FAIT Committee Report
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PART II
Advancing Canada's Relations with the South Caucasus
The sole aim of my introductory remarks is to convince you that this part of the world is extraordinarily complicated and that most of what goes on there is internal and not the effect of outside actors.
Anybody who tells you that everything is the fault of the Russians, or that it’s the U.S. or NATO, or that Turkey is running things, or that it’s really all about oil, or the "Great Game," is only telling you five percent of it. There are no simple explanations for anything in the Caucasus.
Dr. Patrick Armstrong
May 2000
Conflict Resolution and the Challenges of the South Caucasus
Confronting the interrelated problems of South Caucasus presents a paradox: struggling with the complexity of the region risks inducing a feeling, particularly among outsiders, that nothing can be done; however, assisting the three states of Georgia, Azerbaijan and Armenia to achieve much-needed security, democracy and prosperity requires making use of existing mechanisms.
As we will see below, the Committee has concluded that Canadian policy toward the South Caucasus must be based on three basic points: while small and poor, these three states are very important to Canada and others; though each state is unique, it must be seen as part of a single region; and Canada must significantly increase both its attention to the region and its own permanent presence there if it is to advance its foreign policy objectives.
The following sections review regional security, economic and governance trends, then consider separately circumstances in each of the three states. Following ceasefires, the states are more peaceful than they were in the early 1990s, yet long-term solutions must be found to their "frozen" conflicts and to repair the physical and other damage these have caused. These problems, particularly the existence in each state of large populations of refugees and Internally Displaced Persons (IDP) must be overcome if the region is to make progress in its economic and democratic development. Ideally, conflict resolution and economic and political development should proceed in parallel. Yet in this region, as Committee members found when they visited it in May 2000, some argue that conflict resolution must take precedence and others that priority for economic development would foster compromise and assist conflict resolution. Indeed, in a description which often seems to apply to the region as a whole, one observer in 1998 compared Ossetia to a Rubik’s Cube puzzle — since it seems no single step can be completed until all are.
While some in the South Caucasus blame the lack of progress on conflict resolution on the negative influence of regional powers and Western indifference, most outsiders blame it on the existence of groups in the region with vested interests in the status quo, and a lack of political will for change among regional leaders. The last seven years without active conflict have at least allowed regional leaders to understand the nature of the compromises necessary for conflict resolution, and the necessity of such resolution before the states can be fully integrated into both Europe and the broader international community. As politicians, members of the Committee understand both the difficulty and the value of demonstrating and sustaining political will; Committee members hope that the regional leaders and legislators they met in the South Caucasus, given necessary bilateral and multilateral support, are now capable of doing so.
I. REGIONAL FACTORS IN SHAPING CANADIAN POLICY
Located between the Black and Caspian Seas near the junction of Europe and the Middle East, the mountainous Caucasus (Persian for "ice-glittering") region is ethnically complex and has long been on the edge of great empires. As Patrick Armstrong noted before the Committee:
…all these peoples, with mutually incomprehensible languages, different histories, different ambitions, long-standing enmities, different religions crammed into an area that, altogether, is about the same size as Southern Ontario. There’s nothing like this place anywhere.
The three states of the South Caucasus are both small and relatively poor: Azerbaijan is the largest, with a population of some 7.7 million and an area of 86,600 sq. km; Georgia follows with 5 million people and 69,700 sq. km, and Armenia, with an official population of about 3 million — although most assume the real population is smaller ? has an area of 29,800 sq. km. The past decade has been economically and otherwise difficult for the people of these states. While they remain near the middle of the United Nations Human Development Index — Georgia was 70th of 174 countries in the year 2000, Azerbaijan 90th and Armenia 93rd — the ranking of each has decreased since independence. According to information provided by the EBRD, the forecast level of real income for 2000 in each country was less than half what it was in 1989.
Table 1 |
||
Bilateral Merchandise trade 2000 |
Bilateral assistance |
|
| Armenia | 1,873/1,277 (3,150) | 524,397 |
| Azerbaijan | 3,699/357 (4,056) | 394,618 |
| Georgia | 5,604/610 (6,214) | 406,936 |
| Totals | 11,176/2,244 (13,420) | 1,325,951 |
Sources: Statistics Canada; Canadian International Development Agency
The security situations in the three states of the South Caucasus is determined first by their internal conflicts, and second, by their relations with neighbours, especially the former imperial powers of Russia and Turkey.
Two of the most poisonous legacies of the Soviet Union were arbitrary borders and the continued existence in some republics of an obsolete form of exclusive nationalism. These problems were also exacerbated by Stalin’s actions in forcibly deporting peoples to other regions of the USSR. In the South Caucasus, this combination led in the early 1990s to severe conflicts in Abkhazia and South Ossetia in Georgia, and in the Armenian enclave of Nagorno-Karabakh in Azerbaijan. These conflicts killed thousands and resulted in some 1.5 million refugees and Internally Displaced Persons: more than 800,000 refugees and IDPs in Azerbaijan, more than 300,000 IDPs in Georgia and 300,000 refugees in Armenia. In all three cases, the residents of the disputed territories retained control of them, with Russian-led peacekeeping forces and international organizations monitoring cease-fires.
