Order Code RL33453
Armenia, Azerbaijan, and Georgia:
Political Developments and
Implications for U.S. Interests
Updated June 17, 2008
Jim Nichol
Specialist in Russian and Central Asian Affairs
Foreign Affairs, Defense, and Trade Division

Armenia, Azerbaijan, and Georgia: Political
Developments and Implications for U.S. Interests
Summary
The United States recognized the independence of Armenia, Azerbaijan, and
Georgia when the former Soviet Union broke up at the end of 1991. The United
States has fostered these states’ ties with the West in part to end the dependence of
these states on Russia for trade, security, and other relations. The United States has
pursued close ties with Armenia to encourage its democratization and because of
concerns by Armenian-Americans and others over its fate. Close ties with Georgia
have evolved from U.S. contacts with its pro-Western leadership. The Bush
Administration supports U.S. private investment in Azerbaijan’s energy sector as a
means of increasing the diversity of world energy suppliers and to encourage building
multiple energy pipelines to world markets. The United States has been active in
diplomatic efforts to end conflicts in the region, several of which remain unresolved.
The FREEDOM Support Act of 1992 (P.L. 102-511) authorizes assistance to
the Eurasian states for humanitarian needs, democratization, creation of market
economies, trade and investment, and other purposes. Section 907 of the act
prohibits most U.S. government-to-government aid to Azerbaijan until its ceases
blockades and other offensive use of force against Armenia. In the aftermath of the
September 11, 2001, terrorist attacks on the United States, the Administration
appealed for a national security waiver for Section 907, in consideration of
Azerbaijan’s support to the international coalition to combat terrorism. In December
2001, Congress approved foreign appropriations for FY2002 (P.L. 107-115) that
granted the President authority to waive Section 907, renewable each calendar year
under certain conditions. President Bush exercised the waiver most recently in
March 2007. As part of the U.S. Global War on Terror, the U.S. military in 2002
began providing equipment and training for Georgia’s military and security forces.
Azerbaijani troops participate in stabilization efforts in Afghanistan and Iraq, and
Armenian and Georgian personnel serve in Iraq. Georgia has announced that it will
soon send some troops to Afghanistan.
Key issues in the 2nd Session of the 110th Congress regarding the South
Caucasus are likely to focus on supporting Georgia’s integration into Western
institutions, including NATO; Azerbaijan’s energy development; and Armenia’s
independence and economic development. At the same time, concerns might include
the status of human rights and democratization in the countries, the on-going
Armenia-Azerbaijan conflict over the breakaway Nagorno Karabakh region, and
threats posed to Georgia by ongoing separatism and Russian actions. Congress will
likely scrutinize Armenia’s and Georgia’s reform progress as recipients of
Millennium Challenge Account grants. Some Members of Congress believe that the
United States should provide greater attention to the region’s increasing role as an
east-west trade and security corridor linking the Black Sea and Caspian Sea regions
(and to Armenia’s inclusion in such links). They urge greater U.S. aid and conflict
resolution efforts to contain warfare, crime, smuggling, and Islamic extremism and
to bolster the independence of the states. Others urge caution in adopting policies
that will heavily involve the United States in a region beset by ethnic and civil
conflicts.

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview of U.S. Policy Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Post-September 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Operations in Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Obstacles to Peace and Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Regional Tensions and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Nagorno Karabakh Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Civil and Ethnic Conflict in Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Economic Conditions, Blockades, and Stoppages . . . . . . . . . . . . . . . . . . . . 11
Democratization Problems and Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Armenia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Azerbaijan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The South Caucasus’s External Security Context . . . . . . . . . . . . . . . . . . . . . . . . 20
Russian Involvement in the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Caspian Energy Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Military-Strategic Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Roles of Turkey, Iran, and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
U.S. Aid Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
U.S. Security Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
U.S. Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Energy Resources and U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
110th Congress Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
List of Figures
Figure 1. Map of the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
List of Tables
Table 1. U.S. Foreign Aid to the Region, FY1992-FY2008, and
FY2009 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Armenia, Azerbaijan, and Georgia:
Political Developments and
Implications for U.S. Interests
Most Recent Developments
Armenian President Serzh Sarkisyan and Azerbaijani President Ilkham Aliyev
met briefly on June 6, 2008, while attending a meeting of the Commonwealth of
Independent States in St. Petersburg, Russia. They agreed that talks should continue
on settling the conflict over Azerbaijan’s breakaway Nagorno Karabakh region.
Background
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. All three peoples
can point to periods of past autonomy or self-government. 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 1991.1
Overview of U.S. Policy Concerns
By the end of 1991, the United States had recognized the independence of all
the former Soviet republics. The United States pursued close ties with Armenia,
because of its profession of democratic principles, and concerns by Armenian-
Americans and others over its fate. The United States pursued close ties with
Georgia after Eduard Shevardnadze (formerly a pro-Western Soviet foreign minister)
assumed power there in early 1992. Faced with calls in Congress and elsewhere for
a U.S. aid policy for the Eurasian states, then-President George H.W. Bush sent the
FREEDOM Support Act to Congress, which was signed with amendments into law
in October 1992 (P.L. 102-511).
1 For background, see CRS Report RS20812, Armenia Update, by Carol Migdalovitz; CRS
Report 97-522, Azerbaijan: Recent Developments and U.S. Interests, by Jim Nichol; and
CRS Report 97-727, Georgia: Recent Developments and U.S. Interests, also by Jim Nichol.

