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India’s Growing Engagement with the South Caucasus

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Throughout decades the South Caucasus has played a relatively minor role in India’s foreign policy. However, over the past several years there have been economic and political trends indicating India’s growing interests in the South Caucasus’ economic and infrastructural potential as well as a gradual emergence of New Delhi’s strategy towards the region.

Since the break-up of the Soviet Union the newly independent Georgia, Armenia and Azerbaijan, which constitute the South Caucasus region, began to attract large Eurasian and non-Eurasian states’ attention. Influential players so far have been the US, Russia, European Union (EU), Turkey, to a lesser degree Iran and a latecomer – China. India, however, which is one of the biggest and fast-growing economic markets in the world (seventh country in the world by nominal GDP; third country by GDP PPP; second-largest country by population) and has growing geopolitical ambitions spreading all along its vast land and maritime borders, has been notably absent from the South Caucasus’ geopolitical chessboard.

New Delhi has differing approaches to each of the region’s country, driven both by pure economic and political realism as well as economic preferences. What is common though is that despite the absence of common strategy towards the region, trends of cooperation between India and each of South Caucasus states are on the rise.

Georgia

There is a big potential for economic cooperation. So far, Georgia-India trade is of limited range, where Indian exports to Georgia are mainly meat and frozen meat, cereals (rice), electrical machinery as well as pharmaceuticals. Georgia, on the other hand, exports to India chemical (nitrogenous) fertilizers and metal (aluminum and zinc). As seen, the bilateral trade is limited and belongs to the secondary class of export. Both states have much larger potential to tap into. Georgia could increase its export of ores, metallurgical products, medical products, wine and other alcoholic and non-alcoholic beverages and processed agricultural products to the Indian market.

India, on the other hand could initiate its exports of cement, mineral fuels and plastic products to Georgia. There is also an untapped potential of India providing some advanced software engineering and IT solutions to the Georgian market.

Much can be done in yet another untapped sphere – tourism. Though the number of Indian tourists visiting Georgia has been on the rise, in recent years there were multiple of cases of barring Indian citizens from entering the country. Thus throughout 2019 more than 4200 Indian citizens were denied entry into the country.

Moreover, the improvement of economic and tourist cooperation between the two states is also complicated by the fact that even today India does not have its own embassy in Georgia. It is the Indian embassy in Yerevan, which still oversees all Indian diplomatic affairs in Georgia.

Nevertheless, lately there have been important trends in the bilateral relations indicating upcoming improvements in the state of affairs. Recently Tbilisi and New Delhi launched free trade talks based on completed a joint feasibility study of a free trade agreement. The latter confirmed that a freed trade agreement will have a positive impact on bilateral trade.

Moreover, recently Georgia and India signed an Air Services Agreement (ASA) with the purpose of running non-stop flights with the low-cost airline IndiGo (InterGlobe Aviation Limited). The initiation of flights was planned for March 2020.

There also is work being done to remove a major obstacle in bilateral relations: opening of Indian Embassy in Georgia. The Georgian side has already notified India’s Ministry of External Affairs. This follows, albeit lately, the relations both states enjoyed from 1990s when India had recognized Georgia’s independence on December 26, 1991, following the collapse of the Soviet Union and had established formal diplomatic relations on September 28, 1992. Other efforts included the Georgian government’s decision to set up an honorary consulate in Delhi in 2005, which was then upgraded to a full-fledged embassy in 2009.

Armenia

Armenia’s relations with India are also experiencing interesting twists. For the past many years, beyond Russia’s geopolitical importance, China’s rise has been a subject of debates within the Armenian analytical community. Here too India has been largely absent. This is more surprising as India traditionally has good relations with Armenia’s key strategic ally Russia. Moreover, Moscow and New Delhi are members of both Shanghai Cooperation Organization (SCO) and BRICS. This could mean that Moscow would not be too worried by New Delhi establishing itself deeper in the Armenian economy.

Besides, there is also geopolitical thinking which could unite both states. Strategically Armenia is interested in deeper cooperation with India as Azerbaijan and Pakistan form an increasingly close partnership. Yerevan is in conflict with Baku over Nagorno-Karabakh, while Islamabad is the only state in the world which does not recognize Armenia’s independence and therefore fosters close contacts with Azerbaijan.

