]. Official statistics report a rapid significant drop in poverty levels. 11 The President announced in February 2008 that 480.000 permanent jobs and 170.000 temporary jobs had been 11 This is challenged by the Baku based Economics Resource Center on the basis of the methodology of the calculation of poverty. The poverty level is higher according to this NGO.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

38

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

created in four years. This figure did not convince many analysts in the country and verification has proven difficult because the precise sector and location of the said jobs is not public information. The number of individuals registered to pay social insurance, as required by law for all new hires within a month of employment, is 154.000 according to the State Social Security Fund [22]. The rapid economic growth has not yet dramatically changed the realities of life in the hinterland of Azerbaijan however improvements have been notable. Literature on Azerbaijan’s economy commonly highlights the developing tendencies of “Dutch disease” or resource curse [23]. The competitive advantage of Azerbaijan to attract industrial investment in non-energy sectors has proven weak. The manufacturing sector - beyond oil and gas related industry– has proven difficult to stimulate. This is partly due to rampant corruption and monopolization. Import of basic commodities is monopolized by political networks that are often clan-based. 12 Lack of regulatory policies and contract enforcement, confusion about which institutions are in charge of which services, and a court system open to abuse also significantly hamper the business environment. Transparency International Corruption Perception Index, Heritage Foundation and the World Bank Doing Business report ranks of Azerbaijan reveal these challenges in their assessment of Azerbaijan. The hydrocarbon sector is by nature not labour intensive and employment in this sector will shrink even more over time (with construction of new plants being completed). 2 percent of the population is employed in the energy sector whereas this sector generates 53 percent of the GDP, according to the 2006 figures. The sectors that have grown that appear to be non-hydrocarbon, are actually feeding on the hydrocarbon wealth: construction and services. Increase of wages of those employed by the state is the primary source of overall increased incomes (estimated at around 1 million including health, education, defense, diplomatic corps, central state institutions). Pensioners (around 1.2 million people) also receive higher assistance however due to inflation, this statistic also needs to be put into perspective. Faced with the choice of making a profit in the service sector in Baku or investing in industry in the regions, the latter very rarely is the rational result of a cost-benefit analysis. Therefore much of the investment in regions is either by the state or resemble “charity-work” by businessmen who have made large sums of money utilizing their connections in the central state. Close to half the population is rural and lives on agricultural activities [24], and agriculture is the largest source of non-oil exports [25], thus the problems of the rural population and the limited growth in agricultural output are worthy of attention. Agriculture/processing is labeled the “guarantee for employment in Azerbaijan” yet experienced the least growth in the 2005-2007 period [21]. Farmers face a number of problems: The price of agricultural produce has not increased at the rate of services and products farmers require such as diesel, water, public transport and fertilizer. Farmers have market challenges because quality standards are low (negatively effecting the option of exporting to Europe). Competition from imports of agricultural produce has also had a negative impact. 13 Though improving in the past five years, the road network, electricity and water supplies, weak 12

ESI Interview with Economic Research Center, Baku, April 2007. According to “Boom and Gloom-Azerbaijan’s Economy, Drunk on Oil is Suffering Rapid Inflation”, Economist Intelligence Unit, 8 March 2007, local fruit was losing ground to Latin American competition in the Baku markets. The article attributed this problem partly to the exchange rate and inflation problems of 2007. 13

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

39

banking infrastructure outside of the capital also increase the challenges of agriculture [25]. In 2004, still less than half of the rural households in the country were connected to the water system according to World Bank (2005). Migration to Baku from rural areas for work is common. In Baku, finding work in construction, restaurants, retail and as a taxi driver is relatively easy [26]. Hotels, roads, tourism, utilities, internet access have in the past few years also started developing, albeit at a much slower pace than in Baku, in the secondary cities in the country. Besides employment, other indicators of human development also suffered blows in the transition period. As was the case in other post-Soviet countries, “severe deterioration of state-sponsored secular educational systems” took place [27]. Reduced state subsidies for food and transport, bribery for admission, scholarships and grades, the move of qualified teachers to the private sector have all contributed to stripping education of quality. Available figures vary significantly but there is little doubt that labour migration is significant. According to Russia’s migration service (migration data of Russia more reliable than Azerbaijan), there are 621,000 Azerbaijani citizens living and working in Russia as per the 2002 census. 14 Recent EBRD study shows around 9% of Azerbaijani adults (523,000 people) receive remittances on a regular basis [28]. The State Statistics Committee estimated that remittances from Russia add up to “more than 800 million USD” per year. Transfers from what they estimate to be 2 million Azerbaijani migrants in Russia, amount to more than 1 billion USD according to the State Committee for Work with Azerbaijanis Living Abroad [22]. The migration of men coupled with deeply entrenched gender roles negatively effects the life quality of rural women who are often subject to the control of their inlaws and are left with many responsibilities that are traditionally men. 15

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2.1. The Trickle Down Effect of the Economic Boom: The Case of Sheki 305 km north of Baku, Sheki is one of the 65 administrative districts, or rayons, of Azerbaijan. During Soviet times, Sheki was known for its production of tobacco and silk. In the early 90s, electricity cuts were common, and the delivery of water and gas were choppy at best. Most of the industrial production was cut off. Consequently, migration to Baku and Russia was significant. Life in Sheki has improved particularly since 2004, with more investment to infrastructure, and the injection of money from both the state and private individuals, reflecting to the service sector and consumption. Schools and roads have been constructed by the state, alongside parks and fountains. New schools’ establishment began in 1998. In the villages of Sheki rayon, in 2008 and 2009, 6 new schools, with a capacity of 1920 children were built. In 2007-2008, 59 schools in the rayon have been computerized. Central heating in schools has also increased markedly. Investment in education by the state has increased since 1998, but particularly since 2004, according to residents of Sheki. However the “software” of education is lagging behind according to local accounts. The number of teachers is bloated while their salaries are low – 14 Said the chairman of state statistical committee, Arif Valiyev to today.az -‘Average Azeri Migrant remits 150$ from Russia a month’, today.az, 25 January 2007. Available at: http://www.unaz.org/undp/bulnews46/migrant.php. 15 For further reading on this topic: Abulfez Suleymanov, The influence of labour migration on Azerbaijani Families.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

40

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

dragging motivation down and increasing the practice of ‘grades in return for bribes’. 16 To close the gap of knowledge students do not receive, families need to hire private tutors and that is about 30 AZN per lesson. It is also common that locals need to provide bribes to receive the medical treatment that is supposed to be free. Moreover, infrastructure continues to be a problem. Sewage systems and clean running water does not exist in various villages. Some of the newly built schools already have cracks in their walls from construction flaws. It is questionable whether the new factories established are actually commercially viable; many seem to be “propped up” with the owners’ profits from investments in Baku, and in some cases are rumoured to be established upon direct request of the administration, in return for privileges in lucrative sectors in Baku. Neither the list of shareholders nor the number of workers could be verified for the site providing the most jobs in the district, Sheki Silk Factory. 17 Other rather new factories are mostly in the food processing and dairy farm category – again difficult to obtain clear data about. New hotels in the town have been established largely by businessmen originally from Sheki who have made enough money in Baku to invest back into Sheki. (For example Javanshir Feyziyev’s Sheki Saray or Sahin Huseynov’s Karavansaray). Books are free until 9th grade (in Soviet times they were free until 5th grade). The “governorship” or ‘ex-com’ of the rayon is strong, representing the central state. Municipalities are weak in terms of budget and legitimacy in the eyes of the locals. That the “elected” members of the municipal council spend most of their time contributing to the wealth of their kin via selling and leasing land is a common complaint, as was weak service providence, election fraud and so on. 20 percent of the municipal budget (from land management, local tax, and running local transportation and social enterprises), is allocated amongst the 358 employees. The municipality is mandated by legislation with more duties than it is able to with the available budget therefore the ex-com ends up stepping in on anything from road cleaning to infrastructure needs – thus the confusion about roles. There have been steps taken to strengthen state policy. For example on 23 October 2004, by Presidential Decree, reforms were made in the management of agriculture and agencies were set up like state veterinary service and state agency of agricultural credits. 18 The State Program on Social-Economic Development of the Regions of the Republic of Azerbaijan 2004-2008 introduced state subsidies for agriculture. Per 1 half of land, each farmer gets 40 AZN (50 USD) twice in the season, first when they sow the land and next when they harvest. (The exact amount varies according to the product however this is apparently an average). 19 In the 1336 person village of Inke, the state transferred 50.000 AZN distributed according to land sizes to villagers (80AZN per ha.). In total it costs around 200 AZN to cultivate 1 ha. of land with wheat – sowing, irrigation, fertilizers, harvest – and 3 tons of wheat can be produced, each ton sold for 250 AZN. Cost of fertilizer for farmers also fell as a result of this Program, subsidized by the state. Before this program, one ton of wheat would cover the costs of cultivating the 1 ha, now, with the subsidies, less than 1 ton of wheat covers costs. (There is no 16

These points are confirmed by numerous interviews in Sheki by ESI analysts in March 2008. Interviews by the author in Sheki on behalf of ESI. 18 The same decree also established the Agroleasing Open Stock Company which allocated 100 billion and 150 billion mantas in 2005 and 2006. Available at: www.azerbaijan.az/_statepower/_ministerscabinet/ministerscabinet_08_e.html. 19 Explained first by the excom in Inke village, Vahid Ahmedyov, who covers 3 villages. Then double checked program itself. 17

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

41

transport cost to mills as the wheat is picked up from the farmers from the milling groups from Sheki). For wheat this works, but for example in Lenkaran, a district in South Azerbaijan, where citrus fruits are grown, the fertilizer distributed is insufficient as well as not being the right type for the products grown. Moreover, there are no “collectors” thus for farmers to get their goods to the market has proven challenging. 20 A closer look at a particular village and the dynamics that have driven its change highlight the rather ad hoc growth and service variables. Another case study that reveals the nature of growth and its shortcomings is Boyuk Dehne. A 30 minute drive from Sheki town, Boyuk Dehne village is relatively well-off among the 68 villages of Sheki rayon. The owner of Sheki Saray, Javanshir Feyziyev 21 is from Boyuk Dehne. In 2006, with his money, one of the two schools of the village was renovated. He also financed the installation of street lights. In other villages where there is no “sponsor” the Heydar Aliyev Fund has made renovation of Soviet era schools possible, such as in the Inke village of Sheki rayon. Municipalities do not have the revenue for such investments. The mayor of the village, Elman Mehmetkerimov, is one of the 10 families of the village that have a large plots of land and many animals. He hires help for the land and animal upkeep. He was a businessman left his job in the gas industry and decided – with Javanshir Feyziyev – to “contribute to the village” Collecting taxes is his biggest challenge in his own view. Living conditions have improved by all accounts in the past 4-5 years. 5 years ago there were 10 cars in the village, now there are 100 relates one villager. And still, labour migration is required for many families to sustain themselves. The village is made up of around 1000 households (5300 residents) – with around 500 people abroad for labour migration. 30 houses are totally empty, in others only the head of the family is abroad. People started migrating for work in 1991 according to the village folk – most to Russia, some to Ukraine. The migration does not reflect in village statistics until a person or family registers themselves in Russia, in which case their registration in the village ends. Around 150 families that lived in this village in the mid 80s are now registered in Russia according to the village ex-com representative. “500 families grow wheat on an average of 2 ha of land, each producing 3-4 tons per year per ha”. 22 Silk worms are also kept but this is seasonal work, for only 40 days in the early summer – 150 families engage in this activity and sell the silk to the silk factory ( 50 kg each family on average). Agricultural produce and dairy products can be sold in the Sheki market, or many goods are just consumed, as subsistence. 700 families breed animals. There are 2900 big animals (cow and yak) and 11.000 small animals (goat, sheep). There are 10 families in the village that rent additional land for breeding animals etc. Industrial work is an option for some villages in Sheki rayon, where women travel to work at the Silk factory. The construction boom in Sheki city has provided short term and irregular work opportunities for men from villages in Sheki rayon. The only other employment is the teachers (who claim they receive around 90 USD -or 75 AZN), medical workers, and imam. 800-900 people receive pensions of around 80 AZN (100 USD).

20

Interview with Vahid Ahmedyov. At the time there were also plans to reduce the price of seeds. Javanshir Feyziyev is the General Manager of Avromed JV a large distributor of pharmaceutical products in Azerbaijan supplied by the leading multinational companies ranging from GalaxoSmithKline to Pfizer. 22 ESI Interview with Arif Yusufov, head of the Executive Committee of the village, September 2008. 21

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

42

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

There are still gas shortages and not every house has running water. Farmers can not receive loans readily because “interest rates are over 15 percent and one needs to give a bribe to get a loan.” In conclusion, the rates of oil production will not last forever in Azerbaijan and economic growth rates will diminish. 23 The financial crisis recently demonstrated the vulnerability of Azerbaijan’s economy on the global oil prices. 24 Economic diversification is critical and for this, fighting corruption aggressively, developing infrastructure, improving governance and institutional capacity as well as the “software” of education will be necessary. Focusing on IT and tourism as is often vocalized as a vision for the future of the economy, will not solve the immediate problem of poverty in the rural areas.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3. Georgia Between 1992 and 2002, Georgia lost a fifth of its population, mostly to emigration but also due to conflict and low birthrate. 25 The World Bank Migration and Remittances Factbook 2008 ranks Georgia second in the world in terms of population decrease. 26 Though available statistics on migration are quite contradictory in different sources, the proportion of women is relatively high: between 45 to 55 percent of the emigrating Georgians. This is a pattern not shared by Armenia and Azerbaijan, where migrants are for the most part men, and poses differences also for the demography of villages. Georgian women ordinarily are engaged in work like housekeeping or seasonal cropping in Greece, Italy or Turkey. 27 Like in the other two Caucasus countries, individuals who are “effectively unemployed” but owning a small plot of land through which they enable their families’ subsistence are categorized as “employed” in state statistics [29]. Around half of the Georgia’s population lives in rural areas and relies on agriculture. 28 In the Soviet era Georgian agriculture was known most for its exports of tea, wine and citrus fruits. Tea, milk and meat were subsidized. Planned economy and guaranteed markets guaranteed the sectors livelihood. With the dissolving of the Soviet Union, this changed. Collective farms, or kolkhozes, were privatized and poverty levels rose. Between 1994 and 1994, land reform/privatization took place, leaving most families with 1-3 ha land, on which they could live mostly via subsistence agriculture. Following relative progress in 1996-1997 in terms of economic growth and macroeconomic stabilization (10,5 per cent GDP), sharp decline set in: GDP growth fell to 2.9 percent in 1999 and was 1.8 percent in 2000.

23

For some pre-global economic crisis estimates, see [22]. For a recent analysis on the effect of the financial crisis on Azerbaijan’s economy and related financial policy suggestions for the government, see: Elshad Mikayilov, “The Global Economic Crisis and Azerbaijan”, Turkish Policy Quarterly (Summer 2009). Available at: www.turkishpolicy.com. 25 European Stability Initiative Georgia overview: www.esiweb.org. 26 8th in the world according to the UNPD 2005 report. 27 A relevant issue in the labour migration debate which is not covered in this essay is the ongoing process to liberalize EU visa regulations for Georgian citizens. 28 55 percent are effectively employed in agriculture according to the GEPLAC economic trends report of 2008. 24

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

43

“Economic growth slowed to 2 per cent in 2001 in real terms (although it showed signs of recovering to 4.5 per cent in 2002).Total domestic debt was almost equal to annual tax revenues; a decline of GDP growth could lead to a crisis of government finances, or in other words, bankruptcy of the state. The rescheduling and repayment of the state debt had also been hampered by declining rates of GDP growth, since economic growth had been overtaken by the growth of net government debt and the budget deficit. As a result of the financial crisis in Russia in 1998 and that in Turkey in 2000, and after the depreciation of the lari against the US dollar (in average, from USD 1: GEL 1.36 down to USD 1 : GEL 1.98) the balance of payment of Georgia took a turn for the worse"[30]. Energy shortages, dysfunctional law enforcement (leaving a vacuum which crime and Mafioso/clan networks filled), and the general crumble of infrastructure led Georgia to be commonly referred to as a failed state. With the November 2003 Rose Revolution, a quick pace of reform was introduced. The liberalization was so dramatic that the Georgian model has been referred to as a “libertarian experiment.’ 29 The World Bank ranked Georgia the number one reformer in the world 30 and the top anticorruption performer in 2006 [31]. Policies strengthening property rights, banking reforms, liberalization of trade, simplification of licence and permit procedures 31 and consolidating the rule of law allowed the confidence for foreign direct investment to swell. According to the Doing Business Report of 2007, Georgia was 18th out of 178 countries in the ease of doing business. “Real GDP per capita has increased in the same period, from 1,100 Georgian Lari (472 €) in 2001 to 1,635 Georgian Lari (700 €) in 2006. The state budget has quadrupled in the period between 2001 and 2007, starting at 1 billion Georgian Lari to 6 billion Georgian Lari. Expenditures have increased twofold in the same period: from 18% of the GDP, staying steady for three consecutive years until 2003, to 32.4% of the GDP in 2006. The 2008 World Bank report ranked Georgia on the top 20 most business friendly countries worldwide [32]. From 2002 to 2006, FDI averaged 9% of GDP, with much of it dedicated to the construction of the Baku-Tbilisi-Ceyhan oil pipeline and the South Caucasus gas pipeline. In 2006, which saw diminishing pipeline investment as a function of total FDI, more than half of FDI went to the banking, manufacturing, and tourism sectors” [33]. (ESI research/website) Rural areas benefited from many of the new national policies. Infrastructure improving –including roads, irrigation, school renovation, electricity restoration, communication and computerization investments, garbage collection, positively effected rural inhabitants’ life conditions and opportunities. Not having to bribe for public services makes a marked difference for the well-being of the entire population. 32 However, the rapid reforms also created new challenges for rural inhabitants. Poverty “continues to be deeply entrenched in rural areas, accounting for 60 percent of 29

For a detailed overview of this process, see: “Reinventing Georgia: The story of a Libertarian Revolution,” www.esiweb.org. 30 For a detailed account of the first three years of reform, published by the Government of Georgia, see “Georgia’s Democratic Transformation- An update since the Rose Revolution”, January 2007. 31 For a detailed analysis of the implementation of the Law of Georgia on Licenses and Permits since 2005: “Georgia: After Three Years of Licensing Reform” International Finance Corporation & Canadian International Development Agency. 32 95% of Georgians surveyed said they had not paid a bribe to receive a public service in the last 12 months according to a February 2007 International Republican Institute Poll.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

44

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

the poor” according to the Poverty Assessment of the World Bank in April 2009 [34]. The post-rose revolution policies were not able to catapult productivity in agriculture sufficiently. Tea, citrus production continued to dwindle. “The trends Georgia has been seeing in the past years included a 10 percent point drop in the share of agricultural production in nominal GDP, from 21% in 2001 to 11.2% in 2006. This does not mean that agricultural output has decreased over this period, however. Instead, it has stagnated, with other economic sectors spurring Georgia's significant GDP growth.”(www.esiweb.org) The lifting of import taxes and abolishment of subsidies negatively effected farmers. Domestic production has had trouble competing with imported agricultural products. The dismemberment of state institutions that had previously been dysfunctional – such as food safety and veterinary services- did no service to the quality of goods. Comprehensive research and state statistics is needed to draw up effective state policies and to monitor them, whereas much of this bureaucracy was eliminated rather than being strengthened. GEPLAC refers to low sanitary and technical standards as the “achilles heel” of Georgian exports [35]. Efforts to increase non-agriculture jobs in rural areas, in service sector for example failed as shops could not sell the goods to the rural population which lived on subsistence farming. Without stimulating agricultural production, developing other sectors in rural areas did not prove feasible. Efforts to increase private sector employment[29] and to strengthen private education[35] have been made – however neither are sufficiently accessible to the poor, unskilled rural residents. Also the need to invest in vocational training to develop skills for transition to new sectors has been highlighted. (GEPLAC). The Russian embargo on agricultural imports from Georgia in 2006 was another blow to Georgian rural opportunities – before that 80 percent of wine, fruits and herbs were destined for Russia. Russia was an important market for Georgian agricultural goods. (because countries “horizontal” to Georgia have similar climates and can produce the same goods, the competitive advantage of agricultural goods is higher in neighbours to the north or south). Between 2005 and 2007, the food, beverages and tobacco sector of industry experienced virtually no growth (when the inflation rate is also factored into the figures) [35]. GEPLAC states that the low performance in this sector is only partly explained by the Russian embargo and argues that “it more reflects the deep structural crisis of Georgian agriculture” and calls for a comprehensive strategy on the side of the state [35]. The share of the state budget expenditure on agriculture dropped every year between 2005 and 2008 [35]. Insufficient social allowances and high interest rates on loans trapped farming households into poverty. The frustration of the rural population reflected in opposition swelling to the Saakashvili government and contributed to political crisis in fall 2007. To prevent adverse effects to rural areas, the need to target deregulation/liberalization policies more cautiously was debated widely. To address this discontent, the Georgian government instituted a new economic program, Georgia Without Poverty 2008-2012 [36]. This programme promised to intensify social policy, create agricultural enterprises, and to increase the efficiency of agriculture via cheap credit programs. Health care assistance for those below the poverty line has also been enforced. The importance of social transfers (pro-poor Targeted Social Assistance) as a lifeline for Georgia’s poor is highlighted by the 2009 Georgia Poverty Assessment [34].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

45

Lastly, as would be expected, the “twin shocks” of the August 2008 conflict and the global financial crisis have increased the poverty headcount in Georgia [34].

Conclusion

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Though all three states of the South Caucasus have at their disposal diverse assets, they struggle with similar challenges in terms of developing their countryside and providing employment for rural residents. In all three countries, these challenges not only have led to significant labour migration but also important political consequences for the respective capitals. While Azerbaijan leverages its energy revenues, Armenia the resource of its diaspora and Georgia it’s branding as a favorable destination for foreign investment, without effective state policies to combat corruption and channel assets towards growth opportunities in the countryside, these assets have not translated into meaningful rural development. The global economic crisis has exacerbated the problems in rural settings for all three countries. Looking ahead, it is crucial that the political elite in all three countries recognize that as long as rule of law is questionable and corruption is rampant, investment from abroad or by wealthy natives will be limited to high profit sectors that do not necessarily solve the unemployment problems of the countryside.. Moreover, given the size of the market each country has to offer, the limits imposed by closed borders in the region – which political leadership is critical to overcome- will resonate. Ambitious plans to grow on the basis of more “glamorous” sectors such as information technology, will not sustainably solve the problems at hand. The rural population needs new skills, modern technology, accessible markets, reliable infrastructure, and to be freed of the constraints imposed by cronyism. Developing strong state institutions – as has been the priority of the Europeanization processes of Central European countries as they joined the EU, is a must for such challenges to be tackled systematically.

References [1]

[2] [3]

[4] [5] [6] [7] [8] [9]

S. Milcher and K. Kiss, Rural Development, Food Prices, and Regional Disparities, Development and Transition 11 (December 2008). Available at: http://www.developmentandtransition.net/index.cfm?module=ActiveWeb&page=WebPage&Documen tID=699. UNDP, Human Development Report 2009. Available at: http://hdr.undp.org/en/media/HDR_2009_EN_Complete.pdf. “New York Times reported on December 10 that 45.000 people died”. Gorbachew Tours Quake Wreckage Rescue is Slowing, New York Times, 11 December 1998. Available at: http://www.nytimes.com/1988/12/11/world/gorbachev-tours-quake-wreckage-rescue-is-slowing.html. All Armenia Fund. Available at: http://www.himnadram.org/index.php?id=2. Armenia Earthquake Zone Alliance. Available at http://www.america.gov/st/washfileenglish/2003/September/20030912182959samohtj0.5544093.html. Economist Intelligence Unit, Country Report Armenia, London, 2003. Lincy Foundation to Allocate $60 Million For New Projects in Armenia, Azg Daily, 9 July 2005. Available at: http://www.armtown.com/news/en/azg/20050709/2005070904/ World Bank Project Performance Assessment Report, Armenia Earthquake Reconstruction Project, 31 March 2004. World Bank, Armenia’s Rural Economy - From Transition to Development, August 2005. Available at: http://www-

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

46

[10] [11]

[12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[28] [29] [30] [31] [32] [33] [34] [35]

[36]

N. Göksel / Rural Conditions in the Caucasus and Labour Migration

wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/11/09/000310607_20061109 104903/Rendered/PDF/379500AM0P08411ural1sector01PUBLIC1.pdf. S. Mitra et al., The Caucasian Tiger: Policies to Sustain Growth in Armenia, World Bank Publications, 2007. A. Gevorkyan, K. Mashuryan and A. Gevorkyan, Economics of Labor Migration from Armenia, A Conceptual Study, Armenian International Policy Research Group Working Paper 06/05 (January 2006), 1-61. Eurasia Partnership Foundation, see http://www.epfound.am/. R. Giragosian, Weathering the Storm: A commentary on Armenia and the Economics of Power, ArmeniaNow, 13 February 2009. H. Khachatryan, Is Armenia Blockaded?. Available at http://www.zerbaijan.com/azeri/khachatrian.htm. RA Prime Minister Tigran Sargsyan’s Statement at Presentation of Financial Year 2009 State Budget to RA National Assembly. Available at http://www.gov.am/files/docs/321.pdf. United Nations World Food Programme, Executive Brief- Armenia, 26 May 2009. International Bank for Reconstruction and Development, International Development Association, International Finance Corporation, Country Partnership Strategy, FY07–10, Republic of Azerbaijan. H. Mainhardt-Gibbs, Azerbaijan’s Continued Struggle with Poverty and Oil Dependence: Concerns surrounding a decade of IFI lending, Bank Information Center Discussion Paper, June 2005. World Bank, Proposed Poverty Reduction Support Credit to the Republic of Azerbaijan, April 2005. IMF, Republic of Azerbaijan – Statistical Appendix, IMF Country Report 08-216 (July 2007). G. Ibadoglu, Current State of Azerbaijan’s Economy: Myths and Realities, Transition Studies Review 15 (September 2008), 425-430. E. Salahov, Azerbaijan:Presidential Job Promises Fall Short,Eurasianet.org, 30 May 2008. L. Karimli, Informed Citizenry, Accountable Government and Effective Management of Oil Resources, Issue Paper, June 2006. Azerbaijan in Figures 2008. Boom and Gloom-Azerbaijan’s Economy, Drunk on Oil is Suffering Rapid Inflation, Economist Intelligence Unit, 8 March 2007. R. Ismayilov, Azerbaijan: Baku Boom has yet to hit the regions, Eurasia Insight, 13 August 2007. I. Silova, M.S. Johnson and S.P. Heyneman, Education and the Crisis of Social Cohesion in Azerbaijan and Central Asia, Comparative Education Review 51 (February 2007), 159-180. European Bank for Reconstruction and Development, Azerbaijan National Public Opinion Survey on Remittances, 2007. Available at: http://ebrd.org/country/sector/etc/survaz.pdf. Transparency International Georgia, Fighting Unemployment in Georgia, 2007. World Bank, 10 January 2002. World Bank, Anticorruption in Transition-3 (ACT3) Report, 2006. Doing Business, see http://www.doingbusiness.org/. US Department of State Report on Georgia, February 2008. Available at: http://www.state.gov/r/pa/ei/bgn/5253.htm. World Bank, Georgia Poverty Assessment, April 2009. Georgian-European Policy and Legal Advice Centre (GEPLAC), Georgian Economic Trends, Quarterly Review (May 2008). For more information on Georgian economy see http://www.geplac.org/eng/trends.php. Ministry of Economic Development of Georgia, see http://www.economy.ge/eng/main.php?news=181.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-47

47

Democratization and Civil Society in the Post-Soviet South Caucasus Ayça ERGUN 1 Assistant Professor of Sociology at the Department of Sociology and Vice-chair of the Center Black Sea and Central Asia (KORA), Middle East Technical University, Ankara

Abstract. The post-Soviet period in the South Caucasus is shaped by the processes of nation and state-building and attempts to democratization as elsewhere in the former Soviet Union. The aim of this article is to highlight the peculiarities of the post-Soviet transition in the region while focusing on the nature of political transformation, democratization and civil society development. The analysis of the post-independence politics in the South Caucasus shows that the entire process of transition is dominated by the co-existence of continuity and change. The patterns of continuity inherited from the Soviet past are predominantly represented and reproduced by the ruling elite with varying degrees whereas the patterns of change associated with liberalization and democratization are mainly internalized and propagated by the societal actors. Yet, it is quite clear that unless the ruling elite’s initiatives and policies towards democratic change are secured, the transformative power of societal actors remains insufficient. Keywords. post-Soviet transition, democratization, civil society, political transformation, South Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction Scholarly work on the post-Soviet era generally focuses on the political, social and economic aspects of the transition period. In the literature on post-Soviet democratization, nation-building and state-building, there is a scarcity of work on the South Caucasus. 2 Studies focusing on the Southern Caucasus in general and on Azerbaijan, Armenia and Georgia in particular deal predominantly with nationalist 1 Assistant Professor of Sociology at the Department of Sociology and Vice-chair of the Center Black Sea and Central Asia (KORA), Middle East Technical University, Ankara. E-mail: [email protected]. 2 For early literature on the Southern Caucasus, see R. Allison (ed.), Challenges for the Former Soviet South, Brookings/RIIA, Washington DC, 1996; I. Bremmer and R. Taras (eds.), New States, New Politics: Building the Post-Soviet Nations, Cambridge University Press, Cambridge, 1997; K. Dawisha and B. Parrott (eds.), Conflict, Cleavage and Change in Central Asia and the Caucasus, Cambridge University Press, Cambridge, 1997; M.R. Djalali (ed.), Le Caucase Postsovietique: La Transition Dans le Conflit, L.G.D.J, 1995; E. Herzig, The New Caucasus: Armenia, Azerbaijan and Georgia, RIIA, London, 1999; O, Hoiris and S. M. Yurukel, Contrasts and Solutions in the Caucasus, AARHUS University Press, Denmark, 1998; S. T. Hunter, Transcaucasus In Transition: Nation Building and Conflict, The Center For Strategic and International Studies, Washington D.C, 1994; R. G. Suny (ed.), Transcaucasia, Nationalism and Social Change, The University of Michigan Press, Ann Arbor, 1996; D. Schwartz, and R. Panossian (eds.), Nationalism and History The Politics of Nation-Building in Post-Soviet Armenia, Azerbaijan and Georgia, University of Toronto Press, Toronto, 1994.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

48

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

independence movements, inter-ethnic conflicts, security-building and conflict resolution, and geopolitics of oil and gas. 3 The process of democratization and civil society formation is one of the least discussed issues in the analysis of post-Soviet transition in the South Caucasus. 4 Among other post-Soviet regions, the Southern Caucasus has its own peculiarities which are not easily comparable with Central Asia. The notion of regime change, or at least the possibility of change, has been introduced by the formation of nationalist independence movements. There is potential for a democratic transition particularly at the level of society, yet the limits and boundaries of liberalization and democratization are largely dependent on the ruling elite whose choices do not necessarily meet international standards for democratization. The aim of this article is to provide an overview of the post-Soviet transition in the Southern Caucasus with reference to the nature of political transformation, democratization and civil society development. In the first part of the article, I discuss how the period of transition is studied while focusing on definitions of democratization and civil society. In the second part, I focus on the nature of post-Soviet transition in the South Caucasus and highlight key features affecting the process of democratization. In the third part I discuss the evolution of civil societies while identifying domestic and international dimensions of civil society formation in the region.

