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Georgian accent on energy issues- Adam Lamberd


I. Introduction

For many centuries Georgia has been a central cultural and political power in the Caucasus ((The Caucasus consists of three independent states (Georgia, Azerbaijan and Armenia) plus autonomous republics of the Russian Federation: Daghestan, Chechnya, Ingushetia, North Ossetia, Kabarda and Balkaria, Karachai and Circassia, Adygea. Geographically, the parts of Stavropol, Krasnodar territories and northern parts of Turkey and Iran must be considered as the region also.)) It occupied, and still does, pivotal geopolitical position in the region. Geopolitical formula for the Caucasus is simple – control over Georgia means control over the whole region.

Strategic importance of its location led to numerous attempts by neighbouring powers to gain control over the territory. In the ancient times strategic Silk Road led through the country which is situated in the central part of the Caucasus. It is possible to connect Asia and Europe, East and West, and North with South through Georgia.

The country is located in the actual crossroad of civilisations. This raised strategic significance of Georgia after the collapse of the Soviet Union. Great powers as Turkey, Iran and Russia restarted their struggle for dominance in the region after 1991. It became much more acute when the new fields of hydrocarbon resources were found in the Caspian Sea. The United States (US) and European Union ((The European Parliament’s 2004 Gahrton report recognised the region’s growing importance See ‘Report on the European neighbourhood policy’  2004/2166 INI European Parliament, Committee on Foreign Affairs, Rapporteur: Charles Tannock, 7 December 2005, A6-0399/2005, p. 10))   (EU) also declared their interest in the region. Washington even named the Caucasus as a zone of their vital national interest. The main EU concern was the just appeared opportunity to improve energy security, which became a significant factor driving the EU engagement with the Caucasus. The need to ensure reliable and stable export routes for Caspian hydrocarbons was obvious. Georgia became an irreplaceable land bridge between Asia and Europe once again. It physically linked the Caspian Sea region and Central Asia with the Black Sea and Western Europe. This role has been boosted with the commissioning of the Baku-Tbilisi-Ceyhan (BTC) and Baku-Tbilisi-Erzurum (BTE) export pipelines.

 The policy of western countries, which seek to diversify energy sources in order to secure supply and avoid over-reliance on any one country, includes not only control over the transportation route. The part of this security is stability of transit countries. That is why organisations such as the EU and NATO consequently have a keen self-interest in the Caucasus. Their role in Georgia is expected to grow at least until the importance of the Caspian hydrocarbons is growing.

 The goal of this article is to examine the role of Georgia in the process of ensuring European energy security. The evaluation of the country’s economy, infrastructure and energy sectors in the context of security will help make prognosis of a possible situation development. Brief analysis of the actors’ interest and their policy in the region will define possible threats for Georgia and stability of the transporting routes.

 II. Strategic significance of the region

The Caucasus is one of the most attractive regions for neighbouring powers. For centuries lasted struggle over the Caucasus between different empires proved its significance. Hegemonic powers such as Ottoman and Persian empires used this region as a base to spread their influence.

The political-strategic and economic importance of the region became ground for involvement of many states and organisations nowadays. Iran, Turkey, Russia, the USA, NATO and the EU clearly declared their intentions in the Caucasus. They are interested in gaining: 1) control over the reviving Silk route (the modern name of it is TRACECA); 2) springboard for spreading influence further (different powers are oriented to different directions); 3) access to the abundant energy sources.

At the end of XX century discovered new oil and gas fields in the Caspian Sea (Azerbaijan) and the Central Asian states (Kazakhstan and Turkmenistan) increased significance of this region at the time of growing demand. Moreover, the importance of the region is growing as a result of Western energy policy of diversification. It is known, that dependence on resources from Russia and Central and Eastern European countries is regarded as a threat for their national security. ‘Energy is what makes Europe tick. As without energy Europe’s citizens living standards would be gravely compromised, in that its economic wealth and societies would break down. Hence energy security is a cornerstone of our society. Europe’s dependence on imports with its dependence on limited suppliers and infrastructures only, renders its economy and citizens’ well-being more vulnerable to a possible interruption of its energy supply. Yet, ensuring the continuity of service delivery is not only about ensuring energy supply, but also about the integrity of infrastructure that generates and transmits supply.’ ((White Paper. A Global European Approach for Energy Infrastructure Protection and Resilience. 2009. European Organization for Security. P.4.))

 There is enough natural gas in the Caspian to justify construction of big pipelines system and other elements of infrastructure that would connect gas fields in Turkmenistan, Kazakhstan, Uzbekistan and Azerbaijan to Europe. The region can supply aggregate of up to 60 billion cubic meters of natural gas every year, allowing Central and Eastern European countries to reduce their dependency on Russian gas. The Caspian Sea region contains about 3-4 percent of the world’s oil reserves and 4-6 percent of the world’s gas reserves. ((Although the Caspian has been lauded as the new Middle East, current proven reserves, according to the BP Statistical Review of World Energy, indicate a greater similarity with the North Sea than with the Persian Gulf. Figures are taken from: BP Statistical Review of, June 2007, ))  As Haas, A.Tibold, V.Cillissen noted, Caspian reserves contain much less hydrocarbons than the Middle East (the latter estimated about 34 per cent of world gas and 65 per cent of world oil) but it is enough to satisfy basic needs of Europe in the near future. ((Marcel de Haas, An drej Tibold, Vincent Cillissen. Geo-strategy in the South Caucasus. Power Play and Energy Security of States and Organisations. 2006. Hague. Clingendael Institute. P.12.)) Besides, during the latest EU summits it had been decided to increase usage of renewable energy and thus to decline the dependence on hydrocarbons import.

