South Caucasus Division

Amb Achal Kumar Malhotra, Distinguished Fellow (South Caucasus), Tillotoma Foundation

The demise of the USSR in 1991 resulted in the emergence of fifteen independent States, out of which Armenia, Azerbaijan and Georgia, comprise a well-defined geographic region, known as the South Caucasus to most and trans-Caucasus /Zakavkaze to Russians. India deals with this region as part of Eurasia, as it lies on the cross-roads of Europe and Asia.

Natural features such as seas, mountains and rivers define the region spread over an area of 1,86,000 sq. km, whose cumulative population of around 17 million is multi-ethnic, multilingual and multi-religious. However, there is no unity in the diversity of this multi-ethnic, multi-lingual and multi-religious region, where each of the three countries is mostly mono-ethnic, mono-lingual and mono-religious. Armenia subscribes to Armenian Apostolic Church, the and Georgians follow the Georgian Orthodox Christian Church and Azerbaijanis follow Islam. 

In its history, spread over several centuries, the region underwent multiple painful and turbulent transitions. In medieval ages, the region was under the subjugation of three regional powers—Iran (Persian Empire), Turkey (Ottoman Empire) and Tsarist/Imperial Russia—who fought several wars to gain control over South Caucasus. Following the Russian Revolution in 1917, the entire region was overpowered by the Bolshevik faction of the Russian communists by 1921 and subsequently incorporated into the evolving USSR. Thus began yet another period of transition which entailed complete transformation not only of political and economic systems but also of social and religious values. The positive side of the incorporation into the USSR was that living conditions in the region improved considerably as the region benefited from the overall development, being an integral part of the mighty nuclear world power. 

An unintended fallout of Soviet leader Gorbachev’s liberal policies of Perestroika and Glasnost in the early eighties was the upsurge of suppressed nationalism in South Caucasus, as elsewhere in the USSR and its neighbouring countries in East Europe. The nationalist fervour soon developed into a demand for seceding from the USSR, particularly when sporadic efforts were made by Moscow to suppress nationalism by use of force. As the control of central authorities in Moscow weakened, and the collapse of the Soviet Union became imminent, the three Soviet Republics in South Caucasus declared their independence one after the other by the end of 1991. 

Thus ended the seven decades-long-phase of subservience to Moscow and began yet another period of transition. 

Emergence as sovereign and independent countries, international recognition and entry into the comity of nations were the only positive developments in the history of the South Caucasus region in 1991–1992. Otherwise the path to independent development was ridden with enormous political and economic challenges posed by both internal developments and external factors. 

The first few years were the most turbulent in post-Soviet history of Armenia, Azerbaijan and Georgia, marked by violence, civil wars, coup attempts, intra-state and inter-state armed conflicts and near collapse of the economy. Semblance of stability was introduced from 1995 onwards by which time ceasefire agreements had been signed to stop hostilities between Armenia and Azerbaijan and between Georgia and its breakaway territories, new Constitutions had been adopted, infant institutions of democracy had been put in place and economic recovery had begun. 

The tug of war for influence over the region, however, began soon after the collapse of the Soviet Union. Old players—Iran and Turkey—took a back seat and were replaced by the West—the USA and European Union. Russia remained the constant factor. The objectives are no more territorial gains. Each of the two major contestants—the West and Russian Federation—have their own rationale for digging in their feet in the region. 

The West moved in and stays on in South Caucasus for ideological and politico-economic reasons. Its mission was to make the demise of communism in the region irreversible and introduce values such as democracy and rule of law, market economy etc. as per Western standards. Close political association and economic integration of the region with Europe remain the stated objectives of the West. Further, Azerbaijan is rich in Caspian Sea energy resources, whereas Georgia and Armenia are convenient transit routes for the transportation of crude oil and natural gas to energy-deficient Europe. For reasons of its energy security, the Europe wishes to diversify its narrow-base of energy providers and, for strategic reasons, reduce its current heavy dependence on Russia. Hence, the West has encouraged massive investments in the region to develop infrastructure for the exploration of oil and gas in Azerbaijan and its transportation through pipelines via Georgia to Turkey and beyond. 

