Tuesday, 27 August 2013

Russia Pressures Armenia to Join Customs Union

Published in Analytical Articles

by Stephen Blank (the 08/21/13 issue of the CACI Analyst)

The centerpiece of current Russian foreign policy is integrating as many post-Soviet states as possible in what will ultimately be a Eurasian Economic Union (EEU). The first step of this process is to join a Customs Union and Russia is bringing enormous pressure to bear upon Kyrgyzstan, Tajikistan, Ukraine, and now Armenia to join. It is being made clear to these states that if they join the EEU or what Moscow calls EURASEC, they will not be able to join other trade organizations, e.g. those inherent in the EU’s Eastern Partnership. While most publicity has focused on Ukraine, recent Russian policy towards Armenia is no less revealing of Moscow’s tactics and goals. 

BACKGROUND: Armenia has recently announced that drawing closer to the EU and signing an Association Agreement with Brussels are its main priorities. Once Armenia made that announcement Moscow drew up its heavy artillery. Even though EU Commissioner for Enlargement and the European Neighborhood, Stefan Fule, stated that this Association Agreement would not affect Armenia’s deep cooperation with Russia who has a military base and extensive military deployment in Armenia and controls its energy policy, Moscow announced its opposition to that “integration” with Europe. Vyacheslav Kovalenko, Russia’s former Ambassador to Armenia, warned that Armenia would get few tangible benefits from the agreement with the EU while risking alienating Russia because the Association Agreement would preclude Armenia’s entry into the Eurasian Economic Community and its Customs Union.  Signing the agreement with Brussels would place boundaries between Russia and Armenia and lead to the withering of the current allied relations.        

Meanwhile Gazprom simultaneously announced its intention to acquire all the shares in the majority-owned Armenian natural gas distribution company rather than simply retain its 80 percent holding of those shares as is presently the case and extinguish any leverage that Armenia might have as a result. As part of its demands for Armenian entry into the Customs Union, Moscow announced plans for a 60 percent gas price rise. It settled for an 18 percent rise but even that might become excessively onerous for Armenia which almost totally depends on Russian energy.

Yet, Russia’s support is crucial if Armenia wants to hold onto Nagorno-Karabakh, where Russia has also, through arms sales to both Armenia and Azerbaijan, demonstrated that it plays both sides against the middle to perpetuate that conflict and its ensuing leverage in the Caucasus. Not surprisingly, Armenia’s political opposition has strongly denounced Russia’s pressure on Armenia and the potential giveaway of Armenia’s remaining stake in its gas distribution network. It should also be clear to outside observers that Moscow has sought to bring similar pressures upon Kyiv to give up control of its distribution network to Russia in return for membership in the Customs Union. Such a deal, even if it briefly led to lower gas prices (and experience shows that this does not, in fact, happen) would also mean the effective renunciation of Ukraine’s (and Armenia’s) independence. Such tactics clearly explain these states’ resistance to Russia and Gazprom, albeit with varying degrees of success. These tactics also show the similarity across geography of Moscow’s tactical use of energy to blackmail states it believes should be in its thrall.

IMPLICATIONS: Moscow’s two abiding goals are to integrate the entire post-Soviet space under its domination and as part of that larger multi-dimensional process, ensure that it is the only security manager in the Caucasus. Not only is it now using energy blackmail against Armenia; it has consistently tried to maintain the Nagorno-Karabakh conflict at a simmering level by providing large-scale military assistance to both Armenia and Azerbaijan to ensure its domination of any processes connected with conflict resolution there. But Russia’s Caucasus games do not end there. Leaving aside its determination to enforce an amputation of Georgia’s territorial integrity and sovereignty upon Tbilisi, it is projecting its power against Azerbaijan as well even if Azerbaijan has announced on June 28 that Azerbaijani gas will go to Europe through the Trans-Adriatic pipeline and not through Gazprom.