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In June 2006, Deputy Assistant Secretary of State Matthew Bryza stated that the
United States has three inter-related sets of interests in the region: “we’re not
embarrassed to say that energy is a strategic interest. We [also] have ... traditional
security interests — meaning fighting terrorism, fighting proliferation, avoiding
military conflict, and restoring (or preserving, in some cases) the territorial integrity
of the states of the region.... And then we have a third set of interests, in ...
democratic and market economic reform ... based on our belief that stability only
comes from legitimacy. And legitimacy requires democracy on the political side and
prosperity on the economic side.”2
The Caucasus Region: Basic Facts
Area: The region is slightly larger than Syria: Armenia is 11,620 sq. mi.; Azerbaijan
is 33,774 sq. mi.; Georgia is 26,872 sq. mi.
Population: 15.8 million, similar to Netherlands; Armenia: 2.97 m.; Azerbaijan: 8.18
m.; Georgia: 4.63 m. (The World Factbook, July 2008 est.). Over a million people
from the region are migrant workers in Russia and elsewhere.
GDP: $103.1 billion: Armenia: $17.15 b.; Azerbaijan: $65.47 b.; Georgia: $20.5 b.
(World Factbook, 2007 est., purchasing power parity)
In addition, 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. Since 1993, successive U.S. Special Negotiators for
Eurasian Conflicts have helped in various ways to try to settle these “frozen”
conflicts. (In early 2006, the State Department eliminated this post and divided its
responsibilities among the Deputy Assistant Secretary of State and the Office of
Caucasus Affairs and Regional Conflicts.)3 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.
2 “U.S. Says Aliyev, Kocharyan Must Show ‘Political Will,’” RFE/RL, June 23, 2006. The
three priorities were repeated in a joint statement issued after the 10th annual meeting of the
U.S.-Azerbaijan Security Dialogue. U.S. Department of State. Office of the Spokesman,
July 9, 2007.
3 According to a report by the State Department’s Office of the Inspector General, the added
duties of the Office of Caucasus Affairs and Regional Conflicts and the relevant deputy
assistant secretary were not accompanied by increased staff support, and “some mis-
communications and divergence of expectations between [the State Department] and the
[U.S. Embassy in Azerbaijan] have occurred as a consequence.” U.S. Department of State.
Report of Inspection: Embassy Baku, Azerbaijan, Report Number ISP-I-07-40A, September
2007.

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Some observers argue that developments in the South Caucasus 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, and some argue that, since the European Union
has recognized the region as part of its “neighborhood,” it rightfully should play a
major role. Some observers argue that the U.S. interest in democratization should
not be subordinated to interests in energy and anti-terrorism.4
Other observers believe that U.S. policy now requires more active engagement
in the region. They urge greater U.S. aid and conflict resolution efforts to contain
warfare, crime, smuggling, 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, because Azerbaijani and Central Asian oil
and natural gas deliveries could lessen Western energy dependency on Russia and the
Middle East (see below, Energy Resources).
Post-September 11. In the wake of September 11, 2001, the United States
obtained quick pledges from the three South Caucasian states to support Operation
Enduring Freedom (OEF) in Afghanistan, including overflight rights and
Azerbaijan’s and Georgia’s offers of airbase and other support. Congressional
attitudes toward Azerbaijan and Section 907 shifted, resulting in presidential waiver
authority being incorporated into 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, the
President must report to Congress on the nature of aid to be provided to Azerbaijan,
the military balance between Armenia and Azerbaijan and the effects of U.S. aid on
that balance, the status of Armenia-Azerbaijan peace talks, and the effects of U.S. aid
on those talks. President Bush has exercised the waiver annually, most recently in
March 2008.
Since late 2002, Azerbaijan has contributed troops for peacekeeping in
Afghanistan. In October 2007, Azerbaijan’s legislature approved doubling the
number of troops (currently 22) it deploys to Afghanistan. Georgia contributed about
50 troops during Afghan elections in late 2004-early 2005. In October 2007,
Georgia’s President Mikheil Saakashvili stated that Georgia intended to send 200-
4 U.S. House of Representatives. Committee on Foreign Relations. Subcommittee on
International Organizations, Human Rights and Oversight. Ideals vs. Reality in Human
Rights and U.S. Foreign Policy: The Cases of Azerbaijan, Cuba, and Egypt
, July 12, 2007;
U.S. Commission on Security and Cooperation in Europe. Energy and Democracy, July 23,
2007.

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400 troops to support NATO in Afghanistan. Reportedly, they may be deployed in
mid-2008.
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 and Georgia dispatched
forces to Iraq. Azerbaijan’s 150 troops serve under U.S. command and provide
security in northern Iraq. Armenia began sending personnel to Iraq in January 2005,
where 46 serve with the Polish contingent in non-combat roles.
Georgia boosted its deployment from 69 to 850 troops in July 2005. In March
2007, President Saakashvili announced that Georgia intended to boost its troop
deployment up to 2,000. The new troops were fully deployed by September 2007.
Georgian troops serve under U.S. command. Many have provided security in the
“Green zone”in Baghdad, the town of Baqubah northeast of Baghdad, and in Wasit
Governorate, along the Iranian border. With these new deployments, Georgia has the
third-largest number of troops in Iraq, after the United States and the United
Kingdom. The Georgian Defense Minister announced in September 2007, that in
accordance with a U.S.-Georgia agreement that led Georgia to boost its troops in Iraq
to 2,000, the number of troops would be reduced to 300-500 later in 2008.
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 since the Soviet collapse in 1991, 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/transportation
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 for all three states. The secessionist NK, Abkhazia, and South Ossetia have