Russia’s involvement in the region is more for strategic reasons, less for economic and least for ideological reasons. Russia treats the region as part of its “Near Abroad” and as a sphere of its natural influence in the post-Soviet space. It is averse to east-ward expansion of NATO, it opposes in particular, the possible NATO membership of Georgia (and Ukraine) which will bring NATO right up to its doorsteps. 

In the initial phase of independence, each of the three countries had opted to acquire European identity by signing the Partnership and Cooperation Agreements with EU in 1996 and obtaining membership of the Council of Europe in 2001. However, gradually each of them has carved out a different trajectory, either by choice or by compulsions. Both Georgia and Armenia have established democratic structures of governance. Azerbaijan has evolved into a country where democracy exists in form but is absent in content.

Only Georgia has remained fully committed to its complete integration with the Euro-Atlantic structures. Azerbaijan is clearly interested only in economic cooperation but not in political, economic or social integration with the West. Azerbaijan has managed to maintain an equidistance from Russia and the West. Armenia is stuck in between the West and Russia, and has endeavoured to play a balancing act between the two, justifying it by underlining that Armenia’s multi-vectoral foreign policy is guided by the concept of “and -and” and not “either-or.” Armenia’s economic and security dependence on Russia is heavy if not complete; it has Russia as the sole guarantor of its security through a bilateral Treaty and CIS membership. Armenia is the only country which has allowed Russia to establish a military base on its territory. Russia’s economic penetration in Armenia is deep. Russia is home to a sizeable Armenian Diaspora, contributing substantially to Armenian economy, remitting on average $1.5 billion annually. Armenia has joined Russia-led EAEC, as well as entered into Comprehensive Economic Partnership Agreement with EU. Armenia thus has its one leg in EU and one in Russia. 

The unresolved ethno-territorial conflicts (between Armenia and Azerbaijan and Georgia and its breakaway territories and Russia) in the region are a cause for concern for the international community. These are not frozen but simmering conflicts and pose serious threat to the stability of the region. The global and regional organizations—UN and OSCE—and global players—Russia, the USA, EU have so far failed to resolve them despite several years of intensive mediation between the parties to conflict. Their main focus now is in managing the conflicts and even in this respect they have failed more than once as was as was evident from the 44-days war between Armenia and Azerbaijan in 2020 over the disputed territory of Nagorno-Karabakh,

India’s footprints in the region can be traced back at least to 149 BC when Hindu colonies were established in Pagan Armenia. Enough literary, documentary and archival evidence is available to confirm the extensive interaction between the peoples of India and South Caucasus, particularly through Silk Road/Route trade connections. Armenians, Georgians and Azerbaijanis had all enjoyed the patronage of the Mughal Empire. Between the three communities the Armenian merchants were arguably the most visible and prosperous community in medieval India and enjoyed the confidence of both the Mughals and the English rulers of India. The Churches, cathedrals and the educational institutes which they built have survived till date to reflect their glorious past. 

In modern times, India was quick in recognising the independence of Armenia, Georgia and Azerbaijan and establishing diplomatic relations in 1992. However, for next several years the region was not on India’s radar partly due to its focus on Russia and central Asia and partly due to turbulent and unstable situation in the region. Twenty-five years later, India has no major bilateral irritants with any of the three countries, while maintaining different levels of engagement with each of the three countries.

India does not have a publicly articulated “South Caucasus policy” unlike for instance “Central Asia Connect” or “Neighbourhood First.” Probably one is not needed, considering that three countries in the region have chartered a distinctive foreign policy course. India deals with each one of them separately on merits. 

The region’s geographic location is important as a viable corridor for India’s connectivity with Russia and Europe. The region has the potential to meet some of India’s requirements of raw material and technology, including oil and gas, cooperation in the field of seismic science etc. 

In a nutshell, In the course of twenty-five years of independence, the South Caucasus has evolved as a least integrated region despite the geographical contiguity between the three constituent countries. It  is a complex region where major global players are contesting to establish firm footprints in pursuance of ideological, economic and strategic interests. Currently, no single global or regional player alone can claim to be in a position to guide or control the destiny of the South Caucasus.
 

