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Bracing for impact. Shifting geopolitics in the South Caucasus

For the three countries of the South Caucasus, the sudden emergence of the COVID-19 pandemic has reconfigured domestic politics, reordered policy priorities and recommitted each government to respond to the overwhelming crisis in public health. For Armenia, Azerbaijan and Georgia, the urgency of managing the immediate crisis will soon be matched by the equally daunting task of ensuring economic recovery and enabling social repair.

July 7, 2020 - Richard Giragosian - Hot TopicsIssue 4 2020Magazine

Photo courtesy of Richard Giragosian

But beyond the need for containing the virus and the necessity for economic restoration, the deeper significance of the COVID-19 crisis is even more profound, as shifts in regional geopolitics now underway exert even deeper implications.

These geopolitical shifts in the South Caucasus region can already be seen. And although each country will have to “brace for impact” in the face of these looming shifts and coping with challenges of different degrees, the region as a whole is already subject to the effects from a new shared geopolitical landscape. More specifically, there is a set of three distinct geopolitical trends that directly impact the South Caucasus. The three elements of this triad of geopolitical trends include: energy, which has already become a downward driver of global economic decline; economics, when the traditional global supply chain, “just in time” model of highly interconnected trade in the globalised marketplace is on the verge of collapse; and security, where public health is now recognised as a more urgent threat than any external threat or consideration of border defence. As each of these three geopolitical trends and shifts – in energy, economics and security – poses serious repercussions, the longer-term impact will be largely irreparable.

Beginning with the first of these three trends, evidence of the shift in geopolitics is already clear in terms of energy, where profit and power from oil and gas no longer offer comparable dividends to energy producers. With the immediate collapse of global energy prices, producing countries, like Azerbaijan, can no longer rely on guaranteed energy wealth. The over-dominance on the energy sector, coupled with a lack of diversification, has already challenged the government in Azerbaijan, with wider implications as the sharp fall in energy exports only weakens its capacity to respond to the coronavirus crisis.

Important energy transit countries, like Georgia, will also suffer an immediate decline in revenue, matched by a downgrading of strategic significance as pivotal transit states. For Armenia, which has no oil or gas resources, the significance of its nuclear power plant is likely to increase, especially as it is the only country with a nuclear facility in the region. At the same time, both Georgia and Armenia will probably move further and faster in adopting more environmentally-friendly energy choices, thus aligning closer to EU standards of “green” environmental policies while also looking more to hydroelectricity and renewable energy (like solar and wind alternatives) in response to the broader decline of hydrocarbons.

Just as energy poses a substantial geopolitical impact on the region, the economics of the post-COVID-19 period will also transform the South Caucasus. The spillover from the dramatic revision of the traditional global supply chain, based on a model of highly interconnected trade, will likely result in new changes to the pattern and direction of trade. While this will affect agriculture throughout the region, it will also pose new challenges to Armenia’s reliance on mining and mineral exports, magnified by both lower prices and greater volatility in global commodity markets.

Moreover, the shift in economics through the recovery phase will also result in wider disparities in wealth and income and will require new investment in a more equitable social “safety net” in each country. Additionally, there will be a sharp decrease in foreign direct investment in the region, as traditional investors and sources of finance will be distracted by competing priority areas. For the South Caucasus, this will only further alter the region’s economic profile and investment climate, as Chinese investment may replace Russian investment and outmatch western aid in the coming years.

Beyond energy and economics, the third trend of security is also significant, and will impose a redefinition of threat and a reinterpretation of security. Obviously, public health has already been regarded as a more urgent threat than other external threats or military considerations of border defence. Within the region itself, the post-crisis security environment may also include a new risk: renewed hostilities over pre-existing “frozen conflicts”. Such a scenario would be based on the temptation to exploit weakness as an opportunity to act militarily, possibly a renewed military offensive by Azerbaijani forces against Nagorno-Karabakh, or, less likely but still possible, a Georgian attempt to restore control over its Russian-backed separatist regions of Abkhazia and South Ossetia.

Outside of the region, however, regional security may actually be bolstered as Russia will be less capable of power projection as it becomes more invested in the imperative of its own domestic stabilisation. At the same time, the necessity for economic recovery amid a collapse of the global energy sector may induce Iran to become more of a constructive, and even productive, contributor to security and stability in the region.

Most importantly, however, is the fact that each of these three geopolitical trends will impose irreparable and lasting change across a wide range of areas. In a cumulative convergence, these trends will only entrench lasting changes in the geopolitics of the South Caucasus. While the region is now “bracing for impact”, it remains far too early to accurately assess the capacity for weathering these shifts, but also far too late to ignore the impact and severity of these changes. Therefore, for the South Caucasus, the geological tectonics of shifting geopolitics will pose a degree of unprecedented change with unparalleled opportunities.

Richard Giragosian is the founding director of the Regional Studies Center (RSC), an independent think tank in Yerevan, Armenia.

This text is part of a special expert survey titled “Geopolitics and coronavirus” co-financed through an agreement with the Eastern Europe Department at the Polish Ministry of Foreign Affairs.

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