Weakened by ethnic conflict and poor governance, the South Caucasus countries (Armenia, Azerbaijan and Georgia) are losing international significance. Moreover, the West is preoccupied elsewhere with economic challenges and crises in the Middle and Far East. To sustain the Western support the three countries expect and need, they must implement reforms and lessen regional tensions.
Two decades ago, war between Armenia and Azerbaijan over Nagorno-Karabakh, an ethnic Armenian majority area in Azerbaijan, displaced hundreds of thousands of people and led to the occupation of seven districts of Azerbaijan surrounding Nagorno-Karabakh. Occasional shootings test an uneasy ceasefire agreed in 1994. With international mediation stalled, energy-rich Azerbaijan is stocking up on foreign arms but may overestimate its military power. Armenia has a Russian security accord and military base but is relatively isolated and may also be overconfident. The Russian military occupation of Abkhazia, South Ossetia and some contiguous areas in Georgia since the 2008 war has left a fragile peace. Regional security also suffers from kleptocracy and unrest in Azerbaijan, and fractious governance in Armenia and Georgia.
There are positives. The South Caucasus is a major export route to world markets for oil and gas from the Caspian Sea basin. The region facilitates surface transport linking Europe, the Mediterranean, Central Asia and China. Azerbaijan is a big energy producer and exporter, and Caspian energy is a key source for reducing Europe’s energy dependence on Russia.
Some trends, however, are reducing the importance of the South Caucasus. Over time, Azerbaijan’s global market share will ebb as new and transformational technologies expand output elsewhere in the world. Moreover, although logistical support for NATO forces in Afghanistan along this ancient Silk Road is important, this concern will diminish as troops are withdrawn.
In February, Armenian President Serzh Sarksyan won reelection, but protests erupted, politics are precarious, and corruption is pervasive. Blockaded by Turkey and Azerbaijan, Armenia has extensive relations with Iran. Its educated people earn below their potential. Average income, using World Bank data on purchasing power parity, is only $6,100.
Azerbaijan’s autocratic President Ilham Aliyev faces growing discontent. On March 10, authorities used water cannons and police charges to put down an unauthorized demonstration. Aliyev tries to abate unrest by showering money on elites while suppressing dissent and firing token officials. Oil and gas income buoys average income to $8,960, but oil exports are declining as production peaks. Stage-managed elections later this year are likely to rubber-stamp another Aliyev victory.
Georgia’s Rose revolution in 2003 ushered in younger, pro-Western leaders who advanced many reforms, but President Mikheil Saakashvili inclined toward authoritarianism as his power grew. In historic free and fair parliamentary elections last October an opposition coalition won. Political tensions remain high, however, as deep distrust and competing governance styles play out between Prime Minister Bidzina Ivanishvili and Saakashvili, who will remain in office until October. Georgia’s progress toward democracy is unique in the South Caucasus but is now being questioned by an apparent exercise in selective justice against the outgoing President and his team. Recent mob violence against gay and lesbian demonstrators led by Georgian Orthodox priests challenges the new government to demonstrate its commitment to human rights and civil liberties.
While facing westward for security and economic integration, Ivanishvili is easing tensions with Russia, which is reopening its market to Georgian wine, mineral water and agriculture products. This will be a slow process, however, as long as Russia recognizes Abkhazia and South Ossetia as “independent.” Georgia’s inadequate economic reforms have weakened the country. Per capita income remains depressed at $5,350, and unemployment is a daunting 30 percent.
Russian President Vladimir Putin seeks to corral former Soviet neighbors into a customs union, but Armenia and Georgia want deeper ties with the far richer European Union. Azerbaijan also prefers links with Europeans, major energy customers, even as they criticize Baku’s human rights abuses.
Most important is what South Caucasus countries do to help themselves. Renewed fighting around Nagorno-Karabakh, even if accidental, could bring human tragedy. Tensions may not ease until illiberal rulers stop exploiting nationalism to hold on to power, although democratic leaders might also play this card. International mediation will likely continue but should not be a Western priority unless the sides are ready to make concessions.
Democratic and economic reforms, especially in Armenia and Azerbaijan, are crucial and long overdue. Throughout the region, poverty and corruption are self-reinforcing, even in Azerbaijan, which is oil rich but has a skewed income distribution.
US economic assistance to the South Caucasus is leveling off, and the European Union is focused on internal financial issues. Unless the South Caucasus countries do more to address their problems, Western support and interest will ebb despite the risks. Russia’s invasion of Georgia in 2008 showed the need for active, consistent Western help to resist coercion. As the energy importance of Azerbaijan diminishes, democratic gains will be vital to sustain Western attention. The Armenian diaspora in the West helps, but the country needs broader international support to overcome isolation. This means improving conditions at home.
Even though progress in the South Caucasus is slow, the West must continue efforts to promote peace and stability in the region. The European Union ought to conclude free trade accords with Armenia and Georgia, and with Azerbaijan once it joins the World Trade Organization. America should do likewise. Western encouragement of civil society is vital.
To avoid being marginalized, the South Caucasus countries must demonstrate positive change and avoid new conflicts, or they will twist in uncertain winds.