Authors: Aliyar Azimov and Aynur Azimzade*
South Caucasus has always been a focus of geopolitical competitions for centuries with its geo-strategic location and natural resources. The transportation and energy projects, which implemented in the region, have further increased strategic importance of South Caucasus due to being in the junction West and East in the globalized 21st century. After the dissolution of USSR two major processes occurred: 1) regional cooperation between independent states in terms of common threats and economic-political projects; 2) geopolitical interests and competition among the regional powers (Russia, Iran, Turkey) and the US and the EU.
After the disintegration of the Soviet Union, the three South Caucasus countries found themselves in a new geopolitical vacuum, which resulted in serious events also (territorial conflicts and separatism). On the other hand, this vacuum enabled two of the newly independent South Caucasus countries – Azerbaijan and Georgia – to build and maintain good neighboring relationships, to jointly implement major and strategic regional oil and gas projects (Baku-Tbilisi-Ceyhan oil pipeline, Baku-Tbilisi-Erzurum gas pipeline) without any intervention of Russia. Until 2008, Russia was a major gas supplier to Georgia. However, the August War in 2008 ended with cut off relations between Russia and Georgia. Starting from 2007, Azerbaijan has steadily been supplying the majority of Georgia’s oil and gas demand, especially after the August War Azerbaijan provided more energy flow by completely meeting its strategic ally’s energy needs.
The development of east-west energy corridor in the South Caucasus allowed Azerbaijan and Georgia to involve in the projects as the main partners and to promote the development of the infrastructure by improving the macro-economic environment and international integration. Turkey also gives support to the international projects in the region and deepening the multilateral relations between Azerbaijan-Georgia-Turkey also promotes and intra-regional cooperation and diplomatic resolutions of regional problems. This cooperation is the most functional; it is built on interdependence by trade and transportation relations.
Since 1992, political relations between Azerbaijan and Georgia has reached a high level, cooperation in all fields has become more strategic year by year, and neighborship relations are based on the principles of the strong friendship and mutual respect. Because of this, all officials in Georgia have always firstly visited Azerbaijan in their terms.
Why Georgia needs Azerbaijan?
The East-West strategic energy cooperation helped to strengthen the state independence of Georgia and Azerbaijan. The projects, which implemented and proposed to be realized, are the basis of a strong foundation for economic stability and prosperity for both countries, even for South Caucasus. Considering this fact, in 2009 Georgia was not affected by the energy crisis thanks to Azerbaijan and energy contracts for the supply of gas and oil. Georgia is especially interested in energy transportation from Azerbaijan because since the gaining independence Georgia has had a permanent and stable supply of energy which allowed industries to operate smoothly and contributed the economy of Georgia significantly by making it as a transit country.
Azerbaijan also plays a vital role in the transformation of Georgia into the EU and the development of EU-Georgia relations. The lack of stability in the Middle East increases the role of Caspian Basin not only as a significant energy source but also more secure and shortest supply route for both countries as well as for the EU. Azerbaijan-Georgia good neighborhood relations are vital for the EU in the context of east-west energy cooperation. As the EU is more interested in ensuring a reliable flow of energy resources to the Member States and cooperates with Azerbaijan and Georgia, it makes both countries to be a significant player in the projects and economically and politically powerful in the South Caucasus region.
Salome Zourabichvili’s first official visit to Azerbaijan
On 27 February 2019, newly elected Georgian President Salome Zourabichvili made her first official visit to Azerbaijan. It was a signal of Georgian administration’s desire to continue its strategic partnership with Azerbaijan. Azerbaijan is one of the biggest investors to the Georgian economy and considering large regional projects between both countries, her first official visit to Azerbaijan in the region was not surprising.
In the recent past, there was a tension between Azerbaijan and Georgia due to:
- The monument of an Armenian separatist, who fought against Azerbaijan during the occupation of the Nagorno-Karabakh territory of Azerbaijan by Armenian military, in the Akhalkalaki region of Georgia, where ethnic Armenians live, and the participation of Georgian administration in the opening ceremony of this monument,
- In the response of this event, protest of Baku against the unveiling of a monument to a separatist in Georgia.