This broader geopolitical setting explains Armenia’s efforts to foster closer military, technological and generally diplomatic relations with India. For example, in 2017 an Indian delegation headed by Vice President Mohammad Hamid Ansari visited Yerevan where for the first time in 25 years Indians actively discussed the Nagorno-Karabakh conflict.

These overlapping interests of New Delhi and Yerevan could be behind recent decision by the Armenian government to grant India a $40 million deal to supply four India-produced weapon locating radars (‘SWATHI’, which can handle multiple projectiles fired from different weapons at different locations) to Armenia. In this tender Indians has reportedly outbid Russia and Poland. According to the ANI news agency which based its reporting on Indian government sources, “the deal is for supplying four SWATHI weapon locating radars developed by the Defense Research and Development Organization (DRDO) and manufactured by the Bharat Electronics Limited.”

Beyond geopolitics, there is a growing people-to-people contacts between India and Armenia. The latter has become Indians’ one of the favorite destinations for education and employment. Considering Armenia’s small size, the number of Indian citizens that were allowed to reside in the country is substantial. In 2016, 1119 Indian nationals received residency in Armenia, in 2017, 1086 received residency and in 2018, residency status was given to 938 Indian nationals. Throughout most of 2019 the number went downwards with more Indians leaving Armenia than arriving, but as many expect the country will remain an attractive destination for the Indians.

Azerbaijan

India’s relations with Azerbaijan are mainly driven by political realism. Though Azerbaijan is close to Pakistan, India’s geopolitical rival, in the recent years New Delhi worked hard to tap into Azerbaijan’s advantageous geographic and economic position.

This is well reflected in the bilateral trade which grew from around US$ 50 million in 2005 to approximately US$ 922 million in 2018. In 2019 the trade turnover constituted some $1.1 billion. Moreover, by 2020, there are over 200 Indian companies operating in Azerbaijan with over US $ 1.2 billion investments, which is much larger than in Georgia or Armenia.

India exports rice, mobile phones, heat exchange units, air and gas compressors/ ventilation units, drugs/human vaccine, cables, plaited cords from ferrous metals without electric isolation, small machines, black tea, insecticide etc to Azerbaijan. Azerbaijan’s export to India, on the other hand, mainly consists of crude oil. Overall, as in the case with Georgia, the bilateral trade is mainly based on products of secondary importance. A much bigger untapped potential exists where India could become Azerbaijan’s major importer of high technologies.

Another potential sphere is military cooperation. Though Azerbaijan purchases most of its weapons from Russia, Baku is nevertheless interested in diversifying its options. India, with its nascent growing capabilities to create military technologies for export across the globe, could become Azerbaijan’s close partner.

There is also an issue of the geopolitics which drives India’s approach to Azerbaijan. The latter strategic location as a starting point in the South Caucasus energy corridor makes the country attractive to India. It is no wonder that a quick growth in bilateral trade between the two states took place when the opening of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and Baku-Tbilisi-Kars railway materialized. As a result, Indian oil companies have been buying substantive quantities of crude oil from this corridor.

India is also interested in Azerbaijan’s location as the latter lies in the center of the International North-South Transport Corridor (NSTC) which stretched from the Indian territory (through Azerbaijan) to Russia’s Baltic ports. Though the route has yet to show its full potential, ships and railroads to be used along the NSTC would allow India to connect to the European market.

Thus, all South Caucasus states are set to gain exponentially in the economic and in some cases military realms from establishing deeper cooperation with India. There is a clear trend showing that after the end of the Soviet Union, the South Caucasus has never really been a part of India’s active foreign policy, this began to change in the recent past. New Delhi still lacks an overall geopolitical approach (i.e. strategy) towards the South Caucasus and builds its bilateral relations on an ad hoc basis, but the country grows increasingly perceptive of the region’s growing infrastructure which connects the Caspian and Black seas and would allow India to connect to the European market.

Author’s note: first published in Caucasus Watch

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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