Perspectives of EU – South Caucasus relations

South Caucasus is a part of the EU Eastern Partnership program. Launched in 2009, Program envisages fostering relations between the EU and the six former Soviet Union republics – Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The key goal of the program was the signature of Association Agreements with Deep and Comprehensive Free Trade Area to bring about political association and economic integration. The top priority for the EU was the political and economic development of the region, as Brussels did not want to have a permanent source of instability in its immediate neighborhood.

However, despite being included in the same program, three South Caucasian republics have different backgrounds and unique set of foreign and domestic policy challenges, which makes one solution for all approach difficult to realize.

Armenia

Due to the Nagorno Karabakh conflict, Armenia is in a “no peace, no war” situation with Azerbaijan and has closed borders with Turkey. The only realistic way for Armenia to successfully counter joint Azerbaijan – Turkey pressure was the strategic alliance with Russia. Not surprisingly, Armenia is a founding member of Collective Security Treaty (later transformed into Collective Security Treaty Organization, CSTO), and hosts Russian military base and border troops. Russian state and state affiliated companies have strong positions in key sectors of Armenian economy including telecommunications, railway system, electricity production and distribution. Russian Gazprom owns 100 percent of Armenia’s domestic gas distribution network.

Armenia was and is seeking to diversify its foreign policy and develop partner relations with other centers of power involved in the regional geopolitics. Yerevan has close partnership with NATO through Individual Partnership Action Plans, seeks to develop relations with the US relying on the support of strong Armenian – American community. The development of relations with the EU is perceived in Armenia within this strategic concept – a reliable way to diversify its foreign policy and receive much needed assistance in strengthening its institutions.

Armenia welcomed the launch of the Eastern Partnership and was actively involved in negotiations to elaborate Association Agreement successfully finishing them in summer 2013. However, the diversification of Armenia’s foreign policy has clear red lines – not to jeopardize its strategic alliance with Russia as no other power was able or willing to provide the minimum level of hard security guarantees. Due to the overall deterioration of Russia – West relations after the start of the third Presidential term of Vladimir Putin and growing Russian perception of Eastern Partnership as another Western tool to encroach in its legitimate sphere of influence, Russia in Summer 2013 sent a clear message to Armenia that signature of Association Agreement would be perceived in Moscow as a hostile action. Armenia could do nothing but to cancel the initialization of Association Agreement and instead state about its willingness to enter Eurasian Economic Union (EAEU).

The 2014 Ukraine crisis which brought Russia – West relations to their lowest point since the end of the cold war created more difficulties for Armenia in its efforts “not to put all eggs in one basket”. However, former Armenian authorities had managed to do almost unthinkable. While being a member of CSTO and EAEU, Armenia launched new phase of negotiations with EU and in November 2017 signed Comprehensive and Enhanced Partnership Agreement (CEPA), a quite ambitious program of EU supported reforms in Armenia, which in its political part was almost identical with draft Association Agreement of 2013. The Agreement provisionally came into force in June 2018 and in June 2019 the CEPA implementation Road Map was approved during the second Armenia – EU partnership council meeting.

Within European Neighborhood Instrument, total allocation of European funds to Armenia for the period of 2014-2020 is 252-308 million Euro. Armenia is also eligible for support under the number of others EU instruments. Currently, the EU is Armenia’s biggest export market with a 28.4 percent share in total Armenian exports and the second biggest source of Armenian imports. EU has granted Armenia Generalized Scheme of Preferences (GSP+) and in 2017 the total value of preferential imports from Armenia into the EU under this scheme was 135 million Euro. EU imported 0.4 billion Euros of goods from Armenia in 2018 and exported 0.9 billion Euros of goods.  

Meanwhile, in April – May 2018, the rather surprising domestic political developments in Armenia resulted in non violent “Velvet revolution”. The opposition leader Nikol Pashinyan was able to galvanize mass support and force resignation of Serzh Sargsyan (two terms President of Armenia in 2008-2018) from Prime Minister Office only six days after his election. Nikol Pahisnyan was elected Prime Minister on May 8, 2018 and then consolidated its power through snap Parliamentary elections in December 2018 securing 70 percent of seats in the new parliament. The peaceful change of government and free and fair parliamentary elections (all elections in Armenia held in 1995-2017 lacked public legitimacy and were marred by multiple irregularities), created additional impetus for the development of Armenia – EU relations.