As one observer has noted, Russia played the primary external role in the suspension of conflicts in the South Caucasus, while Western and international organizations contributed by helping the victims of war and encouraging contact and negotiation between the parties in conflict. In the years since then, the international community has continued to encourage conflict resolution. The chairs of the "Minsk Group" (the United States, Russia, Germany, France, Czech Republic, Sweden, Italy, Belarus, Turkey, Azerbaijan, Armenia) have been mandated by the OSCE to negotiate a peace settlement on Nagorno-Karabakh, while the OSCE also works in South Ossetia and the UN works in Abkhazia. In each case, the international community has pursued settlements based on an acceptance of Soviet-era borders, including territorial integrity of the states in question and the highest possible degree of autonomy and security for minority populations. The Nagorno-Karabakh conflict remains the key to regional conflict resolution in many ways, since it involves not only two of the three South Caucasus states, but also neighbouring Turkey. Its resolution could therefore help improve relations between all three states, with positive economic and other results.
The problem of large refugee and IDP populations challenges each of the states, particularly Azerbaijan, both from a humanitarian point of view, and also because of the significant economic and social pressures they exert. The international community has so far mainly contributed on a humanitarian basis; however, the lack of progress in reaching settlements has recently encouraged more solution-oriented approaches by the United Nations High Commissioner for Refugees (UNHCR) and others. The UNHCR has played a key role in humanitarian relief. Yet the fact that Internally Displaced Persons are not technically refugees means that UNHCR must launch special appeals to help these populations; this has resulted in intermittent and reduced funding because the needs continue although the crises have ceased to make headlines. As Committee members learned during their visit to the region, Canada’s contribution to these efforts has been quite small, though, of course, any help is welcome: in Ganja, Azerbaijan, one man thanked Committee members for donated Canadian seeds ? distributed there by the Adventist Development and Relief Agency (ADRA) which produced flowers that reminded him of those in his home in Nagorno-Karabakh. While small, however, Canada’s most recent official contribution to this work prior to the Committee’s visit was also highly instructive: CIDA’s contribution in 1998 of some $ 90,000 to a UNHCR/UNDP pilot project for repatriating IDPs to areas from which Nagorno-Karabakh military forces had withdrawn freed up much larger U.S. funds of over $ 2 million — an example of the type of leveraging all donors, particularly more modest ones, must seek and encourage.
By mid-2000 prospects for resolution of at least some of the conflicts appeared somewhat brighter: as part of its admission to the Council of Europe in 1999, Georgia agreed to set out a legal framework for guaranteeing autonomy for Abkhazia and South Ossetia within two years. The presidents of Armenia and Azerbaijan have continued bilateral meetings over the years on the issue of Nagorno-Karabakh, and the Council of Europe recognized progress in this area in its January 2001 decision to admit Armenia and Azerbaijan together as members.
All the states are publicly committed to finding peaceful solutions; however, the question is whether to wait for the perfect "package" to resolve all issues at once, or to pursue phased approaches that can increase confidence. Given that territorial exchanges or recognized secession may seem beyond reach at the moment, the latter path may seem more promising. In the case of Abkhazia, for example, it has been suggested that a partial return of the Georgian-Mingrel population to the Gali district could be accompanied by an expanded international monitoring presence, thereby reassuring both the Abkhaz and the returnees. If the rail line from Russia through Abkhazia to the rest of Georgia were also to be rehabilitated and reopened, the Abkahaz would benefit most directly, but all would enjoy increased regional trade. Similarly, the return of IDPs into the territories between Nagorno-Karabakh and Iran, coupled with demilitarization and an international monitoring presence and assistance, could be traded for the reopening of the railway line between Baku and Yerevan; this would reduce IDP pressure on Azerbaijan and end its blockade of Armenia. No matter which approach is ultimately successful, it will require international assistance and support in the form not only of donations and technical assistance but quite probably international monitors or peacekeeping troops.
Given their geography and history, the three states of the South Caucasus can only be truly secure in a cooperative system. At the November 1999 OSCE Summit in Istanbul, Armenia and Azerbaijan publicly called on OSCE member states to create a security system for the South Caucasus. According to one report, "At the time, however, the international community, concerned that the war in Chechnya might spill over into Georgia or Azerbaijan, reacted coolly to the proposal for a wider ranging security system. But the idea did not die altogether." In the months that followed Turkish President Suleyman Demirel strongly supported the idea of "Caucasus Stability Pact," and told Committee members in Ankara in May 2000 that there was no other way to ensure the security and stability of the region. In March 2000, Armenia proposed a blueprint for such a pact based on the so-called 3+3+2 formula, based on an agreement between the three Caucasus states of Georgia, Armenia and Azerbaijan, with neighbouring Russia, Iran and Turkey as guarantors and two outside sponsors ? the U.S. and the EU.
Azerbaijan later distanced itself from this idea pending a resolution of the Nagorno-Karabakh conflict; however, work continues on refining this regional community approach. For example, in June 2000 the Brussels-based Centre for European Policy Studies (which played an important role in drafting the EU’s Balkans Stability Pact) unveiled a proposal for "A Stability Pact for the Caucasus," which Dr. Robert Cutler had earlier discussed with the Committee. This proposal would include a "South Caucasus Community" modelled on either the EU or another regional grouping such as the Association of South-East Asian Nations (ASEAN) and include its own parliament (Parliamentary Assembly) and executive (Council of Ministers).
Responsibility for resolving the conflicts and strengthening relations in the South Caucasus rests first with the states themselves, yet international involvement through such existing mechanisms as the OSCE, the United Nations and even NATO’s Partnership for Peace (PFP) program can make a useful contribution to the security of the region.
As noted above, despite a lack of funding and consensus over its role, the OSCE has helped to improve the security of the South Caucasus, and can do still more in the future. As Professor Neil MacFarlane noted before the Committee:
If we look at relative success and relative failure, I would say the OSCE in Georgia has been fairly successful. Their principal responsibility is the monitoring and observation of the conflict in South Ossetia, coupled with the more general human rights monitoring role in Georgia as a whole.
