Order Code IB95024
CRS Issue Brief for Congress
Received through the CRS Web
Armenia, Azerbaijan, and Georgia:
Political Developments and
Implications for U.S. Interests
Updated June 15, 2005
Jim Nichol
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Overview of U.S. Policy Concerns
Post-September 11
Operations in Iraq
Obstacles to Peace and Independence
Regional Tensions and Conflicts
Nagorno Karabakh Conflict
Civil and Ethnic Conflict in Georgia
Economic Conditions, Blockades, and Stoppages
Democratization Problems
Armenia
Azerbaijan
Georgia
The South Caucasus’s External Security Context
Russian Involvement in the Region
Military-Strategic Interests
Caspian Energy Resources
The Protection of Ethnic Russians and “Citizens”
The Roles of Turkey, Iran, and Others
U.S. Aid Overview
U.S. Security Assistance
U.S. Trade and Investment
Energy Resources and U.S. Policy
LEGISLATION

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Armenia, Azerbaijan, and Georgia:
Political Developments and Implications for U.S. Interests
SUMMARY
The United States recognized the inde-
In the aftermath of the September 11,
pendence of all the former Soviet republics by
2001 terrorist attacks on the United States, the
the end of 1991, including the South Caucasus
Administration appealed for a national secu-
states of Armenia, Azerbaijan, and Georgia.
rity waiver of the prohibition on aid to
The United States has fostered these states’
Azerbaijan, in consideration of Azerbaijan’s
ties with the West in part to end the depend-
assistance to the international coalition to
ence of these states on Russia for trade, secu-
combat terrorism. In December 2001,
rity, and other relations. The United States
Congress approved foreign appropriations for
has pursued close ties with Armenia to en-
FY2002 (P.L. 107-115) that granted the Presi-
courage its democratization and because of
dent authority to waive Section 907, renew-
concerns by Armenian-Americans and others
able each calendar year under certain
over its fate. Close ties with Georgia have
conditions. President Bush exercised the
evolved from U.S. contacts with its pro-West-
waiver most recently on January 13, 2005.
ern leadership. The Bush Administration
supports U.S. private investment in
As part of the U.S. Global War on Ter-
Azerbaijan’s energy sector as a means of
rorism, the U.S. military in May 2002 began
increasing the diversity of world energy sup-
providing security equipment and training to
pliers and encourages building multiple en-
help Georgia combat terrorist groups in its
ergy pipelines to world markets. The United
Pankisi Gorge area and elsewhere in the
States has been active in diplomatic efforts to
country. Azerbaijani and Georgian troops
end conflicts in the region, many of which
participate in stabilization efforts in Afghani-
remain unresolved.
stan and Iraq, and Armenian personnel serve
in Iraq.
The FREEDOM Support Act (P.L. 102-
511) provides the major authorization for
Consolidated Appropriations for
assistance to the Eurasian states for humani-
FY2005, including Foreign Operations (P.L.
tarian needs, democratization, creation of
108-447, signed into law on December 8,
market economies, trade and investment, and
2004), provides $205 million in FREEDOM
other purposes. Section 907 of the act pro-
Support Act (FSA) assistance to the South
hibits most U.S. government-to-government
Caucasus states. The Conference managers
aid to Azerbaijan until its ceases blockades
(H.Rept.108-792) direct $75 million in FSA
and other offensive use of force against Arme-
funding for Armenia ($13 million above the
nia. This provision has been partly altered
budget request), $38 million for Azerbaijan,
over the years to permit humanitarian aid and
and $92 million for Georgia ($2 million above
democratization aid, border security and
the budget request). The managers call for at
customs support to promote non- prolifera-
least $3 million to be “provided to address
tion, Trade and Development Agency aid,
ongoing humanitarian needs in Nagorno
Overseas Private Investment Corporation
Karabakh.” Among other foreign assistance,
insurance, Eximbank financing, and Foreign
$8 million is provided for Armenia, $8 million
Commercial Service activities.
for Azerbaijan, and $12 million for Georgia
for Foreign Military Financing.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On June 4, 2005, the first legal opposition rally since the troubled 2003 presidential
election took place in the heart of Baku, Azerbaijan’s capital. About 10,000 protestors —
some of whom held pictures of President Bush — called for Azerbaijan’s president to resign
and for democratic legislative elections later in the year. The rally was permitted following
U.S. and other international criticism of a harsh government crackdown on opposition
protesters on May 21.
In early June, Georgian officials protested statements by the Moscow Mayor’s office
that it was sending military-related assistance to Georgia’s breakaway South Ossetia.
Georgia asserted that such aid violates international law, as well as Russia’s role as
“peacekeeper” under ceasefire accords.
BACKGROUND AND ANALYSIS
Armenia, Azerbaijan, and Georgia are located south of the Caucasus Mountains that
form part of Russia’s borders (see Figure 1). The South Caucasus states served historically
as a north-south and east-west trade and transport “land bridge” linking Europe to the Middle
East and Asia, over which the Russian Empire and others at various times endeavored to gain
control. In ancient as well as more recent times, oil and natural gas resources in Azerbaijan
attracted outside interest. Although Armenia and Georgia can point to past autonomy or
self-government, Azerbaijan was not independent before the 20th century. After the Russian
Empire collapsed in 1917, all three states declared independence, but by early 1921 all had
been re-conquered by Russia’s Red (Communist) Army. They regained independence when
the Soviet Union collapsed in 1991. (For background, see CRS Report RS20812, Armenia
Update; CRS Report 97-522, Azerbaijan; and CRS Report 97-727, Georgia.)
Overview of U.S. Policy Concerns
By the end of 1991, the United
The Caucasus Region: Basic Facts
States had recognized the independence
of all the former Soviet republics. The
Area: The region is slightly larger than Syria:
United States pursued close ties with
Armenia is 11,620 sq. mi.; Azerbaijan is
Armenia, because of its profession of
33,774 sq. mi.; Georgia is 26,872 sq. mi.
democratic principles, and concerns by
Population: 16.1 million, similar to Netherlands;
Armenian-Americans and others over
Armenia: 3.2 m.; Azerbaijan: 8.3 m.;
its fate. The United States pursued
Georgia: 4.6 m. (Economist Intelligence
close ties with Georgia after Eduard
Unit and regional governments, 2004
Shevardnadze, formerly a pro-Western
est.)
Soviet foreign minister, assumed power
GDP: $17.6 billion; Armenia: $3.7 b.;
there in early 1992. Faced with calls in
Azerbaijan: $8.5 b.; Georgia: $5.4 b.
Congress and elsewhere for a U.S. aid
(EIU and regional governments, 2004
policy for the Eurasian states, then-
est., market exchange rate)
President George H.W. Bush sent the
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FREEDOM Support Act to Congress, which was signed with amendments into law in
October 1992 (P.L. 102-511).