 One can argue that in itself the Caucasian share of global oil and gas reserves is not considerable.Moreover,in the context of the uncertainty over the reliability of Persian Gulf supplies and eagerness of Russia to use energy delivery as a power tool, the transport of Caucasian and Central Asian (Kazakhstan and Turkmenistan) energy resources to the West is gaining vital importance. Because of different geopolitical and geo-strategic reasons, which will be discussed later, Georgia was chosen as a main transportation route. This choice made the country a very important part of the transit chain. The new transport routes through Georgia (Baku-Tbilisi-Ceyhan (BTC) for oil and Baku-Tbilisi-Erzurum (BTE) for gas hailed the end of Russian monopoly on the transport of energy supplies in the Eurasian region and was greeted by most local and regional players as well as global ones.

The BTC and BTE pipelines strengthened the economic security of both Azerbaijan and Georgia. Two countries actually withdrew from the Russian sphere of influence and approached closer to the West. They also helped to boost security of Georgia and Azerbaijan, by strengthening their political and economic stability thus increasing the involvement of external actors in the region. Although, Georgia and Azerbaijan are small countries in terms of territory, they are at the same time increasingly important as energy corridors. The region is playing a key role in enabling European countries reduce their dependence on Russia and the Middle East.

 Bearing in mind that energy security consists of the reliable availability of usable energy supplies along with economic price levels, sufficient quantities, and timeliness, it makes sense to evaluate other significant for national security factors also. The best way to do so laysthrough analysis of the interest of the global and regional players in the Caucasus.

It has to be noted that the main obstacles for development in the Caucasus and for ensuring the delivery of the hydrocarbons to the Western markets are ethnic conflicts. They increase vulnerability of stability and economic growth. Conflicts between local states cause tension between global and regional powers. Such tensions can easily develop into armed conflicts or instability on a larger scale. This in its turn would affect both the political and energy security state of the actors involved in conflict. Other states, that are not directly involved, may also be affected by it. ‘Thus, the security and energy situation in the South Caucasus is of interest to many local, regional, and even global actors. Importance of the Caucasus in the field of energy stability in the Caucasus is a vital requirement for the uninterrupted transport of Caspian oil and gas’. ((Ibid. P. 12)) 

III. Global and regional powers in the Caucasus

III. 1. Intentions and tools of Russia

 Due to the size of its territory and population, nuclear capabilities and permanent seat in the United Nations Security Council Russia can be considered as a global power. Moscow regards South Caucasian states as its traditional backyard. Russia even developed the concept of ‘The Near Abroad’, that is emphasizing Moscow’s influence and ties with republics of the former USSR.

Although it lost former influence in the neighbourhood, Moscow is still a very important player in the region. The Kremlin counters increasing involvement in the Caucasus by the West. The most powerful man in the country Vladimir Putin has insisted that Moscow will continue trying to influence affairs in former Soviet states, dismayed at perceived Western attempts to ‘manufacture democracy’. Moscow is evaluating the EU and US involvement in the South Caucasus in terms of zero-sum policy.

 The huge country with obsolete economy still cherishes a hope to regain the power possessed by its predecessor – the USSR. main interests of Russia in the South Caucasus are: 1) to secure its position as the main regional player, 2) to control pipeline systems in the region and the resources of the Caspian Sea and 3) to ensure dominance over the South in order to safe its presence in the North Caucasus.

However, due to the economic weakness mentioned above, capability Moscow of to achieve its goals is restricted. There are three main tools that Russia utilizes dealing with former USSR states: 1) energetic leverage (prices of crude oil and gas plus control over transportation routes) ((During the Soviet era, pipelines were constructed to serve the needs of the Union. Most of the former republics still use the same infrastructure. New independent infrastructure development conducted by local players is going on simultaneously with Russian attempt to unfold new routes.)) 

 ; 2) military power and coercive diplomacy (military menace and even aggression); 3) engagement in the problem of unsolved conflicts. Using these tools Russia is hampering the establishment of strong, politically and economically stable democratic states in the neighbourhood. In other words Moscow is seeking to reassert its waning hegemony by means of political posturing, sabre-rattling and manipulating separatist conflicts. Even brief analysis of Russian interior situation shows that priority of mentioned tools and goals will not be re-examined in the near future (at least for 12 years). ((It is hardly imaginable that situation and attitude will change while President Vladimir Putin is in the office. Nobody doubts that he will win both terms he is eligible for.)) 

III. 1.1. Energy leverage

Russia is using its position as the primary energy supplier for many countries in Central and Eastern Europe to influence their policy. Some countries in the region fully depend on Russian gas imports, others partially. The most vivid example of using energy cuts to coerce other members of The Commonwealth of Independent States (CIS) was exposed in December 2005 when Russia stopped delivering resources to Ukraine. Russia forced it to pay a higher gas price only because the country declared the change in its political course. For the same reasons Moscow decided to cut Lithuania from pipeline ‘Friendship’ in 2006.

Energy leverage was utilized pressuring Georgia after E.Shevardnadze’s regime was overthrown. Tbilisi suffered from constant electricity shortages while Russia controlled Georgian energy market. Moreover, Georgian attempts to replace Russian peacekeepers deployed in Abkhazia and South Ossetia by international contingents led to

 Russia’s economic bans on the import of Georgian wine, mineral water and agricultural products. Tensions raised high and eventually, in November 2006 Gazprom more than doubled gas price for Georgia.

