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A New EU Approach Towards The South Caucasus By Stefan Meister aussenpolitik.net – 27/2/2011 https://aussenpolitik-net.dgap.org/de/aussenpolitiknet/regionen/new-eu- approach-towards-south-caucasus Kategorie: Sicherheitspolitik, EuropÃ¤ische Nachbarschaftspolitik, Ostliche Partnerschaft, EuropÃ¤ische Union, Konflikte und Strategien, KonfliktprÃ¤vention/-management, Krieg/Kriegfuhrung, Russische FÃ¶deration, Osteuropa, Kaukasische Staaten der ehemaligen Sowjetunion Der Sudkaukasus erlangt fur die Energieversorgung Europas eine immer grÃ¶Ã~_ere Bedeutung. Nach dem georgisch-russischen Krieg hat die EuropÃ¤ische Union ihr Engagement in der Region weiter verstÃ¤rkt und ist seitdem mit der Beobachtermission EUMM in Sudossetien prÃ¤sent. Vor allem der Karabach-Konflikt blockiert noch immer die Entwicklung der gesamten Region. Angesichts der Bedeutung des Kaukasus und der dortigen sicherheitspolitischen Herausforderungen mangelt es der EU allerdings weiter an einer kohÃ¤renten Strategie. Es ist an der Zeit, dass Deutschland wieder eine Schlusselrolle in der Sudkaukasus-Politik der EU ubernimmt und neue Impulse setzt. Introduction The EU's policy towards the South Caucasus is a typical example of the inability of its member-states to develop a common policy strategy towards the post-Soviet space. The failure of conflict resolution in its neighborhood is also the result of diverging interests between the member- states. First, the South Caucasus is a battlefield for EU-member states on how one should develop a policy towards Russia and its post-Soviet neighbors. Second, it is a key region for the highly ideologically driven European energy debate on the diversification of energy supply without tangible results. Third, it exemplifies the lack of a common Western, that is US and EU, strategy towards the post-Soviet space. As a result, conflict resolution in this fragmented region has not yielded results in the last twenty years, and Russia, lacking its own strategy for the development of the region, arguably used the absence of serious EU involvement in conflict resolution to freeze the status quo and control the region. The three South Caucasian states are highly frustrated with the EU's weak and contradictory policy in the region. Rather than focusing first of all on Georgia, the EU should make equal offers to all states of the region. This policy should take the varying levels of development of all three states into consideration, their different conflicts as well as different interests in the rapprochement with the EU. There is a need for recalibrating the EU's policy towards the South Caucasus. Germany played a crucial role in setting in motion a new policy approach towards the region, and it is currently a weak link in the EU Eastern policy debate. If Germany is not willing to promote the Eastern Partnership (EaP) more actively and to take a new approach towards the South Caucasus, the EU as a whole will fail to be a relevant player in the South Caucasus and in the post-Soviet space in general. With its monitoring mission in Georgia Brussels is at the moment the only international player which takes responsibility for the region. The EU and its member states should use the window of opportunity that opened after the Russian-Georgian war in August 2008 in order to develop a comprehensive strategy towards the South Caucasus. Germany should become an advocate for the South Caucasus inside of the EU. South Caucasus after the Russian-Georgian War The Georgian-Russian war in August 2008 and the recognition of South Ossetia and Abkhazia by Russia have changed the geopolitical situation in the South Caucasus. The post-Soviet countries are increasingly searching for alternative allies and links in order to avoid their dependence on Russia. In fact, no serious external power has recognized the independence of the two separatist territories. This weakens Russia's position in the post-Soviet space and challenges its alliance policy. The Russian leadership was not able to get support from "allies" in organizations like Collective Security Treaty Organization (CSTO) or Shanghai Cooperation Organization (SCO). Now only Russia is responsible for the economic development and political stability of South Ossetia and Abkhazia. The experience in the North Caucasus shows that Russia has no strategy to pacify and develop ethnic difficult regions. While Abkhazia has the potential to be independent from Russia, South Ossetia has become a de facto subject of the Russian Federation. For Azerbaijan the results of the war were problematic in two ways: First, the recognition of South Ossetia's and Abkhazia's independence by Russia set a dangerous precedent and can have a negative effect on the ethnic conflict around Nagorno-Karabakh. Second, the bulk of Azerbaijan's energy exports go through Georgia, which was challenged by the war. In addition, for Turkey the war in Georgia threatened oil and gas transportation routes from Azerbaijan to Turkey (like BTC pipeline) and put Turkey's ally Azerbaijan under pressure. Moreover, Azerbaijan then began to press Turkey because of its rapprochement with Armenia and threatened Ankara with closer energy cooperation with Russia. For Turkey, Azerbaijan is not only an important political ally but also an important alternative supplier for oil and gas compared to Russia. Georgia lost its reputation in the West: not only most of the EU member- states assess the current Georgian leadership as unpredictable, but also the Obama Administration is less interested in supporting Georgia unequivocally. During the war, Georgia lost its breakaway regions, which put an indefinite end to the policy of re-integration. Tbilisi's second important goal, NATO membership, is no longer on the table. Despite increasing critical voices, the Western reaction to the war was to give Georgia an unprecedented amount of foreign funds of $4.55 billion to deal with the economic consequences. For regional stability it was important that Georgia got international support directly after the war. But as long as a Georgian president will lead the country without efficient checks and balances, Georgia will not have a chance to contribute to the conflict resolution in the region. After having been provoked by Russia, the Georgian president was able to start a war against South Ossetia without having been called to account. Neither the parliament, the constitutional court, the opposition nor the public were able to control the executive. After the August war, negotiations on the Nagorno-Karabakh conflict intensified. Russia started an initiative of high-level meetings, which culminated in a joint Russian-Armenian-Azerbaijani declaration on the non- use of force signed by the presidents of the three states, Ilham Aliev, Serzh Sargsyan and Dmitri Medvedev on the 2 November 2008. Yet, neither the Minsk group nor the Russian initiative obtained a breakthrough in the Karabakh conflict. On the contrary, Baku has grown increasingly frustrated with the Turkish-Armenian rapprochement and subsequent Armenian refusal to yield on the condition of full withdrawal from the occupied territories, while the Armenian President suspended the ratification of the protocols with Turkey, in light of Turkish president Erdogan's refusal to commit to the border opening between Turkey and Armenia as long as Armenian troops remain in Azerbaijan. Having been a bystander in the South Caucasus, the EU, after mediating a ceasefire between Russia and Georgia and establishing a monitoring mission (EUMM), has assumed a large degree of responsibility for the future stability of the region. The EU has strengthened its presence in the region, which raises expectations in the South Caucasian states about the future role Brussels is willing to play in the region. For its part, Russia has accepted the EU's role in monitoring the situation. However, it expects the EU to recognize the current status quo of the de-facto separation of South Ossetia and Abkhazia from Georgia. This is a challenge that the EU has to manage and will determine the future of Europe's role in the region. What is still missing is a long-term EU strategy for the region and a willingness to take on the responsibility for conflict resolution and development in the South Caucasus. The Eastern partnership and the Southern energy corridor might be tools for deepening the ties between the EU and the South Caucasus, but they are no strategy. Ethnic conflicts as the main obstacle to development in the South Caucasus Ethnic conflicts and political fragmentation are characteristic of the South Caucasus. There are three sovereign states - Azerbaijan, Georgia and Armenia - and three separatist territories - Abkhazia, South Ossetia and Nagorno-Karabakh. The conflicts over the three separatist regions interfere with regional cooperation in the wider South Caucasus region and have seen outside players become involved. The Georgian conflicts in particular are in the spotlight of