South Ossetia has been quite stable for years, and it’s universally agreed that the OSCE presence has played a significant role in this in at least two respects. First, it mitigates Russian predominance. The second is that the presence of foreigners, oddly, has built confidence among the locals. It creates a more reassuring environment in which they can start to rebuild economic connections between communities.
That said, among international organizations, obviously the OSCE is the most underresourced. You put the OSCE office in Tbilisi up against the UN office in Tbilisi and it’s a whole different ball of wax. Where the OSCE has been effective in that context is in developing innovative means of cooperating with people like UNDP in order to release UNDP resources for projects with a conflict resolution thrust that the OSCE wants in South Ossetia. They’ve been reasonably successful at that.
The November 1999 OSCE Istanbul Summit finalized long-sought changes to the Conventional Forces in Europe (CFE) treaty, which reduced conventional military forces in Europe, and Russia agreed to dismantle two of its four military bases in Georgia. In more practical terms, following the resumption of the conflict in Chechnya in 1999, Russia accused Georgia of failing to control its border with Chechnya and allowing a significant number of rebel fighters to cross back and forth through the mountains at will. Georgia denied this claim and requested the OSCE to observe and report movement across that border. While in Georgia in May 2000, members discussed the work of the OSCE with Ambassador Jean-Michel Lacombe and international staff of the OSCE Mission to Georgia; they were particularly impressed with this recent and high profile example of how tension can be diffused, conflict prevented and refugees protected.
NATO’s Euro-Atlantic Partnership Council and Partnership for Peace
Some have argued that NATO membership for Georgia and Azerbaijan would improve the security of the region. Given Russian sensitivities over NATO enlargement into this or other areas of the former Soviet Union, however, such a development would not in the short term increase regional security. Yet NATO can hopefully make a contribution through its Euro-Atlantic Partnership Council (EAPC) and Partnership for Peace (PFP) programs. PFP is designed to increase defence-related links and cooperation between NATO and individual countries. The EAPC is a multilateral forum which allows for regular consultation and cooperation between NATO members and some 27 partner countries, including Georgia, Azerbaijan, Armenia and Russia itself. An example of the useful consultation role of the EAPC occurred during the crisis in Kosovo. A more direct EAPC contribution to the security of the South Caucasus was a regional cooperation seminar held in Georgia in October 1998. It will not be easy to increase security and other cooperation with and between states of the South Caucasus while at the same time convincing Russia that this is not a threat to its interests. With EAPC and PFP, however, structures exist for Canada and other states to try.
Beyond ending and preventing conflicts, it recent years it has become apparent that a key element in ensuring stability and security is repairing the fabric of states torn by conflict. Such "peacebuilding" programs have become increasingly important in Canadian foreign policy. As Stephen Wallace of CIDA noted before the Committee, "a … lesson we have learned is that while regional cooperation is intrinsically valuable from a developmental perspective, it can also have a powerful peace-building impact. It's why most of our initiatives in the Caucasus involve at least two countries." While some Government of Canada projects in the region have peacebuilding implications, few have this specific objective. Given that it also promotes regional development, the Committee believes this to be a promising area for increased Canadian activity.
Academic organizations and NGOs have become increasingly active in peacebuilding efforts in the South Caucasus, although much of this work still tends to take place outside the region itself or in a single country there. One specific proposal that was submitted to the Canadian government adopted a joint approach to regional cooperation and operated in two phases. In the first, a team of academics and policy experts in each of the states of the South Caucasus would develop a detailed country perspectives paper on the subject of regional cooperation. In phase two, these papers would be compared and debated, and an agreed joint document produced providing common perspectives on regional cooperation and concrete suggestions for initiatives. The total cost of this project would have amounted to some $ 160,000 (U.S.), but since half was available in matching funds, the amount needed was some $ 80,000. Despite funding delays, the project is currently expected to begin in the fall of 2001.
The states of the South Caucasus were among the poorest parts of the Soviet Union, and the past decade of conflict, closed borders and the challenges of transition to market economies — made even worse by the Russian economic crash of 1998 — has not helped their economic situation. As the summary report of a March 2000 expert conference on the Political and Economic prospects in the Caspian Sea Region at Britain’s Wilton Park noted:
…the independent states, which emerged in the South Caucasus and Central Asia after 1991, have failed to establish sustainable strategies for economic development, and particularly for the exploitation of the region’s energy reserves. Their political prospects are hostage to uncertainties over succession and unresolved separatist conflicts.
Yet in addition to the oil wealth of Azerbaijan, the three countries have highly educated workforces and a number of promising industries; if they were able to open their borders following successful conflict resolution and address widespread corruption, their economic prospects would be much brighter and foreign investment would increase.
As noted above, the states of the South Caucasus have been relatively successful in creating the framework for economic transition — Georgia became the 137th member of the World Trade Organization in June 2000 — supported at least partly by capacity-building programs of Canada and other states. In terms of net foreign direct investment (FDI), Azerbaijan led with a forecast $274 million (U.S.) in 2000, followed by Armenia at $150 million and Georgia at $109 million. Corruption remains a significant problem in these countries, however: according to the EBRD, of firms asked whether it was common to make "unofficial payments" to get things done, 59.3% of those active in Azerbaijan said they did so frequently or more, 40.3 % in Armenia, and 36.8 % in Georgia (The average in a number of Transition Countries was 30.3%).
