As the Second Karabakh War ended, all regional players’ interests were scrutinized in detail. One power however, China, was largely absent from the analysis. Official rhetoric from Beijing indicates the continuation of China’s non-intervention policy in the region. However, its position also indicates the limits of China’s involvement in the South Caucasus.
There is a good deal of ambivalence in the Chinese position on the South Caucasus. The country’s ambassadors to the region’s three states – Armenia, Azerbaijan, and Georgia – often announce how important the Caucasus is, but Beijing’s investment policies and political moves reflect little of the vocalized grand geopolitical thinking.
As late as 2017 the prospects seemed rosier, with each South Caucasian state hoping for a larger Chinese presence. In 2017, China and Georgia signed a free trade agreement. Georgian government hoped the country’s location on the Black Sea. With several ports such as Batumi, Poti and the then-planned Anaklia deep sea port, Baku-Tbilisi-Kars (BTK) railway and East-West Highway, would allow it to operate as a logistics and transit hub for the expanding Belt and Road Initiative – a near-trillion US dollar Chinese initiative aimed at linking the Indo-Pacific region with the European market.
Moreover, there was a geopolitical aspect to the Georgian-Chinese cooperation. Deeper economic penetration into Georgia could spell a greater stake in Georgia’s stability and security for Beijing. For Tbilisi, relations with China were in a way a means to mitigate Russian geopolitical pressure following the invasion of Georgia in 2008.
A similar understanding was behind Armenia’s and Azerbaijan’s calculations. Chinese investment, especially in infrastructure, was to be the main driver of the nascent cooperation in both cases. After all, most of the infrastructure hails from the Soviet era, making financing for new construction badly needed.
Baku in particular was enthusiastic about infrastructure development in Central Asia as well as a steady growth of shipments from China, as it could provide a boost for the South Caucasus transport and energy corridor. Over the past years the ports of Baku and a small city of Alat have invested into improving their infrastructure. Alat is especially promising as an estimated transshipment of the new port complex potentially reaches 25 million tons of cargo and 1 million twenty-foot equivalent unit (TEU) per year.
As was the case with Georgia, Armenia and Azerbaijan too looked at China as a source for diversification of their foreign policy orientation. Baku and Yerevan enjoy deep economic and military cooperation with Moscow, but uneasiness in both capitals about Russian geopolitical pressure persists. As such, China could have played a pivotal role in mitigating their fears of dependence on Moscow.
Last, but not least, Armenia also pinned its hopes on the economic involvement of China in the country. Though sandwiched between the rival Turkey and Azerbaijan and having only two borders open – in the north with Georgia and in the south with Iran – the country has been positioning itself as a potential transit corridor for Chinese goods from Iran to the Black Sea.
None of the hopes of the South Caucasus countries regarding China have materialized. Perhaps the hope for more active Trans-Caspian transshipment could still be realized in one form or another, but overall, the South Caucasus has seen little Chinese investment or general geopolitical attention from Beijing. Trade with the three states has grown, but it has not so far been a game changer. Moreover, official BRI documents published in China over the past years too do not mention the region as a potential corridor to the European Union.
For China, the South Caucasus plays a modest role. In terms of BRI, the Russian corridor is a logical option for China-Europe links. Rather than transporting goods via the Caspian and Black Seas a direct Russian route may be longer in terms of distance, but is more feasible in practice. Other aspects of geography put limits on Chinese engagement in the South Caucasus as well. Unlike Central Asia, the region does not border on China. It also does not represent a primary security concern for Beijing, which would have necessitated larger engagement similar to Chinese actions in Tajikistan.
In a way, this physical distance does provide a certain advantage. Beijing can approach the region unencumbered by the problems its faces in Central Asia. Mistrust towards and fear of Chinese expansionism pervade the moods of political elites and the general public of Central Asian states, but this is not the case in the South Caucasus. Further, China has not so far gotten embroiled in internal affairs of the region’s three states and has not awarded special preference to governments on ideological grounds. Ideally this would pave the way for a more active Chinese involvement. However, we have not seen Beijing tapping into this opportunity so far.