the international media because of the Russian-Georgian war, but the Karabakh conflict has even more influence on the limited regional cooperation. While the Georgian conflicts first of all concerns touches the relations between Russia and Georgia, the Karabakh conflict blockades the relations between all three states of the region. The tensions between Georgia and its breakaway regions escalated in spring 2008 and culminated in a Georgian attack on South Ossetia in August of the same year and a subsequent Russian military strike on Georgian territory. No international initiative for conflict prevention was successful in reducing these tensions. There is no functioning international mechanism for conflict resolution in the South Caucasus. >From the beginning of the collapse of the Soviet Union, Georgia was confronted with separatist movements that led the country into two ethnically motivated civil wars (with Abkhazia and South Ossetia). Consequently, Georgia was on the brink of being a failed state. Russia was the main player in negotiating ceasefire agreements after the military conflicts between Georgia and South Ossetia as well as with Abkhazia. Russian engaged so called "peacekeeping" troops in both regions, which became more important with the deterioration of the relations with Georgia after the Rose Revolution. After the Rose Revolution in November 2003 and the election of Mikhail Saakashvili as Georgian president, the new leadership successfully strengthened the state's political institutions and started an offensive integration policy of the separatist regions. The third breakaway region of Adjara was, compared with Abkhazia and South Ossetia, easy to integrate by president Saakashvili in May 2004 because there was no ethnic conflict, no experience of violence and no declaration of independence like in the two other cases. The subsequent attempt to integrate the other two territories worsened relations with Russia, which implicitly annexed the two separatist regions through its policy of pasportisacija, that is, the extensive issuance of Russian passports to people from both regions. From a regional point of view, these conflicts were relevant for the relations between Georgia and Russia because Russia took from the beginning the side of the separatist regions in order to weaken Georgia and to prevent the country from joining NATO. Russia and Georgia tried to exaggerate their conflicts as a conflict between Russia and the West. Russia blamed Georgia to get support from the US. Georgia worsened relations with Russia, which complicated regional politics and conflict resolution even more. This gave Moscow the opportunity to escalate the conflict and to justify, in part, its policy. The first ethnic conflict in the context of the fall of the Soviet Union exists between Azerbaijan and Armenia over Nagorno-Karabakh. The Karabakh question is a major conflict in the South Caucasus because it is the main obstacle to intra-regional cooperation which involves all three states of the region. The conflict erupted in 1988 and a ceasefire was not reached until 1994. As a result, Armenia occupied 17 percent of Azerbaijani territory including Nagorno-Karabakh and seven formerly Azerbaijani- populated provinces. As a consequence, the Turkish-Armenian border was closed in 1993. If the Turkish-Armenian blockade breaks, Georgia will lose its key role as the sole transit route from the Caspian Sea to Europe. Since 1992 the Minsk-group of the OSCE under the Co-Chair of Russia, France, and the US (since 1997) has led negotiations in the Karabakh conflict without a breakthrough. Azerbaijan's frustration has increased because of the frozen status quo and the indirect international acceptance of Armenian occupation of a big part of Azerbaijani's territory. Most of the one million refugees on the territory of Azerbaijan come from the occupied regions. Despite a good basis for further negotiations with the Madrid principles from 2007 (updated in July 2009) the main controversies are still unresolved: the future status of Karabakh, the return of areas controlled by Armenia, the return of refugees, and the protection of the border. More than before Armenia was afraid of a blitz- attack by Azerbaijan, while Baku feared the recognition of Karabakh's independence by Moscow. Despite long-term negotiations involving the international community, no breakthrough has been achieved and all three conflicts are still a security risk for the region. They contribute to the deficit of good governance, limited transparency in the economic policy and rise of transnational threats like organized crime and the increased militarization in the region. The lack of multilateral economic cooperation and the absence of a constructive dialog are typical of the relationship among the South Caucasian states. Instead of communicating and cooperating with each other, all three states compete for international attention and support. This makes the region vulnerable to external interests and it easy for outside players to use the ethnic conflict for their interests as especially Russia does. The vulnerability of economic growth From an economic point of view, the states of the region differ from but depend on each other. While Azerbaijan is producing more than 60 percent of its GDP with the export of oil and gas, Georgia's and Armenia's economic growth up to 2008 was based mainly on the construction sector, services, and agriculture. For Armenia, remittances from Armenians living and working abroad play an important role. The amount of money sent home by migrant workers was more than $2.1 billion in 2008, which is more than half of the Armenian domestic retail trade turnover. For Georgia, the transit of resources from the Caspian Sea to Turkey matters greatly, while for Azerbaijan, Georgia is the most important transit country for its resources to Europe. Georgia is the main link for Armenia to Russian energy supply and to the regional and international market. Approximately 70 percent of Armenian trade transits via Georgia. Because of Armenia's economic and energy dependency on Russia (Russia is its main trade partner with about 20 percent exports and imports to and from Russia) and its transit dependency on Georgia, the recent conflicts between Russia and Georgia have hurt the Armenian economy much. The periodic disruption of fuel and food imports from Russia highlighted Armenia's vulnerability due to the single transit corridor. Azerbaijan is the most important energy supplier for Georgia. Baku decided to cut Russian gas imports and to provide Georgia with natural gas for a lower price of $120 per 1000 m3 (five years contract) against Gazprom's demand of doubling the price for both countries from $110 to $235 per 1000 m3 in 2006. Just as Russian companies had taken over Armenian energy assets, the state oil company of Azerbaijan, SOCAR, purchased significant parts of the Georgian gas distribution network at the end of 2008. Despite the high potential for conflicts, the South Caucasus has demonstrated impressive economic growth and reform since the mid-2000s: up to the financial crisis an economic recovering of the three states could be observed. Azerbaijan had one of the highest real GDP growth rates worldwide (between 10 percent and 30 percent, 2002-08), reaching the growth peak of just over 30 percent of real GDP growth in 2006. In spite of the financial crisis in 2009 there was still GDP growth of 9.3 percent and an IMF study forecasts of 2.7 percent for 2010. Between 2003 and 2008 Armenia and Georgia, too, registered growth rates of around 10 percent. While Azerbaijan still retained positive growth despite the financial crisis, Georgia, and especially Armenia were hit strongly by the downturn. Georgia could mitigate the negative trend because of the huge amount of international aid after the war in August 2008 and a loan of $750 million by the IMF. In terms of economic reforms, Georgia is ahead of the other states of the region. After Mikhail Saakashvili became president he started comprehensive economic reforms which led to a high level of foreign direct investments and impressive economic growth. The government simplified the tax code, overhauled the custom code and started to fight corruption with success. The World Bank recognized Georgia as one of the fastest reforming countries in the world in 2008, ranking it as one of the 15th easiest places for doing business in the world. During the peak of the economic growth between 2006 and 2008, foreign direct investment quarterly inflows averaged half a billion dollars per year. Growth abruptly slowed down with the dual shock of the disastrous war with Russia and the global financial crisis. Azerbaijan and Armenia also started economic reforms. Azerbaijan's creation of a state oil fund (SOFAZ) contributes to making the country more credible as an economic and trade partner in spite of enduring problems with bureaucracy and corruption, comparable to those in Armenia. Azerbaijan's oil production is largely