ENERGY AND SECURITY IN TRANSCAUCASIA Stephen J. Blank September 7, 1994 ******* The views expressed in this report are those of the author and do not necessarily reflect the official policy or position of the Department of the Army, the Department of Defense, or the U.S. Government. This report is approved for public release; distribution is unlimited. ******* Comments pertaining to this report are invited and should be forwarded to: Director, Strategic Studies Institute, U.S. Army War College, Carlisle Barracks, PA 17013-5050. Comments also may be conveyed directly to the author by calling commercial (717) 245-4085 or DSN 242-4085. FOREWORD One of the world's enduring regional conflicts is in Nagorno-Karabakh. This war pits local Armenians and their cousins from Armenia against Azerbaidzhan and has enmeshed Russia, Turkey and the Western allies (France, Great Britain, and the United States) in a complex series of regional relationships. The international stakes of this war involve the control over exploration for natural gas and oil and the transhipment of these commodities from Azerbaidzhan to the West. Energy resources represent Azerbaidzhan's primary means of economic modernization and are therefore vital to its economic and political freedom. For Russia and Turkey the question is one of access to enormous amounts of desperately needed hard currency and control over a long-standing area of contention between them. More broadly, Russia's tactics in attempting to impose a peace settlement in the war and to establish control of a large share of the local energy economy represent a recrudescence of the imperial tendencies in Russian policy that are incompatible with democratic reform. Accordingly, this war is overlaid with international rivalries of great scope and of more than regional significance. Western policy here is a sign of U.S. and European intentions to preserve the post-Soviet status quo while Russian policy is no less illustrative of the direction of its political evolution. The Strategic Studies Institute hopes that this study will clarify the links between energy and regional security and that it will enable our readers to assess regional trends and their importance for the United States, its allies, and the Commonwealth of Independent States. JOHN W. MOUNTCASTLE Colonel, U.S. Army Director, Strategic Studies Institute BIOGRAPHICAL SKETCH OF THE AUTHOR STEPHEN J. BLANK has been an Associate Professor of Russian/Soviet Affairs at the Strategic Studies Institute since 1989. Prior to this appointment, Dr. Blank was Associate Professor for Soviet Studies at the Center for Aerospace Doctrine, Research, and Education of Air University at Maxwell Air Force Base. Dr. Blank's M.A. and Ph.D. are in Russian history from the University of Chicago. He has published numerous articles on Soviet military and foreign policies, notably in the Third World, has edited books on Soviet military policies and nationalities policies, and is the author of forthcoming studies of Russian foreign policies in Asia and of the future of the Soviet military. SUMMARY With the collapse of the Soviet Union, new states, regions, and security issues entered into international affairs. One of these regions is the Transcaucasus or Transcaucasia. It comprises Georgia, Armenia, and Azerbaidzhan and is a zone of centuries-old international rivalry between Turkey and its supporters and Russia and its friends. At stake today is the international economic life, and thus the politics, of Transcaucasia. This rivalry now engages Turkey, the United States, Great Britain, and France against Russia in the struggle to control (or at least leverage) Azerbaidzhan's energy exploration and pipeline programs. This competition interacts with the international effort to bring about peace in the Armenian-Azerbaidzhani war over Nagorno-Karabakh. (See Figure 1.) Thus, in Transcaucasia energy or economic issues and security are closely linked; almost indistinguishable. This study examines that linkage. It relates Russia's efforts to impose a peace on the area to its aim of securing a stake in the local energy economy. Russia's stated goal of 10-20 percent of the revenues from that energy is wildly disproportionate to its economic investment (which is nil). But Russian policies reflect its tactics and strategies for reintegrating the former Soviet space. At the same time, this assessment of Russian and international efforts to gain influence is conducted in the context of Azerbaidzhan's efforts to escape unilateral dependence upon Russia by involving Western firms and governments, and Turkey's efforts to keep Russia from gaining hegemony over Transcaucasia. By tracing the complex international maneuvers of the parties, and relating energy and economics to defense and security issues, we can see the strategic issues and importance of the area in a clearer context. What then becomes clear is that Russia seeks to coerce Azerbaidzhan, Georgia, and Armenia into a return to some form of economic-military-political union under its auspices, but is meeting considerable political opposition from Baku, Ankara, and the Western powers. This opposition recently led Russia to issue a demarche to Great Britain (significantly not to Azerbaidzhan) concerning its rights to veto anything having to do with the disposition of the energy resources of the Caspian Sea that borders Azerbaidzhan and Kazakhstan. This demarche validates Western reports of Russia's belief that it has a proprietary relationship to energy resources throughout the Commonwealth of Independent States (CIS) and of its efforts to "blackmail" (The Washington Post's word) the new republics into surrendering control over those resources to Russia. It also illustrates that Russia still believes in the diminished sovereignty of Transcaucasian and Central Asian states. However, Russia's demarche and other actions also reflect its weakness when confronted by steadfast Western opposition to its neo-colonialist policies. The claims it makes on Azerbaidzhan and its Western supporters reflect that weakness and the fear that Western influence might supplant Russian influence in these borderlands. While the local situation is one of unresolved war and Russian efforts to impose a one-sided settlement, the great strength residing in the Western position (should the West seek to engage both Russia and the other CIS members in a comprehensive engagement) is also visible. ENERGY AND SECURITY IN TRANSCAUCASIA Since 1993, a three-way struggle for control of all phases of the production of Transcaucasia's energy resources has become a key factor in international politics. The three sides are Russia, Azerbaidzhan (the sole regional oil producer), and international oil firms backed by their governments. This struggle will shape Transcaucasia's economic and political future; therefore, the stakes are vital to the region's states and their neighbors. Today, as it did previously, Moscow consciously uses control of oil and gas as a weapon, attempting to force Ukraine, the Baltic states, and Belarus into economic integration and political unity with or submission to Russia.1 The use, or threatened use, of an energy cutoff began in 1990 when Mikhail Gorbachev employed this weapon in the Baltic states to compel their subjection to Moscow. Energy is now both the stakes and a weapon in what amounts to a policy of economic warfare that is part of Russia's larger strategy. Other energy producers and/or energy consumers are, in turn, resisting Russian efforts in this area. That resistance is also part of the warfare. Analyzing regional energy issues lets us trace the struggle between Russia's imperial reach and the new states', especially Azerbaidzhan's, capacity for autonomy.2 Russia is also obviously motivated by the lucrative possibilities implicit in being a key player in all aspects of the energy business, e.g., by redirecting the energy trade flows of the other post-Soviet republics in Transcaucasia and Central Asia back to it and its transport network. Indeed, in January 1994, Premier Viktor Chernomyrdin announced Russia's interest in joining the Organization of Petroleum Exporting Countries (OPEC), only to retract that statement later.3 Any Russian entry into OPEC before Russia consolidated control over its neighbors' energy economies would make it more difficult to attain that control, since they too would then have a case for entering OPEC. Furthermore, if Russia can gain that control over them before joining OPEC, its power inside that organization would grow considerably as would its ability to play a monopolist's or oligopolist's role as the hegemon of the Commonwealth of Independent States' (CIS) energy economy. In line with efforts to consolidate Russia's preeminent position in regional energy economies, Russian Energy Minister Yuri Shafranik stated his intention of furthering preexisting energy cooperation with Iran in April 1994. That strategy is also part of a larger policy dating back to Gorbachev's opening to Iran in 1987. Today the strategy comprises arms sales to Iran and support for it in the Gulf in return for Iranian moderation vis-a-vis the Muslim republics of the CIS, including Azerbaidzhan.4 Shafranik's statement also came just when reports of Moscow's interest in easing the embargo against Iraq began circulating. Russian commentators, like Valery Lipitskiy in Nezavisimaya Gazeta, now openly contend that Arab states should invest in Russian oil to prevent a Western "takeover" of those assets and concomitant decline of OPEC. They also recommend that the Arabs should buy Russian arms.5 Therefore, a deal with Iraq or other OPEC states may be brewing behind the scenes even as Russian pressure to control the energy resources of other CIS states grows. What also makes this complex international rivalry important is that for Russia, Azerbaidzhan, Kazakhstan, and Turkmenistan, exportable energy resources are the main, if not only, path to the world economy and to hard currency resources necessary for future investment and development. Control over energy is indispensable to those states' future economic strategies because it means control over their economic and political destinies.6 That also holds true for states like Uzbekistan whose wealth lies in cotton and gold. Since the existing Central Asian pipelines and those under consideration either go through Transcaucasia and Russia or might go through these areas in the future, control over the pipelines vitally affects not only Azerbaidzhan but Central Asia as well. Thus, here the traditional struggle for markets is itself a major factor in interstate rivalries. The continuing local economic warfare interacts with more general conflicts, including wars, across these regions. The belief that, "Indeed, if carefully articulated, Russian interests will find broad support (in the West) because few people have any great interests in generating more `great games' between East and West or between North and South" is unfounded, naive and misleading.7 Russia's recent policies here show that it rejects that perspective, thus compelling other states to respond accordingly. As Andranik Migranyan, an advisor to President Yeltsin, recently