The rationale for China’s reluctance to engage the South Caucasus could be Russia, which regards the region as its sphere of influence. Considering the budding partnership between Moscow and Beijing, the latter might be unwilling to challenge Russia’s geopolitical preeminence. However, the Russia factor is not sufficient to explain Chinese abstention. After all, China does challenge Russia’s position in Central Asia and Moscow has been very careful not to voice its concerns openly.
In many ways China’s relative inconspicuousness in the South Caucasus is dictated by its position on the Black Sea, a strategic location providing connection to Eastern, Central, Southern Europe, and Russia. It also allows access to the Mediterranean through the Bosphorus and Dardanelles Straits. Being involved in this sea would offer serious geopolitical opportunities to China, but much depends on energy availability. As the demand for oil and gas resources in China increases, so does Beijing’s quest to find new energy sources and safe avenues for import.
However, trends indicate that the Black Sea does not stand out in this regard. Black Sea adjacent states, with the significant exception of Russia (though even the latter exports gas and oil to China from its deposits in Siberia), have little to no direct energy trade with China. Overall, the resource potential of the Black Sea is too uncertain to invite deeper Chinese involvement. Even with Turkey which recently made gas discoveries in the Black Sea, the Chinese stance is unlikely to change as the potential gas deposits would mostly be consumed by Turkey’s growing internal demands.
Instead, the region seems to be much more important for other actors, mainly the EU and Russia .China does not seem motivated to compete with these other players when the potential benefits remain uncertain. The South Caucasus is of critical importance to the EU’s energy security as a transport corridor through which as much as 10 percent of Europe’s oil and oil import transit. The EU is also heavily involved in the region through its Eastern Partnership and the Transport Corridor Europe-Caucasus-Asia (TRACECA) projects. Besides, Russia’s growing military involvement in the Black Sea also limits Chinese potential involvement in the region. A geopolitically overcrowded Black Sea region provides little incentive for Chinese companies.
No breakthrough in sight
Looking ahead, the picture is not promising for the realization of the South Caucasus states expectations. It appears instead that both global and regional trends will limit China’s involvement in the region.
Though China has performed much better than others economically following the negative effects of the COVID-19 pandemic, its growth remains unstable and government debt is soaring. This will put pressure on China’s willingness to lend money abroad, which does not portend well for the South Caucasus. Most likely, the region will remain overshadowed by other regions of primary importance for BRI – Southeast Asia, Central Asia and the Middle East.
A changing balance of power in the Black Sea and the Russo-Turkish geopolitical pre-eminence in the South Caucasus following the second Karabakh War will further limit Chinese companies’ willingness to invest or participate in region-wide projects. The South Caucasus will remain a major fault line between Russia and the West, and increasingly between Turkey and Russia as of late. Engaging this geopolitically fraught region will be risky for Chinese companies and therefore likely undesirable.
Finally, one must account for US pressure on the South Caucasus states. As the region will be subject to the great power competition between China and the US, Georgia and, to a certain extent Azerbaijan, will face a dilemma of damaging bilateral relations with Washington should they invite large Chinese investments into the countries’ critical infrastructure.
Author’s note: first published in chinaobservers
Education: Armenia’s Path to Stronger Economic Growth
Better education and a stronger innovation drive are crucial for achieving higher rates of economic growth and prosperity in any country. Countries that prioritize improvements in education – from the pre-primary to the university level – and innovation are better positioned to adapt to economic change and help raise the living standards for their people.
Education equips individuals with the knowledge and skills necessary to contribute to the economy, with the ability to learn – and unlearn – continuously. Innovation involves the creation of new products, processes, and services that expand the capacity of enterprises and economies. In fact, the most innovative countries tend to be the most successful economically.
Take the case of Estonia. In 1993, Estonia’s GDP per capita was a modest about $6,480. In comparison, Japan’s was $24,000. Fast forward 30 years. Estonia’s GDP per capita was equal to that of Japan in 2022, at nearly $43,000. Estonia now boasts the highest PISA (Programme for International Student Assessment) scores in math, science and reading in Europe. A similar ‘miracle’ happened in Korea, a country that moved from developing country status to an advanced economy in just one generation. How can countries replicate Estonia’s or Korea’s success and achieve faster economic growth and standards of living that are like to those of high-income countries?