For this reason, the Georgian President’s visit to Azerbaijan was of particular importance. The Georgian President knew well that Azerbaijan plays a crucial role in the energy supply and settlement of the problems in the region. At the same time, because its energy sector is dependent on Baku-Supsa, Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines and Southern Gas Corridor, Georgia does not want to lose Azerbaijan as a strategic partner. Georgian President’s visit to Azerbaijan also showed that some provocations could not affect the relations between the two countries. Zourabichvili’s speech in Baku once again confirmed that Georgia always stands together with Azerbaijan on the issue of Nagorno-Karabakh by stating, “Conflicts and violation of territorial integrity are tragedies for both countries. We still fight together to restore and recognize our territorial integrity in international organizations.” The Armenian media expressed assurance that Zourabichvili would change her statement during her visit to Armenia on March 13-14.However, Georgian President protested visit to Abkhazia and South Ossetia paid by Nagorno-Karabakh separatists by stating “It is very unfortunate when delegations from Nagorno-Karabakh visit Abkhazia and South Ossetia and discuss these two conflicts as of the same type. This is very sad and painful for us. These conflicts impede the development of our region. Georgia has two occupied territories, and if we talk about the country’s interests, then one single concern for us is recognition of our sovereignty in deeds than in words.” After the meeting, the Russian newspaper “Kommersant” mentioned about the Georgian president’s visit in its article by stating, “These statements by President Zurabishvili were not seen in the Georgian post-Soviet history, because Georgia has pursued an impartial policy in the Armenian-Azerbaijani conflict till now.”
Armenia has tried to position itself as a bridge between Iran and Georgia to transport Iranian energy resources to Europe. However, in 2008, its position in the Russian-Georgian war strained relations between Georgia and Armenia. Armenia was interested in North-South cooperation in order to escape from regional isolation and to revive its economic condition. Nevertheless, newly elected Georgian President’s visit to both countries and her statements declared that relations with Azerbaijan are a high priority for Georgia and for being leading countries in East-West cooperation, Georgia has extensive interests in establishing strong friendship relations.
Azerbaijan and Georgia have been cooperating in several political and economic projects since the early years of independence. Several factors influence the dynamics of the Georgian-Azerbaijani relations in a positive way. Firstly, cooperation in transportation, energy, and economics is interdependent. Georgia’s location makes it more essential for Azerbaijan in terms of to reach European and World markets. On the other hand, Georgia has increased its economic prosperity by participating in regional projects. In 2018, Azerbaijan was a third-largest direct foreign investor (33 million dollars) to the Georgian economy, second in Georgian imports (14.4%) and third in Georgian exports (10.7%).
Another key factor in the Azerbaijani-Georgian relations is that Azerbaijan and Georgia support eachother’s positions on important issues in the international arena. Georgian officials always stress all the official statements that the solution of the Nagorno-Karabakh conflict, which occurred as a result of the occupation of Azerbaijani lands by Armenia, within the framework of Azerbaijan’s territorial integrity.
When it comes to energy cooperation, Azerbaijani oil-gas company SOCAR is the main supplier of gas to Georgia as a reliable energy partner. Despite the gas agreement signed between Georgia and Russia in 2017, SOCAR has a large share in the Georgian energy sector. In 2018, gas transportation volume was 2.5 billion cubic meters of natural gas to Georgia. High dependence on Azerbaijani gas arose the concerns about national security, but in fact, Azerbaijan never used energy shipments as a political pressure tool. Even Azerbaijan have supplied more energy to Georgia in order to resolve energy shortages during difficult times.
S. Zourabichvili’s recent visit to Baku declared that Georgia does not want to lose its strategic ally. Because political and economic support by Azerbaijan is essential for Georgia in terms of its integration to the West. Also, because of Georgia plays a transit role between Azerbaijan and the West in the field of transportation and energy, losing this position is unacceptable for the Georgian administration.
*Aynur Azimzade is research fellow at the Institute of Caucasus studies of Azerbaijan National Academy of Sciences
Quality of Life in Latvia is not a priority
Four presidents, 14 governments and eight Seimas have changed in Latvia over the past 20 years. The country joined the European Union and NATO, and then switched to the euro. But have Latvians become better off? Has their quality of life improved? Statistics shows that the general well-being of population remains very low. Political turbulence only worsens the situation.
Thus, according to Numbeo.com portal, one of the largest databases on the cost of living and quality of life worldwide, Lithuania and Latvia are the worst Nordic countries for quality of life.