While economic development is critical, in assisting the states of the South Caucasus, it is important to remember the ends to which increased resources must be put, rather than just focusing on the development itself. As Janet Hatcher Roberts of the Canadian Society for International Health and others noted before the Committee, the states of the South Caucasus need such development in order to address their serious health, social and other problems; this has implications for Canadian policy. In her words:
Our main concern is that Canada should not rely on trade and economic development alone to solve the serious problems of the South Caucasus. Canada should consider a long-term strategic investment in social development of the regions, including the promotion of human health and environmental sustainability.
Many rejoiced when the Soviet domination ended in the Caucasus in the early 1990s, but there have been dramatic declines in health status in these countries…Life expectancy for men has fallen in the Caucasus. There’s a high maternal mortality and infant mortality rate. Many who once had access to free medical care cannot afford the cost of fee-for-service systems. Nutritional status has fallen...
She added:
Economic development may be conducive to better income, social tolerance and welfare, and finally health, but such a positive effect is not automatic. The prerequisites of health can even be adversely affected under economic growth if the appropriate social policies are not in place.
The legal dispute over the division of resources in the Caspian Sea is still unsettled but in practice this has become less important over time as states have increasingly accepted the position that undersea resources should be divided among them in exclusive zones. The precise size of Azerbaijan’s oil and gas resources remain to be seen, but they are significant, and, if properly developed, can improve the prosperity of the country and the region as a whole. Yet while Georgia, for example, stands to benefit increasingly from transit fees for oil pipelines — including those from the proposed Baku-Tbilisi-Ceyhan Main Export Pipeline — Armenia will not as long as Azerbaijan and Turkey continue to seal their borders because of the ongoing dispute over Nagorno-Karabakh.
Large volumes of oil at high prices may be sufficiently profitable to persuade Western firms to underwrite the huge cost of anywhere from $2-$6 billion (U.S.) of the Baku-Tbilisi-Ceyhan pipeline and others, although security and stability concerns obviously will be taken into account as well. If these states are to improve their economies, however, in almost every case geography and economics would make cooperation among them desirable. Recognizing the key importance of regional cooperation in the economic development of the region, the World Bank has promoted the idea of a Caucasian Cooperation Forum, bringing together multilateral agencies, donor countries, and the countries of the region for a mutual approach to regional cooperation.
The World Bank proposal obviously takes a macro approach to increasing regional economic cooperation, but such cooperation is already underway at lower levels in the region. The thriving regional market at Sadakhlo on the Georgian-Armenian border is a good example. According to a June 2000 report in the Economist magazine:
Sadakhlo is close to the hinge on the map where the three Caucasus republics meet. Buses from Azerbaijan’s capital, Baku, from Armenia and even from Nagorno-Karabakh itself queue up at the edge of the village. The Azeris exchange food, clothes and flour from Turkey and Russia for assorted Armenian produce and an Iranian washing-powder called Barf…
The market fills vital economic needs for the people of an extremely poor region, whose longest border is closed. Perhaps half the population of the Armenian capital, Yerevan, dress in Turkish clothes bought at Sadakhlo. Rebel Armenians in the self-proclaimed Nagorno-Karabakh republic happily drink Azercay (Azerbaijani tea) produced by their supposed enemies. The Georgians seem content to keep customs duties to a minimum. "the trade centre here is not a free-trade zone," explains Jamal Bediev, the market’s Georgian director. "Still, it solves a lot of interstate problems."
As Committee members learned in Istanbul from representatives of the Turkish-Armenian Business Development Committee, unofficial commerce can be pursued as a means of increasing contact between parties to conflict, encouraging prosperity and building the confidence necessary to accept compromise. These representatives suggested several ways in which Canada could help development in the region and raise its profile there; they, too, recommended taking more students from the region to Canada.
Canada’s economic links with the three countries of the South Caucasus remain minor: the number of Canadian firms active in the region is small, and two-way merchandise trade with Canada amounted to $6.21 million (Cdn.) in 2000 in the case of Georgia, $4.05 million with Azerbaijan and $3.15 million with Armenia. While it is important not to overestimate the potential in the South Caucasus for Canadian oil and gas, construction and other firms, we should not underestimate them either — particularly if and when peace agreements are reached in the outstanding conflicts. A permanent Canadian diplomatic presence in the South Caucasus would almost certainly have increased economic links and enhanced the quality and quantity of information available to Canadians interested in pursuing opportunities there.
The states of the South Caucasus have succeeded somewhat more than those in Central Asia in adopting international standards of democracy, good governance and human rights, yet they still have far to go. In a presentation covering both the South Caucasus and Central Asia, Alex Neve of Amnesty International recommended focusing on protecting human rights defenders, ending impunity and addressing persistent reports of torture. On the South Caucasus in particular, he stressed the challenges posed by ceasefires in Georgia and Nagorno-Karabakh and large refugee and IDP populations. He agreed that an increased Canadian presence in the region would be helpful in promoting human rights. As he noted, "increased presence — increased diplomatic presence in particular — is obviously giving us a greater capacity to start to take action, to monitor, to engage with the governments around these issues." He added:
Another body not to forget is the Council of Europe, which, particularly for the states of the South Caucasus, is a very important body. I highlighted the fact, for instance, that Georgia has recently joined the Council of Europe. Canada is not a member of the Council of Europe, but we do have observer status within the Council of Europe. We follow it. We’re active within it. We have discussions with those states, so that’s another body to which we could devote some attention, which is a body that I think can play a very important role in advancing improvements on a lot of these fronts as well.