Through education and innovation.
Here in Armenia, education has been a priority since the country’s independence in 1991. The government has made efforts to increase the number of schools, provide free education for primary and secondary schools, and promote STEM (Science, Technology, Engineering, and Mathematics) education. As a result, Armenia has a high literacy rate of over 99% and over 60% of adults have completed at least secondary education.
Yet, the education system is not producing the needed outcomes. Children born in Armenia today will be only 58% as productive during their lives as they could have been if they had received quality health and education services available. Armenian children are expected to complete 11.3 years of schooling. This decreases to 8 years if the quality of education is factored in. Pre-primary school and secondary school enrollment is low compared to peer countries in Europe and Central Asia (ECA). It is the quality of education that is the most pressing concern. Armenia’s TIMSS mathematics score – a standardized test for children in grade 4 – is one of the lowest in the region. The quality of tertiary education is below the ECA average: it is nearly 30% lower than Georgia, and half as low as the new EU member states. These outcomes are not surprising, given that public spending on education is just under 2.7% of GDP in Armenia, which is half that of the EU.
The World Bank is helping Armenia improve its education system, including through the Education Improvement Project, which is enhancing the conditions for learning across educational levels by extending preschool coverage, providing laboratory equipment, informing curriculum revisions, and improving the relevance and quality of higher education institutions. The many outcomes of the project include new preschools in rural communities, training of preschool teachers, and grants to higher education institutions through the Competitive Innovation Fund. Under the EU4Innovation Trust Fund, the World Bank is also helping improve the quality of STEM education. By September this year, Armenia will have a fully revised STEM curriculum for middle and high schools (grades 5 to 12), improved learning materials, school-based STEM laboratories and as well as enhanced student-centered instructional methodologies/teaching methods.
Education is essential but alone is not sufficient to drive economic growth. How knowledge is applied by firms, researchers and workers through innovation is critical. In Armenia, there is a disconnect between education, research, and the link to entrepreneurs and markets. For example, academic research in Armenia is dominated by the National Academy of Sciences which comprises more than 30 separate research institutes. None of these institutes are formally integrated with any teaching university in the country. There is also a proliferation of universities in Armenia, with 26 public (state) and 33 private universities; many of the latter, in name only. In Denmark, a country with almost twice the population, there are only eight state-recognized and funded universities offering research-based education.
Consolidating the universities in Armenia, merging them with the research institutes, and focusing government attention on accreditation could help address some of these challenges. It is also essential to reform the university admission process to incentivize talented high schoolers to apply. The government could also support the commercialization of research. In many advanced economies, universities are prodigious producers of knowledge and basic research output, and the private sector, the user of this research, is very vibrant. Without practical application, research may have little impact on the country’s growth potential.
Extensive work by the World Bank shows that human capital is at the core of efforts to strengthen innovation and technology adoption. In Armenia, as in many other countries, human capital is one of the main binding constraints to growth.
While the government has taken significant steps and has initiated important reforms to promote both education and innovation, more is needed to realize their potential. By making a greater investment in education and innovation, Armenia can build a knowledge-based economy that can help the country deliver a development miracle and elevate standards of living to those of high-income countries. The dialogue at the recent panel discussion on “Growth, Education, and Innovation” could help policymakers in their efforts to transform education and innovation in Armenia.
This op-ed was originally published in Banks.am via World Bank
The dilemma of China’s role as Mediator in the case of Ukraine
Since the full-scale Russo-Ukrainian war unfolding after 24 February 2022, China has maintained so-called neutral stance on the conflict, passively calling for a peaceful resolution. But on the anniversary of Russian invasion, Beijing popped up with concrete suggestions on how to end the war: China claimed its readiness to participate in peaceful adjustment.
