The Centre for Research into Post-Communist Economies


CRCE Briefing Paper

Security and Western Integration in the Caucasus

Based on a talk given at the CRCE by Alexandros Petersen

Price for print edition: £7.50

About the Author

Alexandros Petersen is Senior ACD Researcher at the International Institute for Strategic Studies (IISS) in London and an Adjunct Fellow with the Russia and Eurasia Program at the Center for Strategic and International Studies (CSIS) in Washington DC. He is also Deputy Director of Operations at the Henry Jackson Society, Vice President in charge of the London branch of Young Professionals in Foreign Policy and on the editorial board of Millennium: Journal of International Studies. In 2007, he was a Visiting Fellow at CSIS and in 2006 he was a Visiting Scholar at the Georgian Foundation for Strategic and International Studies in Tbilisi. He has held researcher and research assistant positions at CSIS, IISS, the King's College London Department of War Studies and the Western Policy Center. He has also provided research for the U.S. National Petroleum Council's Geopolitics and Policy Task Group and research support for the Council on Foreign Relations Task Force on Russian-American Relations.

Mr Petersen's analysis regularly appears on the IISS Armed Conflict Database, and has been published by The Wall Street Journal, The Baltimore Sun, The Washington Examiner, The Moscow Times, The St Petersburg Times, The Kyiv Post, RUSI Newsbrief, European Voice, EU Observer, Georgia Today, The Messenger (Georgia), The Georgian Times, Central Asia-Caucasus Analyst, EurasiaNet, Atlantic Community, TCS Daily, Atlantic Affairs, the Western Policy Center and CSIS.

He is currently pursuing a PhD in International Relations at the London School of Economics, and received his BA in War Studies with First Class Honors from King's College London.

Portions of this paper appeared as a Center for Strategic and International Studies working paper in October 2007.

The Constitution of the CRCE requires that its Trustees and Advisers dissociate themselves from the analysis contained in its publications, but it is hoped that readers will find this study of value and interest.

First published December 2007

© Alexandros Petersen & Centre for Research into Post-Communist Economies

All Rights Reserved

Security and Western Integration in the Caucasus

The title of this talk is fairly ambiguous, but I will ask you to bear with me in my explanation of a phenomenon of Western integration in the South Caucasus that has received much less attention than I believe it should: that of the development of the so-called East-West Transport Corridor. I will then say a few words on the effect that this Western integrative process has on security in the region, and then, more generally, why security and Western integration in the Caucasus region is important for Europe and the broader West. I also assume that many of you may have come hear tonight due to the recent political upheaval in Georgia, so I will close my remarks with a bit of analysis on the situation there.

A regional grouping is being formed that ties Azerbaijan and Georgia, primarily through Turkey, to Western integration. This dynamic is chiefly manifested in the development of what has been dubbed the East-West Transport Corridor (EWTC), a network of infrastructure made up of energy pipelines, roads, railroads and electricity links that physically connect these countries to Europe and the broader West. The development of these links and the process of securing them is leading to better governance and greater ties with Western institutions.

Before I go on, let me just make some definitions quite clear. When I speak of “the West”, I mean this in the broadest sense possible. This is for two reasons, the first is that when I speak of Western integration , I do not mean only European integration, as the U.S., NATO, Norway, as well as Western international financial institutions, such as the World Bank, and Western companies, such as BP, have played a major role in the integrative processes I will describe. In this context, Western integration is defined by two pillars: increased good governance and greater links with Western institutions. I define good governance as encompassing everything from the more common, greater representative government, to greater efficiency and professionalization of the state and state officials.

Following the end of the Cold War, transport and energy infrastructure in the newly independent Caucasus states of Azerbaijan and Georgia was underused and in a state of significant disrepair. Any usable infrastructure was positioned on a “North-South” axis, directed towards Moscow, the former Soviet centre. The concept of developing a new East-West corridor for the transport of energy and other trade goods was put forth by the Turkish government in the early 1990s. It was envisioned that this route, what many have called a “New Silk Road”, would take advantage of significant Caspian energy resources and potential Eurasian trade networks that had been neglected during the Soviet period, while at the same time strengthening the sovereignty, regional cooperation and Western integration of the former Soviet states involved.