Despite Baku’s June 28 announcement, apparently fearing Russian intervention in the October 2013 presidential elections, Azerbaijan made “unbelievable promises” to Rosneft about having it explore for oil in Azerbaijan, on land and in the Caspian Sea. When Moscow hosted a summit for countries exporting gas and did not invite Baku it thus sent an unmistakable signal that was understood along with its ability and past willingness to interfere in Azerbaijan’s domestic politics at a sensitive time. Baku’s moves show the power residing in Russian energy firms that goes beyond the Russian Federation’s borders. But it also reflects the Azerbaijani reaction to Moscow’s more or less unveiled fist displayed in the Caucasus.

Although the EU has stated its support for Armenia’s efforts to broaden its foreign policy, something more is needed if Armenia is to be able to stand up to Russian pressure. We must understand what will ensue if Yerevan cannot do so. Becoming ever more dependent upon Russia, Armenia will then be unable to move on its own accord either to break the impasse on Nagorno-Karabakh peacefully with Azerbaijan or to effectuate much needed domestic democratizing economic and political reforms. This means continued backwardness, authoritarian governance, and dependence upon Russia as both a protector and model. At the same time the state of high tension around Nagorno-Karabakh with both sides rearming and constant skirmishes occurring will continue. And further conflict could then break out, especially if there is no movement towards resolution. Only Russia benefits from both this tension and the potential of actual conflict. Neither Azerbaijan nor Armenia gains anything from it. If anything, their economic-political development and freely chosen integration into Europe is impeded by such trends. In domestic politics, the preservation of Putin-like regimes throughout may be seen as a boon to Russia but actually this represents a major and ongoing threat to peace for everyone, including those regimes. 

The Caucasus then becomes not just a hotbed of potential regional conflicts and of stagnant regimes that could easily give rise to major domestic upheavals given the widespread demonstrations against governments in Greece, Turkey, Egypt, Syria, and potentially other nearby countries. It also remains one of the most militarized areas of the world because of the very large and continuing Russian buildup here since 2008 which has not enhanced security but rather Russian domination. Indeed, Russian domination of any region in the CIS immediately lowers the level of security enjoyed by the local governments there, hardly a situation that any of them could want. In view of the repercussions of the Georgian-Russian war of 2008 that spread far beyond Georgia, the prospect of renewed strife and instability in the Caucasus is not one that should be viewed with complacency and/or equanimity.

CONCLUSIONS: Until now, the United States and Europe have essentially pursued a policy of neglect in the Caucasus, all of whose implications are malign as we can see from local trends in the security of the South Caucasus. More recently, in her confirmation testimony to be Assistant Secretary of State for Europe and Eurasia, Victoria Nuland inveighed against the policy of doing nothing to resolve the frozen conflicts – not just Nagorno-Karabakh – that continue around the Black Sea to include Georgia’s conflicts and Moldova. One hopes that these remarks are not just rhetoric and actually betoken an American realization that allowing Russian domination of the Caucasus and taking a hands off policy towards the area’s conflicts – a policy that is really two sides of the same coin – undermines regional security, makes conflict all the more likely, impedes democratization as well as the integration of local governments into Europe and thus contradicts the national interests not only of these states but also of the U.S.

In this regard, Russia’s unceasing employment of the tactics of energy blackmail and its attempt to force all of its neighbors into an economic and ultimately political union neither benefits them, nor the West. Worse yet Moscow’s tactics would force all of its neighbors into accepting long-term backwardness and dependence upon a criminalized an increasingly economically incapable Russia.

The practical question is whether the West will step up and expose Russian economic and political machinations for what they are and thus counter them or let another opportunity slip. As the history of the CIS over the last few years should remind us, opportunities to bolster the standing of the new post-Soviet states, once surrendered or lost, cannot be regained and then both they and the West pay the price for that malign neglect.

AUTHOR’S BIO: Stephen Blank is Professor at the Strategic Studies Institute, U.S. Army War College. The views expressed here do not represent those of the U.S. Army, Defense Department, or the U.S. Government. 

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