The Power and Interest News Report- PINR
Dec 15 2006

”Current Geostrategy in the South Caucasus”

In recent months, relations between Georgia and Russia have
deteriorated. The clash between these two states is only a symptom of
the broader strategic positioning of the West and Russia in and
around the South Caucasus. In this scenario, at regional and global
levels, countries and organizations are involved in a struggle for
power and energy security. Considering these two issues, what is the
current situation in the South Caucasus and what can be expected in
the future?

Affecting the region are the political-military and security policies
of the actors involved. These actors include Georgia, Armenia, and
Azerbaijan, and their "frozen" conflicts of Abkhazia, South Ossetia
and Nagorno-Karabakh. Additionally, the leverage of regional powers,
such as Turkey and Iran, and of global powers, such as the United
States, Russia and China, is part of the power configuration in the
region.

In addition to countries, international organizations are also
involved in this game. At the regional level, there is the Black Sea
Economic Cooperation (B.S.E.C.), the Black Sea Force (BLACKSEAFOR)
the Caspian Sea Force (CASFOR), the cooperation between Georgia,
Ukraine, Azerbaijan and Moldova (G.U.A.M.) and the Collective
Security Treaty Organization (C.S.T.O.) within the Commonwealth of
Independent States (C.I.S.). At the global level, the North Atlantic
Treaty Organization (N.A.T.O.) and the European Union also exercise
political weight in the South Caucasus.

Energy Security

In addition to the power configuration is the issue of energy
security. Energy security is high on the international agenda, as the
United States, the European Union and N.A.T.O. have expressed their
concern about threats to energy security. E.U. countries as a whole
currently import 50 percent of their energy needs (the U.S. imports
58 percent of its oil), and will import 70 percent by 2030.
Furthermore, E.U. countries import 25 percent of their energy needs
from Russia, which may rise to 40 percent in 2030 (another 45 percent
comes from the Middle East). Besides this growing dependency, it has
became clear that the energy instrument is an essential part of
Russia’s external and security policy after it used this to force
Ukraine to pay a higher gas price at the end of 2005.

The geopolitical importance of the South Caucasus is also based on
the presence of energy resources. Stability in the Caucasus is a
vital requirement for the uninterrupted transport of Caspian oil and
gas. The Caspian Sea region (the South Caucasus and Central Asia)
contains about 3-4 percent of the world’s oil reserves and 4-6
percent of the world’s gas reserves. In itself, the Caucasian share
of global oil and gas reserves is not considerable. However, in light
of the uncertainty over the reliability of Persian Gulf supplies, as
well as the possibility that Russia may use energy delivery as a
power tool, the transport of Caspian and Central Asian (Kazakhstan
and Turkmenistan) energy supplies to the West via the Caucasus has
gained vital importance.

The importance of the region has also grown as a result of energy
policies by consumer states in the West that want to decrease their
dependence on resources from Russia and the Middle East. A number of
states and organizations are making efforts to end Russia’s near
monopoly on the transport of energy supplies in the Eurasian region
by creating alternative pipeline routes to transport these supplies.
Thus, the Atasu-Alashankou oil pipeline (China and Kazakhstan), the
Baku-Tbilisi-Ceyhan (B.T.C.) and Baku-Tbilisi-Erzurum (B.T.E.)
pipelines (Georgia, Azerbaijan, Turkey and Kazakhstan) and the
Nabucco gas pipeline (European Union, Turkey, Bulgaria, Romania,
Hungary and Austria) are operational, under construction or planned.

Defrosting the Frozen Conflicts

Washington wants a stable South Caucasus region for its investment in
the energy sector, as well as for its geostrategic interests in the
region. The separatist regions in Georgia — Abkhazia and South
Ossetia — have become areas of the major players’ interests in the
region. With the exception of the tensions surrounding Tbilisi,
Russia has not played a very neutral role in these conflicts. Russia
has used the conflicts as political leverage with the West.

The objectives are clear: the West and Russia have the aspiration of
being the major player in the South Caucasus. Russia, however, is
gradually being forced to retreat from this region. To counter this
development, one of Russia’s tactics is to slow down Western advances
by keeping the so-called "frozen conflicts" active. This makes it
harder for Georgia to attract Western investment and it is
complicating its accession to N.A.T.O.

The tensions are likely to continue if these global powers and their
organizations cannot find consensus or "peaceful coexistence." In
these circumstances, a solution to the frozen conflicts is rather
unthinkable. If that is the case, disputes — harmful to the economic
development of the South Caucasus — are likely to continue until the
time that these countries are consolidated into Western structures.

Concerning the Nagorno-Karabakh conflict between Armenia and
Azerbaijan, the outlook is similar to that of the Georgian regions.
The main foreign actors in this conflict — Russia, the United States
and the European Union — will have to find a compromise. At the
moment, the United States is the party most interested in solving the
conflict and is putting serious efforts into finding a settlement.
Yet, political will and public support has to be created on both
sides. It seems that political pressure is rising on Azerbaijan and
Armenia. The United States — perhaps more than Europe — has the
military, political and economic capacities, and, due to its
investments, the will to force a breakthrough in the negotiations.
Just like the Georgian separatist regions, the main condition for a
solution is cooperation with and by Russia.