It was also thought, by the US government and the EU, both of which eventually supported Turkey's idea, that the development of alternative energy routes to alternative sources, devoid of Russian or Iranian influence, could help to ameliorate Europe's looming dependence on Russian energy reserves, as well as reduce dangerous tanker traffic in Turkey's populous Bosporus Straits. In 1994, a consortium of Western energy companies, led by BP, signed what was called “the deal of the century” with the Azerbaijani government. This agreement, to begin the development of Caspian energy resources was the first step in creating a viable Transport Corridor through Azerbaijan, Georgia and Turkey.

I am not going to bore you with all of the infrastructural projects that make up the corridor, but you will likely have heard of the BTC oil pipeline from Baku through Georgia, down to Turkey's Mediterranean port of Ceyhan. Widely considered a pipe-dream when first proposed, the BTC is now built: the second longest pipeline in the world, considered to be the most secure pipeline in the world, with the highest standards for sustainability and development for an extractive industry project. You may also have heard of the BTE, or South Caucasus gas pipeline that follows largely the same route, but stops short and flows into Turkey's gas grid, and through other projects, further into Europe. Another important piece is the Baku-Kars railway that goes through Georgia, but it is most important to keep in mind that this Transport Corridor is not one pipeline or one railroad, but a vast multitude of infrastructural connections that binds these states to Europe and the broader West.

I am going to speak today about three examples of the East-West Transport Corridor facilitating Western integration in Azerbaijan and Georgia. All are examples of what some theorists would call “spillover”. It is not necessary to be familiar with this idea to understand the concept that Western integrative change in a purely functional area: transport infrastructure, can have a “spillover” Western integrative effect on other areas of governance or within a society. You will notice that my examples expand in scope as I go along.

The first example of this process is BP (formerly British Petroleum)'s implementation of a regulatory framework called the Voluntary Principles in its providing for security for and dealing with government and local populations with regards to its pipeline projects in the two countries. Now, the Voluntary Principles on Security and Human Rights is a legally binding set of provisions, drawn up by the US State Department and UK Foreign Office, as well as a number of NGOs, such as Oxfam and Human Rights Watch, that governs the responsibilities of extractive companies in providing security for their projects. BP and other Western companies involved in the EWTC like Hess and Statoil signed up to this framework, as did Azerbaijan and Georgia, as part of the deal to go ahead with the development of the pipelines in the Corridor.

The implementation process of these Principles in Azerbaijan and Georgia has been highlighted as “best practice” for the industry by outside observers. This process includes the training of Azerbaijani and Georgian security, police and military units for the protection of the Corridor in Western standards of human rights and professional conduct. It involves ethical relations with local communities affected by the infrastructure projects, Western-standard environmental protection, aid and development projects, as well as a process of judiciary reform in both Azerbaijan and Georgia, because the Principles mandate that those arrested for any reason to do with these infrastructure projects must receive a Western-standard trial and detention. So, for example, BP has provided for Western-standard training for significant portions of Azerbaijan's National Police. You may ask, how much of this is being retained? Well, the lifespan of the pipeline projects in the Corridor is expected to be 40 years, and the implementation of these Principles must go on throughout that period.

The second example is the key role of the World Bank in the development of the EWTC. It can very easily be argued, and people involved on the business side, the government side and the non-profit side of this project say it, that the development of the BTC pipeline, and much of the Transport Corridor would not have been possible were it not for the financial assistance, but more importantly the reputational clout that the World Bank provided for international investors to come in as part of the project. You see, it was the Western integrative process that the World Bank brought to the Corridor, which I will describe, that made it possible for the Corridor to be built so that it could facilitate the further Western integration of Azerbaijan and Georgia. As one World Bank official put it to me, “World Bank programs are a complete package”, a government cannot choose “a la carte” what aspects it wants to comply with. So, along with World Bank support for the Corridor, and World Bank good governance control of its construction and operation, the World Bank is involved in programs creating greater transparency and professionalism in almost every ministry in the Azerbaijani and Georgian governments, significant rule of law reform, environmental protection programs etc. The Bank is deeply involved with fostering transparency in Azerbaijan's notoriously corrupt energy sector, setting up Azerbaijan oil fund, modelled on that of Norway's, and monitoring compliance with the Extraction Industry Transparency Initiative, an international anti-corruption framework. Were it not for the World Bank's role in the Corridor, many sections of both the Azerbaijani and Georgian governments would likely not have seen the benefits of the Bank's attendant programs – some of the most intrusive anywhere – but implemented with the full cooperation of the governments.

