Valery Egozaryan,

Ph.D. in Political Science,

THE COMPROMISE DEFICIT:

factors and causes of volatility of economic development
of the Black Sea region

Annotation
The goal of this research is to establish and found factors and causes of
volatile economic development of the Black Sea region. The research was held
employing methods of study of the nature of economic processes in the context of
factors influencing their development, analysis of causal relationships of economic
phenomena in the context of key political determinants of their formation,
evaluation of economic trends in the context of factors and causes leading to its
turbulence. This research has resulted in establishing that on the international
economic map the Black Sea region marks a special enclave, who's primary
characteristic is multiplicity of member-states taking part in economic relations
and having very diverse interests in developing region's potential. Contemporary
geopolitical and geoeconomics reality has lead to escalation of inter country
competitive rivalry for energy resources of the Black Sea region, migration of
population of the coastal states, intensification of militarization with the aim of
protecting national economic interests. Along with these trends, the existence of
multiple "frozen" conflicts among the countries of the region interferes with
effective development of natural resources, use of logistic advantages, construction
of new transportation routs. It has been proven that in the near future we should
expect the situation in the Black Sea region to grow more complicated due to
increase in tensions in the system of international relations and the reality of the
risk of change of the region's political map.
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 Key words: economic development, economic potential, economic interests,
energy resources, Black Sea region.

Introduction
Historically on the international economic arena there have been forming
special regions that present great interest to many countries who aim at
development of region's potential. The contraversy of these interests leading at
times to military conflicts has been a serious obstacle to the development of
international economic cooperation.
This applies to the Black Sea region. Many studies have uncovered the role
and importance of the Black Sea region in the global economy (1, 5, 6, 8, 9, 12,
etc.), they have revealed the grounds of existing intercountry conflicts (2, 3, 7, 11
etc.) for the most part in the context of geopolitics (4, 10, etc.).
The goal of this study was establishing and founding factors and causes
leading to th volatile economic development of the Black Sea region.
The goal is detailed in the solution of the following research objectives:
 distinguishing factors of development of economic instability and
military-political tension in the Black Sea region;
 establishing new trends in the development of international trade of
energy resources;
 grounding the Black Sea region economic development problems
caused by the present geopolitical reality.
The working hypothesis of this research was that the definition of region's
economic development prospects requires deep analysis of factors and causes of
the way intercountry economic relationships form especially when dealing with a
region where many countries' interests cross. Establishment of these factors and
reasons, study of the nature of their emergence becomes a necessary condition for
securing stable economic development of the region, searching for compromises
and lowering the risk of a conflict of national interests.
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 Research methods
The research was held with the employment of methods studying the nature
of economic processes in the context of factors influencing their development,
analysis of causal relationships of economic phenomena in the context of key
political determinants of their formation, evaluation of economic trends in the
context of factors and causes leading to its turbulence.

Research results
When evaluating political and economic processes that have been occurring
in the Black Sea region in the past 25 years, one can state with a rather high degree
of certainty that this region for many years to come will experience instability as
well as both military and political tensions. Many factors lead to this situation
including:
 transit opportunities of the Black Sea region in times of an escalating
competition for raw materials, especially for energy resources;
 probable increase in oil and gas extraction on the Black Sea shelf;
 modest level of socio-economic and technological development of the
countries in the region;
 unresolved regional conflicts;
 change of the political mapk;
 active multilateral militarization of the region;
 recent progress in Russo-Turkish cooperation;
 lack of real power that could act as the guarantor of safe development of
the region and could take responsibility for conflict prevention.
It doesn’t make sense to go into detail over the transit value of the Black Sea
region. This aspect has been analyzed on multiple occasions and has been
discussed on different levels (1, 4, 6, 8, 10, 12).