Recommended Readings:

1 “The Caucasus: An Introduction” by Thomas De Wall, Oxford University Press, 2010 

2 “The South Caucasus: Transition From Subjugation to Independence (Tracing India’s Footprints) by Achal Malhotra, Macmillan/Indian Council of World Affairs, 2020 

Prof Robert Cutler
  

It is in India’s interest to extend cooperation with Azerbaijan, because Azerbaijan will be the driver of economic growth in the South Caucasus throughout the 2020s and into the 2030s. The country has over three times the population of Armenia and nearly three and a half times its gross domestic product. Azerbaijan’s population and gross domestic product are, indeed, one and a half times as large as those of Armenia and Georgia together. But for various reasons, India and Azerbaijan do not see eye-to-eye on certain diplomatic issues that are respectively important to them. So what to do?

An easy place to begin is with cultural cooperation. By this I do not necessarily mean cultural exchanges but rather cultural preservation. This is a field in which both countries are quite active. India has a great deal of experience, and Azerbaijan has much cultural restoration to do in the regions formerly occupied by Armenian military forces. The world will be shocked over next few years as the extent of the devastation wrought by 30 years of occupation is laid out before its eyes, in international legal proceedings that Azerbaijan intends to institute in 2022.

In September 2021 the Irish Senator Paul Gavan submitted his report, “Humanitarian Consequences of the Conflict between Armenia and Azerbaijan,” to the Council of Europe, acting as Rapporteur for its Committee on Migration, Refugees and Displaced Persons. One blind-spot in Gavan’s report is that, whereas he is concerned with an antecedent “Caucasian Albanian” narrative on the part of Azerbaijan, nevertheless he omits the “Persian” cultural narrative that Armenia has promoted, with Iranian assistance, so as to portray all actual Muslim/Turkic heritage in the region as Persian. (The Blue Mosque in Yerevan is a stand-out example.)

Gavan noted that, according to the Azerbaijani Ministry of Culture, “From 1988 to 1993 [alone], 900 settlements, 150 residential buildings, 7,000 public buildings, 693 schools, 855 kindergartens, 695 health-care facilities, 927 libraries, 44 temples, 9 mosques, 473 historical monuments, palaces and museums, 40,000 museum exhibits, 6,000 industrial and agricultural facilities, 160 bridges and other infrastructure facilities were destroyed in Karabakh.” He recommended that both parties to the conflict should “allow UNESCO unlimited access to all cultural heritage sites in both countries to assess the damage and assess the steps necessary to safeguard what remains.”

At the end of November, both India and Azerbaijan—and Armenia as well—were elected to four-year terms as Members of UNESCO’s Executive Board. This is an opportunity not to be wasted. Azerbaijan was also elected to membership of UNESCO’s Committee for the Protection of Cultural Property in the Event of Armed Conflict. This Committee comprises twelve States Parties to the Second Protocol (1999) to The Hague Convention (1954) for the Protection of Cultural Property in the Event of Armed Conflict. The Committee was established by the Second Protocol for the purpose of its implementation. It is expected, following Gavan’s recommendation, that UNESCO visits to the South Caucasus will begin in 2022.

Given the devastation of cultural heritage in Karabakh during 30 years of Armenian military occupation, India’s Ministry of Culture is a natural partner for exchanging experience. It specifically has, for example, a “Scheme for Safeguarding the Intangible Heritage and Diverse Cultural Traditions of India.” Azerbaijan’s Ministry of Culture, for its part, has a Section for International Cooperation. Mutual outreach between the two countries through their respective ministries would seem to be “no-brainer.” 

The other field of endeavor that has an immediately evident potential for pragmatic and tangible bilateral cooperation is in reconstructing the devastation of the forrmerly occupied territories. They was once home to more than 700,000 indigenous Azerbaijanis who were forced to leave their lands in 1990s when Armenia occupied them. Now that the war is over, a monumental task lies in front of Azerbaijan: to develop and repopulate them. Although Baku has declared that it will finance such work on its own, without foreign loans, it is welcoming the participation by the business communities of many countries in the relevant economic sectors. One sector in which India may be particular appropriate is smart cities, smart villages, green energy concepts; and others should be explored.