The third example, and I will be brief, is the European Union's role, on a functional level, in promoting good governance practices with regards to the Corridor. There are three EU organisational mechanisms that do this. The first is TRACECA, with stands for Transport Corridor Europe-Caucasus-Asia. This program, which has interestingly been taken over by the regional governments like Azerbaijan and Georgia provides technical assistance and investment programs to integrate the transport infrastructure in the Caucasus with Europe's transport infrastructure, again all under Western standards. The second is INOGATE, or Interstate Oil and Gas Transport to Europe, a similar program that focuses on the integration of energy infrastructure in the Caucasus with that of Europe's. As part of their programs, both of these mechanisms strengthen good governance in the target countries. The third, and this is now looking into the future is the eventual expansion of the European Energy Community to Azerbaijan and Georgia. The European Energy Community was part of the Athens Process to integrate the energy infrastructure of the Balkans into the rest of Europe. There are now plans to expand this to the Caucasus to fully integrate the two energy systems.

Now, you may say, these are just pipelines and roads. How significant can their effects be? After all, the same sort of infrastructure leads from Russia to Europe and Russia to the South Caucasus – why is the Western-oriented infrastructure noteworthy? This criticism is usually made by those not fully acquainted with the region, not aware of just how important the East-West Transport Corridor projects are considered to be in Azerbaijan and Georgia. Aside from the purely economic benefits they bring, the strategic significance of a functional link with the West is key for Azerbaijan's lifeblood, the export of its hydrocarbons to the outside world. Due to the geopolitical realities of the region, Russia to the north, Iran to the south, and Armenia to the south-west, Georgia present not only the sole route through which Azerbaijan can forge ties with the broader West, but also the needles eye through which the countries of the Caspian region and Central Asia can form similar strategically vital links between East and West. The East-West Transport Corridor is only a small, but key piece of an energy and transport network that stretches from Shanghai to London.

Now, no discussion of the South Caucasus region is complete without mentioning the frozen conflicts in the region: Abkhazia, South Ossetia on Georgia's borders with Russia, and Nagorno-Karabakh and its surrounding areas between Azerbaijan and Armenia. As most of you will know, all three of these conflicts have been simmering for about 15 years now, and probably present the greatest obstacles to security and development in the region. Despite some of the provocative actions taken by the post-Rose Revolution government in Georgia vis-à-vis the Russian-supported separatist enclaves of Abkhazia and South Ossetia, Mikhail Saakashvili's reformist and enthusiastically Western-oriented government is probably the best thing that could happen for eventual resolution of these seemingly intractable conflicts. I say this because the investment that this government's reforms has attracted, and the development and good governance encouragement made possible by the East-West Transport Corridor are serving to create a Georgia-proper that is more prosperous, more secure and more open to the outside world than either Abkhazia or South Ossetia. The enclaves' porous borders, not to mention development efforts made by Tbilisi within the enclaves, will eventually spark a cost-benefit analysis amongst the populations in those areas. Abkhazia and South Ossetia are not closed, authoritarian fiefdoms, as many would have you think. The people there have free will and they will exercise it. At the same time, as Saakashvili's main objective is Western integration, primarily NATO membership at this time, he is likely to make sure that his government does not take any action against the separatist enclaves that could be seen as too provocative, or out of line.

“What of Nagorno-Karabakh?” it is frequently asked. Doesn't Azerbaijan's development mean that it will attempt to gain the upper hand in this, the third and perhaps most infamous of the South Caucasus frozen conflicts. The truth is that in recent years Azerbaijan's military assets have been augmented significantly with money from the energy sector, funds facilitated by its greater Western integration. However, this increase in spending and capabilities has only served to move towards parity with the forces of Armenia, that has benefited from significant Russian military aid, and contains Russian armed forces in a number of bases. Despite the occasional rhetorical flourish from Aliyev or other Azerbaijani leaders, I am not of the opinion that this will lead to an attempt by Azerbaijan to seize its occupied Azeri areas, much less the majority ethnic Armenian Karabakh region. There is nothing to be gained by Baku in reigniting the conflict, and from what I can see, the leadership in Baku is aware of this.