However, Tbilisi managed to reduce its economic and energetic dependence on Russia. First of all, it re-routed the main trade flows towards other countries. Then Georgia ensured country’s energetic independence. Tbilisi managed to modernize its hydropower system and became a state-exporter of electricity and finally it started importing gas and oil from Azerbaijan. Of course, Georgia is still vulnerable in terms of energy security. Russian private company, that is likely to be in connection with Kremlin, owns the main electricity distributing station in the country. Moreover, Russia is almost unable to press Georgia using energy leverage any longer. That is why Moscow replaced energy tool by military one.

III.1.2. Frozen conflicts and military threat

After the collapse of the Soviet Union some former republics decided to follow the way paved by the Western democracies. Others were more inclined to stay within CIS due to specific reasons. In Georgian case itwas the problem of unresolved or frozen conflicts with Abkhazia and South Ossetia (the region of Inner Kartli). Russia, the influence on separatist movement of which is doubtless, was regarded by Tbilisi as a main partner solving this problem. However, Moscow’s attitude was different.

Frozen conflicts for Russia were and still are the instruments that help ensure country’s interests in the region. Russia emphasizes the threat of resumption of fighting in such territories and tries to control them by deploying troops of ‘piece-keepers’. It is true that frozen conflicts undermine regional stability and develop conditions for security challenges such as terrorism, organised crime and illegal trafficking. They endanger efforts to boost regional co-operation, hamper economic development. All these factors endanger stability of energy resources transportation and provide Russia with opportunity to propose its ‘secure’ infrastructure to transport oil and gas.

The war between Russia and Georgia that broke out in 2008 eventually made the role of Moscow in conflict resolution process clear. In fact, Moscow retreated off the process and unveiled its plans by recognizing two break-off republics because of fixed pro-western orientation of Georgia. It should be noticed that the decision of Russia to attack Georgia was actually driven by the fear of a ‘domino-effect’ in this region. Georgia has a leading position among the three South Caucasian states in terms of governmental and public support in the process of integration to NATO (and the EU). Azerbaijan and even Armenia are likely to follow Georgia after it becomes a member-state.

The second strategic goal of the war for Russia was the attempt to restore the military balance with NATO on the southern border. The Kremlin deployed additional troops in both separate republics of Georgia. Having done this ‘Russia violated Treaty of Conventional Armed Forces in Europe (CFE) over flank limits’ ((Pavel Baev, Russia Refocuses its Policies in the Southern Caucasus, Security Dialogue: Caspian Studies Program, 2001, p. 8))  , and ensured its military presence in the Caucasus for many years. One of key arguments of Russia regarding the adapted in 1999 CFE Treaty has been to remove Russia from the so-called flank regime, which exists in the northern and southern flanks of the CFE Treaty area of application.

III.2.1 US and EU in Georgia: goals and means

The US and EU are two leaders of the democratic world that seek to spread their influence, promote democratic values and create stable environment in the Caucasus. Following this tactics they attempt to ensure long-term development and prosperity for the region. Strengthening US positions in the South Caucasus is one of the key elements of Washington’s global strategy. ‘Every US president since 1992 has claimed that the commitment to the Caspian region is a strategic priority of his country’. ((Von Stefan Meister. A New Approach towards the South Caucasus. 04.03.2011. 

 Both the US and EU estimate the region as an independent alternative supplier of hydrocarbons. The possibility to circumvent Russia transporting oil and gas makes it even strategically important. The EU is eager to reduce its dependence on Russian supply which varies from around 30-40 percent of consumed natural gas in the Western Europe, and close to 100 percent in most of the Central European and Eastern European countries that inherited Soviet infrastructure.

The specific aim that Washington is eager to achieve cooperating with region is to ensure a foothold for further expansion or, at least, control over unstable Afghanistan and unpredictable Iran. For the USA – with its heavy military involvement in Iraq and Afghanistan the Caucasus gained vital significance. Deterring Russian influence in the region is another reason for the US being in the Caucasus. According to the Washington strategists, another power that is needed to be deterred in the region is Iran. By containing Iran the US seek to prevent Tehran from influencing the Caucasus and Central Asia or infecting these territories with radical Islam. The US is implementing containment strategy by surrounding Iran with a buffer. Integrated into NATO Georgia would be part of it. Simultaneously Washington would ensure security of transit routes for oil and gas. Moreover, according to Z. Baran, the US at the dawn of third millennia has started regarding the South Caucasus as part of a larger strategy of creating a zone of stability from the Balkans to Central Asia. ((Zeino Baran, ‘the Caucasus: Ten Years after Independence’. The Washington Quarterly. 2002. P. 222)) 

 The US and EU are considered as warrants of hard and soft security in the Caucasus. While the EU is developing social stability via Neighbourhood Policy ((There were some other programmes worth mentioning: TACIS, TRACECA and INOGATE.))  in the Caucasus, Washington is actively promoting democracy and military cooperation ((The amount of the US humanitarian aid to Georgia is incomparable. The aid levels of the US to Armenia and Georgia have been among the highest per capita in the world. However, military cooperation is considered as essential for the region.)) 

 Since ‘9/11’, the US political goals have been supplemented with security objectives. No South Caucasian country is excluded from the security cooperation programmes, but the main attention of Washington is concentrated in Georgia. Train and Equip Programme was followed by a Sustainability and Stability Operations Programme in Georgia after 2002. These programmes, as it was noted by Yalowitz and Cornell, were aimed at enhancing antiterrorism and border guard capabilities and to modernise Georgian army (( K. S. Yalowitz, S. Cornell, ‘the Critical but Perilous Caucasus’. 2004 Orbis, A Journal of World Affair. P 112)).In addition to this, the US has also attempted to engage and solve frozen conflicts, but these attempts met little success so far.

