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In 1994, the United States displayed a new interest in the Caucasus region of the former Soviet Union. High-level emissaries were dispatched and neglected regional leaders such as Geidar Aliev of Azerbaijan and Eduard Shevardnadze of Georgia were enthusiastically embraced. News stories about regional conflicts in the Caucasus that had previously been buried in the New York Times and the Washington Post were now featured in front-page articles and lead editorials.
The United States'' new preoccupation with the Caucasus coincided with the disastrous Russian invasion of the secessionist Caucasian republic of Chechnya that occurred in December 1994. Prior to the invasion, Chechnya had been largely ignored by Moscow in spite of its persistent opposition to Russian rule in the Caucasus. From 1991-1994, the self-proclaimed independence of the republic of Chechnya-Ichkeria and the erratic behavior of its President, former Soviet General Dzhokhar Dudaev, were barely a blip on the international screen. The Byzantine rivalries of Chechnya''s political factions were followed by only a few die-hard analysts and a handful of ethnographers in the US. Indeed, after the collapse of the USSR, the Caucasus region as a whole— consisting of Chechnya, the other autonomous Russian republics of the North Caucasus, and the newly independent states of Armenia, Georgia and Azerbaijan— was a mere "exotica."
International benign neglect notwithstanding, from 1988 the Caucasus was the proverbial "hotspot" of the former Soviet Union, a morass of ethno-political conflicts and bloody power struggles. Only two of a litany of small wars before Chechnya, in the Armenian enclave of Nagorno-Karabakh in Azerbaijan, and in the Georgian republic of Abkhazia, gained significant media and government attention in the United States— largely the result of the efforts of the influential US Armenian lobby and high-level sympathy for Eduard Shevardnadze, the former Soviet Foreign Minister who brought the Cold War to an end, and not an acknowledgement of the geopolitical importance of the Caucasus. The region''s chronic instability was viewed in US Government circles as an issue of marginal concern.
Why then the US focus on the Caucasus in 1994, and Russia''s almost simultaneous decision to launch a full-blown military operation in an obscure republic?
September 1994 brought the signing of the so-called "Contract of the Century": a $7.5 billion agreement between Azerbaijan''s state oil company, SOCAR, and a consortium of major international oil companies— the Azerbaijan International Operating Company (AIOC)--to exploit Caspian Sea oilfields off Azerbaijan. This contract underscored the historic strategic significance of the Caucasus.
The Caspian Sea, bordered by Russia, Azerbaijan, Iran and the Central Asian states of Kazakhstan and Turkmenistan, has been a major commercial oil producing area since 1871. From the beginning, the region''s oil industry has been dependent on foreign capital and technology. The Swedish Nobels and the French Rothschilds built considerable fortunes drilling wells and constructing railroads to carry oil from the Azerbaijani capital, Baku, to Georgian ports on the Black Sea. In World War I, control of Baku''s oilfields was the goal of fierce competition among German, Turkish and British forces after the collapse of the Russian Empire. In World War II, the oilfields were a strategic objective in Nazi Germany''s campaign against the Soviet Union.
The Caspian fields declined after the war, as the USSR concentrated on exploiting new resources in Siberia. In the late 1980s, however, expert estimates suggested that the Caspian still held somewhere in the range of 32 billion barrels of recoverable oil reserves. Only the reserves in the Persian Gulf are greater. Like the Nobels and Rothschilds before them, US oil companies were quick to appreciate the Caspian''s potential. The AIOC was first established at the initiative of the US oil giant, AMOCO, in October 1991, while another major US company, Chevron, pioneered the development of Caspian reserves in Kazakhstan.
Caspian oil is, however, a difficult commodity to bring to world markets. The Caspian is a land-locked sea and transportation options inevitably lead across the territory of one the littoral states with a direct outlet to the major seaways. Only two states fall into this category: Russia and Iran, which respectively border the Black Sea with its outlet to the Mediterranean, and the Persian Gulf with its outlet to the Indian Ocean. The Iranian route to Persian Gulf ports is blocked by the US veto on trade with Iran. From Baku, that leaves the Russian option, the traditional Nobel and Rothschild route inland across Georgia to its Black Sea ports, and a new complex of pipeline routes across Georgia and Armenia to Turkey and its Mediterranean ports.