1. Study of Transition in the Post-Soviet Countries

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

The literature on transition is wide-ranging and controversial. It involves several definitions of democracy and democratization as well as varied explanations of these processes and approaches to them. In various studies, factors which foster or hinder democratization are identified. Useful analytical tools draw attention to different phases of post-communist political transformation (i.e. the shift and its aftermath, transition and consolidation). Studies have taken into account simultaneous processes, uncertain futures, factors inherited from the previous regime (i.e. identification of the prior 3 Among these are M. R. Beissinger, Nationalist Mobilization and The Collapse of the Soviet Union, Cambridge University Press, Cambridge, 2002; I. Bremmer and R. Taras (eds.), New States, New Politics: Building the Post-Soviet Nations, Cambridge University Press, Cambridge, 1997; M. Buttino (ed.), In a Collapsing Empire, Underdevelopment, Ethnic Conflict and Nationalisms in the Soviet Union, Fondazione Giagacomo Feltrinelli, Milano, 1993; L. Hajda and M. Beissinger (eds.), The Nationalities Factor in Soviet Politics and Society, Westview Press, Boulder and Oxford, 1990; G. A. Hosking, J. Aves and P. Duncan, The Road to Post-Communism: Independence Movements in the Soviet Union, 1985-1991, Pinter Publishers, London, 1992; G. Lapidus, V. Zaslavksy and P. Goldman, The road to post-Communism : independent political movements in the former Soviet Union, 1985-1991, Pinter Publishers, London , 1992; A. Motyl (ed.), The Post-Soviet Nations : Perspectives on the Demise of the USSR, Columbia University Press, New York, 1992; G. Smith (ed.), The Nationalities Question in the post-Soviet States, London, Longman, 1996; G. Smith et al, Nation-building in the Post-Soviet Borderlands: the Politics of National Identities, Cambridge University Press, Cambridge, 1998; R. G. Suny, The Revenge of the Past, Stanford, Stanford University Press, California, 1993; V. Tishkov, Ethnicity, Nationalism and Conflict in and After the Soviet Union : The Mind Aflame, Sage, Thousand Oaks, California, 1997. 4 Recent works include A. Ergun, “Democratization from Below: The Role of Civil Society in Azerbaijan” in A. Ayata, A. Ergun and I. Çelimli (eds.), Black Sea Politics: Political Culture and Civil Society in an Unstable Region, IB Tauris, London, 2005, 103-120; A. Ishkanian, Democracy Building and Civil Society in Post-Soviet Armenia, Routledge, London, 2008; J. Weathley, Georgia From National Awakening to Rose Revolution: Delayed Transition in the former Soviet Union, Ashgate, Aldershot, 2005; L. Broers, “After the ‘revolution’: civil society and the challenges of consolidating democracy in Georgia”, Central Asian Survey 24:3 (2005), 333-350.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

49

regime type), the impact of these factors (i.e. path dependence), the role of elites, and institution-building. Overall, the literature on the transition to democracy points out that democratization is a process that begins with the overthrow of an authoritarian regime and continues as a process of introducing and embedding genuinely democratic institutions. Debates on democratization also have drawn attention to different conceptualizations of democracy. Invariably however, free elections are seen as fundamental to democratization, often said to begin with the first free and fair elections [1]. Similarly, for Linz and Stepan, “…[democratization] requires free competitive elections, the results of which determine who governs”[2]. Once a would-be democratizing country has had its first free and fair elections, then follows the consolidation of the electoral process in order to achieve accountability of the rulers, respect for the rule of law and the establishment of a multi-party system [3] [4]. The consolidation of the electoral process in order to achieve accountability of rulers, with respect to the rule of law and the establishment of a multi-party system, is considered to be the basic principle of democratization; but these may or may not be attained. Thus, in the study of democratization, democracy is often identified with free and fair elections. The emphasis on the procedural elements of democracy while characterizing a state as democratizing remains at the core of the issue. The exact fulfillment of the requirements of democratization is exceedingly difficult to realize in an environment of continuity and change. That is why we should reconsider our parameters of democratization with reference to continuity and change, taking into account their impacts on the whole process. Transition is about change. However, in the post-communist context change is surrounded by continuity which is mainly represented by the former representatives of the Communist Party elite. The impacts of the prior regime type are clearly discernible in most of the post-Soviet countries, via one-party rule, anti-democratic, authoritarian and semi-authoritarian practices of the ruling elite, as well as varying degrees of oppression of the opposition and media control. The process of democratization in transitional countries can be best analyzed as a process. It is not a linear process especially, when a triple transformation of regime, nation and state-building takes place simultaneously and brings about many uncertainties concerning the future of the regime change. Thus, the study of democratization in the post-Soviet context should take into account: the decisive nature of the Soviet experience and its legacy; the dynamics between and within state and society that shape the nature of democratization; and, the role and the impact of the international environment. In this respect, we can characterize democratization in the former Soviet Union as a process within which the shift from an authoritarian rule to democracy is shaped by the previous historical, social and political heritage, simultaneously containing features of liberalization and democratization as well as authoritarian practices. Thus, democratization can be characterized as a learning process in which old and new formations are competing. The analysis of democratization as well as the definition of the term should consider the conflicting nature of this co-existence and its effect on the rule of law, accountability, civil society, political society and economic society. Many studies of democratization view civil society as a later development in the process of political transformation. However, in the case of the post-Soviet transition, civil society is the place where fundamental questions of how to democratize, what constitutes the state and the nation dominate the resolutions to other questions and shapes the approaches to them. An analysis of the Southern Caucasus shows that

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

50

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

dramatic changes in civil society can occur even as authoritarian mechanisms persist or recur: changes in various arenas are not necessarily sequential but may occur in parallel or even in contradiction to changes for the elite or within institutions. In the Southern Caucasus, the pre-independence period was marked by a mobilizing of the masses and increasing organizational activity. These nationalist independence movements initiated the transition to democracy and gave new direction to the political transformation with their emphasis on democratization and nationbuilding. 5 However, Armenia, Azerbaijan and Georgia did not maintain a pattern of steady democratization. The continuation of the old elite under the presidencies of Heydar Aliyev and Eduard Shevardnadze reminds us of the importance of prior regime type and path dependence. Symbolized by the old elite, the prior regime type brings the legacies of the past to the present. 6 In the post-Soviet era, the old elite, who were accustomed to the previous ruling practices, resisted further democratization and embraced authoritarian elements. However, change had created a situation in which a restoration of the old regime was not possible. Resistance from the opposition and the increasing influence of international agencies meant that they could not reconsolidate the old rule as it was. Instead there emerged a hybrid form of political transformation where new and old competed. With regards to civil society, organizational activity developed in a premature manner heavily initiated by political parties or party elites along with the ‘importing’ of international governmental and non-governmental organizations. As the regime seems to be unwilling to democratize, the dynamics of democratization are shaped within society. This is a configuration that approaches to transition should not overlook: a new hybrid regime, in which both the legacies of the old regime and the imperatives of transformation are salient, and society, not political institutions, become the main arena for democratization. For the South Caucasus, where greater political change has been apparent, the future of the democratic process is also affected by inter-ethnic and interstate conflict such as the Abhazian and South Ossetian problems in Georgia and the Karabagh conflict between Armenia and Azerbaijan. These conflicts also appear to make the regimes resistant to further democratization. In sum, the process of transition involves a three step-procedure: the overthrow of the authoritarian regime, the establishment of a democratic regime and the consolidation of the democratic culture [5]. Transition to democracy is to be fulfilled if “[the] old authoritarian power apparatus is dismantled and… the new political forces opt for democratic institutions as a framework within which they would compete for the realization of their interests”[6]. Transition remains incomplete if the authoritarian elite remains in power as a result of manipulated elections with anti-democratic practices undermining their fairness and freeness. In such cases, the legitimacy and accountability of rulers are far from being consolidated which leads us to conclude that these regimes represent incomplete or partial transitions.

5 See A. Altstadt, “Azerbaijan’s Struggle Toward Democracy,” in K. Dawisha and B. Parrott (eds.), Conflict, Cleavage and Change in Central Asia and the Caucasus, Cambridge University Press, Cambridge, 1997; R. G. Suny, “Incomplete Revolution: National Movements and the Collapse of the Soviet Empire”, New Left Review 189 (1991), 111-127; M. Saroyan, “The “Karabakh Syndrome” and Azerbaijani Politics”, Problems of Communism 39:5 (1990). 6 For the discussion of the impact of the prior regime type on transition see, Linz and Stepan, Problems of Democratic Transition and Consolidation, p. 53.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

51

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2. Peculiarities of Post-Soviet Transition in the Southern Caucasus The independence movements in the South Caucasus are one of main factors shaping the post-Soviet politics in the region. 7 Their significance can be seen in two ways. First, their emergence was triggered by inter-ethnic conflicts. The re-definition of national identity, the formation of discourses on nationhood, processes of nation and state-building, and the regulation of majority-minority relations were all shaped by the existence of ethnic conflicts in the region. In these types of conflicts, both nation- and state-building projects remain incomplete in cases where territorial integrity was either violated (as in case of Azerbaijan) or threatened (as in case of Georgia). Second, the independence movements resulted in the emergence of a counter-elite alternative to Communist Party rule in the Soviet Union. The relationship between the ruling elite and the opposition was not an easy one and it dominated the entire process of postSoviet transformation. After the achievement of independence, the nationalist elite constituted the basis of alternative elite groups who later established their own political parties and therefore contributed to the foundation of a multi-party system. The presence of an opposition in the South Caucasus which was either fully or partially organized prevented, to some extent, the consolidation and expansion of arbitrary practices. The entire process of political transformation in the Southern Caucasus was remarkably shaped by the legacies of the past, so these legacies should be analyzed in political and socio-cultural terms. The continuity of rule by the old communist party leadership, exemplified by the cases of Azerbaijan and Georgia, resulted in a reconsolidation of the Soviet type of governing, though in a modified form. The old leaders were the ‘strong men’ who were believed that they could overcome the crises of transition through their leadership skills to secure stability in their respective countries. Given their experience and talent in state affairs and with popular legitimacy, both Aliyev and Shevardnadze should have been able to initiate processes of democratic transition quite easily. Yet it seems that their political upbringing prevented them from being open to the challenges associated with democratization, primarily peaceful political turnover by free and fair elections. Moreover, the existing cadres in administrative structures who did not possess the experience and knowledge of working with democratic principles proved their loyalty to the ruling elite without questioning the necessity for a new regime type. Leaders of the independence movements, both Ebulfez Elchibey and Zviad Gamsakhurdia, were not perceived as strong enough to deal with the burdens of a new state-building since they lacked the Soviet-type of leadership skills including concentration of power, strong control and authority. Another problem associated with the establishment of democratic state-building was the lack of an elite consensus regarding the path towards democratization. The need for pact formation as put forth by O’Donnell, Schmitter and Whitehead in order to initiate democratic transition was never possible [6]. The relationship between the 7 For a detailed discussion, see R. Allison (ed.), Challenges for the Former Soviet South, Brookings/RIIA, Washington DC, 1996; J. Aves, “The Evolution of Independent Political Movements after 1988” in G.A. Hosking, J. Aves and P. Duncan (eds.), The Road to Post-Communism: Independence Movements in the Soviet Union, 1985-1991, Pinter Publishers, London, 1992; L. Chorbajian (ed.), The Making of NagornoKarabagh, Palgrave, London, 2000; K. Dawisha and B. Parrott (eds.), Conflict, Cleavage and Change in Central Asia and the Caucasus, Cambridge University Press, Cambridge, 1997; S. Goldenberg, Pride of Small Nations, Zed Books Ltd, London, 1994.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

52

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

ruling elite and the opposition was defined in terms of conflict, and consensus was hardly possible. The origins of the lack of pact formation date back to the preindependence period. During this time, the local communist cadres were reluctant to cooperate with the then emerging counter elite, who were seen as constituting a threat to their rule. In the post-independence era, Aliyev and Shevardnadze felt uneasy cooperating with the nationalist opposition and even considered them to be enemies of their respective governments. A significant peculiarity of the South Caucasus is the dominance of regionalism and patron-client relationships. 8 The dominance of patron-client relationships in the region is by no means a product of the post-Soviet period. Soviet authorities turned a blind eye to the presence and dominance of clientelism in the region and the strong representation of regional identities at the administrative level. The importance of such clientelism is evident when considering the long-lasting dominance of Nahchivan and Yeraz (Azerbaijanis originally from areas in Armenia) clan and the Karabagh clan in Armenia. Clientelism operates in a cyclical process: those who have political and economic power give their share to their regional allies, and in turn, these protégés pay tribute to the leader by supporting political forces and ensuring their continuity. Since association with the family, clan or tribe is a common and dominant cultural pattern in the region, its influence in current politics is quite tangible. The allocation and sharing of resources, both political and economic, remain in the hands of the dominant clan. In this case, one can hardly talk about the implementation of democratic principles but rather favoritism on the basis of clientelism and regionalism. As a last point on the issue, the idea of independence propagated by nationalist elites was associated with a string of unfulfilled promises in the early years of the postSoviet era. It was stated that the establishment of an independent democratic nationstate would lead to better living conditions and freedom, and also encourage prosperity and development. These expectations were far from being met, and the burdens and the immediate problems of the transition resulted in severe disappointment among these war-torn societies. The inefficiency and inexperience of elites pushing for independence along with decreasing standards of living and an increasing sense of insecurity about the future actually made the representatives of the Soviet period appear to be the only legitimate leaders capable of saving the country. However, the continuation of the old Soviet-type of authoritarian practices such as restrictions on freedom of speech and association, the dominance of single-party rule, and unfair and tainted elections also created mistrust among the population. In addition, widespread anti-democratic practices in electoral processes also resulted in an increasing political apathy and disbelief in the functioning of a multi-party system that had previously promised further democratization. Although the Colored Revolutions in Georgia (2003) and Ukraine (2004) were inspiring for Azerbaijan and Armenia, attempts to consolidate democratization remained incomplete. To conclude, the countries of the Southern Caucasus share several common characteristics in their process of political transformation. All of them have problems related to democratization process (Azerbaijan and Armenia) and democratic consolidation (Georgia). Their post-independence periods were shaped by incomplete nation-building processes (particularly in Azerbaijan and Georgia) mainly due to interethnic and interstate conflicts. State-building remains fragile since the territorial 8 For a detailed discussion of patron-client relationships in the Southern Caucasus, see J. P. Willerton, Patronage and Politics in the USSR, Cambridge University Press, Cambridge, 1992.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

53

integrity and inviolability of borders have not been secured. Government-opposition relations are defined in terms of conflict, and there seems to be no room for consensus and/or negotiation. The multi-party system has not been consolidated because of antidemocratic practices in electoral politics and a lack of arenas of opportunity for political parties in which to operate. The fairness and freeness of elections remain largely questionable because anti-democratic practices have been visible during the counting of votes. The opposition has increasingly lost its credibility and, more importantly, its core supporters. Civil societies are in the making; however, given the lack of mass membership, grassroots structures and ability to influence governments, these groups only consist of a handful of NGO activists who are professional in civil societal activity but are incapable of effectuating a state-society relationship. 9 One can hardly talk about their representativeness, although they do constitute a platform for the expression of discontent. Lastly, an already existing practice of corruption and bribery has continuously been strengthened in the post-Soviet era due to economic hardship, unemployment and low salaries. 10 Corruption has become more widespread because of the aforementioned and ever-present clientelism found throughout the South Caucasus. The process of post-Soviet transition in the South Caucasus has also been influenced by the involvement of international actors, i.e. international governmental and non-governmental organizations, as well as foreign countries. The involvement of international actors has occurred in such fields as regional and international cooperation in conflict resolution, security-building, economic cooperation, promotion of democracy and good governance, technical and financial aid in institution-building, and assistance to the formation of civil societies. These have been realized through guidance, training, technical assistance programs and grant schemes. It is quite crucial for the international actors to have the consent of local actors in their attempts to contribute to post-Soviet democratization and civil society development. Consent is relevant for sure, yet it is not sufficient to promote democratization. Although governments seem to be welcoming the international community to prove their willingness to be part of the Western world and its institutions, the success of the cooperation between domestic and international actors relies on the willingness of local actors, particularly state actors. In cases where state authorities remain reluctant to initiate and consolidate democratic practices, the contribution of international actors to the promotion of democracy is limited.

3. Peculiarities of Civil Societies in the South Caucasus The formation of civil societies in post-Soviet region is an integral part of political transformation. Civil society in the former Soviet Union is a product of independence movements and patterns of liberalization and democratization initiated in the aftermath of independence. Local initiatives and demands are of crucial importance in the formation of civil society. Moreover, local civil societal actors have been greatly supported by international governmental and non-governmental organizations through guidance, training and funding. Before discussing the nature of post-Soviet civil 9 For a detailed discussion see, A. Ergun, State and Society in Post-Soviet Democratization of Azerbaijan, Unpublished PhD. Thesis, University of Essex, 2003. 10 For an analysis of corruption in the post-Soviet countries, see C.H. Stefes, Understanding Post-Soviet Transitions Corruption, Collusion and Clientelism, New York, Palgrave, 2006.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

54

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

societies in the Southern Caucasus we need to highlight the characteristics of the sphere of social organizations in the Soviet period. There was not much of a civil society in the Soviet era, but there were state-led and state-controlled social organizations. The organizational sphere in the former Soviet Union had been largely defined by the state. Social and professional organizations, associations and unions of the Soviet period were funded by the respective governments. Because of this, one cannot talk about the independence of civil society since all social organizations were dependent to the state. They had a large membership profile and engaged, in a way, with the representation of the interests of their members without of course challenging the state’s policies. With the high membership rate, one can say that they had a mass basis yet no potential and/or opportunity to influence state’s policies and/or initiate mass-movements. They had to show loyalty to the policies initiated and implemented by the Communist Party and back state propaganda. Thus, local Communist Parties benefited from these social organizations and unions to popularize and in a way legitimize their policies in the public opinion. Through these organizations, they also created a loyal community of intellectuals and the professional elite. Only with the introduction of glasnost and perestroika did social organizations outside the state domain begin to emerge. Particularly in regions like the Southern Caucasus, these organizations became the places where questions related to liberalization, regime change and independence were discussed. The formation of nationalist independence movements (i.e. the People’s Front of Azerbaijan, the Armenian National Movement and the Round Table in Georgia) and the building up of their organizational basis in Azerbaijan, Armenia and Georgia paved the way for declarations of independence. These movements were marked by an emphasis on nationhood, national identity and independence, and they initiated a new and alternative discourse for the future of their countries. The notions of a need for a regime change and a democratic path were articulated via the discourses of the nationalist elite. Moreover, the emergence of these movements also paved the way for the formation of a counter-elite as an alternative to the Communist Party, and thus challenged its power. The power and success of these organizations derived from their ability to represent the public’s demands, to express popular discontent and to organize mass movements. Larry Diamond defines civil society as “…the realm of organised social life that is open, voluntary, self generating, at least partially self-supporting, autonomous from the state, and bound by a legal order or set of shared values”[7]. Although this notion of civil society is hardly applicable to the post-Soviet context, the sphere of social organizations shares common features. The post-independence period was marked by the mushrooming of civil society organizations in the Southern Caucasus, as elsewhere in the former Soviet Union. 11 Their sphere of activities have mainly been in the fields of democratization, civil rights and political liberties, human rights, gender and women, children’s rights, the environment, conflict resolution and peace-building. Their activities are primarily research and publications, awareness and consciousness-raising, and they also organize conferences and workshops. Local civil society organizations (CSOs) are predominantly founded and run by a small group of experts, academics and 11 For the discussion of civil society in the post-Soviet countries, see M.M. Howard, The Weakness of Civil Society in Post-Communist Europe, Cambridge University Press, Cambridge, 2003; A. Umland, Post-Soviet Civil Society: Democratization in Russia and the Baltic States, Routledge, London, 2006.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

55

activists. Unlike the nationalist movement organizations of the pre-independence period, they do not a have real popular support. They act as research organizations and think-tanks rather than represent the interests of their members, since the membership level is very low. Not the names of local CSOs but their chairpersons are known in the public opinion. Although civil societies in the region are weak, their contribution to the political transformation should not be ignored. Civil society is the sphere where criticism against local governments is expressed. Notions associated with democratization, human rights, and the protection of vulnerable groups are promoted through the activities of local CSOs. The growth of civil society in the region is largely supported by international governmental and non-governmental organizations. Support for local civil societal actors is an integral part of efforts made to promote democratization. Thus, the impact of the international community on civil society formation in the post-Soviet countries should not be neglected by scholars of post-Soviet democratization. Although local initiatives are crucial for civil society to develop, resource allocation by the international community provides a basis for the flourishing of activities carried out by local CSOs. The empowerment of post-Soviet civil societies has been realized through the advise, guidance, training and funding provided by international organizations. International funding and grant schemes make civil societies’ activities possible, since national donors are not available in the post-Soviet context. Moreover, through the cooperation mechanisms between international and local actors, such as conferences, workshops and training programs, CSOs become familiar with the international way of doing civil society work; they learn new tools to carry out activities and how to work with international organizations. Yet international involvement in local political and social transformations has also its shortcomings. First, a group of representatives of civil society has emerged in post-Soviet countries. This group is in an advantageous position compared to other actors within civil society since they have a monopoly over access to grants; they are regularly and frequently invited to international venues and are seen as qualified partners by international organizations. This results in an unequal development within local civil societies. Some organizations can easily become internationalized whereas some others lack the opportunity to become familiar with the Western type of civil society work. Second, international funding also creates donordependency. If local CSOs cannot secure funding, their activities cannot be realized, so one can hardly talk about self-sustainable civil societies in the near future. Lastly, the international community’s success in contributing to civil society development in the region is also dependent on the governments’ willingness to promote democratization. In cases where local governments remain reluctant to allow for the strengthening of civil society, the contribution of the international community remains limited. To conclude, civil societies in the post-Soviet space are in the process of developing, and their impact on democratic transformation has been very weak and limited. The contribution of civil society to democratization is dependent on the presence of opportunities which will be available through the strengthening of democratic institutions.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

56

A. Ergun / Democratization and Civil Society in the Post-Soviet South Caucasus

Conclusion Tensions between patterns of continuity and change still dominate the politics of postindependence in the South Caucasus, and it is not possible to talk about a mere continuity of the Soviet type of authoritarian policies in the region. Azerbaijan and Armenia still have difficulties in meeting international standards for democratization. Georgia has also faced problems in the consolidation of democracy after the Rose Revolution. The path of political, social and economic transformation is also dependent on the existence of unresolved inter-ethnic conflicts which challenge the consolidation of both nationhood and statehood. Thus, the transition to and/or consolidation of democracy remains incomplete in the region. It is clear to observers of the post-Soviet period that patterns of change are predominantly handled and internalized by societal rather than state actors. The ruling elite can resist consolidation of democratic principles whereas societal actors seem to be more open and keen on fostering liberalization and democratization. Yet, it is quite clear that unless the ruling elite’s initiatives and policies towards democratic change are secured, the transformative power of societal actors remains insufficient.

References [1]

[2] [3] [4]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[5] [6]

[7]

K. Dawisha, “Democratization and Political Participation: Research Concepts and Methodologies” in K. Dawisha and B. Parrott (eds.), Conflict, Cleavage and Change in Central Asia and the Caucasus, Cambridge University Press, Cambridge, 1997. J. J. Linz and A. Stepan, Problems of Democratic Transition and Consolidation, The Johns Hopkins University Press, Baltimore, 1996. R. Dahl, Democracy and Its Critics, Yale University Press, New Heaven, 1989. D. Potter, “Framework For Analysis” in D. Potter et al. (eds.), Democratization, Polity Press, Cambridge, 1997. S. Huntington, The Third Wave, University of Oklahoma Press, USA, 1991. A. Przeworski, “Some Problems in the Study of the Transition to Democracy” in G. O’Donnell, C. Schmitter and L. Whitehead (eds.), Transitions From Authoritarian Rule: Comparative Perspectives, The Johns Hopkins University Press, Baltimore, 1986. L. J. Diamond, “Toward Democratic Consolidation”, Journal of Democracy 5 (July 1994), 4-17.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-57

57

Prospects for Liberal State in the South Caucasus (Interplay of Principles and Security Considerations)

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

David DARCHIASHVILI1 Professor at Ilia Chavchavadze State University in Tbilisi and a Member of the Georgian Parliament in the Ruling UNM Party List

Abstract. The South Caucasus states are not consolidated liberal-democracies, but liberalization attempts and prospects are rather visible there. The Georgian case is particularly interesting in this respect. At the same time, the interdependence of these states, stemming from historical complexities of amity/enmity, as well as modern economic or other imperatives, will make success in one of them positively resonate within others. But to speculate about the foreseeable prospects or think of relevant policies, one has to analyze different external and internal factors. The main challenge for the liberalization agenda of Georgia, which might also be of relevance to Armenia and Azerbaijan, arises from the complex political and ideological reality: 1) Pre-modern indigenous forces resist modernization from within; 2) Russia, which challenges the sovereignty and freedom of choice of its “Near Abroad,” exploits possibilities to ally with those forces. It is also dictated by ideological and social sympathies, since the Russian model of today has some feudal overtones; 3) Postmodern conditions, namely the ability of mediatechnologies to “create” reality, are exploited by local pre-modern or foreign revisionist actors in a destabilizing manner; 4) Post-national, postmodern imperatives limit the state’s discretion to act according to security requirements. Of course, none of the governments of the South Caucasus states are to be kept beyond critical questioning of their performance. But when political rulers constantly remain accountable to global liberal institutions, finding it impossible to ignore their criticism, those internal non-state actors and their external exploiters do not always deserve due attention. To succeed in the liberalization of the South Caucasus, local and global agents of change should better balance democratic and security arguments, as well as understand that while the main principles of liberal democracy are the same, the tactics and tools of the defense of liberalism in postnational, postmodern Europe might be slightly different from those in modernizing young nation-states. Keywords. Liberalization, modernization, nationalism, institution-building, internal and external factors, pre-modern and post-modern challenges, revisionism.

1 Professor at Ilia Chavchavadze State University and a Member of the Georgian Parliament in the Ruling UNM Party List, Tbilisi. E-mail: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

58

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction To answer the question of whether a liberal state is feasible in the South Caucasus in the foreseeable future, internal developments and external context should be examined. Globalization, interdependence of nations and geopolitics are the reasons behind the interrelation of local and universal tendencies. No less important factors are the correlations between foreign and domestic policies of the states under consideration, as well as the cause-outcome interplay of their politics and culture. Together with the geopolitical landscape in and around the region, and power interests and balances inside it, one has to consider the strength of global liberal players, as well as the construction/reconstruction of identities and norms of behavior within Caucasian nations, as the main determinants of their future. The variables and concepts found in such an approach will not bring a straightforward answer, but might help in understanding the tendencies, as well as designing relevant policies. One of these would become obvious at least: Universal liberalism and its international regimes strongly influence the identity and norms in Georgia, Armenia and Azerbaijan but encounter indigenous socio-cultural structures, perceptions of security and dynamics of securitization, which are not always favorable to quick and full-fledged liberalization. Security and liberalism are inseparable, but not the friendliest couple in every locale; and, the South Caucasus cannot be seen as an exception to this. Sometimes liberalism has to give way to security; even universal human rights documents point to that. There is a caveat of course: Human greed and selfishness, which is no less universal than liberal principles, might exploit security logic, as well as those local socio-cultural structures, which fall short of liberal standards. It may slow down democratization by arguments for national security, while those arguments might be just a disguise for so called regime or sectarian security. But the good news with regards to the South Caucasus is that indigenous forces of liberalism, together with its universal/international agents, are rather firmly rooted there. So if local and global agents of liberalization better realize when pressure for further reforms is timely, but when and how real security issues ought not to be ignored, stability, as a derivative and fundamental of liberalism and security, will gain. What is also important to realize is the role of disinformation in the modern world; sometimes those who are the loudest about human rights and governmental failures are the least interested in genuine liberalism. The Georgian case is especially rich with such phenomenon. In the following paper, the Georgian case takes precedence for three reasons: 1. The author is more familiar with Georgian material analytically, but also practically, since he is personally involved in Georgian politics; 2. Without prejudice to the reform attempts in Armenia and Azerbaijan, one might assume that so-called Rose Revolution of Georgia in 2003 is widely accepted as a positive and bold democratic and liberal reaction against total corruption and failures of the state.2 3. The Georgian case shows that indigenous forces which stand for liberal values in the South Caucasus region are 2 See for instance the open letter of the Human Rights Watch, which was and remains constantly critical of Post-Soviet governments, including that in Georgian. The letter outlined that the Rose Revolution was carried out in democratic opposition against a corrupt and fraudulent regime. A Wake-up Call for Local Tyrants, 27 November 2003. Available at: www.hrw.org/en/news/2003/11/27/.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

59

no less stronger than forces opposing them. If a final, irreversible breakthrough of liberalization in Georgia takes place, transformation of all three countries, which rather depend on each other, will gain additional impetus. This article tries to outline the key variables and pros and cons for such a prospect. This article neither draws psychological profiles of South Caucasus governmental leaders nor discusses how personally liberal they are or not. On the one hand, it would require a different and longer research to ensure maximum objectivity. On the other hand, systemic factors are given just preference. While historians know perfectly well the role of individuals, I hope many of them would agree with Richard Evans, when he recalls Marx’s dictum that people make their own history, but they do not do it under circumstances of their own choosing [1]. The point here is that those leaders cannot ignore the roles and norms assigned to them by local, regional and universal institutional and cultural environments. Or if they ignore these, they usually fail, like Shevardnadze, former president of Georgia, under the Rose revolution. In the short run, their personal will definitely influences the developments in the countries under consideration. But in the long run, forces like societal attitudes, power balances, geopolitics and global players supposedly have the final say. In any case, one has to analyze how encouraging/discouraging are impersonal local, regional and global variables vis-à-vis the personal, political and ideological preferences of Mr. Aliev, Saakashvili and Sargisian. And last but not the least: A detailed assessment of concrete reforms and political acts carried out by the respective governments of South Caucasus states is not the main subject of the article. Only in certain instances concrete actions are recalled, based on independent foreign and/or non-governmental sources, in order to clearly outline main societal and political forces and factors playing for or against liberalization. At the same time, concrete decisions regarding education, the judiciary, the economy, social protection, the police, or military sectors, of course, sometimes might seem contradictory, incomplete, or mistaken for a liberal or illiberal viewpoint. Their detailed analysis is also worthy, but too much scrutiny of particular steps would have required descriptive historical research. Neither the title nor the limited space of this article would allow it, nor my personality: I myself am co-responsible for some of the ongoing political decisions and risk not being as distanced from concrete processes, names and dates as the authorship of an analytical article requires.

