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Wednesday, 15 May 2013

Why The South Caucasus Needs A Stronger U.S. and European Policy

Published in Analytical Articles
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by Mamuka Tsereteli (05/15/2013 issue of the CACI Analyst)

The South Caucasus has been on the radar screen of U.S. policy makers since the mid-1990s, when the region was seen as an integral part of the pro-active U.S. security and energy policy towards Europe. Those policies resulted in several pipeline projects that connected Azerbaijani resources via Georgia and Turkey to European and world markets. Today, after several years of decline in U.S. strategic interests towards Europe, the U.S. is revitalizing its focus through the Transatlantic Trade and Investment Initiative. This opens new opportunities for countries that are not members of the European Union, but aspire for integration into the Trans-Atlantic strategic and trade space. 

 

BACKGROUND: The collapse of the Soviet Union and the Warsaw Pact security system opened an opportunity for a pro-active U.S. security and economic policy towards Central and Eastern Europe, oriented towards strengthening the sovereignty and independence of the countries liberated from the Soviet yoke. Alongside the eastward enlargement of NATO and the EU, energy security also became a subject of attention for U.S. policy-makers due to Europe’s high overall dependency on Russian energy. The discovery of hydrocarbon resources in the Azerbaijani section of the Caspian Sea allowed Azerbaijan, Georgia, and Turkey to present themselves as a new alternative transit system, viable for supplies of oil and natural gas to European markets.

The close collaboration of the U.S., Turkey, Azerbaijan, Georgia, and Kazakhstan in the process of implementing the so called multiple pipeline policy played a crucial role in building strong economic and trade links between the Caspian Sea and Black Sea/Mediterranean seaports. The energy engagement with the region translated into substantial Western, as well as regional geopolitical and economic gains. The construction of the major oil and natural gas pipelines between Azerbaijan, Georgia and Turkey solidified the region’s dramatic break from Russia’s political and energy dominance.

After the enlargements of NATO and the EU and the Multiple Pipeline Policy’s success, there were no U.S. policy initiatives of a similar magnitude towards the region. Respectively, there were no major policy initiatives aimed at linking the South Caucasus to Europe. Russia was no longer seen as a source of strategic threats and U.S. strategic attention switched to Asia, the Middle East and other parts of the world.

Due to shale gas development in recent years, the U.S. has become the world’s largest producer of natural gas and no longer needs to import Liquefied Natural Gas (LNG). Volumes that were designed for the U.S. market by producer countries such as Qatar, Algeria, Trinidad and others could now be exported to Europe, which has built, and continues to build, several new LNG receiving terminals. This reduced the relative dependence on Russian gas in Europe, and also reduced prices. Hence, while the Southern Corridor for natural gas, originating in Azerbaijan, is still a priority in European diversification strategy, there is a diminishing sense of urgency related to this project. This fact is also reflected in policy making. The fact that the U.S. government abolished the position of Special Envoy for Caspian Diplomacy Issues for the first time since its introduction in the 1990s is reflective of these new realities.

IMPLICATIONS: Yet, the U.S. and European states remain interested in developments in the South Caucasus. There is broad support both for the Southern Energy and Transportation Corridor, and for the greater integration of the three South Caucasian countries into the European political, economic and cultural space. The South Caucasus is still relevant for the purposes of ongoing military operations in Afghanistan and remains prospective transit area for the planned withdrawal of forces in 2014. However, this support no longer translates into major strategic and political initiatives, let alone the political or financial resources to support such initiatives. The region’s unresolved conflicts are a vivid demonstration of the lack of coordinated efforts by the international community to facilitate significant development in the region.

However, the Transatlantic Trade and Investment Initiative, as reflected in President Obama’s 2013 State of the Union speech, presents a potential avenue for increased strategic engagement. The South Caucasus has the potential to become part of this process through various mechanisms and agreements that bring the region closer to Europe. 

The primary strategic objective for the South Caucasus is to find ways to raise the region’s visibility in the policy-making processes in Washington and Brussels. In turn, such visibility requires that the region is attached to major U.S. and EU policy initiatives.

Skeptics say that Europe no longer has the capacity to offer significant incentives to its partners due to the ongoing economic crisis. In this view, Europe is exceedingly slow in decision making and offers many unnecessary regulations that slow down economic growth. After all, it is a fact that even highly prioritized EU projects aimed at connecting Caspian natural gas resources to Europe remain unimplemented, while China managed to build both oil and natural gas pipelines, thus allowing Central Asian states to diversify their markets.

Yet, these skeptical views tend to ignore that the combined EU economy is still the largest economy in the world. The EU is also the largest trade partner for the U.S., by far the largest foreign direct investor in the U.S. economy and the safest destination of U.S. FDI, and the average GDP of EU countries is still four times larger than China’s. Closer integration into the European economic space through trade and investments opens greater economic opportunities for the countries in the European neighborhood, and the countries of the South Caucasus have a potential to be a part of the process. 

In this context, the South Caucasus countries should ally themselves closely with other Eastern European countries, and most importantly with Turkey to find a common voice and convince Washington and Brussels that the region represents a natural expansion of the European economic space, and must be included in any policy initiative related to the broader Europe. Reinventing the European economic space to include Turkey, Ukraine, the South Caucasus and even Russia may become an attractive long term policy initiative for both Washington and Brussels that will also incorporate the interests of South Caucasus. Existing EU mechanisms such as the Eastern Partnership initiative, covering Moldova, Belarus, Ukraine and the three countries of the South Caucasus, may facilitate reaching this ultimate goal. However, like many other EU initiatives, they lack dynamism.

CONCLUSIONS: The leadership and initiative of the South Caucasus countries in this process will be decisive. Armenia, Azerbaijan and Georgia need to take a pro-active stand and demonstrate that they are willing and capable of being strategic partners for the transatlantic community of values. Similar to the role Azerbaijan and Georgia played in the development and implementation of the multiple pipeline policy in the 1990s, the Euro-Atlantic integration of the South Caucasus can only turn into a long-term strategic project if there is a sense of strategic presence from the U.S. and EU, and if regional actors assume the responsibility and implement the policies that will lead to greater integration.  

AUTHOR’S BIO: Dr. Mamuka Tsereteli is a Senior Research Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center.

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