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Current Status of Active and Potential Conflicts and Security Threats

The security threats in the South Caucasus region can be roughly divided into four interrelated categories. These are first, ethnic tensions and conflicts, actual and potential; second, civil conflicts and political violence, including coups d’état and insurgencies; third, transnational threats including narcotics trafficking and Islamic radicalism; and fourth, the external realm, specifically negative fallout of geopolitical competition among regional and great powers. It is important to note that all of these four realms are closely inter-related. In the past decade, geopolitical competition has directly influenced ethnic conflicts and played a direct role in the overthrow of governments; similarly, the civil conflicts that have emerged have been closely tied to the ethnopolitical conflicts in the region, and to the growth of transnational criminality.

Ethnic Relations and Ethnic Conflicts

The Caucasus region is one of the most ethnically diverse areas in the world. Over 50 ethnic groups find their home in this region, though the North Caucasus in particular displays a stunning diversity. Even in the South Caucasus, however, ethnic diversity is remarkable and has challenged the attempts in the past century to draw political borders in the region. The three largest ethnic groups are the titular groups of the three independent states of today: the Armenians, Azerbaijanis, and Georgians. (See Map x on p. xx – Ethnocaucasus map). The Armenians speak an Indo-European language and are Monophysite Christians; the Azerbaijanis speak a Turkic language and are predominantly (ca. 75%) Shi’ite Muslims; the Georgians speak a unique, South Caucasian language, and are predominantly (over 95%) Orthodox Christians. Only Armenia, among the three republics, is relatively homogeneously populated, especially since the forced exodus of Azerbaijanis in the late 1980s; at present, only a small number of Yezidi Kurds remain. Georgia and Azerbaijan, however, are multi-ethnic states. Relatively small, dispersed and declining Russian minorities exist in all three countries.

The main minorities in Azerbaijan at the time of the last Soviet census of 1989 were the Armenians, Lezgins, Kurds, and Talysh. The largest community of Armenians, ca. 250,000, lived in the capital Baku and thousands lived scattered in Azerbaijan’s other cities, whereas Armenians were the titular nationality of the Mountainous Karabakh Autonomous Province, where they composed 75% of the Province’s 175,000 inhabitants. The Lezgins, a Dagestani ethnic group, lives in the Northeast of Azerbaijan, close to the border with Dagestan. They form a community estimated at ca. 250,000, with a roughly equal number   of co-ethnics in Dagestan. Kurds live scattered over Azerbaijan, but the main concentrations were in the Kelbajar region between Mountainous Karabakh and Armenia, areas that were ethnically cleansed in early 1993. The Talysh, finally, are a strongly Shi’ite Muslim Iranian group that lives in the extreme southeast of the country, on the Iranian border, numbering some 300,000. The main minorities in Georgia were the Armenians, Azeris, Abkhaz and Ossetians. Armenians, 9% of Georgia’s population, live in three separate areas in Georgia: in the capital Tbilisi (roughly 100,000), in the province of Samtskhe-Javakheti in southern Georgia (ca. 150,000) and in Abkhazia (ca. 75,000). The Azeris live compactly settled in the southeastern Kvemo Kartli province, forming a rapidly increasing population of ca. 400,000. The Abkhaz live in their ancestral homeland chiefly in the north of the Autonomous Republic of Abkhazia, forming ca. 100,000 people. The Ossetians held a South Ossetian Autonomous Province in north-central Georgia, but only 66,000 of the 165,000 Ossetians in Georgia lived there, the remainder lived in adjoining areas of Kakheti, Kartli, and Meskheti.

Ongoing Conflicts

Three unresolved conflicts are frozen along cease-fire lines: that between Armenia and Azerbaijan over Mountainous Karabakh; and those in Georgia between the central government on the one hand and the secessionist territories of Abkhazia and South Ossetia.

·        Mountainous Karabakh. Mountainous Karabakh is a predominantly Armenian-populated region in the west of Azerbaijan. The conflict over the area, dating back to the first period of independence of Armenia and Azerbaijan in 1918-20, re-emerged during the Soviet period at various times of central government weakness, most markedly in the late 1980s during Glasnost’ as Armenians demanded the annexation of the region to Armenia. Beginning in late 1987 with the forced expulsion of ethnic Azerbaijanis from Armenia followed by demonstrations in Mountainous Karabakh and Armenia for the transfer of the region to Armenian jurisdiction, the conflict was driven to escalation in 1988 and 1989 with anti-Armenian riots in Sumgait, Baku and Ganja and a two-way ethnic cleansing campaign in the two republics, with over 300,000 Armenians leaving Azerbaijan and ca. 200,000 Azeris leaving Armenia.

The Soviet government failed to stop these riots or contain the conflict, and with the unexpected independence of Armenia and Azerbaijan in late 1991, the conflict rapidly escalated to a full-scale war between the two countries. In Spring 1992, Armenia and the ‘self-defense forces’ of Mountainous Karabakh achieved control over the entire Province and created a corridor to Armenia. In 1993, Armenian forces occupied six additional Azerbaijani-populated districts outside Mountainous Karabakh, which remain under Armenian occupation to this day, with a massive ethnic cleansing of over 700,000 IDPs.

Text Box: Russian peacekeepers, Georgian paramilitaries, and Abkhaz forces are involved in the smuggling  business, which knows no ethnic limits.A cease-fire was signed in May 1994, which has held without major violations ever since. Negotiations to find a peaceful solution to the conflict have been held for the past ten years under the auspices of the OSCE. The OSCE’s ‘Minsk Group’ was created in 1992, and was co-chaired by Sweden and Russia in 1993-94. Finland took over Sweden’s role in 1995, and in 1996 the U.S., France and Russia have co-chaired the mediation efforts. Many approaches have been tried in the conflict. A 1997 OSCE proposal suggested a staged solution to the conflict, which would begin by the withdrawal of Armenian forces from occupied territories, and subsequently continue with the return of refugees, economic interaction, and finally a solution to the status issue. This option was refused by the Karabakh leadership. A 1998 solution alternatively proposed the creation of a ‘common state’ between Azerbaijan and Mountainous Karabakh, which was rejected by Baku. In 1999, advanced discussions, where a preliminary deal was reportedly even reached before the October 27 tragedy, envisaged a land swap whereby Armenia would receive Mountainous Karabakh, and the Lachin corridor linking it with Armenia; in return, Azerbaijan would receive a corridor to Nakhchivan, cutting Armenia off from Iran. However, negotiations have yielded no concrete results, in spite of expectations of an imminent solution several times, most noticeably in Fall 1997, Fall 1999, and Spring 2001.

