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Political and Economic interests of Japan in South Caucasus: Perspectives of Cooperation

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Though Japan was among the first to recognize the independence of three South Caucasus states, relations with Tbilisi, Yerevan and Baku remained limited in the 1990s. It is only in the 2010s that we saw an increased effort from Tokyo to build deeper economic cooperation. Another feature of those relations is Tokyo’s efforts to improve the South Caucasus transport corridor running through Georgia and Azerbaijan and connecting the Caspian and the Black Seas.

Japan’s position in the South Caucasus has been evolving over the past two decades. Japan traditional geopolitical expansion has historically been in the Asia-Pacific region. Very little, if at any attempts were made by Japan to penetrate economically and culturally into the South Caucasus. Surely geography played an important role. Distance between Japan and the South Caucasus precluded the two from cooperation. However, as Armenia, Azerbaijan and Georgia gained independence in 1991 and a rapid rise of globalization, there has been growing Japanese interest in the South Caucasus. 

First, Japan views the region beyond a purely geopolitical dimension as compared to China. For Tokyo, due to its military constrains it was important to build a platform of cooperation upon which it would later base numerous initiatives for deepening bilateral relations with Baku, Tbilisi and Yerevan. 

Such a platform was Japan’s Official Development Assistance program. The programs its priorities include disaster reduction; raising security; assistance regarding software; mobilization of Japan’s experience, expertise, and technology etc. As is seen here very little is of direct geopolitical importance. Surely Russia, Turkey, China, and the European Union (EU) work in similar areas and help the South Caucasus states, but their moves are more geopolitical than that of Japan. Perhaps Tokyo’s moves are more similar to the US’ involvement in the South Caucasus. Here too are several caveats: the US is interested in ensuring that the region does not fall back into the Russian sphere of influence, whereas Japan cannot compete with Russia. However, Tokyo and Washington, being distant powers share one similarity: the pouring of money to improve security, infrastructure and social conditions of those living in the region.

Perhaps the biggest beneficiary of Japan’s economic initiatives among the South Caucasus states has been Armenia. In fact, this is based on history of Armenian-Japanese ties. Tokyo was one of the first to recognize the independence of Armenia in 1919.

Bolshevik invasion of Armenia stopped the first contacts, but they nevertheless revived even before the collapse of the Soviet Union when Armenia was hit by an earthquake. Since 1998, Japan provided technical and expert support for the reform of Armenia’s poor energy sector. Moreover, a 40 million USD credit was used for the construction and modernization of various infrastructure in Armenia’s energy sector. This cooperation still continues as Japan now helps Armenia to reconnect the far-flung territories with modern roads and other infrastructure capabilities.

Another dimension of the cooperation is the provision of technical support for the implementation of ODA projects in the agricultural sector. There is also the Japan International Cooperation Agency (JICA) where Armenia is actively involved as a major recipient. 

Armenia currently has a dynamically developing IT market and is especially interested in Japan as a major source high technology. This could serve as a solid basis for deeper cooperation between the two states.

However, when we talk about various spheres of Japan-Armenia cooperation, it should be remembered that there are no immediate economic benefits for the local communities. Unlike the EU’s China’s, Russia’s investments which bring a certain economic gain, there is little local development to be seen in case of Japan’s moves. Nevertheless, those initiatives are not entirely without merit, but are rather long-term, paving way for new initiatives. Only the projects such as educational grants and grants for agricultural producers, had an immediate economic impact for local communities.

Another state, albeit to a lesser degree, enjoying Japan’s economic aid is Georgia. There was a significant development in Japanese-Georgian relations over the past couple of years.

In 2018 ‘Japan’s Caucasus Initiative’ was announced, which involved two policy components: providing assistance in human resource development state building and supporting infrastructure development and business environment improvement. In both cases, Tbilisi became a benefactor.

All of Japan’s moves and initiatives are to support Georgia’s self-sustained development. This includes helping to improve the country’s connectivity and transportation infrastructure; developing renewable energy through the provision of hybrid cars and electric cars etc. Indeed, Japan has already allocated $343 million to finance construction of the 14km long Shorapani-Argveti section of the East-West Highway, which runs through Georgia and connects Azerbaijan with Turkey and Georgia’s Black Sea ports.

Another important initiative from the Japanese side has been to lessen the travel burden for South Caucasus nationals. In 2018, Tokyo voiced its decision to ease visa requirements for Georgian citizens to promote people to people connections and deepen relations between the two countries.

Moreover, Georgian President Salome Zourabichvili this January 2020 said Tbilisi aims at boosting economic cooperation with Japan with an eye to sign a free trade agreement.

