In 2017 South Caucasus countries will have to navigate a more complicated international context
25 December 2016

Over the last year, the active engagement of Armenia, Azerbaijan and Georgia with a broad range of international partners mitigated the negative impact of turbulence in regional and international politics. In 2017 the three countries will have to navigate through an even more challenging and complicated regional and international context, and with heightened risks. In the second of three articles looking at the Caucasus in 2016, and prospects for 2017, Dr Dennis Sammut discusses the risks ahead.

In the wider world, two events in 2016 overshadowed most others, and have serious implications on 2017 and beyond - Brexit and the unexpected election of Donald Trump as US President.  The full implications of both are yet to unfold, and for the Caucasus region both may result in unexpected and unwelcome consequences. As a minimum both are likely to result in less western attention to events in the Caucasus, at a time when a more visible footprint is necessary.

The Caucasus three immediate neighbours - Russia, Iran and Turkey - have long standing connections with the region. 2016 saw substantial changes in the the dynamic between them, and for at least one of them - Turkey - this year has been one of the most significant in its modern history. The year started with two of them - Russia and Turkey, locked in a bitter dispute after Turkey shot down a Russian military plane near its border with Syria. Rhetoric spiralled very quickly, with the Russians demanding an apology and imposing restrictions on Turkey's lucrative business interests in their country. There was also a risk that Armenia and Azerbaijan could get embroiled in the dispute. Both showed caution, and Azerbaijan actively tried to calm things down and help heal the rift. There was a sigh of relief when this eventually happened. Russia, Iran and Turkey subsequently buried their differences enough to start a process for imposing their solution on Syria - a sign perhaps of things to come elsewhere in 2017.

The failed military coup in Turkey on 15 July was a political earthquake that unleashed a tsunami that has enveloped the country since. For different reasons, and to different extents, Armenia, Azerbaijan and Georgia need a stable and prosperous Turkey and all three hope for things in Turkey to settle down as soon as possible.

2016 was also the year when many countries looked forward to the return of Iran as a trade and political partner following the deal with the international community on the nuclear issue. President Hassan Rouhani led a diplomatic offensive with visits to European countries, as well as the region. Prospects of lucrative trade deals with Iran wetted the appetite of many countries, and the region looked forward to its share of the spoils. The new US administration however is making negative noises about the deal, to the ire of Tehran and the irritation of Brussels. If, under the new American leadership, the deal starts unravelling, this may have serious consequences, even on the transatlantic relatioship.

As for Russia, President Putin's belicose rhetoric, hard line domestic policies, and military muscle flexing have in 2016 been vindicated, at least in the eyes of Russian nationalists. President putin basked in what seemed to be symbolic, even if modest, diplomatic and military triumphs. But Russians are starting to question the costs in economic and human terms, of Russia's imperial adventures.

If 2016 was tumultuous, 2017 is likely to be even more so. Among the big external challenges facing the region in 2017, three need to be highlighted: Russia; the danger of a Middle East contagion; and the risk of negative global economic processes.


2016 ended with Kremlin spokesman Dimitri Peskov reminding us that Russian president Vladimir Putin still believes that the collapse of the USSR was a catastrophe for people living in its territory, and whilst it was impossible to talk about reversing the process, "logic dictates the need for new integration in the area of the former Soviet Union". This hankering back for the Soviet Union has been the single most consistent theme of Putin's foreign policy throughout his leadership of Russia. Putin has never tried to explain how the USSR could be kept together, let alone be recreated, once the Marxist-Lenninist ideology that justified it had evaporated, and the Communist Party, with its leading role in enforcing its existence, was no longer around. Nonetheless, in the current global uncertainties, the Kremlin's obsession with integration processes in the former Soviet space raises serious concerns.  In Abkhazia and South Ossetia the Kremlin has been constructing a model of how it sees these integration processes going forward - allowing all the trappings of state, and a certain degree of internal self-government, but establishing a "protectorate system" that delegates all important aspects of sovereignty to the centre. One can see a similar creeping process ongoing in Armenia, although here resistance to the notion is higher.

The big risk for the countries of the South Caucasus in 2017 is that with the US caught in the expected turmoil of an incoming Trump White House, and Europe in the messy Brexit process, Putin may think that this is his best chance of taking the new integration processes forward. If Georgia (2008) and Ukraine (2013) are to offer a model, what may happen is that Putin will turn a crisis which he helped provoke into an opportunity. Karabakh is the most obvious crisis ready to happen in the region, and the Kremlin's leverage on this matter is high, and increasing. In both Armenia and Azerbaijan domestic political turmoil, not from the bottom up, but from within existing elites, may similarly create uncertainties that the Kremlin can exploit to pursue its agenda. Georgia may look less vulnerable to this pressure than the other two at the moment, but if western support for Georgia falters, it could also very quickly become vulnerable to similar pressures.


The Middle East contagion

The second biggest risk for the region in 2017 is contagion from current upheavels in the middle east.  The proximity of the Caucasus to the Middle East trouble spots is often overlooked, as are the networks that link communities from both regions. With Russia, Iran and Turkey embroiled in the Middle East, as never before in modern times, the risk of importing problems of the middle east in to the Caucasus is high. Serious questions arise as to the dispersal of Islamic State militants once their strongholds in Syria and Iraq are wiped out over the coming months as is likely. Russia seems to understand this risk very well. It is not a coincidence that it is deploying military police units from Chechnya to Aleppo as part of the mopping up operations. The return of hundreds of militants from the levant to the north Caucasus may re-ignite the insurgency there - put on hold whilst militants fought for IS. Thousands of IS fighters will soon be looking for safe haven, and enough may end up in the Caucasus, north and south, to constitute a serious security problem. Security forces in all three South Caucasus countries run a tight ship, but the size of the problem may simply be overwhelming. The risk of terrorism in 2017 is therefore likely to be significantly higher.


Negative global economic processes can quickly derail efforts for economic development

A third risk for the region in 2017 is another global economic downturn, triggered by a trade war between the US and China, a mismanaged Brexit, or an economic meltdown in Saudi Arabia. The economies of the three South Caucasus countries remain fragile. Armenia and Georgia are still in the process of adjusting their economies to get the benefit of membership in the economic groupings of their choice - the EEU in the case of Armenia, and the EU in the case of Georgia. Contradictions within the economic and political system of Azerbaijan continue to hamper progress. All three countries have given more attention to their economic development in 2016 than they have ever done before. This reflects changing expectations amongst the local populations which the governments are now obliged to respond to. In all three countries, a new generation, better informed and better connected to international processes, is more demanding and not ready to be appeased by meaningless slogans, or calls to false patriotism. Given a stable global economic environment all three countries have the potential to develop rapidly, and there is on the face of it, enough vision and commitment by their leaderships to do so. But negative external factors can seriously hamper this, and none of the three countries has enough economic cushion to see them through a protracted economic crisis.

Digging-in is not the solution

In the past, governments in Armenia, Azerbaijan and Georgia have responded to outside turbulence by digging-in, often at the expense of their own citizens. That is not going to be the solution for the problems of 2017. Whilst firm government will be necessary it will be by galvanising the talents of the whole of society that the next challenges can be overcome, and this can only be achieved through an open and inclusive political and economic process.

This article, the second in a three part series, was prepared for Caucasus Concise by regional analyst Dr Dennis Sammut. The third and last article focusing on domestic issues in Armenia, Azerbaijan and Georgia in 2017 will be published on 5 January 2017.