·        Abkhazia. Ethnic unrest re-emerged in Abkhazia in 1988-89, with increasing demands by Abkhaz to be removed from Georgian jurisdiction. Abkhazia factually declared independence in Summer 1992, prompting an attack by Georgian paramilitary forces in mid-August. However an Abkhaz counter-offensive, equipped with large amounts of Russian weaponry and North Caucasian volunteers, eventually pushed back the Georgians and acquired control over almost all of Abkhazia by late 1993. This was followed by the ethnic cleansing of about 240,000 Georgians living in the Gali raion of southern Abkhazia.

Abkhaz authorities under “President” Vladislav Ardzinba control the power structures of the region. The buffer zone along the Inguri river is extremely unstable. UNOMIG, which is responsible for monitoring the situation in the region and the demilitarization of the border, has practically no influence over the Russian peacekeepers, who, together with Georgian Paramilitaries and Abkhaz forces, are heavily involved in the smuggling business going through Abkhazia. Participation in the illegal economy extends high into the state hierarchy, knows no ethnic limits, and remains one of the few areas where quick enrichment (and ironically, interethnic cooperation) is possible. Neither side has an economic interest to finding a resolution to the conflict, although neither desires a resumption of hostilities. Recent clashes between peacekeepers and guerrillas in Gali have occurred on economic (redistribution of spheres of influence) rather than political grounds. There are no guarantees for the safety and dignity of the 40,000 IDPs, who returned to the Gali region after hostilities in May 1998. Russian peacekeepers deployed along the Inguri have assisted Abkhaz de facto authorities to build up a state border with Georgia, and to advance towards the Kodori gorge in eastern Abkhazia, which is out of Sukhumi’s control and remains a Georgian outpost in Abkhazia. Kodori became a haven for Georgian guerillas and Chechen irregulars, who launched abortive attack against Sukhumi in October 2001.

The peace process is presently stagnant. A document on ‘basic principles’ authored by the UN Secretary-General’s envoy Mr. Boden has gained support of the UN, the OSCE, and the ‘Group of Friends to Secretary-General’ (the U.S., U.K., Germany, France, and Russia). The Abkhaz side refuses to discuss the issue of final status, insisting on its independence, and demands that the return of IDPs be linked to economic rehabilitation of the conflict zone and a final peace agreement. Though not very happy with the document, the Georgian side agreed to sign it. Georgia also advocates the internationalization of peacekeeping forces, which are presently solely Russian. The ‘Group of Friends of the Secretary-General’, while capable of exerting appropriate pressure on the two sides, has not exhibited the will to do so. Hopes were raised for a movement toward accommodation between Tbilisi and Sukhumi when Aslan Abashidze, leader of Ajaria, was appointed as the Georgian President’s representative to the conflict resolution process. The Ajarian example of autonomy and strong economic performance through open international trade may serve as a useful model for conflict resolution in Abkhazia. Abashidze’s good relations with Russian military, political, and economic leaders may also be instrumental in promoting a peaceful resolution to the conflict.

·        South Ossetia. The armed conflict between Georgians and Ossetians between 1989-1992 led to hundreds of casualties and thousands of refugees on both sides. The talks on settling the conflict launched in 1995 under OSCE auspices and with Russian mediation helped bringing the sides closer on many issues. However, the main issue – the political status of South Ossetia – remains unresolved. Georgia has offered South Ossetia broad autonomy and reconstruction of the region’s infrastructure, while South Ossetia remains reluctant to relinquish its de facto independence. Talks in 2000 made significant steps towards final status talks, yet little has been done since. The moderate “President” of South Ossetia, Ludvig Chibirov, lost the 2001 elections to Russian citizen and Moscow-based businessman Eduard Kokoev. Kokoev has called for South Ossetia’s merger with North Ossetia as a subject of the Russian Federation, and has actively negotiated with Russia on South Ossetia’s accession to the Russian Federation. The deadlock in negotiations does nevertheless not necessarily mean that an armed conflict will erupt. Unofficial reports suggest Shevardnadze and Kokoev have met privately in Gori, suggesting that steps are being taken to establish a new modus vivendi between Tbilisi and Tskhinvali. Special attention has been accorded to the problem of IDPs. Although Georgians and South Ossetians have committed themselves to facilitating the return of refugees and displaced persons, in practice both sides have created obstacles to return. Consequently, not only did few ethnic Georgians return to South Ossetia during the year, but some displaced people who had previously returned to their homes left again in 2001. The Georgian government, in turn, has not implemented proactive measures to help ethnic Ossetians return to their homes in other areas of Georgia.

South Ossetia remains one of the most heavily armed regions of Georgia. Robbery and violence are common features of life of the breakaway republic. Attacks on peacekeepers are commonplace, and smuggling is flourishing along the trucking route from Russia. An extensive market (Falloy Bazaar) has developed between Tskhinvali and Georgia proper. Neither Georgian nor Ossetian authorities officially control this market, the primary commodity of which is fuel, which has permitted the creation of a tax-free smuggling haven. Since officials in both Tskhinvali and Tbilisi pocket a portion of the revenue generated by this illicit market, there is little incentive to see this market dismantled.

Processes and Situation in Minority Areas

Several minority areas have attracted attention. The Javakheti region of southern Georgian is Armenian-populated, while adjacent Kvemo Kartli includes a large Azerbaijani population. In the Southwest of Georgia, the autonomous republic of Ajaria is populated by Muslim Georgians. Azerbaijan’s main minorities are the Lezgins in the North and the Talysh in the South.

·        Javakheti Armenians (Georgia). Javakheti is a part of the Samtskhe-Javakheti province, located in the southern part of Georgia, bordering Turkey. The population of Javakheti of more than 100,000 is concentrated in the districts of Akhalkalaki and Ninotsminda, and is over 90% ethnic Armenian. International experts have frequently cited Javakheti as a potential secessionist region. The presence of a Russian military base in Akhalkalaki, a high concentration of ethnic Armenians along the border with Armenia, rumors of weapons in the population, isolation from Georgian language and culture, and the possible repatriation of the Meskhetian Turks (deported to Central Asia in 1943) are cited as issues that could transform this region into a hotspot. A 1998 armed protest by Javakheti residents, who prevented the Georgian military from entering the region to conduct military exercises, is frequently mentioned as further evidence of separatist ambitions.

