The U.S. Policy toward the South Caucasus in the 1990s

Carnegie Endowment for International Peace
The U.S. Policy toward the South Caucasus in the 1990s

The United States has important but not vital interests in the South Caucasus, which include preserving regional stability; preventing the resumption of frozen conflicts; and supporting democratic change and better governance as well as the international integration of Armenia, Azerbaijan, and Georgia. Recent events—the breakdown of the post–Cold War European security order, changing global energy markets, instability to the region’s south, a new U.S. administration, and the European Union’s (EU) internal challenges—call for sustained U.S. engagement to advance those interests. It is stated in a survey by Carnegie Endowment for International Peace titled U.S. Policy Toward the South Caucasus: Take Three Vestnik Kavkaza presents the most interesting parts of the analysis. See Part 1


It is hardly a secret that U.S. and European policymakers had neither expected nor prepared for the swift breakup of the Soviet Union. It had caught all by surprise and left little time for Western governments to develop blueprints for engaging with the far-flung and diverse regions of the vast former empire. With the focus of U.S. policymakers first and foremost on securing the nuclear arsenal of the Soviet Union scattered across many newly independent states, Armenia, Azerbaijan, and Georgia did not merit the same degree of immediate attention, since none of them had nuclear weapons deployed in their territory.

Nonetheless, U.S. policymakers proceeded to shape an approach to Armenia, Azerbaijan, and Georgia derived from the same set of principles they applied to other parts of the former Soviet Union. This consisted of recognizing and encouraging other countries, especially Russia, to respect the sovereignty and independence of the three states and supporting their declared desire to make the economic and political reforms necessary to transition to inclusive political systems and market economies. Over time, however, the goals of these efforts shifted in response to events on the ground and elsewhere in the world. The United States and other members of the international community undertook efforts first to curb the various conflicts in the South Caucasus, then to foster oil-fueled economic growth in the region. Later, their attention shifted to garnering regional support for the U.S.-led global counterterrorism coalition and supporting domestic reform efforts in Georgia.

Job One — Stop the Fighting

The South Caucasus stood out in the post-Soviet landscape because it was engulfed in three active conflicts simultaneously: Nagorno-Karabakh, Abkhazia, and South Ossetia. The top priority for U.S. policymakers was not democratization or market reform but rather stopping the fighting, providing humanitarian relief for many thousands of refugees, and bringing a measure of stability to the region. 

While none of these new states had a history of relations with the United States, all three potentially had special claims on its attention. Georgia’s then president, Eduard Shevardnadze, had served previously as Gorbachev’s foreign minister and played a pivotal role in the peaceful settlement of the Cold War. He was widely recognized in the United States as an elder statesman and almost an iconic figure. Armenia too had a special claim on U.S. attention and affection. The large, active, and well-organized Armenian-American community has long been an important actor in U.S. domestic politics, and the newly independent Armenian state was effectively guaranteed a friendly reception among U.S. policymakers. And Azerbaijan had oil. The birthplace of the global oil industry, the country sat atop important oil reserves. Lacking Georgia’s or Armenia’s claims on Washington’s attention, it could command the attention of any number of major oil companies—another important actor in U.S. domestic politics.

Nonetheless, the question of U.S. interests and policy in the South Caucasus remained unsettled. None of the interests or ties between the South Caucasus countries and the United States was sufficiently compelling to warrant U.S. direct military involvement to stop conflicts in the region. Moreover, several other crises—the unraveling of Yugoslavia, the disastrous intervention in Somalia, and the failed attempt to intervene in Haiti—left little room or appetite for another robust, boots-on-the-ground U.S. military operation. Finally, the preoccupation of U.S. policy with Russia made the option of a U.S. military presence in the South Caucasus risky due to concerns about possible Russian resentment and backlash.