The Caucasus is the land bridge between the Caspian and Black Seas and all Russian, Georgian and Armenian routes lead through the region''s most volatile territory: Chechnya and Nagorno-Karabakh. In September 1994, with the "Contract of the Century" signed and new Caspian oil scheduled for production, Caucasian instability became a major international problem for the first time. The question for the AIOC, and thus US oil companies, was which route across the Caucasus could ensure a reliable flow of oil to world petroleum markets? Russia was anxious to persuade the AIOC to favor its pipeline route across the Caucasus and Chechnya to the Black Sea port of Novorossiisk. In this context, Chechnya''s declared secession from the Russian Federation became a major complicating factor.
Russia has protected its strategic interests in the Caucasus for three centuries. Since 1991, however, Moscow has seen its position in the region progressively decline. The independence of Armenia, Georgia and Azerbaijan, and their reorientation toward the West, have been accompanied by cultural, economic and political incursions by Turkey and Iran. Traditional geopolitical rivalries with Turkey and Iran, and Caspian oil were two of a number of compelling factors that focused Moscow''s attention on reestablishing its dominance of the Caucasus.
Prior to 1994, Moscow had its eyes on a far more important Caucasian objective than Chechnya: Georgia, with its extensive Black Sea coastline, strategic bases, and land border with Turkey. Chechnya initially served as a useful counterweight to Georgia. Chechen mercenaries spearheaded fighting in Abkhazia that shattered the Georgian state. The Chechen republic provided a haven for deposed Georgian President Zviad Gamsakhurdia, whose surprise attack brought Eduard Shevardnadze to the point of capitulation in fall 1993. Georgia''s eventual return to the Russian orbit coincided with the growth of international competition over pipeline routes. At this point, Chechnya became a liability.
Similarly, at this same juncture, the Caucasus became a concern of the United States. From the creation of the AIOC in 1991 to fall 1993, negotiations between the consortium and the Azerbaijani government had been stymied by political upheaval in Azerbaijan, including the forcible overthrow of two post-independence governments and the intensification of the war in Nagorno-Karabakh. In November 1993, an agreement in principle to proceed with the negotiations was finally initialed by a new Azerbaijani government under Geidar Aliev. The stakes for the United States in ensuring the signing of the final contract were high. US oil companies, including AMOCO, UNOCAL and Pennzoil, had a 44% stake in the agreement.
Oil and the security of energy supplies are a vital national and strategic interest for the United States which imports over 40% of its oil supplies. It was this vital interest that took the United States and the international coalition to war in the Persian Gulf to ensure the uninterrupted flow of oil from that region. Given the significance of the estimated Caspian Sea oil reserves, the United States government made the obvious connection that the exploitation of these resources would have a positive effect on the global energy balance— diversifying oil supplies and easing dependence on the volatile Persian Gulf— as well as bringing long-term commercial benefits. In the old US tradition, the flag eventually followed trade.
Three years of neglect of the Caucasus and Caspian had, however, taken their toll. With the exception of cordial, although hardly intense, relations with Armenia and Georgia, the United States'' bilateral relations with the Caucasus and other littoral Caspian states were poor. There had been few high-level visits to the region, and relations with the crucial player in the proposed contract, Azerbaijan, were abysmal. In 1992, the US Congress excluded Azerbaijan from the Freedom Support act in response to its blockade of Armenia. The subsequent occupation of one fifth of Azerbaijan''s territory by Armenian forces from Nagorno-Karabakh in Summer 1993 had not, however, led to similar sanctions against Armenia. The Azerbaijani government saw US policy in the region as partisan.
Since 1991, in the absence of US engagement, Turkey had operated as the West''s surrogate in the Caucasus— ostensibly promoting the region''s independent development and free interaction with the outside world. In practice, however, Turkey was more concerned with extending its own influence. Turkey''s policy focused on securing the transportation of Caspian oil across its territory and affirming itself as the cultural and political model for the Turkish-speaking Caucasus and Central Asia. Turkish overtures in the Caucasus did little to further regional stability. Instead, they alienated Armenia and antagonized Russia.