U.S. policy toward the South Caucasus states includes promoting the resolution of the
Armenia-Azerbaijan conflict over Azerbaijan’s breakaway Nagorno Karabakh (NK) region,
and Georgia’s conflicts with its breakaway regions of Abkhazia and South Ossetia.
Successive U.S. Special Negotiators for NK and Eurasian Conflicts have helped in various
ways to settle these conflicts. Congressional concerns about the NK conflict led to the
inclusion of Section 907 in the FREEDOM Support Act, which prohibits U.S. government-
to-government assistance to Azerbaijan, except for non-proliferation and disarmament
activities, until the President determines that Azerbaijan has taken “demonstrable steps to
cease all blockades and other offensive uses of force against Armenia and NK” (on waiver
authority, see below). Provisions in FY1996, FY1998, and FY1999 legislation eased the
prohibition by providing for humanitarian, democratization, and business aid exemptions.
Some observers argue that developments in the South Caucasus region are largely
marginal to global anti-terrorism and to U.S. interests in general. They urge great caution
in adopting policies that will heavily involve the United States in a region beset by ethnic and
civil conflicts. Other observers believe that U.S. policy now requires more active
engagement in the South Caucasus. They urge greater U.S. aid and conflict resolution efforts
to contain warfare, crime, smuggling, terrorism, and Islamic extremism and to bolster the
independence of the states. Some argue that such enhanced U.S. relations also would serve
to “contain” Russian and Iranian influence, and that close U.S. ties with Azerbaijan would
benefit U.S. relations with other Islamic countries, particularly Turkey and the Central Asian
states. They also point to the prompt support offered to the United States by the regional
states in the aftermath of the September 11, 2001, attacks by Al Qaeda on the United States.
Some argue that energy resources in the Caspian region are a central U.S. strategic interest,
including because Azerbaijani and Central Asian oil and natural gas deliveries would lessen
Western energy dependency on the Middle East (see below, Energy Resources).
Post-September 11. In the wake of September 11, 2001, U.S. policy priorities
shifted toward global anti-terrorist efforts. In the South Caucasus, the United States obtained
quick pledges from the three states to support Operation Enduring Freedom (OEF) in
Afghanistan, including overflight rights and Azerbaijan’s and Georgia’s offers of airbase and
other support. OEF was later expanded to Georgia (see below, Security Assistance). The
State Department’s Patterns of Global Terrorism 2002 highlighted U.S. support for
Azerbaijan’s and Georgia’s efforts to stop their territories from being used by international
mujahidin and Chechen guerrillas to finance and supply Chechen and other terrorism.
Congressional attitudes toward Azerbaijan and Section 907 also shifted. Presidential
waiver authority was added to Foreign Operations Appropriations for FY2002 (H.R. 2506;
P.L. 107-115). The President may use the waiver authority if he certifies that U.S. aid
supports U.S. counter-terrorism efforts, supports the operational readiness of the armed
forces, is important for Azerbaijan’s border security, and will not harm NK peace talks or be
used for offensive purposes against Armenia. The waiver may be renewed annually, and
sixty days after the exercise of the waiver authority, the President must report to Congress
on the nature of aid to be provided to Azerbaijan, the status of the military balance between
Armenia and Azerbaijan and the effects of U.S. aid on that balance, the status of peace talks
between Armenia and Azerbaijan, and the effects of U.S. aid on those talks. Days after being
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signed into law, President Bush on January 25, 2002, exercised the waiver. The waiver most
recently was exercised on January 13, 2005.
Operations in Iraq. Azerbaijan and Georgia were among the countries that openly
pledged to support the U.S.-led Operation Iraqi Freedom (OIF), with both offering the use
of their airbases, and to assist the United States in re-building Iraq. Both countries agreed
to participate, subject to U.S. financial support, in the stabilization force for Iraq. In August
2003, both Azerbaijan (150 troops) and Georgia (69 troops) dispatched forces to Iraq. U.S.
officials reportedly asked Azerbaijan and Georgia in April 2004 to bolster their troop
contributions in the face of Spain’s troop pullout. Georgia boosted its deployment to about
850 in March 2005, making it among the top ten contributors. Azerbaijan has raised
concerns about the welfare of an estimated 300,000-900,000 Turkic speakers in Iraq it
considers Azerbaijani, as has Armenia about the safety of 25,000 ethnic Armenians. In
September 2004, the presidents of Poland and Armenia agreed that Armenian troops could
serve with the Polish contingent in Iraq to carry out humanitarian work. The Armenian
legislature approved the planned deployment, and 46 personnel left for Iraq in January 2005.
Obstacles to Peace and Independence
Regional Tensions and Conflicts
Ethnic conflicts have kept the South Caucasus states from fully partaking in peace,
stability, and economic development over the decade since the Soviet collapse, some
observers lament. The countries are faced with on-going budgetary burdens of arms races
and caring for refugees and displaced persons. Other costs of ethnic conflict include threats
to bordering states of widening conflict and the limited ability of the region or outside states
to fully exploit energy resources or trade/transport networks.
U.S. and international efforts to foster peace and the continued independence of the
South Caucasus states face daunting challenges. The region has been the most unstable part
of the former Soviet Union in terms of the numbers, intensity, and length of its ethnic and
civil conflicts. The ruling nationalities in the three states are culturally rather insular and
harbor various grievances against each other. This is particularly the case between Armenia
and Azerbaijan, where discord has led to the virtually complete displacement of ethnic
Armenians from Azerbaijan and vice versa. The main languages in the three states are
dissimilar (also, those who generally consider themselves Georgians — Kartvelians,
Mingrelians, and Svans — speak dissimilar languages). Few of the region’s borders coincide
with ethnic populations. Attempts by territorially based ethnic minorities to secede are
primary security concerns in Georgia and Azerbaijan. Armenia and Azerbaijan view NK’s
status as a major security concern. The three major secessionist areas of NK, Abkhazia, and
South Ossetia have failed to gain international recognition. NK relies on economic support
from Armenia, and Abkhazia and South Ossetia from Russia.
Nagorno Karabakh Conflict. Since 1988, the separatist conflict in Nagorno
Karabakh (NK) has resulted in up to 20,000 deaths, up to 1 million Azerbaijani refugees and
displaced persons, and about 300,000 Armenian refugees. About 15-20% of Azerbaijan’s
territory, including NK, reportedly is controlled by NK Armenian forces. The OSCE’s
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“Minsk Group” of concerned member-states began talks in 1992. A U.S. presidential envoy
was appointed to these talks. A Russian-mediated cease-fire was agreed to in May 1994 and
was formalized by an armistice signed by the ministers of defense of Armenia and
Azerbaijan and the commander of the NK army on July 27, 1994 (and reaffirmed a month
later). The United States, France, and Russia co-chair meetings of the Minsk Group.