Military Alliances as Guardians of Energy

Matters of energy security tend to attract the attention of military
organizations. For example, military organizations are at the center
of the security of oil and gas pipelines against terrorist attacks.
In G.U.A.M., increasing tensions between Georgia and Moldova with
Russia has forced it to reconsider its energy security and to find an
alternative to dependency on Russian oil and gas. In such an
alternative scenario, Azerbaijan is to play a crucial role both as
energy supplier and transit country for oil and gas from Central
Asia. The sustainability of such a scenario is yet to be shown.
Considering the current more pro-Russian government in Ukraine,
however, G.U.A.M.’s energy security plans have become unlikely.

The Russian armed forces are currently tasked with the protection of
energy resources, such as off-shore platforms. Also, for the
Russian-led C.S.T.O., energy security seems to be recognized as a
task of growing importance. A recent exercise at a nuclear energy
station in Armenia showed that the C.I.S. Anti-Terrorist Center is
already involved in this. It is not unlikely that in the future the
C.S.T.O. will take over energy security tasks and other
responsibilities of the C.I.S. Anti-Terrorist Center. Therefore, the
involvement of the C.S.T.O. in energy security, especially in the
South Caucasus, specifically in Armenia, is likely to develop
further. Moreover, regional maritime task forces — CASFOR and
BLACKSEAFOR — could potentially be used for such operations around
the Caucasus.

According to Western and Russian sources, the West is also directly
involved in energy security in the South Caucasus. Allegedly,
military officers from Turkey, together with their colleagues from
Azerbaijan and Georgia, have regularly carried out command staff
exercises to practice the protection of the B.T.C. pipeline.
Furthermore, in 2005 an agreement had supposedly been reached which
arranged for the United States and N.A.T.O. to secure the B.T.C.
pipeline. In the future, they would also safeguard the B.T.E. gas
pipeline.

In addition to this, military units of N.A.T.O. and the United States
would also support and/or train Azeri and Georgian troops tasked with
the protection of pipelines. Moreover, the United States is allegedly
going to provide Azerbaijan three cutters and small submarines,
intended to guard its oil fields. However, Georgian, N.A.T.O. and
U.S. officials all deny any N.A.T.O. or U.S. involvement in pipeline
security in Georgia and Azerbaijan and claim that these two states
have their own dedicated units for pipeline protection. Nevertheless,
statements by leading N.A.T.O. officials, dedicated meetings, and
other activities indicate that N.A.T.O. is increasingly interested in
the South Caucasus and its energy resources in particular.

Considering that the United States and N.A.T.O. are likely to be
involved in energy security in the South Caucasus, as is Russia with
the C.S.T.O., this could lead to rivalry. In the worst case, even a
local arms race between their regional allies — with Iran and
Armenia on the Russian side versus Azerbaijan and Georgia on the
Western side — should not be ruled out.

U.S.-Russian Competition in the Caucasus and the Caspian Sea

The geostrategic importance of the South Caucasus and the Caspian
region as a corridor from Europe to Central Asia, as a bridgehead to
control and pressure Iran, and also because of the energy resources
and the war on terrorism, are the main reasons for the U.S. presence
in the region. The United States, with its heavy military involvement
in Iraq and Afghanistan, and following the switch of Uzbekistan to
the Russian camp, is apt to seek strong points in the Caucasian area
in support of its global geostrategy.

The recent involvement of the United States might upset the
precarious power balance in these regions, which has evolved after
the disintegration of the Soviet Union. This is especially true now
that Iran and Russia, the greatest powers in the region, feel
threatened. Russia regards the South Caucasus as its traditional
backyard of influence and counters increasing involvement in the area
by the West. The United States has chosen Azerbaijan as its most
important ally in the Caspian basin and has developed a program of
intense military cooperation. Russian military analysts argue that
the situation is reminiscent to the U.S.-Georgian Train and Equip
Program, which since its start in 2002 has provided Georgia with a
capable, well-trained and equipped army. Russian analysts fear that
this soon will be the case with Azerbaijan as well, thus depriving
Russia of all its means of influencing Azerbaijan.

U.S. military cooperation in the South Caucasus and the Caspian seems
to evolve smoothly. Although the United States gives the impression
of being reluctant to make its military presence and activities
public, it is clear that it is effectively defending its interests in
the region, including its energy security. In addition to U.S.
military support, Azerbaijan’s increasing defense budget will also
contribute to strengthening its military power. The question remains
whether the United States will be able to convince other states, such
as Kazakhstan, to join this military cooperation.

