Twenty five years after Armenia, Azerbaijan and Georgia became independent states, the South Caucasus remains a strategically sensitive region between Europe and Asia, Russia and the Middle East. It is still struggling with the legacy of the conflicts that broke out as the Soviet Union collapsed. Economic development lags behind its neighbors and unemployment and emigration are enduring problems.

The South Caucasus is still a region more in potential than in reality. The three nation-states have grown apart and resemble one another far less than they did 20 years ago. The future development of both Armenia and Azerbaijan is still hostage to the most dangerous unresolved conflict in wider Europe, the dispute over Nagorny Karabakh. An outbreak of fighting in April 2016, in which up to 200 people died, was a reminder that this is a smoldering conflict which is currently nearer to full-scale war than to peaceful resolution.

Thomas de Waal
De Waal is a senior fellow with Carnegie Europe, specializing in Eastern Europe and the Caucasus region.
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The long-term cost of the Karabakh conflict on Armenia and Azerbaijan is high. Armenia, the victorious party in the war of the early 1990s, still has two of its four land borders, with Azerbaijan and Turkey, closed and is overly dependent on Russia as its security patron. Azerbaijan has mostly resolved the acute humanitarian problems it suffered as a result of the Karabakh conflict and it has benefited from a decade of oil-fuelled prosperity after 2003. But the end of the boom and a turn to more authoritarian rule has made Azerbaijan much more inward-looking and fragile.

This makes Georgia a strong contrast to its two neighbors. Unlike its neighbors, Georgia has acquired the “habit of democracy” and held genuinely competitive elections in October 2016. A pro-Western consensus has been maintained through the very different periods when the country was led by Eduard Shevardnadze, Mikheil Saakashvili and Bidzina Ivanishvili. Its institutions—parliament, courts, media, civil service—are growing stronger.

Importantly, Georgia is helped by the fact that its unresolved conflicts in Abkhazia and South Ossetia are not a brake on domestic progress and aspirations for Euro-Atlantic integration. Opinion polls show that ordinary Georgians still care about the loss of the two breakaway regions but that domestic issues are uppermost in their minds. Also, the 2008 war with Russia and Moscow’s recognition of Abkhazia and South Ossetia as independent states is a huge obstacle to any ambitions Russia has of pulling Georgia back into its orbit. The de facto loss of the two territories is painful for Georgia, but also leaves it free to move faster towards Europe.

Russia continues to be the most important big neighbor for all three South Caucasus states. Since 2013 it has managed to strengthen its relationship with Azerbaijan, while incorporating Armenia into the Eurasian Union. Trade and communication links between Russia and Georgia have been restored since 2012, even as the two countries still have no formal diplomatic relations.

Yet a quarter-century of independence has confirmed the statehood of the three countries and given them plenty of tools to resist Russian influence and advice if they wish to. Knowledge of the Russian language and exposure to the Russian media are all slowly decreasing and Russia’s image has suffered as a result of the Ukraine conflicts.

Both the crisis in Ukraine and the conflict in Syria have had a generally negative impact on the region. The sight of the Maidan movement in Ukraine helped persuade the government of Azerbaijan to crack down harder in order to stifle dissent. As the crisis began in 2013, Armenia, under pressure from Moscow, went down “the road not taken” by Ukraine, agreeing to abandon its plans for an Association Agreement with the EU and to join Russia’s Eurasian Union instead.

The Syrian conflict, which is not far from the Caucasus geographically, also had a direct impact on all three South Caucasus countries. Armenia took in tens of thousands of Syrian Armenian refugees. Azerbaijan and Georgia (as well as the Russian North Caucasus) saw recruits from their countries join the ranks of so-called Islamic State and must now craft policies to deal with returnees from Iraq and Syria.

More broadly, these two crises have pushed the Caucasus down the agenda in both the United States and the European Union. With resources stretched and no obvious breakthroughs in sight, “conflict management” is now the order of the day. Ten or 15 years ago, when the peace processes in the region were more dynamic it was possible to recommend radical steps and hope for full resolution of the conflicts. Now, it is more realistic to pursue incremental change and to see the protracted conflicts in the context of societal development in the region as a whole.

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This publication was originally published by the Center for Transatlantic Relations.