1. The South Caucasus Polities 1.1. Internal Challenges in Transition Experts on liberal democracy demand from liberalizing countries not only the managing of at least two peaceful consecutive changes in their governments through elections, but also the presence of a mature civil society, a pluralistic political society, an efficient and professional bureaucracy and an independent economic society [2]. The logic of such a list of criteria is convincing, since those are the systemic guarantees and indicators that check whether the basic premises of liberalism – rule of law and human rights – are respected in a given state. Without those institutions, the response to traditional calls for free media and so on will remain at the mercy of individual decision makers. Long-lasting respect for individual rights and the independence of

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

60

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

journalists and/or the judiciary are dependent variables vis-à-vis above-mentioned institutional pluralism and strength of the political system. Given those universally accepted criteria, as well as the assessments made by well-known international observers, none of the three South Caucasus states have yet passed the test for liberalism. According to the Freedom House “Freedom in The World” reports, two out of three states, namely Georgia and Armenia, belong to partly free countries, while Azerbaijan is characterized as not free. At the same time, ratings given to Georgia and Armenia for political rights and civil liberties slightly worsened in recent years: On a scale 1 to 7, where 1 means the highest and 7 is the lowest level, Georgia moved from 3-3 in 2007 to 4-4 in 2008, while Armenia from 5-4 in 2008 to 6-4 in 2009 [3]. Of course, such assessments are not immune to subjectivism. Analysts working on the reports point out that freedom can be affected by non-state actors – a circumstance which is not always thoroughly taken into account by human rights organizations. However, Freedom House ratings cannot be ignored by any means. Challenges related to South Caucasus liberalization are clearly visible in other sources and analyses. For instance, Juan J. Linz and Alfred Stephan (cited above) deem the existence of strong political parties necessary for the establishment of liberal democracy. But as Human Rights Watch reports, “The functioning of Armenia’s multiparty system and genuine political competition are also hampered by the persistent inability of the array of political parties to stabilize and consolidate… Real political competition is volatile with a permanent risk of violence, and mutual respect between electoral competitors – especially between victors and losers – is lacking” [4]. These or other problems of party-building and functioning, as well as other structural shortcomings of the South Caucasus liberalization path, can of course be identified in Georgia and Azerbaijan as well. Namely, the Georgian government has been repeatedly criticized internationally for the police crack down on the opposition demonstration in November 2007 [5]. Criticism on that or other matters, like the extent of the independence of the judiciary, the situation regarding minority rights, and so forth, can be read in reports compiled by international governmental organizations like the Council of Europe. They are echoed or rather preceded by local NGOs and the public defender. Of course, some of these reports may raise suspicion about politically-motivated interest in criticism or other causes of authors’ subjectivity.3 For instance, a harsh critic of the Georgian government, a former public defender recently found himself in one of the radically critical opposition political groups. Per the article by Alexander Cooley and Lincoln Mitchell, they go far beyond the EU-sponsored report on the Independent International Fact Finding Mission on Conflict in Georgia, and blame the Georgian government for Russia’s military aggression in August 2008, due to a “classic attempt to use nationalism to deflect attention from its domestic failings.” Advocating at the same time for restraint of the US government in participation of Georgia’s defense build-up [6], the authors show a lighthearted attitude towards small nations’ right to self-defense, territorial integrity and regional security imperatives. However, while national security remains a strong variable, any liberalization project should take into

3 On the selective reporting style and weaknesses of representativeness and accountability of some human rights NGOs, see, NGO Monitor, 13 January 2009, Examining Human Rights Watch in 2008: Double Standards and Post-Colonial Ideology www.ngo-monitor.org.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

61

account, by and large, the number of critical remarks made internationally or domestically prove the incomplete nature of the South Caucasus’ democratic transition. The last but not the least factor to be reckoned with is the political culture and experience of the political classes and societies in the South Caucasus states. The development of the above mentioned institutional and procedural premises of consolidated liberal democracies needs time and a build-up of tradition. This task is especially difficult after decades of Soviet totalitarianism, combined with pre-modern and/or nineteenth-century impulses. Until recently the latter manifested itself as wide acceptance of the influence of religion over politics, strength of family-clan ties, and a strong allegiance to ethnicity, which competes with the sense and idea of citizenship. For instance, a sociological survey in 2000 conducted in Georgia revealed that most Georgian citizens of Georgian as well as minority origins identified themselves more in ethnic, rather than civic, terms [7]. Borrowing the concept of culture from sociology and defining it as collective models of power and identity constituted by norms, rules, and actors that follow their requirements [8], some scholars see it as a no less substantial factor of international relations than material interests and rational calculations. Others focused on democracy building, point out that post-communist countries have to work on changes in political culture [9]. In such a change, which needs a focus on education, the adoption of particular laws or freedom of the press are not sufficient. According to Hedwig de Smaele, “politicians, media workers and public alike share the same political culture and in extension the same information and communication culture… [C]ulture is not unchangeable, but too high expectations concerning the role of media as triggers of democracy are doomed to fail.” 4 One more well-known expert on democracy and international relations, Fareed Zakaria, also warns that democratic institutions might get overwhelmed with populism and xenophobia, and give rise to illiberal democracies unless the concept of liberalism gains a foothold in society [10]. But in reality, the future is far from doomed. Political, economic and cultural developments in the South Caucasus, and particularly in Georgia, are heavily influenced by liberal-democratic imperatives which slowly penetrate identity and norms, i.e., culture. Forces inside and outside of the country which are interested in its liberal future remain substantial. As a result, the grounds exist to argue that, for instance, the glass of Georgian democracy is half full rather than half empty. One can continuously point out the particular institutional and procedural weaknesses of democratic checks and balances and the insufficient democratic nature of decision-making and accountability in Armenia and Azerbaijan; the same holds for Georgia. While sometimes such debates are directed by misunderstandings, biased political considerations and rivalries, and are unavoidably exaggerated, it is impossible to deny systemic shortcomings and cases of human rights violations. But admitting problems and working on them is one more step towards liberalization.5 4

“In the Name of Democracy” The Paradox of Democracy and Press Freedom in Post-Communist Russia, Paper prepared for the ECPR Workshop on Political Communication, the Mass Media, and the Consolidation of Democracy, Turin, 22-27 March 2002, by H. deSmaele, Ghent University, [email protected]. 5 For instance, the HRW, echoing many local critics, referred to constitutional change in Georgia, which took place in 2004 and weakened the power of the parliament vis-à-vis the presidential one. http://www.hrw.org. While not without controversy itself, such criticism has eventually and partially been accepted by the governing political party and a multiparty council for constitutional reform was set up in 2008. The same can be said about the participatory process of reforming the election system in the country, conducted in 2008-2009. Until recent changes, the election system was very much winner-take-all oriented,

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

62

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1.2. Attempts and Indications of Liberalization A recent report, made by an independent network of research and training centers, shows that despite widespread criticism concerning the almost total lack of freedom in the media, 47% of Georgians partially or fully trust to it, compared to 43% in Azerbaijan and 39% in Armenia [11]. The report also reveals that Georgia has the best laws protecting journalists and the media is diverse, and governmental officials admit that more should be done to expand the press freedoms. According to Ana Karlsreiter from the OSCE, “Journalists have no risk of being imprisoned…but the print media is very much politicized.” Nino Zuriashvili, one of the critics of the government, also agrees that there are independent sources not controlled by the government. Most importantly, the majority of Georgians are strongly opposed to any form of censorship [11]. While independence of the media is not a remedy in itself, as it was argued in the previous chapter, or that it can be easily manipulated by non-democratic forces, as will be outlined later, steps towards its establishment are a must for liberalism. On the other hand, public attitudes against censorship, from whomever and for whatever reasons, are encouraging. Now, less promising in terms of spreading liberal culture could be the numerous attempts of media outlets and individual journalists in Georgia to develop media ethics and self-regulatory mechanisms. One has to note that the process has been encouraged by the government since the Rose Revolution. Residual or modernized feudalism, manifested in political and economic connotations of widely spread ethnic, religious and family/clan identities in the South Caucasus societies, is still the main internal impediment of liberalization. For years, in all three countries, it was mainly associated with corruption. Some international and national security experts agree that corruption constitutes a national security threat in several transition states [12]. Linkages between corruption and culture and an incomplete departure from the feudal past, as one of the main impediments of liberalism in Post-Soviet space, have been explicitly pointed out by scholars and international public figures. A few years ago, when the first anti-corruption national program was developed in Georgia, its authors stated that corruption had turned into a way of life in a number of spheres and it was difficult to distinguish between corruption and the society’s traditions [13]. A more recent survey of Georgian values and attitudes reveals an indecisive mixture of modern, pre-modern and post-modern tendencies and shows disagreement over how one has to ensure societal security and identity. While the majority of the population supports Georgia’s accession to NATO and the EU, it does not quite seem to be a conscious choice of liberal-democracy for many [14]. Correlation between feudalism and corrupt practices in transitional states, which finds ground in some societal attitudes, derives from the following similarity: in feudal times, the same individual often acted as a military officer, police officer and judge.6 Such individuals also had a conditional monopoly over property and economic benefits within the space given by suzerain. Nowadays no modern constitutional design would allow for such arrangement, but corruption may constitute an alternative structure of power relations, resembling feudal interaction. It is noteworthy that analysts point to depriving the rather fractured opposition of the ability to more adequately balance the ruling United National Movement. 6 See for instance, A. Nordlinger, Soldiers and Politics: Military Coups and Governments, Prentice-Hall Contemporary Comparative Politics Series, Sep. 1976. Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

63

feudal elements in modern Russia [15] [16]. While the leadership of this country is a special case, one also cannot forget the common Tsarist/Communist cultural and political roots which the South Caucasian nations are struggling to emancipate themselves from. Modern types of feudalism can also be traced in the actions and influence of organized crime, which was especially notorious in pre-Rose Revolution Georgia. But unlike in Russia, since 2004, Georgian corruption and in particular organized crime networks have received a noticeable blow. For the first time in Georgian history, the mere fact of being a so-called “Thief in Law,” i.e. having the title of a leader and mediator of a Soviet/post-Soviet type of organized criminal groups, became a punishable offence. The practical fight against local mafia did not go without controversial cases of death during anti-criminal operations, critically noticed by the opposition or the human rights community. 7 The opposition called this fight excessively repressive and/or not serious. But the matter of fact is that anti-criminal and anti-corruption policies – through confiscation of illegally obtained properties, newly established plea-bargaining procedures, the firing of thousands of policemen or public servants of the old regime, and corruption charges of high rank public figures resulted in a manifold increase of the state budget. According to a group of writers and scholars who recently gathered in Prague on a conference dedicated to the 20th anniversary of the democratic revolutions that swept Central and Eastern Europe in 1989, corruption in politics threatens democracy in Europe. Adam Michnik, editor of the Polish newspaper “Gazeta Wyborcza” said that corruption is the trap of freedom [16]. In this context one has to review the Transparency International Europe corruption perception analysis to see that in 2009, Georgia continued to make progress in its anti-corruption efforts, achieving rates equal to or better than some EU countries [17]. Today, despite many ups and downs in the process of modernizing-liberalizing policies in Georgia, police and education institutions, notorious for their corrupt habits until 2003, have gained qualitatively higher public confidence. Currently, 62% of respondents in Tbilisi see the Rose Revolution as a positive step in the country’s development, 38% particularly agree that the curtailing of corruption was the number one achievement, 23% prioritize the successes in education and 54% approve of the government’s pro-Western foreign policy. These figures show that substantial modernization takes place not only in institutions, but also in the minds of the people. No less promising in terms of the spread of liberal values is that the majority of those respondents opposing the government prioritized not nostalgic feelings for the old Soviet days or a fear of Westernization, but the independence of the judiciary and human rights.8 Thus, one can assume that Georgian cultural and structural development, while incomplete, is directed towards liberalism. Rhetorically as well as practically, Saakashvili’s government stands for it. Making changes in the education system which aim at fighting corruption is important, but so is making the curricula of Georgian universities compatible with those in Europe. A special presidential program of graduate education support in European and American universities has been launched. Fighting corruption in the system of justice is being accompanied by attempts to 7

See, for instance, www.hwr.org. The survey took place in Tbilisi, 15-19 of November. It was conducted by GCG under the sponsorship of the information agency GHN. Institute of Public Research, 24 November, 2009. 8

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

64

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

establish liberal practices like jury trials, adversarial trials and equality of arms.9 An increase of budgetary funds was also associated with the substantial privatization policy. If such policies and their results can gain footage in Georgia, the same can be likely in the whole region. It is noteworthy that according to various sources, the NGO community (as well as the young technocratic generation, which by definition are seen as agents of liberalism), are rather visible in Georgia, and also in Armenia and Azerbaijan. The South Caucasus is heavily “infected” by liberalism. These countries are as close to the EU and NATO as never before. Those institutions, together with the UN, OSCE, CoE, International NGOs and IFIs continue to play a decisive role in shaping internal and external policies of the given countries. Processes in economic, political and media diversity, together with regular and internationally observed elections with all their deficiencies, still show how far in their transformation those countries have gone since the dissolution of the USSR. Democracy-building in the South Caucasus has also acquired the form of development of the relevant identity in those countries. Together with Ukraine, Belarus and Moldova, South Caucasian governments demand that the Eastern Partnership Initiative of the EU is taken in Brussels as the recognition of European identity of those respective nations.10 If the West unequivocally accepts such claims in one or another form, a pro-liberal transformation of identity and relevant norms in the South Caucasus will take stronger root in culture. The struggle for more democracy, transparency and accountability should and will continue. For instance, the EU demands that the Georgian government adjust its competition legislation as well as other regulatory mechanisms in economic and social policies to be in line with European standards. The incentive is concrete – prospects for a Deep and Comprehensive Free Trade Agreement with the EU. The EU also expects Georgia, as well as Armenia and Azerbaijan, to more robustly implement democracyrelated recommendations drawn by the CoE or the OSCE monitoring bodies. For various objective or subjective reasons, it might still take time. However, grounds for arguing that illiberal, feudal institutions and values can be slowly but steadily transformed, does exist. Thus one can agree with Larry Diamond, who assumed that the given social and political environment of certain post-Communist states, when he states that liberal democracy can also be built on the bases of ethno-nationalistic beliefs [9]. The South Caucasus has also the potential to prove practically that Islam, as well as any other religion rooted in traditions, has the foundations for liberty and equality [18].

2. External and Global Factors 2.1. Realpolitik and Revisionism in the Region It is obvious that the development of the South Caucasus is substantially dependent on external - regional or global - factors and political variables. Despite the optimism expressed in the previous chapter regarding liberalization prospects in the region, one has to return to the points mentioned in the beginning, that none of the countries under 9

Interview with Levan Ramishvili, Director of the Liberty Institute, December 2009. Recommendations For National Parliaments of Armenia, Azerbaijan, Georgia, Moldova and Ukraine about Possible Participation in Parliamentary Assembly of the EU – EURONEAST, Adopted at the Joint Meeting of the Profile Committees in Kiev, on 18 May 2009. 10

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

65

consideration are on the safe side yet. Side steps in the transformation processes, accompanied by politically motivated violence, are far too much evident in the recent histories of Georgia, Armenia and Azerbaijan. Internal development in these countries from the end of Soviet rule up to today was burdened by coups and other forms of politically flavored violence, waves of xenophobic sentiments, and so on. This all creates the legitimate ground to question the capacity of local political classes, as well as societies at large, to stick to their declared allegiance to liberal-democratic principles, values and norms. But while internal reasons for such democracy failures are important, these are external factors and security considerations which enter the scene directly, indirectly or sometimes on the level of local perceptions, and decisively influence the shape of sovereignty, integrity and democracy in Armenia, Azerbaijan and Georgia. One may argue whether the South Caucasus is too small to be a full-fledged political-security or economic region in itself, but it definitely is at least a sub-region of other emerging constellations, like the Caucasus-Central Asia or the wider Black Sea area. This is not just because of East-West energy transport routes, which of course play an important role. In terms of the South Caucasus, it is historical, economic and socio-demographic interdependence and complexes of amity-enmity which links the fates of these three countries today. This inter-linkage is believed to be the main ingredient for region-building. In the long run, it is an asset for cooperative relations, which are treasured by outside democratic partners. 11 As such, South Caucasus regionalization is an additional stimulus for the democratization and liberalization of its constituent members. But currently, the South Caucasus remains in the so-called “conflict formation” stage of its regional development.12 In conflicting stages of region-building, enmity prevails between the actors. With regards to the South Caucasus, the conflict over Nagorno-Karabakh is the most vivid illustration of this. While the situation in separatist Abkhazia and the South Ossetia/Tskhinvali Region is different, due to the direct intervention of an external force - the Russian Federation - one has to admit that local historical grievances had also been cultivated and used to the detriment of peaceful conflict settlements in Georgia. Thus, so far the clashing ethno-nationalist projects in the South Caucasus do not allow for full-fledged cooperative relations and negatively influence the internal political dynamics of its constituent parts. In these circumstances, the security-versusdemocracy argument gains ground: when parts of a state are under direct and unilateral occupation, which has nothing to do with multilateral peace-keeping/peace-making efforts (as in the cases of Georgia and Azerbaijan), or when a state itself engages in occupation (in the case of Armenia), a) a government has to focus on strengthening its security and defense apparatus and b) look at internal political debates or attacks through the lens of state security. It is no surprise that Georgian governmental representatives, for instance, closely watch and critically assess trips taken by some of the opposition leaders to Moscow, as well as financial contacts of those with Russianfavored oligarchs of Georgian origin. Real threats of externally-encouraged separatism also slow down the acceptance and implementation of the best modern practices of democratic decentralization.

11 On cooperative security, as an alternative to conflict-prone national security/interest based approaches to international relations see for instance, R. Cohen and M. Mihalka, Cooperative Security: New Horizons for International Order, The Marshall Center Papers, No 3, April 2001. 12 On the concept of the region and stages of its development, see B. Buzan, O. Waever, J. DeWilde, Security, A New Framework for Analysis, Lynne Riener Publishers, Inc. 1998.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

66

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

If the South Caucasus was left on its own, or rather given the chance to engage with democracy promoting international actors on an unlimited scale, region building, as well as the liberal transformation of national cultures and institutions, would have unavoidably sped up. The South Caucasus is too weak to promote any substantial alternative to liberal-democracy on its own. It is neither able to engage in intra-regional confrontation indefinitely, if the confrontation is not encouraged by external powerful forces. But the problem is the very existence of such force, which tries either to make an area into a front-line, or to monopolize the political, economic and cultural control over the whole South Caucasus, using divide and rule tactics. Without going into a lengthy description of when and how Russian politicians, special services or the military acted against the political, economic, as well as military security of Georgia,13 one can simply listen to high rank Russian officials or read their foreign/security policy statements. In his 2005 state of the nation address to the parliament, Vladimir Putin described the collapse of the Soviet Union as “the greatest geopolitical catastrophe” of the 20th century [19]. Before the 2008 August war against Georgia, Putin said: “Russia has played a positive, stabilizing role in the Caucasus for centuries, a guarantor of security, co-operation and progress. This is how it was in the past and this is how it is going to be in future. Let there be no doubt about this” [20]. Such words can only be understood as revisionism - negligence of independence and sovereignty of the South Caucasus states, while post-August War Russian rhetoric about the new European architecture of security acquires hypocritical overtones. As a result, in response to president Medvedev’s initiative on the European Security Treaty, many representatives of Western liberal democracies stated that a “common security system in which all countries enjoy equal security can only work if all partners share common values.” They point on the fact that “continued occupation of Georgian territory… raises question marks over the very principles President Medvedev has set out as integral to the kind of new security architecture he wants for Europe” [21]. In July of 2009, former leaders of ex-communist countries and other public figures addressed the US president with an open letter, stating that “Russia is back as a revisionist power pursuing a 19th century agenda with 21st century tactics and methods… It uses overt and covert means of economic warfare, ranging from economic blockades…to bribery and media manipulation” [22]. These words indicate also to the whereabouts of the main supporter and promoter of illiberal tendencies and forces in the South Caucasus. The problem is not only geopolitical rivalry; Russia engages in the region with real or perceived opponents from the West. It is not even only about the occupation of part of Georgia or attempts to limit the sovereignty of all former Soviet republics. The main problem, when one discusses the prospects of liberal state in the South Caucasus, is the following: Russia, as the most powerful representative of the post-Soviet space, pursues the agenda of reversing democratic reforms throughout it. Freedom House regards Russia as a non-free state. Employing bribery, media manipulations and other, more traditional imperialist means, it definitely does not serve democratic development anywhere else. While adapting to Western practices of humanitarian actions and so-called soft power measures, the Russian style of the 13 One could refer in this respect not only to governmental resources, but to the EU-sponsored report of the Independent International Fact Finding Mission on Conflict in Georgia, which could be hardly seen as favoring Georgian government for certain subjective reasons. See also: S. E. Cornell and S. F. Starr (eds.), The Guns of August 2008, Russia’s War in Georgia, Studies of Central Asia and Caucasus, M.E. Sharpe, New York, London, England, 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

67

promotion of education, science, or human rights abroad also serve opposing objectives. First of all, soft power policy implies that the promoter attracts recipient countries with universal values or superior standards of their protection. Hence, pointing to alleged human rights violations in some post-Soviet countries “Russia actually projects something that it’s not” [23]. Secondly, Russian soft power measures became linked with the concept of the “Russian World.” One of its architects, Pyotr Schedrovsky “often accentuates the idea that those who speak Russian in their everyday life also think Russian, and as a result, they act Russian [23]. As a recent study of Russian soft power policy cases reveals, as it is promoted through soft power measures, “Russia’s system of values stresses the role of the historical interpretation of WW II. Moscow harshly denounces the countries (Baltic states, Ukraine), where Russia’s specific historical interpretation is not accepted” [24]. Given those ideological premises, it becomes obvious that whether through diplomatic or economic representations, media outlets or through Kremlin backed NGO’s, Russian soft power policy is just an addition to Kremlin’s revisionist agenda. Due to the poverty and non-attractiveness of its content, it seems relatively easy to withstand such ideological attacks. As one of Russia’s leading politician admits, “(Russia) cannot explain the purpose of its presence in the post-Soviet union…. The West is doing this under the banner of democratization, and one gets the impression we are doing it only for the sake of ourselves… Our activeness is following too openly Russian interests. This is patriotic but not competitive”[23]. That could be one additional explanation why Russia, driven by revisionist agenda, continues to use hard power on its neighbors, despite the fact that it is costly, farther damages Russia’s image worldwide and usually appears counterproductive. But the situation is not so simple. Money, disinformation and manipulation of pre-modern feelings among segments of indigenous societies allows Russian rulers to search for anti-democratic allies in countries like the South Caucasus and challenge the modernization and liberalization agenda from within.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2.2. Post-Modern Challenges of Liberalization Combining soft power policy with hard power overtones, Russian post-communist leadership employs a mixture of pre-modern, feudal tactics of bribery and intimidation and rather post-modern methods of disinformation and virtual politics on an international scale. It is believed to be dangerous not only for transitional countries, but for democracy worldwide. Modern authoritarian states, including Russia, “have developed information and economic activity that allow them to ‘guide’ and ‘manage’ political discourse; selectively suppress or reshape news and information of political consequence; and squelch, co-opt, or parasitize the most important business entities… As the world’s democracies have struggled to find a common approach to the problem, or even to agree that there is a problem…modern authoritarian states have worked diligently to spread their influence through an extensive web of media concerns, public relations consultants, diplomatic initiatives, and nontransparent aid packages… [J]ust as they rule without law within their borders, authoritarian regimes are eroding the international rules and standards built up by the democratic world over the past several decades, threatening to export the instability and abuses that their systems engender” [25].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

68

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

For Daniel Kimmage, the emergence of the paradoxical modern Russian paradigm, based on sympathies towards Stalinist and Tsarist past and denial of failures of the both, might already seem to be a postmodern free play of decontextualised symbols [26]. For Andrew Wilson, Russian style media-created virtual politics, as a tool to manipulate opinions for the sake of kleptocratic elites, proves novelist Victor Pelevin’s eloquent insight that media usage of the word “democracy” derives not from Greek “demos” but from “demo-version” [27]. While the same analyst convincingly tries to trace the Russian tradition of political technologies with its staged events, faked political figures and disinformation tactics back from the beginning of 20th century [27], postmodernism seems to be the relevant concept addressed in an analysis of South Caucasus developments and Russian meddling in the region. Understood not only as a theory but as a condition of the post-industrial, globalized and media-dominant world, postmodernism brings an array of new threats and challenges to the fundamentals of liberal and liberalizing countries. On the one hand, the maxims of post-modern theory, “like…truth is ‘really’ a kind of fiction, reading is always a form of misreading” [28], are well-learned by post-Soviet political technologists, to make it difficult to assess whether particular claims for democracy or criticism for autocracy are genuine. On the other hand, postmodernism weakens the nation state and brings non-state actors to a level of power never enjoyed before. While balancing the selfishness of states is positive, as liberal-institutionalist theories of international relations or the human rights approach suggest, non-state actors benefiting from globalization are not the only supra-state institutions; there are international NGOs or legal business corporations, but also illegal entities of various kinds. If they employ media technologies, as well as covert support from revisionist powers, small transitional countries find themselves in a most precarious situation. The irony is that in this fight, the two pillars of liberalism - the modern state and relatively post-modern human rights community - challenge each other, sometimes more than those of illiberal non-state actors, while the latter finds shelter and support in authoritarian, revisionist powers. Postmodernism became associated with an antinational discourse (at least, through the challenge of so-called “grand or master narratives”). It weakened states, as guardians of not only nationhood, but also liberalism.14 In the meantime, pre-modern, imperial tendencies, dominant in Russian political circles and special services, benefit by it. By helping different radical factions in neighboring countries to challenge local state monopoly on violence, as well as establish sophisticated propaganda tools, by bribing and disinforming various local or international stake-holders, they promote not a post-modern, “beyond state” reality, but zones of their exclusive, imperial control. Witnessing such concerted attacks, governments in the Russian neighborhood might become lost and/or heavy-handed in response. It makes it much easier for worldwide agents of liberalization, whether governmental or non-governmental nature, to blame and shame official elites rather than address the threat stemming from parasocieties operating in post-modern conditions and under pre-modern patrons. 14 Modern analysis of international relations shows that the institutional and cultural foundations of the world order are partially shaped by ideologies, and carried by international governmental and nongovernmental organizations, as well as by so called epistemic communities, (See R. L. Jepperson, A. Wendt, P. J. Katzenstein, “Norms, Identity, and Culture in National Security” in P. J. Katzenstein (ed.), The Culture of National Security, Norms and Identity in World Politics, Columbia University Press, NY, 1996. In turn, those communities are heavily influenced by post-modern/post-national thinking, translated into critical security studies, which does not favor state interests.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

69

The South Caucasus, at least in the case of Georgia, is a good example of a modernizing nation, squeezed between postmodern conditions and pre-modern opponents. That is not to say that none of these three countries’ elites ever abuse media tools for their own interests. But when it happens, the international liberal community of modern, as well as post-modern flavors, becomes alarmed and gets involved, making governments accountable. Local civil society also raises its voice. For instance, in 2007 Georgian governmental performance in the area of civil liberties was downgraded by the very IGO/INGOs community, largely due to the shutting down of one of the TV channels. The same happened, for the closure of Russian internet sites and TV channels during the August war in 2008. But not many human rights defenders cared about the context. The TV channel “Imedi,” which was violently shut down by police during the mass disorder on November the 7th in 2007, was owned by a shady Russian oligarch of Georgian origin who made his fortune in Russian-style predatory business and manipulative media-politics. One of the main advisors on media-political technologies and employed at the same outlet, was also the Russian expert, who used to work for the prominent Russian ORT and NTV channels under Beresovski, Gusinski, and the above-mentioned oligarch Badri Patarkatsishvili.15 Patarkatsishvili, who returned to Georgia before the Rose Revolution and founded private TV channel Imedi, perfectly knew that it could not benefit him in Georgia with its limited advertisement market, except through politics. Of course, it is not a crime by itself - the media, business and politics cooperate everywhere. But Patarkatsishvili’s TV channel not just became extremely critical of the revolutionary government, but after the founder failed to have preferential business and political treatment, it started manipulation of religious, and the above-mentioned pre-modern, illiberal feelings and attitudes. Criticism was parallel to governmental attempts to curtail the most blatant xenophobic expressions in society and promote liberalism in education. Cases of excessive use of force by police were also among the beloved themes of Imedi. The very real, dangerous intentions Patarkatsishvili held against liberalization produced by his media project became apparent in October-November of 2007. Capitalizing on governmental mistakes and shielding some human rights activists, Imedi also helped mobilize those forces in Georgian society which were hurt by the anti-corruption campaign, the anti-crime struggle and various systemic reforms. For days the rallies in downtown Tbilisi were broadcast live non-stop. The owner of Imedi joined the rally personally. On November the 7th, when state anti-riot units were engaged in a street fight with opposition-minded youth, and mutual excessive violence could not be avoided, an Imedi news program correspondent reported on the air that, according to eye witnesses, the police were going to move into the cathedral where a few hundred protesters had found shelter. The report was accompanied by interviews on the spot. While saying that rumors about the possible assault needed to be confirmed, the wording expressed emotions such as “people almost forget that in an orthodox country the church can be touched, but priests call people to stay in the church yard and go inside…” and at the conclusion of the program the anchor stated that the “dispersed crowd hides in the church, but seems even here they are not safe.” This statement was interpreted by authorities as a provocation aimed at fueling religious hysteria and mass disorder. Accordingly, the order was made to raid the TV station and take it off the air. 15 Interview with Oleg Panfilov, Director of the Center for Journalism in Extreme Situations, December 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

70

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

Later, when Imedi was allowed back, an audio tape revealing that Patarkatsishvili was readying for a coup and offering payment for the forthcoming presidential election manipulations and “neutralization” of the minister of interior, had been recorded. Patarkatsishvili himself never denied the authenticity of the tape. The Georgian state and its Western orientation were saved; however, this was at a high cost. The government was severely criticized internationally, as well as by local civil societies for the use of force, especially against the media outlet. But the Georgian government found it no less difficult to explain to some post-national liberals why it blocked the Russian media during the August war. As Paul A. Gobble writes, by blocking the Russian media and internet outlets while on the defensive, Georgians succeeded in national mobilization, but this raised question marks about the image of its democratic and open nature [29]. This particular case shows even more explicitly that prospects for liberalism differ, whether one looks through a modernist or postmodern, post-national lens. According to the same author, “Russia-Georgia war...was and remains first and foremost an information war” [29]. Hence, mobilization, as well as informational struggle is understandable for a national cause, which is compatible and a pre-requisite for liberalization, but is questionable for the same liberalism in postmodern situations. Of course, it does add difficulty to: a) figure out the chances of the South Caucasus liberal-democratic future, since measurements depend on different epistemological calculus; b) to generate unanimous international support for the liberalism of transitional countries, which have yet to achieve modern objectives of independence and sovereignty, while some liberal actors of international scene no longer favor/understand those very objectives or the traditional methods of their achievement. Without going into a lengthy analysis of Patarkatsishvili’s linkages to Russian special services, it does seem easily provable that he did not aim for better democracy in Georgia when unleashing his media campaign together with his conspiracy attempts discussed earlier. It is no less evident that Russia acted against the fundamentals of the very existence of the Georgian state during the August war, whether physically or in terms of communications. There is also strong evidence that before this dramatic event, the former Georgian security minister, who had found shelter in Russia, was creating and financing anti-governmental political and civic organizations in Georgia. All of this demonstrates that the global forces of liberalism of various kinds, which remain materially and morally the strongest in the world, need to realize that liberal prospects in such a neighborhood like the South Caucasus cannot be ensured or understood separately from national security concerns. It is not easy, since national security arguments are dubious and deceiving. However, while scrutinizing that the governments under consideration behave according to the basic tenets of liberal democracy, world liberals have to pay attention to non-state actors and the post-modern flavor of new security threats. Unfortunately, civilized international society has fewer tools to influence the private media owners, corrupt or exalted journalists and diverse anti-liberal actors behind the scene. These circles do not care about the Strasbourg court of human rights or other international mechanisms which can be efficiently used against officials in the South Caucasus.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