It is only a matter of time until Yerevan realizes that Armenia is a Russian-dominated island in a prospering and Western-oriented region. Interestingly, of all of the region's highly significant diaspora communities, Armenia's is the most Western-oriented, and possesses the most potential funds and expertise for development were the country to be set on a concerted path of Western integration.

Now, why should Europe or the West be particularly concerned about this region? Why should a voter in London be concerned about security and Western integration in the Caucasus? I hope I am somewhat preaching to the choir here, so I will keep this succinct, but there are 3 main reasons. The first has to do with Europe's energy security. When most Europeans turn on their central heating this winter, the gas that warms them will have originated in Russia. Europe's overdependence on Russian energy would be a strategic problem even if Moscow were a reliable partner. Unfortunately, recent Russian foreign policy moves, from flying nuclear bombers to Scotland, to withholding gas from Georgia, Ukraine, Belarus and EU-member Lithuania indicate that it is imperative that European countries diversify their sources and routes for energy. The East-West Transport Corridor is the primary alternative route available, bereft of Russian influence and along with its attendant aspects, a force for securing the flow of energy supplies.

The second reason has to do with broader European-Russian relations. As long as Moscow can hold the energy guillotine over Europe's neck, the leverage of every European country in its relations with Russia in other areas will be limited. Expansion of the East-West Transport Corridor, for which there are many options, is an important source of leverage for the EU and individual member-states. For some inexplicable reason, the primary backer of the Corridor is and has always been the U.S., because of the leverage it acquires through Europe's lessened dependence on Russia through greater links with the Caucasus and Central Asia. Why European countries, including the UK have not pursued this route and benefited more than any other Western partner shows an incredible lack of judgment by decision-makers – some of whom, of course, are out of office and currently working for the Kremlin.

The third reason Europeans should be concerned about Western integration and security in the Caucasus is because like it or not, the EU's expansion means that this part of the world is now in Europe's neighborhood. Developments in the frozen conflicts, Russia's influence in the region and the region's prosperity and Western integration directly affect the security and economic fortunes of the EU. It is very important that Europe seek to incorporate the South Caucasus and the Greater Black Sea Region into the Western fold. The consequences of poverty and instability in the region would be significant. This is not to say that such a process is not underway. The Western integration of the region is occurring now, and it will continue, but it must be strengthened.

Now, about recent developments in Georgia. I will only say that recent major protests in Georgia are neither a new Rose Revolution against Mikhail Saakashvili's government, as much of the opposition would have us think, nor are they a Russian-orchestrated counterrevolution, as Saakashvili would have us think. In fact, like most things in the Caucasus, the recent political turmoil in Georgia is due to a combination of many factors. There are certainly elements of the opposition that have strong ties to Moscow, but on the whole, if the opposition were in power it would likely be more nationalistic, more corrupt, and more reflexively anti-Russian than the current government. The protests that drew tens of thousands in front of the parliament, however, seem to have been primarily made up of those left behind by Saakashvili's rapid reforms. The governments rather heavy-handed handling of the protestors, as well as its closing of the opposition Imedi television channel is troubling, but in my mind does not represent a departure from the government's reformist, Western integrative path.

In fact, the impressive thing about both Georgia and Azerbaijan is that there are no significant constituencies among the population or among decision-makers that reject the Western integrative route. And, I will close with a note on how this ties in with the Transport Corridor. The functional, what some would call the “low politics” links to the West to do with the East-West Transport Corridor present an important anchor for Azerbaijan, Georgia, and the wider region, including Turkey, Ukraine, and hopefully Armenia at some point. Regardless of so-called “high politics” changes, so changes in the diplomatic realm, at the level of heads of state, that may occur, the functionalist integrative links that bind this area to Europe, and through the processes described, to the wider Western world, are there for the long term. Energy and transport infrastructure, and all of its attendant aspects discussed here this evening, compel the development of Western-oriented policies in the region, leading to a more secure region in the long term.