 The US-Georgian military cooperation, however, has not been one-way. In return for US Assistance, Georgia has deployed military units in NATO and US-led operations in Kosovo, Iraq and Afghanistan.

US support for Georgia does not consist only of military cooperation. It also encompasses political and energy dimensions. In the political field, the US is in favour of integrating Georgia into NATO. As for the energy, the US realized the importance of the South Caucasus not only for geopolitical but also for geo-economic reasons, especially for energy security. Because of this the US actively encouraged the building of the BTC and BTE pipelines, by which energy flows became diversified. Thus, it is fair to say, that military, political and energy interests determined the intensive engagement of the US in Georgia and the South Caucasus.

III.2.2. Battle over transit routes


 Some analysts describe the issue of pipelines in the Caspian region as a ‘battle for domination’. In other words, the future of the Caucasian region could be determined by the control on pipelines running through it. According to this point of view, the US along with the EU is seeking to politically and economically isolate former Soviet republics from Russia. Russia and the US are disputing not about independent oil transportation from the Caspian region and securing transit revenues but predominantly about securing geopolitical influence in the region. The success of the US and EU initiated transportation projects, according to some analysts, ended an almost century-old Russian stranglehold on the oil and gas resources of the Caspian. The new pipelines clearly weakened the influence of Russia in the region and therefore are regarded as hostile by the Russian Government, but ‘war’ is not over. Moscow might choose to cause more trouble in the Caucasus. It has fomented rebellions in the past and can do so again. Georgia, through which the new pipelines pass, is particularly vulnerable because of the secession of Abkhazia and South Ossetia. ((The EU imports 50% of the energy it consumes, of which about 45% of imported gas comes from Russia. The 2008 Russia-Georgia conflict affected the traffic of the BTC pipeline, though the South Caucasus pipeline, Baku-Tbilisi-Erzurum-BTE, which runs from Azerbaijan through Georgia, still sends very limited quantities of gas to Europe. The war between Russia and Georgia in the August 2008 created a funding problem for Nabucco large enough to make the future of the project doubtful as of early 2010. See N.Edilashvili, ‘Georgia – Oil and Gas Politics’. 2010. ))  Further analysis of existing and planed pipelines helps to draw full picture of the situation in the region.

Baku-Tbilisi-Ceyhan. In September 1994 a consortium of twelve, mostly Western oil companies with BP as an operator, signed a contract with the Azerbaijani government to transport oil from three fields (Azeri, Gyuneshli, Chirag) to world markets. The discussion over the transportation route started. There were several options ((The shortest and easiest route lay via Iran, but the US ruled it out because of the tensions between two countries. An alternative proposal via Armenia was unacceptable to Baku due to the unresolved conflict over Nagorno-Karabakh. The diversification of the energy resources policy made the route via Russia impossible too.)) , but due to political reasons the way proposed by Turkey and Georgia found favour with Washington. Transportation via Georgia to Turkey would anchor all these countries to the West. Moreover it would undercut Russian influence in the South Caucasus. The Baku-Tbilisi-Ceyhan (BTC) oil pipeline became a doubtlessly profitable option after many Kazakh producers decided to join this project. The Kazakh government joined the BTC-project on 16 June 2006. They ensured filling BTC with three-quarters of Kazakh oil for ten years period. ((Marcel de Haas, Andrej Tibold, Vincent Cillissen. Geo-strategy in the South Caucasus. Power Play and Energy Security of States and Organisations. 2006. Hague. Clingendael Institute. P.14.)) 

 In May 2005 BTC oil pipeline came on-stream. The 1,768-kilometre pipeline’s capacity is a million barrels of oil a day. The 692-km South Caucasus Pipeline (SCP or Baku-Tbilisi-Erzurum – BTE) runs parallel to the BTC and transports gas from the giant offshore Shah Deniz field that is in the Azeri sector of the Caspian Sea through Georgia to Erzurum in Turkey, where it connects with the Turkish domestic supply network. Once it reaches full capacity the pipeline will be able to export 16 billion cubic metres of gas per year. Politicians and analysts believe that these pipelines boosted the economic security in Azerbaijan and Georgia and, as a result, increased overall stability.

One more pipeline project is planned to start operating in 2017. White Stream pipeline will link Azerbaijan to Romanian port Constanta via the Black Sea with an extension to Ukraine, with the planned throughput capacity of 32 billion cubic meters a year.


EU: Nabucco pipeline. Nabucco (( Route: Turkey – Bulgaria – Romania – Hungary – Austria 

Length: 3300 km

Flow capacity: 31 billion m3

Project cost: € 5 billion

Consortium: Nabucco Gas Pipeline International

GmbH; shareholders Botas, Bulgargaz, Transgaz, Mol, OMV and RWE

Raw material sources (planned): Azerbaijan, Central Asia (Turkmenistan and Kazakhstan), Iran, Iraq and Egypt; no supply contracts have been signed

Implementation progress and future prospects of the project:

• 2002 – memorandum of understanding on the project signed

• 2004 – consortium established and feasibility study carried out

• 2008 – final investment decision expected to be made

• 2010 – agreements ratified by participating countries

• 2017 – building work planned to be completed and supplies launched))  is the strategic gas pipeline project for the European Union. A joint declaration supporting this gas pipeline was signed in 2006. Nabucco is set to deliver Azeri – and later to be followed by Kazakh and possibly Turkmen – gas from the Caspian region through Azerbaijan, Georgia, Turkey, Bulgaria, Romania and Hungary to the Baumgarten terminal in Austria, from where it will be distributed around Europe. Nabucco is expected to contribute to the diversification of sources and routes of natural gas supply and thus improve energy security in Europe. After the Russian-Ukrainian gas crisis in 2006 Nabucco became the most important EU gas pipeline project. 