Already new roads from the Azerbaijani lowlands in the east to the de-occupied areas are under construction. One new airport in the region has already opened, and two more are under construction. It is as if a cork has exploded out of a bottle, and pent-up energies are overflowing into the demographic vacuum created first by the ethnic cleansing of Azerbaijanis from the region 30 years ago, followed then by the exodus of the illegally settled Armenians after the end of the Second Karabakh War in late 2020.

A last issue, within the issue-area of humanitarian cooperation, on which pragmatic bilateral cooperation should be easy to establish is in the de-mining of the formerly occupied zones. When Armenia finally turned over mining maps to Azerbaijan for the city of Aghdam alone, they showed 92,000 mines. Even though in the end, the maps happened to be only about 25 percent accurate, Aghdam has now been declared mine-free. However, there is still a great deal of work to be done. The de-occupied area is nearly half a large as the Indian state of Kerala. It is estimated that, at an expense of many hundreds of millions of dollars, Armenia seeded that land with up to a million mines, possibly even more, during its 30 years of illegal military occupation.

India has at least two civil-society organizations that specialize in de-mining. One is the Horizon Organisation for Post Conflict Environment Management (OPCEM), along with its adjunct Horizon Assignments (India) Pvt Ltd. The other is SARVATRA. Many other countries are now contributing personnel, machinery, training, and education to address this fundamental humanitarian issue; but the amounts contributed so far are relatively modest. India has a lot to offer Azerbaijan, and Azerbaijan has a lot to offer India in return.

Dr Vahe Davtyan. Professor, Russian-Armenian University
 

Within the framework of the geopolitical transformations taking place in the South Caucasus, the Armenian-Iranian relations require special understanding, which is due to the growing role of Tehran in the emerging regional architecture. In this regard, given the key importance of the geo-economic and, in particular, the infrastructural component in these transformations, the dialogue between Yerevan and Tehran should be built around the creation of strategic transport and energy communications aimed at deepening integration processes. In this case, we are talking about both bilateral and multilateral integration. The latter, first of all, should be understood as the development of trade and economic interaction between Iran and the Eurasian Economic Union (EAEU) using both sea communications running through the Caspian Sea and overland communications through Armenia. However, the increasing tension observed today in the region, due to the clash of interests of international actors, does not allow for harmonious and unhindered integration. In turn, Armenia, being the beneficiary of this integration, continues to be in a state of post-war shock, which affects both political and economic stability in the republic. And although the Armenian-Iranian relations continue to be declared by Tehran and Yerevan as constructive, at the level of real politics these relations are distinguished by a complex of problems.

However, before turning to the problems themselves, let us give a brief description of the Armenian-Iranian economic cooperation. In recent years, trade between the countries has been in the limits of $400 million. In the first half of 2021, it amounted to about $225 million, while in the same period of 2020, it was $177 million. The growth, thus, amounted to 26.6%. At the same time, at the beginning of this year, the Ministry of Economy of Armenia announced the possibility of increasing trade with Iran by 2.5 times by the end of the year, bringing it to $1 billion. Taking into account the above tendencies, as well as the indicators for the first half of the year, it seems almost impossible to achieve such a level. However, taking into consideration that the rhetoric of Yerevan regarding the increase in trade in general coincides with the rhetoric of Tehran (Dr Farhad Dejpasand, Minister of Economic Affairs and Finance, Iran also announced the readiness of Iran to bring the trade turnover to $1 billion), it can be considered as part of the economic diplomacy that Tehran is building, the purpose of which is to demonstrate to other actors in the region (first of all, Turkey) the Iranian strategic ambitions.

At present, Armenia imports from Iran liquefied gas, oil products, polymers, cement, building materials, vegetables and fruits. The key item of Armenian exports to the Iranian direction is electricity (approximately 1.5 billion kWh per year). As for other types of goods, their export is limited, firstly, due to the strict protective measures applied in the Iranian market, and secondly, with the disconnection of Iran from the SWIFT interbank transfer system.