Text Box: Javakheti is often cited by Georgian and international experts alike as a potential secessionist region.Separatism is nourished by several factors. In a weak state like Georgia, the central Government exercises its authority by establishing mutually beneficial relations with elites and clans who exercise local control, through the privatization of major regional assets and control over illegal transit flows. Some members of these clans were appointed to senior government positions in Tbilisi and in Javakheti itself. The Georgian authorities practically turns a blind eye to the activities of the Russian military base, particularly those that provide considerable benefits to the local residents. However, the region has been unable to integrate into Georgia’s political processes since most of the local Armenian population, including government officials and civil servants, do not speak Georgian. However, the opening of a branch of Tbilisi University in Akhalkalaki was aimed at developing social and cultural integration. Javakheti is poorly integrated in Georgia economically as well, a result of poorly maintained communications infrastructure. Cross-border trade with Armenia has developed more rapidly than economic relations with other parts of Georgia. Moreover, direct power supply from Armenia has enhanced economic links between Armenia and Javakheti. Economic relations with Russia are also preserved due to the presence of the Russian military base. The Russian ruble’s status as the main local currency instead of the Georgian lari is a demonstration, as well as further contribution to, the economic isolation of Javakheti. The main sources of instability in the region have been linked to general economic decline, high unemployment and corruption, which are symptomatic for all regions of Georgia. The primary grievances are common to both ethnic Georgian and Armenian communities: sharp deterioration in living standards since the collapse of the Soviet Union, environmental problems which affect public health and agriculture, lack of reliable electricity and heating. Increasing poverty and deteriorating economic conditions, partially connected with the 1998 Russian crisis, as well as growing speculation over the withdrawal of the Russian military base following a decision taken at the 1999 OSCE Summit, and which provoked a new wave of public protest from the end of 1999.

Demands for local autonomy reappeared following the decision of the Georgian government to codify the autonomous status of Ajaria in March 2000. These demands are supported by radical nationalist groups in Javakheti (“Javakhk”, “Virk”) and increasingly being endorsed by Armenian Diaspora groups, especially the Dashnaktsutiun in the U.S. Recognizing the critical situation in Javakheti, in February 2001 the President issued a decree to develop a Comprehensive State Program for Regional Development. But so far the government has failed to allocate additional resources, and has opposed any proposals for autonomy.

·        Kvemo Kartli Azerbaijanis (Georgia). Less than 50 km south of Tbilisi, a compactly settled community of Azerbaijanis live in the raions of Marneuli (80%), Bolnisi (74%), Dmanisi (70%), and Gardabani (51%). The Azerbaijani-populated areas include some of the best agricultural lands in Georgia, providing the Azerbaijanis with an economic condition at par with the rest of Georgia. The mainly Sunni Muslim Azerbaijani minority has seen little tension with the central government since independence. However, the conclusion that this is an area without problems is premature. In 1989, at the height of the Georgian nationalist movement, some extreme nationalist groups expressed concern over the rapid demographic increase of the Muslim population in Georgia, that means, chiefly the Azerbaijanis. Georgian groups at this point tried to incite Azerbaijanis to leave Georgia, and the pressure got so intense in areas of the Bolnisi region that an estimated 800 families left Georgia for Azerbaijan. Partly due to the lack of political organization among the rural and mainly agricultural Azerbaijani population, however, no response occurred and the situation calmed down in 1990-91. While the problems of the region are similar to those of the rest of the country, settlement patterns of village-based enclaves create tensions within and between communities over access to resources (water, arable lands, pasture). Corrupt, brutal police brought in from outside the region, and the perception that they operate with the contrivance of local authorities, fuels discontent. A feeling of mistreatment in parliamentary and local elections is another source of grievances. Azeris still complain of a lack of political access and representation, and of other types of discrimination. However, the good relations between Georgia and Azerbaijan have ensured that this area remains relatively stable.

·        Ajaria (Georgia). Ajaria, on Georgia’s Black Sea coast and bordering Turkey, is populated mainly by Muslim Georgians. Ajaria was part of the Ottoman empire until 1878, when it was incorporated into the Russian empire. Ajaria received the status of an autonomous republic in 1923. However, Ajars as a separate people disappeared from Soviet censuses after 1926, and were counted as Georgians. Since independence, however, Ajaria has been led by Aslan Abashidze, a local strongman who has managed to strengthen Ajaria’s autonomy from Georgia’s central government during the conflicts in South Ossetia and Abkhazia. Abashidze has refused to subordinate Ajaria to Tbilisi’s control, and ruled the region as a semi-independent fiefdom. Due to trade with Turkey, Ajaria is relatively wealthy,  a wealth that has been the base for Abashidze’s public support. A Russian military base in Batumi as well as Turkish backing have helped Abashidze remain aloof of Shevardnadze attempts to control Ajaria. Ajaria is however a case of regionalism, not secessionism. Ajars have a strong sense of Georgian identity, implying that the risk of secession or ethnic conflict is low.

·        Lezgins in Azerbaijan. The Lezgin people reside in the north of the country, near the border with Russia’s Dagestan Republic. In the towns of Qusar and Khachmaz, Lezgins make up ca. 75% of the population. The Lezgins belong to the North Caucasian group of peoples and a large portion of them also resides across the border in Dagestan. Lezgins are generally Sunni Muslims. Strong marriage and community relations connect the Lezgins in Azerbaijan and in Dagestan, and the two groups are engaged in daily trade and commerce over the border. The history of separatism among Lezgins is very long, and culminated in the first half of the 1990s. Many Lezgins were somewhat fearful of former President Elchibey’s nationalist rhetoric. When Elchibey came to power in 1992, he declared Turkish the national language and adopted the Latin alphabet in the place of old Cyrillic one. This created friction with the non-Turkic Lezgins, who felt increasingly dominated by the titular nation and feared further hostility from the central government. An additional problem was the lack of textbooks and educational curriculum in the Lezgin language. Fueled by difficult socio-economic conditions and by elements in the Russian government interested in weakening Azerbaijan, some Lezgin representatives called for secession. An organization, Sadval (unity) became associated with secessionist demands for the creation of a Lezgistan republic composed of southern Dagestan and Northern Azerbaijan. In 1995, Sadval was accused of masterminding an explosion in Baku metro that killed 12 people. Sadval also allegedly cooperated with Armenian intelligence services. At the time of political chaos and civil war in Azerbaijan in 1993, the Lezgin secessionist movement reached its peak. With the declaration of the independent Talysh Mugan republic in the south of Azerbaijan, some Lezgins politicians also called for the creation of Lezgistan. However, the election of President Aliyev and the subsequent stabilization of the political situation in Azerbaijan diminished secessionist claims among Lezgins. Several prominent Lezgins were elected or appointed to high governmental positions. For instance, General Safar Abiyev was appointed the Minister of Defense and Ms. Asya Manafova was elected chairperson of the Parliament’s commission on natural resources. For the time being, the Lezgin secessionist movement has calmed down and Sadval has all but disappeared. However, the Azerbaijani press regularly reports on the regrouping of Sadval in Russia.