wrote, Russia faces numerous problems, both abroad and with other newly independent former Soviet republics. It cannot afford to be constrained when its own interests do not coincide with NATO's or with those of the Partnership for Peace.8 In other words, as far as the republics of the CIS and Transcaucasia are concerned, Russia demands a free hand. Therefore, a classical realist perspective that sees states colliding in pursuit of incompatible vital interests is more useful and relevant for analyzing regional trends. In Transcaucasia (Figure 2) an intense struggle is already underway. Armenia, Nagorno-Karabakh and Azerbaidzhan are at war over its former province. Georgia is racked by two ethnic uprisings in Abkhazia and South Ossetia. The North Caucasus, technically within Russia, is pervaded by real or only temporarily dormant ethnic conflicts among the Chechens, the Ingush, and the North Ossetians. As an overarching international motif above and beyond these local conflicts, Russo-Turkish rivalry over energy, military issues, territorial competition, and security from the Balkans to Tadzhikistan is intense and long-standing. Turkey not only feels menaced by Russian imperial revival near its borders; it also believes that it has been abandoned by the West.9 Open economic warfare and international political rivalries of great scope and diversity thus coincide with purely military conflicts along the southern borders of Russia and the CIS. In Transcaucasia, energy, economic, political, and military interests are inextricable. Energy exports to the West remain the primary source for hard currency in the Soviet and post-Soviet economy and are vital to CIS economic reconstruction and foreign economic integration. Thus, control over all phases of energy production is fundamental in shaping domestic and international linkages. Energy exports are vital to the economic and political freedom of the non-Russian members of the CIS. Once Azerbaidzhan became independent, other states seeking influence over these resources jumped into the fray to control them from production to market. By 1993, this struggle over energy resources and pipelines had become a basic feature of international politics and rivalries, linking local struggles over land and nationality, as in Nagorno-Karabakh, with control over energy.10 Today, Turkey, Iran, the United States, Great Britain, and France are rivals with Russia in a complex struggle for control (or leverage over) those resources. For example, British Petroleum (BP) led the lobbying effort against U.S. aid to Azerbaidzhan in its war with Armenia over Nagorno-Karabakh to prevent Washington from dominating in Baku. But BP is hardly alone in the game. The Background to the Struggle. The Nagorno-Karabakh war began in 1988 as an Armenian-Azeri struggle of that province's largely Armenian population for autonomy and then independence from Azerbaidzhan. The Soviet government did not precipitate the conflict or directly stoke the nationalist furies that now prevail there. But since 1990 the governments of Mikhail Gorbachev and of Boris Yeltsin have sought to exploit the conflict either to preserve the USSR or now to enhance Russia's regional strategic position.11 Today, the main international issue behind the scenes of this war is no longer who controls the territory, but rather who controls Azerbaidzhan's oil production and pipelines. This struggle mainly pits Russia and perhaps Iran against Azerbaidzhan and Turkey.12 Russia's campaign to intimidate and subvert independent states in Transcaucasia arguably began in March 1992 when Turkey proposed a territorial solution to end this war that gave it unmediated access to a direct pipeline from Turkmenistan that bypassed and excluded regional Iranian and Russian influence.13 The plan was vital to Turkey's grand design for a leading role in the Caucasus and Central Asia, and for its own economy, because of the pipeline's capacity for oil shipments.14 Its annual capacity of 40 million tons far exceeds Azerbaidzhan's capacity. Azeri oil production over the next few years is not expected to exceed 25 million tonnes per year. The extra capacity has been incorporated into the pipeline to attract oil transportation demand from Central Asian countries, mainly from Kazakhstan.15 The pipeline would integrate Turkey, Azerbaidzhan and Central Asia into a single economic and political network excluding both Russia and Iran, a solution that Russia finds intolerable. The key players' major strategic objectives are easily discernible; Turkey's is economic integration with Azerbaidzhan and Central Asia through this pipeline, Azerbaidzhan's is integrity and independence, and Russia's is a permanent and uncontested strategic primacy in regional politics, economics, and overall security. This is because Russia discerns a need to preempt potential strategic threats that might come directly from the south or through the countries on Russia's periphery. In military terms, the construction of border infrastructures and fortifications along the new interstate boundaries is beyond Russia's means. It seeks, therefore, to perpetuate a condition where the CIS borders remain, in effect, those of Russia. Thus Russian border troops remain on the old Soviet international borders. Russia also seeks to deny Iran, Turkey, and China any direct territorial influence to its south because it fears either Pan-Turkism, Muslim fundamentalism (by which it means a politicized Islam), or any influence that might accrue to an outside state that may mediate any of the conflicts in the Caucasus or Central Asia.