1.      Georgia, Armenia and Azerbaijan sit quite literally on a strategic crossroads. Energy from the Caspian Sea region will increasingly flow through those countries on its way to the global
market. Drugs from Afghanistan and elsewhere in Central Asia transit through
the South Caucasus region as well. Terrorist groups and extremist Islamist
organizations operate in nearby regions and view the Southern Caucasus as a
potential conduit to Europe and source of potential recruits.Â
2.      The three countries are also tied
into a web of commercial and diplomatic interests that complicate the role of
NATO in the region when dealing with all three. Armenia is closely tied to Russia and depends on Russia for much of its energy. Armenia also has a tense relationship with its
neighbours Turkey and especially Azerbaijan. Azerbaijan for its part remains
closer to Turkey and retains good relations with Russia. Georgia, on the other hand has a tense relationship with Russia and is the most western-oriented of
the three, preferring closer relations with NATO and other institutions. All
three countries maintain good relations with neighbouring Iran. As NATO builds its relationship with the region and each country individually, it
must take into account the interlocking interests of the regional actors.
3.      All of this play against a
volatile background. The South Caucasus region is home to struggling, nascent
democracies, unresolved ethnic conflicts that have uprooted hundreds of
thousands, high unemployment and high levels of corruption. Targeted
assistance, incentives and pressure could help push the region toward stable
democratic governance and self-sustaining economic development. But failing to
do so could allow the region to slide the other direction into autocracy, ethnic
strife and economic stagnation. This would clearly have negative consequences
for the members of NATO who all have an interest in seeing the South Caucasus region become a stable transit route for energy resources and a bulwark
against drug smuggling and extremist organizations.
4.      It should come as no surprise,
therefore, that NATO is heavily involved in the South Caucasus Region. That
involvement takes several forms. Most importantly, NATO has several forms of
partnership with those countries to assist their armed forces to develop in a
manner consistent with democratic governance. But questions remain about NATO
involvement in the region. How effective are those programs and what have they
accomplished so far? What more can and should NATO do to promote the reform
agenda in the region? How well are NATO’s efforts integrated with other
organizations’ efforts in the region, and are there more opportunities for
cooperation?
5.      We will attempt to answer those
questions over the course of 2006. The Subcommittee will visit Georgia, Armenia and Azerbaijan to learn more about the political and military situation in each
country. We will examine the reform of the security sector in the South Caucasus region and what NATO is doing to assist in the development of regional
stability. We will learn about the political situation in each country, the
state of the “frozen†conflicts and the prospects for their resolution. We
will examine the efforts of other international organizations in the region.
The results of those visits will constitute the bulk of the final report to be
presented at the Fall Session of the NATO Parliamentary Assembly.
6.      This interim report, however, was
drafted before those visits could take place. As such, it relies on press accounts,
published reports, and interviews with knowledgeable individuals in NATO and
other international organizations. Therefore, it should be seen as a
background document designed to supply a basis for further inquiry.  This
assembly has discussed the region in seminars and committee reports in the
recent past. For a detailed examination of the situation of ethnic minorities
in the South Caucasus region and views on other topical matters, your
Rapporteur refers you to the 2004 report of the Civilian Dimensions of Security
Committee and the report of the 61st Rose-Roth Seminar held in
Yerevan, Armenia in October 2005.
II.
