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Russia’s Changing Economic Attitude towards Abkhazia & Tskhinvali Regions

Emil Avdaliani

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Looking at the arc of separatist states on the Russian borders, there have recently been interesting developments which might signal a new approach in Moscow’s policies.

Ukraine’s Lugansk and Donetsk, Georgia’s Abkhazia and Tskhinvali regions, Moldova’s Transdnistria region – all these territories were helped and maintained in one way or another by Moscow. In some cases, Moscow recognized independence (Georgia’s territories); in others, it pursues a federalization model (for example, in Ukraine and previously in Moldova).

Models of support differ, but the geopolitical agenda remains the same for all territories: preventing Georgia, Moldova and Ukraine from becoming fully-fledged members of NATO and the EU.

If so far this policy has been successful, its long-term prospects, however, are doubtful. Preventing the NATO/EU membership of Georgia, Moldova and Ukraine does not prevent deeper cooperation between these states and the West. In fact, this approach has resulted in the creation of an arc of states geopolitically hostile to Russia. This increases instability and serves as a constant diplomatic pressure on Moscow’s foreign policy.

Moscow’s control of those separatist states has been based on direct financial and military aid. But the Russians were also interested in the economic benefits those regions could bring to Moscow. Decades have passed since the end of the Soviet Union, and the separatist regions have transformed into veritable appendages to Russia, with Russian money serving as the only economic lifeline. Though there were at times genuine measures taken in Moscow to raise economic and social conditions in Abkhazia and Tskhinvali, the policy has largely failed. Abkhazia and Tskhinvali have become predatory entities which pin their survival on Moscow’s money and military might.

A decade or two ago, when Russia was on the rise economically, this state of affairs was still acceptable to the Kremlin. However, the Ukraine crisis of 2014 resulted in large economic sanctions with Russia’s GDP having experienced a sharp decline. As a result, control over expenses became stricter.

Vladislav Surkov’s resignation in January 2020 from his curating position in the Kremlin, over the Abkhazia and Tskhinvali region and eastern Ukraine, came as a result of this changing attitude within the Russian political elite. This is the case not only with Georgia’s territories, but also with eastern Ukraine. There too expenses are high, while economic benefits are not.

There is also a question of the political elites of the separatist entities in Ukraine, Georgia and Moldova, which failed to provide Moscow with clear ideas on how they are willing to raise the economic and social conditions in their territories.

These changes in attitude are not only dictated by immediate economic concerns. True, the expenses the Russian budget bears should not be overestimated, as spending tens of millions of US dollars does not represent a big fraction of the Russian budget.

What we are seeing here is more about those deeper developments in the thinking of the Russian political elite, which span the entire period since the break-up of the Soviet Union. Russian political elites have grown increasingly unwilling to spend money abroad if there are no benefits on the ground. And it is not only about winning in a geopolitical sense, as was the case in the 1990s or 2000s: Moscow is now increasingly tending to seek a mixture of both economic and geopolitical benefits.

We are then likely to see in the coming years Moscow’s stricter approach to spending in the Abkhazia and Tskhinvali regions. This could further complicate an already difficult economic and social situation in these two Georgian territories, as well as causing deep reverberations in the structures of politics classes in Abkhazia and Tskhinvali. However, even these measures are not set to improve the internal situation. For Moscow, Abkhazia and Tskhinvali are adjacent territories and despite some hopes in Tskhinvali, there is little chance that Russia will be looking to annex those lands.

Thus, in the long run, Russia’s policies towards Abkhazia and Tskhinvali have reached a certain deadlock. Those territories now only serve a geopolitical purpose: preventing Tbilisi from NATO/EU membership, but not full-scale cooperation between Georgia and the West.

Author’s note: first published in Georgia Today

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

Azerbaijan-Russia Ties Face Increasing Challenges

Emil Avdaliani

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Russia-Azerbaijan ties face increased challenges as Baku accused Moscow of purposefully stoking the conflict by providing arms to Armenia. It is notable that this rhetoric develops when Turkey is particularly vocal in its military support for Azerbaijan. Though it still remains to be seen whether these signs evolve into a concrete policy shift in Azerbaijan, hopes for diplomatic solution of Nagorno Karabakh conflict recede, and Turkey and Russia up their military support for Baku and Yerevan.