In general, it can be stated that with a favourable international environment and competent diversification of interstate communication systems, the trade turnover between Armenia and Iran has growth potential, primarily in the energy sector. The countries have the necessary infrastructural base, the use of which is still partially taking place, which has both a political and an economic explanation. First of all, we are talking about the key, most successful Armenian-Iranian project - the Iran-Armenia gas pipeline, which was put into operation in 2007. With a throughput capacity of 2.3 billion cubic meters per year, in recent years the gas pipeline has been used at best by 30%. It is known that deliveries are carried out within the framework of countertrade - a barter transaction ''1 cubic meter of gas in exchange for 3 kWh of electricity''. However, taking into attention the influence of Russian capital on the Armenian gas transportation market (the republic's gas transportation system, including the Armenian section of the Iran-Armenia gas pipeline, is on the balance sheet of Russian ''Gazprom Armenia'' company), it is difficult to build an Armenian-Iranian energy dialogue bypassing the Russian side. 

On the other hand, as a monopoly, ''Gazprom Armenia'' still undertakes to provide infrastructure for the supply of cheaper gas to Armenia, including Iranian. It is known, however, that the above barter transaction is based on a price of approximately $165 per 1,000 cubic meters, i.e. as much as the price of Russian gas supplied to Armenia. There are cases when the Iranian side declared its readiness to supply gas to Armenia at a low price, but the matter did not go beyond political rhetoric. Finally, one should also take into account the geopolitical factor, namely: the Armenian gas market has very modest consumer volumes (1.8-2 billion cubic meters per year), for which Tehran is unlikely to be ready to compete with Russian ''Gazprom''.

As for the supply of electricity from Armenia, given the growing deficit in Iran, this direction can become one of the key ones in the framework of the interstate agenda. As you know, Iran traditionally experiences a deficit in its northern provinces bordering with Armenia. The deficit here is estimated at around 2,500 MW per year. Recently, however, a deficit has begun to manifest itself throughout Iran, which is mainly associated with the activation of cryptocurrency mining - a very energy-intensive process. As a result, already this summer, the Iranian authorities were forced to take extreme measures aimed at reducing electricity consumption, including by limiting supplies to industrial facilities, business centers, banks, etc.

It would seem that a rather favorable situation is developing to increase the supply of electricity from Armenia. However, supplies continue to remain at the same level for several reasons. Firstly, Turkmenistan is the key supplier of electricity to the Iranian market, and after 2018 Azerbaijan also began to strengthen its position here. Competition is growing, in which it is quite difficult for Armenia today to show itself, given the crisis in the domestic economy and, in particular, the high cost of electricity produced.

Secondly, the construction of the 3rd high-voltage power transmission line Iran-Armenia is being carried out at an extremely slow pace, designed to increase the mutual flows between the countries from 300 to 1400 MW. The Covid-19 pandemic, as well as the war in Karabakh in 2021, are usually noted among the reasons for this project to be running behind schedule. Well, both of these factors really temporarily paralyzed a number of projects being implemented in Armenia (including the modernization of the nuclear power plant, the construction of a new block of the Yerevan TPP, etc.), however, according to the project, the power transmission line should have been put into operation in the winter of 2019. Today, the Armenian authorities have announced a new deadline - 2022. In the context of increasing competition for the Iranian electricity market, such a delay is unacceptable. Likewise, it is unacceptable to postpone the construction of a new power transmission line with Georgia, which is considered as a continuation of the Iran-Armenia power transmission line within the framework of the North-South international electricity corridor (Iran-Armenia-Georgia-Russia). A situation is emerging in which Armenia is gradually losing external electricity markets, in which it was once very active.