·        Talysh in Azerbaijan. As with the Lezgins, the Talysh are one of the largest minorities in Azerbaijan. Officially, their numbers reach 100,000, however, the actual number could be significantly higher due to incorrect reporting of ethnicity during the Soviet times: many Talysh were registered as ethnic Azeris. Talysh people live in the south of the country near the border with Iran, speak a western Iranian language and belong to the Shia branch of Islam. The secessionist movement among Talysh is relatively recent, as Talysh people have generally been passive in national politics. The only major political event related to the Talysh took place during the turmoil of the summer of 1993, when retired colonel Aliakram Humbatov, an ethnic Talysh, declared an independent Talysh –Mugan republic and attempted to fortify its borders. The idea of independence did not gain popularity even among the majority of Talysh people and seemed to closely relate to political games in Baku at the time of the coup d’etat. Specifically, Humbatov allied himself with then Prime Minister Suret Husseynov to weaken President Aliyev’s position. The latter sent government troops to Lenkoran, where Humbatov’s forces were concentrated. The rebellion was rapidly crushed and Humbatov fled to Iran. Later, Humbatov was extradited to Azerbaijan and up to this day remains in prison, convicted of high treason. Talysh ethnic mobilization has been on decline since then, as many leaders of the so-called “Talysh Mugan Republic” were arrested.

Civil Conflicts and Political Violence

The three Caucasian states have seen a relatively high level of political violence in the past decade, spurring fears that the use of violence for political aims may be used by domestic actors in the future as well. Political instability and civil conflict seriously worsened the economic situation in the region and adversely affected the welfare of the population. In turn, public disaffection with government leads to a risk of civil unrest, with disaffection focusing on chronic energy shortages, increased electricity tariff, rampant corruption, the unresponsiveness of government, and the growing gap between a privileged elite that holds economic and political power and the rest of the population. While public dissatisfaction with governments is often high, discontent rarely galvanizes into violent conflict.

The first civil conflicts in the South Caucasus took place at the end of Soviet rule, as nationalist demonstrations in all three countries challenged Soviet rule. The Soviet army intervened in Tbilisi on April 9, 1989, killing 17 people; almost a year later, the Soviet military entered Baku on January 20, 1990, killing up to 300 people. These interventions led to the complete loss of legitimacy of the Soviet regime, and speeded up the process of secession of the Caucasian republics.

Text Box: Coups d’état have taken place in various forms in all three countries … attempts to murder political leaders have also occurred.Coups d’état have also taken place in various forms in all three countries. For example, in late 1991, the elected President of Georgia, Zviad Gamsakhurdia, was deposed after a short military confrontation in the center of Tbilisi by a paramilitary junta that failed to receive international recognition until it invited former Soviet foreign minister Eduard Shevardnadze to head the newly formed ‘State Council of Georgia’. Gamsakhurdia had alienated most political opponents and erstwhile allies alike by his eccentric style of government and paranoia. Yet Gamsakhurdia returned from exile in Chechnya in late 1993, at the height of the Abkhaz war, and tried to reassert himself as the legitimate President of Georgia, leading to another brief civil war. His grab for power that threatened to push Georgia to the point of disintegration nevertheless failed, and he committed suicide in the end of December 1993. In Azerbaijan, popular demonstrations succeeded in forcing the resignation of the Communist government in April 1992. Elections were held that brought the leader of the Popular Front, Abulfaz Elçibey, to power in June. In May 1993, however, a rebellious military commander in Ganja, Surat Husseinov, launched a revolt against the government and marched on Baku. This forced President Elçibey to leave Baku, thus averting a civil war as Azerbaijan’s former communist leader, Heydar Aliyev (who was nevertheless not involved in the coup) returned to power. In 1994-95, President Aliyev averted two coups by elements of the armed forces, though Azerbaijan has been spared such events since. In Armenia, no similarly dramatic events have taken place. However, when President Levon Ter-Petrossian in October 1997 accepted a OSCE proposal that would leave Mountainous Karabakh within Azerbaijan, he was deposed in a palace coup by his Prime Minister Robert Kocharyan, Defense Minister, Vazgen Sarkissian, and Security Minister Serzh Sarkissian.

Attempts to murder political leaders have also occurred. The 1994 and 1995 coups against Aliyev clearly intended to eliminate him. In Georgia, two attempts to assassinate President Shevardnadze have narrowly failed, in 1995 and 1998, and several other coup or assassination attempts have been foiled. The most tragic event took place in October 1999 in Armenia, when armed gunmen entered the parliament in full session and succeeded in killing the Prime Minister while addressing a plenary session, as well as the Speaker of Parliament and several cabinet members, plunging Armenia into a political crisis that it has barely managed to recover from. Military insurgencies are another problem that has especially plagued Georgia, whose army is in the worst material condition and suffers from poor discipline. A revolt by a tank battalion in Senaki in western Georgia in 1998 led by colonel Akaki Eliava was put down, while a National Guard insurgency in Mukhrovani 25km East of Tbilisi in May 2001 was silenced, though it seemed to have more to do with the desperate condition of the soldiers than with politics.

In spite of these many problems, it should be noted that relations between the Governments and their domestic opposition have mainly been handled in a non-violent way. Unlike in Central Asia, there are relatively few instances of beatings and disappearances of political figures and activists. Police beatings at demonstrations has happened in all countries, most frequently in Azerbaijan, but on the whole, the regular political process in the three states seems to develop in the direction of acceptance and recognition of the principles of dialogue and non-violent means of protest. Public discontent may nevertheless be rising, and labor strikes, riots, and violent demonstrations are becoming more frequent. Armenian demonstrations protesting the closure of a TV channel were observed in 2002; Unrest in Sheki and other areas in Azerbaijan after the 2000 parliamentary elections had to be put down; and most dramatically, Georgian security forces’ abortive raid on the Rustavi-2 TV channel brought students and others into the streets of Tbilisi, forcing a government crisis and Shevardnadze firing the entire cabinet.

Transnational Threats

The transnational threats that are present in the Caucasus today are both criminal and ideological in nature. The trafficking of narcotics, arms and persons in the South Caucasus has gradually increased since the demise of the Soviet Union. While transnational crime does not yet pose a danger to these states to the level that they do in Central Asia (where several states are in danger of becoming so-called narco-states) the location of the South Caucasus on the major trafficking routes from Afghanistan to western Europe imply that drug trafficking may become a serious threat to statehood and breed instability. In the ideological realm, radical Islamic movements are another transnational threat. These groups exist in the South Caucasus though not on a significant scale. However, dire socio-economic conditions and the continued deficit of democratic governance are factors that could spur the rising influence of radical and militant Islamic movements. Being the only overwhelmingly Muslim country in the region, Azerbaijan is more affected by this problem than its neighbors, though Georgia also experienced its fair share of the problem.