Russia’s response. The Kremlin counters Western countries’ attempts of re-routing energy supply from the South Caucasus. Russia uses different methods to convince actors that they should seriously consider the potential of Moscow resistance to their projects.

As one response Russia signed the agreements with Bulgaria, Serbia and Hungary facilitating implementation of South Stream (( Route – initial idea: from Russia through the Black Sea bed to Bulgaria, then two pipes: a) to Serbia (or Romania), Hungary and Austria b) to Greece and Italy, possible branch pipes;

Length: 900 km (maritime section)

Flow capacity: max 63 billion m3

Project costs: (initial estimates) between € 7 and 10 billion

Consortium: n/a; ENI and Gazprom established South Stream company to carry out a feasibility study for the project

Implementation progress and future prospects of the project:

• mid 2007 – memorandum of understanding between ENI and Gazprom signed

• November 2007 – company which was expected to carry out the feasibility study for the maritime section by the end of 2008 established

• 1st quarter of 2008 – agreements on building the gas pipeline signed with Bulgaria, Serbia and Hungary, 2010 agreements with Croatia, 2011 agreements with Slovenia.

• 2011 – a shareholders’ agreement was signed between Gazprom, Eni, Électricité de France and Wintershal.))  , which is an alternative project to Nabucco. The effects of this action could be felt at once. The doubts about the possibility of completion of the Union’s strategic project appeared. Nevertheless, it seems that Nabucco will stay on the agenda anyway. Although Brussels has officially recognised the possibility of the coexistence of the two projects, it has emphasised Nabucco’s significance for the Union. The EU clearly demonstrated the will to continue activities aimed at building the pipeline. It should be noted, that none of the countries which have supported the Russian South Stream project have given up the idea of Nabucco.

The second moment is, that all the above mentioned pipelines (BTC, BTE, Nabucco) have to cross the territory of Georgia, the country that

Map-not to be scaled, just indicative.

Map-not to be scaled, just indicative.

is suffering from secessionism. Attacks or sabotage on these pipelines are possible. Moreover, Russia still has leverage on Kazakhstan, participation of which in all these projects is very important.

The success in implementing its projects, such as the subsea Blue Stream (pipeline from Russia to Turkey with the capacity of 16 billion cubic meters a year) gas pipeline or South Stream, would have been evaluated by Russia as the failure of American pipeline strategy in the Caucasus.


III.2.3 Turkey as a strategic ally of Georgia


One of the principal actors in the region is Turkey. Its influence in the Caucasus is more than tangible. Ankara is one of the main economic partners for Azerbaijan and Georgia. Being an ally with the US and EU, Turkey makes necessary contribution into the achievement of their goals.

The relations with Armenia are marred by Azerbaijan-Armenian conflict over Nagorno-Karabakh, but still Ankara is trying to increase cooperation and trade between two countries. With Baku it is constructing its relations based on the principle ‘Two states – one nation’. For Turkey the main tool dealing with Caucasian countries is trade and military cooperation. Thus Ankara is trying to become the main political player in the region.

Nonetheless, Ankara strives to spread its influence even further to the North Caucasus. Trying to achieve this goal, Turkey employs Islam and ethnic bonds with some peoples (Karachay and Balkar) who live there. Abundant Diasporas of Caucasians can be used by Ankara as pressure leverage in the future.

After the trade war between Georgia and Russia started Tbilisi succeeded to reroute its export and import to other countries. Turkey became the main trade partner for Georgia. ‘Their bilateral trade increased almost eightfold from 2002 to 2010. Export of Georgian products to Turkey augmented fourfold – from 53 million $ in 2002 to 216 mln. $ in 2010. Turkish import to Georgia amplified almost tenfold – from 89 mln. $ in 2002 to 888 mln. $ in 2010.’ (( Ivane Chkhikvadze. Zero Problems with Neighbours: The Case of Georgia. Turkish Policy Quarterly. Vol.10. No: 2 / SUMMER 2011. P.80.)) 

 Political relations between Turkey and Georgia are also quite good. Turkey supports Georgia in strengthening its position in the region. Furthermore, military cooperation is going on. Allegedly, officers from Turkey, Azerbaijan and Georgia would regularly carry out command staff exercises practising the protection of the pipelines in the region.

Energy sector is a developing sphere of cooperation. Construction of new high voltage Black Sea High Voltage Transmission Line 400-500 kV to Turkey will be completed in 2012. Construction of additional interconnection with Turkey is under negotiation. Current time existing and plannedtransmission lines to Turkey are going to provide country with up to 2000 mV a year. By 2013 Turkey is expected to be a net importer of electricity. Its demand during the last decades grew about 7.6 per cent per annum at an average rate. (( The figures are taken from the presentation ‘Hydro Potential and Investment Opportunities in Georgia’ of the Ministry of Energy and Natural Resources of Georgia.))  In February 2011, Energotrans, a company 100% owned by Georgian State Electro System, launched the construction of a 500/400/220 kV Akhaltsikhe substation located near the Turkish border.

The substation is the key component of the high voltage line project. The infrastructural works, such as access roads, workers dwellings and a concrete factory have already been completed. The foundations for the substation equipment and buildings are in the final stages of completion.

The thing that could really boost Turkish and Georgian cooperation is Kars-Akhalkalaki railway which has been under discussion for over a decade. It will be able to transport 1 million passengers and 6.5 million tons of freight at the first stage. This capacity will then reach 3 million passengers and over 15 million tons of freight. The project is planned to be finished in 2012.