If for Armenia cooperation with Japan is about geopolitics, for Tbilisi closer relations with Tokyo could produce some points of cooperation. Indeed, both states have territorial troubles with Russia and both regard Moscow’s ambitions as a certain geopolitical threat. Surely, Japan is hesitant to position itself openly in such a context, but for Tbilisi to have deeper cooperation with Tokyo is all about Georgia’s strategy of diversifying its foreign policy, finding new players able to balance Russia’s resurgent position in the South Caucasus.

Japan has been developing closer cooperation with Azerbaijan. Development of the country’s basic infrastructures and living environment has been a priority for Tokyo. For example, Shimal Gas Combined Cycle Power Plant Project (US$261million); Provincial Cities Water Supply and Sewerage Project (US$293million); Maintenance of Water Supply and Sewerage facilities at major cities in provincial areas etc.

As a starting point in the South Caucasus energy and transport corridor, Azerbaijan’s strategic position is clearly appreciated by the Japanese. This is reflected in bilateral negotiations when Japanese officials hail Azerbaijan’s strategic location and the progress made by the development of non-oil sector. 

Both countries often hold sessions of the Japanese-Azerbaijani Economic Committee in Baku and work on increasing trade turnover which is currently growing but remains far lower than what is hoped for. For instance, in 2018 Japanese imports to Azerbaijan constituted approximately $400 million. Japan mainly imports Azerbaijan’s oil and agricultural products, while Azerbaijan is interested in increasing the import of Japanese technological novelties.

Here again, as in the case of Armenia and Georgia, Tokyo is hesitant to openly position itself in regional geopolitical conflicts such as the one over Nagorno-Karabakh. Japan limits itself to diplomatic statements on the need to resolve the issues peacefully.

Overall, it could be argued that in comparison with the 1990s, Japan’s interests in the South Caucasus grew in 2010s. It is true that Tokyo does not have a definite geopolitical agenda for the region, but it clearly sees long-term geopolitical implications of helping the South Caucasus states. For Japan, the region is an interconnector of Central Asia with the Black Sea and the Eastern Europe. In that sense, Japan’s covert geopolitical agenda could be to help Georgia and Azerbaijan develop their transit capabilities. In fact, the above-mentioned initiatives implemented by Tokyo reflect this thinking. Armenia might the biggest benefactor in terms of amount of money, but in long-term geopolitical sense, the aid to develop Georgia’s and Azerbaijan’s road infrastructure would a much bigger purpose of strengthening these countries’ ability to circumvent Russian territory. Thus, considering previous Japanese moves in the South Caucasus, it is likely that we will see continuous attempts by Tokyo to pour in money in the South Caucasus, lessen visa requirements, increase trade and develop deeper educational cooperation with the three states.

Author’s note: first published in caucasuswatch.de

Emil Avdaliani specializes on former Soviet space and wider Eurasia with particular focus on Russia's internal and foreign policy, relations with Iran, China, the EU and the US. He teaches history and international relations at Tbilisi State University and Ilia State University (Georgia).

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Eastern Europe

Latvia developed new tasks for NATO soldiers

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Member of the Latvian Saemas’ national association “Everything for Latvia!” and Freedom”/LNNK Jānis Dombrava stated the need to attract NATO troops to resolve the migration crisis. This is reported by la.lv.  In his opinion, illegal migration from the Middle East to Europe may acquire the feature of an invasion. He believes that under the guise of refugees, foreign military and intelligence officers can enter the country. To his mind, in this case, the involvement of the alliance forces is more reasonable and effective than the actions of the European border agencies. Dombrava also noted that in the face of an increase in the flow of refugees, the government may even neglect the observance of human rights.

The Canadian-led battlegroup in Latvia at Camp Ādaži consists of approximately 1512 soldiers, as well as military equipment, including tanks and armoured fighting vehicles.

Though the main task of the battlegroup in Latvia is country’s defence in case of military aggression, Latvian officials unilaterally invented new tasks for NATO soldiers So, it is absolutely clear, that Latvian politicians are ready to allow NATO troops to resolve any problem even without legal basis. Such deification and complete trust could lead to the full substitution of NATO’s real tasks in Latvia.

It should be noted that NATO troops are very far from being ideal soldiers. Their inappropriate behaviour is very often in a centre of scandals. The recent incidents prove the existing problems within NATO contingents in the Baltic States.

They are not always ready to fulfill their tasks during military exercises and training. And in this situation Latvian politicians call to use them as border guards! It is nonsense! It seems as if it is time to narrow their tasks rather than to widen them. They are just guests for some time in the territory of the Baltic States. It could happen that they would decide who will enter Latvia and who will be forbidden to cross the border!

