65-English-COVER.qxd 19/12/2003 09:42 Page 1 Chaillot Papers December 2003 n°65 The South Caucasus: a challenge for the EU Pavel Baev, Bruno Coppieters, Svante E. Cornell, David Darchiashvili, Arman Grigorian, Dov Lynch, John Roberts, Domitilla Sagramoso, Brenda Shaffer and Arif Yunusov Edited by Dov Lynch 65-English-COVER.qxd 19/12/2003 09:42 Page 2 Chaillot Papers Papers Chaillot n° 65 The South Caucasus: a challenge for the EU In January 2002 the Institute for Security Studies (ISS) beca- me an autonomous Paris-based agency of the European Union. Following an EU Council Joint Action of 20 July 2001, it is now an integral part of the new structures that will support the further development of the CFSP/ESDP. The Institute’s core mission is to provide analyses and recommendations that can be of use and relevance to the formulation of the European security and defence policy. In carrying out that mission, it also acts as an interface between European experts and decision-makers at all levels. Chaillot Papers are monographs on topical questions written either by a member of the ISS research team or by outside authors chosen and commissioned by the Institute. Early drafts are normally discussed at a semi- nar or study group of experts convened by the Institute and publication indicates that the paper is considered Edited by Dov Lynch by the ISS as a useful and authoritative contribution to the debate on CFSP/ESDP. Responsibility for the views expressed in them lies exclusively with authors. Chaillot Papers are also accessible via the Institute’s Website: www.iss-eu.org 65-English-Text.qxd 19/12/2003 09:15 Page 1 Chaillot Papers December 2003 n°65 The South Caucasus: a challenge for the EU Pavel Baev, Bruno Coppieters, Svante E. Cornell, David Darchiashvili, Arman Grigorian, Dov Lynch, John Roberts, Domitilla Sagramoso, Brenda Shaffer and Arif Yunusov Edited by Dov Lynch Institute for Security Studies European Union Paris 65-English-Text.qxd 19/12/2003 09:15 Page 2 Institute for Security Studies European Union Paris Director: Nicole Gnesotto © EU Institute for Security Studies 2003. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the EU Institute for Security Studies. ISSN 1017-7566 Published by the EU Institute for Security Studies and printed in Alençon (France) by l’Alençonnaise d’Impressions. Graphic design by Claire Mabille (Paris). 65-English-Text.qxd 19/12/2003 09:15 Page 3 Contents n°65 December 2003 Preface Nicole Gnesotto 7 1 A regional insecurity dynamic 9 Dov Lynch • ‘The transition is over’ 10 • The states of the South Caucasus 12 • External actors 15 • The structure of this volume 20 2 The growing threat of transnational crime 23 Svante E. Cornell • Crime in the former Soviet Union 23 • The Caucasus 25 • The drug trade 28 • Arms and nuclear smuggling 35 • Conclusions 37 3 Russia’s policies in the North and South Caucasus 41 Pavel Baev • Countering the threat of terrorism and containing Chechnya 42 • Charting pipelines on the geopolitical/geoeconomic maps 45 • Projecting power for (mis)managing conflicts 47 • Ready for new challenges? 50 4 US policy 53 Brenda Shaffer • Evolution of US policy towards the South Caucasus 54 • Current US policy towards the Caucausus 57 • Moving ahead: cooperation with Europe? 60 5 The UN, the OSCE and NATO 63 Domitilla Sagramoso • The United Nations 63 • The OSCE 72 • NATO 82 • Conclusions 88 65-English-Text.qxd 19/12/2003 09:16 Page 4 Contents 6 Energy reserves, pipeline politics and security implications 91 John Roberts • Reserves and production forecasts 91 • Pipeline politics 92 • Security implications 96 • Caspian boundary issues 100 • Appendix 1 104 • Appendix 2 105 7 Georgian security problems and policies 107 David Darchiashvili • Political-military problems and the external dimension 109 • Internal risks and the human security dimension 111 • Obstacles to regional security cooperation 117 • Contradictory efforts to handle security risks 118 • External assistance 123 • Dilemmas and directions for the future 126 8 The EU and the Karabakh conflict 129 Arman Grigorian • The current situation 130 • The optimal solution 131 • Obstacles to peace 135 • Third-party mediators: parts of a solution or parts of a problem? 