Аналитический Центр "Разумные Решения"

Esen Usubaliev.

The end of the longstanding Nagorny Karabakh conflict — for more than 30 years considered one of the most dramatic in the entire post-Soviet space — is undoubtedly a significant event both in terms of the history of the collapse of the USSR and in the context of the formation of new conditions for the development of not only the South Caucasus, but also other related regions, as Central Asia can also be considered.

«Central Asia and the Caucasus» has been used for some time by many scholars to denote a common region, but since it is difficult to «construct» a region without cultural proximity (with the exception of Azerbaijan), this common name has been applied more in the foreign policy arena when analyzing the initiatives of certain states — the USA, Russia and EU countries. Nevertheless, it was initially clear that even the very understanding of the Caucasus, namely the South Caucasus as an integral region united not so much by common cultural and political ties but rather by a common idea of economic development, was also difficult to achieve — Azerbaijan, Armenia and Georgia initially had different development priorities. And in this context, Armenia and its domestic and foreign policy of unfounded «historical» and contemporary claims to Turkey acted as the main obstacle to the formation of a favourable economic and political climate in the South Caucasus, while contributing to military and political tensions in the region — Armenia refused to liberate the occupied territories of Nagorno-Karabakh and other areas of Azerbaijan.

By defining Armenia’s destructive policy under this article as the «Armenian factor», it should be understood that its impact was not limited to the strictly South Caucasus, but also largely blocked a number of important transport and economic initiatives linking Central Asia, the South Caucasus and Turkey. The significance of the «Armenian factor» was considerably reduced after 1999, when «during the Istanbul summit of the OSCE the presidents of Georgia, Azerbaijan, and the Turkish prime-minister signed an intergovernmental agreement on the Baku-Tbilisi-Ceyhan project» [1]. [1]. During this period, new economic and political relations began to take shape in the South Caucasus, marking Armenia’s withdrawal and exclusion from the overall system of regional and interregional relations. At the same time, the new opportunities in the region also reflected Turkey’s growing role in the South Caucasus and its own transport, trade and economic initiatives in Central Asia.

For the first time in modern times the old Turkish concept of a common historical legacy (Tarihsel Miras) stretching from the Middle East and the Balkans to the South Caucasus and Central Asia started to take shape, with the sole exception that now Azerbaijan had turned from an object of Turkish foreign policy into an important actor and strategic partner of Turkey in the whole geopolitical area that was being created. Especially after the restoration of historical justice as a result of the second Karabakh war, which in addition opens up the prospect of additional forms of security cooperation involving Central Asian states, Turkey and Azerbaijan in the framework of the Turkic Council.

Nevertheless, now, after the second Karabakh war, Armenia has been forced to cooperate by opening transport corridors through its territory to Turkey and Azerbaijan. The involvement of Armenian territory in large-scale projects linking Central Asia (with various offshoots and ancillary projects) with Turkey and Europe again increases the importance of the ‘Armenian factor’, which could become destructive. Particularly given the presence of Russian troops in Nagorny Karabakh and Armenia’s desire to use this factor as an additional element of its own security.

For a number of years after the collapse of the USSR, it was assumed that Azerbaijan and the Central Asian countries, sharing a common culture, language and historical commonality within the Soviet state, could initiate ambitious projects in the fields of trade and economic relations, infrastructure and transport, particularly in the transportation of energy resources from Central Asia and the South Caucasus to Turkey and on to European countries. This route, via the Caspian Sea and Azerbaijan, was also supposed to be an important way of ‘unlocking’ Central Asia and bringing the region’s energy resources to world markets. At least this was relevant for hydrocarbon-rich Turkmenistan, Uzbekistan and Kazakhstan.

However, the unresolved legal status of the Caspian Sea until 2018, as well as objective factors, among which the choice of Central Asian countries in favour of continental gas pipelines to the PRC, and the export of other resources in the Chinese direction, have influenced the rather low rates of trade and economic relations between the countries of the region and Azerbaijan.

The exception is Turkmenistan, with which Azerbaijan has had rather contradictory relations, including disputes over oil and gas deposits in the Caspian Sea, the settlement of its gas debt to Turkmenistan, etc., and until the Caspian agreement was signed it was difficult to speak of a steadily increasing trade and economic turnover.