CRS-5
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 about 15,000 casualties and hundreds of thousands
of refugees and displaced persons in Armenia and Azerbaijan. The U.N. High
Commissioner for Refugees has reported that at the end of 2006, there were still
about 692,000 people considered refugees or displaced persons in Azerbaijan and
114,000 in Armenia.5 Armenia has granted citizenship and acted to permanently
house most of the ethnic Armenians who fled Azerbaijan The non-governmental
International Crisis Group estimates that about 13-14% of Azerbaijan’s territory,
including NK, is controlled by NK Armenian forces (The World Factbook estimates
about 16%).6 The OSCE’s “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. Since 2005, officials in both
countries have reported negotiations on a fourth “hybrid” peace plan calling for initial
agreement on “core principles.” The Minsk Group co-chairs issued a statement and
made other remarks in April-July 2006 that revealed some of their proposals for a
settlement. These included the phased “redeployment of Armenian troops from
Azerbaijani territories around NK, with special modalities for Kelbajar and Lachin
districts (including a corridor between Armenia and NK); demilitarization of those
territories; and a referendum or population vote (at a date and in a manner to be
decided ...) to determine the final legal status of NK.” International peacekeepers
also would be deployed in the conflict area.7
On November 29, 2007, Undersecretary of State Nicholas Burns, Russian
Foreign Minister Sergey Lavrov, and French Foreign Minister Bernard Kouchner
presented the Foreign Ministers of Armenia and Azerbaijan, Vardan Oskanyan and
Elmar Mammadyarov with a draft text — Basic Principles for the Peaceful
Settlement of the Nagorno-Karabakh Conflict
— for transmission to their presidents.
These officials urged the two sides to accept the Basic Principles (also termed the
Madrid proposals, after the location where the draft text was presented) that had
5 U.N. High Commissioner for Refugees. 2006 Global Trends: Refugees, Asylum-seekers,
Returnees, Internally Displaced and Stateless Persons
, July 16, 2007. The NGO Amnesty
International has raised concerns that refugees and displaced persons in Azerbaijan face
prejudice and segregation. They are more likely to be unemployed and in poverty.
Azerbaijan: Displaced then Discriminated Against — the Plight of the Internally Displaced
Population
, June 28, 2007.
6 International Crisis Group. Nagorno-Karabakh: Viewing the Conflict from the Ground,
September 14, 2005; CIA World Factbook. Azerbaijan, online at [https://www.cia.gov/cia/
publications/factbook/geos/aj.html].
7 OSCE. Statement by the Minsk Group Co-Chairs, July 3, 2006.

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resulted from three years of talks and to begin “a new phase of talks” on a
comprehensive peace settlement.8
Although the text was not released, Azerbaijani Foreign Minister Elmar
Mammadyarov reportedly claimed that the principles uphold Azerbaijan’s territorial
integrity and NK’s autonomous status as part of Azerbaijan. Armenia’s then-Foreign
Minister Oskanyan asserted, on the other hand, that the principles supported
Armenia’s insistence on respecting self-determination for NK. Many observers
suggest that progress in the talks may occur only after the current electoral cycle
concludes in Armenia and Azerbaijan.9
In March 2008, the peace process faced challenges from a ceasefire breakdown
along the NK front that reportedly led to some troop casualties and from the passage
of a resolution by the U.N. General Assembly that called for Armenia to
“immediately and unconditionally” withdraw from “occupied” Azerbaijani territory.
In the former case, each side blamed the other for breaking the ceasefire. In the
latter case, the resolution introduced by Azerbaijan in the U.N. General Assembly
was approved with a vote of 39 for and 7 against, with 100 abstentions. The United
States voted against the resolution in part because according to Deputy Assistant
Secretary of State Matthew Bryza it violated the provisions of the Basic Principles
(see above) and thus harmed the peace process.
On May 6, 2008, France hosted a meeting between the Armenian and
Azerbaijani foreign ministers. The foreign ministers also met with the Minsk Group
co-chairs. No details were made available to the public.
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. Some observers have argued that Russia’s increasing
controls over South Ossetia and Abkhazia have transformed the separatist conflicts
into essentially Russia-Georgia disputes. Most residents of Abkhazia and South
Ossetia reportedly have been granted Russian citizenship and most appear to want
their regions to be part of Russia.10 According to U.N. Secretary-General Ban
Ki-moon, President Putin’s threats that Russia might recognize Abkhazia and South
Ossetia — if the international community recognizes Kosovo — have helped spur
8 U.S. Department of State. Office of the Spokesman. Media Note: Support for Basic
Principles for Peaceful Settlement of the Nagorno-Karabakh Conflict
, November 29, 2007.
9 CEDR, December 10, 2007, Doc. No. CEP-950390; December 13, 2007, Doc. No. CEP-
950360; December 19, 2007, Doc. No. CEP-950339.
10 Vladimir Socor, Eurasia Insight, November 20, 2006. According to Rossiyskoye
Voyennoye Obozreniye
(Russian Military Review), published by the Defense Ministry, 80%
of residents of Abkhazia are citizens of Russia, and most voted in the December 2007
Russian legislative election. CEDR, April 21, 2008, Doc. No. CEP-358004.

