Navigating EU-Caucasus Integration

by Jaim Coddington

Intern – Transatlantic Energy and Environment

May 2011
Introduction:

Recent events have shown that international cooperation is alive and well.

Multinational organizations like NATO and the UN have been at the forefront of peacekeeping

and disaster relief efforts throughout the world, and even the most powerful and individualistic

states, including the United States, Russia, and China, have endeavored to address issues of

global concern through multinational bodies like the G20. Although these international forums

often witness disagreement and dissent, most states seem to recognize the benefits of

multilateral decision –making and world governance. As the importance of international

institutions grows, many states have moved to forge closer ties with these institutions. Russia’s

impending accession to the World Trade Organization and Turkey’s pursuit of European Union

membership both indicate the international community’s growing desire for greater

cooperation and integration. This desire is reflected in the robust economic and political ties

developing between the states of the southern Caucasus and the transatlantic community.

Issues of energy security, territorial integrity, democratic development, and

transnational security make Caucasus-EU integration an essential goal for the future of

transatlanticism, and yet many obstacles still prevent the Caucasus countries from becoming

viable members of supranational organizations like the EU. As Turkey’s tortuous EU accession

process has shown, the international community demands high standards of democratic

governance, stable and well-regulated economies, and strong protection for civil liberties

amongst its member states. The issue of Caucasus integration requires careful consideration of

socioeconomic conditions in each of these states, as well as a long term view of the process.

Crucially, Caucasus integration must be seen as a course that will incorporate Armenia, Georgia,

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and Azerbaijan; these three states are linked by territorial conflict and other mutual policy

concerns, and cannot be separated from each other in any political consideration of the region.

Caucasus integration must occur all at once, or not at all. This paper will elaborate on the

mutual benefits of Caucasus integration into the EU community and the larger transatlantic

community, and discuss how to best overcome the obstacles currently preventing Georgia,

Armenia, and Azerbaijan from moving towards European Union membership.

How is Caucasus integration beneficial to the transatlantic community?

While the Caucasus states would undoubtedly benefit from further integration into the

transatlantic community, the transatlantic powerhouses of the European Union and the United

States will also profit from closer relationships with the Caucasus. The United States considers

the Caucasus crucial to world energy security, a stance made clear in 2009 by Richard

Morningstar, the US Special Envoy for Eurasian Energy: “President Obama and Secretary of

State Clinton share your support for the Southern Corridor and consider Eurasian energy issues

to be of the highest importance…Given current global financial and economic conditions, it is

more important than ever to have a reliable international energy supply. Greater energy

interconnectivity, competitiveness, and transparency will increase energy security and propel

economic development and prosperity.” The most pertinent example of Morningstar’s vision

for transatlantic energy security is the proposed Nabucco gas pipeline, which would run from

Central Asia through the Caucasus and enter Europe through Turkey[1]. This project would

provide Europe with a viable alternative to dwindling domestic supplies and monopolistic

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Russian sources. The argument for Europe’s need to diversify its energy supply becomes even

stronger in light of the 2006 Ukrainian natural gas crisis.

When Russia and Ukraine began negotiating 2006 natural gas prices in early 2005, Russia’s

Gazprom energy company began pressing for a higher price per 1,000 cubic meters of gas. Ukraine

eventually settled with the new price, and agreed to make payments in cash as long as future price

increases were gradual. Soon after an agreement had been reached, it was discovered that 7.8 billion

cubic meters of natural gas being stored in Ukrainian reservoirs had gone missing. It was unclear

whether the gas had seeped out due to infrastructural problems, or if it had been siphoned off by an

outside entity. This event caused price negotiations to break down, and on January 1, 2006, Gazprom

reduced the pressure of gas in its Ukrainian pipelines. Moldova suffered a simultaneous drop in its

natural gas supply after failing to agree to higher gas prices. At the onset of the crisis, Ukraine vowed to

siphon gas from the pipelines going to the rest of Europe if temperatures dropped below freezing. Gas

pressure in Western European pipelines subsequently dropped during the next few days [2].