The fact that these three states have now been accepted as members of the Council of Europe illustrates the progress made, and will help ensure they do comply with international legal and political norms — as the case of Turkey has shown over the last two decades. The values defended and promoted by Canada and others states are important in and of themselves. In the case of the South Caucasus, however, they are critical for conflict resolution in the region, an outcome that will demand significant compromises on all sides, willingness to provide tangible guarantees for minority rights within federal systems, and the ability to resist possible provocations by hard-liners with vested interests in the status quo. All of this depends critically on democratic principles and practice. As the summary report of a March 2000 expert conference at Wilton Park noted:
The weakness of civil society and the absence of an active, informed public opinion will be most felt when countries have to accept controversial peace agreements. Thus, the Azerbaijani and Armenian presidents, who are well-aware of the political and economic realities faced by their countries, are clearly able to agree on the outlines for a peace agreement on Nagorno-Karabakh. There is great anxiety, however, about the potential public reaction to compromises.
II. COUNTRY-SPECIFIC FACTORS FOR CANADIAN POLICY
Georgia continues to be preoccupied by the issue of territorial integrity stemming from violent civil wars in the early 1990s and faces significant other challenges, including that of corruption. Thus, and not least because its major problems are internal, Georgia remains a test case for transition in the Caucasus. As The Economist magazine put it in July 2000:
Georgia is both pro-western and more or less democratic, rare characteristics in the former Soviet Union: keep going due east from Tbilisi and you reach Japan before you find another country with a press that is as free or a civil society as worthy of the name. If everything went right, Georgia might join the European Union eventually, perhaps in a decade or two. Even more distantly, Mr. Shevardnadze would like it to join NATO. More immediately important, Georgia is the only feasible westward route for exports from the Caspian’s copious oil reserves. A prosperous, democratic, stable Georgia would be a bastion of hope for the whole region — for Central Asia to the east, and for Russia’s troubled fringe to the north. But if Georgia were to crack up or decay further, the Caucasus might stay blighted for a generation.
The conflicts that racked Georgia in the early 1990s — a period President Edward Shevardnadze has called the "most difficult" in the history of the country — were provoked in the first instance by the extreme nationalist policies of Georgia’s government under President Zviad Gamsakhurdia. These policies resulted in violence and calls for independence in the regions of Abkhazia and South Ossetia. A measure of stability returned to Georgia following Shevardnadze’s return and election as president and the end of active conflict; however, several assassination attempts against Shevardnadze have shown that the situation in Georgia remains tense.
As Committee members learned in Georgia, of the two outstanding conflicts there, that in Abkhazia remains much further from settlement, still potentially volatile and erupting in occasional violent incidents. By accepting the existing borders of Georgia upon the dissolution of the Soviet Union the international community unanimously rejected Abkhazia’s demands for independence. Thus, the issue is the degree of autonomy Abkhazia can be granted within Georgia, and how to persuade the Abkhaz, who vividly remember the war of the early 1990s and are de facto independent, that they could enjoy physical and other security as a minority within Georgia. The Commonwealth of Independent States (CIS) peacekeeping force maintaining the ceasefire in Abkhazia is currently composed of a single Russian contingent; the United Nations is active both in monitoring the ceasefire and in pursuing a comprehensive political settlement. As noted above, draft legislation guaranteeing a high degree of autonomy for Abkhazia and South Ossetia was a condition of Georgia’s entry to the Council of Europe in 1999. It remains to be seen whether the leaders of Georgia and Abkhazia can make the necessary compromises, encouraged and supported as necessary by the international community.
The conflict in South Ossetia is much closer to resolution. In an agreement signed in Moscow in 1996, Georgia and South Ossetia agreed that South Ossetia would remain within Georgia, and while differences remain they are much less extreme than in the case of Abkhazia. While in Georgia Committee members travelled to South Ossetia and met with its leader Loudwig Chibirov, and were directly confronted with the "chicken and egg" problem. There had been positive developments since 1996 and the solution to the conflict had reached its final stages. At the same time, Mr. Chibirov emphasized the very difficult humanitarian situation of the people of South Ossetia; indeed, his meeting with Committee Members took place just minutes after he had met with Mr. Francis Deng, the UN Secretary General’s Special Representative on Internally Displaced Persons. Noting that Canada has so far had little contact with South Ossetia, Mr. Chibirov asked that it help with even small donations of wheat, since bread was seen as the barometer of life in South Ossetia: in addition to solving serious internal problems, such a contribution would lighten the political mood, making a peace agreement easier to reach. While the Committee is aware that the international community would probably prefer to co-ordinate further assistance to South Ossetia after it has reached a peace agreement with Georgia, it believes that, as part of its enhanced policy on the South Caucasus, the Government of Canada should seek a means to demonstrate its concern for the people of South Ossetia without prolonging the conflict resolution process.
Finally, President Shevardnadze has emphasized the importance of good relations with the Russian Federation, without which, in his words, "Georgian independence would be unthinkable." Yet the continued instability in southern Russia — which Patrick Armstrong told the Committee results from a combination of factors, including a traditional Chechen desire for national freedom, the longstanding desire of some to create a "Mountaineer Republic" in the Caucasus, and the newer phenomenon of "Wahhabi" jihadists — has posed significant problems for both countries.
As noted earlier, Russia has accused Georgia of failing to adequately control its border with Chechnya. Following months of Russian accusations and Georgian denials, in December 2000 Russia imposed a strict visa regime on Georgia, although it exempted residents of Abkhazia and South Ossetia. This regime has imposed a significant economic burden on Georgia, and, in the opinion of some observers, has succeeded in moderating Georgia’s pro-Western stance into a more neutral one.