Azerbaijan-Russia relations face increasing challenges as the geopolitical situation in the South Caucasus evolves. A series of events tested the bilateral ties and there is an increasing amount of evidence that some reconsideration of foreign policy on Azerbaijan’s part could be taking place. 

The first challenge was the July fighting on Armenia-Azerbaijan frontier, far from the actual source of conflict – Nagorno Karabakh. What could have been a relatively unnoticed confrontation, it drew international attention due to the geostrategic infrastructure which runs near the fighting zone in Azerbaijan’s Tovuz region. Those are:

  • Baku-Supsa and Baku-Tbilisi-Ceyhan pipelines, which deliver Caspian oil to the Black and the Mediterranean Seas;
  • South Caucasus natural gas pipeline, which will send Azerbaijani gas to the EU and plays a key component in Turkey’s emerging strategy of positioning itself as regional energy hub.

In addition, the region also has the Baku-Tbilisi-Akhalkalaki-Kars (BTAK) railroad (unveiled in 2017) and rarely mentioned the fiber-optic cables linking Europe with Central Asia. The Tovuz corridor also has a crucial Azerbaijan-Georgia highway, which allows Azerbaijan to connect to the Black Sea.

Thus in July Azerbaijan faced a threat to its major income. Damage to the infrastructure would also diminish the country’s geopolitical weight as a safe source of oil and gas. While fighting in or around Nagorno Karabakh takes place occasionally and at times reaches a serious level, such as in 2016, it nevertheless fits into the overall narrative of more or less predictable military scenarios which military and political leaders in Baku would expect. The Tovuz fighting, on the other hand, goes against most military narratives and required Baku’s tougher reaction. This is how the ties with Russia, Armenia’s major economic and military ally, come under intense scrutiny in Baku.

It is has always been a long-term challenge for Azerbaijan. Baku occasionally expresses its concerns on Russia’s military support for Armenia, but the criticism has usually been aired though newspapers and media rather than by high-level political figures. This changed following the July fighting.

Reasons are multiple. First, Russia (using its 102rd military base in Gyumri) and Armenia launched snap combat drills on July 17-20, just as the fighting in Tovuz region was still unfolding. Second, a series of flights of Russian military cargo planes to Armenia took place right after the July fighting. 

In a notable change of tone the Azerbaijani president Ilham Aliyev surprisingly publicly complained to his Russian counterpart Vladimir Putin, stating that the recent reports on allegedly increasing Russian military support (400 tons of military hardware) for Armenia raise concerns and questions in Azerbaijani society. Perhaps as a reaction to growing bilateral differences, the Russian defense minister Sergey Shoigu visited Baku to assure the Azerbaijani public that the flights were not of a military nature, but rather transported materials for the 102nd military base.

However, the affair did not end there as a senior adviser to Aliyev, Hikmet Hajiyev, on August 29, following Shoigu’s visit, claimed that “the explanation by the Russian side is not entirely satisfactory.” This effectively meant publicly refuting the Russian defense minister’s statements, further aggravating differences between the two states.

A September 1 article by Nezavisimaya Gazeta claimed that Azerbaijan had readied 500 Syrian militants in preparation for a “blitzkrieg against Armenia” and that Turkey has its troops on Azerbaijani soil. Baku vehemently criticized the report calling it “slander and [a] dirty campaign against our country.” 

Yet another sign of troubled ties is the September 6th decision by Azerbaijan’s Defense Ministry opting out the Russia-led “Caucasus-2020” military drills (planned to be held in the southwest of Russia). Only two servicemen will be sent as observers. Though officially no concrete reasons for the withdrawal were given, it is possible to link the decision to Azerbaijan’s recent grievances at Russia.

Some larger reasons too might be at play motivating a change in Azerbaijan’s rhetoric. The Minsk Group, the body that aims to facilitate the negotiations between Armenia and Azerbaijan is faltering. No concrete way to resolve the stand-off is present and the July fighting has just showed that diplomatic tools are receding. A vacuum is being created for regional powers to fill in. This is how Turkey comes to play an increasingly larger role in Baku’s strategic calculus.