responsible for the high growth rates between 2005 and 2007 as the oil and gas sector accounted for 53 percent of the GDP in 2007. More than 40 percent of state revenues were provided by transfer from the SOFAZ in 2009. Azerbaijan made some efforts in modernizing its economy, which means, first, simplifying domestic regulatory requirements for investments and transparency. But the non- transparent and corrupt public administration still limits the impact of these reforms. Like in Armenia (but in contrast to Georgia), the state still plays a dominate role in the economy of Azerbaijan. What Azerbaijan has not managed yet, however, is to diversify its economy from natural resources; it continues to depend heavily on oil. All three countries used their revenues to invest in armament. The Armenian defense budget increased from $296 million in 2007 to $395 million in 2008 (GDP 2007: $9.4 billion, 2008 $12.4 billion). At the same time, Azerbaijan raised its defense budget from $936 million to $1.3 billion (GDP $27 billion and $40 billion). Georgia, meanwhile, doubled its defense budget from $573 million to $1 billion (GDP $10.2 billion and $14.5 billion). As a member of the Collective Treaty Security Organization (CSTO), Yerevan gets weapons from Russia for a much lower price than Azerbaijan. The economic performance of the region is closely connected to the natural resources of the Caspian and its transit to Europe. There is more economic cooperation among the states of the South Caucasus than the political conflicts would suggest. Georgia is the key country for transit of resources from Azerbaijan to Turkey and the main transit country for Armenian trade. As a result, Georgia's instability after the war in August 2008 had a direct influence on both neighbors. For a short time the war also questioned the transit of Caspian oil and gas to Europe, which was, nevertheless, not interrupted by Russia. The situation became more complicated within the context of the difficult relations between Georgia and Russia because Moscow enjoys warm relations with Armenia, and because of its geopolitical location and the Karabakh conflict Azerbaijan has an interest in good relations with Russia. This geopolitical constellation makes it easy for Russia to influence developments in all three states as long as Armenia is isolated and Azerbaijan and Georgia have only limited support from other international players to solve their conflicts. The South Caucasus and the Caspian resources According to the BP Statistical Review of World Energy, by the end of 2008 Azerbaijan had a share of 0.6 percent of both the world's oil and gas reserves. It increased its oil production from 180,000 barrels per day in 1997 to 914,000 barrels per day in 2008. The majority of the oil is exported through the BTC-pipeline to Turkey and shipped from there by tanker mainly to European markets. Azerbaijan's gas production increased to 16 billion m3 in 2008. With the development of the second phase of the Shah Deniz gas field, Baku can put an additional 14-16 billion m3 per year gas on the market, which is the potential gas supply available for European markets from the Caspian region before 2020. Contrary to the increasing resource nationalism of Russia and Kazakhstan, the Azerbaijani leadership still let its petroleum sector open for international companies. This is a result of the disastrous economic situation after 1990 and the interest of the political elite to diversify its resource sector from Russian companies and transit. The Azerbaijani State Oil Company SOCAR developed close partnership with multinational petroleum company's worldwide, bringing Western presence in the Caspian Sea. SOCAR holds a stake of 25 percent in the BTC oil and the South Caucasus gas pipelines, and is partner to more than 20 partnership and cooperation agreements with international companies where it holds mostly between 10 and 50 percent. The government has not achieved its goal of decreased dependence on oil, in contrary, its dependency has increased. In the end of 2008 approximately 97 percent of total exports were made up of crude oil and oil products. Even the low price of oil in the beginning of the global financial crisis did not reduce this dependency. At the centre of the dispute over resources in the Caspian Sea stand different pipeline projects and supply contracts. At present, there are three pipelines supplying Europe with resources, which bypass Russia. The Baku-Supsa-Pipeline (between Azerbaijan and Georgia) and the Baku-Tbilisi-Ceyhan-Pipeline (BTC) have delivered oil from Azerbaijan via Georgia to Turkish Ceyhan since 2005/06. They have made Azerbaijan independent from the oil export through Russia. The Baku-Tbilisi-Erzurum-Pipeline also known as the South Caucasus gas pipeline (SCP) runs parallel to the BTC and transports gas from the offshore field Shah Deniz in the Azerbaijani sector of the Caspian Sea through Georgia to Erzurum in Turkey. It has supplied Turkey with gas since 2007. From there, the Turkey-Greece-Italy interconnector (TGI) and the interconnector Greece-Italy (IGI) offshore pipelines should transport the gas in future further to Greece and Italy. The SCP could also transport gas from Turkmenistan and Kazakhstan to Turkey, if transport facilities across the Caspian Sea or the route through the Caspian Sea would be available. The commercialization of the BTC and SCP pipelines have created substantial revenues for the transit countries and have strengthened the economic and political links between Azerbaijan, Georgia, Turkey, and the EU member-states. Especially the BTC pipeline completed the first phase of the East-West corridor and opened the discussion for other projects like the transport of Central Asian gas and oil to European markets. There is an ongoing debate about new pipelines leading from the Caspian Sea to Europe passing and bypassing Russia. The most prestigious European project is the Nabucco pipeline as part of the Southern gas corridor, which is supposed to connect Bulgaria and Austria as well as Southern and Central Europe via Turkey with the gas resources of the Caspian Sea, Central Asia, the Middle East, and even North Africa. After the Russian-Ukrainian gas dispute in January 2009 the project was broadly discussed as an alternative project to Russian gas supply. Azerbaijan plays a key role for the Nabucco project. So far it has been the only Caspian country committed to fill in the pipeline from the beginning of the project, but this is not enough for the full capacity. Due the exploration of the second phase of the major offshore Shah Deniz gas field in the Caspian Sea Azerbaijan will be able to export up to 30 billion m3 in long run. Kazakhstan, Turkmenistan and Uzbekistan have a long-term potential (starting from 2020) for gas export of around 150 to 200 billion m3, but it is still unclear, how to transport their gas trough the Caspian Sea. Other possible suppliers for Nabucco are Iran, Iraq, and Egypt. Because of the current political and economic situation, Iran, the second richest gas country in the world, will be no supply country for Nabucco. Iraq, on the contrary, could be a supply country but with a much smaller amount of resources. There are Chinese and Russian competition projects which should bring Caspian resources to the North and the East. Nabucco and the South Stream pipeline (Russian Gazprom and Italian ENI share each 50 percent) are described as competing projects, designed to provide the same gas to the same markets. Despite the financial crisis and even though the elections in Ukraine questioned the South Stream project because of decreasing gas demand in Europe and the difficulties to get international loans, the project has a strong support by the Russian government. If Gazprom will get control over the Ukrainian state gas company Naftogaz and/or the transit pipelines to Europe, the situation may change, but this is not in the interest of the Ukrainian elites. South Stream's planned capacity is 63 billion m3 gas. While South Stream can get the gas which Russia pumps at the moment trough the Ukraine, Nabucco has only the commitment of Baku to be supplied with gas by Azerbaijan. Furthermore, both pipelines compete for Central Asian and Caspian gas. The third competing party with interest in Caspian resources is China, which opened a gas pipeline running from Turkmenistan via Uzbekistan and Kazakhstan in December 2009. Its current capacity of approximately 13 billion m3 per year should increase to the final 40 billion m3 in 2012. China has made strategic investments in energy reserves and infrastructure in Central Asia in recent years, but is not a key player in the South Caucasus. China has become a major buyer of Central Asian and Caspian gas next to Russia, which broke Russian monopoly of transit in the region. If China further increases its position as a consumer of Central Asian gas it will gain influence on the Russian ability to supply the European markets. In mid-November 2009, the head of the