Although Russia restored natural gas provision to Ukraine and Moldova on January 4 th, the crisis

caused huge unrest in those countries and left tens of thousands without heat during the coldest part of

the year. The incident led to ‘orange’ Ukrainian President Viktor Yuschenko to accuse Russia of

punishing Ukraine for forging closer ties with the West, and roused the ire of many European leaders as

a dramatic and disturbing example of Russia wielding its energy supply as a political and economic lever

[2]. Further disagreements and reductions in Europe’s natural gas supply in 2007, 2008, and 2009 have

shown that Russia is willing to exert political pressure on European countries by cutting off their energy

supply, and cannot be seen as a fully cooperative and reliable provider of natural gas [3]. Additionally,

the decaying Soviet-era infrastructure that leaked gas from the Ukrainian reservoirs demonstrates

technical faultiness in the Russian natural gas network. In light of these facts, the proposed Nabucco

pipeline becomes an alluring option. The Nabucco would cross through all of the Caucasus states,

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making Armenia, Georgia, and Azerbaijan all crucial to its success. Furthermore, the construction of the

Nabucco would benefit more remote members of the transatlantic community, such as the United

States, by fortifying the energy security of European NATO members. Through closer cooperation with

alternative energy suppliers such as Azerbaijan and Turkmenistan and the development of south

Caucasus energy projects like the Nabucco pipeline, the transatlantic community can ultimately make

the European natural gas market more competitive, lower natural gas prices, and ensure European

energy security for years to come.

The Caucasus states’ role in world energy security transcends even Azerbaijan’s crucial position

as a supplier of oil and natural gas to the EU and beyond. Georgia and Armenia’s current and planned

hydroelectricity projects represent excellent opportunities for the promotion and development of

renewable energy sources. Some European entities, such as the German Development Bank (KfW), have

already begun to take advantage of this energy-producing capacity. In April 2011, the Kfw launched a

low-interest €5 million loan for Georgian energy firms. The loan, known as the Georgian Renewable

Energy Fund, will be disbursed to private developers for the purpose of building small hydroelectric

dams throughout the country [4]. Small-scale hydropower plants are being supplemented with large

government hydropower initiatives like the Khudoni Project, which will rehabilitate a Soviet-era

hydroelectric power plant in northwestern Georgia [4]. Such projects made it possible for Georgia to

become a net exporter of electricity in 2007 [5]. Together, Armenian and Georgian territory covers

more than 27,000 lakes, rivers, and streams [4][6], and these countries’ high average elevation

combined with their bountiful hydropower resources could eventually lead to the Caucasus supplying a

significant amount of Europe’s electricity through renewable means. It is also likely that further

development of hydropower technology in new environments like the Caucasus will build momentum

and contribute to technological innovation in the global renewable energy sector.

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 Aside from the Caucasus’ vast potential as an energy supplier to the EU, integrating Georgia,

Armenia, and Azerbaijan into the European community would bring about higher standards of

democratic governance, transparency, and transnational security in these countries. Europe is

particularly affected by the Caucasus’ lack of border security, as both illicit materials and people are

smuggled across Caucasus borders on a regular basis. The Nagorno-Karabakh conflict between

Azerbaijan and Armenia has created huge holes in the southern border of the Caucasus [6]. Russia is

particularly affected by transnational arms and narcotics smuggling through these lapses in border

security; according to the CIA, Chechnyan crime syndicates use the profits from transnational narcotics

sales to buy weapons and bribes for the Chechnyan insurgency [6]. In 2009, police broke up 19 separate

transnational smuggling groups in Azerbaijan alone [7], while Caucasus states serve as both transit and

destination countries for forced labor and prostitution [8]. The Caucasus’ insecure borders are a

destabilizing influence for the entire Eurasian region, and many of the drugs and people flowing through

the Caucasus make their way to European consumers [6]. Were the Caucasus states incorporated into

the EU, organizations like EUROPOL, the EP, and the European Court of Justice would be able to take

legal action to effectively prevent and reduce transnational crime originating in Azerbaijan, Georgia, and

Armenia.

For reasons of energy and transnational security, the European Union and the Caucasus states

would reap enormous mutual benefits from future integration. Europe needs a dependable, friendly

supplier of natural gas and oil, and Azerbaijan is the perfect candidate for this role. Meanwhile, Armenia

and Georgia have massive hydroelectric potential, and could become Europe’s major providers of clean,

renewable energy. Both the Caucasus and European states suffer from Caucasus border insecurity, and

Caucasus-EU integration would give powerful EU institutions greater oversight on Caucasus border

activity, helping reduce transnational crime and improving the safety and well-being of all within the

Eurasian region and the transatlantic community.

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How can the EU facilitate Caucasus integration?

By shoring up the stability of its eastern periphery, the EU would be able to mitigate the

problems caused by drugs, arms, and human trafficking. Because the EU maintains strict ethical

standards for doing business with external states, it could offer the Caucasus greater economic

cooperation in exchange for political and security reform. This kind of cooperative policy

would both alleviate problems in transnational security and corruption and bring the Caucasus

states closer to the high levels of economic development, political accountability, and social

integrity that EU membership requires.