The 98-km link between Kars in Turkey and Akhalkalaki in Georgia is a final link in the region network, connecting Baku with Istanbul. It will also help Georgia to integrate the remote Samatskhe-Javakheti district with the centre. The construction is financed by Azerbaijan and US.


III.2.4. Iran as a possible threat for Georgia


Tehran is trying to fill in the gaps that have been left in the Caucasus by other actors. Iran’s goals in the South Caucasus include preventing Western powers (especially US and Turkey) from gaining influence. It wages mutually beneficial trade with regional countries thus diminishing US economic blockade. Hostile politics towards the Western countries and their response determined Iran’s convergence with Russia and its ally in the Caucasus – Armenia. Iran developed good relations with Armenia because of difficult relations of both countries with Azerbaijan. Tehran provides Armenia with natural gas and receives electricity in return.

Iran has developed its own strategy to overcome Washington blockade. Tehran seeks to get access to political, security and economic cooperation that it needs through non-Western based organisations, such as the Sanghai Cooperation Organisation (SCO). An important remark that should be made here is the fact that the Asian energy market is less attractive for both Russia and Iran because the price they get is considerably lower than on the European market. Additionally, the aim of the US is not to allow Iranian gas get into China. Further developments may prove whether Iran finds a way to evade further isolation of the West.

Since the independence of Azerbaijan, a great deal of suspicion has arisen between Tehran and Baku due to the religious and ethnic conflicts. Azerbaijan with a sizable Shi’ite community feared the export of Islamic ideas from Iran in particular. Another obstacle in their relations is the Caspian Sea status. Moreover, the dominate nation in Iran is Azeri (estimates amount up to 24 per cent of Iranian population) ((Karl de Rouen Jr. and Paul Bellamy. International Security and the United States. 2008. Praeger Security International. Westport. P.344.)).

 Tehran’s trials to use this card dealing with Azerbaijan can provoke turmoil near Georgian frontiers. Another threat to stability is that many Iranians are not happy with ruling regime, which can be overthrown any time.

IV. Policy and goals of Georgia

IV.1.1. Independence of energy supply


After The Rose Revolution the new Georgian government started reforms in the energy sector. It declared these short-term priorities:

• Eradication of the energy deficiency;

• Rehabilitation of energy infrastructure;

• Liberalization of the energy sector and improvement of its financial conditions;

• Privatization of the energy distribution system and certain hydropower stations.

All these goals were achieved in quite a short period of time with the US financial support. Between 1995 and 2003, Georgia received approximately $500 million in grants for electricity production, and an additional estimated $2.5 billion towards redeveloping its energy sector in combined international assistance, private investment, pipeline construction, and gas and electricity loans. After a while the country forgot about chronic power cuts and became an electricity exporter and its potential is just growing. As it was noted by the officials of Georgian Ministry of Energy, only 18 percent of hydro potential of the country is utilized yet. There are more than 300 rivers in Georgia significant in terms of energy production. (( 53 Hydro Power Plants (HPP) are offered for investors each up to 100 MW. Hydro potential of Georgia can be used to offset part of the growing demand in surrounding countries and Europe. Total installed capacity of 1500 MW and annual generation up to 5 TWH.

Projected investment 2,5 bn $

Construction works to be finished 2014-2017

6 new HPP construction were launched in 2009-2010

8 more will be launched in 2011.

The figures are taken from the presentation ‘Hydro Potential and Investment Opportunities in Georgia’ of the Ministry of Energy and Natural Resources of Georgia.)) 

 Georgia succeeded in developing its whole infrastructural system. The US was the main donor for it. Washington donated 1.1 billion $ to Georgia and bulk part of them went to infrastructure rehabilitation, roads and railways, energy infrastructure – grids and pipelines, and regional development funds.

United States and Georgia signed a Charter on Strategic Partnership. Section III of the Charter says: ‘The United States and Georgia intend to expand cooperation to enhance job creation and economic growth, support economic/market reform and liberalization, continue improving the business climate, and improve market access for goods and services. We recognize that trade is essential for promoting global economic growth, development, freedom, and prosperity. We welcome the emergence of a Southern Corridor of energy infrastructure. The United States endeavours to facilitate the integration of Georgia into the global economy and appropriate international economic organizations’ ((United States-Georgia Charter on Strategic Partnership, Chapter III.)) . Moreover, the US is committed to assisting the post-war reconstruction and financial stabilization of Georgia. Washington promised to invest 4.55 bn $ for reconstruction after 2008 and is going to implement policies and programs that reduce poverty in the country and promote the welfare of all Georgian citizens through investments and sustained improvements in the health and education systems.

In addition to the overview of energy situation in Georgia, it has to be noted that country has not achieved the full energy independence from Russia. Russian Joint-Stock Company Unified Energy Systems of Russia (RAO-UES) bought 75% controlling interest in the Tbilisi electricity generator Telasi for $26 million in 2003 ((Press-release of the RAO-UES. .

 Through its 50% shares in the Sakrusenergo (a Georgian–Russian joint venture), RAO-UES also acquired ownership of a significant amount of all the high voltage power lines in Georgia. Thus, given that primary transmission line of Georgia, Kavkasioni, originated in Russia, that the capital residencies and major state agencies (1.6 mln. customers, or 30% of the population) are now served by RAO-UES it can be noticed that Russia could have a significant influence on Georgian electricity market.