Narcotics and Arms Trafficking

The states of the South Caucasus have been increasingly plagued by illicit activities perpetrated by criminal organizations. In addition to cigarette, fuel and alcohol smuggling rings – which pose little more than an economic threat – the region, situated along both the ‘Balkan’ and ‘Northern’ smuggling routes, is an important international centre for narcotics and arms trafficking. Widespread corruption, political and economic instability, and both real and potential armed conflict have further helped the rooting of transnational crime in the Caucasus – most obviously as armed conflict has resulted in the loss of central government control over territory, including approximately 30% of Georgia and 20% of Azerbaijan. Given its proximity to Russia, Turkey and the Arab world, the South Caucasus acts as a natural channel for arms smuggling. Separatist and civil conflicts also led to a flood of weapons pouring into the region since 1989/1990, from Russia, Turkey, Iran, Greece and Western states. Given the unresolved nature of these conflicts, there is both a great demand for arms in the region and a steady supply. The majority of illicit trafficking operations in the South Caucasus are conducted by criminal groups, as opposed to terrorists or individuals. Criminal organizations involved in the large scale trafficking of arms and drugs tend to be highly organized entities with influential leaders and connections to key state institutions, in some cases directly connected to the upper echelons of government.

Armenia is least involved in arms and drugs trafficking, mainly due to Armenia’s lack of transportation links with two of its four neighbors. It is also surrounded by countries traditionally involved in drug production and trafficking, restricting its opportunities to penetrate the regional drugs and arms trade. That said, narcotics transiting Iran subsequently transit Armenian territory en route to Russia or further to Western Europe.

Azerbaijan, on the other hand, plays a key role in both the ‘Balkan’ (Iran to Western Europe) and ‘Northern’ (Central Asia to Western Europe, often from Turkmenistan via the Caspian Sea) trafficking routes. Insufficient border controls and collusive government relations with trafficking groups has secured Azerbaijani territory as a transshipment point for narcotics being transported to Russia and Central and Western Europe. Among the most important centers for trafficking are the port of Sumgait and the exclave of Nakhchivan – both with their own entrenched criminal structures. The Sumgait mafia, with direct links to Central Asia, has been involved in the drugs trade for much of the past decade, and drugs also enter Azerbaijan from Iran through the Astara and Jalilabad areas. Recent evidence also shows that the Nakhchivan mafia is involved in the drug trade, partly due to Nakhchivan’s location between Iran and Turkey and its detachment from the rest of Azerbaijan. Nakhchivan is presently an important transshipment point for Afghan heroin. Azerbaijan is also a natural conduit for weapons being smuggled between Russia and Iran. Despite seizures in April 1998 of suspected missile parts by the National Security Service, and given the corruption present in Azerbaijan, this probably remains the tip of the iceberg as far as trade in conventional arms and possibly even the trade in weapons of mass destruction go.

Text Box: Abkhazia on the Black Sea coast has become a key heroin transiting point.Georgia seems to play an increasingly important role in the international trafficking game, for several reasons. A first factor is its internal problems including corruption, low living standards, and weak law enforcement. Another is its location on the Black sea coast, within easy reach of Central and Eastern Europe; a third is the existence of the uncontrolled territories of Abkhazia and South Ossetia, which have become smuggling havens. Abkhazia, on the Black sea coast with its ports of Sukhumi, Ochamchira and Gudauta, has hence logically become a key heroin transiting point. The narcotics, typically handled by Turkish and Iranian groups, reach Georgia either from Azerbaijan, or from the Russian North Caucasus through South Ossetia or the Pankisi gorge, another area that the government doesn’t control. The drugs then transit Georgia either to Abkhazia or the ports of Batumi in Ajaria or Poti, from where they are shipped to Ukraine and Rumania. The existence of serious corruption within the Georgian law enforcement agencies and military have facilitated criminal activities. Although civil servants are not regularly connected to drug trafficking operations, they have been commonly associated with arms smuggling. There have been several cases pointing to the involvement of the state security ministries and soldiers as mediators in the regional arms trade, involving Chechnya. It is estimated that since 1990, Georgian officials have confiscated approximately 20,000 wagons of weapons and ammunition – the majority of which are believed to have originated in South Ossetia and Abkhazia, and Russian military bases (in Georgia and Armenia).

The greatest concern with regards to arms smuggling, however, is that the Caucasus is being used as transshipment points for nuclear, biological, chemical and radiological weapons. There have been several recent cases of clandestine trafficking of radiological material (which could be used for dirty bombs), primarily through Georgia; in addition to suggestions that enriched uranium and other radioactive materials stored in Abkhazia may have been sold to Iraq or terrorist groups during the Abkhaz conflict. Given the evident role of both Georgia and Central Asia in NBCR weapons smuggling, it is not far-fetched to assume that Azerbaijan would also play a central role in smuggling operations of this nature.

Islamic Radicalism

The threat of radical Islam gaining a foothold in the South Caucasus is less acute than in either Central Asia or the North Caucasus. Only Azerbaijan among the three states of the South Caucasus is predominantly Muslim, whereas Muslims also live in parts of Georgia: Ajaria is majority Muslim, Kvemo Kartli is populated by Sunni Azeris, and the Pankisi gorge in the North of the Country is populated by several thousand Kists or ethnic Chechens with Georgian citizenship. Foreign missionaries from Saudi Arabia, Iran, Turkey, Egypt, and other Muslim countries have flocked to the former Soviet Union’s Muslim areas since independence, mainly to Azerbaijan – pouring millions of dollars into religious activities that have fueled the rise of Islamic radicalism. Hundreds of mosques and religious schools, medreses, were built in the country in the 1990s with the financial help of these countries. Every year, dozens of Azerbaijani youth are sent to study religion in the Middle East. Due to Azerbaijan’s Shi’a heritage, state-supported Iranian missionaries have been especially active. However, in the Sunni North of Azerbaijan, Turkish, Saudi and Dagestani activists have lately been very active. Among these activists, some have belonged to the purist Salafi sect of Islam, colloquially known as Wahhabism, one of the strictest forms of Islam. Radical thoughts have nevertheless not found a foothold among Azerbaijan’s traditionally tolerant population. Except for the religious areas in the Sunni North and the Shi’a South, little religious fervor can be observed in Azerbaijan; nevertheless, in the capital Baku, increasing numbers of people started flocking to the Abu Bakr mosque by mid-2001, which had developed into a center of Islamic fervor with Wahhabi undertones in the city. The Mosque was closed down in late 2001.