Similar methods of achieving reform have already succeeded in Georgia, where the

United States has used the Millennium Challenge Corporation to incentivize democratic

development [9]. In 2005, the Millennium Challenge Account authorized a $295 million

compact with Georgia for the purpose of developing rural infrastructure and encouraging rural

enterprise, particularly in the agricultural sector [9]. The US made this funding available to

Georgia as a reward for Georgia’s progress in ‘ruling justly, investing in people, and promoting

economic freedom’ [10]. This progress is measured by sixteen different indicators across each

of the three categories, which are endorsed by the Freedom House as measurements of global

development [11]. Following the success of the MCC compact with Georgia, the United States

entered into negotiations with Armenia for its own MCA fund [12]. The European Union is just

as capable as the US in encouraging Caucasus socioeconomic development through such free-

market measures as the Millennium Challenge Account, and would do well to build on the

momentum of the MCC compacts in the Caucasus.

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 Although somewhat different from the Millennium Challenge Corporation in form and

spirit, the European Neighborhood Policy represents a viable EU tool for encouraging Caucasus

development towards EU standards [13]. The ENP has two important effects on the countries

surrounding the European Union. The first is the real economic effect of giving EU neighbor

states open access to European markets in exchange for pledges of democratic development

and domestic economic liberalization. This outcome closely resembles the goal of the MCC,

although it is more difficult to enforce. The second effect of the ENP is to delineate ‘European

neighbors,’ thereby indicating potential future members of the EU community [13]. This

interpretation of the ENP suggests that Caucasus integration may only be a matter of time. By

emphasizing inclusivity and supporting Caucasus growth through the ENP, the European Union

can bring the Caucasus closer to EU-caliber governance and open market reform.

In addition to incentivizing development and bringing the Caucasus closer to the

transatlantic community through economic means, the EU has a pre-existing legal framework

for Caucasus integration. The EuroNest, a proposed parliamentary component of the ENP’s

Eastern Partnership, would include representatives from Armenia, Georgia, Azerbaijan, as well

as Ukraine, Belarus, and Moldova, and would provide a forum for the discussion of treaties

involving trade and immigration between and among these states and the EU [14]. While the

EuroNest would not specifically deal with EU integration, its close relationship with the

European Commission suggests deepening communalism between the EU and the governments

of the Caucasus.

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What are the Caucasus’ states greatest obstacles to EU integration and accession?

The Caucasus’ internal obstacles to EU integration, including political corruption and

vulnerable borders, have already been acknowledged in the preceding pages. Externally, the

most difficult challenge for EU-Caucasus integration will be potential Russian interference in the

process. Russia has maintained a separate and distinct identity throughout European history,

and has shown in recent years that it will not submit to transatlantic or EU predominance. By

the Commonwealth of Independent States in 1991 [15], grudgingly opposing NATO expansion

[16], and sparring with the US and EU over a proposed missile defense shield [17], Russia has

continuously resisted transatlantic expansion into its former turf. Russia would be particularly

opposed to the development of the Nabucco gas pipeline, which would threaten its profit

margins as Europe’s primary gas supplier.

If the Caucasus moved towards EU membership without Russian approval, Russia would

make life very difficult for its southern neighbors, particularly Georgia. Russia’s reaction could

take the form of economic sanctions, political pressure, or, in Georgia’s case, military

intimidation. Russia would also be alienated from the transatlantic community if the EU

pursued Caucasus integration at the expense of Russian interests. This is something that EU

cannot afford politically, as mutually beneficial as Caucasus integration might be.

In spite of Russia’s prickly demeanor, it has shown that it does not want complete

isolation. The Russian government’s collaboration with the US on the New START and Russia’s

recent accession to the WTO show that Russia is willing and capable of international

cooperation. Although Georgia could have vetoed the Russian WTO bid, the Caucasus state

allowed its hostile neighbor’s accession to proceed, and such magnanimous moves will be

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crucial to future Russian goodwill and support for EU-Caucasus integration. In order for

Armenia, Georgia, and Azerbaijan to become EU members, all of the Caucasus states will have

to improve their relations with Moscow. This achievement will remove the most significant

external obstacle to Caucasus integration.

Conclusion

Full EU-Caucasus integration is likely many years away. As evidence, one need only look

at Turkey’s drawn-out EU accession bid. Turkey is ahead of the Caucasus on standards of

democratic governance, transparency, economic development, and other EU prerequisites for

membership, and many European leaders continue to oppose Turkish accession [18]. It is

highly unlikely that any of the Caucasus states will reach acceptable standards of democracy

and economic liberalization for EU membership before Turkey does, or that the EU will even

allow its eastern periphery to accede before Turkey. Turkish EU accession is a prerequisite for

Caucasus integration and accession.