Azerbaijani energy company SOCAR pointed out that their company can also sell gas to China as part of the countries diversification strategy if Europe takes too long to figure out a solution for the Nabucco pipeline. The key question for the European Union is how to get access to the Caspian resources and how to become a serious player in the competition on resources with Russia and China. Alternative routes for Central Asian gas to Europe bypassing Russian territory include a Trans-Caspian pipeline to Azerbaijan, transporting LNG or compressed gas to Azerbaijani ports. With a planned Kazakhstan-Caspian oil transportation system Kazakh oil fields are supposed to be connected by tanker with the BTC pipeline by 2012. The idea of a Trans-Caspian-Pipeline, which should bring Turkmen and Kazakh gas to Baku and then further with the BTC-pipeline to Europe, has been discussed since the 1990s. But there are still difficult negotiations among the five littoral states regarding the division and management of the Caspian Sea and its natural undersea resources. Especially the unclear status of the Caspian Sea and the opposition of Russia and Iran hamper the implementation of a Trans-Caspian pipeline. Since October 2008 Kazakh oil has been transported with tankers via the Caspian Sea to Baku for further export through the BTC. Comparing with the European annual overall consumption of 500 billion3 of gas, Nabucco can contribute only a small amount to European energy security. But it would be an important step to develop the Caspian region for Europe, because it would open the access to new resources with a new pipeline. The EU is lacking a political strategy to get access to the Caspian energy resources and especially in the last two years the European debate was too much concentrated on Russia. In a couple of years China will be the main player on the Central Asian energy market, because it has the resources to invest, gives the political support and it is a highly pragmatic economic player. Russia will further lose its economic influence in the region. A big advantage for the EU is that the states of that region are interested in depending neither on Russia nor on China too much. But as long as the EU is no player in the region Europe is only a bargaining chip for the post-Soviet Caspian states to get a better price from Russia and from China. External Powers in the South Caucasus and Caspian Basin Because of the South Caucasus' geopolitical location between Europe, Central Asia, Russia and the Middle East as well as the deposits of energy resources, there is a high interest of external powers in being involved in the region. However, there is a limited interest in solving conflicts or in contributing to the future development of the region. In the past, the US was the key player in developing links with the Caspian energy resources to Europe through the BTC and SCP. Turkey and, to some extent, Iran are gaining increasing influence as regional powers in the South Caucasus. In terms of security and the development of Caspian resources, Iran is a big challenge for the region. For the EU and most of its member-states, it was mostly the consideration taken for Russia, which hindered deeper involvement in the region up to the summer of 2008. The international community's involvement in conflict resolution was more or less limited. Sponsored mainly by the OSCE and UN it has brought little result. Russia is still a player in conflict resolution but it is a regional player which primarily follows its national interests. Since no other country takes the initiative to promote conflict resolution in this region, the role of the main player is left, once again, to Russia. Russia Russia's main interests in the South Caucasus are to secure its position as the main regional player, to control pipeline systems in the region and the resources of the Caspian Sea and to ensure dominance over the South in order to stabilize the North Caucasus. Since the end of the Soviet Union this has meant constant interference with internal affairs of the three states of this region by using the ethnic conflicts to preserve weak and dependent states. Russia has failed to solve the conflicts in the North Caucasus; on the contrary, with its repression and mismanagement in Chechnya it destabilized the entire region. A mix of Islamic radicalization, corruption, organized crime, and poverty show, that Russia is unable to react adequately to the challenges in the region. This policy is against EU interests because it destabilizes its neighborhood. It makes international initiatives for solving conflicts in the region even more difficult. The Russian strategy towards the three Caucasian states was to hamper the establishment of strong states with control over their own territory and to fragment the region into weak states with unrecognized separatist areas. From a Russian point of view the North Caucasus was a taboo for international intervention. At the same time Russia tried to hinder EU and US involvement in the South Caucasus in terms of a zero-sum policy. Instead of cooperating with the Western partners to stabilize the Caucasus, Moscow wanted to prevent Western influence in the region at the cost of those countries' instability. International conflict management in the post-Soviet space is not possible without or against Russia. Because Russia follows its own agenda, which is based on its national interests, it is not willing to be a cooperative partner in conflict resolution. Moscow instrumentalized the recognition of the independence of Kosovo by the US and most of the European states for its policy regarding South Ossetia and Abkhazia, which led to the recognition of their independence in August 2008. After the war Moscow stationed troops in both regions which were reduced each from 3.700 to 1.500, supported by 1.300 border guards in 2009. But from a Russian point of view Kosovo seems to be not relevant for the Karabakh conflict. Russian military presence in Abkhazia and South Ossetia creates a precarious security and economic environment, under a constant threat of possible further military aggressions, which undermines the stability of the entire region. Turkey Turkey's main interest in the South Caucasus is to become a main political player and an energy hub for resources from the Caspian Sea to Europe. As a NATO country it provides military assistance like training and equipment for Georgia and Azerbaijan. With large and politically organized Diaspora communities of most of the ethnic groups of the South Caucasus it has ties to nearly all states and ethnic groups in the region. For instance, in Turkey live more Abkhazians than in their ethnic region. Turkey's trade turnover with the three South Caucasian states is substantially lower than with Russia but for all three states it is an important economic partner. Turkey is an important link for the EU to the South Caucasus and Central Asia and an energy interconnector between the Caspian region and Europe. Ankara wants buy cheap gas from Azerbaijan and sell it for a better price to the EU. While Turkey has bought from Azerbaijan only small amounts of gas since 2007 it hopes to increase this volume, for instance, with Nabucco. Azerbaijan, on the other hand will first of all increase volumes of gas crossing the Turkish area to Europe. Turkey participates in the Nabucco project as well as in South Stream, which means it plays by its own rules and tries to use its geopolitical position to increase its importance for Europe and Russia. It is a candidate country of the EU and a strategic partner of the US but has also developed a fast growing economic and energy cooperation with Russia for a couple of years. Russia has replaced Germany as Turkey's main trading partner in 2008 accounting for a trade turnover of $38 billion. Since 2006 Russia has become Turkey's largest source of imports with natural gas, and both countries completed the 16 billion m3 capacity Blue Stream gas pipeline in 2002, connecting Russian and Turkish coasts on the bottom of the Black Sea. While Turkey calibrated its regional policy with the US in the 1990s, the situation changed with the election of president Erdogan's Justice and Development party (AKP) in 2002 and especially with Bush's war in Iraq. With its "zero conflict with its neighbors" foreign policy approach Turkey became a more independent player also in the South Caucasus region. This new policy approach is also a reaction on the stagnating EU-accession process. Turkey wants to clarify its independent position from the EU and makes itself an indispensible partner for the Brussels in terms of conflict resolution and energy policy in the region in the context of the EU accession. On the one hand, the growing interdependency between Turkey and Russia led to a more coordinated foreign and economic policy strategy, which is not always in line with the interests of the US and the EU. On the other hand, because Turkey was an important partner of Georgia and the US, it has to manage