Indeed, as the July fighting unfolded Turkey has been especially supportive of Azerbaijan. For instance, Turkish President Recep Tayyip Erdoğan noted “Turkey will never hesitate to stand against any attack on the rights and lands of Azerbaijan, with which it has deep-rooted friendly ties and brotherly relations.” Turkey’s Defense Minister Hulusi Akar even warned that Armenia will be “brought to account” for its “attack” on Azerbaijan. Then large Turkish-Azerbaijani military exercises followed.

Turkey’s calculus here is clear as the country needs to defend the vital oil, gas and railway infrastructure coming from Azerbaijan. And considering how far has diplomacy receded around Nagorno Karabakh issue, Turkey and Russia are set to play an even larger military and economic role in the South Caucasus. For the moment open rivalry will be avoided, but for Moscow and Ankara the region represents yet another area of covert competition along with Syria and Libya.

However, casting Azerbaijan-Russia relations as deteriorating is not entirely correct. Intensive cooperation still exists between the states. Azerbaijan’s Minister of Foreign Affairs, Jeyhun Bayramov, paid an official visit to Russia on August 26 at the invitation of Russian Foreign Minister, Sergey Lavrov.

In late August-early September Azerbaijani servicemen participated in the “Tank Biathlon” and also won the Sea Cup competition – both held as part of the “International Army Games – 2020” organized by the Russian Ministry of Defense.

It is still hard to see whether Azerbaijan’s changing rhetoric towards Russia is more than just a temporary, tactical maneuver. It could be a clever diplomatic game Azerbaijan has always pursued since 1990s – namely, facing its larger neighbors against one another. Nevertheless, the rhetoric and recent political decision signal a search for reconsideration of some basic elements in Baku’s strategic vision. Turkey’s bigger role is likely to be sought more intensively, while hopes for a diplomatic solution to the Nagorno Karabakh conflict would further recede.

Author’s note: first published in caucasuswatch

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Eastern Europe

Putting People in Control of Their Land to Realize Ukraine’s Potential

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Land reform will allow Ukraine to capitalize on its economic potential and improve the lives of Ukrainian people – but a lot still needs to be done before a successful land market opening.

I have now had the privilege of being the World Bank’s Regional Director for Eastern Europe for a little over two months. Returning to Ukraine after almost twenty years, I have been impressed by many recent achievements on Ukraine’s reform path.  Many of these are complex, and consequential – creating an independent gas transmission system operator that is already helping safeguard Ukraine’s gas transit revenue; continuing, in the face of opposition and setbacks, to strengthen anti-corruption institutions; undertaking the difficult process of resolving non-performing loans in state-owned banks; and moving, amidst the unprecedented global pandemic, to protect pensioners and other poor and vulnerable Ukrainians.

Today, the immediate challenge Ukraine faces is the COVID-19 pandemic – first to immediately reduce both the mounting toll on health and lives, and then to rebuild livelihoods and incomes. But what reforms are most needed to restore and even improve incomes for the average Ukrainian in the aftermath of the epidemic?

There are many that are required. But for me, the greatest promise is offered by the set of measures around agricultural land reform. Here again, much has been accomplished, most notably when, this past March , the Rada voted to end the nearly two-decade old moratorium on the sale of farm-land. This was a critical first step to unlocking Ukraine’s greatest source of growth. But it is not enough. The next and necessary step is to advance fundamental measures around the governance of land – to allow ordinary people and local governments to benefit from their land without intimidation, bureaucratic interference or corruption.

Land reform that truly allows owners and users to take control of their land can be transformative. By World Bank calculations, for Ukraine as a whole, this can permanently add almost one percentage point a year to economic growth. For landowners currently leasing out their land, this could provide up to  $3 billion every year. For rural residents and small farmers, this can create some  $24 billion of collateralizable assets that allow them to invest in irrigation, horticulture or non-agricultural small enterprises. And for local communities and local governments, this can provide an income stream of up to  $2 billion annually to better the lives of Ukrainians.

The Ukrainian authorities have already made enormous strides in this direction by passing a package of legislation that reduces raider attacks and land-related schemes, makes land data publicly accessible, and allows local communities to plan land use.

