The South Caucasus after the Second Karabakh War

Vladimir Putin meets with the leaders of Azerbaijan and Armenia. Photo (CC) kremlin.ru

This is largely due to the fact that the success of these states is rarely associated with regional success. As a result, the prospect of creating conditions for harmonious development is still in decline. Today’s reality gives no grounds for optimism. Nevertheless, this opportunity is closer today than it was before the start of the Second Karabakh War, which broke out last year.

Waiting for the future

Even taking into account the region’s conflicts, it is enough just to look at a map to see the potential of the South Caucasus. Overall, it is difficult to find such a compact region with almost inexhaustible resources for development anywhere else in the world. Along with its huge geopolitical and geoeconomic opportunities, the South Caucasus has great potential regarding transit and tourism. The region also possesses natural resources of global importance and an educated, relatively cheap labour force.

It is clear that the area’s ability to act as a transit hub has already been developed in spite of several conflicts. This has been achieved through the efforts of Azerbaijan and Georgia and their co-operation together with Turkey. Before the pandemic, tourism was also developing rapidly in Armenia, Azerbaijan and Georgia. For example, thousands of tourists from Japan managed to visit all three countries in one tour despite the conflict between Armenia and Azerbaijan. For these groups, perhaps the greatest motivation for visiting the region was its cultural and civilisational diversity. Otherwise, it would be impossible for tour operators to spark interest in the area among these exacting Japanese tourists.

The region is also losing a lot in terms of foreign direct investment. In conditions of peace, integration and stability, the amount of FDI would naturally be several times higher. Considering the economic potential of its large diaspora, Armenia would perhaps benefit the most from increasing investment. These facts only further suggest that all the necessary prerequisites for the development of the South Caucasus already exist. In the future, the region may well take a prominent place in international relations. It would subsequently be able to ensure the average European standard of living for the population and prospects for further sustainable growth.

Unfortunately, the South Caucasus is still waiting for a better future. After the collapse of the Soviet Union and the restoration of Armenia, Azerbaijan and Georgia’s independence, the South Caucasus was primarily associated with conflict, hostility, warfare, closed borders (still happening in the 21st century), tension and negative expectations. Why is this happening? Could all of this have been avoided before and what needs to be done to prevent this from happening again? Do these three nations have the vision, political will and resources to change this situation for the better?

The situation is complicated by the fact that the three states see their future differently. Georgia sees potential membership of NATO and the European Union as its main foreign policy priority. In contrast, Armenia has already become a member of the Russia-led Collective Security Treaty Organisation (CSTO), Eurasian Economic Union (EEU) and Eurasian Customs Union. It should be remembered that such projects naturally limit the country’s sovereignty. This is especially clear in terms of Armenia’s economic relations with third countries. If we imagine a hypothetical situation in which Armenia, Azerbaijan and Georgia agree to create a free trade zone, then Armenia will have to coordinate this with the bodies of the EEU.

Azerbaijan, meanwhile, is an active member of the Non-Aligned Movement and the Organisation of Islamic Cooperation, which maintains contacts with both the EU and the EEU. At the same time, the South Caucasus remains an arena for competition between major players at the regional and global scales. These powers are often guided by their own values ​​and principles of co-operation in pursuit of their goals. Of course, these players affect the development of the region in various different ways. Whilst some encourage regional co-operation and open up new development prospects for the South Caucasus, others act based on the “divide and rule” principle and attempt to minimise the possibility of integration and stability in the region.

Missed opportunities

What are the prospects for the South Caucasus to become a prosperous, attractive region capable of using its practically unlimited and unrealised potential? In general, it seems that the South Caucasus is a champion of missed opportunities. The area’s three states could create a unique common space for joint development that would allow them to benefit from all of the aforementioned natural advantages. With regards to stabilising the political situation of the South Caucasus, the international community’s interest in the region will grow many times over if steps are made towards this goal. Serious entrepreneurs with billions of direct investments will likely come to the region in such a situation. Billions of dollars from local states’ own national budgets could also be spent on development. Today, however, they are forced to spend these funds on military needs.