its relations with Russia after the August war. Turkish leadership was pretty quiet in the time of the Russian-Georgian war. Iran Iran's goals in the South Caucasus include preventing Western powers especially the US but also Turkey from gaining influence, ending regional instability that might threat its own territorial integrity, and building economic links. In Iran live a huge Azerbaijani minority (estimates amount to 24 percent of the population) and about 200,000 Armenians. With the collapse of the Soviet Union Iran borders on several new independent states which destabilized the region because of their ethnic conflicts. Furthermore, the situation in the Caspian Sea has changed because the new states claimed parts of the sea and of the resources. Azerbaijani elites fear Iranian-supported Islamic extremism and criticize Teheran's support for Armenia. In order to block companies from Europe, the US, and Azerbaijan from developing Caspian energy resources, Iran insisted on either a common control by the littoral states or the division of the seabed in five equal sectors. Iran had developed good relations in the region with Armenia because of both countries' difficult relations with Azerbaijan. Teheran provides Armenia with natural gas through a pipeline that was completed in March 2009, and receives electricity in return. In the context of a North-South Corridor, supported by Russia, goods are to be transferred from Russia via the South Caucasus and Iran to the Persian Gulf, Pakistan and India. Since the independence of Azerbaijan, between Teheran and Baku has arisen a great deal of suspicion due to the religious and ethnic conflicts. Especially Azerbaijan with a sizable Shi'ite community feared the export of Islamic ideas from Iran. A further obstacle in the relations was the status of the Caspian Sea. Because the main oil and gas reserves are located close to Azerbaijan, Kazakhstan, Turkmenistan but not Iran, Teheran blocked the negotiations. While Iran is critical in terms of Azerbaijan's close relations with the US, Baku is looking for security guarantees concerning the Iranian nuclear program. That the US partly withdrew from the region under the Obama administration was looked at critically by the Azerbaijan leadership since, as a result, only Russia could guaranty its security. The US Every US president since 1992 has claimed that the commitment to the Caspian region is a strategic priority of his country. The region is important because of its unexploited oil and gas reserves, its neighborhood to Iran, and as an important staging area for the US military in Afghanistan. In the past years, Russia was first of all seen as a competitor for resources in this region. The Bush administration (2001-2009) developed close ties with the Georgian president Mikhail Saakashvili, supported Georgia economically, and helped to modernize its army. While the US was a major lobbyist for Azerbaijani energy projects without Russia, US oil companies play only a minor role in the Azerbaijani oil sector with not more than 10,2 percent participation. The US is by far the largest bilateral aid donor to Armenia and Georgia, which received each around $1,8 billion aid between 1992 and 2007. In the same period Azerbaijan received around $750 million. The money was used for a wide range of projects, reaching from infrastructure modernization, to democratization up to defense projects in the case of Georgia. For the conflict on Nagorno-Karabakh the US-aid amounted to $34 million between 1998 and 2009. Because of the US-human aid for Karabakh and Armenia the Azerbaijani leadership criticized the US government several times. Especially the US pressure on the Turkish-Armenian rapprochement led to a discussion in the US about "losing" Azerbaijan. At the donor conference after the August war, the US provided the highest amount of aid for Georgia of $1 billion. Before the war Georgia got from the US and some NATO partners military training support and funds for equipment. Despite a less active support of the Obama administration for Georgia Obama took over the US-Georgia Charter on Strategic Partnership signed by the Bush administration in January 2009. It allows US military training of the Georgian army and improvement of interoperability with NATO as well as greater economic and trade cooperation. With the appointment of Richard J. Morningstar as the US special envoy on Eurasian energy issues in April 2009 the Obama administration showed its interest in the resources of the region. Morningstar should provide strategic advice on policy issues relating to development, transit, and distribution of energy resources in Eurasia. The Caspian Sea is of strategic interest for the policy of Obama because the region is situated between Russia and Iran and close to its important ally Turkey.  US interests towards the region have not changed but the effort to rebuilt relations with Russia is new. US involvement in the Caspian region are still related to energy, counter-terrorism, conflict resolution, containing Iran, and logistics for operational support in Afghanistan. The past South Caucasus policy of the US differed from that of the EU: While Washington concentrated on securing transit routes, the integration of Georgia into NATO, and containing Russian influence in the region, the EU, within the framework of its European Neighborhood Policy (ENP) supported economic and political reforms in all countries of the region without coming into conflict with Russia. Both approaches do not go together well which hampers a more calibrated policy. According to the Russian-Georgian relations and Georgian domestic policy in the last years a lot of EU member-states were much more critical about the direction of Saakashvili's policy than the US. While Washington tries to push the EU for more strategic development of the Southern energy corridor, the EU is not willing to prioritize this project. The EU in the South Caucasus The emergence of an EU-policy Before the war in August 2008, the EU's activities in the South Caucasus were channeled through three instruments: the Partnership and Cooperation Agreements (PCA), the action plans within the framework of the ENP and the EU Special Representative for the South Caucasus. The EU's strategy towards the region was to develop simultaneously relations with all three states. Therefore, the PCA's were concluded with all three South Caucasian states in 1999. This was supplemented by the ENP-Action Plans in 2006, which are meant to support reforms in the partner countries and enhance cooperation with the EU. All the action plans focus on economic post-conflict reconstruction and confidence-building. When Swedish diplomat Peter Semneby was appointed as the EU special representative to the South Caucasus in 2006 his mandate was expanded compared with his predecessor Heikki Talvitie, to enable a more active role for the EU in the Caucasus. His mandate includes assisting the three countries in carrying out political and economic reform and, in the case of Georgia, to support Tbilisi's capacity to secure its borders. Pierre Morell was appointed as the EU Special Representative for the crisis in Georgia in September 2008. His mandate was extended several times, recently through 31 August 2011. It is his responsibility help prepare international talks between the parties of the Russian-Georgian war and to facilitate the implementation of the peace agreements made from 12 August and 8 September 2008 in close coordination with the UN and the OSCE. With HansjÃ¶rg Haber, a third EU diplomat is dealing with finding a solution to the conflict over the two Georgian separatist regions. Haber is the head of the EUMM, a civilian and unarmed mission which is supposed to contribute to the stabilization and normalization of post-war Georgia as well as to confidence-building between the different parties. Established in September 2008, the EUMM observes the Georgian border with Abkhazia and South Ossetia with 200 monitors. Initiating this monitoring mission contributed to freezing the hot conflict between Georgia, Russia, Abkhazia and South Ossetia, and demonstrated the EU's conflict management ability. Nevertheless, the EU sends two high-ranking EU diplomats dealing with the conflict solution in Georgia, whose mandate - except that of HansjÃ¶rg Haber - is overlapping or not definitive. It is a wrong approach to abolish the post of the EU Special Representative for the South Caucasus and to transfer the tasks into the EU embassies in the three South Caucasus countries. This approach will lack effectiveness because it would downgrade EU's role in the South Caucasus in a time when the region needs more attention. Brussels needs to develop a coherent policy towards the region with one contact person for all three states and who has a broad mandate as well as for negotiations with Russia and Turkey regarding the South Caucasus The EU tried to stabilize the South Caucasus through economic and institutional cooperation as well as by playing