CRS-7
Georgia to set up pro-Georgian governments in Abkhazia’s Kodori Gorge and in
South Ossetia (see below) to complicate such recognition attempts.11
U.S. diplomacy generally has appeared to urge Georgia to work within existing
peace settlement frameworks for Abkhazia and South Ossetia — which provide for
Russian “peacekeepers” — while criticizing some Russian actions in the regions. The
United States and others in the international community strongly objected in April
2008 when President Putin issued a directive for stepping up government-to-
government ties with Abkhazia and South Ossetia. He also ordered stepped up
consular services for the many Russian citizens in the two regions. He proclaimed
that many documents issued by the separatist governments and businesses which had
been established in the regions would be recognized as legitimate by the Russian
government. As a prelude to this directive, the Russian government in March 2008
had withdrawn from CIS economic sanctions on Abkhazia, permitting open Russian
trade and investment. Georgian officials and other observers raised concerns that this
directive tightened and flaunted Russia’s jurisdiction over the regions.
A meeting of the U.N. Security Council (UNSC) on April 23 discussed these
Russian moves. Although the Security Council issued no public decision, the United
States, Great Britain, France, and Germany stated that same day that they “are highly
concerned about the latest Russian initiative to establish official ties with ... Abkhazia
and South Ossetia without the consent of the Government of Georgia. We call on the
Russian Federation to revoke or not to implement its decision.”12 On April 29, 2008,
the Russian foreign ministry asserted that Russia’s actions had been taken to boost
the basic human rights of residents in the regions.
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 contributing to an
estimated 2,000-4,000 deaths and the displacement of tens of thousands of people.
In June 1992, Russia brokered a cease-fire, and Russian, Georgian, and Ossetian
“peacekeeping” units have set up base camps in a security zone around Tskhinvali,
South Ossetia. Reportedly, the units total around 1,100 troops, including about 530
Russians, a 300-member North Ossetian brigade (which is actually composed of
South Ossetians and headed by a North Ossetian), and about 300 Georgians. OSCE
monitors do most of the patrolling. A Joint Control Commission (JCC) composed
of Russian, Georgian, and North and South Ossetian emissaries promotes a
settlement of the conflict, with the OSCE as facilitator. According to some
estimates, some 25,000 ethnic Ossetians and 20,000 ethnic Georgians reside in a
region that, according to the 1989 Soviet census, at that time contained over 98,000
residents.
In 2004, President Saakashvili increased pressure on South Ossetia by tightening
border controls, breaking up a large-scale smuggling operation in the region that
11 U.N. Security Council. Report of the Secretary-General on the Situation in Abkhazia,
Georgia
, S/2007/15, January 11, 2007.
12 “Germany, Great Britain, France, U.S.A. and Germany Passed Communique,” Black Sea
Press
, April 24, 2008.

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allegedly involved Russian organized crime and corrupt Georgian officials. He also
reportedly sent several hundred police, military, and intelligence personnel 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. Georgian
guerrilla forces also reportedly entered the region. Allegedly, Russian officials
likewise assisted several hundred paramilitary elements from Abkhazia, Transnistria,
and Russia to enter. Following inconclusive clashes, both sides by late 2004
ostensibly had pulled back most undeclared forces.
In July 2005, President Saakashvili announced a new peace plan for South
Ossetia that offered substantial autonomy and a three-stage settlement, consisting of
demilitarization, economic rehabilitation, and a political settlement. South Ossetian
“president” Eduard Kokoiti rejected the plan, asserting in October 2005 that “we
[South Ossetians] are citizens of Russia.”13 The Georgian peace plan received
backing by the OSCE Ministerial Council in early December 2005. Perhaps faced
with this international support, in mid-December 2005, Kokoiti proffered a South
Ossetian peace proposal that also envisaged benchmarks. The JCC in May 2006
agreed on economic reconstruction projects estimated to cost $10 million, and the
next month, the OSCE sponsored a donor’s conference that raised these funds. A
Steering Committee composed by the sides to the conflict and donors met in October
2006 to discuss project implementation. In February 2007, the pro-Georgian
alternative leadership (see below) called for participating in projects. In April 2007,
Kokoiti praised Russia’s unilateral aid efforts and accused the Steering Committee
of dallying (see also below).
In November 2006, a popular referendum was held in South Ossetia to reaffirm
its “independence” from Georgia. The separatists reported that 95% of 55,000
registered voters turned out and that 99% approved the referendum. In a separate
vote, 96% reelected Kokoiti. The OSCE and U.S. State Department declined to
recognize these votes. In “alternative” voting among ethnic Georgians in South
Ossetia (and those displaced from South Ossetia) and other South Ossetians, the pro-
Georgian Dmitriy Sanakoyev was elected governor, and a referendum was approved
supporting Georgia’s territorial integrity.
In March 2007, President Saakashvili proposed another peace plan for South
Ossetia that involved creating “transitional” administrative districts throughout the
region — ostensibly under Sanakoyev’s authority — which would be represented by
an emissary at JCC or alternative peace talks. Each side accused the other in mid-
2007 of blockading water supplies in South Ossetia and other “provocations,”
including failure to hold JCC meetings. The OSCE Steering Committee has financed
the building of a water pipeline. In July 2007, President Saakashvili decreed the
establishment of a commission to work out South Ossetia’s “status” as a part of
13 CEDR, October 7, 2005, Doc. No. CEP-15001. CEDR, December 12, 2005, Doc. No.
CEP-27204. South Ossetians who were citizens of Russia voted in the 2003 Russian
presidential election, and a poster in South Ossetia proclaims that “Putin is our president.”
South Ossetia reported that there were about 38,000 Russian citizens in the region who were
eligible to vote in the early December 2007 Russian Duma election. CEDR, December 3,
2007, Doc. No. CEP-950289.

CRS-9
Georgia. The JCC finally held a meeting (with Georgia’s emissaries in attendance)
in Tbilisi, Georgia, in October 2007, but the Russian Foreign Ministry claimed that
the Georgian emissaries made unacceptable demands in order to deliberately
sabotage the results of the meeting.14 No further meetings had been held as of mid-
2008.
Abkhazia. In July 1992, Abkhazia’s legislature declared the region’s effective
independence, prompting an attack by Georgian national guardsmen. 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 “volunteers” (who reportedly made up the bulk of Abkhaz
separatist forces) routed Georgian forces in 1993. Georgia and Abkhazia agreed in
April-May 1994 on a framework for a political settlement and the return of refugees.
A Quadripartite Commission (QC) was set up to discuss repatriation and Russian
troops (acting as CIS “peacekeepers”) were deployed along the Inguri River dividing
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 (CC) to discuss cease-fire maintenance and
refugee, economic, and humanitarian issues. The QC met periodically and addressed
grievances not considered by the CC. Abkhazia had resisted holding CC meetings
since 2001. The two sides finally held some CC meetings in mid-2006 but rising
tensions led to the suspension of the meetings in August.
The Deputy Assistant Secretary of State works with the Special Representative
of the U.N. Secretary General and other “Friends of the Secretary General” (France,
Germany, Russia, the United Kingdom, and Ukraine) to facilitate a settlement. A
“New Friends” group was formed in 2005 (members include Bulgaria, Czech
Republic, Estonia, Latvia, Lithuania, Moldova, Poland, Romania, and Sweden) to
advocate increased EU and NATO attention to a settlement. Sticking points have
included Georgia’s demand that displaced persons be allowed to return to Abkhazia,
after which an agreement on autonomy for Abkhazia would be negotiated. The
Abkhazians have insisted upon recognition of their independence as a precondition
to large-scale repatriation.
The Kodori Gorge. In July 2006, a warlord in the Kodori Gorge area of
northern Abkhazia, where many ethnic Svans reside, foreswore his nominal
allegiance to the Georgian government. The Georgian government quickly sent
forces to the area and defeated the warlord’s militia. President Saakashvili asserted
that the action marked progress in Georgia’s efforts to re-establish its authority
throughout Abkhazia, and he directed that the Abkhaz “government-in-exile” make
the Gorge its home. Georgia claims that the military troops have left the Gorge,
leaving only police, but Abkhazia asserts that many troops are still present, in
violation of the cease-fire agreement.
Regular Georgia-Abkhazia peace talks were suspended in October 2006.
Abkhazia has called for Georgia to remove the government representatives and
alleged military forces. In October 2006, the UNSC criticized Georgia for
14 CEDR, November 1, 2007, Doc. No. CEP-950449.