The Minsk Group reportedly has presented four proposals as a framework for talks, but
a peace settlement has proved elusive. In late 1997, a new step-by-step peace proposal was
recognized by the presidents of Azerbaijan and Armenia as a basis for further discussion.
This led to protests in both countries and to the forced resignation of Armenian President
Levon Ter-Petrosyan in early 1998. Heydar Aliyev in February 2001 stated that he had
“turned down” and refused to discuss a late 1998 Minsk Group proposal embracing elements
of a comprehensive settlement. The assassination of Armenian political leaders in late 1999
set back the peace process. In 2001, the two presidents attended talks in Key West, Florida,
and then met with President Bush, highlighting early Administration interest in a settlement.
In January 2003, Armenia’s President, Robert Kocharyan, proclaimed that its peace policy
rested on three pillars: a “horizontal” — instead of hierarchical — relationship between NK
and Azerbaijan; a secure land corridor between Armenia and NK; and security guarantees
for NK’s populace. Armenian Foreign Minister Oskanyan in October 2004 stated that the
continued occupation of NK border areas was necessary leverage to convince Azerbaijan to
agree to NK’s status as a “common state,” and that there could be no compromise on this
status, since “every inch of Armenia is priceless, including Karabakh.” In January 2005,
media in both countries reported progress in talks on a “hybrid” peace plan involving the
return of most NK border areas prior to a referendum in NK on its status.
Civil and Ethnic Conflict in Georgia. Several of Georgia’s ethnic minorities
stepped up their dissidence, including separatism, in the late 1980s and early 1990s, resulting
in the loss of central government control over the regions of South Ossetia and Abkhazia.
President Saakashvili in his January 2004 inaugural address proclaimed his responsibility to
re-integrate these regions into Georgia. Some observers have argued that Russia’s increasing
controls over South Ossetia and Abkhazia have transformed the separatist conflicts into
essentially Russia-Georgia disputes (see also below, Russia).
South Ossetia. In 1989, the region lobbied for joining its territory with North Ossetia
in Russia or for independence. Repressive efforts by former Georgian President
Gamsakhurdia triggered conflict in 1990, reportedly leading to about 1,500 deaths. In June
1992, Russia brokered a cease-fire, and a “peacekeeping” force composed of Russian,
Georgian, and Ossetian units has been stationed in South Ossetia (reportedly numbering
around 1,000 troops, including about 530 Russians, 300 South Ossetians, and until recently,
100-150 Georgians). A Joint Control Commission composed of OSCE, Russian, Georgian,
and North and South Ossetian emissaries was formed to promote a settlement of the conflict.
Relations with Georgia deteriorated following a contentious “presidential” election in South
Ossetia in late 2001, won by Russian citizen and St. Petersburg resident Eduard Kokoyev
(also spelled Kokoiti), who had run on a platform of “associating” the region with Russia.
According to some estimates, some 25,000 ethnic Ossetians and 20,000 ethnic Georgians
reside in the now largely vacant region.
President Saakashvili increased pressure on South Ossetia in 2004 by tightening border
controls. He also reportedly sent several hundred police, military, and intelligence personnel
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into the region. Georgia maintained that it was only bolstering its peacekeeping contingent
up to the limit of 500 troops, as permitted by the cease-fire agreement, and stated that these
peacekeepers were preventing smuggling and guarding ethnic Georgian villages. Georgian
guerrilla forces also reportedly entered the region. Allegedly, Russian defense and security
officers assisted several hundred paramilitary elements from Abkhazia, Transnistria, and
Russia to enter the region. Following inconclusive clashes, both sides by late 2004
ostensibly had pulled back most undeclared forces. Saakashvili announced a new peace plan
for South Ossetia in January 2005 that provided substantial autonomy and quotas for
Ossetian representation in federal branches of power. Kokoiti rejected the plan, asserting
that South Ossetia was already independent.
Abkhazia. In July 1992, Abkhazia’s legislature declared the region’s effective
independence from Georgia, prompting Georgian national guardsmen to attack the region.
In October 1992, the U.N. Security Council (UNSC) approved the first U.N. observer
mission to a Eurasian state, termed UNOMIG, to help the parties reach a settlement. Russian
and North Caucasian “volunteer” troops that reportedly made up the bulk of Abkhaz
separatist forces routed Georgian forces, leading in April 1994 to agreement by the two sides
on a framework for a political settlement and the return of refugees. A Quadripartite
Commission (QC) was set up to discuss repatriation. Russian troops (acting as CIS
“peacekeepers”) were deployed in a security zone along the Inguri River that divides
Abkhazia from the rest of Georgia. The conflict resulted in about 10,000 deaths and over
200,000 displaced persons, mostly ethnic Georgians.
In late 1997, the sides agreed to set up a Coordinating Council to discuss cease-fire
maintenance and refugee, economic, and humanitarian issues. The QC meets periodically
and addresses grievances not considered by the Coordinating Council, which Abkhazia has
boycotted since 2001. These talks have been supplemented by other discussions between
Abkhaz and Georgian representatives. The U.S. Special Negotiator for NK and Eurasian
Conflicts works with the U.N. Secretary General, his Special Representative, and other
Friends of Georgia (France, Germany, Russia, the United Kingdom, and Ukraine) to facilitate
a peace settlement. A “New Friends of Georgia” group was formed by Bulgaria, Estonia,
Latvia, Lithuania, Poland, and Romania in early 2005 to advocate increased EU and NATO
involvement in Georgia, including in settling conflicts. Sticking points between the two
sides have included Georgia’s demand that displaced persons be allowed to return to
Abkhazia, after which an agreement on broad autonomy for Abkhazia may be negotiated.
The Abkhazians have insisted upon recognition of their effective independence as a
precondition to large-scale repatriation. Since 2002, Abkhaz authorities have refused to
consider a draft negotiating document prepared by the U.N. and the Friends of Georgia.
They also have balked at permitting some U.N.-trained Georgian and Abkhaz police to patrol
the Gali district (where many Georgians formerly resided) and in mid-June 2005 refused
permission for an U.N. human rights office in Gali.
Ajaria. Aslan Abashidze had controlled the semi-independent Ajaria region since 1991
and had long resisted many of Shevardnadze’s attempts to establish central authority over
the region. After being elected as Georgia’s president in January 2004, Saakashvili called
for the region to submit to central government authority. Saakashvili successfully appealed
for the allegiance of many Georgian military and police elements in the region, and they
abandoned loyalty to Abashidze. Russia offered sanctuary to Abashidze and flew him to
Moscow on May 6, 2004.