The stability and security of its southern borders is of legitimate concern to Russia, and the Committee does not share the view of some that Russia is responsible for all the conflicts in the Caucasus. At the same time, Russia’s military actions in Chechnya have rightly been criticized on human rights and other grounds, and its imposition in the name of containing the conflict in Chechnya of a strict visa regime on Georgia which exempts residents of Abkhazia and South Ossetia raises questions about its broader motives.
Through the OSCE, the international community can act to reassure Russia that its borders are secure, but this cannot be done at the expense of Georgia. Given that in the summer of 2000 Georgia was forced for budgetary reasons to reduce its armed forces, including border guards, international assistance in this area would be very useful.
Georgia has reached a number of significant milestones of economic transition, particularly its entry into the World Trade Organization in the summer of 2000. While in Tbilisi, members met with representatives of the Ottawa-based Centre for Trade Policy and Law, which was carrying out CIDA-financed work to assist Georgia to develop trade policy expertise. The CTPL, established by the Government of Canada but now independent, has developed a useful model whereby trade policy groups are established in countries in transition, originally with links to governments but eventually independent. This model has so far seen success in Russia and elsewhere, and Committee members believe it is a good example of how partnerships between government and the non-profit sector can assist transition.
Despite success at the WTO level, Georgia remains very poor — according to official data, more than 50% of Georgians live below the poverty line — and this poverty has significant social implications. Foreign assistance can help, but public corruption and other challenges continue to limit foreign investment and restrain economic development. Committee members were therefore pleased to hear in Georgia of plans for a new anti-corruption program, including the appointment of a special (well-paid) anti-corruption group within the government; they would urge the government of Georgia to pursue action along these lines both to improve the lives of its citizens and also as a means of attracting foreign investment.
Notwithstanding the relatively positive assessment of Georgia’s progress in terms of democratic development and governance, much remains to be done: Amnesty International noted persistent concerns about the use of torture in Georgia, and, despite the strong popularity of Mr. Shevardnadze, the April 2000 presidential election was marked by irregularities. In addition, as noted above, successful conflict resolution requires that minority groups feel confident that democratic principles and processes are strong enough to offer real protection. This will be particularly true in Georgia, given its recent history of conflict and it will continue to be pressed on these and other issues in the Council of Europe, the OSCE and elsewhere. As noted, a permanent Canadian presence in the region would help monitoring of and engagement in these issues.
Azerbaijan is confronted with the twin challenges of overcoming the territorial and social legacies of the conflict in Nagorno-Karabakh and ensuring that its significant oil and gas resources are developed wisely. President Haidar Aliyev and government officials in Azerbaijan stressed the importance of oil development in meetings with Committee members in Baku. Such development, however, would be much easier in a stable security environment, and the resolution of the conflict in Nagorno-Karabakh — including the return to their homes of refugees and Internally Displaced Persons — remains the priority; President Aliyev told Committee members that the refugee problem is the most challenging task in Azerbaijan, both economically and politically.
According to a 1999 report of the Office of the United Nations High Commissioner for Refugees in Azerbaijan:
Azerbaijan continues to suffer one of the world’s most complex humanitarian situations with the largest (per capita) population of uprooted people of approximately 800,000 (including IDPs, refugees and stateless persons) over a total national community of 8 million. The still prevailing weakness of the national economy hinders the revival of essential social services including health care and education. Wide unemployment and insufficient income generating opportunities in the country forestall self-reliance and uphold dependence on external assistance in IDP communities.
The predominantly Armenian enclave of Nagorno-Karabakh was placed within Azerbaijan during the Soviet period. Ethnic tension mounted in the late 1980s, and, following the collapse of the Soviet Union, violence broke out between those in Nagorno-Karabakh (and Armenia) who wanted independence for the territory, and those who insisted it remain part of Azerbaijan. The war that followed had a tremendous humanitarian cost, ending with many dead and at least 800,000 refugees and Internally Displaced Persons living in camps and other makeshift accommodations within Azerbaijan, and both Nagorno-Karabakh itself and a number of adjacent regions under the control of the Karabakhians. Noting that most visitors to Azerbaijan remain in Baku, President Aliyev told Committee members he was "extremely glad" they had decided to drive to Georgia to see first hand the conditions in which over 7,000 refugees and Internally Displaced Persons are still living in the tent city of Barda and nearby Ganja nearly six years after the end of active conflict in Nagorno-Karabakh.
By accepting the borders of Azerbaijan at the collapse of the Soviet Union, the international community was again rejecting a demand for independence by the people in Nagorno-Karabakh. At the OSCE’s Lisbon Summit in December 1996, three broad principles were proposed: territorial integrity, meaning Nagorno-Karabakh would remain within Azerbaijan; the provision for it of the highest degree of autonomy; and security guarantees for all parties. In 1997, the leaders of Azerbaijan and Armenia (which effectively negotiates on behalf of Nagorno-Karabakh, further complicating the situation) agreed to a Minsk Group proposal for a phased approach to resolving the conflict: it was proposed that Armenian forces would first be withdrawn from areas outside Nagorno-Karabakh, and the refugees returned, following which decisions would be made on the status of the territory. Armenian President Levon Ter-Petrosian was unable to convince his country — and the leadership of Nagorno-Karabakh — to accept this agreement, however, and was forced to resign in consequence. He was replaced by Robert Kocharian, a former leader of Nagorno-Karabakh.