Eduard Shevardnadze

Still, the region could not be left to its own devices. The humanitarian situation could not be ignored. It was perhaps not on the same scale as the tragedy that would befall the Balkans a short time later, let alone the massacres in Rwanda, but it was occurring on the edge of Europe—the continent that after the end of the Cold War was supposed to have left war and conflict in the past. The conflict in Nagorno-Karabakh carried the risk of Turkish intervention in support of Azerbaijan and Russian intervention in support of Armenia. A conflict between Russia and a North Atlantic Treaty Organization (NATO) ally of the United States like Turkey was to be avoided at all costs. Moreover, Russia’s growing military involvement in Georgia’s conflicts on behalf of the separatists in Abkhazia and South Ossetia also had to be stopped or minimized, so as to end the fighting, avoid the collapse of Georgia, and prevent a very visible manifestation of Russia’s lingering neo-imperialist instincts.

The result was a series of complicated diplomatic undertakings designed by various actors to end or at least freeze these conflicts. This was to be done while paying due deference to Russian sensitivities by including it as a key partner in these efforts. It was equally important to internationalize efforts to end these conflicts to prevent an exclusive Russian role and to avoid the appearance of great power interference in the affairs of small states. Involving the Organization for Security and Co-operation in Europe (OSCE) and the United Nations (UN) would presumably restrain Russia, while simultaneously giving the United States a veto on these matters and avoiding greater, and potentially costly, long-term U.S. entanglement in a region where immediate U.S. interests did not warrant it. What emerged from these diplomatic initiatives was a patchwork quilt of international actors and efforts seeking—with varying degree of intensity, but usually with little success—to resolve the region’s conflicts and improve its security environment. OSCE observers, Russian peacekeepers with a UN mandate, and U.S. observers as part of a UN-mandated observer mission were all playing on this crowded diplomatic field.

The United States’s biggest stake was in the outcome of the conflict in Nagorno-Karabakh, and U.S. involvement there was greater than in all other South Caucasus conflicts combined. The existence of the Armenian-American community was an important factor behind this level of commitment. The United States took an active diplomatic role as one of the co-chairs of the so-called Minsk process. It also became the biggest donor to Armenia, which at the time was suffering from the combined effects of the conflict, a blockade imposed on it by Azerbaijan and Turkey, and the consequences of the post-Soviet economic meltdown. In a further sign of its political commitment to Armenia, the United States adopted legislation—Section 907 of the Freedom Support Act—that punished Azerbaijan for its blockade and limited U.S. assistance to Baku, even though the blockade was imposed in retribution for the Armenian occupation of Nagorno-Karabakh and surrounding areas of Azerbaijan.

The Nagorno-Karabakh ceasefire reached in May 1994 was the last and arguably most important step in this series of efforts by the international community that froze but did not end the conflicts in the South Caucasus. This made it possible to move on to the task of reconstruction. Notwithstanding the raging conflict just north of the border in Chechnya and elsewhere in the Russian North Caucasus, the freezing of these conflicts also allowed the United States to proceed with its support for the three countries’ transition to market-based economies and representative political systems.

Pipeline Dreams

All three countries’ economies were shattered by the combined effects of these conflicts, the consequences of the breakup of the Soviet economy, and Russia’s own economic troubles—and these effects cascaded throughout the economies of its neighbors long dependent on access to Russian markets. In this otherwise bleak situation, the one bright spot was Azerbaijan’s oil wealth, which had the potential to provide a much-needed spark for the economic development of the entire South Caucasus region and its immediate neighborhood. From the standpoint of U.S. policy, the significance of Azerbaijan’s oil and gas reserves far exceeded their value as an energy resource and potential as an engine for economic development—in fact, these resources were seen in Washington as a one-stop answer to all of the region’s problems. According to this vision, Azerbaijani hydrocarbons would generate much-needed revenues for the country’s reconstruction with multiplier effects rippling beyond its borders.

Oil and gas would have to be transported via pipelines, which would serve as the backbone of a new transport corridor. Oil and gas were also found in vast quantities in Kazakhstan and Turkmenistan, and these resources would feed via trans-Caspian pipelines into this emerging South Caucasus transportation corridor. This corridor would extend all the way across Georgia and through Turkey to the eastern Mediterranean, and thus benefit Georgia and enhance Turkey’s strategic importance in the South Caucasus and in Europe as the energy hub between the East and the West. The transport corridor would enhance not only the economic development of the South Caucasus states—it would also help secure their independence from Russia by removing Moscow’s monopolistic grip on Caspian energy exports.