Georgia
7.      Georgia re-gained its independence in 1991
when an overwhelming majority of Georgians voted to secede from the Soviet Union. But the country’s first elected leader, Zviad Gamsakhudia pursued policies
that damaged relations with the minority communities in South Ossetia and
Abkhazia. A coup in 1992 brought Eduard Shevardnadze to power who remained as
president of the country until 2003.Â
8.      The “Rose Revolution†of late 2003
ushered in a new era in Georgian political development. Public dissatisfaction
with the corrupt governance and deeply flawed elections of the post-Soviet
period finally culminated in several weeks of intense popular protest that led
to the collapse of the Shevardnadze administration. Mikhail Saakashvili won
the election held in January 2004 with an overwhelming majority and he
continues as president today. He has pushed for economic reforms and a crackdown
on corrupt practices. Most importantly from NATO’s perspective, he has pushed
for closer integration into Euro-Atlantic institutions. Saakashvili is a
western-educated, post-Soviet leader who appears committed to making Georgia a country based on rule of law and more western-oriented while at the same time improving
its relationship with Russia.Â
9.      Elections for the parliament held
in October 2005 provided some measure of the progress of democracy in Georgia. International election monitors noted some minor problems but overall concluded
that the process was reasonably free and fair. This stands in marked contrast
to much of the post- Soviet period.Â
10.    In economic policy, the government
is committed to a privatization programme of its remaining state-owned
enterprises. The president launched a major privatization drive in 2004 that
is slated to sell off 1800 enterprises. Although a boon for the government’s
budget, the privatization process has come with allegations of corrupt
practices. This has weakened investor confidence. Several non-governmental
organizations, including Transparency International, have given Georgia low scores on perceptions of corruption and cited it as one of the least favourable
business environments of those surveyed. This is not a problem unique to
Georgia- it is a serious problem across the region- but it will be very
difficult to produce the sort of self-sustaining economic growth that is needed
unless there is marked progress on this front.
11.    Georgia is faced with three regions
that have become autonomous or have declared independence that is not
recognized by other countries. Ajara on the Black Sea coast bordering on Turkey is the least problematic region and has more or less rejoined Georgia as an autonomous
region. Abkhazia and South Ossetia, however, share a history of bloody warfare
and the displacement of hundreds of thousands of ethnic Georgians, Ossetians
and Abkhazians from their homes in the course of wars fought with Georgia in the early 1990s. The unresolved situation with Abkhazia and South Ossetia
threatens to undermine the security of the region and Georgia’s relations with Russia.
12.    The troubled relationship between Georgia and the breakaway regions of South Ossetia and Abkhazia may have deep roots, but the current
situation is based on the violent confrontations that occurred in the wake of Georgia’s independence from the Soviet Union. After an intense war and a decade-long standoff,
little has been resolved. Neither region is internationally recognized as an
independent state, but they have the elements of elected government, manage
their own internal affairs and maintain independent militaries.
13.    The conflict between South Ossetia
and Georgia began with disagreements over the autonomy of the region. Some
Ossetians, a minority group with its own language, pushed for greater autonomy
from Georgia. Georgian leaders at the time were insisting on removing some of
the autonomy the region enjoyed in Soviet times, such as the right to use
Ossetian as an official language. Violent conflict began in 1991 and more than
100,000 refugees - Georgian and Ossetian - were created. The problem of
internally displaced persons and refugees remains a serious problem. One
complicating factor is that Ossetia is not a contiguous area. It is a
patchwork of areas populated by Georgians and Ossetians, which makes it very
difficult to define ethnically homogeneous regions without creating still more
internally displaced persons.
14.    Relations between Georgia and the Abkhazian region followed a similar unfortunate trajectory. Concerns over
losing the autonomy of the region and the right to use the Abkhazian language
led to violent clashes between Georgians and Abkhazians. In 1992 Abkhazian
leaders effectively declared the independence of the region and Georgian troops
moved in to take back the capital city. Heavy fighting between Georgian forces
and Abkhazian forces supported by paramilitary volunteers from Russia left thousands dead and some 250,000 refugees.
15.    Over the past few months, the South Ossetia region has become something of a flashpoint. On 22 January, two natural gas
pipelines on the Russian side of the border in North Ossetia exploded under
mysterious circumstances in the middle of one of the coldest winters in recent
memory. On 1 February there was a car accident between Georgian civilians and
Russian peacekeepers that degenerated into a brawl and on 8 February some
Russian peacekeepers were detained by Georgian authorities for lacking the
proper papers.  Those are just some recent examples of the tense situation in
the region.Â
16.    President Saakashvili has declared
his intent to reunite South Ossetia and Abkhazia with Georgia, and Georgia’s parliament is pushing for the withdrawal of Russian peacekeeping forces from
the region.  The parliament passed a non-binding resolution in 2005 that
called for the removal of Russian peacekeeping forces from South Ossetia by
February 2006 unless there is substantial progress on resolving the status of
the region. Some within the Georgian government have been more in favour of a
military solution to the situation, but they are kept in check by more moderate
voices and pressure from some NATO members. Russia - which supports the
separatist movement in South Ossetia - reacted angrily to the increased
Georgian pressure on South Ossetia. As long as Russia remains materially
supportive of South Ossetia as a separate entity from Georgia, little progress can be made that will satisfy Georgian concerns.