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Eastern Europe

Changes are Possible: Which Reforms does Ukraine Need Now?

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Photo: Robert Anasch/Unsplash

The past 16 months have tested our resilience to sudden, unexpected, and prolonged shocks. As for an individual, resilience for a country or economy is reflected in how well it has prepared for an uncertain future.

A look around the globe reveals how resilient countries have been to the COVID-19 pandemic. Some have done well, others less so. The costs of having done less well are almost always borne by the poor. It is for this reason the World Bank and the international community more broadly urge—and provide support to—countries to undertake economic and structural reforms, not just for today’s challenges but tomorrow’s.

One country where the dialogue on reform has been longstanding and intense is Ukraine. This is particularly true since the economic crisis of 2014-2015 in the wake of the Maidan Revolution, when the economy collapsed, and poverty skyrocketed. Many feared the COVID pandemic would have similar effects on the country.

The good news is that thanks to a sustained, even if often difficult, movement on reforms, Ukraine is better positioned to emerge from the pandemic than many expected. Our initial projection in the World Bank, for example, was that the economy would contract by nearly 8 percent in 2020; the actual decline was half that. Gross international reserves at end-2020 were US$10 billion higher than projected. Most important, there are far fewer poor than anticipated.

Let’s consider three reform areas which have contributed to these outcomes.

First, no area of the economy contributed more to the economic crisis of 2014-2015 than the banking sector. Powerful interests captured the largest banks, distorted the flow of capital, and strangled economic activity. Fortunately, Ukraine developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank was nationalized and is now earning profits. It is now being prepared for privatization.

Second, COVID halted and threatened to reverse a five-year trend in poverty reduction. Thanks to reforms of the social safety net, Ukraine is avoiding this reversal. A few years back, the government was spending some 4.7 percent of GDP on social programs with limited poverty impact. Nearly half these resources went to an energy subsidy that expanded to cover one-in-two of the country’s households.

Since 2018, the Government has been restructuring the system by reducing broad subsidies and targeting resources to the poor. This is working. Transfers going to the poorest one-fifth of the population are rising significantly—from just 37 percent in 2019 to 50 percent this year and are projected to reach 55 percent in 2023.

Third, the health system itself. Ukrainians live a decade less than their EU neighbors. Basic epidemiological vulnerabilities are exacerbated by a health delivery system centered around outdated hospitals and an excessive reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a package of primary care for all Ukrainians, free-of-charge. The law is transforming Ukraine’s constitutional commitment to free health care from an aspiration into specific critical services that are actually being delivered.

The performance of these sectors, which were on the “front line” during COVID, demonstrate the payoff of reforms. The job now is to tackle the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. Ukraine has some 3,500 companies owned by the state—most of them loss-making—in sectors from machine building to hotels. Ukraine needs far fewer SOEs. Those that remain must be better managed.

Ukraine has demonstrated that progress can be made in this area. The first round of corporate governance reforms has been successfully implemented at state-owned banks. Naftogaz was unbundled in 2020. The electricity sector too is being gradually liberalized. Tariffs have increased and reforms are expected to support investment in aging electricity-producing and transmitting infrastructure. Investments in renewable energy are also surging.

But there are developments of concern, including a recent removal of the CEO of an SOE which raised concerns among Ukraine’s friends eager to see management independence of these enterprises. Management functions of SOE supervisory boards and their members need to remain free of interference.

The second challenge is to strengthen the rule of law. Over recent years, the country has established—and has committed to protect—new institutions to combat corruption. These need to be allowed to function professionally and independently. And they need to be supported by a judicial system defined by integrity and transparency. The move to re-establish an independent High Qualification Council is a welcome step in this direction.

Finally, we know change is possible because after nearly twenty years, Ukraine on July first opened its agricultural land market. Farmers are now free to sell their land which will help unleash the country’s greatest potential source of economic growth and employment.

Ukraine has demonstrated its ability to undertake tough reforms and, thanks to the COVID-19 pandemic, has seen the real-life benefits of these reforms. The World Bank looks forward to providing continued assistance as the country takes on new challenges on the way to closer European integration.

This article was first published in European Pravda via World Bank

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Eastern Europe

Liberal Development at Stake as LGBT+ Flags Burn in Georgia

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Photo: Protesters hold a banner depicting U.S. Ambassador to Georgia Kelly Degnan during a rally against Pride Week in Tbilisi, Georgia July 1, 2021. Credit: REUTERS/Irakli Gedenidze

Protests against Georgia’s LGBT+ Pride parade turned ugly in Tbilisi on July 5 when members of the community were hunted down and attacked, around 50 journalists beaten up and the offices of various organizations vandalized. Tensions continued the following day, despite a heavy police presence.