Anyway, as it was noticed above, Georgia became an essential part of the Western energy corridors and now the US and EU are really concerned about stability in the country. Doubtlessly, being a part of transit chain for Georgia means political support and economic development. That is why these projects are vitally important for Georgia. Moreover, transit fees paid to Georgia for energy transports are substantial asset to the nation’s economy. The country imports all of its natural gas supply, virtually all of its petroleum products, but Georgian government managed to ensure its continuity, and Russia is unable to cut energy supply to Georgia anymore.


IV.1.2. Economic Conditions


Economic outlook of Georgia is promising. As a small open economy Georgia depends on developments of neighbouring countries for its own trade and economic growth. Georgian economy sustained GDP growth of more than 10% in 2006-07, based on inflows of foreign investment and government spending. Due to the global and regional economic recovery and the return of investor confidence after the war ((Armed conflict with Russia over the break away regions Abkhazia or South Ossetia had huge impact on Georgian policy, economy and social life. The key strategic implication of this conflict is that Georgia now finds itself, yet again, in a “no war, no peace” situation with regard to Russia. However, this conflict helped to strengthen Georgian Euro-Atlantic orientation and to magnet more support from the US and EU.)) of 2008 GDP growth in the country increased more than 6.1 per cent in 2010 and 5.5 in 2011 (( ))

 Georgian economy suffered in 2008-2009 from the after-effects of the world economic downturn and the Russia-Georgia conflict. The GDP growth slowed to 2% in 2008 following the August 2008 conflict with Russia, and the economy contracted by nearly 5%, but began to recover in 2010. The Economist Intelligence Unit (EIU) estimates that gross domestic product (GDP) of Georgia contracted 3.8% in 2009, but resumed growth. According to some analysts, inflation in Georgia increased slightly from 7.1% in 2010 to 8.4% in 2011. Consumers are facing rising food prices and farmers are confronting high seed and fuel prices.

Economic activities include agriculture, mining, and a small industrial sector. Agricultural products includes cultivation of grapes, citrus fruits, and hazelnuts; mining of manganese and copper; and output of a small industrial sector producing alcoholic and non-alcoholic beverages, metals, machinery, aircraft and chemicals. Areas of recent improvement include growth in the construction, banking services, and mining sectors, but reduced availability of external investment and the slowing regional economy are emerging risks.

Civil conflict and poverty have spurred the emigration of about one-fifth (1 million) of the population since 1991. A large percentage of the working population has migrated for work. Their remittance contributed to the Georgian economy recovery.

Georgia is a member of the World Trade Organization. In 2010, Georgia exported $1.58 billion in goods and imported $5.1 billion. Turkey, Azerbaijan, and Ukraine were main trade partners of Georgia. Main Georgian exports during 2010 were ferrous metals, automobiles (through reselling rather than production), ferrous scrap, and gold and copper production. The US exports to Georgia were $300 million during 2010 (slightly less than those of the previous year) and the US imports from Georgia were $193 million (nearly three times those of the previous year).

Georgian State Statistics Department has reported that total foreign direct investment in Georgia was $553 million in 2010, and that the largest investors were the Netherlands ($143 million), the United States ($108 million) and Russia ($51 million). This level of foreign direct investment remains below that of the pre-2008 conflict period, and eventually could harm economic growth, according to the International Monetary Fund. However, stability and confidence index of Georgia is high and investors are turning back to the country. The constructions on Baku-T’bilisi-Ceyhan oil pipeline, Baku-T’bilisi-Erzerum gas pipeline, and the Kars-Akhalkalaki Railroad contributed to the stability of Georgia.

In February 2011 President M.Saakashvili called for major economic progress over the next five years. He declared an intention to double agricultural production and exports, to half the unemployment, and to boost salaries by 50%. He also called for boosting tourism, which is becoming a significant part of Georgian economy.

Georgia succeeded in implementing some reforms. The country has historically suffered from a chronic failure in tax collecting; however, the government, since coming to power in 2004, has simplified the tax code, improved its administration, increased tax enforcement, and cracked down on corruption.


IV.1.3. Regional cooperation


Georgia regards its stability and sustainable development in the context of the region. The Georgian government try to maintain mutually useful relations not only with global and regional powers but local actors also.

Having regained independence after the collapse of the USSR the two closest neighbours of Georgia Azerbaijan and Armenia are considered as small states. Being small states first of all they endeavour to survive. When building their foreign policy they have to take into account the opinion of the great powers. Despite that they usually are capable of protecting and fulfilling their own national interest within a certain range. Thus they can and they do support developing relations with Georgia.

Azerbaijan. The national interests of Georgia and Azerbaijan partially coincide. Baku, as well as Tbilisi, is interested in the possibility of having a safe environment and energetic independence. In case of Azerbaijan this means military cooperation with NATO and secured transportation of Caspian oil to the Western market. Rapprochement with the West was determined by perception of Russian role in resolving Nagorno-Karabakh conflict. However, Azerbaijan endeavours to restrict its cooperation by contacting mostly with Turkey. The course of the further integration into Euro-Atlantic structures is not a choice of Azerbaijan because of the domestic situation. The ruling regime attempts to stay in power as long as possible. It supported itself with revenue from oil business. However, ‘Arab spring’ showed that the situation in the states with similar attitude towards governing can explode any moment.

Georgia and Azerbaijan relations are cooperative and developing. The largest minority in Georgia is Azeri. Baku provides Tbilisi with necessary supply of energy resources and imports cement, locomotives and other railway vehicles, mineral and chemical fertilizers, mineral waters, strong drinks, glass and glass wares, and pharmaceuticals. Visa free regime and signed agreement on free trade have boosted the trade and cooperation between the countries. (( 

Armenia. Georgia tries to behave as a good neighbour with Armenia also, despite the pro-Russian orientation of the latter. Tbilisi realizes the complexity of Armenian situation. The small country’s ultimate goal is to survive physically. All Armenian strategies are built in order to strengthen security and its military capacity. It is still in the stand of war with Azerbaijan and regards Turkey as a close ally of Baku. This particular situation forced Yerevan to get into embracement of Russia. Relations with Iran are being developed simultaneously, but Moscow is still the only strategic partner and security warrant for Armenia.

