Caucasian Interim Report (II)

A Partial Success

Eclipsed by the power struggle over the Ukraine, Berlin is pushing to speed up the signing of two other EU Association Agreements. At the Vilnius summit, in late November 2013, at which Ukraine declined signing the Association Agreement, the EU was able to initial two other such agreements - with Georgia and Moldova. Both should be signed no later than August and be implemented as soon as possible. Germany has therefore achieved partial success. However, the future of Ukraine and Azerbaijan remain uncertain. From the German European power perspective, Belarus and Armenia are perceived as "lost" - they will join Russia's rival integration project, the "Eurasian Union." In a brief analysis, the German Institute for International and Security Affairs (SWP) recently attempted an inventory of the balance of power in the South Caucasus. The region is of considerable strategic importance - particularly because it serves as the transit corridor for gas and oil from the Caspian Basin, allowing the transport of resources to Europe, while bypassing Russia. Russia's not having enough influence to intervene in the transit countries is, however, the prerequisite.

Western Oriented

The West has its strongest standing in Georgia, according to SWP: Two thirds of the Georgian population reject Russia's "leading role in the post-Soviet realm," according to a 2010 survey. More important, however, is the fact that the Georgian government has succeeded in reorienting its economic ties westward. "The largest foreign investments in 2012 came from Germany, the UK, Turkey and Azerbaijan," writes the SWP. Georgia receives about 90 percent of its gas supply from Azerbaijan; the EU is its main trading partner. Of great significance is, however, the amount of remittance from Georgians working abroad - more than half of the 1.3 billion US dollars they had transferred home in 2012 (about 8.4 percent of Georgia's GDP) came from Russia.[1] On the political level, former President Mikhail Saakashvili's extremely aggressive policy has left profound marks in two ways. On the one hand, close ties between his country and the West have been established, even though the planned NATO membership - like Ukraine's - failed because of Germany. Germany would like to integrate the southern Caucasus into its sphere of hegemony and does not want to surrender it to the US.[2] On the other hand, tensions with Russia have been exacerbated, thereby worsening relations on all levels, including economically. Following the end of Saakashvili's reign, Tbilisi has been pursuing a less aggressive policy, but it has not changed its basically Western orientation.

The "United Caucasus" Strategy

This is not least of all significant because, a few years ago, Georgia began offensively interfering in the affairs of Russia's North Caucasus. The SWP had reported, already two years ago, that in September 2010, Mikhail Saakashvili, President at the time, officially announced the "United Caucasus" strategy: There is no "North and South Caucasus" separated by a mountain ridge, "only one, single Caucasus." A few weeks later, Tbilisi granted visa-free right of entry solely to inhabitants of Russia's Caucasian territories. In early 2012, and only after massive protests, the other Russians were also permitted visa-free entry. Tbilisi initiated a Russian-language TV channel, aimed particularly at the inhabitants of the North Caucasus. In Mai 2012, the Georgian parliament began debating a "government strategy of relations with the peoples of the North Caucasus," aimed at the typical methods of exerting influence through cultural institutions, human rights organizations, and "civil society" associations.[3] Even though a new government, more cooperative towards Russia, had come to power in Tbilisi, the strategic option of interfering in Russia's North Caucasus has been maintained.

Eastern Oriented

Whereas at the Vilnius Summit in late November, Georgia initialed an Association Agreement with the EU, Armenia had declared (September 3, 2013) its intention to join the Moscow-dominated customs union comprised of Russia, Belarus and Kazakhstan, and eventually the "Eurasian Union," as well. Armenia is strongly dependent upon Russia economically. Russia accounts for nearly 40 percent of the country's foreign investments and dominates strategic branches, for example, Russian companies control the energy sector, the rail operations, the telecommunications and the country's mining industries. Even the natural gas pipeline from Iran to Armenia is under Moscow's control. The proportion of Armenia's GNP comprised of remittances from workers abroad - 19 percent - is double the proportion of Georgia's. 80 - 90 percent of that 19 percent are from workers in Russia. In addition, its borders have been closed to Azerbaijan and Azerbaijan's ally, Turkey since the beginning of the war over Nagorno-Karabakh. The war has exacerbated not only the economic situation, but also dependence on Moscow for military policy. Armenia has joined the Russia-dominated "Collective Security Treaty Organization" (CSTO) to have reassurance against Azerbaijan. Yerevan - unlike Tbilisi and Baku - even permits Moscow to maintain a military base on its territory (Gyumri, under contract until 2044).[4]

Fraternal Nation, Turkey

Azerbaijan plays a particular role, due to its voluminous oil and gas deposits, which has not only provided an economic basis neither Georgia nor Armenia have. Azerbaijan has signed over the exploitation of most of its oil and gas fields primarily to western companies, which provide a supplementary advantage in that they have done everything possible to pipe Azerbaijan's resources to the West via western, rather than Russian, pipelines, using a transit corridor through Georgia and Turkey, skirting territories under direct Russian influence. Relations between Moscow and Baku are "reserved" - also because of the continuing conflict over Nagorno-Karabakh. However, this has not pushed Azerbaijan to forge stronger ties to the EU by way of Association Agreements. That country is closely cooperating with Turkey, which is perceived as a "fraternal nation" due to its linguistic-cultural similarities.[5] This cooperation has come to include the natural gas sector - and had recently even thwarted the "Nabucco" Project. (german-foreign-policy.com reported.[6])

Iranian Natural Gas

Even though it is of high geostrategic significance, the power struggle between the German-dominated EU and Russia in the South Caucasus has been eclipsed by power struggles over Ukraine. This can be seen by the recently revived, older considerations of also pumping Iranian gas through the South Caucasus pipelines toward the EU,[7] which had been in discussion a few years ago, before being abandoned as impractical, because of the nuclear dispute with Iran. However, now that the dispute is to be resolved non-militarily, the perspective of doing business with Iran is again open. Bringing Iran into play as a supplier for the European pipeline network would be of enormous advantage to the EU. The fact that the South Caucasus is being considered as a transit region is renewed confirmation of the region's geostrategic significance.

[1] Uwe Halbach, Franziska Smolnik: Russlands Stellung im Südkaukasus. SWP-Aktuell 1, Januar 2014.
[2] See Operationskonzepte and Kaukasische Rivalitäten (II).
[3] Uwe Halbach: Trennlinien und Schnittstellen zwischen Nord- und Südkaukasus. SWP-Aktuell 31, Juni 2012.
[4], [5] Uwe Halbach, Franziska Smolnik: Russlands Stellung im Südkaukasus. SWP-Aktuell 1, Januar 2014.
[6] See Nabucco, Southern Corridor and Das letzte Kapitel.
[7] Stefan Meister: Energy Security in the South Caucasus. The Southern Gas Corridor in its geopolitical environment. DGAPkompakt No. 2, Januar 2014.