The signing of the AIOC contract thus inspired a sea change in US government policy toward the Caucasus. This began with a state visit by Bill Clinton to the Caucasus and Azerbaijan in September 1994, and the participation of US Deputy Secretary of Energy, William White, in the signing ceremony for the oil consortium deal in Baku on September 20, 1994. Since fall 1994, the United States has acted aggressively to improve its bilateral relationships; mitigate the competition over pipeline routes that has threatened to exacerbate already tense relations among Russia, Georgia and Turkey; contain Iran''s participation in the development of Caspian oil; and promote regional stability. These objectives have led the United States government to redress the balance in its treatment of Armenia and Azerbaijan; support the construction of multiple pipelines that offer every contender a stake in transportation; pressure Azerbaijan to exclude Iran from international oil consortia; and encourage international efforts to resolve the myriad Caucasus conflicts.
How successful has this new US policy been? On two fronts developments have been favorable to United States'' interests. First, the Clinton administration has established a close relationship with Azerbaijani President Aliev, which has greatly facilitated the operations of US oil companies in Baku. Second, in October 1995, the AIOC agreed to transport the initial flow of Caspian oil through both Russia and Georgia in dual pipelines. This compromise decision prevented competition over routes from stalling the progress made in September 1994. On other fronts, however, there are a number of pitfalls for the United States.
Efforts to contain Iran, and the new US engagement in the region, have fostered a nominal alliance between Iran and Russia in the Caspian. In 1995, Iran was successfully shut out of the AIOC contract by direct US pressure on Baku, and US diplomacy was instrumental in preventing Russia from monopolizing the pipeline routes from Baku. In response, Iran and Russia have threatened to veto the further exploitation of Caspian oil if their interests are not taken into consideration. Both countries have challenged the ownership regime of the Caspian offshore oilfields, and asserted that the Sea is in fact a "lake," which implies that the Caspian is the common property of all littoral states and its offshore resources can not be divided into national sectors. In December 1995, Iran and Russia cemented the alliance by concluding a ten-year cooperation agreement in the specific issues of military, energy and oil, and declaring themselves "partners in strategic cooperation."
Both Russia and Iran have also established a presence in the international Caspian oil consortia. In April 1994, Moscow''s political pressure on the Azerbaijani government secured a 10% stake for the Russian oil giant LUKoil in the AIOC. In June 1996, the Azerbaijan government also awarded the Iranian state oil company a 10% share in a new international consortium to develop offshore fields that did not involve US oil companies. So far, the US has managed to avoid any overt clashes with either Russia or Iran. In the case of Russia, since its heavy-handed treatment of Georgia in 1993, and the signing of the AIOC contract in 1994, Moscow''s activities have been restrained everywhere except Chechnya.
US efforts to promote international mediation in regional conflicts have also met with mixed success. In Chechnya, repeated US admonitions and protests to the Russian Government were not a major factor in propelling the August 1996 peace process forward. In other Caucasus conflicts, US active support for the OSCE Minsk group process in Nagorno-Karabakh, and OSCE and UN initiatives in Georgia has yet to bring tangible results. United States unilateral and multilateral involvement in the mire of territorial claims and counter-claims in the Caucasus region has also been tempered by their complexity. The Caucasus is one of the world''s most ethnically diverse regions, with its peoples spread across every state structure in the region, including Iran and Turkey. The ethnic mosaic, and considerable interaction between regional conflicts have traditionally bedeviled Great Power politics. Russia''s experiences in the Caucasus in both the 19th and the 20th centuries, where "pacifications" turned into protracted and bloody wars, are a cautionary tale of attempting to play the various Caucasian sides against each other.
The United States, a new-comer to the region, needs to proceed with great caution, particularly since US security experts increasingly see the Caucasus as a major global trouble spot in terms of its instability, the potential export of terrorism, and its growing function as a conduit for arms and drugs. The war in Chechnya has already sparked terrorist acts in Turkey, and allowed for the infiltration of well-armed extremist groups from Iran and Afghanistan into the Caucasus. Investigative journalists in Russia have also alluded to a well-established narcotics trade route running from Pakistan and Afghanistan through Chechnya to European Russia and beyond.
Even though the Clinton administration has espoused a broader interest in the democratization and marketization of the Caucasus, as it has elsewhere in the former Soviet Union and Eastern Europe, the timing of US focus on the region implies that current US real interests are tied to Caspian Sea oil. Larger goals of promoting political and economic development are pursued in so far as they further oil security. Ironically, the drive to diversify energy resources has drawn the United States into a region as volatile as the Persian Gulf— and a region where the US has considerably less knowledge and experience in the rules of engagement.
This document is a part of the Caucasus and the Caspian Seminar Transcripts collection.