Beijing’s peacemaking attitude and Xi Jinping’s legitimacy as Mediator were acknowledged by Putin during Xi’s visit to Moscow and the rumors about the following soon phone call between Xi and Zelensky spread, however, it is arguable whether Kyiv is truly ready to welcome China as the broker. The US, in turn, treated Beijing’s position skeptically.
This piece elaborates on how China became Global Mediator of the 21st century and why now Ukraine is reluctant to accept Beijing’s brokering.
For starters, China is a realist actor across the domain of international relations. Kissinger states that Chinese leaders are making profound foreign policy decisions only when they do not lack the means to achieve the goals [Kissinger, 2010], hereby Xi knew that Beijing’s possible mediation between Moscow and Kyiv during first months of the war would not be realizable. The sides were not sincerely ready for a truce, neither Russia, occupied territories and continued advancements in Donbas, nor preparing counteroffensive Ukraine, backed by vast Western support.
Moreover, from realism perspective, peace achievement lies in accepting and adapting to the irresistible existence of powers involved in security competition [Mearsheimer, 2001] and peacemaking is most likely when there is no hegemon [Morgenthau, 1946].
China adhered tenaciously to aforementioned realist position by declaring that “the security of the country should not be pursued at the expense of others”, obviously referring to NATO’s strengthening and Russian lament about bloc’s eastward expansion. But such Xi’s mediation ceasefire proposition in the heat of the war would be found senseless by Ukraine and the USA, which were publicly committed to peace restoration by beating Russia on the battlefield and reestablishing liberal world order led by predominant power – the U.S.
Beijing had to prepare before ascending as Mediator between Kyiv and Moscow.
Firstly, China gained legitimacy as a global security provider. Ukraine fights for its land, but Washington made a geostrategic mistake by being directly involved in a confrontation with Russia: by imposing enormous economic sanctions on Moscow, tolerating Nord Stream pipeline sabotage and trying to end the Russo-Ukrainian war only by military means, not diplomacy.
While China proposes negotiations, the U.S. is only committed to the war continuation.
As a result, the USA lost worldwide recognized status as the sole provider of economic prosperity and global security; the unipolar liberal world order ideology became an American tool for maintaining the U.S. leadership and Western dominance at any price, despite the economic losses of others.
Therefore, some states, especially from the Global South, did not support American efforts to isolate Russia, perceiving Washington’s strategy as destabilizing. Instead, they opted for cooperation with China as an alternative planetary center within the uprising multipolar world order model; Beijing met the demand by launching Global Security Initiative, posing itself as a stabilizing Mediator.
Secondly, Beijing successfully proved its new status. China became broker between Iran and Saudi Arabia, helping two longstanding Middle East rivals to achieve reconciliation as well as détente, giving them solid security guarantees. Tehran and Riyadh restored relations without Washington’s participation and pleasingly deepened economic interaction with China.
Thirdly, concerning the Russo-Ukrainian war, Xi Jinping can become Mediator and repeat the historical brokering successes of pacification Russia achieved by such famous statesmen like Otto Bismarck and Theodore Roosevelt.
German “iron” chancellor, apologist of realpolitik, frequently played role of mediator among leading European nations in the 19th century, balancing their interests within spheres of influence. Balkans became one of such great states’ competition arenas, where Austria and Russia struggled to gain control over newborn Bulgaria and influence in the region. The war between them was prevented because Bismarck sagaciously established “League of Three Emperors”, through which mediated disputes between two empires, therefore he was known as “honest broker”.
American president contributed to halting the war between Russia and Japan in 1905. His wise brokering helped states to sign the Treaty of Portsmouth. Serving as mediator for combatants, Roosevelt induced two countries to make concessions on the most intense issues regarding reparations and territorial disputes, thereby sides reached peace.
But while Putin acknowledges Xi as broker, Zelensky probably does not, due to Ukrainian survival dilemma – if Kyiv accepts China as a Mediator, it loses Western vital support.
Thus, there are three reasons why Ukraine is not enthusiastic about Beijing’s brokering, at least publicly.