Quality of Life Index by Country 2019
The leaders of the rating are Denmark, Finland and Iceland. Latvia
showed the lowest result, the quality of life index here is 149.15 points. In
Lithuania, the result is slightly higher – 156.36 points.
Numbeo experts took into account the purchasing power of the population, safety, health care, the cost of living and some other factors.
It is noted that the world ranking of countries for the quality of life is led by Denmark, Switzerland and Finland. Estonia took 11th place, Lithuania – 29th, and Latvia – 34th.
The more so, experts said that the proportion of shadow economy in Latvia rose by 2.2 percentage point last year to 24.2 percent.
The shadow economy proportion in Latvia has risen for the past two years in a row.
EU-SILC survey gives another frightening indicator. According to eurostat.ec.europa.eu, Latvia, as well as Estonia and Lithuania are top three EU countries in terms of poverty risk among pensioners.
Political and economic short-sightedness has lead to the state when the Baltic States have become the first battlefield in case of war between NATO and Russia.
The United States is preparing for the use of nuclear weapons in Europe along with non-nuclear countries, said Vladimir Ermakov, director of the Department for Non-Proliferation and Arms Control of the Russian Foreign Ministry. Experts point out that military airfields in the Baltic States and Poland have already been prepared to receive NATO aircraft that can carry tactical nuclear weapons. If take his words seriously, this means the end of the Baltic States’ existence.
The behavior of the authorities guaranteed Latvia, Lithuania and Estonia the status of the first battlefield, despite the fact that in the event of war, economy would be completely destroyed and population would disappear.
How the Caspian Sea joins the Black Sea
In the development of international cooperation and the deepening of industrial cooperation, the leading role belongs to the formation of a network of international transport corridors. It has a special place in solving transport problems associated with the expansion of interstate transportation, economic, cultural and other ties, with the creation of an international transport infrastructure that has common technical parameters and ensures the use of a single transportation technology as the basis for the integration of national transport systems into the global transport system.
Developing corridors are to play a system-forming role in the economic and social development of the territories along which they pass. Their creation is directly related to projects for the development of sectors of the economy and social sphere.
If a modern transport corridor connects the Caspian Sea and Black Sea, it will lead to uninterrupted cargo transportation between Asia and Europe. New opportunities for the regional states will be opened up. This was confirmed by the first meeting of the foreign ministers of Azerbaijan, Romania, Georgia and Turkmenistan, held in mid-March 2019 in Bucharest.
According to its results, a political declaration was signed. The document reflects the determination of the four states to implement the project of an international freight route between two seas by joint forces.
As expected, the corridor between the two seas will have a real impact on the standard of living in the participating countries and cause a sharp surge in business activity in neighboring regions.
The idea of the project is to make full use of the geographical proximity of Romania, Georgia, Azerbaijan and Turkmenistan, as well as the capabilities of the ports of Constanta in Romania, Poti in Georgia, Baku in Azerbaijan and Turkmenbashi in Turkmenistan.
New transport route will allow establishing a direct connection between the port of Constanta and the Danube River, and then the rivers and canals on the European continent, that will open access to Central and Northern Europe.
In general, the Caspian-Black Sea region is becoming links of a single Eurasian transport network.
The main question is how to direct the necessary volumes of cargo along this route, which would make its work profitable and profitable. To meet these challenges, in the near future four countries have planned to create an expert working group, optimize working procedures, harmonize tariffs, identify remaining infrastructure and legal constraints, and jointly promote the project at the international level, including in the course of interaction with the European Union. But it will not be easy for them to achieve all these ambitious goals.
The closest allies of Azerbaijan, Turkey and Russia, support all the projects aimed at strengthening economic cooperation between Baku and other countries of the Caspian-Black Sea region. Moscow and Ankara are lobbying for the creation of a transport corridor between the two seas.
Azerbaijan once again demonstrates that it is becoming one of the most important transport hubs of Eurasia – a transit hub in which the East and the West are tightly tied.
This country is interested in East and West, not conflicting with each other, but driven forward by the single energy of partnership.