However, as the Chinese gas transportation route has reached its capacity limit — about 43 bcm in 2019 [2] and in the absence of other Central Asian gas buyers, other energy supply routes to the world market are becoming increasingly urgent. These include TAPI, the Trans-Caspian gas pipeline and many other projects necessary to develop the energy industries of resource-rich countries in the region.

There is a similar situation in the field of transport — all Central Asian countries need to diversify their trade and economic relations and modernise their transport infrastructure; in this context, redirecting part of transport flows along the conditional corridor «China-Europe» (East-West) through Azerbaijan territory meets the common interests of the development of both regions.

For a long time, Central Asia has been considered a blocked region with the potential to become an important supplier of energy resources to the world market. The PRC is the first country to unblock the region (the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline), thereby diversifying the region’s existing energy and other links with the outside world. The Caspian route, with access to Azerbaijan, Turkey and further on to Europe, is a natural, logical and long-awaited route for the development of the region’s diverse trade and energy relations with the outside world. In this regard, together with the development of relations within the framework of the Turkic Council, this route is of great interest not only to energy-rich states but also to countries that pin their hopes on intensifying trade and economic cooperation with the South Caucasus and Turkey — Tajikistan and Kyrgyzstan.

Tajikistan, for its part, considers access to the Caspian Sea in a more comprehensive way, involving Afghanistan, which is also interested in this route, in its multifaceted trade and economic relations. The construction of the Tajikistan-Afghanistan-Turkmenistan railway and further to the Caspian Sea is nearing completion, which significantly increases the importance of Azerbaijan and Turkey in the developing economic relations of Central Asia at this time.

The construction of the Azerbaijan-Turkey transport corridor, which involves a combination of rail and road transport, will undoubtedly have a serious economic impact for both Azerbaijan and Turkey, as well as for the countries which intend to use this corridor for their trade and economic purposes. Equally, the transport routes that can link Armenia to Russia through Azerbaijan open up new prospects for the development of Armenia itself. In this case, the end of the second Karabakh war creates conditions not only for the development of the two countries (Azerbaijan and Armenia), but can also have a major impact on the economic recovery and development of the entire South Caucasus and turn it into a regional and one of the important centres (hubs) of world trade.

As the BTC gets busier, the new transport corridors (Zangelan) could be an important addition to the growing flow of goods. Given the Chinese foreign minister’s recent visit to Turkey, and the agreements between Turkey and China on cooperation and interaction, there is every reason to believe that China will consider transport routes through Azerbaijan and Turkey as an important focus of its ‘One Belt, One Road’ initiative.

Meanwhile, the outcome of the Karabakh conflict captures the division of geopolitical influence between the two powers of Turkey and Russia, which also through the development of transport routes have the opportunity to strengthen their presence in the region. This appears to be in the fundamental interest of all countries in the South Caucasus.

However, if in the case of Azerbaijan and Turkey, one can be confident that the transport corridor will be created as soon as possible (at least the construction period of 2 years was mentioned), given the motivation and interest of the two countries. With regard to Armenia, however, the situation is a bit more complicated.

It is difficult to talk about the implementation of any projects in Armenia until political stability is restored in the country — after the loss of control over the territory of Nagorno-Karabakh the political battles in the country are not subsiding, and all this against the background of economic stagnation and a growing incidence of coronavirus.

Moreover, it should be understood that Armenia is now experiencing serious ‘psychological’ trauma from the loss of control in Nagorny Karabakh and the impression is that, bogged down in political disputes and identifying ways out of the political crisis, there is little reflection in Armenia on the economic benefits which the implementation of transport projects in the South Caucasus can bring. In this case, it appears that Russia will still have to ‘convince’ Armenia of the economic and other benefits of the transport projects being implemented.

Naturally, Armenia itself does not have the financial means to build and restore rail links with Russia and this process will be managed by Russian Railways. Here, it appears that the railway is more important to Russia than Armenia, in terms of Russia’s geopolitical interests in the South Caucasus.

Obviously, under these conditions Armenia’s importance in the overall structure of transport and energy projects between Central Asia and the South Caucasus, on the South-North (Iran-Armenia-Russia) line, increases and if the Armenian leadership takes a more pragmatic approach to development projects in the South Caucasus, Armenia may significantly improve its strategic and economic position in the future. Here, however, there are several aspects that point to the unrealistic nature of such expectations.