After September 11, both Azerbaijan and Georgia joined the war on terrorism, and have fed the hype on Islamic radicalism, managing thereby to obtain increased levels of U.S. support. Most obvious was the connection made between the Pankisi gorge and Al Qaeda (see below) Moreover, several members of the Egyptian Gama-al-Islami, closely connected with Al Qaeda, were arrested in Azerbaijan and extradited to Egypt. Even before 9/11, the government had found it necessary to crack down on the radical Shi’a Jeyshaullah movement, which had apparent support from Iran, connections to Hizbullah, and has been implicated in plotting subversive actions in the country. As a result of rising suspicion, the crackdown intensified in 2002. President Aliyev also created the State Committee on Religious Affairs, which immediately started the re-registration process of nearly 2,000 mosques, churches and other religious communities and organizations. Only 410 of these have so far been registered by the state. The commission intends to keep a close eye on the activity of all religious institutions in the country. Azerbaijani security services have increased surveillance at mosques that are not state-affiliated, and have focused their attention on locating and confiscating ‘anti-state’ religious materials, mostly in the northern regions. Most recently, the government has sought to increase its influence on religious affair by licensing the Mullahs (religious clergy), a move that has been met with great criticism among the clergy and some government officials. Furthermore, Azerbaijan has officially named Hizb-ut-Tahrir a terrorist organization because their activities, which are not violent in nature, have been deemed to be “directed against the State system and the sovereignty of Azerbaijan”. This move could be alienating followers of Islam, though Hizb-ut-Tahrir is a Sunni organization and Azerbaijan is predominantly Shi’a, and therefore has a limited constituency, unlike in Central Asia. The government is still at a loss in finding a way to balance its support of the U.S.-led campaign against terrorism with the interests of the domestic religious constituency.

The Pankisi Gorge

The Pankisi gorge is home to several transnational phenomena, including drug trafficking, kidnappings, extortion, and allegedly Islamic radicalism. General instability and conflict in Georgia and in Chechnya over the past decade, coupled with Tbilisi’s lack of control over Pankisi, have made the gorge a perfect location for criminals from the North and South Caucasus engaged in smuggling illicit commodities, and a major route for arms and drug trafficking. Local criminals – mostly Georgians of Chechen ethnicity, known as Kists – have also engaged in systematic kidnapping for ransom. Crime caused tension between the Chechen and Georgian communities to rise to dangerous levels in Pankisi. Criminals’ activities and unabated attacks on and kidnapping of Georgian security officers have also underscored the weakness of state authority. Since the late 1990s, close ties have developed between state and law enforcement officials (possibly up to the ministerial level in the Georgian cabinet that was sacked in November 2001) and entrenched criminal barons in the Pankisi Gorge. The influx of Chechen refugees served as a political fuse that called attention to the security situation in Pankisi. The presence of ca. 600 Chechen militants in the gorge, loyal to several field commanders, most prominently Ruslan Gelayev, has added to the complexity of the situation. Text Box: Close ties developed between Georgian high officials and entrenched criminal barons in Pankisi.This led to Russian accusation against Tbilisi of sheltering Chechen fighters – terrorists in Moscow’s parlance - and demands to start military operations on Georgian territory.

The chaos in the Pankisi gorge provides an ideal operating environment for Islamic radicals. Fears that the Pankisi housed Islamic radicals other than Chechen militants were raised in February 2002, when a top U.S. diplomat in Tbilisi publicly alleged that Islamic radicals directly linked to Al Qaeda were operating in Pankisi. It was thus strongly inferred that Pankisi could become a terrorist haven. Following these allegations, Washington speedily dispatched military advisors to Georgia, which was soon followed by an anti-terrorism training program. However, although Pankisi has long been home to kidnappers, heroin traffickers, weapons dealers, and armed Chechen militants, there is no viable evidence to suggest that the gorge has ever been a haven for al-Qaeda. There are several reasons to explain U.S. perceptions of an al-Qaeda presence, including the fact that a small population of Arabs have settled in Pankisi over the past few years. These Arabs seem to be involved in humanitarian operations (they have built a mosque and a health clinic, and distribute food and wood), and peacefully endorse the teaching of Islam and the Arabic language. Little evidence suggests that these individuals are connected to al-Qaeda, or involved in terrorist activities of any kind.

The Zaqatala Region

Events in summer 2001 showed Azerbaijan's vulnerability to organized crime and attempts to incite ethnic separatism. Groups of armed individuals in the Zaqatala region in the extreme northwest of the country, close to the border of Georgia and of Dagestan, attacked the offices of local authorities and police several times, wounded and killed several policemen and terrorized the local population. These groups were allegedly connected with Chechen criminal gangs and used the issue of separatism to gain support among the local population. Communities of Dagestani peoples, including Avars and Lezgins, live in the area. Reportedly, anonymous persons in Zaqatala distributed leaflets, calling the locals to revolt against Azerbaijani domination. Although it remains unclear what goals these criminal groups were pursuing, allegations emerged that these groups were involved in narcotics trafficking and demanded the return of “dirty money” that Azerbaijani authorities had previously confiscated. Links with Armenian and Russian secret services were also alleged, though not proven. Nevertheless, these events significantly alarmed the Azerbaijani government. President Aliyev sent deputy Minister of Interior Zahid Dunyamaliyev to control the anti-criminal operation in the region. The government also sent large army and police forces to the region to restore order and crush down any armed groups. The situation was rapidly calmed and the central authorities restored control over the area. Whether this was made possible due to the efficiency of the government or through secret negotiations between authorities and the criminal groups is unclear. The government still maintains a large military presence in the region, fearing the renewal of this kind of violence.

Geopolitical Competition and External Threats

The South Caucasus has become one of the most attractive areas for great power competition in the post-cold war era. The region’s location and its own energy resources have contributed to this competition. Geographically, the South Caucasus is located on the ancient trade and communication routes linking Europe and Asia. Moreover, it is the meeting place of Slavic, Turkic, Persian and indigenous Caucasian cultures, and of the Christian and Islamic civilizations. Politically, it is located in the historical intersection of the Russian, Persian, and Ottoman empires, and in the modern era, between the regional powers Russia, Turkey and Iran. As a result, these three powers see a logical and natural influence for themselves in this Text Box: The South Caucasus has become one of the most attractive areas for great power competition in the post-cold war era.area, which is compounded by historical links of amity as well as enmity among each other and with the states and people in the region. These links have interacted with the perceived national interests of the three powers as well as the three regional states to form a complex but well-defined Caucasian ‘security complex’ in the present era. In addition to this, the oil and natural gas resources of the Caspian sea area, in particular Azerbaijan, have increased both private and state interests in the region. Issues of ownership of the energy resources, and even more strongly of their transportation to world markets, have formed an intrinsic part of the geopolitical competition in the South Caucasus. The regional politics in the Caucasus cannot be viewed in isolation, but is heavily affected by developments in adjacent regions, including Central Asia, the Middle East, and as far as Afghanistan and Pakistan, adding to the unpredictability and ambiguity of the region.