71

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2.3. The Prevalence of the Global Liberal Context Notwithstanding the attempts of outsider or insider illiberal actors, governmental mistakes or the pains of reformation, the Georgian experiment of transition to liberalism continues. As it was mentioned initially, liberal forces are vividly present in Armenia, as well as in Azerbaijan. Thus, the prospects for further reforms, modernization and better ensuring of basic human rights and the rule of law are not that gloomy in the South Caucasus. Neither Russian revisionist and illiberal impulses are omnipotent – otherwise the Soviet Union would have been restored. The main reason is that after the end of the Cold War, liberal democracy, as a political system and underlying political philosophy, has become widely accepted as a universal, paradigmatic principle of the best world order. It is not only about human rights and the rule of law, as well as free elections, however; it also has been seen as the ground for international stability. Despite all of the difficulties in its practical realization, the concept of cooperative security, which finds roots in liberal thinking and rests upon the shared values of its contributors, 16 remains the most convincing one. A liberal paradigm and relevant policies are associated with the most powerful global actors. Regional institutions such as the OSCE, CoE, international trade and financing regimes, and last but not the least, NATO and the EU, not only stand for liberalism, but marginalize all other players, which decide to ignore their interests, principles and policies. Of course, the dream about an area of freedom and stability stretching from Vancouver to Vladivostok have not been materialized yet. Fukuiama’s initial optimism about the coming end of history also looks premature, to put it mildly. But it is not because bloody conflicts continue and authoritarian tendencies can still be found in the South Caucasus, Russia, other parts of the FSU or elsewhere. One can better argue with Fukuiama on the grounds of the impossibility of the end of history (although the mentioned author used this expression as a metaphor) in a similar way, as historians argued with Hegel, who also believed that progress might one day reach its culmination [30]. History, as well as its producer and consumer, human nature, is too diverse and controversial to reach the point of irreversible solutions of all individual or collective existential problems. But because of the freedom-loving nature of human beings, liberalism, as an idea of emancipation of communities and individuals, maintains universal appeal. It is also projected by the largest material powers worldwide, which have diverse incentives and tools for assistance, as well as sanctions, at their disposal. Hence, transition countries continue with their difficult tasks of reformation. The South Caucasus falls directly within this realm, where the European and Euro-Atlantic liberal community has stake at continuous liberalization, at least, for its own security. The rest, namely apparent slowness and bewilderment on the side of global liberal forces in pursuing the agenda, can be explained by overstretching, as well as by political expediency. It is manifested

16 On cooperative security policy, as well as liberal democracy as a foundation for security community and on NATO as a true materialization of this concept see for instance, T. Risse-Kappen, “Collective Identityin a Democratic Community: The Case of NATO” in P. J. Katzenstein (ed.), The Culture of National Security, Norms and Identity in World Politics, Columbia University Press, NY, 1996; See also R. Cohen and M. MIhalka, Cooperative Security: New Horizons for International Order, The Marshall Center Papers, No 3, April 2001; B. Buzan, O. Waever, J. DeWilde, Security, A New Framework for Analysis, Lynne Rienner Publishers, Inc. 1998.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

72

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

by the EU and US administration attempts to influence Russia’s behavior through engagement. On the other hand, the liberal world is not unanimous. It consists of too many players, with their own vested interests and different senses of timing and methods. No less important could be the modern-postmodern divide in the above-mentioned “epistemic communities” of liberal thinkers, as well as within political actors. Without further speculations, whether the observation that Americans are from the Mars and Europeans from Venus[31] is not an oversimplification, one can agree with Robert Kagan in his analysis about EU policies and attitudes being heavily flavored by posthistoric, postmodern overtones. First of all, it is felt in the European suspicion towards the notion of national interests, and nationalism at large. While explainable, European distaste for the classical nation-state model can be premature: a sense of nationhood and national identity remain the most powerful driving forces in the regions where the EU tries to promote its post-modern liberal model. Nationalism can be risky ground for international relations, but it is an inseparable part of processes of modernization that South Caucasus countries are engaged in. It must not be forgotten that while the search for democracy might have preceded the creation of modern nations, these are essentially twin concepts: it is impossible to separate the territorial nation from the idea of popular sovereignty [32]. At the same time, one should not overlook that post-modern ideas of diluted national sovereignty, as well as European styles of conflict resolution, which sometimes emphasize “process over results, believing that ultimately process can become substance”[31] prevails, are being abused by pre-modern non-state actors, or their revisionist protectors from authoritarian states. With regards to the South Caucasus, this means that Europeans have to look with more understanding at why, for instance, the Georgian government is reluctant to allow EU-funded projects to be run in Russian-occupied territories without its prior consent or engagement.17 The above illustrations, concerning illiberal forces abusing post-modern media capacities, are also grounds for a better understanding of local governments. By and large, liberalism is still associated with modernization, a steady promotion of professional bureaucracy, liberal education and a free economic society, and is thus linked with a sense of nationhood. But it also implies increased activities of human rights defenders and post-modern, supra- or sub-national checks on the nation-state. The task is to strike the right balance between two sources or styles of liberalism. It is also necessary to check authoritarianism and generate the capacity for confronting new threats, stemming from non-state actors - especially if these find alliance with illiberal states. It is a global problem, but usually, the antidotes can only be local, dependent on peculiar circumstances. The South Caucasus, with its uneven path towards liberalization and array of challenges arising from pre-modern versus post-modern impulses and modernization imperatives is such a place where nuances matter. For instance, reforms of the security sector, as part of liberalization agenda, rightfully demand civilian democratic control over the armed and security forces, delineation of internal and external security functions, maximum budgetary transparency, adherence to detailed procedures of decision-making, and the strong say of civil society. But, as Dylan Hendrickson and Andrzej Karkoszka point out, it is 17 The EU representatives, as well as the CoE institutions deem Georgian law on occupied territories, which does not allow free pass and activity in Russian controlled Abkhazia and South Ossetia, to be too restrictive.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

73

difficult to reach the “ideal type” situation. Such institutional arrangements are “not always consistent with the immediate needs or priorities of reforming countries”[33]. Governments under pressure for reforms are inherently concerned that such reforms “might undermine their power base and compromise their own efforts to address security problems”[33]. And it is not always about the concern for governmental security per se. Sometimes, especially in conflict-driven societies, “government reluctance to embark on a reform process tends to be confused with a weak commitment to a peace process or democratization rather than with a lack of the instruments, resources, and support needed to push through difficult changes… Donor emphasis on governance, human rights, and ‘human security’ is not always consistent with the overwhelming immediate needs felt by the population in some countries for ‘security’ in its narrower physical sense”[33]. The Georgian case also brings to the table the additional lesson of insufficient involvement of global liberal players in addressing genuine security needs and concerns, which has repercussions for liberalization prospects. This is related to weak EU involvement in avoidance of the escalation of confrontation in conflict zones, very much stemming from Russia’s desire to prevent Georgia, through fueling conflict or otherwise, from getting closer to NATO. This stance eventually resulted in the August war. The Independent International Fact-Finding Mission’s report might be seen as an acknowledgement of the reluctance of Europe to deal intensively with pre-war security concerns of a given country. 18 But as some analysts point out, the report’s acknowledgement that conflict prevention mechanisms on the ground were inadequate is an understatement. Ronald Asmus believes that the Russo-Georgian War represents “a failure of the European security system… [which] was supposed to ban spheres of influence, prevent the predatory behavior of large states, and guarantee the security of small ones – in addition to providing warning against growing tensions and giving… mechanisms to prevent war”[34]. As he concludes, “we should have no illusions. The underlying conflict between Georgia and Russia has not been resolved. Tbilisi still wants to go West, and Moscow still wants to stop it”[34]. The question is, if the EU and all other global liberal players are truly ready to do the maximum to help Georgia’s drive towards the club of liberal democracies. That is a matter of intensive cooperation in the field of security. If conducted diligently and constantly, combining soft and hard power/security measures, as a recent report to the US Senate committee on foreign relations suggests, 19 the Georgian political elite will be much more self-confident in meeting all challenges of the security sector reform or other complex liberal tasks. In its turn, such a scenario will increase the chances and speed of reformations throughout the whole region. If not, Georgian leadership will remain by and large left on its own. In such a case, mere financial aid or European-style expert assistance might not be enough to attract other neighbors in the South Caucasus by the Georgian example. 18

See for instance EU’s Failure in Georgia, Euobserver.com , 4 October 2009. The report, written on the basis of the committee’s minority professional staffers’ travel to Georgia in the fall of 2009, emphasizes that Georgia’s concerns in the sphere of territorial defense should be seriously addressed by NATO allies. It also requires work on internationalization of the situation in Russian controlled South Ossetian region and helping the Georgian government set forth a reintegration strategy for the breakaway enclaves. Stressing the need for the access of humanitarian aid organizations etc, in occupied territories, the report says, that “such efforts should include finding workable definitions of humanitarian assistance so that ostensible humanitarian aid is not used in other sectors like institution building.” 19

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

74

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Conclusion The systemic characteristics of the South Caucasus states and their regional/global context, taken together with the particular case of Georgia, show that transformation to liberal statehood encounters many challenges here. Formal checks and the requirement for the consolidation of democracy, namely two consecutive peaceful changes of the governments, are yet to be realized. However, its immediate occurrence can be challenging for the same liberalization agenda. Genuine liberal-democracies are to be based on mature and independent political, civil, economic societies, as well as consolidated and professional bureaucracies. This also requires stability and security of statehood. In all three countries, the process of such institution-building is ongoing, encouraged by the global dominance of liberal discourse and institutions. That is a positive internal and external environment for eventual success. But institutionbuilding is not finished yet, nor has security been ensured. Hence it gives grounds and the opportunity for anti-systemic forces to disguise their pre-modern, illiberal inclinations with the help of postmodern conditions, and under the democratic discourse, challenge the very fundaments of statehood. The situation is complicated by the revisionist agenda of the Russian federation, which not only questions the independence and freedom of choice of young South Caucasus states, but tries to exploit, mobilize and empower illiberal, pre-modern indigenous forces. Mistakes made by South Caucasus governments, as well as the illiberal nature or behavior of its particular representatives, should always be on the radar screen, locally and internationally. But while this is constantly done, whether objectively or in a superficial/biased manner, the problem of new threats stemming from non-state actors and their conscious or sub-conscious harmony with Russia should not be overlooked either. Otherwise, the abovementioned test of governmental change might be the way for the postponement of the liberal project for future generations. The presence of international players on an unprecedented scale in the region, the genuine desire for the liberation from the post-imperial dominance of Russia, and the slow but steady political and societal drive toward European identity will never fade away and continues to determine the future. The future will come relatively soon, if: a) Local elites find better ways to balance liberal-democratic and purely security interests, as well as devote more energy to the development of decision-making procedures and rules of the engagement in internal political battles; b) If the international liberal community develops a comprehensive strategy for the region, based on practical rejection and resistance to Russia’s desire for zones of exclusive influence as well as a correct balance of its security concerns and agendas for democracy. This must include an understanding and confrontation of pre-modern forces disguised as postmodernism, which constitutes new threats. While continuing critical engagement with local governments, the West must also pay attention to the mitigation of confrontational and xenophobic attitudes in opposition circles, as well as in the civic/media community. Political culture is one of the decisive variables for liberalization and governments alone are not able to modernize it.

References [1] [2]

R.J. Evans, In Defense of History, W.W. Norton and Company, New York, 2000. J. J. Linz and A. Stephan, Toward Consolidated Democracy, Journal of Democracy 7 (1996), 14-33.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

D. Darchiashvili / Prospects for Liberal State in the South Caucasus

[3] [4] [5] [6] [7] [8]

[9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] 21]

[22] [23]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[24] [25]

[26]

[27] [28] [29]

[30] [31] [32] [33]

[34]

75

Freedom House, see www.freedomhouse.org. Human Rights Watch, Democracy on Rocky Grounds, February 2009. Available at: http://www.hrw.org. A. Cooley and L. Mitchell, No Way to Treat Our Friends: Recasting Resent US-Georgian Relations, The Washington Quarterly 32 (January 2009), 27-41. NGO Monitor, Examining Human Rights Watch in 2008: Double Standards and Post-Colonial Ideology, 13 January 2009. Available at www.ngo-monitor.org. T. Hanf and G. Nodia, Georgia Lurching to Democracy, Nomos Verlagsgesellschaft, Baden-Baden, 2000. P. J. Katzenstein, “Introduction: Alternative Perspectives of National Security” in P. J. Katzenstein (ed.), The Culture of National Security, Norms and Identity in World Politics, Columbia University Press, NY, 1996. L. Diamond, Is the Third Wave Over?, Journal of Democracy 7 (July 1996), 20-37. From: Readings, Module 4, G. Marshall Center, 2001, p. 11. F. Zakaria, The Rise of Illiberal Democracy, Foreign Affairs 76 (November/December 1997), 22-43. Georgian media most trusted in Caucasus, poll reveals, Right Vision News, 14 November 2009. C. Donnelly, Rethinking Security, NATO Review 48 (Winter 2000-2001), 32-34. Main Directions of Georgian National Anti-Corruption Programme, 31 October 2000. Values of Georgian Society: Reports, Analysis, Recommendations, The Open Society-Georgia Foundation, 2006. C. H, Fairbanks, The Feudal Analogy, Journal of Democracy 11 (July 2000), 34-36. G. Feifer, European Intellectuals Warn of Democracy Crisis 20 Years After Berlin Wall's Fall, Radio Free Europe/Radio Liberty, 14 November 2009. Transparency International Europe Corruption Perceptions-Georgia Rises, Reuters, 17 November 2009. J. L. Esposito and J. O. Voll, Islam and Democracy, Oxford University Press, 1996. Putin deplores collapse of USSR, BBC News, 25 April 2005. Available at: http://news.bbc.co.uk/2/hi/4480745.stm. Khrushcev to Putin, a War of Words, New York Times, 18 August 2008. Available at: http://topics.blogs.nytimes.com/2008/08/18/khrushchev-to-putin-a-war-of-words/. Towards a New Security Architecture for Europe? – Reply to the Annual Report of the Council, Report submitted on Behalf of the Political Committee, European Security and Defense AssemblyAssembly of Western European Union, Document C/2053, 4 November 2009. East Europeans Seek Obama’s Support on Russia, Reuters, 16 July 2009. G. Pelnens (ed.), The “Humanitarian Dimension” of Russian Foreign Policy Toward Georgia, Moldova, Ukraine, and the Baltic States, Centre for East European Policy Studies, Riga 2009. Available at: http://www.icds.ee. Baltic News Service, 21 November 2009. Overview Essay, Undermining Democracy 21st Century Authoritarians, Freedom House, Radio Free Europe/Radio Liberty, Radio Free Asia, June 2009. Available at: http://www.underminingdemocracy.org/files/UnderminingDemocracy_Full.pdf. D. Kimmage, “Russia, Selective Capitalism and Kleptocracy” in Undermining Democracy, 21st Century Authoritarians, Freedom House, Radio Free Europe/Radio Liberty, Radio Free Asia, June 2009. Available at: http://www.underminingdemocracy.org/files/UnderminingDemocracy_Full.pdf. A. Wilson, Virtual Politics, Faking Democracy in the Post-Soviet World, Yale University Press, 2005. C. Butler, Postmodernism: A Very Short Introduction, Oxford University Press, 2002. (pdf file). P.A. Gobble, “Defining Victory and Defeat: The Information War Between Russians and Georgians” in S.E. Cornel and F. Starr (eds.), The Guns of August 2008, Russia’s War in Georgia, Studies of Central Asia and Caucasus, M.E. Sharpe, Armonk, New York, London, England, 2009. E.H. Carr, What Is History, CIPDD, Tbilisi, 2001. (In Georgian). R. Kagan, Of Paradise and Power. America and Europe in the World Order, Alfred A. Knopf, NY 2003. J. Daniel, “Democracy and Nation” in M.F. Plattner and J.C. Espada (eds.), The Democratic Invention, The Cohns Hopkins University Press, 2000. D. Hendrickson and A. Karkoszka, “Security Sector Reform and Donor Policies” in A. Schnabel and H.G. Ehrhard (eds.), Security Sector Reform and Post-Conflict Peace Building, UN University Press, 2005. R.D. Asmus, Ironed Curtain, The New Republic, 8 October 2009. Available at: http://www.tnr.com/article/world/ironed-curtin.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

This page intentionally left blank

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Non-Conventional Threats and International Involvement in Southern Caucasus

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

This page intentionally left blank

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-79

79

Third Party Conflict Resolution in the Caucasus Nina CASPERSEN 1 Department of Politics and International Relations, Lancaster University, United Kingdom

Abstract. It is often argued that third party conflict resolution in the Caucasus has failed since the conflicts are not yet ripe for resolution, and due to the obstacles posed by the existence of unrecognised states. This chapter asks if such ‘ripeness’ can be created and it examines the solutions available in these extreme cases of separatist conflict. It finds that the timing of conflict resolution interacts with the process and substance of the approach. There is therefore room for creative diplomacy, but a viable strategy requires a multi-level approach which encompasses the international and the intra-communal level, including in the unrecognised states. Moreover, a solution needs to fudge the issue of sovereignty, and significant third party involvement is needed to make such a settlement both acceptable and sustainable. Keywords. Nagorno Karabakh, South Ossetia, Abkhazia, conflict resolution, external actors.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction Attempts by third parties to manage or resolve the conflicts in the Caucasus have ranged from secret negotiations between men in dark suits, through problem-solving workshops involving middle-range actors, to grassroots peace-building. But these attempts have, so far, been known more for their failures than for their successes: the conflicts over Nagorno Karabakh, Abkhazia and South Ossetia are as protracted as ever and the latter even descended into full-scale war in the summer of 2008. Third party conflict resolution in the Caucasus is, as elsewhere, not only affected by the strategies chosen by third parties and the resources they are willing to commit, but also by the dynamics of the ongoing conflicts. While the failure of international mediation is therefore in some cases down to the wrong choice of approach, it will just as often be due to the timing of the involvement; the specific phase of a conflict may be almost immune to conflict resolution. But the question is if this timing can itself be affected by third party involvement: can a ‘ripe moment’ for conflict resolution be created in the Caucasus? And, if so, how? An additional complication is that the Caucasus conflicts involve unrecognised or de facto states; that is, entities that have managed to gain de facto independence, but have not been recognised by any states, or at the most by a few 1

Lecturer at Department of Politics and International Relations, Lancaster University, United Kingdom. Email: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

80

N. Caspersen / Third Party Conflict Resolution in the Caucasus

states. 2 The conflicts consequently differ from ‘conventional’ separatist conflicts: the separatists have won, and seemingly have little incentive to compromise. This will invariably affect the kind of conflict resolution strategies that are likely to succeeded, so the second question explored in this chapter is the way in which this form of ‘nontraditional security threat’ affects third party conflict resolution: what are the constraints and the opportunities?

1. Timing, Process or Substance? I.W Zartman argues that there are essentially two approaches to conflict resolution: one holds that the key to successful conflict resolution lies in the substance of the proposals to a solution, while the other argues that the key to success lies in the timing of the resolution efforts; the moment must be ripe, otherwise substantive answers are fruitless [3]. The latter approach certainly appears to explain a lot of what has gone wrong for third party conflict resolution in the Caucasus [4]. There has been a demonstrable lack of willingness, on all sides, to consider compromise solutions; all options have essentially been on the table, but the timing has just not been right. But this does not necessarily mean that international mediators just have to wait for everything to click into place.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1.1. To Negotiate or not to Negotiate When is the right time for conflict resolution, when is a conflict ripe for a settlement? According to Zartman the most important elements is the existence of a ‘mutually hurting stalemate’. This entails, firstly, that all parties to the conflict realise that they cannot escalate to victory and, secondly, that the current situation is costly. In its initial formulation this primarily concerned the relative military strength of the conflict parties [5] but subjective factors are now increasingly emphasised because, as Marianne Kleibor has pointed out, a mutually hurting stalemate depends as much on perceptions as it does on the objective military balance [6]. This is clearly illustrated in the Caucasus where despite the prolonged existence of military stalemates, all sides have perceived that time was on their side, and these perceptions have proved a crucial obstacle to conflict resolution in the region [7]. The de facto regimes in Abkhazia, South Ossetia and Nagorno Karabakh believed that the passing of time served to entrench their de facto independence; it created facts on the ground which made reintegration less likely. The parent states, on the other hand, hoped that international isolation would weaken the breakaway regions while they themselves were growing stronger. Azerbaijan’s government, for example, repeatedly points to its immense defence budget and the resulting strengthening of its army, and stresses that it is prepared to use all available means to reintegrate Nagorno Karabakh [8]. With all sides perceiving time to be on their side there is little room for compromise; why agree to a difficult compromise, if you still think that you can have it all? As a result, the situation has not been ripe for resolution but, as Chester Crocker warns, “the absence of ‘ripeness’ does not tell us to walk away and do nothing” [9]. Ripeness can be the subject of “creative diplomacy”, meaning that third parties can try to create the 2

For definitions of unrecognised states see, for example, Kolstø [1] and Pegg [2] .

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Caspersen / Third Party Conflict Resolution in the Caucasus

81

perception of a mutually hurting stalemate, either by fostering a realisation of a stalemate or by making the status quo costlier. International mediators have to be aware of windows of opportunity - which may be short-lived - but the dynamics of conflict can also under some circumstances be affected by third parties; and timing can therefore, at least to some extent, be seen as endogenous to the conflict resolution process. A highly committed third party intervener could decide to alter the military balance, thereby making it impossible for the most obstinate side to achieve a complete victory and hopefully resulting in the perception of a mutually hurting stalemate. This was the approach used in Bosnia, where a NATO air campaign in 1995 added to the growing realisation among the Bosnian Serb leaders that their maximalist goals were unrealistic; they were unable to hold on to the territory they currently controlled, and were even facing the prospect of defeat [10]. However, for most third party actors this kind of involvement is a step too far, and we are highly unlikely to see a NATO intervention in, say, Nagorno Karabakh. The Russian intervention in Georgia in the summer of 2008 clearly influenced the military balance, but it did not create a mutually hurting stalemate. It, moreover, serves to demonstrate that the possibility of a military victory is not the only factor of importance for willingness to compromise; Georgia may, at least for the foreseeable future, find itself in the weaker position, unable to regain control of its territory, but this situation is not necessarily static in the long term and the Georgian government is clearly not poised to abandon its claim on Abkhazia and South Ossetia [11]. It is, however, not only the military balance and the prospect of a military victory that can be affected by third parties. Third parties can also affect the cost of the status quo or the benefits associated with a compromise solution; the latter can also be conceived of as the opportunity costs accruing from insisting on maintaining status quo and both strategies relate to whether or not the military stalemate is seen as ‘hurting’. Much of the third party conflict resolution in the Caucasus has been focused precisely on influencing the calculations of the top leadership by threatening to penalise the conflict parties in the absence of a settlement, or by pointing to rewards that would be forthcoming were an agreement to be reached. High-level talks in the Caucasus take place behind closed doors, so we are unable to know the exact details of the carrots and sticks involved, but the strategy is likely to have included more or less explicit promises of closer ties to Europe or various trade agreements and threats relating to the prospect of international isolation or stepped up criticism of the democratic shortcomings found in all three states. The current rapprochement between Turkey and Armenia is another example of this strategy; the thinking being that a foreign policy victory will make it easier for the Armenian President to agree to a difficult to compromise on Nagorno Karabakh [12]. The problem with such a carrot-based approach is, however, that without tying it specifically to progress in the settlement talks, it might give the leaders less reason to compromise, by making the status quo less costly and therefore more sustainable. But even if conditions are clearly set out, the effectiveness of international sticks and carrots is far from guaranteed. 1.2. Ineffective Use of Carrots and Sticks There are a number of reasons for the potential ineffectiveness of the carrot-and-stick approach. Firstly, the strategy risks being undermined by a lack of unified international

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

82

N. Caspersen / Third Party Conflict Resolution in the Caucasus

responses, due to strategic interests or lack thereof. Secondly, pressure can relatively easily be deflected by seasoned leaders. Thirdly, internal dynamics often constitute a significant obstacle. The effectiveness of the carrot-and-stick approach will be significantly reduced if the third parties are competing over influence in the region and, consequently, making contradictory promises and threats. This has been prevalent in the Caucasus where Russian, American and European mediators are not only trying to affect the calculations of the conflict parties but also aiming to protect their own strategic interests. As a result, the Minsk Group (under whose auspices the Nagorno Karabakh talks are taking place) has, for example, far from functioned as a unified team and this has had more than a little to do with the contradictory policies of the three co-chairs, Russia, the US and France [13] [14]. Both Armenia and Azerbaijan have made conscious efforts not to choose sides between Russia and the West, 3 and the leaderships can to some extent evade pressure by playing the third parties against each other. Fear of losing influence may, in any case, result in third party unwillingness to use enough leverage to significantly affect local perceptions. This is important since a lot is at stake and small sticks and carrots are therefore unlikely to be sufficient; after all, what is a trade agreement if you are asked to compromise on the territorial integrity of your state, or give up a decade-long struggle for self-determination? It might sweeten a bitter pill, but is unlikely to make the conflict parties accept the medicine in the first place. While competing great power interests may therefore undermine the carrot-andstick strategy, unbalanced great power involvement can prove even more detrimental to conflict resolution attempts. Significant interests in a conflict zone may render an external actor too willing to use leverage, to the extent that they become a party to the conflict. This is clearly illustrated by Russia’s actions in Georgia in August 2008. In this case the conflict has become so internationalised - or the external dimension is so powerful - that Russia cannot, with any stretch of the concept, be seen as a third party. Russia’s very significant strategic interests are, moreover, not balanced by Western interests in the region; the Caucasus is not the Middle East, it does not pose a direct security threat and its strategic importance is dwarfed by other regions. Consequently, there is a lack of willingness on part of the US and Europe to commit the resources needed to put significant pressure on the conflict parties or provide substantive guarantees, for example by committing troops, but there is also an unwillingness to use leverage against those external actors who obstruct the process. The latter is exemplified by the very subdued US and EU criticism of Russia’s current obstruction of any form of conflict resolution in Georgia [15]. Conflict resolution in such cases requires a multilevel approach that also involves the international level; using leverage at the local levels will otherwise be cancelled out by the external dimension of the conflict. Even if this hurdle is overcome and pressure is applied in a unified, determined and coherent manner, success is however not guaranteed. The problem is that even significant pressure – as long as it falls short of actual coercive intervention - can be deflected by the leaders. The presidents of Armenia and Azerbaijan are, for example, both very adept at ‘pretend negotiations’; they play the game and take part in peace talks, but with little or no inclination to agree to a compromise. They are cooperative enough to deflect the immediate pressure, but no results are forthcoming. One could for example question if the ‘imminent breakthroughs’ that were predicted in the Karabakh 3

In Armenia this policy is referred to as ‘complementarity’.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Caspersen / Third Party Conflict Resolution in the Caucasus

83

talks in 2001, 2006 and again in 2008 reflected actual movements by the leaders on the main issues or just an astute ability to say the right thing at the right time, when the pressure became too much, but without committing to anything. The presidents have even used their involvement in the peace process to avoid international criticism of dubious electoral practices [16]; the rationale being, “don’t criticise our elections now because then we won’t be able to agree to a difficult compromise”. This brings us to the final obstacle: the importance of internal politics. The ripe moment for conflict resolution is not only affected by relations between groups, such as the military balance, or by the prospects for the state or the communal group as a collective actor; the right timing also depends on the powerbase enjoyed by the leaders. Are the leaders strong enough to carry an agreement and can they bring their followers along? The existence of a “valid spokesperson”, a strong leader capable of bringing his/her followers along in compromise, was part of the original formulation of Zartman’s ripe moment [5]. But while still acknowledging its importance, Zartman now argues that this structural element is of a different order than the two perceptual elements (a mutual hurting stalemate and a sense of a way out) and therefore omits it from the definition [3]. I would however argue that internal politics is crucial, not only for the ability of leaders to carry a settlement but also for their willingness to engage in serious negotiations in the first place. Moreover, the perception of a costly stalemate can also originate in internal politics. For example, when the Bosnian Serbs finally became willing to negotiate a compromise, this owed a lot to internal dynamics: the political leaders were facing significant opposition, they were worried that the army might try to take over power and they therefore began searching for an alternative, for a way out [17]. Given that ripeness is therefore neither just about the ‘objective’ prospects for each side, nor solely about collective prospects, it becomes a great deal more difficult for third parties to influence – but not impossible.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1.3. Influencing Intra-Communal Dynamics Since intra-communal dynamics are essential for the emergence of a ripe moment, the ability of third parties to help create the right timing for conflict resolution becomes closely linked to the process adopted: how inclusive is the conflict resolution process, both horizontally and vertically. The former refers to the scope of elite negotiations; are all veto players included or are potential spoilers, who might be able to wreck a settlement, left outside? If the process is too narrow, then the leaders will find it difficult to carry a settlement, as they risk being undermined by more radical forces, but if the process is too broad then it may be impossible to reach an agreement in the first place. What is needed is what John Darby and Roger MacGinty term “sufficient inclusion” [18]. The vertical scope of the process refers to the levels of society that are included in the process: is it restricted to the top leadership or are the middle-range and the grassroots levels included as well? The same balancing act as above is often encountered by the mediators when deciding on this: if the process is too narrow, then the leaders will have difficulty bringing their followers along - they will have problems selling it to their publics and peace is unlikely to be sustainable - but if it is too broad then the leaders might find themselves under too much pressure and be unlikely to risk a difficult compromise. This is of course assuming that the most likely driving force behind a settlement comes from the top leadership - due to international pressure or otherwise - but as a number of scholars have pointed out, this is not necessarily the