In particular, this is due to the fact that so far no country has shown interest in investing in Armenia and especially in transport and communications — «foreign direct investment, unlike other countries in the region, still plays a minor role, while economic recovery to 2019 levels should not be expected before 2022». [3]. At the same time, Russia has long been and remains Armenia’s main investor — as of December 2019, Russia’s share in total accumulated investment is 36.1% and in FDI 49.2% [4].

In other words, it is now entirely up to Russia to implement transport and other projects in Armenia. In turn, Russia will not invest in Armenia until it is confident of Armenia’s political stability and, most importantly, its foreign policy orientation.

It is no secret that since Prime Minister Pashinyan came to power in 2018, relations between the two countries have cooled considerably, amid frequent criticism from both the Armenian leadership itself and changing public opinion in the country. Since the end of the second Karabakh war, the level of criticism of Russia, with claims of ‘betrayal of Armenia’, as well as a number of other accusations, has risen considerably. At least until parliamentary elections in Armenia on 20 June 2021, it is difficult to speak at all about the prospects for political stability and economic development in Armenia.

At the same time, it is difficult to expect Armenia to change its basic approaches in foreign policy — Armenian society is now more unprepared than ever to normalise relations with Turkey and Azerbaijan, immersed in even more aggressive international rhetoric about the ‘Armenian genocide’, again taking fictitious historical facts as the main factor in saving the country and solving all problems.

For Central Asia, Armenia’s role in trade, economic and other ties is extremely small, and it is also difficult to speak of a relationship of trust at the level of state leaderships between the countries of the region and Armenia. In this respect, Armenian participation or non-participation in common projects within Central Asia and the South Caucasus does not play a significant role. Nor have the countries of Central Asia ever felt the need to discuss the «Armenian genocide» issue. The only problematic issue was the visit of the first president of Kyrgyzstan, A. Akaev’s visit to Armenia in 1997 where he commemorated the «victims of the Armenian genocide» in the Ottoman Empire, which considerably cooled relations between Kyrgyzstan and Turkey for a short period and as a consequence led to serious proceedings in the Central Office of the Kyrgyz MFA.

Thus, one important consequence of the second Karabakh war may be the exacerbation of Armenia’s external dependence on Russia and an even greater transport isolation and plunge of that country into the abyss of a protracted economic crisis.

However, problems could arise if Armenia fails to stabilise its political and economic situation and its destabilisation begins to threaten the already established trade, economic and transport arteries linking Europe and Turkey to the South Caucasus and Central Asia. It appears that the problem of terrorism by Armenian nationalist groups could re-emerge in the South Caucasus and cause new conflicts in the Turkey-Armenia-Azerbaijan triangle.

In this regard, the intentions of Azerbaijan and Turkey to develop military-technical cooperation not only within the framework of bilateral relations, but also to promote interaction between the military departments and representatives of the military-industrial complex of Central Asian countries within the framework of the Turkic Council are fully understandable.

Overall, however, the implementation of these transport and communications projects, as well as the increase in freight traffic along these corridors, will undoubtedly have a serious economic and political boost, creating conditions for long-term stability in the South Caucasus.

In the foreseeable future, we expect the formation of a new space of trade and economic interaction and cooperation that will include the South Caucasus and Central Asia and act as a central nucleus for continental trade and a key participant in international projects and initiatives.

Esen Usubaliev, Ph. D., Director, Prudent Solutions.

Archive, May 2021

[1] Мачавариани Г.Г. Характер и особенности грузино-турецких отношений на современном этапе// Архонт, 2017. No 2. С. 4-13. 

[2] Стоит ли центральноазиатским экспортерам газа рассчитывать на Китай? https://russian.eurasianet.org/стоит-ли-центральноазиатским-экспортерам-газа-рассчитывать-на-китай
[3]Эксперт: Экономика Армении может достичь докризисных объемов не раньше 2022 года. https://eabr.org/press/news/ekspert-ekonomika-armenii-mozhet-dostich-dokrizisnykh-obemov-ne-ranshe-2022-goda/

[4] Чистый приток ПИИ в Армению в 2019 году составил $254,5 млн. 

https://eabr.org/press/news/chistyy-pritok-pii-v-armeniyu-v-2019-godu-sostavil-254-5-mln/