CRS-10
introducing military forces into the Kodori Gorge in violation of cease-fire accords
and for other “militant rhetoric and provocative actions” and called on it to abide by
the accords. Some violations by Abkhaz forces were also criticized. The UNSC
stressed the “important” and “stabilizing” role played by Russian peacekeepers and
UNOMIG.15 Some Georgian officials viewed the resolution as negating their calls
for a wider international composition of the peacekeeping forces. The U.N. Secretary
General subsequently has stated that Georgia has appeared not to have heavy military
weaponry in the Gorge. The Friends of the Secretary General hosted meetings in
Germany in June 2007 and Switzerland in February 2008 that urged the sides to abide
by the existing cease-fire agreement and to renew talks, but talks remained suspended
as of mid-2008.16 The U.N. Secretary General has heavily criticized accusations and
disinformation (much of which he claims comes from Georgia) that heighten distrust
and the risk of conflict.
In March and April 2008, President Saakashvili proposed new peace initiatives
that included international guarantees of autonomy for Abkhazia, quotas for Abkhaz
representation in Georgian executive and legislative bodies, the establishment of a
special economic zone in the Gali region, and more active involvement by the
international community and Russia in a peace settlement. The initiatives were
rejected by the de facto Abkhaz authorities.
In March and April 2008, unmanned aerial vehicles (UAVs) from Georgia were
shot down over Abkhazia. Georgia claimed that Russians shot down the UAVs, but
the Abkhaz claimed that they shot them down. The Russian foreign ministry
asserted that the UAVs have a military surveillance mission and are banned under the
1994 ceasefire agreement, but the Georgians asserted that they are non-threatening
and permitted. On April 23, 2008, the UNSC discussed the most recent shootdown
in a closed meeting. The United States, Great Britain, France, and Germany issued
a communique that appeared to both criticize the launch of the UAV and its
shootdown as raising tensions, and urged “all parties involved in these incidents to
renounce any armed or military action and to respect Georgia’s sovereignty and
territorial integrity.”17 UNOMIG issued a statement on April 21, 2008, that skirted
these arguments but criticized the UAVs for raising tensions.18
After an investigation, UNOMIG concluded in late May 2008 that at least one
of the UAVs had been shot down by a fighter jet flying into Abkhazia from Russian
airspace. UNOMIG stated that Georgia should not fly the UAVs over Abkhazia, but
15 U.N. Security Council. Resolution 1716 (2006), Adopted by the Security Council at Its
5549th Meeting
, October 13, 2006.
16 U.N. Secretary General. Report of the Secretary-General on the Situation in Abkhazia,
S/2007/15, January 11, 2007; S/2007/182, April 3, 2007; S/2007/439, July 18, 2007;
S/2007/588, October 3, 2007; S/2008/38, January 23, 2008; S/2008/219, April 2, 2008. He
stated in his July 2007 report that UNOMIG had seen what appeared to be a Georgian
military truck in the upper Kodori Gorge.
17 “Germany, Great Britain, France, U.S.A. and Germany Passed Communique,” Black Sea
Press
, April 24, 2008.
18 UNOMIG. Press Release, PR/2008/89, April 21, 2008.

CRS-11
also termed the shootdown by the Russian air force “fundamentally inconsistent”
with the Abkhaz-Georgia ceasefire agreement. At a closed meeting of the UNSC on
May 30, 2008, Georgia stated that it would end the flights of the UAVs. The next
day, Russia announced that about 400 railway construction troops were being sent
to Abkhazia for “humanitarian” work. The U.S. State Department responded that the
“announcement is particularly difficult to understand,” in light of Georgia’s peace
overtures. While some observers have speculated that the railway troops would make
repairs to facilitate the shipment of building materials from Abkhazia for
construction in Sochi, Russia, for the 2014 Olympics, one Russian military analyst
has argued that such troops typically prepare for the rail transport of heavy military
equipment.19
The United States and others in the international community raised concerns
when the Russian foreign and defense ministries announced on April 29, 2008, that
the number of “peacekeepers” in Abkhazia would be boosted up to the maximum
permitted under ceasefire accords. There also would be added military equipment
and checkpoints. The ministries claimed that the increases were necessary to counter
the presence of a Georgian youth camp in a restricted zone near the Abkhaz border,
the flight of Georgian UAVs over Abkhazia, and a buildup of Georgian “military
forces” and police in the Kodori Gorge, which were preparing to attack the de facto
Abkhaz government. The defense ministry asserted that any Georgian “violence
against Russian peacekeepers and Russian citizens...will be met with an appropriate
and robust response.”20 Georgia’s speaker objected that an increase in the number
of “peacekeepers” should be a subject of negotiation, and termed it another move
toward Russia’s “annexation” of Abkhazia.21 The EU’s High Representative for
Common Foreign and Security Policy, Javier Solana, raised concerns that the
decision would increase tensions. NATO reported on April 28, 2008, that its
members “support Georgia’s territorial integrity and regard Abkhazia as Georgia’s
inseparable part. NATO members believe that the unilaterally biased Russian
peacekeeping contingent should be withdrawn.”22
Russia-Georgia tensions appeared to deepen in mid-May 2008 when the U.N.
General Assembly approved a resolution introduced by Georgia that called for
displaced persons to be permitted to return to Abkhazia and to reclaim their property.
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
19 Pavel Felgenhauer, Eurasia Daily Monitor, June 12, 2008.
20 CEDR, April 29, 2008, Doc. No. CEP-950318. By late 2007, Russia had bolstered its
“peacekeeping” forces by deploying some pro-Russia Chechen troops from the Zapad
battalion.
21 CEDR, April 29, 2008, Doc. No. CEP-950329.
22 CEDR, April 28, 2008, Doc. No. CEP-950444.