But there is much more legislation around land governance that is needed to ensure all the benefits of land reform for every Ukrainian. And just passing the laws is not enough – once that is done, there is the need to draft implementing regulations, to set up institutions to administer these regulations, and to actually implement measures.

Moreover, for improved land governance to lead to more investment, and thus income, it is especially important that Ukrainian landowners or land users be aware of their rights and how to exercise them, and have these rights protected. This is particularly true for small and medium farmers. They must be able to have any actual or attempted violations of their rights redressed quickly. Farmers and other private participants must know how to use land as collateral to access credit. Banks and other financial institutions must be able to professionally assess the value of the collateral and have the incentives to lend to smaller borrowers. Once relevant laws and regulations are in place, there is thus a need for a broad-based legal awareness and a financial literacy campaign.

All of this takes time – and time is running out.

By the most conservative estimates, the needed regulations, institutions and implementation could take at least nine months. The land market opens on 1 July 2021. So, it is essential to pass the appropriate laws by the end of September, at the very latest.

If this deadline is missed because of entirely avoidable delays, there is a real risk that on the date the land market opens, Ukraine will miss this golden chance. Even more, there is the danger that opening the land market in the absence of these strong legal and regulatory safeguards will result in an echo of the 1990s privatization – leaving the market vulnerable to the powerful and well connected and actually worsening land-related corruption and inequality.

Together with our partners, the World Bank has long advocated land reform as a key for Ukraine to develop the productive potential of its abundant land resources. We see this as central to revitalizing the incomes of average Ukrainians, especially in rural areas.

This is a once-in-a-generation opportunity to unlock the sector’s growth potential through investment in high value-added crops and agri-processing and, most important, to transform the welfare of millions of Ukrainians. Ukrainian parliamentarians and policymakers have to ensure that we do not miss it.

World Bank The article was first published in Ukrainska Pravda

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Eastern Europe

Opportunism and July’s Armenian-Azerbaijani Flareup

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By mid-July, within days of the latest flareup in fighting between Armenia and Azerbaijan, a flurry of articles written by Azerbaijani think tank members appeared on Modern Diplomacy (MD). Azerbaijani think tanks may have erroneously assumed that MD was a media battlefield between Armenians and Azerbaijanis after a Geopolitical Handbook on Armenian issues was published a month earlier.

On August 2, 2020, MD published an article entitled The Treasure Map to the Forgotten Epoch of the Iravan Khanate, by Irina Tsukerman. The article uncritically adopts the most vulgar of Azerbaijani historical falsifications claiming that most of Armenia and its capital, Yerevan, have little or no Armenian lineage – and are instead Azerbaijani. The rambling nature of this four-thousand word article, and its spectacular disregard for the accepted historical record, seemed designed for the express purpose of appealing to Azerbaijanis and offending Armenians, for example by pointedly referring to the 2800-year-old Armenian capital city as Iravan, instead of Yerevan.

The thesis of Tsukerman’s article on MD dates back well over a generation. It parrots nationalist screeds, penned by Azerbaijani and sometimes Turkish propagandists, usually intended for local consumption. In recent years, many such works have been translated into reasonable English and evidently distributed for posting by western authors under their names. A common characteristic of these articles is their lack of hard references – a relic from the Soviet days. Tsukerman’s MD article appears to have been post-annotated with reference links before it was submitted to MD. Most of these links are of low quality and/or have little to do with the associated text. Forty-five of the fifty-three reference links were Wikipedia articles, gratuitously including general Wikipedia articles on Russia, Armenia, Georgia, Azerbaijan, The Republic of Azerbaijan, Tehran, etc. Another reference points to a Turkish-language text that originally appeared in an anti-Armenian publication, Yeni Turkiye 62, which includes articles claiming Armenians committed genocide on Turks and Azerbaijanis – a claim widely known to be untrue, and similar in form, tactics and intent to Holocaust denial.

Within weeks of the apparent success of post-annotating an article in MD with useless reference links, Israel’s Begin-Sadat Center for Strategic Studies (BESA) published another anti-Armenian article of dubious integrity by Tsukerman, entitled “Russia and Iran’s Dangerous Energy Gambit in the Caucasus“. Due to a reader complaint noting the lack of any references and the article’s clear anti-Armenian bias, BESA initially took down the article, but then restored it the very next day, replete with ill-considered, low-quality references, not unlike those in Tsukerman’s MD article.