On the face of it, the Georgian state condemned the violence. President Salome Zourabichvili was among the first with a clear statement supporting freedom of expression, members of parliament did likewise and the Ministry of Internal Affairs condemned any form of violence.

But behind the scenes, another less tolerant message had been spread before the attacks. Anxiety about this year’s events had been rising as a result of statements by the government and clergy. Prime Minister Irakli Garibashvili suggested the march “poses a threat of civil strife.” The Georgian Orthodox Church meanwhile condemned the event, saying it, “contains signs of provocation, conflicts with socially recognized moral norms and aims to legalize grave sin.”

For many, these statements signified tacit approval for the abuse of peaceful demonstrators. Meanwhile, the near-complete absence of security at the outset of the five-day event was all too obvious in Tbilisi’s streets and caused a public outcry. Many alleged the government was less focused on public safety than on upcoming elections where will need support from socially conservative voters and the powerful clergy, in a country where more than 80% of the population is tied to the Georgian Orthodox Church.

The violence brought a joint statement of condemnation from Western embassies. “Violence is simply unacceptable and cannot be excused,” it said. The Pride event was not the first and had previously been used by anti-gay groups. Violence was widespread in 2013 — and the reality of attacks against sexual minorities in Georgia remains ever-present.

In a socially conservative country such as Georgia, antagonism to all things liberal can run deep. Resistance to non-traditional sexual and religious mores divides society. This in turn causes political tension and polarization and can drown out discussion of other problems the country is marred in. It very obviously damages the country’s reputation abroad, where the treatment of minorities is considered a key marker of democratic progress and readiness for further involvement in European institutions.

That is why this violence should also be seen from a broader perspective. It is a challenge to liberal ideas and ultimately to the liberal world order.

A country can be democratic, have a multiplicity of parties, active election campaigns, and other features characteristic of rule by popular consent. But democracies can also be ruled by illiberal methods, used for the preservation of political power, the denigration of opposing political forces, and most of all the use of religious and nationalist sentiments to raise or lower tensions.

It happens across Eurasia, and Georgia is no exception. These are hybrid democracies with nominally democratic rule. Armenia, Georgia, Kyrgyzstan, and others have increasingly more in common, despite geographic distance and cultural differences.

Hungary too has been treading this path. Its recent law banning the supposed propagation of LGBT+ materials in schools must be repealed, European Commission President Ursula von der Leyen said on July 7. “This legislation uses the protection of children . . . to discriminate against people because of their sexual orientation . . . It is a disgrace,” she said.

One of the defining features of illiberalism is agility in appropriating ideas on state governance and molding them to the illiberal agenda.

It is true that a mere 30 years since the collapse of the Soviet Union is not enough to have built a truly liberal democratic state. Generations born and raised in the Soviet period or in the troubled 1990s still dominate the political landscape. This means that a different worldview still prevails. It favors democratic development but is also violently nationalistic in opposing liberal state-building.

Georgia’s growing illiberalism has to be understood in the context of the Russian gravitational pull. Blaming all the internal problems of Russia’s neighbors has become mainstream thinking among opposition politicians, NGOs, and sometimes even government figures. Exaggeration is commonplace, but when looking at the illiberal challenge from a long-term perspective, it becomes clear where Russia has succeeded in its illiberal goals. It is determined to stop Georgia from joining NATO and the EU. Partly as a result, the process drags on and this causes friction across society. Belief in the ultimate success of the liberal agenda is meanwhile undermined and alternatives are sought. Hybrid illiberal governments are the most plausible development. The next stage could well be a total abandonment of Euro-Atlantic aspirations.

Indeed what seemed irrevocable now seems probable, if not real. Pushback against Georgia’s Euro-Atlantic choice is growing stronger. Protesters in front of the parliament in central Tbilisi violently brought tore the EU flag. Twice.

The message of anti-liberal groups has also been evolving. There has been significant growth in their messaging. The anti-pride sentiment is evolving into a wider resistance to the Western way of life and Georgia’s Western foreign policy path, perhaps because it is easily attacked and misrepresented.

To deal with this, Western support is important, but much depends on Georgian governments and the population at large. A pushback against radicalism and anti-liberalism should come in the guise of time and resources for the development of stronger and currently faltering institutions. Urgency in addressing these problems has never been higher — internal and foreign challenges converge and present a fundamental challenge to what Georgia has been pursuing since the days of Eduard Shevardnadze – the Western path to development.

Author’s note: first published at cepa

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