Roles and Interests of Regional Powers

Geopolitical competition has presented the three South Caucasian states with both threats to their security and opportunities to further their perceived national interests. Hence all three states have sought to cement their statehood and independence with the help of friendly regional powers, while all three also perceive considerable and even lethal security threats from other powers, interlinked with the security threats they perceive from one another. Four major powers form a part of the Caucasian security complex: Russia, Iran, Turkey, and the United States.

·         Russia. Since the independence of the South Caucasus, Moscow has reluctantly seen its influence in the region gradually declining, a process that it has sought to block by the use of various diplomatic, economic, and military means. Moscow has tried to keep the South Caucasus within the Russian sphere of influence, and has to that end tried to prevent the local states from pursuing independent foreign policies, and hinder the United States and Turkey from increasing their presence and influence in the region. Ties with Iran have also served  this purpose. Russian overt policy demanded that all three states acceded to the CIS, accepted Russian border guards on their ‘external’ border with Iran and Turkey, and allowed Russian military bases on their territory. Moreover, Russia seeks to monopolize the transportation of Caspian energy resources to world markets, and has sheltered coup-makers and secessionist leaders from Azerbaijan and Georgia.

Moscow played a crucial role in the separatists wars in Georgia and in the Armenian-Azerbaijani conflict. Russia effectively used these conflicts as levers to rein in independent-minded Georgia and Azerbaijan. Russian support was crucial in providing the breakaway republics with de facto independence; Russia forced both Georgia and Azerbaijan to join the CIS in 1993, and Georgia to recognize its military presence for the next 25 years. Military bases in Vaziani (close to Tbilisi), Gudauta (Abkhazia), Batumi (Ajaria), and Akhalkalaki (Javakheti) promoted Russian influence throughout the country. The bases then engaged in arms trading and strengthening of separatist forces in the minority areas. At the 1999 OSCE Istanbul Summit, Russia agreed to withdraw from the Vaziani and Gudauta bases and to reach an accord with Georgia on the status of bases in Akhalkalaki and Batumi by the end of 2001. Russia demands a 15-year time frame for withdrawal, while Georgia seeks a three-year time limit for withdrawal. Through the CIS Peacekeeping Force, Russia maintains a firm military presence in Abkhazia and South Ossetia. While Russia has not recognized independence of the Abkhazian and Ossetian republics, Russian government policies provide them direct political and economic, and indirect military support. Russia exempted Abkhaz and Ossetians from a visa requirement imposed on Georgia in December 2000, and granted Russian citizenship to the Abkhaz and Ossetians in June 2002, amounting to a de facto annexation of these territories. Meanwhile, the Russian military continues to pursue a harder-line foreign policy towards Georgia; the bombing of the Kodori and Pankisi gorges are evidence of this. Russia has also developed close military ties with Armenia, which has become an outpost of Russian influence in the South Caucasus.

Since President Putin came to power, Russia has adopted a more pragmatic position toward Azerbaijan, leading to an improvement in relations and a more constructive attitude in the Minsk Group negotiations; Russia has also been less vocal toward expanded American and Turkish influence in the region. However, continued strong-arm policies toward Georgia generate doubt as to what Moscow’s intentions are. With respect to the stalemated conflicts of the region, Moscow’s policies have given abundant evidence to support that Russia finds the present status quo convenient, and does not desire a resolution to any conflict. In particular, Moscow seems to fear that an Armenian-Azerbaijani peace deal would decrease Armenia’s security dependence on Russia.

·         Iran. The independence of the South Caucasian states took Iran by surprise, especially as the war between Azerbaijan and Armenia revealed deep contradictions in the foreign policy of the Islamic Republic. Disagreements within the ruling circles in Tehran have ensured a certain level of mixed signals, but in spite of these differences, Iranian policy has proven remarkably durable. Three main facets have characterized Iranian policy. Firstly, a concern over the emergence of the independent state of Azerbaijan, leading to a gradual tilt toward Armenia in the Armenian-Azerbaijani conflict. Secondly, a dramatic improvement in relations with Russia that, despite a shaky basis, have developed into a strategic partnership. Thirdly, an increasing desire to influence the development of oil and gas resources in the Caspian sea, seeking to avoid Turkish influence over pipeline routes. Iran’s recent belligerence in Caspian naval matters is a rising concern, as viewed below. Concern over the large Azeri minority in Iran has guided Iran’s policy toward the Caucasus. The over 20 million-strong (over twice the population of the state of Azerbaijan) Azeri minority is a growing concern to the Iranian government, as Tehran fears increased nationalism and separatism among Azeris could threaten the integrity of the Iranian state. Aware of its waning legitimacy and popularity, the clerical regime seeks to prevent the emergence of a strong and wealthy Republic of Azerbaijan that would act as a magnet for Azeris in Iran. Azerbaijani President Elçibey’s anti-Iranian attitude worsened relations to the freezing point in 1992, and speeded up Tehran’s tilt toward Armenia in the conflict. Iran has also found common ground with Russia in many issues. Beyond economic benefits, Iran and Russia share an ambition to limit Turkish and American influence in their backyard, and to restrict the westward orientation of the South Caucasian nations.

·         Turkey. After a bout of pan-Turkic euphoria in the early 1990s that frightened Armenia, Iran, Russia, and discomforted Georgia, Ankara has since the late 1990s pursued a pragmatic and stable policy toward the South Caucasus. Turkey gives primacy to relations with Azerbaijan, both because of the close cultural and linguistic affinities between the two states, and because of Azerbaijan’s pivotal geopolitical position. The projected Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum gas pipeline have added economic importance to the Caucasus for Turkey. A logical result of Turkey’s ambition to become an energy corridor between the Caspian and Europe has led to increased attention on Georgia, the geographic link between Turkey and Azerbaijan and Central Asia. Turkey has improved its relations with Georgia to the level of strategic partnership. After Iranian military threats toward Azerbaijan in July-August 2001, Turkey strongly signaled that it had taken on a role as guarantor of Azerbaijan’s security. Turkey has supervised the building-up of Azerbaijan’s military forces, and entertains close military ties not only with Azerbaijan but also with Georgia, in a sense forging a Turkish-Georgian-Azerbaijani military relationship that is in turn linked to the Turkish-Israeli alliance.