17.    A Georgian peace plan for South
Ossetia featuring a substantial amount of autonomy was offered in 2005, but
this was not enough to arouse interest in opening talks among the leaders of South Ossetia. Georgia has also suspended its participation in the Joint Control
Commission (JCC), the body responsible for maintaining stability in the region
and working toward a solution. But the JCC is composed of representatives from
South Ossetia, Georgia, Russia and North Ossetia, an autonomous region of Russia. The Georgian government is seeking to find another international forum for the
negotiations because they believe the composition of the JCC favours
maintaining the current situation. President Saakashvili has called on the
United Nations and the European Union to become more involved in settling the
situation in South Ossetia.
18.    Georgia’s relationship with
Abkhazia is somewhat more stable. Abkhazia seems to be a stronger entity and Georgia appears to be taking a more restrained approach to the region than with South Ossetia.Â
Georgia and Abkhazia have worked on mutually beneficial economic arrangements,
including reopening rail links. Nevertheless, the situation remains
unresolved:Â hundreds of thousands of individuals remain displaced as a result
of the conflict and Abkhazia is not internationally recognized as an
independent country.Â
19.    The relationship between Georgia
and Ajara is far less problematic. After the former leader of this region was
forced from power by street demonstrations, Levan Varshalomidze was installed
and has worked to reduce corruption and revitalize the economy. He is a
protégé of Georgian President Mikhail Saakashvili and the two reportedly
continue to maintain a good relationship. Georgia hopes that the limited
autonomy enjoyed by Ajara will persuade the regions of South Ossetia and
Abkhazia to accept a similar arrangement, but this appears unlikely given the
current level of hostility and the recent history of violence.Â
20.    Georgia’s relationship with Russia is strained. In large part, the tension revolves around the Russian military bases
on Georgian soil. Russia has agreed to close its two remaining military bases
in the country in May 2006, so this should remove one point of tension. But
the situation in South Ossetia and the recent tendency of Russia to use its energy resources as a means of pressuring its neighbours including Georgia will continue to test the relationship.Â
21.    Georgia has expressed its clear
desire for a close partnership with NATO culminating in eventual membership in
the Alliance. Georgia is currently within the Partnership Action Plan for Defence Institution Building programme (PAP-DIP), the main aim of which is to improve the
operational capability of the military while simultaneously subordinating the
military to civilian authorities. This has been a long-standing aspect of
NATO’s engagement with potential members. In the early 1990s NATO worked
closely with the governments and militaries of Central and Eastern Europe to
assist in the construction of military forces that were firmly under civilian
control.
22.    This is not a simple task as the
countries in question all came from a Soviet-style model of civil-military
relations that subordinated the military to the Communist Party. Changing to a
model appropriate for democratic governance required a wholesale change in the
thinking of military officers. It also required building a cadre of civilians
capable of managing defence ministries.
23.    Ultimately, however, this program
was successful across Central and Eastern Europe. NATO is able to exploit this
success in working with Georgia and other countries in the region. Latvian
military officers, for example, are currently advising their Georgian
counterparts on how to implement the reform process. As a new NATO member that
was formerly part of the Soviet Union, Latvia can offer advice that is highly
relevant to the Georgian military reform effort.