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

84

N. Caspersen / Third Party Conflict Resolution in the Caucasus

case: middle-range leaders or grassroots may be more likely to realise the need for compromise, and be less constrained by previous rhetoric. This therefore suggests the need for a widening of the process even before a settlement is reached [19]. In the Caucasus, the dominant approach to conflict resolution has generally consisted of regularly getting leaders together for secret talks and putting pressure on them - or waving large cheques in front of their noses. The process has been narrow, both horizontally and vertically. In the case of Abkhazia, negotiations were, for example, from the outset conducted between the then Abkhaz leader, Vladislav Ardzinba and the then Georgian president Eduard Shevardnadze; lower level leaders were taking part in talks in the various coordinating councils established and in preliminary talks, but the actual settlement negotiations remained the prerogative of the top leadership. This did not change with the Rose Revolution and the coming to power of Mikhail Saakashvili. In the case of Nagorno Karabakh, the tendency for top level talks has been even more pronounced: not only are the talks reserved for the top leadership but details of what they have been talking about are kept from the public. 4 Moreover, Baku refuses to meet with the leaders of Nagorno Karabakh and the talks are therefore conducted between the presidents or foreign ministers of Azerbaijan and Armenia. The emphasis on top-level talks follows the general trend for third party mediation in intra-state conflicts, but third party efforts in the Caucasus have been more than usually confined to the top leadership. The assumption behind this decision appears to be that the top leaders would first have to agree to a settlement, and in order for them to do this they needed to be insulated from their publics, and only after a difficult compromise was reached would the process be broadened and other strata of society would be included [20]. But key third party actors appear to have started to realise the limitations of this approach. The leaders have demonstrated their lack of willingness to compromise and it is also becoming increasingly clear that they would not be strong enough domestically to carry a settlement. There is a risk of a backlash from the opposition, from within the leaders’ own ranks and from society at large, and the top leadership is painfully aware of this. It has, for example, not escaped their attention that the then President of Armenia, Levon Ter-Petrosyan was ousted when he accepted what was regarded as a too moderate approach to the Karabakh conflict [21]. It therefore seems that in order to get leaders to risk a difficult compromise and in order for this compromise to have any chance of being sustainable, broader involvement is needed. International NGOs have advocated this for years and organisations such as International Alert, Conciliation Resources and the Crisis Management Initiative have been very active in promoting dialogue between the different sides. These initiatives have, in particular, involved middle-range leaders or different opinion-leaders who have taken part in problem-solving workshops and other attempts to promote dialogue and find a way forward. 5 The problem has been how to get such initiatives to ‘trickle up’ to the leadership; this has even proved difficult when former participants in these meetings found themselves in positions of power. The new leadership that came to power in Abkhazia in 2004, for example, included people such as Leonid Lakerbaia and Stanislav Lakoba who had taken part in these workshops, but while members of the new government reportedly said in private that they would 4 The co-chairs of the Minsk Group, however, decided to disclose the basis of the talks in 2006, the socalled Prague Principles, which appeared to herald a greater degree of openness. 5 See, for example, http://www.cmi.fi/peace-mediationand-dialogue/black-sea-project.html and http://www.c-r.org/our-work/caucasus/schlaining.php.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

N. Caspersen / Third Party Conflict Resolution in the Caucasus

85

consider future co-operation with Georgia, 6 such relations were only hinted at in public and the process did not move forward. Moreover, only a very small circle of people – and often the same people – have been involved in these initiatives and the impact is therefore often limited. Middle-level initiatives need to be linked with the top-level negotiations, or enough time is needed for the results to trickle down to the level of the general population thereby enabling the leaders to reach a difficult compromise, or even pushing them in that direction [22]. Track II approaches are in any case not isolated from the obstacles and constraints facing conflict resolution at other levels; a recent civil society meeting in Moscow organised by the Armenian-Azerbaijani Peacebuilding Forum (an International Alert initiative), for example, collapsed when the Karabakh Armenian delegation refused to participate due to the presence of Karabakh Azeris [23]. The linking of the different levels of conflict resolution has gradually been introduced in the Karabakh peace process. Thus, both the Armenian and the Azerbaijani Presidents have increasingly involved civil society and opposition groups and the Minsk Group co-chairs now consult with the civil society organisations they used to ignore; the co-chairs, for example, meet regularly with the Karabakh Public Council in Baku, which consists of former politicians, historians, and human rights activists. 7 The gradual broadening of the process has, however, yet to encompass the wider public. Making the process more inclusive is, in any case, not risk-free; including more strata of society while arguably making a settlement more sustainable is also likely to slow down the process – as more groups have to be consulted and convinced and there is a danger that ‘windows of opportunity’ may be missed. These are concerns that the mediators need to weigh up against each other. In the case of Abkhazia and South Ossetia, no such broadening of the process has taken place. On the contrary, the only conflict resolution attempts remaining after the Georgian-Russian war are the high-level talks in Geneva focused on security and human rights issues. All other initiatives have seemingly come to a halt; Russia has for example prevented the OSCE and the UN from continuing their activities, citing “new realities” [24]. One could argue that at the present time, the situation is anyway not ripe for a settlement, or for other conflict resolution initiatives. But the current highly restricted process will certainly not help create a ripe moment either. The ripeness of a conflict for resolution is not entirely exogenous to the conflict resolution process; it is affected by the approach used – who is included, what kind of incentives and disincentives are offered – and also by what is on the table: is there an attractive, or at least acceptable, way out? 1.4. Substantive Agreement: Fudged Sovereignty This chapter has so far emphasised the importance of the timing and process of conflict resolution, but this does not mean that the content of the proposed agreement is without importance. As Zartman argues, in order for a ripe moment to emerge, the sides have to perceive that a way out is possible, and the content of that ‘way out’ becomes even more important once serious talks are under way [3]. While the decision to start negotiating in earnest might primarily be based on pull factors – the costs associated

6 7

Author’s interview with Paata Zakareishvili, political analyst (Tbilisi, 31 August 2006). Author’s interview with Eldar Namazov, political analyst (Baku, 16 June 2009).

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

86

N. Caspersen / Third Party Conflict Resolution in the Caucasus

with the status quo, the mounting international pressure – this has to be accompanied by pull factors if a sustainable agreement is to be reached. Not any kind of agreement will do and, when it comes to conflict resolution in the Caucasus, the specific nature of the conflicts affects the kind of agreements that are likely to prove acceptable. In all of the Caucasus conflicts, we are dealing with what we could call extreme cases of separatist conflict. These entities are not waiting for military victory, they have already won – or they have at least won the first battle. Dov Lynch argues that the de facto states are the main reason for the absence of progress in the peace talks [25]; independence is increasingly entrenched and the leaders of these entities have little reason to compromise or, as Charles King asks, “Why be a mayor of a small city if you can be president of a country? [26]. I will, however, argue that these leaders are, in fact, under considerable strain and this can result in the perception of a hurting stalemate and thereby provide an opportunity for conflict resolution, if understood correctly by their ‘parent states’ and the mediating third parties. When it comes to conflict resolution, it is important to remember that we are not dealing with unitary actors, and internal power relations and issues of legitimacy often prove crucial for willingness and ability to compromise. The third parties involved in conflict resolution in the Caucasus appear to appreciate these more complex dynamics when it comes to the recognised states in the region, but less so when it comes to their unrecognised counterparts, which still tend to be seen as one-dimensional anarchical badlands. This is partly due to the refusal of ‘parent state’ to negotiate with them - and occasionally the refusal of de facto states, most notably South Ossetia, to partake in talks - but international mediators are also guilty of missing some of the more complex internal dynamics. For example, although the Karabakh authorities appear as intransigent as ever, Kosovo’s declaration of independence and the war in Georgia have seemingly left them under strain. Their narrative of future recognition has become harder to sustain and the population appears increasingly fearful. 8 The ‘painful’ aspect of a mutually hurting stalemate can have its origins in internal politics and such pressures could provide a window of opportunity for a settlement. However, it appears likely that this window may already have been missed; more than a year has passed since the war in Georgia, instability has not spread, and the sense of urgency - the fear of an impending catastrophe that is often crucial for creating a ripe moment for resolution - has therefore been lost. But this does not mean that internal dynamics cannot again produce a situation that is ripe for resolution. Similarly, in the case of Abkhazia, there are reports of internal disputes over the role of Russia and over where the entity is going [27]. Again, this does not mean that willingness to compromise is forthcoming, but if properly understood and if the right proposal is put on the table then it could provide a necessary catalyst; it might make the leaders look for a ‘way out’. So what would the ‘right proposal’ look like? It is important to recognise that in the Caucasus it is not a question of suddenly finding the ‘right’ formula that no one had thought of before. In fact, for these types of conflict, there is almost a blueprint solution that tends to be rolled out. According to this, the territorial integrity of the parent state is maintained, at least in an interim period, but sovereignty is fudged and the central government has little actual control over the entity. These kinds of solutions will not prove popular with either side, but it is hard to think of alternatives. The Georgian government might previously have hoped for a less messy solution, but if it is ever to get Abkhazia and South Ossetia back, then the agreement has to be very generous 8

Authors’ interviews in Nagorno Karabakh (October-November 2008).

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Caspersen / Third Party Conflict Resolution in the Caucasus

87

indeed; what might have worked before August 2008 is no longer sufficient, even if the entities come to dislike Russia’s influence and therefore start looking for alternatives. A solution along similar lines is envisaged for Nagorno Karabakh and the principles forming the basis of the peace talks have been unchanged for years. They involve the following: the withdrawal of Armenian troops from the districts surrounding Karabakh; the deployment of international peacekeepers to these districts and the return of refugees; interim status for Karabakh and the return of refugees to the entity, and a future vote on Karabakh’s final status [28] [29]. These principles largely follow the above-mentioned blueprint for these types of conflicts, although they do according to some readings - hold out the possibility of eventual independence for Karabakh. But even though the Minsk Group co-chairs already in 2007 declared that the two sides had moved closer and that “few differences remain” [30], their interpretations of the basic principles still differ significantly, most notably when it comes to the sequencing of the steps and the interpretation of the vote on Karabakh’s status: who will be allowed to vote, can the vote lead to independence? [31] [32]. A magic formula for conflict resolution will not suddenly be discovered, but the devil is clearly in the details. International pressure and waving of carrots combined with domestic discontent may persuade the leaders to start looking for alternatives, but the de facto statehood of these entities along with the deep mistrust that exists between the two sides results in a limited range of options. It, moreover, means that international involvement is likely to prove crucial; third party involvement affects how the conflict parties interpret an agreement, if they trust a phased agreement and if they are therefore willing to take the first step, believing that international involvement will provide a guarantee against the other side reneging on the reached agreement. Third parties therefore have a role to play in more than one phase of conflict resolution: external involvement can help create a ripe moment, make a ‘way out’ appear acceptable and finally provide the guarantees and inducements needed to make the peace sustainable.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Conclusion: Non-Traditional Approaches to Conflict Resolution The timing, process and substance of third party conflict resolution all interact. For example, whether or not a situation is ‘ripe for resolution’ depends in part on whether an acceptable ‘way out’ is perceived to exist, but what is considered acceptable also depends on the context, both domestically and internationally. Third party conflict resolution is therefore affected by internal and external constraints, and two factors have, in particular, put obstacles in the way of international efforts in the Caucasus. Both of these suggest the need for a multi-level approach to conflict resolution, or third party mediators at least need to be aware of these complex interplays and try to affect the resulting dynamics. Firstly, there has been the problem of either unbalanced or competing use of third party leverage. In the case of Georgia, Russia has been all too willing to use its leverage and the resulting obstruction of conflict resolution efforts has not been balanced by the involvement of other external actors. In the case of Nagorno Karabakh, the level of external interests may not exactly be balanced but we have nevertheless witnessed the problems that competing third parties can cause for conflict resolution. Both examples would appear to call for a multilevel approach to conflict resolution that also includes the international level. One way to ensure a more effective use of international leverage would be to prioritise regional co-operation.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

88

N. Caspersen / Third Party Conflict Resolution in the Caucasus

Secondly, there has been too much focus on the top leadership, without enough attention to the intra-communal level. Greater understanding of internal dynamics is called for, in particular when it comes to the de facto states. Moving away from viewing these entities as unitary actors would hopefully make mediators, and other involved in conflict resolution, better able to identify possible solutions, as well as the right timing for these solutions and the kind of process that might get us there. Moreover, the leaders of these entities need to be involved in the process; isolation is counterproductive, it reinforces a siege mentality and makes acceptance of a settlement even less likely. This isolation is to some extent self-imposed, most notably in the case of South Ossetia, but this should not necessarily merely be accepted and it is in any case less of a problem in the two other cases. Such engagement may be unpalatable to some, and it is not problem-free, but for these non-traditional security threats, nontraditional approaches to conflict resolution are sometimes needed.

References [1] [2] [3] [4] [5]

[6] [7]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[8] [9] [10] [11] [12] [13]

[14]

[15] [16] [17] [18] [19] [20] [21]

P. Kolstø, The Sustainability and Future of Unrecognized Quasi-States, Journal of Peace Research 43 (2006), 723-740. S. Pegg, International Society and the De Facto State, Ashgate, Aldershot, 1998. I. W. Zartman, “Ripeness: The Hurting Stalemate and Beyond” in P. C. Stern and D. Druckman (eds.), International Conflict Resolution after the Cold War, National Academy Press, Washington DC, 2000. S. N. MacFarlane, “The Role of the UN” in J. Cohen (ed.), A Question of Sovereignty: The GeorgiaAbkhazia Peace Process, Conciliation Resources, London, 1999. I.W. Zartman, “Dynamics and Constraints in Negotiations in Internal Conflicts” in I. W. Zartman (ed.), Elusive Peace: Negotiating an End to Civil War, The Brookings Institution, Washington DC, 1995. M. Kleiboer, Ripeness of Conflict: A Fruitful Notion?, Journal of Peace Research 31 (1994), 109116. International Crisis Group, Nagorno Karabakh: A Plan for Peace, Europe Report N°167, 11 October 2005. L. Yevgrashina, Azerbaijan may use force in Karabakh after Kosovo, Reuters, 4 March 2008. C. Crocker, High Noon in Southern Africa: Making Peace in a Rough Neighborhood, W. W. Norton, New York, 1992. S. Touval, Coercive Mediation on the Road to Dayton, International Negotiation 1 (1996), 547-570. L. Charbonneau, Abkhazia will one day return to Georgia-Saakashvili, Reuters, 25 September 2009. A. Lobjakas, Turkish-Armenian Rapprochement Leaves Many Questions Unanswered, RFE/RL, 18 October 2009. V. Jacoby, “The role of the OSCE: an assessment of international mediation efforts” in L. Broers (ed.), The Limits of Leadership: Elites and Societies in the Nagorny Karabakh Peace Process, Conciliation Resources, London, 2005. G. J. Libaridian, “The elusive ‘right formula’ at the ‘right time’: a historical analysis of the official peace process” in L. Broers (ed.), The Limits of Leadership: Elites and Societies in the Nagorny Karabakh Peace Process, Conciliation Resources, London, 2005. M. Weller, Escaping the Self-determination Trap, Martinus Njihoff, Leiden, 2008. F. Ismailzade, Karabakh talks: Attention Turns to President Aliyev, Eurasia Insight, 23 January 2006. N. Caspersen, Contested Nationalism: Serb Elite Rivalry in Croatia and Bosnia in the 1990s, Berghahn Books, Oxford, 2009. J. Darby and R. MacGinty. “Conclusion: The Management of Peace” in J. Darby and R. MacGinty (eds.), The Management of Peace Processes, Houndmills, MacMillam, 2000. J. P. Lederach, Building Peace: Sustainable Reconciliation in Divided Societies, United States Institute for Peace, Washington DC, 1998. L. Broers (ed.), The Limits of Leadership: Elites and Societies in the Nagorny Karabakh Peace Process, Conciliation Resources, London, 2005. N. Caspersen, Between Puppets and Independent Actors: Kin-state involvement in the conflicts in Bosnia, Croatia and Nagorno Karabakh, Ethnopolitics 7 (2008), 357-372.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

N. Caspersen / Third Party Conflict Resolution in the Caucasus

89

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[22] O. Richmond, Rethinking Conflict Resolution: The Linkage Problematic Between "Track I" and "Track II”, The Journal of Conflict Studies 21 (2001). [23] International Crisis Group, Nagorno Karabakh: Getting to a Breakthrough, Europe Briefing N°55, 7 October 2009. [24] International Crisis Group. Georgia-Russia: Still Insecure and Dangerous, Europe Briefing N°53, 22 June 2009. [25] D. Lynch, Engaging Eurasia’s Separatist States, United States Institute of Peace, Washington DC, 2004. [26] C. King, The Benefits of Ethnic War: Understanding Eurasia’s Unrecognized States, World Politics 53 (2001), 524-552. [27] I. Khashig, Abkhaz Opposition Fear Growing Russian Influence, Caucasus Reporting Service, 7 August 2009. [28] T. De Waal, Thomas. The Karabakh trap: Dangers and dilemmas of the Nagorny Karabakh conflict, Conciliation Resources, London, 2009. [29] S. Mamedi, N. Melkumian and K. Ohanian, Hopes and Fears After Karabakh Declaration, Caucasus Reporting Service, 6 November 2008. [30] Press Release, OSCE Minsk Group Co-Chairs issue statement on Nagorno-Karabakh, 29 November 2007. Available at: http://www.osce.org/item/28515.html. [31] H. Khachatrian, Armenian-Azerbaijani Disagreement on Madrid Principles Stalls Karabakh Settlement Process, CACI Analyst, 14 October 2009. [32] E. Aslanov, Advice for Armenia On Resolving The Karabakh Dispute, RFE/RL, 9 June 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-90

90

The Role of Intergovernmental Institutions in Regional Cooperation Panagiota MANOLI1 Lecturer, Department of Mediterranean Studies, University of the Aegean and Senior Research Fellow, International Centre for Black Sea Studies, Greece

Abstract. External players either in terms of third countries or of international organisations significantly affect dynamics in the South Caucasus. This paper considers the possible impact of international organisations on regional processes, and maps the obstacles and breakthroughs in regional cooperation in the South Caucasus. It argues that regionalism might be driven by international institutions but its success rests on local countries’ initiatives and support. Keywords. International institutions, South Caucasus, regionalism, European neighbourhood, EU, Black Sea.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction The current complex security and geopolitical situation in the South Caucasus makes it an interesting case study for the potential of regional cooperation and the role of intergovernmental organizations 2 Actual economic and political cooperation, not to mention integration, among the three states - Armenia, Azerbaijan and Georgia - is currently extremely limited, if not absent. The South Caucasus has been accepted as an international region and a security complex3 by the international community. The Caucasian context reveals high levels of interdependence in regional conflicts, migration, economic issues, energy and transport routes, as well as a shared political past. However, and beyond this interdependence, one might question the ‘region-ness’ of the South Caucasus, given the absence of a common political vision around which national policies are adjusted. The three Caucasus states are also far from acting as one voice or as a regional block in international fora.

1

Lecturer at Department of Mediterranean Studies, University of the Aegean and Senior Research Fellow at International Centre for Black Sea Studies, Greece. E-mail: [email protected]. 2 In this paper we use the terms intergovernmental and international organisations interchangeably in order to refer to international governmental institutions. Non-governmental entities are not examined. 3 A security complex is defined as a set of states whose major security perceptions and concerns are so interlinked that their national security problems cannot reasonably be analyzed or resolved apart from one another. The formative dynamics and structure of a security complex are generated by the states within that complex – by their security perceptions of, and interactions with, each other see B. Buzan, O. Weaver, and J. Wilde, Security: A New Framework for Analysis, Lynne- Rienner Publishers, Boulder, 1998.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

91

However, most analysts agree that even if the South Caucasus does not reflect a cohesive regional group, cause for regional cooperation exists [1]. Some even argue that this cannot involve exclusively the three states - Armenia, Azerbaijan and Georgia - but should instead define itself in a broader format, such as the wider Black Sea regional cooperation. The latter emerges as an alternative to rigidity, by introducing flexibility and allowing cross-level inter-relations involving the three Caucasian states in cooperative arrangements [1]. Entering the debate of whether the South Caucasus constitutes a region is an interesting endeavour in terms of theory, advancing as well as a policy-relevant process. However, in this study, we look into the role of intergovernmental organisations in regional cooperation in the South Caucasus rather than asking whether the South Caucasus constitutes a region per se. We, furthermore, discuss regional cooperation through the lens of policy rather than identity. Another necessary conceptual clarification is the use of the terms “integration” and “cooperation.” Though both terms are sometimes used interchangeably, in this paper we specifically refer to cooperation whereby autonomous national stances are brought together for the achievement of a common goal on a trilateral or multilateral platform. Cooperation does not presuppose the transfer of power from the state, while integration institutionally implies supranational institution-building. Of course, cooperation may eventually lead to integration; however, the former is a necessary but not sufficient condition for the latter. With reference to the South Caucasus, it is untimely to employ the term ‘integration.’ Regionalism in this part of Europe has not advanced and its record of achievements is poor, as the Caucasus pendulum during the 1990s and today has been in favour of conflict and disintegration rather than cooperation. In the early 1990s, a wave of post-Cold War ‘new regionalism’ was witnessed, raising expectations for regional solutions to common problems and generating institutions that advocate the region-ness of the South Caucasus. In parallel, the South Caucasus has begun to be seen as a security region of protracted conflicts and organised crime. Labelling of the South Caucasus as the ‘near abroad’ of Russia and the ‘new neighbourhood’ of the European Union indicates precisely the geopolitical dynamics within which regionalism is shaped. International organisations such as the United Nations (and its agencies), the Organisation for Security and Cooperation in Europe (OSCE), the Council of Europe (CoE), as well as the European Union (EU) in particular have supported regional strategies instigating cooperation in this troubled area. Other vectors of cooperation have been locally initiated regional organisations and fora such as the Black Sea Economic Cooperation (BSEC) and the specialised sectoral programmes of international agents such as the European Investment Bank (EIB) and the World Bank. Nevertheless, regional integration remains a goal rather than a reality in the South Caucasus. One of the key features of regional cooperation in South Caucasus is its intergovernmental character. There has been a strictly intergovernmental mode of governance put forward, which nevertheless seems unable to address the multidimensional aspects of the challenges ahead. It is therefore more appropriate to refer to formal, government-driven “regionalism” rather than informal, market or nonstate driven “regionalization” and integration in the South Caucasus.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

92

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1. The Regional Context and the Quest for Regional Cooperation The geographical configuration underlies the significance of the South Caucasus as a borderland and bridge between civilizations, marking a meeting point of the Eurasian steppe to the north and the Middle Eastern highlands, comprising the Anatolian and Iranian plateaux to the South.4 The region lies between two seas; the Black Sea on the west and the Caspian Sea on the east, making the Caucasus open to traffic in transit on the routes of trade and people. In many respects the three South Caucasus states, as weak, small and conflictdriven, are similar. Their combined population is 16.5 million, and they cover a territory of 186,1 1000 square kilometers located at the junction of three much larger and powerful states; Turkey, Russia and Iran, while also neighbouring the European Union. In terms of culture, language and religion, the Caucasus is exceptionally diverse with a complexity of ethnic and linguistic backgrounds, with peoples belonging to the Caucasian, the Indo-European and Turkic language families, as well as significant communities of Jews, Greeks, Russian and others. The political history of the South Caucasus has been turbulent. Ethnic diversity, big power politics and military conflict have combined to keep the region fragmented. During the last two decades, politics in Armenia, Azerbaijan and Georgia have been dominated by nation- and state-building and a long transition period to parliamentary democracy and a free market economy. None of the three states, however, twenty years since their independence seem to have succeeded in stabilizing their states and modernizing their societies. Regionalism in the South Caucasus context takes place against a background of economic underdevelopment, crucial security dilemmas and interstate conflicts, as epitomized in situations concerning the status of breakaway state entities; Abkhazia and South Ossetia from Georgia, and Nagorno Karabakh from Azerbaijan. To date, the conflicts remain unresolved, with Armenia and Azerbaijan technically still in a state of war while Russia and Georgia were brought into conflict in the summer of 2008 over Abkhazia and South Ossetia. Furthermore, the return of refugees and internally displaced persons (IDPs) is of grave concern. Thus, the choices of local and external actors to foster regionalism have been constrained by the security environment inherited from the collapse of the Soviet Union, namely the ethno-political conflicts and the action of external powers by proxy, particularly Russia, Iran and Turkey. Though the South Caucasus has achieved some stability, it still remains in economic constraint and political crises, with high levels of poverty, collapsed health care and education systems, and still low living standards. All three states fall within the medium human development cluster of the Human Development Index (HDI) with Armenia today ranking 84th, Azerbaijan 86th and Georgia 89th out of 182 countries. None of these weak or “failing” states have established a reliable system of government based on the rule of law, as corruption in all spheres of society has become rampant and judicial reform is still in question. Civil society has grown, but remains heavily dependent on foreign support and funding. Though the South Caucasus marked high growth rates during a five year period (real GDP growth was as high as 23,4% for Azerbaijan, 13,8% for Armenia and 12,4% for Georgia in 2007) prior to the global financial and economic crisis of 2008, local economies are still lagging behind the rest of Europe. Economic reforms have been 4 For an account on the S. Caucasus countries of the 1990s see E. Herzig, The New Caucasus Armenia, Azerbaijan and Georgia, The Royal Institute of International Affairs, London, 1999.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

93

undertaken but have so far have failed to create a truly investment-friendly environment, as foreign capital concentrates solely on the oil and gas sector. In the political realm, all three states, despite democratic progress and membership in the Council of Europe and association with the European Union, fail to meet western standards of democracy. Authoritarian rule and political violence is still present, while all have a recent history of insurrections or attempts to assassinate political leaders. These domestic and transnational problems (among them organised crime) have been exacerbated by geopolitical rivalries among regional and extra-regional powers, which have taken advantage of the Caucasian conflicts to secure their own influence over the regional states, especially over energy resources and their transport [2]. Given this regional context, it comes as no surprise that cooperation among the three Caucasus states is limited. Economic transactions are severely interrupted, with the Armenian-Azeri borders closed, while access to other two major bordering markets, that of Turkey and Russia, is also problematic (following the Georgian-Russian war of 2008 and due to the closed Turkish-Armenian border). Intra-regional trade flows are at low levels given the potential of the countries and they primarily reflect exports of mineral fuels (oil and gas) from Azerbaijan. In terms of trade, Georgia ranks as the ninth partner of Armenia and Azerbaijan, representing only 2.4% of the foreign trade of Armenia (89,3 million Euro) and 1.4% of the foreign trade of Azerbaijan (315,7 million Euro). As for Georgia’s regional trade partners, Azerbaijan ranks sixth representing 5.3% (347.8 million Euro) and Armenia ranks 13th representing 1.4% (91.8 million Euro) of Georgia’s foreign trade.5 Closer economic ties are also affected by membership of the World Trade Organisation. Georgia and Armenia have been members since 2000 and 2003 respectively. Azerbaijan applied for membership in 1997, and the process is ongoing. It is interesting here to refer to a common theme emerging from specialised studies conducted by the World Bank early in 20006, that closed borders, blockades, and wardamaged infrastructure provide only a partial explanation for the dramatic drop in exports of the three countries. Even in areas where no serious political obstacles to commerce exist, there are institutional, bureaucratic and structural barriers to trade that will need to be lifted before trade can expand and these countries can reap any substantial economic benefits from a re-opening of borders: “In the long run a peace settlement will only generate widespread and sustainable benefits, if the institutional and physical milieu is sufficiently supportive. The realization of these potential benefits appears highly unlikely, at present, as the current institutional and physical milieu is anything but supportive and offers few incentives for new development” [3]. The three Caucasus states, despite rhetoric, have sought regional cooperation primarily as a foreign policy tool and less as an economic development tool. It has nevertheless not been a top priority given troubled relations with their immediate 5 According to European Commission trade statistics, since 2004, the EU has become the main trade partner of each country (in 2007 trade with the EU represented 41% of overall trade for Armenia, 28,5% for Azerbaijan and 32% for Georgia). These countries share of overall EU trade remains very low, however (less than 0.5% altogether). Available at: http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/ regions/south-caucasus/. 6 The studies are entitled Changing Trade Patterns after Conflict Resolution in South Caucasus, Trade Facilitation in the Caucasus, Armenia and Azerbaijan: Post-Conflict Study – Road Transport, Post Conflict Study of Railways in Armenia, Azerbaijan, Georgia and Turkey, Regional Study on Telecommunications in the Caucasus, and Regional Study on Community-Based Tourism in the Caucasus. All six studies, along with summaries and terms of reference are available on the World Bank site under “South Caucasus Regional Cooperation.”