a limited role as a security actor in the region. It remained, however, an outsider to the frozen conflicts in the region, an observer and possible future guarantor of a final agreement about the conflicts. Not the European Commission but EU member-states participated in the Minsk-Group negotiation about in the Karabakh conflict. Instead, especially Russia, Turkey and the US have acted as both supporters and financiers of the states of the region. The EU and good governance in the South Caucasus A successful EU policy toward the South Caucasus needs to involve the support of democracy and good governance. Only pluralistic political systems can successfully contribute to regional stability and cooperation and can provide long-term guarantees for investment. Georgia's case arguably shows that modernization without democratization is not sustainable. With a functioning system of checks and balances, the Georgian-Russian war might not have taken place. While the Georgian President Mikhail Saakshvili, after the Rose Revolution, stabilized successfully state institutions and began to tackle corruption effectively, he failed in democratizing the country. Strong and effective state institutes are prerequisites for an increased public trust and democratization of a state, but modernization from above can only be successful if all parts of society are involved. After the Rose Revolution, the Georgian leadership sought to achieve the transformation of the society, territorial restoration and economic modernization simultaneously as quickly as possible without asking for resources and conditions. The president tried to modernize the state and society too fast and without taking the people with. Georgian civil society, which is well differentiated compared to Armenia and Azerbaijan, could not reach significant influence on the political decision-making process in the country. The lack of control of the executive led to the conflicting policy of President Saakashvili and hindered conflict resolution with the separatist regions. The relatively stable autocracy of Azerbaijan is characterized by a weak and fragmented opposition and a small civil society without influence. Strong presidential power (based on clan structures) and a symbiotic relationship between the economy and the political elite results in high levels of corruption, a lack of economic and political competition, and a state-controlled economy. All these are obstacles to sustainable economic development and to the willingness for compromise in the conflict resolution process in the region. In addition, Armenia lacks a sustainable democratization process, having a weaker president than in Azerbaijan but strong interest groups outside the democratic-decision making process. The isolation of Armenia and its economic dependence on Russia supports the informal political structures and hampers the political and economic modernization process of the country. Although democratization and good governance are the main points of focus of EU policy towards the South Caucasus, the chances for a consolidation of democracy and security decreased in the past years. The EU's limited involvement in conflict resolution and lack of a strategy for the regions made its policy less attractive and implausible. If the EU wants to be successful in supporting good governance in the South Caucasus, it needs to combine conflict resolution, economic cooperation with the support of civil society and democratization. Greater involvement of the EU in the region would strengthen its ability to promote good governance and principles of a market economy. In order to do so, however, the EU needs to become an attractive and more active partner. It needs to offer short term incentives and it has to involve more actively in conflict solution. EU policy in the South Caucasus after the Georgian war The Russian-Georgian war had a direct impact on the EU-neighborhood policy. If not for the war, the Polish-Swedish initiative of the Eastern Partnership (EaP), would have been implemented immediately as an element of the EU neighborhood policy under the Czech EU presidency in the first half 2009. Simultaneously, Russia perceives the EU increasingly as a rival because of growing competition for influence and policy models in the post-Soviet space. Therefore, the Georgian war seems to have reinforced the tendency of a paradigm change of EU policy towards the South Caucasus. This does not mean that a long-term strategy of the EU for the South Caucasus exists, but after ignoring more or less the conflicts in the Caucasus, the EU now is with its monitoring mission the only international institution in the South Caucasus. Thus, the EU acted in the region just as a consequence of pressure from outside, but with the EaP for the first time it has started to develop a separate agenda for the South Caucasus which now has to be filled with content. The EaP, established in May 2009, is meant to expand and deepen the ENP with the three South Caucasus states as well as Belarus, Ukraine and Moldova. The European Commission offers bilateral negotiations to the participating countries on association agreements including the possibility to establish a free trade regime. Other bilateral components comprise discussion about eased visa rules, border security and energy security. Key areas encouraging multilateral cooperation are democracy and good governance, economic integration, energy security, and the promotion of civil society exchange. While Russia is not a member of the EaP, it can be involved in projects on a case-by-case basis. The target countries are to receive â~B¬600 million until 2013 for investment in state institutions and border control, as well as for the support of small businesses. Despite the low budget of the EaP it has to be filled with content and must be used by the target countries and the EU member-states as a platform for more than "support of stability and prosperity" in the neighborhood. The EaP is a positive development because compared with the ENP it is directed solely at former Soviet countries and strengthens the EU's policy towards its immediate eastern Neighborhood. However, it still lacks a strategic dimension and the broad support of the EU member-states, including Germany. The approach of the ENP to develop the rapprochement and cooperation with the South Caucasus states with the same speed contradicts with the policy of the three states to differ from each other and to have independent special relations with extern players like the EU. For instance Azerbaijan needs a strong business partner which helps to modernize its economy and administration while Georgian leadership has a big interest to integrate much deeper into the EU in all sectors of the state. The EaP seems to correct this approach, because it emphasizes joint ownership, differentiation and conditionality towards the states of the region. However, because of the intraregional conflicts, there are no signs of regional integration, i.e. that which the EaP would support. This new approach must take into consideration the heterogeneity of the three states, their different problems and different levels of economic development, transformation and interest of integration with the EU. European policy towards the South Caucasus primarily concerns development aid, foreign trade and cooperation policy - that is, technical policy but not of strategic relevance. The South Caucasus is of strategic importance for the EU and it is a test case of the credibility of its foreign and economic policy in the neighborhood. A strategy demands a common position, but especially the position towards Russia, which some EU countries see as a problem and some as the key for conflict solution, hinders the emergence of a common policy. While EU programs like ENP, first of all, set stimuli for long-term development and reforms, the political elites of the region want to have practical and financial offers, which matter at the present. As in Central Asia, there is again a difference between what the EU offers and the regional elites want and needs in the short term. As long as the EU does not offer real economic incentives and direct involvement in conflict solution, it can be no relevant player in the region. Germany, an advocate for an EU strategy in the South Caucasus What the South Caucasus needs is a strong advocate inside of the European Union comparable to France's role in the Union for the Mediterranean. The EaP was important in bringing the focus of the EU to its eastern neighborhood at a time when the whole region is undergoing a process of change and differentiation. But the Polish-Swedish initiative lacks the active support of countries playing a key role for EU's eastern policy. In particular, Germany is a weak player in the current EU eastern policy debate. The division of EU countries between those that perceive Russia as a key partner for Eastern policy (Germany, Italy and France) and those that see Russia as the main obstacle to the EU's