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Economic Conditions, Blockades, and Stoppages
The economies of all three South Caucasus states greatly declined in the early 1990s,
affected by the dislocations caused by the breakup of the Soviet Union, conflicts, trade
disruptions, and the lingering effects of the 1988 earthquake in Armenia. Although gross
domestic product (GDP) began to rebound in the states in the mid-1990s, the economies
remain fragile. Investment in oil and gas resources and delivery systems has fueled
economic growth in Azerbaijan in recent years. Armenia’s GDP was about $1,160 per capita,
Azerbaijan’s about $1,020, and Georgia’s about $1,200 (Economist Intelligence Unit and
regional governments, 2004 estimates, market exchange rates). Widespread poverty and
regional conflict have contributed to high emigration from all three states, and remittances
from these emigres provide major support for the remaining populations.
Transport and communications obstructions and stoppages have severely affected
economic development in the South Caucasus and stymied the region’s emergence as an
East-West and North-South corridor. Since 1989, Azerbaijan has obstructed railways and
pipelines traversing its territory to Armenia. These obstructions have had a negative impact
on the Armenian economy, since it is heavily dependent on energy and raw materials
imports. Turkey has barred U.S. shipments of aid through its territory to Armenia since
March 1993. P.L. 104-107 and P.L. 104-208 mandated a U.S. aid cutoff (with a presidential
waiver) to any country which restricts the transport or delivery of U.S. humanitarian aid to
a third country, aimed at convincing Turkey to allow the transit to U.S. aid to Armenia.
According to the U.S. Embassy in Baku, Azerbaijan’s Nakhichevan exclave “is blockaded
by neighboring Armenia,” severing its “rail, road, or energy links to the rest of Azerbaijan.”
Iran has at times obstructed bypass routes to Nakhichevan. Georgia has cut off natural gas
supplies to South Ossetia and Russia has at times cut off gas supplies to Georgia. Georgia
severely restricts traffic from South Ossetia.
Democratization Problems
The organization Freedom House considers Armenia and Georgia as somewhat more
democratic than Azerbaijan. It judges the former two as “partly free,” and in 2004
downgraded Azerbaijan’s status to “not free,” in part because of abuses surrounding its 2003
presidential election (see below).
Armenia. Illustrating ongoing challenges to stability in Armenia, in October 1999,
gunmen entered the legislature and opened fire on deputies and officials, killing the prime
minister, the legislative speaker, and six others. The killings may have been the product of
personal and clan grievances. Political infighting led President Robert Kocharyan in mid-
2000 to appoint former Soviet dissident Andranik Margaryan as prime minister. In a
February 2003 presidential election, none of the nine candidates on the ballot received a
required 50% plus one of the vote, forcing a run-off in March by the top two candidates,
Kocharyan and People’s Party head Stepan Demirchyan (the murdered speaker’s son).
OSCE and PACE observers termed the campaign vigorous and largely peaceful, but
concluded that the election did not meet international standards for a free and fair race,
because of “widespread” ballot box stuffing, a lack of transparency in vote-counting, and
other “serious” irregularities.
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On May 26, 2003, the Armenian Central Electoral Commission issued preliminary
results for the legislative election and a constitutional referendum held the previous day. In
the party list section of the voting (75 of 131 deputies were elected by party lists), six out of
21 parties running passed a 5% hurdle and won seats. Margaryan’s Republican Party won
about 25% of the votes, the opposition Justice bloc won 14% (led by Stepan Demirchyan),
the pro-government Land of Laws Party won 12%, pro-government Dashnaktsutiun won
10%, the opposition National Unity Movement won 10%, and the pro-government United
Labor Party won 5%. Many seats in individual constituency races were won by
independents. The OSCE said that the election was “less flawed than the recent presidential
poll, but still fell short of international standards.” Proposed constitutional changes,
including those urged by the Council of Europe (COE), failed to be approved by the voters,
allegedly in part because of a poor government effort to inform the public about the proposed
changes (in June 2005, the Venice Commission of COE is expected to begin to review newly
proposed constitutional changes).
Oppositionists in Armenia in early 2004 stepped up their protests against the legitimacy
of the 2003 presidential race. The runners-up in the presidential election, Demirchian and
Artashes Geghamian (head of the National Unity Party) joined forces and urged nationwide
civil disobedience until Kocharyan resigned. The government termed this advocacy a
criminal attempt to change the constitutional order and in April 2004 raided the premises of
the main opposition parties, arrested several dozen opposition activists, and forcibly broke
up a demonstration. The U.S. State Department called on the government and opposition to
peacefully resolve their disputes and termed the government actions “excessive and contrary
to international standards.” At its October 2004 meeting, PACE resolved that it remained
disappointed by the government’s delay in prosecuting those who orchestrated presidential
election “fraud.” Some of those detained in April have been released and others sentenced
to prison terms.
Azerbaijan. Long-time ruler Heydar Aliyev suffered serious cardiac problems in April
2003 and was mostly in hospital up through the expiration of his presidential term. In what
some critics termed a move to ensure a dynastic succession, the legislature convened on
August 4 to confirm Ilkham as prime minister. In early October, the ailing Heydar Aliyev
withdrew from a scheduled October 15, 2003, presidential election in favor of his son.
Ilkham Aliyev handily won, beating seven other candidates with about 77% of the vote.
Protests alleging a rigged vote resulted in violence, and spurred arrests of hundreds of alleged
“instigators” of the violence. The State Department expressed “deep disappointment” with
“serious deficiencies” in the election and “extreme concern” about post-election violence and
“politically-motivated arrests.” In February 2005, the OSCE issued a report that concluded
that many of the dozens of post-election trials of oppositionists fell short of OSCE standards.
PACE in March 2005 warned Azerbaijan that its membership status in the COE might be re-
evaluated if the problems of “political prisoners” and a flawed electoral code were not soon
resolved. Days after this warning, Aliyev pardoned 114 prisoners, including 53 considered
political prisoners by the COE. A legislative election is scheduled for November 2005.
Georgia. Georgia has experienced increased political instability in recent years. Polls
before a November 2, 2003 legislative race and exit polling during the race suggested that
the opposition National Movement (NM) and the United Democrats (UD) would win the
largest shares of seats in the party list vote. Instead, official results gave the largest shares
of seats to the pro-Shevardnadze “For a New Georgia” bloc and the Revival Party. The U.S.
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State Department criticized “massive vote fraud” in Ajaria and other regions. Demonstrators
launched a “rose revolution” that led to Shevardnadze’s resignation on November 23. Russia
and the United States appeared to cooperate diplomatically during the crisis to urge
Georgians to abjure violence.