However, the effect of “Velvet Revolution” on perspectives of Armenia – EU relations should not be overestimated. Despite the early statements of the new authorities that after the revolution CEPA has lost some of its relevance and Brussels should multiple its financial aid to Armenia as a new beacon of democracy in the post soviet space, realization of CEPA remains the only viable path to move forward. “Velvet Revolution” has not changed geopolitical realities in the region and Armenia still can not afford to jeopardize its strategic alliance with Russia. Meanwhile, the next step above CEPA is the signature of Association Agreement with DCFTA, which will require Armenia to leave EAEU. Obviously, that scenario may ruin Armenia – Russia relations.

After the one year of Post revolutionary zeal, Armenian authorities started serious work on CEPA realization, simultaneously discussing new possibilities for bringing additional EU assistance including the direct budget support for the newly developed justice reforms and anti – corruption strategies.  

Azerbaijan

The key connection line between EU and Azerbaijan is oil, gas and transport/transit infrastructure. Since the collapse of the Soviet Union Azerbaijan was perceived as an alternative source as well transit route for oil and gas export to the Europe. The Euro-Atlantic community has put great hopes on Azerbaijan as a state which could decrease the EU dependence on Russian gas through its own resources and providing its territory as a transit route. Not surprisingly, EU was active supporter of Nabucco gas pipeline project and after latter collapse put enormous efforts to bring into reality Southern Gas corridor.

Azerbaijan plans to start deliveries of natural gas to Southern Europe via TANAP and TAP pipelines in 2020. Though Azerbaijan lacks the capacities to strategically alter the energy geopolitics of Europe and compete with Russian Gazprom (latter exported approximately 200 billion cubic meters gas to Europe in 2018 including Turkey while Azerbaijan will pump only 10 billion cubic meters gas in 2020 and may increase the amount to 20 billion in mid 2020s), any alternative source of gas is significant for EU. In a long term perspective Europeans do not exclude the possibility of bringing Turkmen gas to Europe via Southern Gas Corridor through Transcaspain pipeline, which makes Southern Gas Corridor even more valuable for the EU.

Azerbaijan plays a key role also in “North – South” international transport corridor which should connect India with Northern Europe via Iran, Azerbaijan and Russia. Despite the fact that the current crisis around Iran after President Trump’s decision to leave the nuclear deal creates obstacles for the realization of the program, EU hopes that Azerbaijani transit potential could be realized for benefit of Europe.

Currently, the EU is Azerbaijan’s main trading partner, accounting for around 41.7 % of Azerbaijan’s total trade. The EU continues to be Azerbaijan’s biggest export and import market with a 54.3 % share in Azerbaijan’s exports and a 20.3 % share in Azerbaijan’s imports. EU imported 11.5 billion Euros of goods (mainly fuels) from Azerbaijan in 2018 and exported 2.7 billion Euros of goods. Within European Neighborhood Instrument, total allocation of European funds to Azerbaijan for the period of 2018-2020 is 42-51 million Euro.

Meanwhile, the situation on human rights protection and good governance remains a thorny issue in EU – Azerbaijan relations. Azerbaijani authorities are making random gestures towards European partners releasing some journalists and opposition figures from jails, but these steps do not change the situation fundamentally. However, Azerbaijan was included in the Eastern Partnership program, but from the beginning was very skeptical regarding the possibilities of signing Association Agreement. This was in line with Azerbaijan’s balanced foreign policy. Baku seeks to keep some distance from all geopolitical actors involved in the region, except Turkey, simultaneously securing partner relations with all. Not surprisingly Azerbaijan has no intention to join neither EU/NATO nor EAEU/CSTO, but cultivates strong economic and military technical partnership with Russia simultaneously actively being involved in Western energy markets.

Softly rejecting possible signature of Association Agreement, Azerbaijan put forward the idea of signing strategic partnership agreement with the EU and even drafted its version of the document. Negotiations were launched in February 2017 and agreement was supposed to be signed in 2019. However, process is going slowly and according to recent assessments, agreement may be signed only in 2020. Among the difficulties are the EU requirement to fix a date for Azerbaijan’s membership into World Trade Organization, EU demand to abolish visa regime for EU citizens without simultaneous reciprocal EU steps and the wording on Karabakh conflict.

However, regardless of ups and downs of negotiation process, Azerbaijan will continue its energy cooperation with the EU, simultaneously keeping a distance on the issues of human rights, rule of law and good governance.