eastern policy (Baltic States, Poland, Sweden) was the main obstacle to a common neighborhood policy towards Russia and the post-Soviet countries in the past. The EaP was born in a time, when especially Polish policy towards the big eastern neighbor became more cooperative, which opens together with a less confrontational Russian policy towards the "West" a window of opportunity. Germany is still a crucial player in the EU for policy initiatives towards the South Caucasus, but it never became an advocate of the region. Since the collapse of the Soviet Union, the main focus of Germany's foreign policy has been on the relations with Russia. The German "Russia first approach" can be explained by historical ties, namely Russian support for the German reunification, German economic and energy interests in Russia and the perception that the security of Europe is only possible with and not against Russia. Germany's interest in Russia and its support for the Eastern enlargement of the EU made it to the main driver of the EU's eastern policy, including eastern enlargement after 1991. With changes in the post-Soviet space and with the accession of the Central-Eastern European states to the EU, Germany's role as the main player in the EU's eastern policy decreased. While the post-Soviet countries diverge from Russia, supported by the some Central Eastern EU member-states, Germany's foreign policy still is focused first and foremost on Russia. Besides its special relationship with Moscow, the German leadership was not able to develop a two-track policy, which, on one the hand, involves Russia and, on the other hand, establishes bilateral relations without Russia in the post-Soviet space. Moreover, Germany's predominant interest in Russia hinders its initiatives towards Central Asia and the South Caucasus. Germany's policy towards the South Caucasus and the Wider Caspian region The South Caucasus is, for different reasons, relevant for Germany and the EU: energy security (access to the Caspian Sea and Central Asia); regional and global security (borders with the Russian North Caucasus and Iran); and transit security (transit of goods via Central Asia to China). With the introduction of a Central Asia strategy and the Black Sea Synergy initiative during its EU presidency in 2007, the German government introduced to the EU these strategically relevant regions. The German government, however, did not pursue a sustainable policy to foster relations with Central Asia and the Black Sea/South Caucasus states in the long-term. The Central Asia Initiative and Black Sea Synergy point out the significance of the region in terms of its geography and economic importance but they do not offer an entire strategy. Instead, the different approaches of EU member-states towards the region produce a contradictory and weak EU policy. Germany is a key player regarding the South Caucasus, and introduced important initiatives for this region. It was a German initiative to organize an independent international fact-finding mission on the conflict in Georgia after the August war in 2008. Furthermore, Germany placed HansjÃ¶rg Haber as the head of the EUMM, and sends the highest number of members to the monitoring mission. Moreover, the appointment of an EU special representative for the South Caucasus in July 2003 was based on a proposal by the German government. Mediation in the conflicts over South Ossetia and Abkhazia, the concept of a Caucasus Stability Pact (see the following paragraph), and the support of integration of the three states into the EU comprise Germany's initiatives in the region in the past years. However, Germany never took the initiative to bring the EU as a relevant player into the South Caucasus and Trans-Caspian region. Berlin's consideration of Russia's interests in the region inhibited the German government from becoming more involved in conflict resolution and pushing EU policy towards the region. Related to the Partnership and Cooperation Agreements with the three South Caucasian states in 1999, there was, especially among the German political elite, a debate on the significance and risks in the South Caucasus. With regard to the Balkan Stability Pact, originally a German concept, a Stability Pact for the South Caucasus was discussed in 1999/2000. This concept not only included the South Caucasus but also the Caspian region and Central Asia. Besides aiming to prevent a crisis in the region and to contribute to conflict resolution, the Pact's main goal was to create a secure environment for European investment in the region. "European market interests demand political stability as a prerequisite." This project never became reality because neither the EU member-states nor the states of the region were ready for a comprehensive initiative. The lack of political will for regional cooperation within the Caucasus themselves as well as that of a consensus on the region in the EU hindered the implementation of this project. Now, the situation has changed. After the Russian-Georgian war, the geopolitical situation in the region is different, and the EU seems to be more willing to act in the South Caucasus and Caspian region. Former German Minister of Foreign Affairs Frank-Walter Steinmeier traveled to Georgia, Abkhazia and Russia in July 2008 to attempt to mediate the increasing tensions between Abkhazia and Georgia and to put forward a peace plan. Steinmeier's trip came too late and was not embedded in a functioning negotiation process; it could not prevent the war. These important initiatives will always have limited success as long as they are not embedded in a comprehensive strategic and much more focused EU policy towards the entire region. After the Georgian-Russian war, the Green party as well as the leading coalition of CDU/CSU (Christian Democrats) and SPD (Social Democrats) introduced to the German Bundestag proposals for more involvement of the EU in the South Caucasus. Besides the support of cooperation for the peace process in the multilateral framework of the EU, the European Council, the OSCE and the UN, the governing coalition of Christian and Social Democrats demanded a German contribution with a new strategy for the European and international stabilization policy in the region. The window of opportunity is still open and it is the right moment right now to develop a strategy for the South Caucasus. How to recalibrate Germany's and EU's role in the South Caucasus To get more involved in the region on the basis of its interests, the EU and Germany have to recalibrate its policy in the region and to develop a strategy which centers on the following points: Germany should act as an advocate for more European engagement in the South Caucasus and the Trans-Caspian region in the EU. It should use its authority and economic power to develop its Central Asia initiative, the Black Sea Synergy and the Stability Pact for the South Caucasus. The whole region is interlinked and certain regions cannot develop separately from one another. The South Caucasus is the bridge between the Black Sea and Central Asia; it is the connection for Europe to the Caspian resources. This approach should include the development of economic cooperation, the support of good governance, and active work on conflict resolution in the South Caucasus. This multilateral approach could act as a counter model to unilateral and hegemonic interests in the region and can be a precondition for conflict resolution and cross-border cooperation. The EU has to refocus its cooperation in the South Caucasus from Georgia to a more balanced approach, considering stronger the different meaning and needs of all states of the region. A country of the region which is of crucial strategic importance is Azerbaijan. Due to its oil and gas reserves and access to the Caspian Sea, Azerbaijan is the main partner for European investments in the region, which can contribute to the security of supply of EU member-states. But as long as democratization, good governance and the development of civil society is challenged by the autocratic government, Azerbaijan cannot play the role it could have for the entire region and as a partner for the EU. The EU needs answers to the heterogeneity of the three states, their different levels of economic development, transformation and cooperation with the EU. In the past, Brussels developed a policy towards the region that takes the three states as a single political and economic unit, which does not reflect the reality. If the EU wants to be successful with its approach, it has to offer more to the countries: more investment, more integration (including sticks and carrots) and more commitment to conflict resolution. Bilateral incentives can encourage multilateral cooperation in long-term. The EU should get more involved in the Nagorno-Karabakh conflict, which is the main obstacle to cooperation and development in the South Caucasus. The EU should take over from France the position of a Co-Chair of the Minsk group and actively promote a solution