That being said, Turkish EU accession could serve as a catalyst for Caucasus accession,

allowing Georgia, Armenia and Azerbaijan to rapidly become EU members. Turkey’s human

rights record with Armenia, the Kurdish people, and its own citizens remains one of the greatest

stumbling blocks to its EU accession. If Turkey were to make a formal apology to Armenia for

the Armenian Genocide, this international gesture of goodwill would do wonders for its EU

membership bid. Reconciliation with Armenia would allow Turkey to build better relations with

its eastern neighbor, and act as a more effective regional leader for the Caucasus. Turkey’s

close relationship with Azerbaijan and improving ties with Armenia would then allow the

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Turkish government to help mediate the Nagorno-Karabakh conflict, whose end would

strengthen the Caucasus’ southern borders and ameliorate the problems caused by trans-

Caucasus smugglers.

In many ways, the Caucasus is already culturally integrated with the European Union.

The Caucasus national football teams compete in European qualifying brackets for the

European and World Cups, and a duo from Azerbaijan recently won the 2011 Eurovision song

contest [19]. Aside from adding more people and landmass to the European Union, Caucasus

integration would bring unique cultural offerings to the European table. Azerbaijan was the

world’s first secular Islamic state, and its borders contain an incredible 9 of the 11 distinct world

climate zones [20]. Armenia was the first nation to adopt Christianity as a state religion [21],

and possesses its own unique language. Georgia, too, has its own unique alphabet and

language, and is the oldest site of wine production in the world [22]. With a spark of inspiration

and gathering momentum, Caucasus-EU integration will bring both mutual economic benefit

and cultural growth and preservation to the transatlantic community.

Notes

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1. Cohen, A., The North European Gas Pipeline Threatens Europe’s Energy Security . 2006, Heritage
Foundation: Washington, DC.
2. Stern, J. (2006) Natural Gas Security Problems in Europe: The Russian-Ukrainian Crisis of 2006 .
Asia-Pacific Review 13.
3. Lussac, S.J. (2010) Ensuring European energy security in Russian 'Near Abroad': the case of the
South Caucasus. 19.
4. UNDP, Georgia: Hydro power boosts development in the country’s poorest regions . 2011, United
Nations Development Programme: Tbilisi.
5. Kochladze, M., Tradition before Innovation: Electricity Production and Energy Policy in Georgia.
Osteuropa, 2008. 58(4-5): p. 8.
6. Curtis, G.E., Involvement of Russian organized crime syndicates, criminal elements in the Russian
military, and regional terrorist groups in narcotics trafficking in central Asia, the
Caucasus, and Chechnya, L.o. Congress, Editor. 2002: Washington, DC.
7. Today.Az, Statistics of human trafficking-related crimes released in Azerbaijan , in Today.Az.
2009: Baku.
8. Jandl, M. (2007) Irregular Migration, Human Smuggling, and the Eastern Enlargement of the
European Union. International Migration Review 41.
9. Fox, J.W. (2005) The Millennium Challenge Corporation: Moving Towards Smarter Aid .
10. Bush, G.W. (2002) Remarks Following a Meeting With President Elias Antonio Saca Gonzalez of
El Salvador. Weekly Compilation of Presidential Documents 44, 1.
11. House, F., Freedom House Releases Subcategory and Aggregate Scores for Freedom in the
World. 2006, Freedom House: Washington, DC.
12. Armenia, G.o.t.R.o., Proposal for Millennium Challenge Account (MCA) Assistance . 2005:
Yerevan: Armenia.
13. Ferrero-Waldner, B. (2007) European Neighborhood Policy. Baltic Rim Economies Review.
14. Agency, T.N., Initial Agreement Reached To Establish Parliamentary Assembly Of European
Parliament's Eastern Neighbors, in Trend News Agency. 2009: Baku.
15. Clark, M.J. (1992) The Commonwealth of Independent States.
16. Migranya, A. (2008) Why Russia Opposes NATO Expansion to the East . America-Russia.Net.
17. Weir, F. (2009) Russia's response to US missile defense shield shift . Christian Science Monitor.
18. EurActiv.Com (2011) EU-Turkey Relations. EurActiv.Com.
19. Eurovision.Tv (2011) Azerbaijan Wins 2011 Eurovision Song Contest! European Broadcasting
Union.
20. CACbiodiversity.org. Azerbaijan Climate Zones. 2003.
21. Congress, L.o., Armenia - A Country Study, L.o. Congress, Editor. 1994: Washington, DC.
22. Keys, D. (2003) Now that's what you call a real vintage: professor unearths 8,000-year-old wine .
The Independent.

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