CRS-12
the mid-1990s, the economies remain fragile. Investment in oil and gas resources has
fueled economic growth in Azerbaijan in recent years at the expense of other sectors
of the economy. Widespread poverty and regional conflict have contributed to high
emigration from all three states, and remittances from these emigres have provided
major support for the remaining populations.23
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. 24 Turkey closed
its land borders with Armenia in 1993. These obstructions have had a negative
impact on the Armenian economy, since it is heavily dependent on energy and raw
materials imports. Turkey's closure of land borders in effect barred direct U.S.
shipments of aid through its territory to Armenia. Foreign Operations Appropriations
for FY1996 (P.L. 104-107) and Omnibus Consolidated Appropriations for FY1997
(P.L. 104-208)25 have mandated U.S. aid cutoffs (with a presidential waiver) to any
country which restricts the transport or delivery of U.S. humanitarian aid to a third
country. These provisions are designed to convince a nation such as Turkey to allow
the transit of U.S. aid to Armenia. According to the U.S. Embassy in Baku,
Azerbaijan’s Nakhichevan exclave “is blockaded by neighboring Armenia.” Iran has
at times obstructed bypass routes to Nakhichevan. The CIS has imposed an
economic embargo on Abkhazia since 1996 (Russia announced in March 2008 that
it was lifting its part of the embargo).26 Since 2006, Russia has severely restricted
agricultural trade and land, air, and sea links with Georgia. Russia has at times cut
off gas supplies to Georgia. Georgia severely restricts traffic from South Ossetia.
Russia is building a 110-mile gas pipeline to South Ossetia to end the region’s
dependence on gas transiting from other Georgian territory. Russia hinders
Azerbaijan’s use of the Volga-Don Canal to reach world shipping channels.
23 A. V. Korobkov, “Migration Trends in Central Eurasia,” Communist and Post-Communist
Studies
, No. 2, 2007, pp. 169-89.
24 Armenia long opposed the construction or revamping of a section of railway from Kars,
Turkey, to Tbilisi (and thence to Azerbaijan) that would bypass Armenia, arguing that an
existing section of railway from Kars that transits Armenia into Georgia could be returned
to service “in a week.” Azerbaijan and Turkey oppose a transit route through Armenia,
despite Armenia’s offers not to use the railway for its own goods or to impose transit tariffs.
The Export-Import Bank Re-authorization Act of 2006 (P.L. 109-438) prohibits the Bank
from guaranteeing, insuring, or extending credit in support of any railway construction that
does not traverse or connect with Armenia and does traverse or connect Baku, Tbilisi, and
Kars. Work on the railway began in late 2007. In March 2008, Armenian President-elect
Serzh Sargisyan reportedly stated that Armenia might be able to use the railway, and argued
that the railway is designed more as a means of bypassing “much larger countries”
(presumably Russia) than Armenia. CEDR, March 12, 2008, Doc. No. CEP-950482.
25 P.L. 104-208, Sec. 559, amends the Foreign Assistance Authorization Act of 1961.
26 Georgia objected to Russia’s decision to lift its embargo on trade with Abkhazia, arguing
that the ability by Russia to openly establish economic ties with the region constitutes the
further consolidation of de facto control over the region. Other observers suggest that
economic development in the region may ameliorate Georgia’s ties to Abkhazia. CEDR,
March 11, 2008, Doc. No. CEP-950056; March 12, 2008, Doc. No. CEP-950183.