UD co-leader and outgoing legislative Speaker Nino Burjanadze assumed the interim
presidency and appointed co-leader Zurab Zhvania as State Minister (to oversee the
ministries). UD and NM agreed to co-sponsor NM head Saakashvili for a presidential
election scheduled for January 4, 2004. Saakashvili received 96% of 2.2 million popular
votes from a field of five candidates. OSCE observers judged the vote as freer and fairer
than previous elections and as bringing Georgia closer to meeting democratic electoral
standards. The legislature approved constitutional amendments in February 2004 that created
the post of prime minister and confirmed Zhvania for the post (for background, see CRS
Report RS21685, Coup in Georgia). Meeting with the visiting Saakashvili later that month,
President Bush termed him “a strong friend, a friend with whom we share values,” and hailed
the rose revolution as “a powerful example to people around the world who long for freedom
and long for honest government.” After Zhvania’s apparently accidental death in February
2005, his colleague Zurab Noghaideli was approved as prime minister.
President Bush visited Georgia on May 9-10, 2005, and praised its 2003 peaceful “rose
revolution” for “inspiring democratic reformers” and freedom “from the Black Sea to the
Caspian and to the Persian Gulf and beyond.” He urged the peaceful settlement of separatist
conflicts and cautioned that Georgia’s integration into Euro-Atlantic institutions such as
NATO depended on such an approach. He offered to “make a phone call or two” if
Saakashvili asked him to help resolve the separatist conflicts but stressed that the United
States could not impose a solution. He offered unspecified U.S. assistance so that Georgia
may meet objectives necessary to join NATO. He also offered U.S. mediation on the issue
of Russian military bases in Georgia and hailed as a hopeful sign Putin’s assurances to him
that Russia wanted to carry out its commitments to resolve the issue. Georgian President
Mikheil Saakashvili hailed the Bush visit as marking “final proof that Georgia is an
independent state with inviolable territory” and emphasized that the U.S.-Georgian
“partnership” ultimately was based on “our shared belief in freedom” and was the reason
Georgia had sent troops to Iraq to end “enslavement” there.
The South Caucasus’s External Security Context
Russian Involvement in the Region
After Vladimir Putin became president in 1999, Russia appeared to place great strategic
importance on maintaining influence in the South Caucasus region. But although such
efforts appeared initially successful, over the past few months several developments may
have altered this assessment, including the “rose revolution” in Georgia, NATO’s increased
ties with Armenia, the completion of the Baku-Tbilisi-Ceyhan oil pipeline, Russia’s concerns
about security in its North Caucasus regions, and Russia’s agreement to close its remaining
military bases in Georgia.
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At least until recently, Russia appeared to place the highest priority on exercising
influence in the region in the military-strategic sphere, less on influence in the economic
sphere, and a minimum on influence in the domestic political sphere, except for obtaining
assurances on the treatment of ethnic Russians. Russia has viewed Islamic fundamentalism
as a growing threat to the region, but has cooperated with Iran on some issues to counter
Turkish and U.S. influence. Russia has tried to stop ethnic “undesirables,” drugs, weapons,
and other contraband from entering its borders, and to quash separatism in its North
Caucasus areas while seemingly backing it in the South Caucasus. The states have
responded in various ways to Russian overtures. Armenia has close security and economic
ties with Russia, given its unresolved NK conflict and grievances against Turkey. Georgia
has protested Russia’s security actions against its breakaway Chechnya region, foot-dragging
on closing military bases, and support to Abkhaz and South Ossetian separatists. Azerbaijan
has been concerned about Russia’s ties with Armenia.
Military-Strategic Interests. Russia’s armed presence in the South Caucasus has
been multifaceted, including thousands of military base personnel, “peacekeepers,” and
border troops. The first step by Russia in maintaining a military presence in the region was
the signing of the Commonwealth of Independent States (CIS) Collective Security Treaty
(CST) by Armenia, Russia, and others in 1992, which pledges the members to consult in the
event of a threat to one or several members, and to provide mutual aid if attacked (Azerbaijan
and Georgia withdrew in 1999). Russia also secured permission for two military bases in
Armenia and four in Georgia. Armenia reportedly pays Russia to help guard the Armenian-
Turkish border. The total number of Russian troops has been estimated at about 3,500 in
Armenia and 5,000 in Georgia. Another 103,000 Russian troops are stationed nearby in the
North Caucasus (The Military Balance 2004-2005). In 1993, Azerbaijan was the first
Eurasian state to get Russian troops to withdraw, except at the Gabala radar site in northern
Azerbaijan. (Giving up on closing the site, in January 2002 Azerbaijan signed a 10-year
lease agreement with Russia permitting up to 1,500 troops at the site.) By October 1999,
most Russian border troops had left Georgia. Armenia has argued that its Russian bases
provide for regional stability by protecting it from attack. Russia has said that it has supplied
weapons to Armenia, including S-300 missiles and Mig-29 fighters for air defense, to
enhance Armenia’s and NK’s security.
Azerbaijan and Georgia have raised concerns about the spillover effects of Russia’s
military operations in Chechnya. In December 1999, the OSCE agreed to Georgia’s request
to send observers to monitor its border with Chechnya (later this monitoring was expanded
to nearby border areas and included up to 144 monitors in the summer and 111 in the winter).
These monitors notified authorities about hundreds of illegal border crossings and were
regarded by many observers as helping to assuage Russian concerns by providing a more
accurate picture of conditions and by discouraging crossings by armed rebels who might fear
detection. In December 2004, Russia withheld its approval to extend the observer mandate,
terming their help “ineffective.” The United States on March 10, 2005, stated that it was
“disappointed” by OSCE delays in discussing alternative means to monitor the borders, and
the U.S. Senate that same day approved S.Res. 69 that called for continued border
monitoring (see below, Legislation). In March 2005, the EU decided to send two staffers
to assist its representative in Georgia but remained undecided on border monitoring aid.
After the September 11, 2001 terrorist attacks in the United States, Russia stepped up
its claims that Georgia harbored Chechen terrorists (with links to al Qaeda) who used
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Georgia as a staging ground for attacks into Chechnya. The United States expressed
“unequivocal opposition” to military intervention by Russia inside Georgia. Georgia
launched a policing effort in the Gorge and agreed with Russia to some coordinated border
patrols in late 2002 that somewhat reduced tensions over this issue. In February 2004,
Saakashvili reportedly pledged during a Moscow visit to combat “Wahabbis” (referring to
Islamic extremists) in Georgia, including Chechen terrorists hiding in the Pankisi Gorge and
international terrorists that Russia alleged had transited Georgia to fight in Chechnya (for
background, see CRS Report RS21319, Georgia’s Pankisi Gorge).