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 One thing should be noted though, namely the fact that in the course of
many different political-economic and military-political crises the experiences of
energy exporters and importers have altered their business approaches. For many it
has become evident that:
 oil and gas not only have to satisfy market’s quantitative demands, but
also the supply of the resources should go uninterrupted from the well to
the end user;
 the price of energy resources should be guaranteed and stable;
 it is essential to diversify sources and transportation routes of energy
resources so that it would render protection from partners’ “economic
blackmail” (5).
Both the exporters and the importers have the same goals, but the opposing
means. The exporters are trying to gain access to the end user thus securing stable
sales and maximum profits. The importers are trying to get as close to the well as
possible, to control as much of the transportation route as possible in order to
provide the same continuity, cut costs and gain maximum profits.
Thus the battle is for the pipeline and in particular for the distribution
network.
Figuratively speaking both exporters and importers are closing in from the
different ends of the same pipeline accompanying the movement by negotiations,
contracts, international conferences, environmentalist manifestations, separatist
insurgencies, terrorist attacks, internal struggle of the opposition, journalist
investigations, military marches and maneuvers, sometimes a full scale gunfire.
Thus the Black Sea region as a transit corridor stands out on the map of the
world as the area with many country borders, nationalities, religions and conflicts
and a relatively small territory. Under these circumstances the fight for
development prospects and private-state egoism of the parties involved leave
hardly any chances to even out these contradicting interests.
Moreover, the majority of the Black Sea states are energy importers and not
the wealthiest of them all. The chief end user and a solvent buyer is Western
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Europe. And the majority of contracts in this complicated business are bilateral:
the seller – the buyer. Under the circumstances transit countries survive by all
means they can, ensuring participation in the projects by all means imaginable.
This is where diversification of sources and transportation routes comes in handy
for both the exporters and the importers. Such diversification renders an excellent
opportunity to manipulate transit territories, making them bump their heads or
uniting them, meanwhile minimizing negative consequences of their
counterclaims.
Modest level of socio-economic and technological development of most
countries in the region in a high level conflict environment determines their role as
the “wingmen” in the current political and economic processes and their inability
of independent implementation of global economic projects along with the
inability to achieve strategic political objectives. The present order of things in the
region attracts major actors of the world politics who wish to secure their authority
and to strengthen their power of control and influence. Naturally this doesn’t help
mutual understanding in the region leading to the contrary.
Various rumors around the Black Sea’s oil and gas potential is yet another
problem that the countries in the region have to deal with. In this respect the
examples of oil-rich Iraq and Iran have not even stepped back into history yet.
Some large companies such as Exxon Mobil and Royal Dutch Shell have
already performed geological prospecting in the Black Sea (10).
According to some experts, the potential of the Black Sea can be compared
to that of the North Sea. However today no one has drawn the limits of this
potential. We can only state that the Crimea had some importance to the power
supply of the Ukrainian economy allowing Ukraine to extract just under 2 bln m 3
of gas and approximately 10 000 tons of oil annually. According to open sources
Ukraine lost nearly 6.6% of its gas resources and around 16.6% of its oil resources
with the Crimea’s transfer under the jurisdiction of the Russian Federation (9).
Nonetheless it is not the potential of the confirmed resources of the Black
Sea that matters, but speculations and rumors of the underexplored resources that
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heat up both economic and military-political imagination of the parties involved,
including some that are situated quite a distance from the Black Sea region.
Analysis of the region's conflicts of the past decade shows that not a single
conflict had been resolved and that they only grew in numbers. This is a bad trend
that underlines the axiom of inefficiency and false goal setting in foreign policy of
all parties involved in these regional conflicts. It also defines the success of the
world's political heavyweights, who benefit from such a state of affairs, get a
chance to act as mediators, sponsors, judges and moderators, to construct the future
according to their own notions and ideas.
Transnistria, Abkhazia, South Ossetia, Nagorno-Karabakh, the situation
around Crimea, military conflict in the South-East of Ukraine, its internal political
crisis and strengthening of centrifugal tendencies, Rumania's desire to integrate
Moldova, border disputes among the region's countries define a long-term
tendency of instability in the region.
It might seem strange but we can add to this list of instability factors the
successful development of Russo-Turkish relations. It is so because Russia and
Turkey are the two most powerful countries of the region, and many suppose that
development of such a cooperation could configure the asymmetry of the Black
Sea region, which in the opinion of all other countries of the region prevents
strengthening of the region's security.
Without a doubt Turkey and Russia would like to have full and independent
control of the Black Sea region, just as would all other players had they had the
potential. However, since only two states possess the potential, the rest are trying
to insure their conditional independence by engaging international powers and
more powerful partners, the United States in particular, who could withstand the
natural pressure of Moscow and Ankara.
Of course, there are controversial foreign policy issues and conflicts of
interests between Russia and Turkey. However, when it comes to the issue of
control over the Black Sea, these two countries have somewhat divided it into
areas of influence and try not to interfere with one another. All other matters are
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successfully evened out by the development of mutually beneficial cooperation in
the energy sector.
Thus in the nearest future we should anticipate attempts of disruption of this
cooperation and provocation of a conflict in Russo-Turkish relations. For these
purposes some might try to use problems in Russo-Ukrainian relations and the
Crimean Tartars, or the multilateral relations between Russia, Armenia, Nagorno-
Karabakh, Turkey and Azerbaijan, or economic aspects of the construction of the
Turkish Stream. Different scripts might be played but most likely it will be a
combination thereof, nonetheless the ultimate goal remains the same as the conflict
potential of the region increases (4).
All along upholding the balance of naval forces in the Black Sea remains the
unwavering policy course of both Russia and Turkey, but NATO members and
their partners evidently have a different vision of this balance. Militarization of the
region has taken an accelerated pace (2).
In November 2014, NATO Secretary General Jens Stoltenberg said that the
North Atlantic Alliance increased its military activity in Europe fivefold due to the
events in Ukraine, as well as in the Black Sea (7).
However, it should be noted that the process of increasing NATO's military
presence in the strategically important region began before the coup in Kiev. In
turn, the Russian Federation also continues to increase its military grouping in
Crimea.
I suppose that in the event of a rapid deterioration of the political situation
the Black Sea region would experience an additional transfer of dozens of ships,
air defenses, hundreds of airplanes and helicopters and thousands of soldiers.
Meanwhile the 1936 Montreux Convention remains a certain barrier. Turkey
is responsible for the implementation of this Convention. Any violation thereof
could potentially threaten the international prestige of Turkey and its relations with
Russia. However the persistence of Turkey's NATO allies may lead to the
reopening of the discussion on the revision of the article of the Convention that
limits the tonnage and transit of foreign military vessels in the Black Sea.
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Moreover, by 2023 Ankara is planning to complete the construction of the Istanbul
Canal, a new 45-kilometer ship canal linking the Black Sea with the Sea of
Marmara, which could in principle eliminate the barrier of the Montreux
Convention for the NATO naval forces (5).
Besides, it is evident that the political map of the region is about to change.
It's a painful process, but it is nothing out of the ordinary. In the last 30 years this
has happened many times. Some old countries have disappeared from the maps,
while a number of new countries have appeared.
The two Germanies united, the USSR and Czechoslovakia fell apart,
Yugoslavia split up into Slovenia, Croatia, Macedonia, Bosnia and Herzegovina,
Serbia, Montenegro and Kosovo. One of the most recent examples of changes of
state borders took part 2016, it was the confirmation of the Czech Republic
transferring 368 hectares of disputed territory to Poland (11).
Iraq is rapidly nearing its disintegration. Syria's chances of splitting up grow
as well. This will lead to the emergence of the new regional entities, breaking the
existing boundaries. Most likely this situation would touch Turkey's sensitive spot
- the Kurds' issue.