24.    Georgia, as well as Azerbaijan and Armenia, is part of the Individual Partnership Action Plan (IPAP). The purpose of
IPAP is to spell out an individual programme for reforms spanning the range of
civil and military issues. The first chapter deals with democratic, judicial,
economic and other civil reforms. The second chapter focuses on defence
reform, in particular, budgeting and planning, equipment standardization and
improving interoperability with NATO member militaries. The third chapter of
the plan looks at civil emergency planning and scientific cooperation. In some
ways this chapter may offer the most tangible benefits to the partner country.Â
NATO’s Disaster Response Coordination Center has proven to be an important resource
for partner countries in coping with natural disasters.Â
Box 1: A
Primer on NATO Partnerships
EAPC: Â Â Â Â Â Â Â Â Â Â Euro-Atlantic
Partnership Council
PfP:Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Partnership for
Peace
IPP: Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Individual
Partnership Programme
PWP: Â Â Â Â Â Â Â Â Â Â Â Â Partnership Work
Programme
PARP: Â Â Â Â Â Â Â Â Â Â Â Planning and Review
Process (PfP)
IPAP: Â Â Â Â Â Â Â Â Â Â Â Â Â Individual
Partnership Action Plan
PAP-DIB: Â Â Â Â Â Â Â Partnership Action
Plan on Defence Institution Building
MAP: Â Â Â Â Â Â Â Â Â Â Â Â Â Â Membership Action
Plan
Countries who choose to participate in
the Partnership for Peace (P-f-P) program become simultaneously members of
the Euro-Atlantic Partnership Council (EAPC), although the organisations
are separate and PfP officials report to the EAPC in a roughly similar way
to how NATO officials report to the North Atlantic Council.
In broad terms, there are three levels
of NATO PfP cooperation. The first level is formulating an Individual
Partnership Plan (IPP). The IPP is constructed from a huge list of
activities in which the partnering country can choose to participate.
Every year there are around 1,500 events that include everything from
assuming observer status at NATO military manoeuvres to basic military
training and/or language training at various NATO-affiliated or NATO-run
officer schools such as the NATO school at Oberammergau. There are
many training schools, most run by NATO allies, with centres in Ljubljana,
Budapest, Ankara, and elsewhere. A partnering country typically
selects the activities that fit its program and then submits its
list. NATO then checks the selection and approves or rejects specific
projects. NATO then has to ensure that the partnership country
actually participates in the events it chooses because oftentimes funding
is an issue. NATO countries provide some assistance and sometimes end
up funding 100% of the participation costs.
Should a partnering country choose to
deepen its relationship with NATO, it can choose to participate in the Partnership
Action Plan on Defence Institution Building (PAP-DIP). NATO created
PAP-DIB at the June 2004 Istanbul Summit as a way of promoting concrete
defence reform among PfP countries. The ‘ten commandments’ of PAP-DIP
reform, listed on pages 76-77 of the Istanbul Summit Reader’s Guide,
include developing transparent and democratic control of defence activities
(the first objective), promoting civilian participation in defence and
security policy development (the second), and establishing legislative and
judicial oversight over the defence sector (the third).
Ostensibly, all partnering countries Â
even those following only an IPP Â can participate in the PAP-DIP, choosing
IPP activities in accordance with a PAP-DIP strategy that concentrates on
institutional reform. In practice, countries following a PAP-DIP also
choose to participate in the PfP Planning And Review Process (PARP) and may
adopt an Individual Partnership Action (IPAP). The PARP and an IPAP
constitute the primary instruments for pursuing PAP-DIP objectives. A
PARP, for its part, is designed on a country-by-country basis to identify
and evaluate forces and capabilities in a PfP member’s military that could
be made available for multinational training, exercise and operations with
Alliance forces. It is a qualitatively higher degree of cooperation
than an IPP that concentrates on upgrading capabilities with a view towards
eventually interoperability.
The adoption of an IPAP constitutes,
roughly speaking, the third and most intensive level of PfP
cooperation. In distinction to the PARP, an IPAP contains political
reforms such as enhanced judicial oversight and democratic and civilian
control over a PfP member’s defence sector. Many countries with IPAPs
have already cooperated with alliance members in peacekeeping and peace
support operations. Kazakhstan, for example, has recently adopted an
IPAP and currently contributes a 29-man-strong de-mining unit to the
Polish-led division in Iraq. The adoption of a Membership Action Plan
(MAP) could involve a PfP member more intimately with alliance
activities. This would, however, place that member on the road to
full Alliance membership.
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25.    Armenia re-gained its independence
in 1990 when the non-communist Armenian National Movement led by Levon
Ter-Petrosian gained a majority of seats in the Armenian Supreme Soviet. Mr.