The total volume of military spending in Armenia for the period 2010-18 amounted to 3.801 billion US dollars, ranging from 2.7 to 4.3 per cent of GDP each year. For Azerbaijan, this figure is 14.905 billion and, accordingly, between 2.2 and 4.6 per cent of GDP. For Georgia, it amounted to 3.041 billion, or 0.7 to 9.2 per cent of GDP. In total, between 2010 and 2018 the three countries spent almost 22 billion US dollars on defence. During the previous 20 years, at least another 30 billion was used for military purposes in the region. All three countries are doomed to similar expenses in the following years. These are huge sums of money even for more successful regions.

In addition to these issues, it is clear that we, as a region, have lost both our authority and reputation in the international arena. We do not enjoy the confidence of international investors and this primarily concerns Armenia. As a result, the main investment projects in the region (the Baku-Supsa oil pipeline, the Baku-Tbilisi-Ceyhan oil pipeline, the Baku-Tbilisi-Erzurum gas pipeline, the Baku-Tbilisi-Kars railway and the Caspian Sea-Black Sea route) have been implemented without the participation of Yerevan.

Instead of regional cooperation, we were drawn into confrontation. External power, along with historical and emotional manipulation, have been skilfully used by various outside interests based on the ‘divide and conquer’ principle. At first, Russia supported Armenia in the Nagorno-Karabakh conflict and helped it establish control over the disputed territory and seven adjacent regions of Azerbaijan. At the same time, Armenia’s overall dependence on Moscow increased. We saw the most dramatic manifestation of this dependence in autumn 2013, when Yerevan refused to sign an EU Association Agreement. Under open pressure from the Kremlin, the state subsequently decided in favour of joining the EAEU.

We must pay tribute to Russian diplomacy – both Armenia and Azerbaijan have declared that they have excellent relations with Moscow. In years past Armenia, for obvious reasons, had more grounds to pursue close ties. Recently, however, Russia disregarded, if not the letter, then the spirit of its agreements with Armenia. This gave Baku a chance to regain control over its internationally recognised borders. Again, both countries talk about their good relations with Russia but now the difference is that Azerbaijan has more reasons to boast.

External factors

The situation in the region has changed radically in the past few years. There is no doubt that the ongoing process of restoring the region’s internationally recognised borders should be assessed positively. This is good not only for Azerbaijan but also for Armenia and, naturally, Georgia. However, the deployment of up to 2,000 additional Russian ‘peacekeepers’ in the region does not give cause for optimism. Georgians know better than anyone else what this means in reality, although Azerbaijan is now in a more advantageous position than Georgia. First of all, the Russian contingent is located in an enclave on the territory of Azerbaijan, having no land access to Russian territory and all the logistical consequences that come with it. This was not the case in Abkhazia and the Tskhinvali region (so-called South Ossetia). Secondly, the ‘peacekeepers’ entered Nagorno-Karabakh to replace the outgoing Armenian military against a backdrop of good relations between Azerbaijan and Moscow. This reality should be definitely attributed to the success of Baku’s diplomacy.

The Turkey factor is also becoming a very important part of regional politics. This makes the situation even more interesting as Russia has always treated our region as a sphere of its exclusive interests. Moscow has fiercely defended this position in all international formats, especially behind the scenes. Now Russia’s position has changed and it is important to understand why this is happening.

Unfortunately, the EU and the United States lacked initiative and were unable to increase their influence in the region. From the Georgian point of view, this is a very unfavourable development. Tbilisi’s pivotal foreign policy priority remains integration with NATO and the EU, with the ultimate goal of membership in these organisations. The strengthening of the transatlantic partnership and a greater presence of the US and the EU in the region will mean that European standards, traditions, practices and cooperation criteria will be introduced in the South Caucasus. These factors will only help long-term prospects for the final political settlement of conflicts in the region. The EU offers a great example of how this process can be achieved. Hundreds of thousands of French and German soldiers died for the right to possess Alsace-Lorraine during the two world wars. Today, the border has a positive symbolic meaning as Germany and France are strategic allies and form the core of the EU.