Russia’s Bases in Georgia. In 1999 Russia and Georgia agreed to provisions of the
adapted Conventional Armed Forces in Europe (CFE) Treaty calling for Russia to reduce
weaponry at its four bases in Georgia, to close two of the bases (at Gudauta and Vaziani) by
July 2001, and to complete negotiations during 2000 on the status of the other two bases (at
Batumi and Akhalkalaki). The Treaty remains unratified by NATO signatories until Russia
satisfies these and other conditions. Russia moved some weaponry from its bases in Georgia
to Armenia, raising objections from Azerbaijan. On July 1, 2001, Georgia reported that
Russia had turned over the Vaziani base. Russia declared in June 2002 that it had closed its
Gudauta base, but that 320 troops would remain to support Russian “peacekeepers” taking
leave at the base. Georgia objected to this stance. Russian Defense Minister Sergey Ivanov
stated in June 2005 that there were about 2,500 Russian troops at the bases.
Putting pressure on Russia to abide by its commitments, the Georgian legislature in
March 2005 passed a resolution calling for Russia to come to an agreement by mid-May on
closing the bases by January 2006 or face various restrictions on base operations. This
pressure, and perhaps the U.S. presidential visit, spurred Russia to come to an agreement
with Georgia announced on May 30, 2005, setting 2008 as the deadline for closing the bases.
Reportedly, the Russian base at Akhalkalaka will be closed by the end of 2007, and the base
at Batumi will be closed during 2008. Paving the way for this agreement, President Putin
on May 23 stated that Georgia had the sovereign right to request the base closures and that
his military General Staff had assured him that the Cold War-era bases were not of strategic
importance to Russia. Russian Defense Minister Ivanov announced on June 6 that two
replacement bases would be constructed near Russia’s borders with Azerbaijan and Georgia
to block “terrorists” from entering Russia. Some observers raised concerns that some
unspecified part of the base at Batumi will be used for a joint anti-terrorism center, possibly
providing a means for Russia to keep some military presence in Georgia.
Caspian Energy Resources. Russia has tried to play a significant role in future oil
production, processing, and transportation in the Caspian Sea region. In an effort to increase
influence over energy development, Russia’s policymakers during much of the 1990s insisted
that the legal status of the Caspian Sea be determined before resources are exploited. Russia
has changed its stance by agreeing on seabed delineation with Kazakhstan and Azerbaijan.
At the May 2002 U.S.-Russia summit, the two presidents issued a joint statement endorsing
multiple pipeline routes, implying Russia’s non-opposition to plans to build oil and gas
pipelines from Azerbaijan to Turkey that do not transit Russia. In March 2004, however,
a Russian official stated that Putin wanted to ensure that the greatest volume of Caspian
energy flowed through Russia.
The Protection of Ethnic Russians and “Citizens”. Russia has claimed to be
concerned about discrimination and other human rights abuses committed in Azerbaijan and
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Georgia against ethnic Russians and pro-Russian groups. Many observers argue that this
ostensible interest in protecting human rights is a stalking horse for Russia’s
military-strategic and economic interests. According to the CIA World Factbook, ethnic
Russians constituted about 3.6% of the region’s population in 2002. A new Russian
citizenship law enacted in 2002 made it easier to grant citizenship and passports to most
residents of Abkhazia and South Ossetia. Russia’s Novosti news service in March 2005
quoted newly elected Abkhaz “president” Sergey Bagapsh as saying that “most Abkhaz
leaders are citizens of Russia, and [I am] also a citizen.” Putin interfered in October 2004
in this election by appearing to favor Abkhaz “prime minister” Raul Khajimba, a former
Russian security agent. However, both Khajimba and Baghapsh claimed to have won a tight
race, leading some observers to suggest that many Abkhaz voters had become alarmed by
Russia’s heavy hand. Others point out that Baghapsh also has close ties to Russia. Moscow
orchestrated a power-sharing arrangement, and the two candidates ran and won on the same
ticket in a new election held in January 2005.
The Roles of Turkey, Iran, and Others
The United States has generally viewed Turkey as able to foster pro-Western policies
and discourage Iranian interference in the South Caucasus states, though favoring Azerbaijan
in the NK conflict. Critics of Turkey’s larger role in the region caution that the United States
and NATO might be drawn by their ties with Turkey into regional imbroglios. Turkey seeks
good relations with Azerbaijan and Georgia and some contacts with Armenia, while trying
to limit Russian and Iranian influence. Azerbaijan likewise views Turkey as a major ally
against such influence, and to balance Armenia’s ties with Russia. Armenia is a member of
the Black Sea Economic Cooperation zone, initiated by Turkey, and the two states have
established consular relations. Obstacles to better Armenian-Turkish relations include
Turkey’s rejection of Armenians’ claims of genocide in 1915-1923 and its support for
Azerbaijan in the NK conflict, including the border closing. Georgia has an abiding interest
in ties with the approximately one million Georgians residing in Turkey and the
approximately 50,000 residing in Iran, and has signed friendship treaties with both states.
Turkey and Russia are Georgia’s primary trade partners. Turkey has hoped to benefit from
the construction of new pipelines delivering oil and gas westward from the Caspian Sea.
Iran’s goals in the South Caucasus include discouraging Western powers such as Turkey
and the United States from gaining influence (Iran’s goal of containing Russia conflicts with
its cooperation with Russia on these interests), ending regional instability that might threaten
its own territorial integrity, and building economic links. A major share of the world’s
Azerbaijanis reside in Iran (estimates range from 6-12 million), as well as about 200,000
Armenians. Ethnic consciousness among some “Southern Azerbaijanis” in Iran has grown,
which Iran has countered by limiting trans-Azerbaijani contacts. Azerbaijani elites fear
Iranian-supported Islamic extremism and object to Iranian support to Armenia. Iran has
growing trade ties with Armenia and Georgia, but its trade with Azerbaijan has declined. To
block the West and Azerbaijan from developing Caspian Sea energy, Iran long has insisted
on either common control by the littoral states or the division of the seabed into five equal
sectors. Iranian warships have challenged Azerbaijani oil exploration vessels. Some
thawing in Azerbaijani-Iranian relations occurred in early 2005 with Ilkham Aliyev’s visit
to Iran and the long-delayed opening of an Azerbaijani consulate in Tabriz. U.S. policy aims
to contain Iran’s threats to U.S. interests (See CRS Report RL32048, Iran: U.S. Concerns
and Policy Responses).
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Among non-bordering states, the United States and European states are the most
influential in the South Caucasus in terms of aid, trade, exchanges, and other ties. U.S. and
European goals in the region are broadly compatible, involving integrating it into the West
and preventing an anti-Western orientation, opening it to trade and transport, obtaining
energy resources, and helping it become peaceful, stable, and democratic. The South
Caucasus region has developed some economic and political ties with other Black Sea and
Caspian Sea littoral states, besides those discussed above. Azerbaijan shares with Central
Asian states common linguistic and religious ties and concerns about some common
bordering powers (Iran and Russia). The South Caucasian and Central Asian states have
common concerns about ongoing terrorist threats and drug trafficking from Afghanistan.