First, Zelensky has his own, approved by the West, peace plan. He wants Xi to take part in Kyiv’s “peace formula.” It assumes restoration of Ukraine’s territorial integrity and Russian troops withdrawal from occupied territories. Chinese “peace position”, on the contrary, suggests the immediate ceasefire and peace talks launch: frozen conflict, not total Ukrainian victory. Moreover, it does not stipulate the matter of Ukraine’s territorial restoration.
Secondly, Ukraine is diplomatically, politically, militarily and economically dependent on the West, i.e. the USA. China, successfully mediating between Moscow and Kyiv, is the worst-case scenario for America, because intensifies Beijing’s global influence at the expanse of the U.S., which has different from Chinese stance on Russo-Ukraine war ending issue. The USA wants to preserve its worldwide leadership. Consequently, Washington will reduce its vital aid to Ukraine if China is chosen as broker. Kyiv needs to consider the stabilization puzzle, given the significantly suffered from the war economy.
Thirdly, Ukrainian ruling elite, opinion leaders and society are ideologically inclined as well as biased to accept West as only one party, which can help Ukraine to stop the war. NATO is seen as the sole security guarantees provider. Besides, there are many West-funded organizations and media outlets in Kyiv, influencing public narratives within Ukrainian society. So, even if Zelensky accepts mediation, economic support and post-war restoration plan from China, elites in Kyiv and Ukrainian society will oppose him, challenging his legitimacy. Zelensky risks repeating former president Yanukovych fate.
To sum up, it should be stated that China’s role as global security provider is inevitable, Beijing will continue to use its economic leverage to reconcile many conflicting rivals in the world. Thus, Beijing mediation option may be considered by Ukraine in the near future, but not today.
Erosion of Russia’s Hegemonic Stability in the South Caucasus and Transition to Risky Instability
In early nineteenth century, following the wars with Persian and Ottoman empires, Russia completed the invasion of the South Caucasus. The region that hosts present day Armenia, Azerbaijan and Georgia remained under the control of Moscow until the collapse of the Soviet Union in 1991, though the three countries were independent for a brief period after the World War I. Suppressing the independence movements in these countries along with the other parts of Russian Empire and later the Soviet Union in Eastern Europe and Central Asia, Moscow also acted as security provider in the region. In this role, Russia subdued conflicts between the subjects of the empire and also countered the intervention of external powers into “its” territories. This created a stability in the South Caucasus, as in other parts of the empire, dubbed by the theories of international relations as “hegemonic stability”.
In early 1990s, the Soviet Union collapsed and, subsequently, most of the newly independent states in the territories of the former empire ushered into inter- and intra-state conflicts. In the South Caucasus, Russia sought to manipulate and ultimately benefit from these flashpoints in order to preserve its influence over the region. Moscow’s support to Abkhaz separatists in Georgia and Armenia’s occupation of the Karabakh region of Azerbaijan in early 1990s helped the Kremlin recover its control over three countries of the South Caucasus. This translated into resurgence of Russia-dominated security order in the region in the post-soviet period but with more assertive independent states that sought to boost their sovereignty while minimizing Russia’s hegemony.
Armenia joined the Russia-led security and economic integration with a full membership at the Collective Security Treaty Organization (CSTO) and Eurasian Economic Union (EAEU). Azerbaijan, on the other hand, managed to build neutral and multilateral foreign policy and succeeded to resist Russia’s pressure thanks to economic independence of the country. The only country of the region, Georgia, that sought to escape Russian orbit and join the Eura-Atlantic political and military structures faced insurmountable obstacles on this path and remained in-between. Russia’s occupation of two regions of Georgia (Abkhazia and South Ossetia) in 2008 has served for the Kremlin as the Sword of Damocles over Tbilisi’s foreign policy.
The post-Soviet hegemonic stability in the South Caucasus has been, therefore, more volatile compared to earlier periods. The occasional military escalations between Baku and Yerevan along with the war in Georgia (2008) manifested such sporadic disruptions of the regional security order. However, in both cases, Russia succeeded to act as hegemon by recovering ceasefire between Armenia and Azerbaijan and putting a de-fact veto on Georgia’s foreign policy.