If the Nagorno-Karabakh conflict is finally settled on the basis of political consensus, this will have a strong positive impact on the conflict settlement process on the territory of Georgia. This can be realised provided that Russia’s ability to influence regional affairs is reduced. Ultimately, Armenia, Azerbaijan and Georgia will be able to take full advantage of the benefits provided by regional cooperation.

Transport corridors

The November 10th 2020 statement of Azerbaijani President Aliyev, Armenian Prime Minister Pashinyan and Russian President Putin, among other things, refers to the unblocking of all economic and transport links in the region. This development can only be welcomed. The opening of transport corridors in the South Caucasus will help to increase the region’s overall competitiveness in the wider international system. At the same time, the competitiveness of each individual route depends on three main criteria: security, capacity and freight rates. Therefore, there is still a lot to be done regarding the routes controlled by Russian peacekeepers and FSB-controlled border troops if they are to become international transport corridors in the fullest sense of the word.

Perhaps the best outcome for the South Caucasus would be a future in which it can compete with other corridors. This is especially true regarding the northern corridor, which sees 130 million tonnes of cargo go from China to the EU and back every year. We should also consider Central Asia, Turkey, India, Iran and others. Each year, the potential for freight traffic grows by several million tonnes. This is worth fighting for and is being pursued by Azerbaijan and Georgia. If Armenia joins the process, it would help strengthen the entire region’s potential to form a space of integration, stability and security.

The diversity of the South Caucasus is our common heritage and asset. Armenians, Azerbaijanis, Georgians, Jews, Russians, Ukrainians and many others have always lived and will live here. But the space of the South Caucasus will belong to three states: Armenia, Azerbaijan and Georgia. These three, not four, five or six, should decide what the region will look like in the future. In this triangle, relations between Armenia and Azerbaijan are the most problematic due to the status of Nagorno-Karabakh. However, Baku knows that Khankendy is not an ordinary regional centre of Azerbaijan, whilst Yerevan is well aware that Stepanakert will not become the capital of an independent state. It is necessary to build on these realities and reach a compromise.

Towards a new atmosphere of tolerance

Experience can be useful here as well in helping to encourage cooperation. More than 180,000 Azerbaijanis form the largest group living in the Georgian region of Kvemo Kartli. At the same time, more than 80,000 Armenians live in Samtskhe-Javakheti. Although these regions are adjacent to each other, there has been no conflict between these groups in the years since the collapse of the Soviet Union. Even the various phases of the Nagorno-Karabakh conflict have not been able to change this situation.

There have never been any conflicts between these two national minorities in Tbilisi, where tens of thousands of Azerbaijanis and Armenians live mainly in the neighbouring regions of Avlabari and Abanotubani. This is a promising sign and a vivid demonstration that cooperation, good-neighbourliness and even friendship between Azerbaijanis and Armenians is possible.

Such centres of friendship and mutual understanding between different ethnic groups deserve special attention and support as a model that can play an important role in the formation of a new atmosphere of tolerance and cooperation in the region. At least, it will give us additional hope for the future.

The trilateral cooperation format – Armenia, Azerbaijan and Georgia – has great potential. Not all external players that claim special interests in the region will be happy about such collaboration. However, the time has come to strengthen the culture of cooperation and improve regional ambitions. This will ultimately lead to the formation of a common vision of regional development as a space belonging to all three countries and their shared interests. Otherwise, the South Caucasus will lose the chance to integrate into global trends related, in particular, to the processes of pan-European cooperation.

Political leaders and the current generation of diplomats from these three countries must take on the responsibility of realising these goals. A stable and integrated South Caucasus will not only turn into a space of comfortable living for the citizens of our countries, but will also make a significant contribution to broader security and bring greater stability to adjacent regions.

Translated by Arzu Bunyad

Valery Chechelashvili is a Georgian politician and diplomat. He has served as Ambassador of Georgia to Switzerland, as well as the permanent representative of Georgia to the United Nations in Geneva. He also served as the secretary general of GUAM.

infrastructure, Nagorno-Karabakh, South Caucasus