Central Asia’s increasing energy and other trade with the South Caucasus will make it more
dependent on stability in the region.
U.S. Aid Overview
The United States is the largest bilateral aid donor by far to Armenia and Georgia, and
the two states are among the four Eurasian states that each have received more than $1
billion in U.S. aid FY1992-FY2004 (the others are Russia and Ukraine). See Table 1. U.S.
assistance has included FREEDOM Support Act (FSA) programs, food aid (U.S. Department
of Agriculture), Peace Corps, and security assistance. Armenia and Georgia have regularly
ranked among the top world states in terms of per capita U.S. aid, indicating the high level
of concern within the Administration and Congress. Foreign Operations Appropriations for
FY1998 (P.L. 105-118) created a new South Caucasian funding category, which still exists,
to emphasize regional peace and development. The Conference Report (H.Rept. 108-792)
on H.R. 4818 (P.L.108-447; Consolidated Appropriations for FY2005) directed FSA and
Foreign Military Financing (FMF) funding for Azerbaijan and Georgia that matched, or
nearly matched, the amount called for by the request, but somewhat boosted such requested
aid to Armenia (from $62 million to $75 million in FSA aid and from $2 million to $8
million in FMF). Apparently in anticipation of congressional calls for parity, the
Administration’s FY2006 foreign aid budget requests the same amounts for FMF and IMET
for both Armenia and Azerbaijan ($5 million for FMF and $750,000 for IMET). Besides
bilateral aid, the United States contributes to multilateral organizations such as the
International Monetary Fund and the World Bank that aid the region.
In January 2004, Congress authorized a major new development assistance program,
the Millennium Challenge Account (Section D of P.L. 108-199). A newly established
Millennium Challenge Corporation announced in May 2004 that Armenia and Georgia would
be among the first states invited to apply for aid. Georgia was deemed eligible despite low
scores on “ruling justly,” “encouraging economic freedom,” and “investing in people,” with
the Corporation arguing that the new government in Georgia appeared reformist. This
assistance could dwarf that appropriated under the authority of the FREEDOM Support Act.
Armenia and Georgia have received none of this aid as of mid-2005.
In perspective, cumulative EU aid to the region has totaled about $1 billion over the past
decade. However, in 2004 EU foreign ministers invited the South Caucasus states to
participate in a “Wider Europe” program of enhanced aid, trade, and political ties. A World
Bank/EU-sponsored donor conference that month resulted in over $1 billion in three-year
pledges for development in Georgia (U.S. pledges amounted to about one-third of the total).
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U.S. Security Assistance
The United States has provided some security assistance to the region, and bolstered
such aid after September 11, 2001, though overall aid amounts to the countries did not
increase post-September 11 as they did in regard to the Central Asian “front line” states in
the war on terrorists in Afghanistan (see Table 1). In testimony to the Senate Armed
Services Committee on March 1, 2005, Gen. James Jones, head of U.S. European Command
(EUCOM), stated that “the Caucasus is increasingly important to our interests. Its air
corridor has become a crucial lifeline between coalition forces in Afghanistan and our bases
in Europe. Caspian oil, carried through the Caucasus, may constitute as much as 25 percent
of the world’s growth in oil production over the next five years ... This region is a
geographical pivot point in the spread of democracy and free market economies to the states
of Central and Southwest Asia.”
EUCOM initiatives in the region include the Sustainment and Stability Operations
Program (SSOP) in Georgia, the South Caucasus Clearinghouse, the Caspian Guard program,
and the Caspian Hydrocarbons initiative. The 16-month SSOP was launched in early 2005
as a follow-on to the Georgia Train and Equip Program (GTEP; see below). Funded at $64
million, SSOP is providing training for four battalions (2,000 troops), in part to support U.S.-
led coalition operations. When completed, the United States will have provided training to
a major portion of Georgia’s armed forces. However, Georgian media have reported that
many of the U.S.-trained troops are not re-enlisting. The Clearinghouse aims to facilitate
cooperation by sharing information on security assistance programs among both donor and
recipient countries. Gen. Jones testified that the Caspian Guard program, launched in 2003,
enhances and coordinates security assistance provided by U.S. agencies to establish an
“integrated airspace, maritime and border control regime” for the littoral states of Azerbaijan
and Kazakhstan. The Hydrocarbons initiative provides maritime security and crisis response
and consequence management assistance to help the regional states protect their pipelines
and other energy transport to the West. Gen. Charles Wald, deputy head of EUCOM, in
November 2004 suggested that the Administration was exploring the possible establishment
of “cooperative security locations” — sites without a full-time U.S. military presence that
are used for refueling and short-duration deployments — in Azerbaijan or Georgia.
Azerbaijan and Georgia play “important” anti-terrorism roles, according to the
Administration, including by sending some troops to support coalition actions in Afghanistan
and Iraq. In Georgia, Congress in 1997 directed setting up a Border Security and Related
Law Enforcement Assistance Program. The United States has committed millions of dollars
to facilitate the closure of Russian military bases in Georgia. Congress initiated the Security
Assistance Act of 2000 (P.L. 106-280) that authorized nonproliferation, export control,
border, anti-terrorism, and other security aid for the South Caucasus states and earmarked
such aid for Georgia.
Azerbaijani and Georgian leaders have stated that they want their countries to join
NATO; much greater progress in military reform, however, will likely be required before
they are considered for membership. All three states joined NATO’s Partnership for Peace
(PFP) in 1994. Troops from Armenia, Azerbaijan, and Georgia serve as peacekeepers in
NATO-led operations in Kosovo and the latter two states support NATO-led operations in
Afghanistan. There reportedly have been some fistfights and even a murder involving
Armenians and Azerbaijanis during some PFP activities. NATO cancelled a PFP exercise
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in Azerbaijan in September 2004, stating that Azerbaijan had violated NATO principles of
inclusiveness by refusing to host Armenian forces. The June 2004 NATO summit pledged
enhanced attention to the South Caucasian and Central Asian PFP members. A Special
Representative of the NATO General Secretary was appointed to encourage democratic civil-
military relations, transparency in defense planning and budgeting, and enhanced force inter-
operability with NATO.
Until waived, Section 907 had prohibited much U.S. security aid to Azerbaijan,
including Foreign Military Financing (FMF), and International Military Education &
Training (IMET). By U.S. policy, similar aid had not been provided to Azerbaijan’s fellow
combatant Armenia. From 1993-2002, both had been on the Munitions List of countries
ineligible for U.S. arms transfers. The Conference Report (H.Rept. 108-792) on H.R. 4818
(P.L.108-447; Consolidated Appropriations for FY2005) directed that FMF funding for
Armenia be boosted to match that for Azerbaijan (from $2 million as requested to $8
million). The Members appeared to reject the Administration’s assurances that the disparate
aid would not affect the Armenia-Azerbaijan military balance or undermine peace talks.