to the conflict. To become an influential player in the region also in terms of conflict resolution, the EU needs to increase its engagement in the region. The EaP should offer incentives that could support a conflict resolution which can include economic stimuli or sanctions. Armenia should be put under pressure to return at least the seven occupied regions around Nagorno-Karabakh to Azerbaijan. With its role as a main donor of aid to Armenia (EU and member states) and its instruments of the neighborhood policy, Brussels has the ability to influence Yerevan. The EU should be more active in creating a new east-west energy and transportation corridor from Central Asia via the South Caucasus and Black Sea region to Europe. This project should involve higher investment (from European banks and member states) and political support for energy and infrastructure projects in the region. It must include the Southern Energy corridor and support for a Trans-Caspian pipeline or transportation system. In the future, Iran might also be integrated into these projects. Nabucco will supply transit countries like Turkey but first of all in South Europe with gas. Germany's support for the pipeline can be also seen in the context of securing energy security in south-east Europe which would be worst affected by an interruption of gas supply from Russia. Turkey is a key country for the policy towards the South Caucasus, Black Sea and the Caspian region. It has to be involved in the conflict resolution processes in the region but can only be a serious negotiator if it resolves its problems with Armenia. Turkey is the European bridge to the resources of the Caspian Sea and the Middle East. The EU's concentration, in relations with Ankara, on the discussion whether Turkey can join the EU hinders a broader cooperation with the country regarding energy and conflict resolution. Together with France, Germany still plays with a negative role in this discussion and has to rethink its approach. The EU and its member-states should better calibrate its policy with Ankara and push the EU accession of the country as an important strategic decision. Russia is also a key country in the region. It has to be involved in conflict resolution, but the EU has also to develop a South Caucasus policy without Moscow. Germany has to realize that its one-sided focus on the special relationship with Russia comes at the expense of its influence in the post-Soviet space. Germany and its European partners should further deepen the energy cooperation with Russia and Turkey, but they should not forget their own agenda in the region. An indispensable partner in the South Caucasus is the US. Brussels and Washington should better calibrate their policies towards the region but not hinder each other with their approaches. The less confrontational policy of the Obama administration concerning Russia in the post-Soviet space, and its special relations with Turkey build a good basis for a better coordinated approach. But the EU and its member-states have to be aware that the US does not have the same interests in the region, and that its current Russia policy is made with regard to other international crises. Europe should accept the reality of a limited involvement of the US in the region in order to push its own agenda in coordination with Washington. ________________________________  The author would like to thank Sabine Fischer, Uwe Halbach, Enno Harks and Alexander Rahr for their inspiring and helpful comments on the text.  See for the contradictory EU-policy: Thomas de Waal, The risks of loosing special role in the Caucasus, in: European Voice, 17.06.2010, http://www.europeanvoice.com/article/imported/the-risks-of-losing-a- special-role-in-the-caucasus/68268.aspx (access, September 29, 2010).  Only Nicaragua, Venezuela and the island nation of Nauru have recognized the independence of the two Georgian separatist territories.  Cf. Sarah E. Mendelson, "Violence in the North Caucasus: 2009, a bloody year", Center for Statregic and International Studies, http://csis.org/files/publication/100114_Violence_NorthCaucasus_2009optmize .pdf (accessed October 5, 2010).  Mamuka Tsereteli, "New strategic realities in the Black Sea/Caspian region", Central Asia-Caucasus Institute Analyst (CACI-Analyst), http://www.cacianalyst.org/?q=node/5270/print (accessed August 24, 2010). Haroutiun Khachatrian, "Turkey enhances pressure on Armenia after constitutional court ruling", Central Asia-Caucasus Institute Analyst (CACI-Analyst), http://www.cacianalyst.org/?q=node/5258/print (accessed October 4, 2010).  On 20 May 2010, the European Parliament discussed a draft resolution on the need for an EU strategy for the South Caucasus. It determines somewhat of a strategy for the EU in the South Caucasus. See. European Parliament, "Report on the need for an EU Strategy for the South Caucasus," European Parliament, http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7- 2010-0123&language=EN&mode=XML (accessed August 24, 2010).  Uwe Halbach, "UngelÃ¶ste Regionalkonflikte im Sudkaukasus" [Undissolved regional conflicts in the South Caucasus], SWP-Study, 8, March 2010, p. 12.  Ibid., p. 18.  Ibid., p. 20. Contrary to Halbach, the UNHCR reported for 2009, that there were still over 605,000 people considered refugees or displaced persons in Azerbaijan. UNHCR, "Azerbaijan," UNHCR, http://www.unhcr.org/cgi-bin/texis/vtx/page?page=49e48d1e6 (accessed August 24, 2010).  1) Returning the territories around Nagorno-Karabakh to Azerbaijan; 2) An interim status for Nagorno-Karabakh providing guarantees for security and self-governance; 3) A corridor linking Armenia and Nagorno-Karabakh; 4) a future referendum on the final legal status of Nagorno-Karabakh; 5) the right of all refugees to return to their former places of residence; 6) international security guarantees that include a peacekeeping operation,Haroutiun Khachatrian, "Armenian-Azerbaijani disagreement on Madrid principles stalls Karabakh settlement process," Central Asia-Caucasus Institute Analyst (CACI-Analyst), http://www.cacianalyst.org/?q=node/5199 (accessed August 24, 2010). Fariz Ismailzade, "Russian arms to Armenia could change Azerbaijan's foreign policy orientation", Central Asia-Caucasus Institute Analyst (CACI-Analyst) (accessed October 4, 2010).  Cf. Dov Lynch, "The South Caucasus: A challenge for the EU," Chaillot Papers, 65, Paris, December 2003, pp. 9-10, http://www.iss.europa.eu/uploads/media/cp065e.pdf (accessed August 24, 2010).  Cf. The Central Bank of the Republic of Azerbaijan, "Annual Report 2009", p. 25-29, http://www.cbar.az/assets/1281/millibank.pdf (accessed October 4, 2010). Haroutiun Khachatrian, "Armenia: How a small country counters the global crisis," Caucasian Analytical Digest, 6, 2009, p. 5, http://kms2.isn.ethz.ch/serviceengine/Files/RESSpecNet/100521/ipublicationd ocument_singledocument/cf7cec59-4850-45b5-906e- 68dd4306cba0/en/CaucasusAnalyticalDigest06.pdf (accessed August 24, 2010).  Nona Mikhelidze, "After the 2008 Russia-Georgia War: Implications for the Wider Caucasus," The International Spectator, 44, No. 3, Sept. 2009, p. 34.  Heidi Kjaernet, "The Energy dimension of Azerbaijani-Russian Relations: Maneuvering for Nagorno-Karabakh," Russian Analytical Digest, 56, 2009, p. 4, http://kms2.isn.ethz.ch/serviceengine/Files/RESSpecNet/97237/ipublicationdo cument_singledocument/aed1fb81-8979-42f1-8be1- 12b2d0b1e673/en/Russian_Analytical_Digest_56.pdf (accessed August 24, 2010).  International Monitary Fund (IMF), "World Economic Outlook April 2010, Rebalancing Growth," Washington DC, p. 58, http://www.imf.org/external/pubs/ft/weo/2010/01/pdf/text.pdf (accessed August 24, 2010).  Ibid. p. 159.  Molly Corso, "Georgia's Expansion Halts," Caucasian Analytical Digest, 6, 2009, p. 20, http://kms2.isn.ethz.ch/serviceengine/Files/RESSpecNet/100521/ipublicationd ocument_singledocument/cf7cec59-4850-45b5-906e- 68dd4306cba0/en/CaucasusAnalyticalDigest06.pdf (accessed August 24, 2010).  U.S. Department of State, "Background Note: Azerbaijan," U.S. Department of State, http://www.state.gov/r/pa/ei/bgn/2909.htm (accessed August 24, 2010).  Ibid.  Gerald Hubner, "As if nothing happened? How Azerbaijan's economy manages to sail through stormy weather", Caucasian Analytical Digest, 18, 2010, p. 4-9, http://kms2.isn.ethz.ch/serviceengine/Files/RESSpecNet/118515/ipublicationd ocument_singledocument/9efe8c87-cd92-41a2-8ce6- b1b8a373773d/en/CaucasusAnalyticalDigest18.pdf (accessed October 4, 2010).  International Institute for Strategic Studies, "The Military Balance 2009," International Institute for Strategic Studies, London 2009, pp.165, 167, 176. Haroutiun Khachatrian, "Armenia to cut its budget next year despite expected economic recovery," Central Asia-Caucasus Institute Analyst (CACI-Analyst), http://www.cacianalyst.org/?q=node/5213 (accessed August 24, 2010).  BP Statistical Review of World Energy, June 2009, pp. 6, 22, 8.  IEA, "World Energy Outlook 2009," p. 476.  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