An increasing number of meetings and improved dialogue between Azerbaijani and Armenian Presidents Aliyev and Kocharian in recent years — most recently in Key West, Florida, in April 2001 ? have convinced many that the outline of an agreement on Nagorno-Karabakh is probably known; however, the political difficulty of implementing such a deal has probably prevented its conclusion. Meetings between Committee members and Presidents Aliyev and Kocharian did not dispel this suggestion. But even if the outlines of a deal are known, the context must still be set. President Aliyev correctly argued that, even without a solution to the conflict, the economy of Azerbaijan would eventually improve as a result of oil revenues, while that of Armenia would worsen. At the same time he is also attempting to encourage Armenia to compromise by suggesting that an agreement would lead to a significant increase in regional economic and other cooperation.
Most of Azerbaijan’s economic prospects are based on development in the oil sector. According to the EBRD, total planned investment by international oil companies in the energy sector is estimated at some $ 40 billion U.S., and increased oil prices over the past year have proven a windfall for that country. President Aliyev has also deliberately involved many players in all aspects of oil development and pipeline construction. These projects are important, of course; however, such reliance on a single resource can bring its own problems, including lack of progress in other sectors resulting from a false sense of security and a possible increase in disparities resulting from narrow ownership and corruption. Azerbaijan has also taken somewhat less steps than either Georgia or Armenia to combat corruption.
Government interlocutors in Azerbaijan repeatedly stressed their desire for increased Canadian commercial and other presence there. Even if that country is not comparable to Saudi Arabia in terms of oil, the potential for Canadian firms in this and other sectors is real. Speaking on behalf of AEC International of Calgary, the largest Canadian oil company active in Azerbaijan, Dr. Rob Sobhani argued strongly that increased Canadian engagement — including through official visits to Canada by heads of state — would help increase Canada’s share of this important market. Whether or not official visits are justified as a result of a strengthened Canadian policy on these regions remains to be seen, yet an increased attention to the South Caucasus would certainly assist Canadian firms interested in pursuing opportunities in the Caspian region.
Once again, an agreement on Nagorno-Karabakh that involved guaranteeing minority rights would have to rely on strong democratic principles and practices. In this respect, as its record shows, Azerbaijan has much work to do. Opposition parties and an active civil society do exist, but, given the power of its president, Azerbaijan is often referred to as a "Presidential Republic." Opposition groups threatened to boycott fall 2000 parliamentary elections, and in the end, according to the Canadian Department of Foreign Affairs and International Trade, the election "demonstrated the gap between international expectations and local practices.". Azerbaijan desires to increase its links with Europe as part of the Great Silk Road, and therefore will be sensitive to pressure by the Council of Europe, to which Canada must add its voice.
Despite a highly educated workforce and real potential in a number of high value-added sectors, the recent past has been very difficult in Armenia, resulting in a massive emigration: the Armenian government admits that its 1991 population of 3.7 million has been reduced by about 700,000, but many feel the real population is closer to 2 million.
It is impossible to understand current events in Armenia and the region without taking into account what the Canadian House of Commons in April 1996 called the "Armenian tragedy" of the death of some 1.5 million Armenians at the hands of Ottoman forces in 1915; however, as former Armenian Foreign Minister Raffi Hovanissian told Committee members in Yerevan, while the "genocide" of 1915 was a defining moment in Armenian history, in the last ten years the country has lost almost as many people through emigration.
Corruption and the lack of good governance are important challenges in Armenia, and have resulted in poverty and a crisis of confidence for its citizens. Once again, however, the dominant factor slowing Armenia’s transition is the lack of conflict resolution, notwithstanding the fact that the conflict in Nagorno-Karabakh took place outside its territory. In a clear example of the need to look at these countries a parts of a single region, the conflict and continued failure to achieve an agreement on that issue has closed landlocked Armenia’s borders with Azerbaijan and Turkey, thereby, among other things, preventing it from sharing in transit or other revenues from the oil resources of the Caspian. As the EBRD noted in 2000:
Regional cooperation will be key to Armenia’s future development. Armenia is contributing to this process through cooperation with Greece and Iran, and is aiming to conclude a transport agreement with Georgia and Bulgaria. Over 1999, relations with Russia continued to strengthen…
Internationally, the Transcaucasian region is important for its role in the transit of oil and gas from Central Asia, although projects for transit pipelines have so far focused on neighbouring Georgia.
Former Prime Minister Armen Darbinian, currently the head of the International Centre for Human Development, stressed the need for regional cooperation if the countries of the South Caucasus are to succeed. In Yerevan, he pointed out to Committee members that regional leaders have so far been content simply to do better than their equally poor neighbours. For example, Armenia has good relations with Georgia, which has succeeded in gaining entry to the World Trade Organization; yet Armenia does not cooperate with Georgia on trade issues.
An important element of Armenian policy has also been its continuation of close links, including military ties, with Russia. The Committee agrees with interlocutors in Yerevan who stressed Armenia’s right to decide for itself the direction of its foreign and defence policies. Given the Western orientation of Georgia and Azerbaijan, however, its pro-Russian policies will probably continue to complicate Armenia’s transition until all the countries of the region increase their cooperation significantly. In any case, in developing bilateral and multilateral programs, such as EU’s Transport Corridor Europe-Caucasus-Asia (TRACECA) program, the international community has an obvious interest in increasing Armenia’s cooperation within the region, if only to remove any incentive for it to act as a spoiler.