A $64 million Georgia Train and Equip Program (GTEP) was carried out in 2002-2004
that U.S. officials explained would help Georgian military, security, and border forces to
combat Chechen, Arab, Afghani, al Qaeda, and other terrorists who allegedly had infiltrated
Georgia. Some of these terrorists allegedly had fled U.S.-led coalition operations in
Afghanistan, so the GTEP was initially linked to OEF. Other reported U.S. aims include
bolstering Georgia’s ability to guard its energy pipelines and ensuring internal stability. The
program formally ended in April 2004 (see above, SSOP).
U.S. Trade and Investment
The Bush Administration and others maintain that U.S. support for privatization and the
creation of free markets directly serve U.S. national interests by opening new markets for
U.S. goods and services, and sources of energy and minerals. Among U.S. economic links
with the region, bilateral trade agreements providing for normal trade relations for products
have been signed and entered into force with all three states. Bilateral investment treaties
providing national treatment guarantees have entered into force. U.S. investment is highest
in Azerbaijan’s energy sector, but rampant corruption in the three regional states otherwise
has discouraged investors. With U.S. support, in June 2000 Georgia became the second
Eurasian state (after Kyrgyzstan) to be admitted to the WTO. The application of Title IV of
the Trade Act of 1974, including the Jackson-Vanik amendment, was terminated with respect
to Georgia in December 2000, so its products receive permanent nondiscriminatory (normal
trade relations or NTR) treatment. Armenia was admitted into WTO in December 2002.
The application of Title IV of the Trade Act of 1974, including the Jackson-Vanik
amendment, was terminated with respect to Armenia in January 2005 (P.L. 108-429). (For
further information, see CRS Report 98-545, The Jackson-Vanik Amendment: A Survey.)
Energy Resources and U.S. Policy
The U.S. Energy Department reports estimates of 1.2 billion barrels of proven oil
reserves, and estimates of 4.4 trillion cubic feet of proven natural gas reserves in Azerbaijan
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(Country Analysis Brief, June 2002). U.S. policy goals regarding energy resources in the
Central Asian and South Caucasian states have included supporting their sovereignty and ties
to the West, supporting U.S. private investment, breaking Russia’s monopoly over oil and
gas transport routes by encouraging the building of pipelines that do not traverse Russia,
promoting Western energy security through diversified suppliers, assisting ally Turkey, and
opposing the building of pipelines that transit Iran. These goals are reflected in the
Administration’s May 2001 National Energy Policy report. It recommends that the President
direct U.S. agencies to support building the Baku-Tbilisi-Ceyhan (BTC) oil pipeline,
expedite use of the pipeline by oil companies operating in Kazakhstan, support constructing
a gas pipeline to export Azerbaijani gas, and otherwise encourage the Caspian regional states
to provide an appealing business climate for energy and infrastructure development.
Since September 11, 2001, the Administration has emphasized the vulnerability of the
United States to possible energy supply disruptions and intensified its commitment to
develop Caspian energy and the BTC pipeline as part of a strategy of diversifying world
energy supplies. Critics of such a focus on the Caspian argue that oil from the region will
amount to less than 4% of world supplies. U.S. companies are shareholders in three
international production-sharing consortiums, including the Azerbaijan International
Operating Company (AIOC), formed to exploit Azerbaijan’s oil and gas fields. In 1995,
Heydar Aliyev and the AIOC decided to transport “early oil” (the first and lower volume of
oil) through two revamped Soviet-era pipelines in Georgia and Russia to ports on the Black
Sea, each with a capacity of around 100-115,000 barrels per day. The trans-Russia “early
oil” pipeline began delivering oil to the port of Novorossiisk in late 1997. The trans-
Georgian pipeline began delivering oil to Black Sea tankers in early 1999.
Table 1. U.S. FY1992-FY2004 and FY2004Budgeted Aid, FY2005
Estimated Aid, and the FY2006 Foreign Assistance Request
(millions of dollars)
South Caucasus
FY1992-FY2004
FY2004 Budgeted
FY2005
FY2006
Country
Budgeted Aida
Aida
Estimatec
Requestc
Armenia
1,487.6
79.82
80.7
63.19
Azerbaijan
500.11
49.63
52.61
48.13
Georgia
1,409.0
93.93
103.72
85.25
Total
3,396.71
223.38b
237.03
196.57
Sources: State Department, Office of the Coordinator for U.S. Assistance to Europe and Eurasia; State Department, U.S.
Government Assistance to and Cooperative Activities with Eurasia: FY2003 Annual Report, January 2004.
a. FREEDOM Support Act and Agency budgets; b. Caucasus Regional funds are included in the total. c. FREEDOM
Support Act and other Function 150 funds (does not include Defense or Energy Department funding or funding for
exchanges).
The Clinton Administration launched a campaign in 1997 stressing the strategic
importance of the BTC route as part of an “Eurasian Transport Corridor.” In November
1999, Azerbaijan, Georgia, Turkey, and Kazakhstan signed the “Istanbul Protocol” on
construction of a 1,040-mile BTC oil pipeline. In August 2002, the BTC Company was
formed to construct, own, and operate the oil pipeline. BTC hopes to begin loading tankers
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at Ceyhan in late 2005. A gas pipeline to Turkey is being built parallel to the oil pipeline.
There are objections from some in Armenia about lack of access to these pipelines, but
Armenian Foreign Minister Oskanyan on January 14, 2004, suggested that the pipelines
would make Azerbaijan reticent to launch conflict. Armenia and Iran signed accords in 2004
on building a gas pipeline to link up with Iran’s pipelines. At a ceremony in Baku on May
25, 2005, to inaugurate the completion of the BTC pipeline, Energy Secretary Samuel
Bodman claimed that “the BTC pipeline will play a crucial role in global energy politics and
have a considerable impact on global energy resources.”
LEGISLATION
S.Res. 69 (Lugar)
A resolution expressing the sense of the Senate about the actions of Russia regarding
Georgia and Moldova. Resolves that the United States should urge Russia to live up to its
1999 OSCE commitments to close or otherwise resolve the status of its military bases in
Georgia and Moldova; maintain strong diplomatic pressure (in cooperation with European
allies) to permit an OSCE Border Monitoring Operation (BMO) in Georgia to continue; and
seek (if BMO ceases to exist) an international presence to monitor borders between Georgia
and Russia. Introduced on March 3, 2005, and agreed to on March 10.
Figure 1. Map of the Region
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