It was thought that all of this would stimulate economic reforms in the region. Economic development in turn would provide a powerful incentive for Armenia and Azerbaijan to find a solution to their conflict in order to fully partake of these benefits. This would even potentially facilitate a détente between Armenia and Turkey. Caspian energy flowing to global markets would also enhance U.S. energy security and reduce Europe’s dependence on Russian energy exports. And all of this could be accomplished with relatively little investment of public funds from Western donor nations, as energy companies would invest in Caspian energy development.

Based on this logic, pipelines to take Caspian oil and gas across the Caucasus to European and other international energy markets became the centerpiece of U.S. policy in the region. At the State Department, a new ambassadorial position was created to coordinate Caspian Basin energy diplomacy. To add political gravitas to the post, its holder was designated not only as an adviser to the secretary of state, but also to the president.

U.S. officials actively promoted the new transportation corridor in various capitals and at conferences in Europe, the South Caucasus, and the United States. Foreign governments and corporate actors were encouraged to support and participate in the project. U.S. taxpayer funds were made available to facilitate various pipeline initiatives. However, the promise of this transportation corridor and its attendant benefits for the region far exceeded its real impact.

Georgia, badly damaged by internal strife and separatist conflicts, suffered from widespread corruption and was, in the words of one of its leading political scientists, “practically a failed state.” In addition, it found itself under constant pressure from Russia, which supported the separatists in Abkhazia and South Ossetia and was rumored to be behind several assassination attempts on Georgia’s then president Shevardnadze.

Similarly, Armenia and Azerbaijan remained locked in their standoff over Nagorno-Karabakh with frequent violations of the ceasefire, multiple casualties, countless refugees, and the ever-present prospect of a resumption of fighting. The promise of economic benefits did little to defuse tensions between the two countries. On the contrary, Armenian representatives occasionally threatened to take military action against the pipeline, which passes near Armenia’s border.

For its part, Armenia’s economy had suffered devastating losses as a result of the war and the blockade imposed by Azerbaijan and Turkey. The lack of economic opportunities—combined with the specter of renewed conflict and the consequences of a devastating 1988 earthquake, which were never fully addressed—led to large-scale, outbound migration. Of the approximately 3.5 million citizens at the time of the Soviet breakup, over 800,000 emigrated during the first decade of independence. The emigration was facilitated by the existence of a large Armenian diaspora abroad willing to accept and support newcomers. In addition, as a result of the war, Armenia had to cope with an influx of displaced people numbering over 200,000.

Meanwhile, Azerbaijan also suffered badly from the war. It lost some 15 percent of its territory to Armenia, and was forced to deal with the influx of over half a million displaced people from the lands occupied by Armenia. The consequences of the war were aggravated by a period of internal turmoil. After the country’s first two post-independence governments collapsed under the weight of intra-elite rivalries and the war, the country’s old communist-era boss, Heydar Aliyev, took over in 1993 and began consolidating power and rebuilding the country’s shattered economy. He successfully leveraged its oil and gas wealth to secure Washington’s attention and attract major energy companies, but the process of reconstruction, linked to the development of the Baku–Tbilisi–Ceyhan pipeline, stretched on for well over a decade; oil and gas revenues would not appear in significant quantities until then.

In short, then, the first post-independence decade produced modest results at best for the South Caucasus. The three regional conflicts remained unresolved and were perennially at risk of renewed fighting. Azerbaijan’s economy recovered to its pre-independence level, but Armenia’s and Georgia’s did not. All three suffered from widespread corruption and remained vulnerable to Russian pressure. Georgia and Azerbaijan were additionally threatened because of their shared borders with Russia’s turbulent North Caucasus provinces. Azerbaijan recovered its domestic political stability, but at the price of gradually becoming an authoritarian regime. Meanwhile, Armenia and Georgia made progress toward democratic governance, although the political systems of both countries remained overly personalized. This inhibited the development of independent institutions and left them at risk of democratic backsliding. Both countries remained fragile, and neither achieved domestic political stability during this period. The tasks of securing their futures by building sustainable democratic governance, fostering economic prosperity, and achieving integration with the international community remained incomplete.

To be continued