Ter-Petrosian led the country until 1998 but became less tolerant of opposition
parties, banning some that challenged his leadership. Suspicions of electoral
fraud led to increasing popular discontent.Â
26.    But the final blow to Mr. Ter-Petrosian’s
presidency came in 1998 when he appeared to accept a plan for settling the
Nagorny-Karabakh conflict. The compromise was opposed by the leaders of
Nagorny-Karabakh and many in the Armenian government, including the prime
minister at the time, Robert Kocharian. Mr. Ter-Petrosian resigned as was
replaced by Mr. Kocharian who remains president today.Â
27.    Mr. Kocharian was re-elected in
2003 for a five-year term. But that election was criticized by international
monitors and the main opposition parties did not accept the outcome.Â
Parlaimentary elections held later in 2003 were also judged by election
monitors as having failed to meet international standards. As a result the
opposition parties began a boycott of the parliament starting in 2004 and
organized street demonstrations. Those protests failed to unseat Mr. Kocharian
and some opposition parties returned to parliament to discuss the proposed
changes to the constitution that would in large part distribute some power away
from the presidency. The reforms were put to a referendum in late 2005 and
passed by a majority of the voters.Â
28.    Armenia is struggling to become a
stable democracy, but several problems are notable and cannot be overlooked.Â
As with its neighbours in the region, unemployment and corruption remain
serious concerns. Elections have been judged as significantly flawed by
international monitoring organizations. Other broad civil reforms need to be
addressed. Freedom House, a non-governmental organization that ranks countries
based on the civil liberties of their citizens, recently downgraded its ranking
of Armenia.
29.    Armenia maintains good relations
with Russia, Georgia and Iran. Russia is Armenia’s largest trading partner, an
important source of energy and other products critical to Armenia’s economy. Armenia also provides Russia with a military foothold in the region and
the Russian bases it hosts are all the more significant now that Georgia and Russia have agreed to remove Russian bases from Georgia.Â
30.    Its relationship with Turkey, however, is strained. As Turkey is the NATO member with borders on two of the
three countries of the South Caucasus region, its relations with those states
is a significant element in NATO’s relationship with the region. Turkey’s support
for Azerbaijan is one factor for the tense relationship with Armenia, but the
other is the massive number of Armenian deaths that occurred during the last
days of the Ottoman Empire in 1915-1922. Armenian and its international
supporters maintain that the death of an estimated 1.5 million Armenians in the
course of forced removals from their homeland constituted an intentional policy
of genocide. Turkey maintains that the deaths that occurred during this time
were not the result of an intentional effort to eradicate the Armenian
population. It is a sensitive issue to say the least, but the end result is
that the border between Turkey and Armenia remains closed. There are now
direct flights between Armenia and Turkey, but full diplomatic relations are on
hold until there is some resolution of the historic grievance between the two
countries.
31.    Armenia has no plans to seek full
membership, owing largely to its status as Russia’s principal partner in the
region. Despite this, it has developed a fairly intensive degree of
cooperation with the alliance. Armenia joined the PfP programme in 1994
and the country adopted an IPAP in December of last year. Armenia is
participating in NATO missions and has troops deployed as part of international
missions in Kosovo and Iraq.
32.    The
familiar litany of problems regarding the conversion of Soviet-style to
all-volunteer professional militaries under civilian control applies no less
for Armenia, with the complicating factor of a large – and strategically vital
– Russian military presence in the country. Armenia is, however, an
enthusiastic participant in its PfP activities, and Armenian officers
participate in a variety of NATO-sponsored training programs.