Moscow has a military base in Armenia, the latter incorporated into military organisation Collective Security Treaty Organisation (CSTO). Since Turkey and Azerbaijan are strategically more important to the US, Armenia has turned to Russia as a guarantor of its security, although at the same time Yerevan tries to maintain ties with the West. Armenia participated at a number of the US and EU programmes.

Relations with Georgia are developing in a good pace. Georgia even became a mediator state helping to wage a trade between Armenia and Azerbaijan. The trade flow is incomparable with the Azerbaijanian one, but it struck positive balance. Georgia and Armenia have visa-free regime and have signed similar agreement on free trade. Armenian minority dominates in the southern Samtske-Javakheti region of Georgia.


International organisations. Out of cooperation with global and regional powers Georgia participates in several others economic and maritime organisations. At the regional level we find the Black Sea Economic Cooperation (BSEC), the Black Sea Force (BLACKSEAFOR), the cooperation between Georgia, Ukraine, Azerbaijan and Moldova (GUAM), and the North Atlantic Treaty Organisation (NATO). The latter is the main player for Georgia, which seeks to become a member of this alliance.

The BSEC ((  was founded in 1992 and became active in 1999. Since 2004, with the accession of Serbia, the organisation numbers 12 member states: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine. Unfortunately due to some political and even military disputes like conflicts between member states, the organisation has not met its goals.

The second international organisation in the Black Sea area is BLACKSEAFOR. Efforts to establish BLACKSEAFOR were started by Turkey in 1998. Three years later, in April 2001, ‘The Black Sea Force Establishment Agreement’ was signed by six countries: Bulgaria, Georgia, Romania, the Russian Federation, Turkey and Ukraine. This organisation is militarily oriented. The original idea was the establishment of a multinational on-call peace taskforce. Among its objectives are: Search and Rescue, humanitarian assistance, mine countermeasures, environmental protection and so on. The BLACKSEAFOR is also available for operations of the UN and OSCE. However, just like the BSEC, the potential of the BLACKSEAFOR is far from realised.

 A more successful forum is GUAM – Organisation for Democracy and Economic Development. GUAM is a regional organisation comprising of four states: Georgia, Ukraine, Azerbaijan, and Moldova. The group was created in October 1997 as a way of countering the influence of Russia in the area, and it has received backing and encouragement from the US. It has been stagnating in recent years, but not all goals are achieved so far and the countries are interested in maintaining cooperation. GUAM course is oriented towards economic cooperation, especially concerning the construction of export pipelines for Caspian oil and gas to bypass Russian territory. All members of GUAM, except for Azerbaijan, are dependent on Russian gas and oil.

Officially, in 2000 NATO policy still was to limit influence in this region, and therefore the alliance was to stay on the sidelines and refrain from direct involvement. NATO was then of the opinion that regional cooperation should be promoted, such as within GUAM and that NATO members individually could be active in the South Caucasus through bilateral measures, and through working with other organisations such as the OSCE and the UN.

In regards to actual military cooperation with the South Caucasian states, NATO has applied its Partnership for Peace programme (PfP), in which partner countries carry out defence policy and military reforms and can participate in NATO exercises and operations to adapt their military organisation to NATO standards. All three the South Caucasus countries joined the PfP in 1994. Clearly, the PfP has been the primary means for the South Caucasian states to move closer to NATO.

To add, the energy security is an indications that the US and NATO are actively involved in the security of energy infrastructure in the South Caucasus. NATO and American armed forces are conducting operations to protect energy transport facilities in the South Caucasus. Allegedly, in 2005 an agreement was reached which arranged for the USA and NATO to secure the BTC-pipeline. However, Georgian, NATO and the US officials all deny any NATO or US involvement in pipeline security.



V. Conclusion


Georgia is a small country with weak economy. The ultimate goal of the country is to survive and become prosperous. Tbilisi seeks to achieve this goal through cooperating with Euro-Atlantic structures.

The country can not provide hard security by itself. The war which broke out in 2008 with Russia over the South Ossetia (Georgian province called Inner Kartli) proved it. That is why Tbilisi strategy is oriented towards getting under NATO umbrella.

Soft security includes strategic goal of Georgia to become an EU member-state. Tbilisi activities, oriented towards getting both hard and soft security, coincide with the US and EU strategic aims in the region. Bearing in mind the energetic wars waged by Russia, it can be said that independent route for transporting hydrocarbons from the different source is vitally important for the EU. Laid through Georgia these routs are also ensuring independence of the country’s energy sector. The US, in its turn, needs Georgia in order to implement its strategic goals in the Middle East, Central Asia and other neighbouring regions.

State-led aggression by Russia and possibility of spilled over turmoil had direct impact on Georgian economy and sustainable development. However, the interest of the Western countries in the region guarantees the survival of Georgia, which is an important part of the transit chain and a convenient base for further expansion. Developing economy and steps towards democracy are determining constant flow of investments into Georgia. It is clear, that in their turn foreign investments become a warrant of the country’s stability and welfare, also. (maps)


Adam Lamberd

Adam Lamberd is a Political Scientist, pursuing his PhD at the Institute of Political Science, University of Vienna, Austria






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