Even during the full-scale military operations between Azerbaijan and Armenia in 2020, known as the Second Karabakh War, Russia appeared as the only mediator with enough authority to bring the sides to ceasefire. Deploying its troops to the Karabakh region of Azerbaijan under the name of peacekeepers, Russia managed to complete its mission of deploying its troops on the soil of each of the three countries of the region.
Hence, in the post-Soviet period, Moscow managed mostly to preserve the security order in the region under hegemony of Russia. The Kremlin, however, has had to swallow growing security ties between Azerbaijan and Turkiye, but reacted more calmly to these ties as Baku demonstrated deference to Russia’s core national interests and concerns in the region.
In the wake of Russia’s invasion of Ukraine in February 2022, Moscow’s dominance established over the South Caucasus in early nineteenth century came under jeopardy for the third time after the post-WWI and early years of the post-Soviet periods. Facing an unexpected military debacle in Ukraine and massive economic troubles at home, Russia encounters challenges against its dominance in the South Caucasus, the region that has overarching geopolitical significance for Moscow.
This time the challenge to Russian power originates in Armenia and Azerbaijan, as Georgia avoids provoking Moscow and seemingly drifts away from its pro-Western aspirations. On the one hand, Azerbaijan criticizes Russia’s support to the separatist regime in the Karabakh region, tries to end the mission of the peacekeeping contingent, deepens its strategic alliance with Turkiye, increases its contributions to the energy security of Europe, and relies more on the EU’s mediation in the peace process with Armenia. On the other hand, Armenia defies Russia’s authority by distancing itself from Russia’s military bloc, builds closer relations with the European countries and the United States and invited a mission of the EU to monitor the security situation along Armenia’s border with Azerbaijan. The Kremlin reacted rather furiously to these developments and blamed the West on attempts to squeeze Russia out of the South Caucasus.
To the disappointment of Moscow, this signifies a decline in Russia’s dominance over the region, although it is now premature to say how this process will go on and whether this will end up with Russia’s withdrawal from the South Caucasus. The decline of Russian influence over the region creates a period which can be seen through the lens of the power-transition theory of international relations. According to this conceptual framework, the decline of the dominant power might lead to a conflict or war with the rising power as the latter becomes more assertive seeking to challenge the dominance of the declining power. This can be observed also as the emergence of a power vacuum in the respective region which other powerful state(s) might try to fill in which again leads to a conflict or war between the dominant power and rising power(s).
The present situation in the South Caucasus, thus, resembles the period described by the power transition theory. Other external powers, including Iran, Turkiye, the EU and United States try to benefit from Russia’s diminishing influence over the region and increases their power. Particularly, for Iran, the “encroachment” of the external players into the South Caucasus is inadmissible. The Russia-Ukraine war complicated the regional geopolitics for Iran as the European Union (EU) and United States have increased their influence in the South Caucasus by boosting their mediating role in the Armenia-Azerbaijan peace process, effectively sidelining Russia therein and deploying a monitoring mission to the Armenia-Azerbaijan border in the aftermath of Prague summit (October 6). Against this background, increasingly closer relations between Israel and Azerbaijan and the emerging possibility of the formation of Israel-Turkiye-Azerbaijan trilateral cooperation platform further enrage the Iranian authorities.
Tehran is determined to use military and other instruments to fill in the power vacuum emerges in the region in the wake of Russia’s decline. In this endeavor Iran effectively enjoys the support of Armenia whose leaders try to use the Iranian card against their common enemies of Azerbaijan and Turkiye. The recently growing ties between Armenia and Iran have provided Tehran a useful chance to get into the South Caucasus more assertively and form a de-facto alliance against the two Turkic states. Towards this end, Yerevan and Tehran are clearly building up their cooperation in various spheres, including military and economy. Apart from aiming to boost bilateral trade turnover from $700 million to $3 billion, Iran is also discussing supplying combat drones to Armenia.
That said, the hegemony Russia acquired over the South Caucasus in early nineteenth century is fading and with it the security order it built in the region is rapidly eroding. This process might be accompanied by violent conflicts and wars amongst different regional and external actors. For now, the major security threat to the regional stability is Iran and the alliance it builds with Armenia.
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