33.    The origins of the Nagorny-Karabakh
conflict stretch back to Stalin’s decision to incorporate an Armenian enclave
within the administrative boundary of Azerbaijan. This mattered less in
practice until the collapse of the Soviet Union, which brought lingering ethnic
tensions and demands for self-determination to the forefront.  Demonstrators
in Armenia demanded that the region be incorporated in Armenia and in 1988
ethnic Armenians in an Azerbaijani town were massacred. Azerbaijan blockaded
the region in 1989, but the residents declared it to be a part of Armenia.Â
More violence in Azerbaijan against ethnic Armenians led to Soviet troops being
placed in and around Nagorny-Karabakh to keep the peace. But with the complete
collapse of the Soviet Union and the withdrawal of Soviet troops, the lingering
conflict turned to open warfare. Armenia was not officially involved in the
battle for Nagorny-Karabakh, but it supplied the region with everything it
needed to conduct the war. Armenian forces overcame Azerbaijani forces and by
1993 controlled not just Nagorny-Karabakh, but a substantial buffer zone around
the region. A cease-fire was declared in 1994 that is still in place today.Â
34.    It is difficult to overestimate the
bitterness on both sides. Tens of thousands of refugees created by the
conflict are present in both countries. Azerbaijan lost 13 % of its territory
to what they perceive as Armenian aggression. Armenia lost thousands of ethnic
Armenians living in Azerbaijan.Â
35.    Despite this, there appears to be
some progress toward a settlement of the conflict in a mutually acceptable
manner. Armenian officials have spoken increasingly in the past year about the
need for compromise and there are some indications that the two sides may be
moving toward a solution that involves aspects of both countries proposed
resolutions. It is possible that a phased plan returning some contested
regions to Azerbaijan could be married with a referendum in Nagorny-Karabakh
over the future of the region. But all of this depends on securing some level
of popular support for a compromise, and hostility on both sides in the general
population still runs high.
36.    The Organization for Security and
Cooperation In Europe (OSCE) has the lead role in assisting Armenia and
Azerbaijan to resolve their dispute over Nagorny-Karabakh. Some experts
involved in the process express optimism that meetings scheduled for 2006 could
produce substantial progress toward a solution. This could pave the way to
more economic growth in the entire region. Armenia has been unable to trade
with Turkey and Azerbaijan since the start of the conflict. Reopening
commercial ties, transit links and other contacts would undoubtedly benefit all
concerned.
37.    Azerbaijan is also a significant
player in the South Caucasus region, not the least because it is an exporter of
oil and gas, and its weight will increase as more pipelines from the Caspian
region come on line in the next few years. Azerbaijan is also a predominantly
Muslim country with ties to Central Asia. As NATO increasingly engages with
countries with largely Muslim populations, it may become important to have
partner militaries with that cultural and ethnic background who will have an
intuitive understanding of issues that must otherwise be taught to European and
North American militaries.Â
38.    Azerbaijan shares a number of
similarities with its neighbours. It is struggling to develop the institutions
that will allow it to more closely integrate with the European Union and NATO.Â
It maintains a balance between its relations with the West, Russia, and Iran.Â
But what separates Azerbaijan from Armenia and Georgia is that it is an
increasingly important exporter of oil and gas. This has potentially positive
and negative aspects. On the positive side, the revenues from those natural
resources could be poured into public goods such as education and
infrastructure in a way that would let the country develop a diversified
economic base. On the negative side, some regional experts warn that
Azerbaijan could go the way of all too many countries that find themselves as
the beneficiaries of oil wealth: an over reliance on the easy money resulting
from current high oil prices, squandered financial resources, and governments
that use the revenue to placate the population and reduce demands for political
and economic reforms that would benefit the country in the long term.
39.    Azerbaijan held its most recent
elections for parliament in November 2005. Those were judged by international
observers to be deeply flawed. A wide range of irregularities was reported by
the OSCE and other monitoring groups, leaving many with concerns about the
direction of Azerbaijan’s political development. This is part of a trend-
previous elections were marred by serious irregularities. At the same, the
opposition to the ruling party does not appear to have the popular support to
confront the situation and bring about the sort of political transformation
that occurred in Ukraine or Georgia after similarly flawed elections. In fact,
the ruling party appears to be genuinely popular, which makes the unwillingness
to allow truly free elections all the more curious.