In my perhaps old-fashioned view, the provision of valid high-quality citations is a responsibility that every author should take seriously, and the verification of the quality of those citations is a responsibility that every editor should take seriously. Padding an article with useless and unhelpful citations pro forma, simply to be able to say that the article has citations, is the tactic of a college freshman – not one that I would expect to see in a scholarly publication. Evidently BESA operates according to a different set of standards.

This brings us to the larger question: Why do so many poorly referenced, factually inaccurate, anti-Armenian propaganda pieces appear in the world press? A short-term answer is that both the ruling family dictatorship in Azerbaijan, and the country’s supporting interests in the west need to bolster Azerbaijan’s image at home and abroad, especially after its significant military loss in the latest border flareup.

In the medium-term, one might note that the amount of western investment in Azerbaijani hydrocarbon extraction and transport is probably well over $100B, with British Petroleum accounting for $75B of that figure. Azerbaijan is also one of the few countries bordering Iran that is compliant enough to be used as a base for intelligence gathering and covert operations targeting Iran. Moreover, forty percent of Israel’s crude oil is supplied by Azerbaijan, and in return Israel has sold Azerbaijan at least $5B in high tech weaponry over the past decade. By contrast, Armenia has no viable petroleum reserves, and comparatively little with which to counter materially. Hence a much lower standard is set for the publication of Azerbaijani propaganda in the western press, and Azerbaijan is propped-up as a reliable partner to the Israeli public – this in spite of the fact that Azerbaijan is a Shia Muslim-majority country that refuses to open an embassy in Israel.

A rare glimpse at the longer-term answer can found in a September 2015 event where Israeli Knesset Members Oren Hazan and advisor Mendi Safadi visited Baku, Azerbaijan, for high-level meetings. During this visit, Safadi commented, “I’ve always been on the side of Azerbaijan, and we are ready to provide assistance and patronage to the Azerbaijani side to neutralize the influence of the Armenian lobby in the US Congress, the EU institutions, and international organizations.”

To this observer in Yerevan, it is manifest that Azerbaijan has enlisted help from certain actors in Israel and the Jewish diaspora in generating and promulgating pro-Azerbaijani propaganda, including anti-Armenian propaganda that falsifies the historical record and that is sometimes overtly racist in nature. Of course, with such an arrangement between two countries comes the opportunity for authors of a mercenary bent who are willing to lend their names to such falsifications. Since 2015, a large number of articles of this sort have appeared, for the most part in the Jewish press. Some writers have focused on the semi-frozen conflict over Nagorno-Karabakh. Others have attempted to characterize Armenia’s normal relations with Iran as in opposition to western-imposed sanctions, while neglecting to note that well over twice as much trade goes on between Azerbaijan and Iran. Still others characterize certain Armenian historical figures as fascist supporters of the Nazis during WWII, conveniently neglecting the fact that well over a quarter million Armenian soldiers never returned from fighting the Nazis, and that fact that Armenia was awarded twenty-four Israeli “Righteous Among Nation Awards, while Azerbaijan was awarded none.

Truth and open debate have little to do with this kind of industrial production of anti-Armenian propaganda. Opportunist writers posting such articles know very well the nature of the endeavor in which they are participating, yet they seem to feel that they can persist without regard to any cost to their reputations, as long as their hate speech is directed only against Armenians.

It is ironic that Jewish writers, many the progeny of Holocaust survivors, blindly support Azerbaijan’s government and its anti-Armenian policies, many of which are designed to create an external enemy in order to redirect popular anger away from a corrupt family dictatorship. The former mayor of Baku, who served between 2001 and 2018, Hajibala Abutalybov, in a 2005 meeting with a municipal delegation from Bavaria, Germany, stated,

“Our goal is the complete elimination of Armenians. You, Nazis, already eliminated the Jews in the 1930s and 40s, right? You should be able to understand us.”

Israelis and Jews everywhere certainly ought to be able to understand these words better than most, and they should be asking themselves if this is really an alignment for which they wish to be remembered in the fullness of the historical record.

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