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

94

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

neighbours. In the early 1990s, the South Caucasus states joined regional initiatives as a means of consolidating statehood and securing international recognition of their borders (primarily by their large neighbours, i.e. Russia) as well as a means of mending disrupted channels of communication with neighbouring political elites. Increasingly however, membership in regional cooperation initiatives was used either as a manifestation of foreign policy Europeanization and ‘good neighbourly’ relations and/or as a coalition formation (i.e. in the case of GUAM). Adhering to regional cooperation has, however, not been without preconditions. Especially Azerbaijan has repeatedly stressed that consensus to regional projects would only be granted once territorial integrity and respect of its sovereignty is pronounced by its immediate neighbours, which means in practical terms the resolution of the Nagorno–Karabakh dispute. Georgia has been moving closer to Azerbaijan after the 2008 recognition of Abkhazia’s and South Ossetia’s independence by Russia. South Caucasus’ restricted, trilateral cooperation was, however, never a priority of local elites, nor has it been pursued by them systematically. Although bilateral cooperation has been underway in the South Caucasus, specifically Armenia’s cooperation with Georgia in economy issues and Azerbaijan with Georgia in both economic and security issues, there is no reciprocity between Armenia and Azerbaijan. In 2005, for example, Azerbaijan halted rail shipments of oil to Georgia in light of the fact that some of the oil was being shipped on to Armenia. In energy trade, Azerbaijan has rejected Armenian suggestions of energy swaps (electricity from Armenia – where it is in surplus for much of the year – to the electricity-starved Naxjivan exclave in return for fuel supplies from Azerbaijan to Armenia), stating flatly that official economic cooperation was not possible in view of the failure to resolve the Karabakh conflict [4]. The South Caucasus, has, therefore, been devoid of trilateral cooperation. Membership in regional organisations shows also a degree of diversity. The only regionally based initiative in which all three states have been founding members is the Black Sea Economic Cooperation. The organisation for Democracy and Economic Development GUAM includes only Georgia and Azerbaijan, while the latter is the only South Caucasus state that participates in the Economic Cooperation Organisation. Regional leaders recognising the complementarities and interdependence of issues and interests in the Caspian, Caucasus, Central Asia and Southeast Europe area have extended cooperation geographically to the wider Black Sea region and along the axis of Eastern Europe to Central Asian. There is hope that Black Sea region-ness may be perceived by local elites. Thus, today, regional leaders indicate a preference to be considered as part of a broader, more stable entity, and closer to the EU and the Black Sea regional complex in which several EU states (and candidates) are members, rather than limiting interaction within a more troubled and Russian-dominated South Caucasus regional complex. By taking a varying regional approach, external actors have also tried to activate ties not just among the three Caucasus states but also with those that range across a multi-dimensional wider region encompassing also Russia, Turkey and western Black Sea states. At the same time, the promotion of regional cooperation has been extensively used by the EU in particular as a means of addressing conflict. In fact, some argue that a multilateral security system complemented by the engagement of transnational institutions such as the Euro-Atlantic Partnership Council or the Black Sea Economic Cooperation Organisation, could enhance common perceptions of security and assure the existence of common frameworks of peace enforcement [5]. This is not, however, without problems. The expansion of Euro-

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

95

Atlantic structures into the former Soviet space has sparked a great deal of frustration and animosity in Moscow, where this process was viewed as designed to offset Russian influence instead of engaging it in cooperative frameworks. Today, the states of the South Caucasus, despite similarities in their level of development and the challenges they face, also follow distinct paths and stand at different points in their transition processes. Azerbaijan, sticking to an authoritarian type of rule, has benefited from energy prices attracting foreign investments, but it runs the risks of an economy exclusively dependent on energy. Armenia, not far behind on the authoritarian political scale, suffers from geographical isolation, closed borders and depopulation, its economy relying heavily on Diaspora remittances. As for Georgia, the 2003 “Rose Revolution” and pro-democratization efforts improved governance and economic prospects but relations with Russia have escalated into armed conflict jeopardizing both economic and political reforms. The limited and fragile progress in Caucasus countries relies on the need for a stable regional environment and could be reinforced by political reforms and engagement in regional cooperation.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2. International Organisations as Agents of Change and their Limitations Hereafter, we look into the regional, not country-specific, initiatives of international organizations such as the OSCE, the Council of Europe, NATO and the European Union. We do not assess the progress or impact of conflict resolution efforts undertaken within the framework of international organisations, such as the OSCE Minsk Group, recognizing, however, that most of the expectations from the local political elites vis-à-vis the role of the international organisations relates to their role on conflict mediation and resolution. The reconfiguration of regional cooperation in South Caucasus has been driven by external anchors, either due to a lack of political commitment by local states or due to lack of resources and capacity. The role of international organisations including the UN has been important in this respect along with the undisputed influence of the European Union which has been the centre of gravity for political and economic dynamics throughout Europe and its periphery. International organisations (and regional ones alike) have also been used, or considered to be used, by extra regional state powers to drive cooperation in South Caucasus. This has been the case for the US, which has employed not only NATO programmes but has also been encouraging GUAM, the Black Sea Forum and other initiatives. One must, of course, not exaggerate the potential of international organizations, as despite their impact they cannot replace local drivers and local interests for cooperation. Over the past decade, the European Union has been singled out as the most active actor in forging regionalism in the European neighbourhood. 7 In its immediate neigbourhood where accession prospects are still open, and also in the South Caucasus and the Mediterranean, which fall beyond the enlargement orbit - at least in the immediate future - it has pursued stabilization through regionality [6]. Such examples are the Euro-Mediterranean dialogue and the Stability Pact in Southeast Europe. For the EU, cooperation within a process of increasing regional integration is a means to 7 The EU is of course only partly an intergovernmental organisation, as it is primarily a supranational organisation.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

96

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

address conflicting scenarios as existing within the framework of the European Neighbourhood Policy (ENP), where it seeks to stabilize the South Caucasus through economic integration and institutional cooperation. Nevertheless, regional cooperation was not pursued systematically in the South Caucasus as in Southeast Europe, nor had it received substantial financing until the launching of the ENP. The reluctance of the EU to engage in this region was manifested by the exclusion of the South Caucasus in the first Communication of the European Commission on the Wider EuropeNeighbourhood (2003) [7]. Nevertheless, the EU had devised already in the early 1990s multilateral programmes covering the fields of transport, energy and environment bringing the three neighbours together adopting thus a sectoral approach in advancing multilateralism. The core of this sectoral regionalism approach of the European Union continues to be pursued today through the EU’s policy. Despite the launching of new more holistic initiatives such as the Black Sea Synergy and the Eastern Partnership, the core of the European policy towards the South Caucasus remains on a sectorial basis manifested among others through the promotion of ‘Black Sea Sectoral Partnerships’ and multilateral thematic dimensions. The geopolitical configuration of the region hinders the development of a comprehensive regional format like that of the Stability Pact in Southeast Europe or the Euro-Mediterranean Dialogue. A regional political umbrella for South Caucasus would not only require the resolution of the protracted conflicts but it would furthermore necessitate a strategic common understanding of South Caucasus dynamics between the EU and Russia. All three states have signed a Partnership and Cooperation Agreement (PCA), which entered into force in July 1999, and the EU established a regional delegation of the European Commission in Tbilisi, dealing with all relevant regional issues. In 2008, the European Commission established two permanent delegations in Yerevan and Baku, also in a coordinated way. The post of a Special Representative for the South Caucasus was created in 2003, envisaging a coordinated implementation of EU policy objectives in the region. Moreover, the European Parliament established, in the framework of the PCA, a Parliamentary Cooperation Committee dealing with the three countries simultaneously. Today, the EU’s policies are formulated within the ENP framework which, though bilateral, also has a significant multilateral track that is being steadily strengthened. Armenia, Azerbaijan and Georgia each have an Action Plan under the ENP designed to help, inter alia, their closer trade and economic integration with the EU, in particular through gradual regulatory alignment. The bilateral ENP Action Plans were adopted simultaneously in November of 2006. The reasoning underlying this similitude approach shows the concern in Brussels to avoid discrimination as much as it tried to underline the advantages of the regional cooperation format, where confidence-building measures could develop and thus facilitate conflict resolution processes [1]. The implementation of the action plans should also enable the countries to progressively become ready to negotiate, and also implement and sustain a deep and comprehensive free trade area with the EU. However, so far only limited progress in fulfilling their respective action plans has been marked.8 Current discussions on EU regional policies regarding the South Caucasus evolve around the implementation of the Black Sea Synergy – BSS (launched in February 2008) and the Eastern Partnership – EaP (launched in May 2009). Though both aim at fostering regional cooperation on the outskirts of the EU, they are driven by different motivations, vary in their approach and have generated diverse reactions [8]. The Black 8

For more information, see ENP progress reports (April 2008 and April 2009).

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

97

Sea Synergy (politically sponsored by Germany) marked the first attempt to strengthen the multilateral Eastern track of the ENP, putting emphasis on intra-regional cooperation (among non-EU partners) including Turkey and Russia. Though Russia did not adhere to it, and despite some confusion on the actual goals and contents of the policy, all local elites favoured the launching of the long awaited Synergy as it put the Black Sea as a region in the EU’s policy map for the first time. The launching of the EaP (politically sponsored by Poland and Sweden) was not met with the same enthusiasm by all local countries (such as Russia and Turkey, which are beyond the scope of the EaP) as it added to the policy confusion of the EU’s ENP deriving policies while it actually brought back an emphasis on bilateral rather than regional frames of policy interaction between the EU and its eastern neighbours. Nevertheless, the South Caucasus political elites wholeheartedly welcomed the EaP, making some enthusiastic declarations such as the one by Georgian President Mikhail Saakashvili that “This is a step closer to a family…there is no way back”[9]. The EaP among others encourages the partners to establish deep and comprehensive free trade areas among themselves and cooperate in four thematic areas, namely democracy, good governance and stability; economic integration and convergence with EU sectoral policies; energy security; and contacts between people. Both initiatives are newly born and their value has still to be proved. So far, BSS indicates a lack of implementation but the EaP could be equally halted given the problems of the partners. The almost synchronous initiation of the BSS and the EaP also indicates the diverse lenses through which EU states view regional cooperation in the eastern neighbourhood. The dilemma of advancing a viable holistic regional approach, while differentiating enough to allow partners to introduce their own pace of reform, has made the EU subject to criticism. Underlying the obvious differences and the obstacles to regional cooperation (most of all the protracted conflicts), leaders in the South Caucasus have pointed to the inefficiencies of linking developments in one country to the pace of reforms in the other, since it does not respond to their short-term needs [10]. With regard to the role of other international actors, the Council of Europe plays an important role in securing the continuation of political and legal reforms in the South Caucasus [11], devising also regional programmes to foster cross-border cooperation and the sharing of expertise, as well as engaging sub-state actors and civil society. Its regional programmes provide direct assistance to member states in developing governance and management capacity in the sector of cultural and natural heritage. Targeted pilot projects support regional efforts for sustainable community development, in particular in areas where cultural and heritage issues are of importance to conflict resolution, confidence-building and development. In the field of nature protection, regional co-operation involves not only managers of areas of special conservation interest, but also encourages the building of physical links between nature-protected areas. Within this framework the CoE launched the “Kiev Initiative Regional Programme: Black Sea and South Caucasus” for democratic development through culture in Armenia, Azerbaijan, Georgia, Moldova and Ukraine. The Kiev Initiative Regional Programme[12] is based on the experiences of already implemented or ongoing regional cooperation programmes of the Council of Europe in the countries concerned, in particular the STAGE (Support for Transition in the Arts and Culture in Greater Europe) Project, the “Regional Programme for Cultural and Natural Heritage” for the South Caucasus region and the “Creating Cultural Capital” project. It was agreed at the 5th Ministerial Colloquy of the STAGE project which took place in Kiev in September

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

98

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

2005, and officially launched by the Ministers of the five participating countries in December 2006 in Bucharest. The programme focuses on five themes that both unite and characterise the participating countries – heritage management, film, the shaping of cultural policy, literature, wine culture and tourism exchange. Through a series of projects designed to encourage cross-border collaboration, the Kiev Initiative enables the sharing of expertise and the development of competence and skills in both towns and the countryside. Each project promotes co-operation between national and local government and the public and private sector, while at the same time offering opportunities to draw upon the experience and practical knowledge of experts from other European countries. Public involvement and benefit is a key component, wherever this is possible. Another initiative launched by the Council of Europe Congress of Local and Regional Authorities in 2006 was the Black Sea Euroregion [13], a platform for cooperation complementary to existing national intergovernmental co-operation initiatives, acting in the remittance of regional and municipal competencies. The Euroregion constitutes a non-profit association designed to facilitate inter-regional and inter-municipal co-operation in the Black Sea basin bringing to the table local authorities from the Caucasus and the Black Sea area, namely the City of Idjevan (Armenia), the Municipality of Bourgas, the Municipality of Nessebar, the Municipality of Shabla and the Municipality of Varna (Bulgaria), the Autonomous Republic of Adjara (Georgia), the Region of Cahul (Moldova), the County of Braila, the County of Constanta, the County of Galati, the County of Tulcea, the Municipality of Braila, the Municipality of Constanta, and the Municipality of Mangalia (Romania). Although the issue of regional cooperation in the South Caucasus has been occasionally highlighted in the NATO Euro-Atlantic Partnership Council (EAPC) framework, NATO itself has kept cooperation at a purely technical level. However, the fact that the three countries sit together in the EAPC and have developed Individual Partnership Action Plans is a positive development in its own right. In July 1999, the Ad Hoc Working Group on Prospects for Practical Regional Cooperation in the Caucasus was established within the framework of the EAPC identifying four areas as being most suitable for further developing practical regional cooperation: defense and economic issues; civil emergency planning; security related science and environmental cooperation; and information and public relations. Unfortunately, this trilateral cooperation under NATO auspices has proved not to be a tremendous success [14]. Cooperation with the South Caucasus countries reflects the decision taken at the Istanbul Summit (June 2004) to forge a partnership with the countries in the region, as well as with Central Asia, a priority of the Alliance. At the Istanbul Summit, the Alliance decided to appoint a Special Representative to the Caucasus and Central Asia. Yet the persistence of unresolved conflicts does not make regional cooperation within the NATO’s framework straightforward. Thus, NATO’s Cooperative Best Effort exercises scheduled to take place in Azerbaijan in September 2004 were cancelled following a refusal to issue visas to a few Armenian military officers invited to participate in the large-scale manoeuvres [15]. Following the NATO Bucharest Summit in April 2008, there has been particular emphasis on engaging with the three South Caucasus partners multilaterally through scientific cooperation. One example of how the Science for Peace and Security (SPS) Programme contributes to regional cooperation is the Virtual Silk Highway, under which NATO has supported the establishment of international internet connectivity and

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

99

improvement of the quality of telecommunications in South Caucasus and Central Asia. Other examples of SPS programmes are [16]: • The “South Caucasus River Monitoring” project, engaging scientists from Armenia, Azerbaijan and Georgia. Through this project, NATO, in cooperation with the Organisation for Security and Co-operation in Europe (OSCE), helps these countries develop their infrastructure on transboundary water quality and quantity monitoring. • “Multi-disciplinary Analysis of the Caspian Sea Ecosystem,” aimed at improving analysis of the Caspian Sea ecosystem through pooling data and expertise on a regional basis. • The “Study of Antimicrobial and Hypoallergenic Products of Lactic Acid Bacteria” brings together scientists in Armenia, Azerbaijan, Bulgaria, Egypt, France and the Russian Federation to study the antimicrobial and hypoallergenic products of lactic acid bacteria in order to protect the food supply. However, there are those who argue that there are significant limitations to the potential security role of the Alliance in the South Caucasus after 2008: “if there was a window of opportunity for NATO to establish an entrenched presence in the South Caucasus, it opened in 2004 and closed in early 2008”[17]. As a regional arrangement under Chapter VIII of the United Nations Charter, the Organisation for Security and Cooperation in Europe (OSCE) serves as a forum for cooperation with regional and sub-regional organisations and initiatives in the OSCE area on the basis of its comprehensive and cooperative approach to regional security. This role of the OSCE was offered by participating states in the 1999 Charter for European Security, and then reiterated in the 2003 Maastricht Strategy. The 1999 Charter stated that “sub-regional co-operation has become an important element in enhancing security across the OSCE area.” Though the OSCE attempted to act as an ‘umbrella’ organisation for subregional groupings within its space, this role did not materialise. OSCE has an extensive role in the South Caucasus and regional working groups cover economic issues, environmental issues and good governance, in particular anticorruption, anti-money laundering and combating terrorist financing, working along with other IOs. One of the best examples of how synergies with partner organisations are developed is the Environment and Security Initiative (ENVSEC), a partnership between the OSCE, the United Nations Environment Programme (UNEP), the United Nations Development Programme (UNDP), the United Nations Economic Commission for Europe (UNECE), and the Regional Environment Centre (REC), with NATO as an associated partner. The ENVSEC initiative provides a framework for co-operation on environmental issues across borders and promotes peace and stability through environmental cooperation and sustainable development [18]. This initiative adopted a regional approach in the belief that many potential sources of environmental conflicts can only be dealt with in their regional context, and that transborder co-operation on such issues can contribute to peace-building, particularly around scarce common goods. For example, in post-conflict settings, joint efforts to clean up contaminated sites and restore natural spaces may revitalize both the environment and the trust among peoples and nations. Two pilot regions, Central Asia and Southeastern Europe, were covered in the first phase, and two more, the South Caucasus and Eastern Europe, were added in 2004. The role and prestige of international organisations in the South Caucasus has been undermined due to the lack of progress with regard to the numerous attempts to resolve

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

100

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

the protracted conflicts, including the role of the UN in Abkhazia and the OSCE Minsk mediator group. Despite their mediation in all South Caucasus conflicts as well as on humanitarian relief efforts, their approach does not have a truly regional scope. IOs nevertheless, remain important drivers of cooperation and providers of resources and expertise on cooperation. While the policy of regional cooperation has been actually generated externally, there have not been any consistent internal attempts on the part of Armenia, Azerbaijan and Georgia to cooperate trilaterally or in their wider neighbourhood as we indicate in the following section.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3. Sub-regional Organisations Searching for a Perspective Under the term sub-regional organisations, we include schemes of cooperation (organisations, fora and initiatives) which are confined to a smaller geographical area than that of an international region, which in our case is Europe. These are organisations that focus on specific subregions such as the Caucasus or the Black Sea. The South Caucasus states are members of several locally initiated cooperative initiatives and organisations whose stated aim is promoting multilateral solutions to security and economic challenges. These groupings are receiving increased scrutiny as they are considered to be an underused means of resolving conflict situations and addressing regional development challenges. Some of the available instruments for enhancing (sub)regional cooperation are the Black Sea Economic Cooperation (BSEC), GUAM, the Black Sea Forum and the Collective Security Treaty Organisation (CSTO). Though of broader membership, they include in their geographical scope the South Caucasus. Proposals on subregional formats are ongoing, with the most recent one the Caucasus Stability and Cooperation Pact, a Turkish-led initiative (supported by Russia) following the Russian military intervention in Georgia in 2008 and reviving the idea of a Stability Pact for the Caucasus. None of the above mentioned subregional fora are properly an example of subregional cooperation in the South Caucasus because they are not limited to the Caucasus strictly while the only fully-fledged organisation engaging all three Caucasus states is the BSEC. One of the first regional fora established in the aftermath of the collapse of the USSR, is the Collective Security Treaty Organisation which is a political and military alliance comprised of seven countries, all of which are also members of the Commonwealth of Independent States (CIS): Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. The Collective Security Treaty (CST) of 15 May 1992 provides the foundation of the CSTO, launched on 14 May 2002 as a regional security organisation [19]. Azerbaijan signed the Treaty on 24 September 1993 and Georgia joined the Treaty on 9 December 1993 but both withdrew in 1999.9 Its stated focus is preserving territorial integrity and seeking closer cooperation with other multilateral institutions, such as the United Nations, the Organisation for Security and Cooperation in Europe, the Shanghai Cooperation Organisation (SCO), and NATO. The May 2002 decision to create the CSTO was based on the reactivation of long standing plans to create a collective CIS rapid reaction force needed to support 9 Since the war between Russia and Georgia in August 2008, Georgia has withdrawn from the CIS as of 17 August 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

101

“collective security.” The plan also called for a common air defense architecture and a coordination in foreign, security and defense policies. However, diverse views among its members on the actual role of the CSTO, be that of a traditional military alliance or a tool to deal with asymmetrical threats, have held the organisation back. Another sub-regional forum, the Eurasian Economic Community, comprises a similar grouping of states but focuses on economic issues, including the creation of a common market, border security standards, a customs union, standardized currency exchange and joint programs on social and economic development. Both of these organisations are strongly supported by Russia and capitalize on residual political, economic, and bureaucratic linkages among former Soviet republics. Russia’s clear pre-eminence within the organisation limits its legitimacy. Cooperation between Georgia and Azerbaijan takes also place within the framework of the GUAM Organisation for Democracy and Economic Development (the other members are Ukraine and Moldova) which was established on 10 October 1997 in Strasbourg. 10 GUAM countries have attempted to form a common front on specific issues as in energy transport and within the framework of the CIS (e.g. Ukraine, Georgia and Moldova lodged complaints against restriction imposed by Russia against some of their national products in the CIS Foreign Ministers Council on 21 April 2005), and on another occasion the four GUAM countries made a proposal to discuss the protracted conflicts of Transnistria, Abkhazia, South Ossetia and Nagorno-Karabakh. Critical of the CIS peacekeeping mechanism’s efficiency, they have placed on their agenda the fight against international terrorism and extremism separately from the CIS. On the economic level, they have committed themselves to establishing a Free Trade Area (Yalta Summit, July 2003), to reduce their dependence on Russian energy and the pipeline infrastructure, and to look after the security of transport corridors and pipelines. This pledge was encapsulated in the Memorandum of Understanding on the Trade and Transportation Facilitation Project and the Joint Statement of GUAM and the US (2003). However, in the years following the signing of its Charter (2001) the group has generally been seen as having stagnated.11 A Romanian initiative, the Black Sea Forum for Partnership and Dialogue (BSF) launched in Bucharest in June 2006, is another forum in which all three South Caucasus states participate. The Forum is not meant to create new regional institutions, but rather to become a regular consultative process among countries of the wider Black Sea region and between this group of countries and international organisations such as the European Union. It was thus meant to hold annual presidential-level summits - the venues rotating among participant countries - and thematic or sectoral-cooperation meetings during those annual intervals. Despite initial enthusiasm for the potential of the BSF, it did not actually take off as it met the reluctance of several major local elites from Turkey, Greece and especially Russia. Russia’s Ministry of Foreign Affairs publicly deprecated the proposed Forum as redundant, duplicative of existing cooperation frameworks, and apt to siphon off limited resources from those frameworks [20]. Moscow, Athens and Ankara, for 10 In 1999, the organisation was renamed GUUAM due to the membership of Uzbekistan. A summit in Yalta on 6-7 June 2001, was accompanied by the signing of GUUAM's charter which formalized the organisation. However in 2002, Uzbekistan announced that it planned to withdraw from the organisation, and following this announcement abstained from GUUAM summits and meetings. On 24 May 2005, shortly after the Andijan massacre, Uzbekistan finally gave an official notice of withdrawal from the organisation to the Moldovan presidency, thus changing the group's name back to GUAM. 11 Among other things, the 2004 meeting in Yalta was only attended by two of the five leaders.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

102

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

different reasons each, maintained that existing cooperation frameworks such as the Black Sea Economic Cooperation (BSEC) are adequate in themselves as well as the only possible basis for deepening regional cooperation. The Organisation of the Black Sea Economic Cooperation (BSEC) is actually the only sub-regional organisation of a comprehensive agenda in which all three South Caucasus states are founding members. It has a capacity for cooperation among member states in areas such as combat against cross-border organised crime, illegal trafficking in humans and terrorism, as well as joint action in response to emergencies caused by natural disasters or industrial accidents. It is an organisation recognized by the EU and the United States which participate in it as observers. Established in June 1992 in Istanbul, BSEC constituted one of the first international frames within which the statehood and independence of the South Caucasus states was internationally, and most importantly by their immediate neighbours and Russia, recognised. Its establishment spurred hopes for the emergence of a new economic and trade zone around the wider Black Sea region through the creation of a free trade area, while the new initiative was welcomed as a new means of addressing security concerns through economic cooperation thus instigating a collaborative approach in interstate affairs. As, however, during the 1990s the economic agenda of the Organisation faded away and collapsed, the Organisation branched out to other fields of “soft” security such as combating organised crime and emergency situations. Though the three Caucasus states have signed the agreements reached so far within the BSEC framework, this has always been with reservations and objections especially with regard to Azerbaijan and Armenia.12 Despite the potential of the BSEC, the latter has failed to generate cooperation beyond structures and vested local interests in the regional process. The performance of the BSEC has, of course, been critically influenced by broader geopolitical dynamics, the most important of which is EU-Russian relations; however, the impact that the South Caucasus security concerns exert on the functioning of the Organisation might even rank as the first cause of its slow progress. Despite efforts to immunize the organisation against local security crises such as the Georgian-Russian war of August 2008,13 the impact of protracted conflicts is evident. The regional agenda has often been swayed, and it has been fragmented due to the lack of consensus among the three S. Caucasus states, also indicating diverse perceptions of regional cooperation especially with regard to how/whether economic cooperation could proceed prior to resolving the security issues. BSEC does not rank as a priority on the foreign policy agenda of the South Caucasus states, testified to by the fact that Georgia declined in 2009 to undertake the six-month term chairmanship of the Organisation, and also by their poor record of initiatives. The record of performance of sub-regional structures in the South Caucasus indicates that regional cooperation has worked as a confidence-building channel for discussing common issues or as a foreign policy tool vis-à-vis common threat perceptions. The regional agenda as well as membership in regional fora is not 12 Azerbaijan has not signed the Agreement on Collaboration in Emergency Situations (Sochi, 15 April 1998). It signed the Additional Protocol of the Agreement (Kyiv, 20 October 2005) but it has not ratified it. The other Agreement reached within the BSEC is the “Agreement among the Governments of the Black Sea Economic Cooperation Participating States on Cooperation in Combating Crime, in particular in its organized forms” (Corfu, 2October 1998). 13 Despite the August 2008 Georgian-Russian conflict, BSEC organs were requested to continue ‘business as usual’. Thus the meetings envisaged in the agenda of the Organization took place as scheduled.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

103

consolidated either. There is no doubt that sub-regional cooperation in the South Caucasus has not been a success so far; that, however, comes as no surprise given the political and economic fragmentation and the armed conflicts that persist in the area and maintain a focus on inter-state relations and high politics.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

4. Some Trends: Does Regionalism Stand a Chance? There is a question that often surfaces in contemporary discussion on Europe’s neighborhood, particularly on the new eastern and Black Sea front. Is regionalism as a policy tool still relevant, or is there a preference for bilateralism (e.g. Georgia-EU) and wider multilateralism (e.g. joining the WTO or NATO). The rationale for such a claim lies in the adverse security conditions harbored in the region which substantially undermine the effectiveness of regionalism, and their weight goes beyond any subregional formats. There are two opposing conditions on the ground that immensely affect the potential of regionalism in the South Caucasus and set the overall policy stage, and these need to be acknowledged. On the one hand, economic difficulties and the need for managing regional public goods (e.g. environment, trade, financial stability, and knowledge) have generated strong demand for regional cooperation and integration; these demands for policy coordination and regional responses need to be strengthened and be efficiently channeled into regional policy making. On the other hand, a high security dilemma (e.g. border disputes, protracted conflicts, and crime) undermine any demands for regionalism, substantially obstructing collective action and institutions; these adverse security conditions need to be eliminated or their impact reduced. Several attempts have been made to provide policy tools for regional cooperation in the area, including a recent effort of the Commission on the Black Sea14 which has proposed targeting policy options addressing the above concerns, specifically those regarding economic development, security and good governance as well as regional cooperation. In recognition of the difficulty of breaking the political deadlock in the region, a project on Regional Cooperation and Conflict Prevention in the Southern Caucasus, initiated under the auspices and with support from the United Nations University (2001-3), explored the extent to which functional regional cooperation on low profile issues could be encouraged in the hope that the experience of limited cooperation would have positive spillover, eventually facilitating progress on more sensitive political questions. The conclusions of the project indicated a supplementary, bottom-up approach to compensate for the lack of a minimum of political will. Strengthening security for human life at the local and subnational levels may enhance opportunities for subnational cooperation – possibly even between local communities across state boundaries. Local human security provisions would thus over time possibly trigger a sense of cross-regional solidarity, allowing cautious attempts to revisit opportunities for functional cooperation across the region [4]. 14

The Commission on the Black Sea is an initiative which aims to contribute to a joint vision and common strategy for the Black Sea region by developing new knowledge on areas of key concern. The Black Sea Trust for Regional Cooperation, a project of the German Marshall Fund of the Unites States (GMFUS BST), Romania, the Bertelsmann Stiftung in Germany, the Economic Policy Research Foundation of Turkey (TEPAV) in Turkey, and the International Centre for Black Sea Studies (ICBSS) in Greece jointly developed the project and launched it in January 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

104

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

.

From our previous discussion we may argue that international institutions - rather than locally initiated sub-regional ones which lack the necessary resources and political will - have set a new stage of regional cooperation in South Caucasus comprising the following characteristics: - Sectoral approach: Despite rhetoric on the need for a comprehensive, multidimensional regional format, IOs have concentrated their efforts on issue-specific regional projects and have rendered relevant resources available. This sectoral regionalism has been systematically supported by the EU in the first post-Cold War era through the initiatives of TRACECA, INOGATE and others, while it is currently supported through sectoral partnerships, as well as through its specialized programmes, e.g. as regards the environment. UN special agencies have also been instrumental in advancing this sectoral regionalism approach (e.g. through the UNDP/EU South Caucasus Anti-Drug Programme - SCAD). - Engaging non-governmental and sub-state actors: There has been a shift of policy regarding the agents of regional cooperation in the South Caucasus with increased emphasis on non-state and sub-state actors. Engaging civil society (e.g. through the Black Sea Forum or the Eastern Partnership), itself very weak and fragmented, is a priority as government-driven action is often hindered by high politics and ends as mere diplomatic bargaining, diluting the notion of regionalism. The EU has also developed cross-border programmes (e.g. the Black Sea Cross-Border Basin Programme) in an effort to advance cooperation beyond the inter-governmental level while engaging substate actors. - Extended frames and variable geometry: As trilateral formats (i.e. engaging the three South Caucasus states alone) seem not to be working, ‘wider’ regions have been formed to set the ground for variable geometry cooperation. Such a case is the BSEC which allow for the South Caucasus states to collaborate within a wider Black Sea region or the Black Sea Synergy and the multilateral track of the Eastern Partnership, which also allows their members to opt out. A set of issues central to facilitating cooperation but requiring the presence of political will and the readiness of third parties to stay engaged include: i) identifying authentic interests to assure ownership; ii) connecting agents of change capable of influencing their societies; and iii) tailoring formats of cooperation to the complex reality of the South Caucasus [21].

Conclusions The South Caucasian states form a clearly delimited and self-conscious region. In spite of historical, linguistic and religious differences and often contrasting foreign policy orientations, the three states of the South Caucasus share similar problems and face similar difficulties in overcoming them. In the long run, the Caucasus can only develop and prosper through interaction among its states, and interaction with the rest of the world, particularly Europe. The interconnection is particularly obvious in the field of security, as the South Caucasian states are interwoven in a single complex set of territorial conflicts and affected by the same trend of increasing transnational crime. Regional cooperation in the South Caucasus has a special role as it is seen as providing a chance for creating peace and prosperity in the region. There is thus value in the

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

105

argument that any effort at long-term development policies and conflict prevention needs to be of a regional character.15 Nevertheless, regional cooperation in the South Caucasus falling within the immediate orbit of EU and Russian neighborhood policies requires both actors’ adherence in order to take roots. Although the EU devotes resources and policies forging regional programmes in this troubled area, Russia does not adhere to regionalism in the South Caucasus, as this area harbors high priority (security and economic) concerns in Russian foreign policy which are treated on a case by case basis. International organisations, despite their own limitations, play a role in regionalism as they help with trust-building, expertise, and financing. Sub-regional structures, at the same time, even though so far functioning along the lines of a “socialization effect” rather that producing concrete results in terms of projects, also have a role to play in advancing the notion of region-ness and collective action and bringing about cooperative aspects in foreign and development policies. Though all these regional processes take place in the shadow of “mainstream” European integration (primarily in EU), their success rests on the willingness and capacity of local players to turn existing interdependencies into conscious cooperation and common action. The course of action of all different kinds of international and (sub)regional organisations in South Caucasus will be affected by the way that the Euro-atlantic security dialogue will evolve (e.g. NATO’s new security concept and the evolution of the new European Security Agreement), the way that the EU will manage its neighbourhood in a post-Lisbon era, and the new development paradigm emerging after the 2008 global financial crisis.

References [1]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[2]

[3] [4]

[5]

[6] [7] [8]

[9]

M.R. Freire and L. Simao, The EU’s neighborhood policy and the South Caucasus: Unfolding new patterns of cooperation, Caucasian Review of International Affairs 2 (Autumn 2008), 225-239. The South Caucasus A Regional Overview and Conflict Assessment, Cornell Caspian Consulting Swedish International Development Cooperation Agency (SIDA), August 2002. Available at: http://www.silkroadstudies.org/docs/publications/2004/SIDA.pdf. Trade Facilitation in the Caucasus Final Report, World Bank, Washington, October 2000. S.N. MacFarlane and A. Schnabel, Human Security and Regional (Non-) Cooperation in the Southern Caucasus, paper at the 46th Annual Convention of the International Studies Association, Honolulu, Hawaii, 1-5 March 2005. P. M. Morgan, “Regional Security Complexes and Regional Orders” in D. A. Lake and P. M. Morgan (eds.), Regional Orders: Building Security in a New World, The Pennsylvania State University Press, Pennsylvania, 1997. A. Missiroli, “The EU in its changing neighbourhood” in R. Dannreuther (ed.), European Union Foreign and Security Policy Towards a neighbourhood strategy, Routledge, London, 2004. Wider Europe-Neighbourhood: A New Framework for Relations with our Eastern and Southern Neighbours. Commission of the European Communities, COM (2003) 104 final, Brussels. Y. Tsantoulis, Black Sea Synergy and Eastern Partnership: Different Centres of Gravity, Complementarity or Confusing Signals? Policy Brief no. 12, International Centre for Black Sea Studies, Athens, February 2009. EU launches 'Eastern Partnership’, BBC News, 8 May 2009.