However, North-South is not just an electric power corridor. This is a geopolitical strategy (including the electric power component), which meets many obstacles and competitors on the way of its implementation. The North-South is an artery designed to provide logistics communication North Europe-Black Sea-South Caucasus-Iran-Persian Gulf-Indian Ocean. And in this logistics, the formation of a stable transport communication between Armenia and Iran is a strategic necessity. First of all, for Yerevan, which today faces a fateful choice: either integration into the North-South or East-West, actively imposed by Ankara and Baku. Iran's interests are obvious here. They were clearly indicated by former Iranian Foreign Minister Javad Zarif during his visit to Yerevan in May this year. He unambiguously made it clear that it is in the interests of Iran and Armenia to establish a railway connection along the Tehran-Julfa-Yeraskh-Yerevan-Tbilisi-Black Sea line. Obviously, this route fundamentally contradicts the Turkish-Azerbaijani transport strategy aimed at forming the Megri corridor through the Armenian Syunik with access to Nakhichevan (Azerbaijan). Hence, every day the increasing activity of the Azerbaijani Armed Forces in the area of ​​the Armenian Yeraskh, which occupies an important position in the North-South corridor. Another key beneficiary of the corridor, India, through its ambassador to Iran, also stated the need to connect Armenia to this transport artery.

The policy of unblocking borders and resuming transport communications in the South Caucasus as a result of the tripartite act signed on November 9, 2020 on the cessation of hostilities in Karabakh, in fact, does not promise Armenia anything but new risks. At the same time, there are risks not only for economy and transport, but also for national security in general. The modern transport architecture of the region dictates Ankara and Baku to promote the model of establishing communications through the formation of a railway corridor along the Kars-Ygdir-Nakhichevan-Meghri-Zangelan-Baku route. This corridor ultimately closes the railway ring around Armenia, taking into account the logistics of the railway Baku-Tbilisi-Kars (BTK), launched in 2017. At the same time, it is obvious that the emerging line is aimed not so much at diversifying trade and economic ties between Baku and Ankara (BTK fully solves this problem), as at developing military transportation with the prospect of forming a military base in Nakhichevan.

In geostrategic terms, the task to form an anti-Iranian bridgehead, and Armenia's participation in this adventure (albeit indirectly) is fraught with very serious consequences for it. However, considering the radical globalist convictions of the Armenian authorities, formed as a result of the 2018 ''velvet revolution'', as well as their rejection of the model of the nation-state, such an alignment looks quite organic.

At the same time, the unblocking of other communication routes in the region is not expected. In particular, the issue of resuming train traffic on the Kars-Gyumri line is completely absent from the official agenda of Ankara, which once again indicates that the Karabakh conflict is more than ever far from regulation, since traditionally Ankara linked the resumption of communications with Armenia on condition of conflict resolution.

In turn, the agenda of both Baku and Yerevan does not include the issue of forming the Ijevan-Kazakh railway and automobile corridor with access to the North Caucasus, which is perhaps the most advantageous (after the Abkhazian corridor) route for Armenia in terms of land access to Russia.

Thus, within the framework of the proposed transport logistics, we are dealing with an attempt to implement the project of the East-West international corridor, while the national interests of Armenia primarily correspond to integration into the North-South corridor in order to deepen interaction with Iran and formation of the multimodal corridor ''Persian Gulf-Black Sea''. In this context, the proposal of the Iranian side on the formation of the Iran-Nakhichivan-Armenia railway communication with access to Georgian sea ports Poti and Batumi seems to be quite promising for Armenia.

Today, the signing of a peace treaty between Armenia and Azerbaijan is on the agenda. It includes the demarcation and delimitation of borders, the recognition by Armenia of the territorial integrity of Azerbaijan within the new borders, as well as the unblocking of communications. Iranian authorities understand that if the agreement is signed and the unblocking of transport links is carried out according to the East-West scenario, further strengthening of Ankara's influence, growth of its economic and, ultimately, cultural and political expansion in the South Caucasus cannot be avoided. And in this sense, the interests of Armenia and Iran today coincide more than ever. Consequently, the intensification of the construction of the Iran-Armenia and Armenia-Georgia transmission lines, the North-South transit highway (Iran-Armenia-Georgia), as well as the creation of conditions for the effective operation of the Meghri free trade zone on the Armenian-Iranian border should be considered as a priority for the Armenian authorities. Moreover, it also seems necessary to gradually return to the interstate agenda such significant, but half-forgotten projects, such as the Meghri HPP, the Tabriz-Meghri oil pipeline, and an oil refinery on the border. Of course, the implementation of such large-scale projects requires regional stability, mutual trust and economic potential, but these projects are more than perspective for the development of bilateral relations.