Russia has shown it is seriously interested in preserving its
regional authority with its Caspian Flotilla. Yet with a growing U.S.
presence, it will need to form alliances. A Russian-led CASFOR
maritime force, including other littoral states in addition to Iran,
still seems far in the future. A cause of potential conflict is the
unclear legal status of the Caspian. So far, the littoral states have
not reached an agreement on dividing the Caspian Sea. Near armed
clashes have already occurred between Azerbaijan and Iran over
disputed oil fields. Tensions are likely to continue as long as the
legal situation of the Caspian Sea remains in dispute. Because of the
geostrategic and economic interests at stake, and an apparent failure
to come to a consensus from both sides, the competition between
Russia and the United States in the Caucasus and the Caspian Sea is
likely to be prolonged in the years ahead.

A Comprehensive Role for the E.U. in Conflict Resolution

The separatist areas of Abkhazia and South Ossetia form a hindrance
for further integration of Georgia into the Western architecture.
Although Georgia is eager to see the Russian peacekeepers withdrawn,
conversely Russia is keen to continue its presence to maintain
influence in Georgia. Nor will Russia accept its forces to be
replaced by those of N.A.T.O. in the separatist areas, which is
another objective of the Georgian government.

Recent statements by the European Union display a more active policy
in the South Caucasus. The European Union has the reputation of an
"honest broker" and as having a wide scope of instruments for
achieving peace and stability. Conversion of statements into an
active security policy could be established by forming a military
mission to be deployed in Abkhazia and South Ossetia, not to replace
the Russian peacekeepers, but as an additional asset to promote
stability and reconstruction. Such a mission would be beneficial for
the stature of the European Union, to prove that it is capable of
conducting crisis management missions. Furthermore, this would adhere
to the call of the Georgian government to introduce Western
peacekeepers in the disputed areas.

Russia may oppose a competitive peacekeeping force, but it will have
a difficult time openly disapproving of such an E.U. mission since it
wants to maintain good relations with the European body and also
because it has no grounds to feel threatened by E.U. peacekeepers. A
possible E.U. military mission to the separatist areas should be part
of a larger E.U. operation, using its social and economic instruments
as well for stability and reconstruction. Such an approach would
strengthen a normal economic build-up and thus be detrimental toward
the largely illegal economic structures of the current leadership of
Abkhazia and South Ossetia. With such an encompassing program, the
separatist regions could gradually develop into stable societies,
which would also be beneficial for their position toward the Georgian
government.

Likewise, taking into account the fact that the O.S.C.E.’s long-time
negotiations to reach a settlement on Nagorno-Karabakh have been in
vain, the European Union could also pursue an encompassing action
program on this conflict. Here, as well, the deployment of an E.U.
military mission, together with social and economic measures to
encourage development of state and society, could bring a political
solution closer. Moreover, a stabilized South Caucasus would also be
advantageous for structural energy supplies from Central Asia via the
South Caucasus to Europe. Therefore, political and economic
objectives could be united.

A Joint Effort of N.A.T.O. and the E.U. in the South Caucasus

Moving past their reluctant attitude in the 1990s, in the 21st
century the alliance and the union have started to pursue a much more
active policy toward the South Caucasus. The reasons for the change
in attitude of N.A.T.O. and the E.U. are found in a corresponding
U.S. agenda, which even earlier started to follow a proactive course
in this region. For the European countries, the issue of energy
security has resulted in more attention for the South Caucasus due to
rising prices, increasing scarcity and uncertainty of energy
deliveries. Although the entrance of Georgia into N.A.T.O. — and
subsequently Azerbaijan and perhaps Armenia as well — might still
take some years, it is probable that the relationship between
N.A.T.O. and the South Caucasian states will further deepen, with
Georgia taking the lead. Similarly, increased ties between the South
Caucasian states and the E.U. can also be expected, although
membership of the E.U. for them seems further away than that of
N.A.T.O., due to the enlargement fatigue within the E.U.

Although formally denied, there is reason to believe that N.A.T.O.
has, or will have, a role in pipeline security in the South Caucasus,
for clear geostrategic reasons. The E.U. is also likely to build up
its activities in the South Caucasus, especially in energy
infrastructure, economic development, rule of law, and probably also
conflict solution — for which it has a more independent reputation
than does N.A.T.O. Consequently, N.A.T.O. and the E.U. will share an
upcoming long-lasting involvement in the region, which, by
establishing a labor division in their best fields of expertise, may
be able to bring security and prosperity to the South Caucasus.

Synergy of Military and Energy Instruments of Security Policy

Considering that the military power of the U.S., N.A.T.O., Russia and
the C.S.T.O. and the regional maritime task forces are assigned to
energy security in this region, the conclusion seems valid that in
the near future the combination of military and energy will
constitute the major instruments of power in the South Caucasus.
Because of the growing importance of energy resources, a further
intertwining of these two policy tools can be expected, not only
around the South Caucasus, but elsewhere in the world as well. This
is in contrast with the thinking that the military instrument has
been replaced by the economic (energy) instrument. Therefore,
countries and organizations will need to have a well-considered
build-up and coordination of their military and energy instruments in
order to conduct a successful security policy.

Report Drafted By:
Dr. Marcel de Haas

The Power and Interest News Report (PINR) is an independent
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