15 “Conflict management and conflict prevention in the South Caucasus is necessarily regional, as no conflict in the region can be understood in detachment from its regional environment. The failure of negotiations is in part due to the lack of a regional approach in conflict management efforts”. The South Caucasus A Regional Overview and Conflict Assessment. Cornell Caspian Consulting Swedish International Development Cooperation Agency (SIDA), August 2002.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

106

P. Manoli / The Role of Intergovernmental Institutions in Regional Cooperation

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[10] A. Lobjakas, South Caucasus: Prospects for Regional Stability Pact Recede, Radio Free Europe/Radio Liberty (RFE/RL), 12 May 2006. Available at: http://www.rferl.org, accessed on June 19 2006. [11] B. Urumova, On the Role of International Organisations in the South Caucasus: Council of Europe, The South Caucasus-2006: Main Trends, Threats and Risks, Spectrum Center for Strategic Analysis, Yerevan, 2007. [12] On the Kiev Initiative, see http://www.coe.int/t/dg4/cultureheritage/cooperation/Kyiv/default_en.asp. [13] On the Black Sea Euroregion, see http://www.bser.eu/index.php?lg=2&s=1. [14] F. Coene, NATO and the South Caucasus: Much ado about nothing?, Central Asia and the Caucasus 3 ( 2003). Available at: http://www.ca-c.org/online/2003/journal_eng/cac-03/01.coeeng.shtml. [15] V. Socor, Azerbaijan's NATO Aspirations Suffer A Self-inflicted Setback, Eurasia Daily Monitor 1, The Jamestown Foundation, 14 September 2004. [16] On NATO SPS programmes, see: http://www.nato.int/science/responding_to_nato_priorities/reaching.htm. [17] A. Lobjakas, NATO lacks the stomach for South Caucasus fight, Caucasus Analytical Digest 5 (2009), 2-5. [18] B. Snoy, M. Baltes, Environmental Security: A Key Challenge for the OSCE, OSCE Yearbook 2007, CORE (2008), 313-326. [19] K. J. Møller, “Collective Security Treaty Organisation: An Entangling Alliance” in P. D. Thruelsen (ed.), International Organisations: Their Role in Conflict Management, Royal Danish Defence College, Copenhagen, October 2009. Available at: http://forsvaret.dk/FAK/Publikationer/B%C3%B8ger%20og%20andre%20publikationer/Documents/C onflict%20management%20net.pdf. [20] V. Socor, Black Sea Forum Seeking Its Rationale, Eurasia Daily Monitor 3, The Jamestown Foundation , 7 June 2006. [21] A. Wittich and A. Maas, Regional Cooperation in the South Caucasus, Lessons for Peacebuilding, from Economy and Environment, Initiative for Peace Building, April 2009.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-107

107

The Evolution of US Policy towards the Southern Caucasus S. Neil MACFARLANE1 Oxford University

Abstract. This chapter traces the evolution of United States’ (U.S) policy in the Southern Caucasus since the collapse of the Union of Soviet Socialist Republics (U.S.S.R). It begins by providing background on the region. It continues with a discussion of the major drivers of US regional policy. A periodization of that policy follows. The analysis concludes with a discussion of the directions being taken by the Obama Administration. The paper argues that US policy has displayed a lack of coherence for much of the period in question. On the one hand, policy towards the Caucasus is part of a larger effort to approach the former Soviet region as a whole. But, on the other hand, policy towards the three states in the Caucasus has been dominated in each case by a different logic: energy, US minority politics, ideological exceptionalism, and leadership preference. The lack of coherence reflects the weakness of systemic drivers (and in particular the role and capacity of Russia). The return of Russia to strategic activism in the region restores the significance of systemic underpinnings to US policy and is producing a more coherent American approach to the region.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Keywords. US policy in the Caucasus, US-Russian relations, the US and Georgia, Georgian-Russian conflict, Caspian energy.

Introduction The recent travails of the Obama Administration in handling Georgian issues in the context of “resetting” Russian-American relations draw attention to the general proposition that small places can generate big problems. More specifically, they highlight the significance of matters Caucasian to the larger interests of the United States as it tries to navigate relations with an increasingly assertive and apparently aggrieved and insecure Russia. The 2008 war in Georgia caused the most significant deterioration in Russian-American relations since the end of the Cold War, and may be a substantial impediment to necessary progress in the bilateral relationship on a wide array of extremely important issues, among them strategic arms control, nonproliferation, Iran and North Korea, as well as more substantial cooperation on Afghanistan.

1 Professor at the Department of Politics and International Relations, Oxford University, United Kingdom. E-mail: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

108

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

This essay assesses the drivers of US policy in the Southern Caucasus, discusses its evolution, and then examines the region in recent US foreign policy. I argue that it has been extremely difficult for the United States to develop a coherent strategic perspective towards the region because, although the three Southern Caucasian states together form one part of a larger challenge for the United States (how to define the nature and direction of American policy in the former Soviet region), policy towards each country has tended to be dominated by alternative logics: the political economy of energy, minority lobbying in the domestic politics of foreign policymaking, ideologies associated with American exceptionalism, and the propensities of successive leaders. The inchoate, more than occasionally personalistic, and often contradictory nature of American policy reflected the lack of strong strategic imperatives in this region. The return of Russia to strategic activism in the Southern Caucasus provides a structural basis for a more strategically coherent American approach to the region.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1. Background In 1991, the Soviet Union collapsed, ending bipolarity and removing a key strategic threat, not least to Turkey, the only North Atlantic Treaty Organisation (NATO) old member state with a substantial land border shared with the USSR. Fifteen new states emerged as the Union came apart. Three (Armenia, Azerbaijan, and Georgia) were located in the Southern Caucasus. All three faced significant political challenges in creating sovereign state structures. Their leaders had no experience of sovereignty or independence. All three were highly integrated into the now defunct Soviet system of production and faced significant economic challenges as supply chains and markets disappeared and as they sought to develop capitalist relations of production out of the rubble of socialism. Their leaderships and political elites also carried the legacy of Soviet politics, which left them ill-prepared for sovereign and pluralist, if not democratic, politics. All three states were implicated in different ways in emergent civil conflict. In Georgia, first South Ossetia and then Abkhazia challenged the authority and jurisdiction of the central government in Tbilisi, resulting in two short wars and the displacement of several hundred thousand people. Civil war in Azerbaijan began before the collapse of the Soviet Union, as the political elite of the predominantly ethnically Armenian region of Nagorno Karabakh sought to secede from Azerbaijan and to join Armenia.2 The six year war (1988-1994) resulted in a substantial exchange of refugees between the two countries and the displacement of well over 500,000 Azeris from Nagorno Karabakh and adjacent territories occupied by Armenian and Karabakh forces. Although active hostilities in the three conflicts ended in 1992-4, durable peace remained elusive. The potential for “conflict recidivism” was highlighted in the renewal of war and intervention in Georgia in August of 2008. The emergence of these new states raised complex questions for others in the international system, not least the United States. How should one respond to this sudden shift in the landscape of international relations? This question took on especial importance in the Southern Caucasus, given the region’s proximity to areas of the 2 I am aware that there are numerous and contested names for this region. I choose the former Soviet one, which appears to be the least controversial.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

109

Middle East where the United States had long-established strategic interests and vulnerabilities. What role should outside actors and their multilateral institutions play in the effort to construct viable states in the Caucasus? How should one deal with the complex mix of civil conflict and with the political, humanitarian, and economic consequences of those conflicts? How should one balance relations with the new states with the continuing need for close relations with the USSR’s successor state, the Russian Federation? Some states in the international system, not least Turkey, had substantial historical experience there. In contrast, for the United States, policy on the Southern Caucasus was a blank sheet of paper. The United States had no historical links to the three countries.3 During the seventy years of Soviet rule, America’s approach to the region was subsumed within its larger policy towards the USSR; the American government concentrated on relations with Moscow to the neglect of the other union republics. A similar lack of attention was evident in American academia.4 Nobody knew much about these places. Few people had been there and those who had been generally were tourists. In the political realm, there was almost no knowledge of alternative political and social forces, including those that emerged in 1991-2 to govern the three new states.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

2. Drivers The foreign policy of any state is an amalgam of numerous factors. Realists like to believe that the behaviour of a state in the international system is, in important respects, a product of the structure of that system, and notably the distribution of power within it [1]. They recognise, however, that in the absence of substantial strategic threat and opportunity, state behaviour is less influenced by the distribution of power. In such instances, states may pursue economic interests, seeking to open up new opportunities and to defend established positions in the world economy. Constructivists emphasise the role of ideas and norms as underpinnings of behaviour. Although these propositions are consistent with a view of the state as a unitary actor in world politics, they do invite enquiry into internal political structures and policy drivers (the second image [2]). Those who open the “black box” of the state focus on elements of the domestic political process that may have implications for foreign policy formulation, among them the division of responsibility between the executive and legislative branches of government, the party system and party preferences, the interests and roles of relevant bureaucracies, and the influence of public opinion and of various lobbies, including minority lobbies.5 The Southern Caucasus is a good environment for testing these possibilities, since there was no historical inertia. I take it that the foreign policy of any state is bounded by constraints and the opportunities in the environment in which it operates. The domestic context – leadership, political culture and values, economic interests, bureaucratic politics, and group affinities – shape the state’s approach to systemic constraints, opportunities, and 3

Armenia is a partial exception, given the large Armenian diaspora in the United States. The academic study of the non-Russian republics, particularly along the southern tier, was also inhibited by difficulties of access, given Soviet political and security sensitivities. 5 For a good introduction to foreign policy analysis in the United States, see C. Kegley and E. Wittkopf, American Foreign Policy: Patterns and Process, Wadsworth, London, 2002. 4

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

110

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

risks. Where systemic imperatives are evident and strong, where external risks are large and obvious, the influence of domestic political variables usually diminishes. The opposite is also true; where systemic factors are weak and risks perceived to be low, there is a greater potential for foreign policy behaviour to be influenced by domestic consideration. Domestic factors tend to pull in various directions; the result is likely to be a degree of incoherence. The key systemic drivers of American policy in the region were, and are, fairly straightforward. The sub-region falls between two zones that, for many decades, have been considered to be of deep significance to the United States. To the North, there is Russia, the successor state to the Soviet Union. Russia inherited the USSR’s nuclear capability. The United States was enmeshed with the USSR in a number of nuclear and nuclear-related [e.g. Anti-Ballistic Missile (ABM), Strategic Arms Limitation Treaty (SALT), Strategic Arms Reduction Treaty (START), Intermediate Nuclear Forces Treaty (INF), and Non-Proliferation Treaty (NPT)] arms control agreements that covered quantities and characteristics of weapons systems, as well as limitation of the proliferation of such systems and related technologies. The collapse of the USSR raised significant concerns regarding the leakage of nuclear weapons and materials that were inadequately secured and also leakage of Soviet human capital to states that might be interested in the development of nuclear, and for that matter, chemical and biological weapons. Managing the challenge posed by the USSR had also been critical to the security of Western Europe, the USA being enmeshed in the NATO regional alliance. The emergence of a weak Russia after the Soviet collapse created new issues for the US-led transatlantic alliance, among them the weakness of the Russian state, its difficulty of controlling its space and economy and consequent non-traditional security externalities (transnational criminality, people-trafficking, illegal migration, control over strategic materials, and, as noted above, potential migration of weapons specialists to third countries). In the longer term, although the tendency was to write Russia off as a major player in the European and global systems, the future of Russian foreign and security policy remained a significant opportunity or risk. As the Russian state and economy recovered in the early years of this decade, the potential of Russia as a hostile power became evident. While the new Russia had been a problem because of its weakness, it became a different kind of problem because of its renewing strength. Russia’s re-emergence and its increasing assertion both in its immediate region and farther afield posed once again the old choice between cooperative and competitive approaches to dealing with this major Eurasian state. Looking south, the region borders on Turkey, a NATO ally long central to American objectives in the northern Middle East and increasingly important in American strategy towards the Islamic world in general. It also borders Iran, a country which since 1979 has been deeply hostile to the United States, and that, to varying degrees, has embodied an expansionist ideological perspective deemed antithetical to US interests in the Gulf and the wider Middle East. In the event of serious security challenges arising in the Middle East, the Caucasus has potential strategic utility as a transit point for American military assets deployed to deal with contingencies there. In addition, the southern Caucasus provides a potentially useful land bridge for logistical of American units operating in Southwest Asia, notably Afghanistan.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

111

Turning to economic issues, while the Caucasus is insignificant as a market for American goods, it is a potentially important source of, and transit route for, oil and natural gas. The Caspian Basin accounts for 1-4% of global oil reserves and roughly 6% of global gas reserves [3]. These are located for the most part in Central Asian littoral states (Kazakhstan and Turkmenistan), but also in Azerbaijan. Caspian Basin energy resources hardly make the Caucasus a fulcrum of global geopolitics. But, despite their rather diminutive share of global reserves, Caspian Basin oil and gas supplies are significant in American strategy for three reasons. Oil supplies at the margin can have significant price effects, and this gives the United States and other consumers an interest in access to these reserves. Moreover, although the United States accesses a wide range of energy sources, continental Europe has developed a significant dependence on Russia for gas. The interruptions in Russian gas flow through Ukraine in 2006 and again in 2009 highlighted that dependence. The United States has an interest in the smooth operation of international energy markets. In addition, for both historical and power-political reasons, it makes sense for America to be attentive to the vulnerabilities of its allies in Europe, particularly when issues of energy dependency may generate ruptures in the alliance of which the United States is a leading part. These considerations give the United States a perceived interest not only in access to the reserves, but in transit routes that bypass Russian territory.6 Energy security and trade link the systemic to the domestic determinants of US policy in the Caucasus. There is a strategic logic to American interest in this area, as seen above, but American policy is also the product of pressure from economic interests inside the United States. A number of major predominantly American energy companies (for example, Chevron, ARCO, ExxonMobil, and CONOCOPhillips in Kazakhstan, and Exxon Mobil, Chevron, CONOCOPhillips and AMOCO – now part of BP – in Azerbaijan) have developed substantial stakes in Caspian Basin oil and gas production and in transit routes (the Caspian Pipeline Consortium [CPC], the BakuTbilisi-Ceyhan [BTC] oil pipeline and the South Caucasus Gas Pipeline) to bring product into larger regional and global markets. Since 1995, they have steadily lobbied the United States to support their commercial ventures both in production and in transport. The energy sector has a particular interest in building a positive relationship between the United States and Azerbaijan, in maintaining close relations with Georgia, through which much energy product must pass in order to exit into international markets, and, more generally, in promoting the strategic logic of access to Caspian energy reserves. Moving beyond domestic economic interests, minority lobbying has also had a selective impact on US policy towards the Southern Caucasus. Azerbaijanis and Georgians have not had a politically significant lobby in the United States. In contrast, there is a substantial and well-organised Armenian minority that has sought to influence electoral politics and also policy outcomes. Its organisations play an active role in campaigning for (and against) congressional and presidential candidates with a view to promoting the interests of the home state, and also to maintaining the salience in US politics of historical grievances, notably those associated with the fate of Armenians in the Ottoman Empire. Its success in this regard was evident, for example, in the mid-1990s when Armenia received a disproportionate amount of US assistance

6

In the context of the war in Afghanistan and logistical difficulties of supporting American troops there, Caucasian transit routes may have military as well as economic significance to the United States.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

112

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

flowing to the region, in the adoption of Section 907 of the Freedom Support Act of 19927, and in the conditionalising of US assistance to Turkey on the provision of a humanitarian corridor to Armenia [4].8 A third internal dimension of US foreign policy in the region is ideational – and specifically the normative commitment to democracy promotion. This commitment was rooted in exceptionalist American beliefs that the United States embodied universalisable lessons for other states and that liberal democracy was a preferable political system and should be emulated elsewhere.9 In the interventionist periods of American foreign relations, this has involved deliberate efforts to spread the faith. The 1990s and the first years of this decade, animated by what was perceived to be America’s victory in the Cold War period, were such a period. The historical/ideological motivation associated with America’s own origins and selfperception was joined at this time by a powerful re-examination of ideas first put forward by Immanuel Kant in what has come to be known as “democratic peace theory” – which boils down to the notion that democracies do not go to war with each other.10 The United States, in its relations with post-communist states, quite deliberately sought to spread democracy through its aid programmes and through such institutions as the National Endowment for Democracy, the National Democratic Institute for International Affairs, and the International Republican Institute, as well as through non-governmental organizations such as Freedom House. The final dimension to mention here is leadership and its legacy. This pertains specifically to Georgia. The George H.W. Bush administration perceived a lingering debt to Eduard Shevardnadze, as a result of the latter’s role in the ending of the Cold War. Shevardnadze also had close personal relations with both the President and with James Baker, Bush’s Secretary of State and Chief of Staff. George W. Bush appeared to have developed similarly close relations with Mikheil Saakashvili, Shevardnadze’s unconstitutional successor, in view of Saakashvili’s success in leading an ostensibly democratic revolution in 2003. He was also successful in building close personal relations with a number of leading Republicans in the Senate, not least John McCain. The result appears to have been a conflation of the Georgian state with the person of its President. To summarise, the drivers of US policy towards the Southern Caucasus comprise an amalgam of various factors operating at the systemic and domestic levels and affecting America’s relationships with each of the three states of the region in different ways at different times.

7

Section 907 barred US assistance to public organizations in Azerbaijan until the latter took demonstrable steps to cease offensive action against Nagorno-Karabakh and the blockading of Armenia. 8 See also Armenian Assembly of America, “President Signs Foreign Aid Bill”, 26 January 1996, where it states “This legislative victory represents everything the Assembly has advocated for the last year and a half.” 9 For a useful treatment of liberal American thought and its external implications, see L. Hartz, The Liberal Tradition in America, Harvest, New York, 1991 and in particular Chapter 6. 10 The key contribution was M. Doyle, Kant, Liberal Legacies, and Foreign Policy, Philosophy and Public Affairs XII (1983).

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

113

3. A Brief Periodization of US Policy in the Southern Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3.1. Early Policy US policy towards the region can be loosely divided into four periods. In the first (from the collapse of the USSR to the mid-1990s, and spanning the last years of the George H. W. Bush Administration and the first term of the Clinton Presidency), the US was new to the region and on a very steep learning curve. At the outset, as noted above, it had no established relations with Southern Caucasian states and very little history of involvement in the region. There was no clear strategic interest and no deep desire for strategic engagement. Consequently, American activity in the region lacked focus. Relations with the three countries were reasonably quickly established (slightly later with Georgia, given US concerns about the nationalist and xenophobic platform of the first President, Zviad Gamsakhurdia, who was removed from office by his own military in January 1992). Much American effort was devoted to responding to the humanitarian consequences of the region’s three conflicts. At a diplomatic level, the United States engaged with the Minsk process11 for a resolution of the Nagorno Karabakh conflict, but its efforts were hamstrung by the difficulty in achieving an uti possidetis outcome, given the Armenian government’s deep engagement in the conflict, the Armenian diaspora’s solidarity with their co-ethnics in Karabakh and the influential role of that diaspora in key electoral swing states in the United States. Matters were not helped by the fact that, for much of the period in question (1992-4), Azerbaijan was not a viable interlocutor, given its domestic political turmoil. The US acquiesced in the successful effort of Russian Defence Minister Pavel Grachev to negotiate a cease-fire in 1994 once the Karabakh Armenians had won their war. In Georgia, the United States supported (or at least did not object to) Yeltsin’s 1992 efforts to achieve a ceasefire in South Ossetia involving the deployment of a mixed peacekeeping force including Russian soldiers. Once the Abkhaz conflict died down, the US supported Russian and United Nations (UN) efforts to stabilise the situation and to move towards a political settlement. The United States, for example, voted in the Security Council in favour of Resolution 937 (1994) which commended the establishment of a Russian-led CIS peacekeeping force for the Abkhaz conflict, and recognised the Russian Federation as a facilitator of the peace process.12 Retrospectively, this was a quintessential example of inviting the fox into the chicken coop, given Russia’s role in fomenting the war13, and its intervention on the Abkhaz side. But, along with acquiescence in, or support of, Russian roles in the other conflicts discussed above, it is an important indicator of American views on the management of security issues in the Southern Caucasus at this time. There was little evidence of any American willingness to take a direct role. Instead, they were satisfied to allow Russia to play the leading part in conflict management in the region. Indeed, the Security Council resolution in question was part of a series of resolutions involving 11 In 1992, the Conference on Security and Cooperation in Europe (CSCE) established a negotiation process to produce a settlement of the Karabakh question. The process was named after the city where the peace conference was to be held – Minsk. 12 S/RES/937 (1994), 21 July 1994. In another indication of US priorities, Georgian communication with the United States in respect of negotiations regarding Abkhazia at this time was reportedly handled largely through US representatives in Moscow. Personal communication. 13 On this point, see S.M. Chervonnaya, Abkhazia-1992: Postkommunisticheskaya Vandeya, Mosgorpechat, Moscow, 1993.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

114

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

responses to regional responses to crises in Africa (Rwanda), the Caribbean (Haiti), and the former Soviet space. That the Security Council authorised the interventions of three permanent members (France, the United States, and Russia) in areas where those powers conceived themselves to have historical roles and immediate strategic stakes suggests a deal among the veto players. But, more importantly for this article, it indicates reasonably clearly an American willingness to give Russia a droit de regard over the management of security and conflict in its traditional region of influence and control. Underlying American policy choices with respect to the region’s conflicts was a set of assumptions about regional order and Russia’s role therein. The early 1990s were marked by a sudden upsurge in civil conflict with often grievous humanitarian consequences throughout much of the international system. The United States became directly involved in several, not least Somalia. These experiences left the Clinton Administration reluctant to take a direct role in conflict management. Some of these conflicts (e.g. those in the former Yugoslavia) occurred in proximity to areas of traditional US strategic interest and variously implicated American allies. In the Caucasus, in contrast, there appeared to be a more or less benign regional player – Russia – both willing and able to take on conflict management roles. Russia’s recent history had been one of democratic reform and the embrace of international liberalism. Its foreign policy initially appeared to be animated by Gorbachev’s “new political thinking” (multilateralism, mutual and cooperative security, the common European space), and manifested an apparently strong desire to cooperate with the United States on issues of mutual concern such as strategic arms control. Russia supported (or at least did not oppose) major US initiatives in the UN Security Council. Russia accepted US advice in economic reform. For all these reasons, the United States saw Russia as a junior partner with comparable objectives in the early days after the collapse of the USSR.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3.2. The Second Clinton Term By the middle of the 1990s, all of the region’s conflicts had subsided. The chaos of Georgian and Azerbaijani politics had been contained and new leaders (both being former first secretaries of their republics’ communist parties) had re-established a degree of order. The region’s currencies had been stabilised and economies were in recovery (though the ruble crisis of 1997-1998 dealt them another severe setback). At a more strategic level, the extent of the Caspian Basin’s energy reserves and its potential export capacity were becoming clearer and international energy companies, including American ones, had actively engaged in Azerbaijan. Finally, by this time, it had become clear that Russia was not capable of generating regional stability, given its domestic political and economic weakness and the atrophy of its military. American hopes for Russia’s democratic transition had been set back by the seemingly endless (and occasionally violent) confrontation between the Duma and the Executive, and by the general deterioration of law and order in the Federation. And Russia’s foreign policy had quite decisively shifted away from its early westward orientation and towards a more focused effort to influence its region and to resist Western initiatives that ran the risk of undermining Russian interests. 14 Significant 14 On this point, see S. N. MacFarlane, Russian Conceptions of Europe, Post-Soviet Affairs X (JulySeptember, 1994), 240-255.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

115

tensions arose between Russia and NATO over the latter’s intended enlargement, and also over the Alliance’s engagement in the Balkans (first the intervention in Bosnia’s civil war, and later the attack on Serbia in relation to Kosovo). The logical conclusion was that it was bad policy to rely on Russia to manage the security affairs of the former Soviet region. The result was a shift in US policy. One element was a rebalancing of relations with Armenia and Azerbaijan. In essence, the increasing interest in Caspian energy created a domestic lobby to contend with that of the Armenian diaspora in respect with relations with the two states. This was related to US government political support of the construction of an early oil pipeline and then a large-diameter oil pipeline (BTC) to transport Azerbaijani oil via Georgia to the Black Sea in the first instance and to the Mediterranean in the second.15 Another element was a more explicit commitment to the sovereignty of the nonRussian former Soviet republics. However, this did not result in any challenge to established Russian positions in respect of the ceasefires in Abkhazia and South Ossetia, while half-hearted efforts to resolve them continued through the Organization for Security (OSCE) and the UN. The US maintained its support of OSCE and UN missions to the conflict zones. As a co-Chair of the Minsk Group, the United States supported the negotiations in 1996-7 leading to a near-resolution of the Karabakh conflict, on the basis of a phased approach that postponed the resolution of Karabakh’s status. This was short-circuited by the removal of Armenian President Levon Ter Petrosyan, and his replacement by the former President of Nagorno Karabakh, Robert Kocharian. The US also worked towards the withdrawal of Russian bases in Georgia, an effort which culminated in the Istanbul Declaration of 1999, where Russia committed to remove its bases at Vaziani, and Gudauta by July 2001 [5]. In addition, the US supported the expansion of the regional states’ links to NATO through the Partnership for Peace (Pfp). When the Chechnya conflict flared up again in 1999, it had no obvious immediate effect on US policy, just as it had had no such effect in the first phase of the conflict (1994-1996). At a domestic level, the United States continued to support democratic reform in the southern Caucasian states, but was not too exercised when it didn’t go anywhere (as in Azerbaijan). The American government also provided capacity building for economic reform. The humanitarian phase of US assistance policy in region was largely wound up, with the exception of continuing contribution to the support of Azeris displaced from Karabakh and the occupied territories. On the whole, the region was not significant to US foreign policy as a whole and there is not much further to say about it during this period. 3.3. The George W. Bush Administration The new Bush Administration continued the main lines of the policy it inherited (a continuing emphasis on sovereignty, access to Caspian Basin energy resources and the continuing development of the Caucasian energy transit corridor, conflict resolution, democratic transition, and economic transformation). Perhaps the most notable US 15 It is noteworthy that the USG did not offer to subsidise construction of the lines. In respect of BTC, they were clear that, although they supported development of the route, it had to be commercially viable. This was problematic at a time when oil prices were well below the level ($15) necessary to make the line profitable.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

116

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

initiative of the period was the effort by Colin Powell to bring a series of bilateral meetings between the Armenian and Azerbaijani Presidents to a successful conclusion through personal mediation over four days in Key West in April 2001. This attempt foundered in the face of the continuing disagreement of the two sides, in particular on the eventual status of the Karabakh region. Further development of the Bush Administration’s approach to the region was influenced strongly by the terrorist attacks on New York and the consequent declaration of the war on terror. International terrorism has never been a significant problem in the southern Caucasus, and the region was marginal to US and coalition operations in Afghanistan.16 But the Chechen insurgency did have substantial connections to Afghan mujahedin and also to the Al Qaeda network. The second Chechen War spilled over in a minor way into Georgia’s Pankisi Gorge, as fleeing civilians and fighters crossed the border seeking refuge from Russian attacks. The Russian Federation strongly pressured Georgia to control the problem17, and – as part of the general commitment to supporting the sovereignty of the Caucasian states – the United States responded by providing training assistance and equipment to Georgian forces involved in the counter-terrorism operation. Policy evolved further after the 2003 “Rose Revolution” in Georgia. Initiatives concerning Karabakh were stalemated by the intransigence of the parties. The capacity of the United States to pursue democratization in Armenia and Azerbaijan was constrained, on the one hand, by the strong support of the Armenian state by America’s Armenian minority and, on the other, by the imperatives of maintaining access to Caspian energy. No such constraints existed with respect to Georgia. The United States had gradually distanced itself from President Shevardnadze18 who was widely perceived both inside and outside Georgia to be increasingly ineffectual, his government tainted by systemic corruption, including corruption involving members of his immediate family and circle. The American government encouraged the development of civil society groups that ultimately challenged the government over rigged parliamentary elections. When a standoff emerged, the United States withheld support and the government fell. The United States quickly embraced Shevardnadze’s successor, who was wellconnected with neoconservative circles in the United States and who benefited from a well-oiled lobbying operation in Washington. The relationship was cemented by President Bush’s visit to Georgia in 2005, and rapidly became personalised. Given the difficulties faced by the United States in Iraq and the manifest failure of neoconservative aspirations to launch a wave of democratic transformation in the Middle East, and growing domestic difficulties (e.g. the Administration’s incompetent response to the destruction of New Orleans by Hurricane Katrina), the appearance of success in democratisation in Georgia became all the more important; the Bush 16 The United States successfully sought overflight rights for military aircraft en route to Central Asia and Afghanistan. In contrast to the Caucasus, Central Asia played a major role in supporting coalition operations in Afghanistan. The US – with Russian acquiescence if not support – quickly arranged access to a major air base in southern Uzbekistan, as well as to the Manas airport in Kyrgyzstan. Once the Taliban government was overthrown, these facilities became less important to US operations. However, as the United States and NATO face increasing difficulty in sustaining logistics through Pakistan, they have regained significance. 17 In addition, on a number of occasions, Russian forces violated Georgian airspace to conduct bombing operations. 18 By this time, and in view of generational change in the US leadership, the influence of personal ties to Shevardnadze had declined.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

117

Administration needed a success story. Moreover, the new Georgian government proved willing to provide a substantial military contribution to the coalition attempting to stabilise Iraq. There is a certain irony here. The close personal relationship between the two presidents, and the American need for a success in democratisation led the United States to disregard the clear retreat from democratic practice in Georgia under President Saakashvili.19 Despite the evidence, the US Administration granted the Georgian government eligibility for Millennium Challenge Account assistance, upgraded US military assistance, and, in 2007-8, strongly supported Georgia’s (and Ukraine’s) doomed applications for NATO Membership Action Plans (MAP). The wider context of American policy in the Southern Caucasus was also changing. It was becoming clear that Russia had substantially recovered as at least a regional power. Government power had been reconsolidated at the expense of the Duma and the regions, the oligarchs had been tamed, and Russia was reinvesting in its military. Its effort to control insurgency in Chechnya had by 2005 been more or less successful. Russian policies towards the former Soviet region were becoming increasingly assertive and exclusionary. Russia, conscious of American overstretch and the limits it placed on the US to dominate the system through the exercise of power[6], increasingly openly claimed a sphere of special interest in the region. Growing European dependence on Russian energy supply provided a coercive instrument in Russia’s relations with the Baltic States, Ukraine, and Georgia. Russian efforts to curb US engagement in Central Asia and to control the export of energy from that region were also increasingly evident. Dmitri Trenin summarised Russian interests in the region well. These included: [P]reventing the disintegration of Moscow’s control of the North Caucasus; thwarting other nations’, especially the United States’, efforts to win formal allies and deploy forces to the South Caucasus; establishing Russia’s primacy in the South Caucasus as the primary external power; [and] retaining as much control over the oil/gas transit routes from the Caspian Basin as possible ...[7]. The tensions with Bush Administration preferences were clear. In the meantime, Russia’s post 9/11 decision to support the United States in the war on terror had been superseded by growing disillusionment over the way the United States was managing its relationship with Russia and Russia’s neighbours. As Prime Minister Putin put it, “after the end of the cold war someone in the United States believed the illusion that they might act without any rules in place at all, just as they want, as they like”[8]. Russia’s discomfort over NATO’s approach to the Kosovo question was exacerbated by the move of the US and many of its NATO allies to recognise the statehood of Kosovo in 2007-2008. Russia’s unhappiness over further NATO enlargement, an enlargement that in 2004 included three former Soviet republics (Estonia, Latvia, and Lithuania), was ignored, as was Russia’s claim to a sphere of privileged interest in the former Soviet space. The Bush Administration’s decision to withdraw from the ABM Treaty and then to forward deploy ballistic missile defences in former Warsaw Pact countries (Poland and the Czech republic) confirmed Russia’s perception that the United States felt it could safely ignore Russian strategic preferences. Its advocacy of the further deepening of NATO engagement in the former 19 For a reasonably clear indication of this deterioration, see the annual ratings of Freedom House from 1999 to 2008, in E. Fuller, Nations in Transit 2009: Georgia, Freedom House, New York, 2009. Available at: http://www.freedomhouse.hu/images/nit2009/georgia-final.pdf.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