Georgia

Georgia is the only South Caucasian state who has clearly articulated its intention to join the EU. The Euro-Atlantic path was chosen in late 1990s but got momentum after the 2003 “Rose Revolution”. President Saakashvili’s energetic reforms during his first two years in office and rather successful fight against low and mid-level corruption earned Georgia a reputation of “Beacon of Democracy” in the post-soviet space and brought the country into the focus of both EU and the US. The tough anti-Russian rhetoric and Georgia’s efforts to present itself as an avant-garde of democracy’s fight against authoritarian and bullying Russia has also contributed to the positive change of Georgia’s image in the West.

The Russia – Georgia war of 2008, growing signs of authoritarianism in President Saakashvili’s rule during his second term as well as the “US – Russia reset” launched by the President Obama in 2009 contributed to the decrease of Georgia’s charm within the Euro-Atlantic community. However, Georgia was included in the Eastern Partnership and despite the change of the government after the 2012 Parliamentary elections has successfully negotiated and signed the Association Agreement with DCFTA in 2014 which entered into force on July 1, 2016. Another milestone in Georgia – EU relations was the decision to grant visa – free regime to Georgian citizens for the Schengen area.

EU is one of the biggest donors for Georgia. Within European Neighborhood Instrument, total allocation of European funds to Georgia for the period of 2014-2020 is 610-746 million Euro, and Georgia is eligible for funding from other European instruments such as Instrument Contributing to Stability and Peace, the Partnership Instrument, Macro-Financial Assistance, etc. The EU is the main trade partner of Georgia. Around 27% of its trade takes place with the EU, followed by Turkey 13.6% and Russia 11%. EU exports to Georgia amounted to €2.1 billion in 2018. The key export products are mineral products, machinery and appliances, and chemical products. The EU imported goods to the value of €653 million from Georgia for the same period.

Georgia is the only South Caucasus state with direct EU involved in conflict resolution process. EU unarmed civilian monitoring mission has been deployed to Georgia since September 2008 following EU mediated Six point agreement that ended the August 2008 war. EU, alongside with the UN and OSCE, is the co-chair of the international discussions on Transcaucasia, with participation of representatives of Georgia, Abkhazia, South Ossetia, Russia and the US.

However, despite the two decades long Euro-Atlantic aspirations, the perspectives of Georgia’s membership into EU are quite vague. There is seemingly no way out from the deadlock over the status of Abkhazia and South Ossetia, and only few EU member states are willing to accept a state with part of territory under occupation. Russia preserves its strict negative attitude towards any future enlargement of either EU or NATO towards the post-soviet space. The EU- Russia relations are at their lowest point since the end of the Cold War, and especially states such as France and Germany are seeking ways to find some solution in Ukraine which will allow improving relations with Russia. Definitely, they are not ready to create additional irritating points in relations with Russia through accepting Georgia into the EU. Besides geopolitical considerations, Georgia has a long journey to fully comply with Copenhagen criteria. Recent anti-governmental demonstrations in Tbilisi caused by the Russian MP appearance in Georgia’s Parliament chairman seat and government tough reaction are signs of domestic instability, which may peak during the 2020 parliamentary elections.

Perspectives of relations

The EU – South Caucasus relations are part of the broader Eastern Partnership Program and EU neighborhood policy. It is worthy to mention that the region is not among top priorities for the EU. Within former soviet space the hot spot is Ukraine, which has enormous impact on EU – Russia relations. The migrant crisis coupled with Islamic terrorist threat has significantly elevated the importance of the southern neighborhood for the Brussels. Given the rise of populist and euro-skeptic movements within the EU, tensions between Brussels and some member states such as Poland, Hungary and Italy, the new wave of the EU enlargement becomes less and less likely. Even such Western Balkans states as Montenegro, Albania and North Macedonia may not be granted membership till the end of the mandate of recently formed new European Commission.

All these developments have created some sort of fatigue within EU regarding its relations with its neighbors. Thus, most probably the most probable scenario for the EU – South Caucasus relations is the preservation of current level of EU interest and engagement. However, even without increase of its involvement in the region EU will retain its role as one of the key players in the fields of political and economic reforms.

Thus, Armenia and Georgia should make maximum efforts to implement the provisions included in Association Agreement and CEPA and Azerbaijan should be more flexible to successfully conclude negotiations on the new agreement. Given the EU approach “more for more” Armenia should not think itself as a second tier (non Association Agreement signatory) state within the Eastern Partnership. In case of successful implementation of CEPA envisaged reforms, Armenia can receive additional EU funds and technical assistance and start the negotiations on visa liberalization.