CRS-13
Democratization Problems and Progress
The World Bank, in a report assessing the quality of democratic governance in
212 countries during 2006, ranked Armenia as perhaps among the better-performing
one-half of the countries in terms of government effectiveness and regulatory
quality.27 On four other indicators — accountability,28 stability, rule of law, and anti-
corruption — Armenia ranked slightly below world norms but had not regressed in
recent years, except perhaps on accountability. Georgia ranked slightly below
Armenia on all indicators except accountability and anti-corruption, and seems to
have made recent progress on all indicators but stability, according to the World
Bank. Azerbaijan was deemed to rank below the other two regional states on all
indicators, but seems to have made some progress in regulatory quality. Trends since
the World Bank’s assessments are discussed below.
Armenia. In November 2005, constitutional changes were approved by 93.2%
of 1.5 million voters, with a 65.4% turnout. A small delegation of monitors from the
Parliamentary Assembly of the Council of Europe (PACE) reported observing ballot-
box stuffing and few voters. Opposition parties boycotted the vote.29 Before the
vote, the Venice Commission of the Council of Europe (COE) had suggested that
the changes would provide a “good basis for ensuring ... respect for human rights,
democracy and the rule of law, and would pave the way to further European
integration,” if implemented. In January 2007, PACE praised progress in passing
legislation implementing the constitutional reforms and urged Armenia to hold free
elections.
A legislative election was held on May 12, 2007, and five parties cleared a 5%
vote hurdle to win 90 seats that were allocated through party list voting. One other
party won 1 of the 41 seats subject to constituency voting. The party that had won
the largest number of seats in the 2003 election — the Republican Party of Armenia
— won a near majority (64 of 131 seats) in 2007. Two opposition parties won 16
seats. According to the final report of observers from the OSCE, COE, and the EU,
the legislative elections “demonstrated improvement and were conducted largely in
accordance with OSCE commitments....” However, the observers raised some
concerns over pro-government party domination of electoral commissions, the low
number of candidates in constituency races, and inaccurate campaign finance
disclosures. They reported some counting irregularities at the precinct level, and
assessed counting “as bad or very bad” at one-third of territorial electoral
27 Government effectiveness refers to “the quality of public services, [and] the quality of the
civil service.” Regulatory quality refers to policies that promote a market economy. The
World Bank. Governance Matters 2007: Worldwide Governance Indicators, 1996-2006,
July 10, 2007.
28 Accountability refers to “the extent to which a country’s citizens are able to participate
in selecting their government, as well as freedom of expression, freedom of association, and
a free media.” Governance Matters 2007, July 10, 2007.
29 PACE. Constitutional Referendum in Armenia: General Compliance Marred by Incidents
of Serious Abuse
, November 28, 2005.

CRS-14
commissions. The report raised concerns that these vote-counting problems harmed
public confidence in the results.30
The two parties that won the most votes in the May 2007 election — the
Republican Party of Armenia and the Prosperous Armenia Party — announced that
they would form a coalition to cooperate on legislative tasks and the formation of the
government. They also agreed to jointly back one candidate for the upcoming 2008
presidential election. Incumbent President Kocharyan was at the end of his
constitutionally limited second term in office. The two parties signed a side
agreement with another party that won many votes — the Armenian Revolutionary
Federation — on its participation in the coalition, although it reserved the right to
run its own candidate in the presidential race. President Robert Kocharyan appointed
defense minister Serzh Sargisyan as prime minister on June 7, 2007.
Armenia's presidential election was held on February 19, 2008. Prime Minister
Sargisyan was nominated by the Republican Party and endorsed by outgoing
President Robert Kocharyan. Other candidates included Levon Ter-Petrossyan (self-
nominated); Vahan Hovhannisyan (nominated by the Armenian Revolutionary
Federation); Arthur Baghdasaryan (Rule of Law Party); Artashes Geghamyan
(National Unity Party); Tigran Karapetyan (People’s Party); Aram Harutiunyan
(National Accord Party); Vazgen Manukyan (National Democratic Union); and
Arman Melikyan (self-nominated). According to final results issued by the Central
Electoral Commission on February 24, Sargisyan was the winner with 52.82% of
1.67 million votes cast, followed by Ter-Petrossyan with 21.5% and Baghdasaryan
with 16.7%.
Election observers from the Organization for Security and Cooperation in
Europe (OSCE), the Council of Europe (COE), and the European Parliament (EP),
issued a final report (with a more negative assessment than given in a preliminary
report) that the election “mostly met OSCE commitments ... in the pre-election
period and during voting hours,” but that “serious challenges to some commitments
did emerge, especially after election day. This displayed an insufficient regard for
standards essential to democratic elections and devalued the overall election process.
In particular, the vote count demonstrated deficiencies of accountability and
transparency....”31
According to the report, the election offered voters a genuine choice among the
nine candidates. However, problems included the absence of a clear separation
between government and party functions. A large majority of territorial and precinct
electoral commission members were linked to the Republican and Prosperous
Armenia parties or the presidential administration. Media gave Sargisyan a great
30 OSCE. ODIHR. Parliamentary Elections, Republic of Armenia, 12 May 2007: Final
Report
, September 10, 2007. PACE. Ad Hoc Committee of the Bureau of the Assembly.
Report: Observation of the Parliamentary Elections in Armenia, Doc. 11312, June 20, 2007.
See also CRS Report RS22675, Armenia’s Legislative Election, by Jim Nichol.
31 OSCE. International Election Observation Mission. Presidential Election, Republic of
Armenia, 19 February 2008: Final Report of the OSCE/ODIHR Election Observation
Mission
, May 30, 2008.

CRS-15
deal of positive coverage and Ter-Petrossyan a large volume of negative coverage.
The Central Electoral Commission “routinely dismissed” most campaign complaints
in closed sessions, raising concerns about the effectiveness of the complaint process.
The lack of public confidence in the electoral process was compounded by
appearances of irregularities in vote counting, which was assessed by the observers
as bad or very bad in some 16% of polling stations visited. Other discrepancies in
vote counting were revealed during recounts in some precincts. The final report also
raised concerns about “implausibly high” voter turnout claims at several precincts.
Demonstrations by oppositionists claiming that the election was not free and fair
were forcibly suppressed by military and police forces in the capital of Yerevan on
March 1. Street battles and looting were reported later in the day. The government
reported that ten people were killed, that dozens were injured, that many of the
demonstrators were armed, and that they had received orders to overthrow the
government. President Robert Kocharyan declared emergency rule in Yerevan late
on March 1, which provided for government control over media and a ban on public
meetings and party activities. Authorities arrested or detained dozens of opposition
politicians and others. On March 12, Deputy Assistant Secretary of State Matthew
Bryza called for the government to “to cease arrests of political leaders” and to
“restore media freedom and then to lift the state of emergency as soon as possible,
and then finally launch a nationwide roundtable ... including all major political
parties to chart the course forward to strengthen Armenia’s democracy.”32
The state of emergency was lifted on March 21, but a new law limits political
rallies. Also on March 21, the Republican Party, Rule of Law Party, Prosperous
Armenia Party, and the Armenian Revolutionary Federation signed an agreement to
form a political coalition. In his April 9, 2008, inaugural address, Sargisyan stated
that “we will build a strong, proud, and democratic state of Armenia where all are
equal under the law.” He named Central Bank chairman Tigran Sargisyan as the
prime minister, and announced that a new coalition government would be composed
of the four parties.33
The Parliamentary Assembly of the Council of Europe (PACE) passed a
resolution on April 17, 2008, that called for a “credible international investigation”
of events surrounding the Armenian government crackdown on demonstrators on
March 1, 2008. The resolution called for the release of demonstrators and others who
it claimed were arrested “on seemingly artificial and politically motivated charges,”
and urged wide political dialogue between pro-government and opposition parties.
The resolution also called for the repeal of the new law restricting freedom of
assembly and suggested that PACE consider at its next session in late June 2008
suspending the voting rights of the Armenian delegation, “if no considerable progress
has been made on these requirements by then.”
President Sargisyan set up a working group to implement the PACE
recommendations. He suggested setting up a legislative commission to examine the
32 “Armenia: Key U.S. Diplomat Calls For Roundtable In Wake Of Clashes,” Radio Free
Europe
, March 12, 2008.
33 ITAR-TASS, April 9, 2008.