118

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

Soviet Union in 2007-2008 was likewise perceived as evidence of indifference if not hostility towards Russia’s strategic preoccupations. 20 The Russian government, both before and after the April 2008 Bucharest NATO Council meeting that considered the question of a MAP for Georgia and Ukraine, made clear that further NATO enlargement into the post-Soviet space was unacceptable. In short, Russia was recovering, and was evidently irritated by being ignored in American policy. Perhaps the largest shortcoming of the Bush Administration’s Caucasus policy was its failure to recognise and to understand this shift in the strategic context.21 As two analysts commented: The strong personalized ties that developed between Washington and Tbilisi prevented the United States from using its power and influence to credible restrain the Saakashvili government from adopting a military solution.22 This blindness was instrumental in the advent of war between Russia and Georgia over South Ossetia in the summer of 2008, a war in which Georgia’s president appeared to believe he had a security guarantee from the United States and the Russian leadership demonstrated its belief that any guarantee that might exist was not credible, that the costs of defying American preferences were manageable, and that Georgia was a good place to make its point about primacy in the Southern Caucasus. To summarise that conflict23, Russia appears to have provoked a Georgian attack on the secessionist region of South Ossetia. It then swiftly responded with a massive retaliation, clearing South Ossetia of Georgian forces, removing Georgian enclaves within South Ossetia and Abkhazia, and destroying strategic targets throughout Georgia. This was soon followed by Russian recognition of the sovereignty of the two territories and the establishment of diplomatic relations. In the next several months, Russia vetoed continuation of the two longstanding multilateral security engagements in Georgia – the UN Observer Mission in Georgia (UNOMIG) which had a monitoring and confidence-building role in and around Abkhazia and the OSCE Mission of Long Term Duration in Tbilisi, which had an observation and reporting role in South Ossetia and its environs [9]. Despite prior expressions of support for Georgia that may have led the Georgian leadership to believe that they had an implicit security guarantee from the United

20 For an authoritative expression of tensions between the Russian Federation and the United States over the CIS, European security architecture, NATO enlargement, the structure of international order, nuclear parity and missile defence, and US unilateralism and democracy promotion, see S. Karaganov, D. Suslov, and T. Bordachev, Reconfiguration, Not Just a Reset: Russia’s Interests in Relations with the United States of America, Paper prepared for Russia and the United States: Rethinking Interests: Conference of the RussianAmerican Section of the Valdai Discussion Club (1 July 2009), Available at: http://en.rian.ru/valdai_op/20090701/155399564.html, section 3.3. See also J. Sherr, “The External Implications” in S. Cornell and F. Starr (eds.), The Guns of August 2008: Russia’s War in Georgia, ME Sharpe, New York, 2009. 21 For a similar assessment, see I. Krastev, The Guns of August: Non-event with Comsequences, OpenDemocracy (5 August 2009). Available at http://www.openDemocracy.net. 22 A. Cooley and L.A. Mitchell, No Way to Treat Our Friends: Recasting U.S.-Georgian Relations, The Washington Quarterly XXXII (2009). A Georgian anlyst recently note in this context that “Georgia’s international friends ... often mistook what they would like to happen for what is actually happening.” V. Papava, Georgia’s Economy: Post-Revolutionary Development and Post-war Difficulties, Central Asian Survey XXVIII (June 2009). 23 This account is consistent with the evaluation of the Independent enquiry into the sources of the conflict, established by the European Council in Council Decision 2008/901/CSFP (2 December 2008). See Independent Fact-finding Mission on the Conflict in Georgia Report (September 2009). Available at: http://www.ceiig.ch/Report.html.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

119

States,24 Washington looked on as Russia took apart Georgia’s Army and bombed military and other strategic installations within Georgia with impunity.25 The war put the Bush Administration into a very difficult position, since it raised doubts about the credibility of implicit US commitments and undermined the reputation, and therefore the position, of the US both in Georgia and in the region as a whole. It also highlighted the absence of any strategic approach to the Russian Federation. The waning months of the Bush Administration were devoted to damage limitation. During the war, American remonstration with the Russians may have halted the Russian military’s advance towards Tbilisi, thereby preventing Russia from achieving one of its objectives – the removal of President Saakashvili. After a misguided and fruitless attempt to raise anew the issue of Georgia’s MAP at the December NATO ministerial, the US concluded a bilateral agreement on strategic cooperation with Georgia [10]. The war in Georgia had wider implications in the region of relevance to US policy, not least because the outcome substantially increased Russian military presence south of the crest of the Caucasus range while partially dismembering a regional state. Azerbaijan had had an ambiguous relationship with Russia (and with the United States) for many years. Too close a relationship with Russia was difficult given Russia’s historical support of Armenia in respect of Karabakh, and in view of Azerbaijan’s wish to avoid Russian control over the transport of its energy resources. On the other hand, the capacity of Russia to interfere with Azerbaijan was clear. Close ties to states outside the post-Soviet space had some deterrent value in respect of Russia. However, the Azerbaijani government was (and is) uncomfortable with the democratic streak in US foreign policy. The result has been a balancing act. The war caused a slight tilt towards the Russian Federation, evident, for example, in the muted Azerbaijani response to Russia’s aggression and, more recently, in the 29 June 2009 Azerbaijani decision to sell a portion of its gas exports to Russia [11]. The deal, however, covered 500 million cubic metres of gas, approximately 2% of Azerbaijan’s total production and the gas was priced at a higher than market price of $350 per thousand cubic metres. In addition, it was limited to one year. Azerbaijan followed this decision by signing an intergovernmental agreement on the development of the Nabucco project on 13 July, 2009, leaving the impression that one Azerbaijani objective was to focus on Turkey and the EU on moving this large project forward [12]. In respect of Armenia, one of the more surprising consequences of the war was an exploration of reconstruction of ties with Turkey, not least in President Gul’s visit to Armenia in September 2008. It is clear that any improvement in Armenian-Turkish relations and the removal of the border closure would require an agreement on Karabakh that was acceptable to Azerbaijan. Armenia also failed to endorse Russia’s actions in Georgia in the Collective Security Treaty Organization (CSTO) and Commonwealth of Independent States (CIS) contexts. The open question here is what the Armenian calculus is. One simple point regarding Armenia’s position in respect of Russia’s invasion of Georgia is that Armenia cannot afford to alienate Georgia so long as the Turkish embargo is in place; Georgia provides Armenia’s only access to the sea. Another is a concern about the implicit questioning of international legal principles (non-use of force, territorial 24

For a discussion, see Cooley and Mitchell, “No Way to Treat Our Friends”, p.35. As Cheterian points out, the lack of a more direct intervention from the US was greeted with great bewilderment in Tbilisi. “Heorgia between War and a Future,” p.6. 25

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

120

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

integrity) evident in Russian behaviour. Generally speaking, small new states are uncomfortable with great power aggression. Whatever the case, there was a substantial acceleration in the long-stalled effort to produce a solution to the Karabakh conflict.26 Both regional states seem more interested than they were in putting the unresolved conflict behind them so that they can better deal with new strategic realities in the sub-region. In short, all three states have entered a new and complex strategic landscape. To summarise, the major potential systemic driver of American policy in the Southern Caucasus (Russia) was weak for much of the period in question. In consequence, that policy reflected a wide array of economic (access to Caspian energy), domestic political (e.g, the Armenian diaspora’s weight in policy-making on Armenia and Karabakh), and ideational (democracy promotion) factors. To an extent, various bits of US policy towards the region were captured by particular interests and lobbies within the American policy process (the energy industry regarding Azerbaijan, Armenian-Americans regarding Armenia and Karabakh, and neoconservatives around President Bush in respect of Georgia). To put another way, American policy was inchoate and more than occasionally contradictory (viz. policy perspectives on democratic transition in Azerbaijan versus Georgia, and the tensions between Armenia and Azerbaijan over Karabakh). By the end of the Bush Administration, however, the increasing salience of Russian policy in the region (on energy, on regional security, and on the regional structure of power), coupled with growing Russian capacity, the deep deterioration of Russia’s relations with that favourite of the Bush Administration, Georgia, and the crisis in US-Russia and NATO-Russia relations occasioned by Russia’s war with Georgia necessitated a fundamental rethinking. This rethinking was also favoured by the general overstretch of US military forces globally, and a profound economic crisis.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

3.4. The Obama Administration These changes in the strategic situation coincided with the election of a new US Administration. It is too early to say much of a definitive nature about the Obama Administration’s policy going forward, not least because policy towards the Caucasus (and Russia) has been subject to careful ongoing review. The challenge for the United States in this context is multifaceted. Current American objectives with regard to the Caucasus cannot be separated from the effort to improve relations with Russia. US objectives with regard to Russia include renegotiating the bilateral strategic arms reduction agreement, securing greater cooperation on the war in Afghanistan, diminishing the negative impact of BMD deployment on the bilateral relationship, strengthening the non-proliferation regime and attaining a higher level of Russian cooperation vis-à-vis Iran and North Korea, and clarifying how Russia fits in to the European and global security architectures. As part of the latter, the United States seeks agreement on Russia’s role in the former Soviet region. The fundamental question with respect to US policy in the Caucasus is how to square American preoccupations in this sub-region with the larger construction of a 26 For early evidence, see the “Moscow Declaration” in November 2008, when the Presidents Aliev, Sarkisian and Medvedev reaffirmed their commitment to a political solution, endorsed the Madrid Principles, and agreed on the need for credible international guarantees of the settlement. The Declaration is discussed in L. Fuller, Moscow Declaration2: A Victory for Armenia, RFE/RL, (2 November, 2008).

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

121

positive and mutually beneficial relationship with the Russian Federation. At the time of writing, several trends seem apparent. One is a re-embrace of multilateralism in the US approach to the region’s security problems. The United States strongly supported the EU effort to mediate a ceasefire in Georgia’s war and the deployment of an EU Monitoring Mission to monitor the cease-fire. There were indications in January 2009 of an American preference for the EU to take a stronger role in this region, as part of a larger transatlantic division of labour.27 Stepping back in favour of the EU (and also, arguably, Turkey) would have the advantage of reducing the risk that disagreements in the Caucasus would pollute the effort to reset the relationship with the Russia Federation. The problem here, of course, is that the EU appears to be incapable of strategic action in the Caucasus because it is has difficulty in formulating a strategy towards Russia itself. Second, in respect of Georgia, there is evidence of a depersonalization of the relationship with President Saakashvili.28 Statements leading up to, and during, the visit of Vice-President Biden to Tbilisi in July 2009 suggest a belief that the process of democratization is incomplete, coupled with support for further democratic and economic reform in Georgia. Statements of support for Saakashvili himself are rare.29 This has reportedly been accompanied by private pressure on Georgia’s president to open up the media, to revise the division of powers between Parliament and the Executive, to progress judicial reform, and to recalibrate the electoral law.30 This more critical perspective on Mr. Saakashvili reflects two factors at least: a belief that Georgia’s president bears some degree of responsibility for the war and for the problems arising therefrom in US-Russian relations; and a recognition that, in fact, Georgia is not a democracy and has been moving in the opposite direction under President Saakashvili. On the other hand, the United States has repeatedly and strongly reaffirmed its commitment to the territorial integrity of Georgia, and its unwillingness to recognise the Russian-occupied breakaway Georgian regions of South Ossetia and Abkhazia and to accept Russia’s claim to special rights and responsibilities in the former Soviet region. Vice-President Biden also called for Russian compliance with the terms of the 12 July 2008 ceasefire accord, including the full withdrawal of Russian forces not only from areas of Georgia outside the two breakaway regions, but also, eventually, from those regions themselves [13]. The Obama talks with Medvedev in Moscow in July 2009 were marked by substantial disagreement on these issues. However, the two sides apparently agreed to leave this disagreement aside and to move forward on other elements of the bilateral agenda, leaving resolution of the Georgia matter for another day. This agreement to disagree is a good indicator of where US priorities lie with respect to the Caucasus. The region is not a central issue in foreign policy formulation.

27

Interviews in London, February 2009. See L. Beehner, Letter from Tbilisi: Georgia’s Change of Fortune, Foreign Affairs LXXXIV (July August 2009).See also D. Rayfield, The Georgia-Russia War, A Year On, Open Democracy (7 August, 2009). Available at: http://opendemocracy.net. 29 Biden’s address to the Georgian Parliament on the 23rd of July 2009 is indicative. He stressed that the United States stands by Georgia (i.e. the country and not the person). He also stressed the American expectation that further progress was needed on government transparency and accountability, effective legislative debate, electoral reform, media independence, judicial independence, and redefining the balance of power between the Executive and the legislature. He also stated that there was no military option for reunification of the country [13]. 30 Interviews in Tbilisi, July 2009. 28

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

122

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

The challenge is how to avoid letting secondary issues arising in the region obstruct forward movement on issues of central importance in US policy. Georgian-American security cooperation clearly displays the modulated and cautious approach of the United States to balancing their relationship with Georgia with the sensitivities of Russia in the area of sub-regional security. The Georgian application for a NATO MAP appears to have fallen off the current agenda.31 The United States has not acceded to Georgian requests for assistance in rearmament (notably anti-aircraft and anti-tank systems).32 Spending on security was excluded from the 2008 grant of an additional $1 billion is assistance to address the consequences of the war with Russia. On the other hand, the United States, like other NATO allies refused to bend to Russian pressure to cancel a planned May 2009 PfP exercise in Georgia.33 In August, the United States announced a modest resumption of its train and equip programme in Georgia (GTEP) for the specific purpose of preparing Georgian troops for service alongside the Marines in Afghanistan. Prior consultation with Russia and assurance that the form of training provided was focused on counterinsurgency rather than conventional operations, coupled with stress on the mutual Russian-American interest in the stabilisation of Afghanistan, was designed to forestall Russian criticism.34 The picture, then, is one of cautious and somewhat sceptical management of the GeorgianAmerican security relationship with careful consideration of how this bilateral relates to evolving US relations with Russia. This shift has not gone unnoticed among American supporters of the Saakashvili government. A recent report from the ranking Republican member of the U.S. Senate Foreign Relations Committee notes that the war has left Georgia largely incapable of effective territorial defence, and that the reluctance of the U.S. and other NATO member states to transfer military equipment to replenish Georgian stocks amounts to a Russian-imposed embargo [14]. That the report does not call directly for a resumption of military sales, however, suggests that senior Republicans are also sensitive to the need to step carefully at a time when the U.S. is attempting to reset the relationship with Russia. Turning to other matters in the region, the United States has reaffirmed its support for the Nabucco gas line from Azerbaijan to Europe, thereby underlining its continuing commitment to open access to Caspian Basin production. In addition, and in cooperation with Turkey, France, and the Russian Federation, it has made a strong effort at the highest level to reinvigorate the Nagorno Karabakh peace process. The recent declaration of the three co-chairs of the Minsk Group is illustrative. The declaration is a concrete indication of the capacity of Russia and the United States to 31 See, for example the cautious wording of paragraphs 29 and 31-32 of the NATO “Strasbourg/Kehl Summit Declaration” (4 April 2009), and the commentary in P. Razoux, What Future for Georgia, NATO Research Paper No. 47, NDC, Rome, June 2009, where it is argued that NATO has made movement towards membership conditional upon democratic, electoral, and judicial reforms, as well as (implicitly) on a peaceful negotiated solution to “the disagreements between [Georgia an] Russia, Abkhazia, and South Ossetia.” 32 On this point, see [14]. 33 In addition, in July 2009, contemporaneously with large Russian naval exercises in the northern Black Sea, the guided missile destroyer USS Stout visited Batumi and Poti to participate in a bilateral GeorgianAmerican naval exercise. See: Embassy of the United States Georgia, “USS Stout to Make Port Call in Batumi” (14 July, 2009). Available at: http://georgia.usembassy.gov/latest-news/2009-press-releases/ussstout-to-make-port-call-in-batumi-july-14.html. 34 It is worth noting that under the terms of the ISAF training, no U.S. equipment can remain in Georgia subsequent to completion of training [14].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

123

put their differences aside where there is potential for resolving an issue that is inconvenient for both of them. Both powers find the Karabakh conflict to be a distraction from their larger policies in the region, and to be an annoying impediment to their efforts to develop relations with both sides in the conflict. In addition, the Russian side wished to highlight that the Georgia events were an exception and that Russia could be an effective broker of peace in the region. The result was this “unusual declaration” renewing the Madrid principles of 2007 and delivering something close to an ultimatum to the parties to get on with it.35 Also in connection with Karabakh, the United States has taken a very substantial role in the efforts of Turkey and Armenia to normalise their relations and to open their borders. In October 2009, this was evident in Secretary Hilary Clinton’s personal involvement in pushing the negotiation towards a successful conclusion and in the American effort to secure unconditional ratification by the two sides [15]. Whether this effort will ultimately succeed in the face of deep Azerbaijani unhappiness over the development, domestic opposition in Turkey to de-linking normalization from progress of the Karabakh question and the reservations of the Armenian diaspora about normalization is another matter.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Conclusion To conclude, for much of the period since the end of the Cold War, American policy in the Southern Caucasus wandered in the void, lacking a strong strategic impulse. This resulted from the absence of any deep historical involvement and of any strategic urgency. The result was foreign policy à la carte. The resurgence of Russia as an assertive regional power altered the strategic landscape. Events in Georgia in 2008 highlighted the capacity for the region to generate significant difficulties in the American effort to manage their relations with Russia. The result, recalling the discussion of policy drivers at the beginning of this article, was a resurgence of the strategic concerns and the marginalization of domestic political, ideological, and personal factors in US policy formulation. This change was also favoured by the change in administration in Washington and the emergence of a more pragmatic and focused policy team. Recalling the earlier mention of the choice between cooperation and competition, current American policy seems to be one of seeking cooperative outcomes with Russia where possible, while making clear the line beyond which Russian unilateralism is unacceptable. In addition, the trend is towards reducing the profile and exposure of US diplomacy in the region and to encourage partners (e.g. the EU in respect of Georgia and Turkey in respect of Karabakh) to share the burden.

35

See White House, “Joint Statement on the Nagorno Karabakh Conflict” (10 July 2009). Available at: http://www.whitehouse.gov/the_press_office/Joint-Statement-on-the-Nagorno-Karabakh-Conflict/. See also the comments by S. Markedonov, “Strategia Mirotvorcheskovo Uskorenia” (13 July, 2009). Available at: http://www.politcom.ru/print.php?id=8492 and P. Goble, “Minsk Co-Chair Presidents Press for Karabakh Settlement” (15 July, 2009). Available at: http://www.ada.edu.az/bwprint.php?itemid=2009072010 2623660&sec_id=241. The reference to the unusual quality of the declaration is in Goble. Of course this does not mean that there will be a settlement. None of the three co-chairs has sufficient influence over the parties to induce them to agree. The two leaders face very powerful domestic constraints on their capacity to compromise on the Karabakh issue.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

S.N. Macfarlane / The Evolution of US Policy towards the Southern Caucasus

124

References [1] [2] [3] [4] [5] [6] [7]

[8]

[9] [10] [11] [12]

[13]

[14]

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

[15]

K. Waltz, Theory of International Politics, McGraw Hill, Boston, 1979. K. Waltz, Man, The State, and War, Columbia University Press, New York, 1959. International Energy Agency, Caspian Oil and Gas, IEA, Paris, 1998. S. N. MacFarlane and L. Minear, Humanitarian Action and Politics: The Case of Nagorno-Karabakh, Occasional Paper #25, The Watson Institute for International Studies, 1997. Annex 14 to OSCE, Istanbul Document 1999, OSCE, Istanbul, 1999. Available at: http://www.osce. org/documents/mcs/1999/11/4050_en.pdf. F. Lukyanov, Learning the Skills of Being a Regional Power, Moscow Times No 4106, 18 March 2009. D. Trenin, Russia in the Caucasus: Reversing the Tide, The Brown Journal of World Affairs XV (Spring-Summer 2009). Available at: http://www.bjwa.org/article.php?id=ae7cG2kZZUW4689bkL1wXWMRI2zJUEsopqHs1H6M. V. Putin, Putin Pledges $500 million for Security Purposes in Abkhazia, Russia Today, 12 August 2009. Available at: http://www.russiatoday.com/Top_News/2009-08-12/putin-interview-abkhaziageorgia.html. V. Cheterian, Georgia: Between War and a Future, OpenDemocracy, 8 July 2009. Available at: http:// www.opendemocracy.net. United States-Georgia Charter on Strategic Partnership, 9 January 2009. Available at: http://www. america.gov/st/texttrans-english/2009/January/20090109145313eaifas0.2139093. Azerbaijan and Russia Sign New Gas Deal, TRT, 30 June 2009. Available at: http://www.trt.net.tr/ international/newsDetail.aspx?HaberKodu=e8580ddc-15cd-4555-b963-97d064bce6a4. V. Socor, Azerbaijan Boosts Implementation Prospects of Nabucco Intergovernmental Agreement, Eurasia Daily Monitor VI, No. 137, 17 July 2009. Available at: http://www.jamestown.org/single/? no_cache=1&tx_ttnews%5Bswords%5D=8fd5893941d69d0be3f378576261ae3e&tx_ttnews%5Bany_ of_the_words%5D=socor&tx_ttnews%5Bpointer%5D=1&tx_ttnews%5Btt_news%5D=35282&tx_ttn ews%5BbackPid%5D=7&cHash=a27601830f. Remarks by the Vice-President to the Georgian Parliament, 23 July 2009. Available at: http://www.whitehouse.gov/the_press_office/Remarks-By-The-Vice-President-To-The-GeorgianParliament/ R. Lugar et.al., Striking the Balance: U.S. Policy and Stability in Georgia – A Report to the Committee on Foreign Relations, United States Senate (22 December, 2009), S.Prt. 111-37, United States Congress, Washington, DC, 2009. Turkey, Armenia Sign L:anmark Agreement to Normalize Ties, RFE RL, 11 October 2009. Available at: http://www.rferl.org/content/Turkey_Armenia_To_Sign_Landmark_Agreement_To_Normalize_ Ties/1848293.html.

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus M. Aydin (Ed.) IOS Press, 2011 © 2011 The authors and IOS Press. All rights reserved. doi:10.3233/978-1-60750-684-3-125

125

The Russian Policies in the South Caucasus    1 Assoc. Prof. Dr., Department of International Relations, Kadir Has University, Istanbul, Turkey

Abstract. In the post-2000 period, Russia’s relations with the former Soviet geography, or its “near abroad,” are dominated by such issues as energy, namely the dependence of the surrounding countries on Russia, changes in the trade patterns and the impact of globalization, the fight with terrorism, entrenched ethnic conflicts, and the enlargement of Western structures including NATO. In this general framework, the Caucasus has had a special importance for Russia due to its geopolitical and strategic position at the crossroads of energy transit lines, the existence of rich energy resources and the complexity of its ethnic structure. This article aims to analyze Russian Federation’s Caucasus policy in a comprehensive manner. Keywords. Russia, the Caucasus, Putin, Frozen Conflicts.

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

Introduction In the post-2000 period, Russian relations with the former Soviet geography, or its “near abroad,” have been dominated by such issues as energy, namely the dependence of the surrounding countries on Russia, shifts in trade patterns and the impact of globalization, the war on terrorism, entrenched ethnic conflicts and the enlargement of Western structures including NATO. In this general framework, the Caucasus has had a special importance for Russia due to its geopolitical and strategic position at the crossroads of energy transit lines, the existence of rich energy resources and the complexity of its ethnic structure. It should also be noted that the increasing attention of the US and the EU on the Caucasus since the 1990s with the goal of eliminating regional instability has appeared to be another factor which contributed to the intensification of Russian sensitivities in this region. The situation is further complicated by the efforts of Turkey and Iran, having been labelled as regional powers, to establish special relations with the Caucasian countries. Under these circumstances, it seems necessary to engage in a comprehensive analysis regarding the policies of the Russian Federation towards the Caucasus. In this regard, the following questions should be analyzed: Does the Russian Federation have a unitary and comprehensive policy regarding the Caucasus? Do Russian policies in the Caucasus deviate from the general characteristics of Russian foreign policy? How do the policies in the Caucasus affect the general outlook of Russian foreign policy? This article mainly seeks to answer these questions. 1 Associate Professor at the Department of International Relations, Kadir Has University, Istanbul, Turkey. E-Mail: [email protected].

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

126

M. Çelikpala / The Russian Policies in the South Caucasus

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

1. The Russian Federation and the Caucasus from Independence to the Putin Presidency In the post-Soviet era, the Caucasus has been defined as a political space only in terms of the South Caucasus or, from the Russian perspective, the Transcaucasus. The North Caucasus, which remains inside the borders of the Russian Federation and stretches along the northern slopes of the Caucasus Mountains range, is kept outside of these evaluations. This is based on the intention to distinguish the republics of the North Caucasus from the South Caucasus and especially Abkhazia and South Ossetia, which are inhabited by people closely related to the North Caucasus. Even though this precipitated regional tensions from time to time, the political boundaries drawn following the dissolution of the Soviet Union reinforced a congruent practice. In this vein, the Caucasus will be used in this article to denote the territorial space covered by Azerbaijan, Armenia and Georgia, if not otherwise stated. Yet the security problems of the region bring the two sides of the Caucasian mountains together under the influence of several political, economic and demographic factors. In the initial period following the establishment of the Russian Federation, primacy was given by Russia, the foreign policy of which was run by the then Foreign Minister Andrey Kozyrev and the then President Boris Yeltsin, to the establishment of harmony and cooperation with the Western world. Also, as the Western world’s priority in this period was Eastern Europe, as the Caucasus had not been identified as a region deserving particular attention. In this regard, the Caucasus was understood to be a strategically important region, which was generally addressed in tandem with Central Asia. For the Western world, the Caucasus was consciously left aside in order not heighten tensions bred by regional conflicts. In this atmosphere of conscious negligence, the Russian Federation, too, had viewed the regional conflicts in the Caucasus as issues that could consume its existing resources and therefore were not deserving of primary consideration at that time. The Russian attitude towards the Caucasus becomes apparent with Kozyrev’s first official visits to the newly independent republics in the Caucasus and Central Asia in April 1992 following three official visits of the then US Secretary General James Baker. In a similar vein, the first embassies of the Russian Federation were opened in these regions in late 1992 and early 1993 after the establishment of the Turkish, Iranian, the US and Chinese embassies. Nevertheless, it should also be noted that this did not mean that Russia did not intend to exercise influence in the Caucasus and the Central Asia and that it was not represented there. Rather, during this initial period, Russia had been represented in these areas through the existence of the ethnically Russian population and its military presence, which could be viewed as the most remarkable Soviet legacy there. However, the Russian military presence in these regions combined with regional conflicts become chronic, leading to an impression of Russia as instigating regional problems rather than solving them. In this respect, the complexities as well as the uncertainties of Russian foreign policy towards these regions contributed to the emergence of a troubled Russian image [1]. This process has changed in time as Russia began to use regional conflicts as a means of strengthening its influence in the Caucasus and Central Asia. The period between 1991 and 1993 coincides with Russian efforts to reform the state apparatus with the vision of establishing internal stability and eliminating the

Non-Traditional Security Threats and Regional Cooperation in the Southern Caucasus, IOS Press, Incorporated, 2011. ProQuest

Copyright © 2011. IOS Press, Incorporated. All rights reserved.

M. Çelikpala / The Russian Policies in the South Caucasus

127

legacy of the cumbersome decision-making process inherited from the Soviet Union. This initial period witnessed economic problems and a lack of institutionalization and coordination among state structures in Russia. Also, Russia could not intervene effectively in ethnic conflicts in the problematic areas inside its own borders such as Tataristan and Chechnya, which began to act relatively independently from the centre during this time. These developments led many to argue that the Russian Federation would face dissolution, similar to the Soviet experience. In this atmosphere, it became possible only after the second half of 1993 for Russia to develop a coherent attitude towards the ex-Soviet republics. This attitude, which is referred to as the “near abroad” doctrine, has come to be regarded by many as a post-imperialist approach with economic, political and military dimensions. 2 Russia had concomitantly begun to construct its internal order following the end of the internal clashes between September and October of 1993. As Yeltsin established his control over the Parliament and took steps to provide internal stability, Russia could begin to deal with the developments in the ex-Soviet geography in a more comprehensive and planned way. During this period, whilst the pro-Western political groups retreated from the political scene, the Eurasianist forces raised their profile and seized political power. This change has been influential on the transformation of Russian foreign policy and the shaping of the new policies. 3 This transformation meant a more interventionist attitude towards its near abroad, which involved a military dimension among others and was also being shaped in the shadow of the Soviet past [2]. In this respect, the Caucasus began to occupy a central position in Russian domestic policies in the context of the developments in Chechnya and the North Caucasus and for Russian foreign policy as well, in the context of the developments in Abkhazia, South Ossetia and Nagorno-Karabakh. The Caucasus was regarded as a centre of instability and inefficiency for a number of reasons: ethnic conflicts in the wider Caucasus including the Russian territory (Chechnya, Nagorno-Karabakh, South Ossetia and Abkhazia in the North Caucasus); opposition to the emerging constitutional order; conflicts between the government and the opposition (Zviad Gamsakhurdia and Eduard Shevardnadze in Georgia, Ebulfeyz Elchibey and Haydar Aliyev in Azerbaijan); efforts of the newly independent states to establish contacts with the international society independent of Russia; and, the close attention the outside world paid to developments in the region. 4 In this period, the priority for Russia was to re-establish order inside its borders by having all autonomous regions sign the Federal Treaty, thus establishing the Commonwealth of Independent 2 “Because of the lack of adequate resources, Russia, instead of being a actor of solutions to the problems and conflicts in the Caucasus, turned out to be a real source of all those problems and conflicts”. P. Baev, Russia’s Policies in the Caucasus, The Royal Institute of International Affairs, Russia and Eurasia Programme, London, 1997. 3 It has been analyzed that Russian foreign policy making was dominated by two main schools during the 1990s: A Euro-Atlanticist approach was dominant in the early years of Soviet collapse. The then minister of foreign affairs of Russia, Andrey Kozirev, was the leading name and for this group foreign policy and economy played the primary role in state affairs. This approach took into account the West and sought to build Russia as a western country. The other approach is taken up by the Eurasianists, and this group increased its presence in Russian politics after the second half of the 1990s. This approach considers itself as realist school and prioritizes power as the main target for Russia. For them Russian decision-makers redefine Russia and its place in the world politics by giving the main role to Russian interests. Priority is not the West but the near abroad, Eurasia. For a detailed analysis, see M. Mesbahi, Russian Foreign Policy and Security in Central Asia and the Caucasus, Central Asian Survey 12 (1993), 181–215. 4 For Russia’s Caucasus policy before Putin see O.     !  "# $%#& '#  *# "%+ in M.