138 • Conclusions and recommendations 139 9 Azerbaijani security problems and policies 143 Arif Yunusov • External factors 143 • Internal factors 149 • Conclusions 156 10 An EU Special Representative to a new periphery 159 Bruno Coppieters • Multi-regional policies: the Caucasus and the South Caucasus 160 • At the periphery of Europe 164 • Final notes 169 65-English-Text.qxd 19/12/2003 09:16 Page 5 Contents 11 The EU: towards a strategy 171 Dov Lynch • From footnote to example 171 • Strategic trends at play 173 • Conditioning factors 175 • EU thinking and debates 180 • Recommendations for an EU strategy 187 • Conclusions 191 • Appendix (Elements of an EU strategy towards the South Caucasus) 192 Annexes 197 • Maps of the region 197 • The Caucasus 197 • Georgia 198 • Armenia 199 • Azerbaijan 200 • About the authors 201 • Abbreviations 204 65-English-Text.qxd 19/12/2003 09:16 Page 6 6 65-English-Text.qxd 19/12/2003 09:16 Page 7 Preface Nicole Gnesotto hy a paper on the Caucasus? After all, the region does not border directly onto the European Union, it does not even W form part of the ‘new neighbourhood’ that the Commission sees as the main consequence of the forthcoming enlargement, and none of the countries that make up the region is a candidate for EU membership. Given the accumulation of both internal and external issues to be tackled by the Union in the coming months – from the IGC to the various international crises in the greater Middle East to enlarge- ment – the South Caucasus as one of the Union’s security concerns might seem to be of only marginal interest. And yet for the Union the significance of the Caucasus far out- weighs considerations of geography or its institutional timetable. Indeed, the region presents practically all the security challenges that typify the post-Cold War period: newly independent states’ transfor- mation from the Soviet system; regional conflicts and separatist move- ments, often against a background of religious strife; the difficult process of democratisation in weak states; the flourishing activities of mafia networks and trafficking of various types directed by criminal organisations; the infiltration of networks linked to international ter- rorism; the security of oil and gas pipelines; ecological risks and mas- sive economic underdevelopment; and so on. As from 2007, when Bul- garia and Romania are due to become members of the EU, all of the region will also form part of the Union’s immediate neighbourhood. The South Caucasus therefore figures de facto on the European Union’s security agenda: at a practical level, with the nomination in July 2003 of an EU Special Representative for the Caucasus; and at a conceptual level, since the region has been recognised as an area where the European Security Strategy would typically apply. This Chaillot Paper is therefore devoted to an examination of the different security challenges posed to the European Union by the coun- tries of the South Caucasus. Dov Lynch, who is a specialist on Russia and responsible for Eurasian questions at the Institute, brilliantly managed and edited the paper, and most of the authors of chapters were members of the task force on the Caucasus led by him at the Insti- tute in 2003. 7 65-English-Text.qxd 19/12/2003 09:16 Page 8 Preface Recent events in Georgia have illustrated that the transition to democracy, in this region as elsewhere, is not only a long-term affair but also calls for a skilful mix of restraint, openness and vigilance on the part of the international community. The European Union has no ambition to become the major security actor in the region, but it holds all the cards required to contribute, along with other international partners, to the gradual stabilisation of crisis zones and to encourage all the forces striving for the democratisation of the countries of the South Caucasus. Paris, December 2003 8 65-English-Text.qxd 19/12/2003 09:16 Page 9 The South Caucasus: A regional insecurity dynamic a challenge for the EU Dov Lynch 1 The South Caucasus contains three states that emerged after the collapse of the Soviet Union: Georgia, Armenia and Azerbaijan. Geographically, the region is populated by some fifteen million people, links the Caspian Sea basin to the Black Sea on an east-to- west axis, and is the juncture between the greater Middle East, Turkey and Iran, and the Russian Federation. This chapter will introduce a number of themes that run through this Chaillot Paper. The first part examines the nature of the ‘transition’ that the three South Caucasian states have undergone with a view to understand- ing the scale of their transformation. A second part discusses dimensions of state weakness across the region. Next, the chapter considers the impact of third parties on regional security/insecu- rity, and finally it outlines the structure of the volume. The South Caucasus is divided by conflicts, blockades and trade restrictions. Armenia has lived under blockade from Azer- baijan and Turkey for more than a decade. Important rail links from Armenia through Georgia to Russia have been blocked since the early 1990s by the failure to resolve Georgia’s conflicts. Russia has applied periodically a strict border regime vis-à-vis the South Caucasus, and this has also disrupted oil/trade flows.