Findings and conclusion

When solving the Black Sea's regional issues one must objectively consider
many facts. This decision, or the stabilization of political and economic situation in
the Black Sea region, cannot be made without a sober assessment of the situation
by all stakeholders. Naturally not all parties are interested in the prosperity of the
region.
Moreover, the lack of problems for many means termination of funding
aimed at "sort of" solving these problems, a fundamental cut in opportunities for
manipulating the states of the region, the disappearance of topics for domestic
political speculations, the change of foreign policy and having to take the
responsibility.

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 Of course, everyone understands that "strong economic ties and the
development of good relations between neighbors help regulate and resolve
various controversial issues," that "interaction contributes to the development of
regional security," that "it is extremely important to develop, formulate and carry
out the necessary policy of stability and cooperation on the basis of trust and a
higher level of political and economic interaction." We are even willing to repeat
this as a mantra at every meeting, workshop and conference, but it can become a
reality only if everyone works together and is ready to compromise.
In the meantime, we must clearly realize that the changes on the political
map of the Black Sea region are not finished. This complex process is unlikely to
occur in good faith and with mutual consent. As mentioned above, the national
egoism of the parties leaves no chance for a settlement. Unfortunately history
teaches us that the rational mind, trust and ability to compromise have at all times
been in short supply.

Works cited
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