China’s changing interests in South Caucasus
On April25-28,“Second Belt and Road Forum for International Cooperation” took place in the capital city of China. From South Caucasus region only Azerbaijan leader Aliyev was in the list of 36 top-Level attendees (Diplomat, April 27).As the Azerbaijan was participating first forum in 2017 on ministerial level, visit of President in second forum demonstrates intention of both sides for close cooperation within the framework BRI.
Despite fact that China’s strong ambition to enter European market through BRI makes Georgia one of the most important players in the region (it has FTA both with China and EU) its high-level officials did not attend the forum (Emerging-Europe, January 3, 2018).
Generally, South Caucasus region was not in the Chinese focus when the BRI project was unveiled in 2013.Its attitude to the region has changed afterwards. Being part of the Central Asia-West Asia Economic Corridor, South Caucasus has strategic importance for China. At the same time, transportation projects such as Baku-Tbilisi-Kars railway and Anaklia Deep-Sea Port has increased significance of the region.
From geopolitical point of view stability in Azerbaijan and Georgia’s political problems with Russia creates ground for Chinese presence in Caucasus. It is clear that having political problems with West Russia is not willing to confront China. Therefore, using these opportunities and establishing good relations both with Georgia and Azerbaijan China is able to avoid its biggest rival in Eurasia and use shortest way to European markets (Trend.az, April 10).
Importance of South Caucasus countries within the BRI framework is not same. Armenia has less potential for BRI. It does not have enough transportation infrastructure and its borders with Azerbaijan and Turkey closed. Armenia has a potential to become a corridor to markets of Eurasian Economic Union (EEU) and Iran. However, it does not have borders with the members of EEU and railway project between Armenia and Iran is not viable due its high costs ($3.2 billion) and less importance in commercial means (Vestnikkavkaza, August 25, 2018).Also, China has borders with two biggest members of EEU and could easily reach EEU markets through them.
In the case of Georgia, China is the biggest foreign investor. China’s Hualing Group controls Kutaisi free industrial zone (FIZ), owns Basis Bank, hotels, wine export enterprise. It also constructs “Tbilisi Sea New City” near Tbilisi Sea in which company has already invested around 150 million dollars (hualing.ge).Another Chinese company CEFC Energy owns 75% of Poti FIZ (Cbw.ge, March 20).
Unlike the Georgia, mostly state-owned Chinese companies have invested in Azerbaijan. One of these companies CTIEC Group constructed biggest cement factory in Azerbaijan in 2014.China also has a great interest on Baku International Sea Trade Port as it is one of the main ports within BRI. Based on intergovernmental grant agreement China transferred $2 million worth equipment to the port (Azernews, April 4, 2018).
Despite fact that Azerbaijan is China’s key trade partner in the South Caucasus (it accounts 43 percent of China’s trade turnover in the region) it has massive investments in Georgia (Azernews, April 25). It mostly related to political orientation of these countries. Georgia follows more western orientation that made it more attractive for China while Azerbaijan implements balanced strategy and it does not want to feel China’s pressure. Besides, Azerbaijan is not in need of financial assistance like Armenia and Georgia as it has enough financial reserves.
However, recent developments of Sino-Azeri economic relations within the framework of the Second Belt and Road Forum creates new perspectives for China’s presence in South Caucasus. During the forum 10 agreements worth of 821 million USD has been signed (Azvision.az, April 24). These contracts cover different economic spheres of non-oil sector including the construction of a tire factory in the Sumgayit chemical-industrial park, the creation of a 300-hectare greenhouse complex in the Kurdamir region of Azerbaijan, and the construction of agrological industrial parks in the Guba, Goychay and Khachmaz regions (Turan.az April 24).If we take in account that Chinese investors have invested800 million USD in the economy of Azerbaijan since independence, obtained agreements in the forum worth of same amount shows China’s growing interest in Azerbaijan.
Nevertheless, it does not mean that China’s preference of Georgia has changed. Within the BRI project both Azerbaijan and Georgia are of geopolitical importance for China. It is in China’s interest to boost bilateral relations with both of countries. It is apparent that China already has considerable investments in Georgia and now it is time to deepen cooperation with Azerbaijan. At the same time Azerbaijan is not going to cross limits of its balanced policy. Chinese companies that signed agreements in second forum are government affiliated companies as well. It again shows that Azerbaijan is willing to deepen cooperation without creating room for pressure in its domestic economy.
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