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BOX 2: ENERGY RESOURCES IN THE
CASPIAN REGION
The Caspian basin has long since been
an exporter of oil and natural gas, but recent developments will make it a
more significant region for global energy markets. Azerbaijan is the main
producer in the South Caucasus region, but Both Georgia and Armenia stand
to gain considerably from the pipelines being constructed across their
territory. Those pipelines will carry energy resources from Azerbaijan and
Central Asia to the Mediterranean where they will enter the global market.Â
The main conduit for oil is the
Baku-Tiblisi-Ceyhan pipeline project that spans the three countries of the
South Caucasus. It is already operational and is expected to transport
800,000 barrels per day (BPD) starting in 2007. The South Caucasus
pipeline for natural gas is being constructed alongside the oil pipeline.Â
It is expected to carry a considerable volume of natural gas for
consumption in Europe and elsewhere.Â
Another aspect of the two pipelines is
that they decrease the reliance of the South Caucasus on Russia for
energy. The disruption of the pipelines from Russia to Georgia in the
winter of 2005 demonstrated the vulnerability of that supply line. By
diversifying its supply of gas and oil, Georgia may find its relations with
Russia assuming a different shape.
The Caspian Basin is currently
producing 2,2 million barrels per day (BPD) and that is expected to grow to
4,2 million BPD by 2010 and 5.3 million BPD by 2015. All of those
development projects are viable at much lower oil prices so they are very
likely to be completed.
Nonetheless, this is a relatively small
amount of production compared to the major producers or global demand.Â
Saudi Arabia, the largest producer, is currently pumping 10 million BPD.Â
The entire Caspian Basin will produce approximately as much oil as
moderately large producers such as Iraq or Venezuela. Global consumption
is currently over 81 million BPD and is expected to continue to rise albeit
at a somewhat slower pace than recent years.
Despite the relatively small volume,
the fact that the region is going to produce significant amounts of oil for
export in the next year or two is potentially significant for global oil
prices.  The 800,000 BPD in the Baku-Tiblisi-Ceyhan pipeline will nearly
double the current global excess production capacity, which would likely
have a calming effect on oil prices.
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40.    Since becoming independent in
1991, Azerbaijan has taken a variety of steps to integrate into Euro-Atlantic
institutions. It joined PfP in 1994 and is a member of EAPC. The
Individual Partnership Programme provides Azerbaijan with a means to cooperate
more closely with NATO in achieving its specific defence reform related goals,
and Azeri military officers participate in training activities. In
addition, NATO approved an Azerbaijani IPAP in 2005 that should encourage a
certain amount of economic, political, and defence-sector reform.
41.    Some NATO officials describe
Azerbaijan as the least enthusiastic of NATO Partners in the South
Caucasus. It is believed that anticipated revenue of the
Baku-Tbilisi-Ceylon pipeline may be discouraging meaningful changes in the
defence sector. This, in turn, has delayed reforms intended to bring
about greater interoperability with alliance members. Of the South
Caucasus countries, Azerbaijan may experience the most difficulty generating
the necessary political will to fully implement its IPAP.
42.    That said, many joint NATO-Azeri
projects have achieved meaningful results, including NATO involvement in the
clearance of unexploded ordnance from the war in Nagorny-Karabakh and the
destruction of anti-personnel landmine stocks funded by the PfP Trust
Fund. Other successful projects tend to be of a scientific nature, such
as the construction of the Virtual Silk Highway promoting Internet development
and the establishment of an environmental pilot project intended to observe the
Caspian Sea ecosystem.
43. The countries of the South Caucasus
region share some similarities. All are struggling to implement the necessary
political, economic, and defence reforms necessary for closer integration into
Euro-Atlantic institutions. But the differences between them mean that the nature
of NATO’s involvement will vary considerably from country to country. Georgia
clearly desires to join NATO as soon as possible, but neither Armenia nor
Azerbaijan has expressed such a desire. Azerbaijan’s oil wealth may help or
hinder its reform process. Armenia’s difficult relationship with Azerbaijan
and Turkey may slow economic progress across the region. NATO at some level is
already drawn into the complex nexus of reform, ethnic conflict and delicate
relations with Russia that characterize the Southern Caucasus. How NATO as an
organization manages its engagement in the region will have lasting effects.
44. Regardless of the differences among
the three countries, it is important for NATO to build positive lasting
relationships with all three. Â The Subcommittee will visit Georgia, Armenia and
Azerbaijan over the course of 2006. Those visits will aim to inform the
members about the effectiveness of NATO efforts in the region and each
country’s progress in the reform process. The final report of the subcommittee
will incorporate the knowledge gained from those visits and offer
recommendations for further action in the region.