The only South Caucasian country with which Turkey has extremely poor relations is with Armenia. Armenia sees Turkey as the chief threat to its security, and still suspects Turkey of having genocidal ambitions against Armenia. Turkey, for its part, refuses to recognize the occurrence of a Genocide of Armenians during the First World War and sees the Armenian government’s struggle to achieve international recognition of the alleged Genocide as a step toward territorial demands on Turkey – a fear compounded by the Armenian government’s reluctance to recognize its border with Turkey. Ankara reacted strongly to Armenia’s occupation of Azerbaijani territories in 1992-93, and refuses to open diplomatic relations with Armenia until it withdraws from the occupied territories in Azerbaijan. Turkey’s military and security role in the South Caucasus increased gradually in the early 2000s.

·         Text Box: All American aircraft that took part in military operations in Afghanistan from bases in the U.S. or Europe transited the airspace of Georgia and Azerbaijan.United States. American interest in the South Caucasus began in 1994 and was spearheaded by two camps: the Department of Defense and the Oil industry. The Pentagon saw the South Caucasus as a strategically important region and urged the U.S. Government to help secure the independence and stability of the South Caucasian States. The oil industry sought government support in its ambition to maximize its market share in the extraction of Caspian oil, and in stabilizing the area to decrease political risks. By the late 1990s, U.S. attention had increased, based on an understanding of the Caucasus as the lynchpin of any U.S. role in Central Asia. This perception increased dramatically in the aftermath of September 11, 2002, as the U.S. deployed military units in Central Asia. Unable or unwilling to rely on supply routes through Iran, Russia, or China, the U.S. saw the Caucasus as a crucial corridor, especially as all American aircraft that took part in military operations in Afghanistan from bases in the U.S. or Europe transited the airspace of Georgia and Azerbaijan. In January 2002, sanctions imposed at the behest of the Armenian lobby in the U.S. Congress against Azerbaijan were waived, and the DoD embarked on a large program of military cooperation with Azerbaijan. In February, U.S. troops were sent to Georgia, tasked to train Georgian special forces in a bid to build up the Georgian army and to help Tbilisi assert control over the situation in the Pankisi gorge. American attention to the South Caucasus is hence likely to remain high, and American coordination with their Turkish ally is an important element in its engagement there. However, uncertainty regarding American intentions in the region may create instability rather than stability.

·         Other Powers. In addition to these four major regional powers, the European Union, Israel, Pakistan and China are also involved – albeit on a lower scale – in the region. EU member states Great Britain, France, Germany and Italy are involved in the Caucasus at a high level, yet none of them is able to single-handedly exert significant influence there. In concert, the EU could conceivably be one of the major actors in the region – in the middle to long term even the most influential – but inability and unwillingness to forge a common policy toward the South Caucasus has prevented Europe from fulfilling its potential. Israel has been active in the Caucasus both through its private sector, investing heavily in Georgia and Azerbaijan, and politically due to the region’s proximity to Iran. Azerbaijan’s close relations with Israel, in particular, have irritated Iran. Pakistan’s role in the Caucasus is mainly as a supporter and ally of Azerbaijan in its conflict with Armenia. Pakistan early on condemned Armenia’s occupation of Azerbaijan’s territories; in Summer 2002, a defense agreement between Pakistan and Azerbaijan was signed. China’s interest in the Caucasus is mainly related to the oil and gas industry of the region, and Chinese companies moved in during the 1998 oil bust to buy shares in Azerbaijani consortia sold at low prices by smaller western companies abandoning the region.

Competition over Natural Resources

Aside from political influence, all regional powers have attempted to increase their influence over the natural resources of the region, especially the energy resources of the Caspian sea, and sought to have oil and gas exporting pipelines pass through their territory. This competition has had a negative effect on the development of the region and has created serious potential threats to its stability.

Azerbaijan at present uses two pipelines to export its ‘early’ oil. The Baku-Novorossiysk pipeline through Russia to the Black Sea coast existed since Soviet times, and since 1999, a Baku-Supsa (Georgia) pipeline, also to the Black Sea, has been operating. However, the capacity of these pipelines is small and plans to construct a Main Export Pipeline (MEP) have been under way since major consortia were created in the mid-1990s. Options for pipelines from Baku have ranged from transiting Russia or Georgia to the Black Sea coast; Iran to the Persian Gulf; and via either Iran, Armenia, or Georgia to the Turkish Mediterranean coast. The two former options have been politically impossible, and the Azerbaijani government is reluctant to rely on either Russia or Iran for its main source of hard currency earnings. Since 1994, Azerbaijan, the U.S. and Turkey have been endorsing the construction of the MEP from Baku through Tbilisi to the Turkish Mediterranean terminal of Ceyhan (The BTC pipeline). Russia and Iran have opposed the idea, claiming the project is commercially not viable, and urged Azerbaijan to route the pipeline through their countries. BTC was at times a doubtful project that seemed far-fetched, but it has managed to survive. In the summer of 2002, BP and several other major oil companies announced that they were beginning construction of the $2.9 billion pipeline. Pipeline security will become a priority as several terrorist groups, including the Kurdistan Workers’ Party (PKK) have in the past threatened to target the regional pipeline network if their demands were not met.

The legal status of the Caspian Sea has been a point of contention between the littoral states, as historical treaties between Iran and the Soviet Union provide an insufficient legal framework for the division of the Caspian sea between its five littoral states. Azerbaijan signed agreements with Russia and Kazakhstan on dividing the seabed and sharing the water resources. Caspian leaders have met numerous times, most recently in Ashgabat in April 2002, to discuss the division of the Caspian Sea. Summits have nevertheless produced no results, with especially Iran rejecting median line division. Immediately following the April summit, Russian President Putin ordered the Russian fleet in the Caspian to conduct its most comprehensive naval exercises in post-Soviet history, a show of force that has not been heavily criticized either internationally or regionally. Of the five littoral states, Russia is the only one that has effectively, and seriously, pursued its demands for dividing the Caspian. Even Iran appears to be accepting Russia’s show of force, in order not to put the wider range of bilateral relations at risk. The unresolved status of the Caspian Sea has also led to problems especially for Azerbaijan, which since 1997 is engaged in a legal dispute with Turkmenistan over the Kyapaz/Serdar fields and since 2001 with Iran over the Sharq/Alov oilfields. The conflict with Iran came reached a climax in July 2001 as Iranian warships forcibly evicted a BP-owned exploration vessel operating over the Sharq/Alov field, claiming the waters to be Iranian. This was followed by almost two weeks of daily overflights of Azerbaijani waters and land by the Iranian air force, which eventually prompted a Turkish reaction and in its aftermath, increased American military assistance to Azerbaijan, with a focus on naval defense. The disputed status of the Caspian Sea can be a real source of political and military conflict between the littoral states, and hinders the exploration of the oil and gas fields in the Caspian as well as the flow of investments into the region.




Copyright 2002 SIDA/Cornell Caspian Consulting
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