While handicapped by its lack of cooperation with neighbouring states, Armenia has achieved some economic success in the last several years, due to a combination of external financial assistance, government policies and investment — particularly from the worldwide Armenian Diaspora. According to the EBRD:
An advantage for Armenia is its large worldwide Diaspora of about 5 million. Many of the largest investors in Armenia are from the Diaspora, which provides support for infrastructure projects and SME development as well. The Diaspora works hard to raise the country’s international profile and thus to maintain inflows of western assistance.
In addition to the economic importance of this Diaspora, its political influence can also be important. Its close military and other ties with Russia and the influence of Armenians in Washington has put Armenia in the unique position of having the support of both the Russian military and the U.S. Congress; when questioned in Yerevan about the U.S. assistance budget for Armenia, a representative of USAID told Committee members that it gets more money than it asks for. Interlocutors in Armenia noted that Canada has more joint ventures in Armenia than has the United States, but argued that a strong potential exists for Canada to increase its economic and other presence there. In this argument they are supported by the substantial and well-organized Armenian community in Canada, some 75,000 of whom live mainly in Toronto and Montreal.
Given its lack of resources and mainly closed borders, Armenia has chosen to focus on high value-added sectors such as diamond polishing and software design, where it shows good potential. Denis Leclaire of St. Mary’s University suggested that the Armenian software industry, though probably not as state-of-the-art as the government thinks, is important. He noted:
…there clearly is a real understanding at a certain level. While technically they are probably as good as if not better than many parts of the world, one of the areas in which they do need help is that they have a problem in making use of the Internet for business purposes and especially for marketing. They’re horrible marketers, absolutely. That’s one of the areas in which we want to provide some assistance.
The scale of the problems in Armenia was underlined by the October 1999 assassination in parliament of Prime Minister Vazgen Sarkisian, Speaker Karen Demirchian and six others in a crime many felt was related to the prospect of a peace settlement on Nagorno-Karabakh. The following months were politically very difficult for Armenian President Robert Kocharian; however, his success in forming a new government in mid-2000 argued positively for his potential to "sell" a peace agreement in both Armenia and Nagorno-Karabakh if and when one is concluded. The Committee does not agree with the suggestion that the ultimate decision on conflict resolution in Nagorno-Karabakh rests with Russia; however, the Government of Russia can undoubtedly have a strong influence on that of Armenia.
The day-to-day politics of Armenia are very important for resolving the conflict in Nagorno-Karabakh. The broader issue, however, is Armenian citizens’ seemingly widespread lack of confidence in the legitimacy of their political system. Finance Minister Levon Barkhoudarian, a former Ambassador to Canada, agreed with the need to address corruption and implement civil service reform: as he noted, while "good governance" is a nice term, civil service reform is key. Suggesting that there has been a general failure to understand the degree to which successful transition depends on stability and the rule of law, Former Prime Minister Darbinian recommended that, in addition to specific civil service and structural reforms, more emphasis be placed on democratic development.
III. DIRECTIONS FOR A STRENGTHENED CANADIAN POLICY
The Committee’s hearings and the visit of Committee members to the South Caucasus have underlined the need for a strengthened Canadian policy on this important and complicated region. As noted above, such a policy must be based on a long-term perspective which supports the development of civil society by focusing on educational and other programs. The states of the South Caucasus face significant economic and governance challenges, which must be addressed by programs for encouraging democratic development and combating corruption in order to attract Canadian and other foreign investment.
The key issue in the South Caucasus, however, remains the unresolved "frozen" conflicts which have blighted the past decade and continue to prevent regional cooperation with respect to security, the economy and other issues. In addition to the recommendations contained in Part I, a strengthened Canadian policy toward this region should therefore focus on conflict resolution and peacebuilding, both through bilateral CIDA and other programs and multilateral mechanisms. The OSCE is obviously of key importance in this respect since it is concerned with both conflict resolution and democratic governance. Canada should therefore increase its support for the work of the OSCE, focusing on support for conflict resolution in Nagorno-Karabakh and elsewhere, and a more solution-oriented approach to the problem of refugees and IDPs, as well as encouragement of regional cooperation and democratic development.
If Canada is to increase its knowledge of and contribution to the development of a stable and prosperous South Caucasus over the long term, the centrepiece of this new policy must be the establishment of a permanent Canadian diplomatic presence in the region. Ideally Canada would benefit from such a presence in each of the three states; however, the Committee believes that in the first instance the evidence justifies the immediate establishment of one Canadian embassy in the region. The decision as to where this should be is simplified by the practical fact that it would be impossible to represent either Azerbaijan or Armenia from the territory of the other. For this reason, the Committee believes that the Government of Canada should establish a permanent embassy in Georgia which would have responsibility for Canadian relations with all three states. Canada should also be willing to consider establishing embassies in Azerbaijan and Armenia, once those countries have agreed to a peaceful resolution of the conflict over Nagorno-Karabakh.
Recommendation 3
The Committee recommends that, as a key element of a strengthened policy toward the South Caucasus, the Government of Canada place particular emphasis on strengthened support for the activities of the OSCE and on supporting the context for conflict resolution and increased foreign investment through democratic development and programs to combat corruption. In respect of Nagorno-Karabakh, the Government of Canada should exploit every opportunity in bilateral relations and multilateral institutions to assist in finding a solution to this conflict.
The Committee recommends that the Government of Canada establish a Canadian embassy in Georgia which would have responsibility for relations with the three states of the South Caucasus. The Government of Canada should also stand ready to consider opening embassies in Azerbaijan and Armenia as progress is made in resolving the dispute over Nagorno-Karabakh and increasing regional cooperation.