CRS-16
events of March 1, 2008. He also proposed the creation of a Public Chamber of pro-
government and opposition politicians and civil society representatives to advise the
government on political and social issues. Ter-Petrossyan reportedly refused to
participate in the Public Chamber until about 40 of his supporters were released from
detention.
Azerbaijan. Changes to the election law, some in line with proposals from the
Venice Commission, were approved by the legislature in June 2005, including those
making it easier for people to become candidates for a November 6, 2005, legislative
election. However, the deputies rejected some of the most significant proposals,
including a more equitable representation of political interests on electoral
commissions. In May and October 2005, Aliyev ordered officials to abide by
election law, and authorities permitted some opposition rallies. The October decree
also led legislators to approve marking hands and permit outside-funded NGOs to
monitor the election, as advocated by PACE. After the election, the U.S. State
Department issued a statement praising democratization progress, but urging the
government to address some electoral irregularities.34 Repeat elections were
scheduled for May 2006 in ten constituencies where alleged irregularities took place.
According to OSCE election monitors, the repeat race appeared to be an
improvement over the November election, but irregularities needed to be addressed,
including interference by local officials in campaigns. The ruling Yeni Azerbaijan
Party won 62 seats, the independents 44, and Musavat 5. The remaining 14 seats
were held by several small parties.35
During the run-up to the 2005 legislative election, authorities arrested several
prominent officials on charges of coup-plotting. Some critics of the arrests claimed
that the defendants included former cohorts of Heydar Aliyev or others who simply
opposed President Ilkham Aliyev’s policies. Although arrested on suspicion of coup-
plotting, several officials instead were convicted on lesser charges. One sensational
trial involved Farhad Aliyev, former minister of economic development (no relation
to Ilkham Aliyev), who was among those arrested in 2005. He was tried along with
his brother, Rafiq (a businessman), and 17 others and was convicted on charges of
embezzlement in October 2007 to ten years in prison. He claimed that he was
prosecuted because of his advocacy of closer Azerbaijani ties with the United States
and the EU, economic reforms, and anti-corruption efforts. Senator John McCain
and Representatives Gary Ackerman and Alcee Hastings were among those in
Congress concerned about due process in the case (see below, Legislation).36
34 U.S. Department of State. Press Statement: Azerbaijan Parliamentary Elections,
November 7, 2005. See also CRS Report RS22340, Azerbaijan’s 2005 Legislative Election,
by Jim Nichol.
35 OSCE/ODIHR Mission. Press Release: Partial Repeat Parliamentary Elections in
Azerbaijan Underscore Continuing Need for Electoral Reform
, May 15, 2006.
36 Eurasia Insight, October 30, 2006; Congressional Record, March 29, 2007, pp. E708-709.
See also PACE. Committee on the Honoring of Obligations and Commitments by Member
States of the Council of Europe, Honoring of Obligations and Commitments by Azerbaijan,
Explanatory Memorandum, Doc. 11226, March 30, 2007.

CRS-17
Meeting with visiting President Ilkham Aliyev in late April 2006, President
Bush hailed the “alliance” between the two countries and Azerbaijan’s
“understand[ing] that democracy is the wave of the future.” After the U.S. visit, the
Azerbaijani foreign minister stated that it marked Azerbaijan’s emerging role as the
major power in the South Caucasus region. Some human rights and other observers
criticized the summit as providing undue U.S. support to a nondemocratic leader.37
Answering this criticism, Deputy Assistant Secretary Bryza stated in June 2006 that
“just because Azerbaijan hasn’t gone as far as we would like on democracy doesn’t
mean we’re going to ignore our energy interests or our military interests. That’s not
to say that our energy interests or our military interests or our counter-terrorism
interests are driving us to ignore democracy.... We have to pursue a balance.”38
The NGO Committee to Protect Journalists in December 2007 ranked
Azerbaijan among the top five countries in the world in terms of the number of
imprisoned journalists.39 President Aliyev amnestied five journalists in December
2007, but several others remained imprisoned. Among recent cases, Qanimat
Zahidov, the editor-in-chief of the opposition newspaper Azadliq, was sentenced to
four years in prison on March 7, 2008, of “hooliganism,” for defending himself from
an attacker, who received a lesser sentence.
A presidential election is scheduled to be held on October 15, 2008. In early
June 2008, the legislature approved changes to the electoral code, including a
reduction of the presidential campaign season from 16 weeks to about 10 weeks. The
opposition Azadliq (Freedom) party bloc denounced the reduction as an attempt to
limit the exposure of opposition candidates, and announced that it would boycott the
election.40 Other opposition parties have rejected Azadliq’s call for a boycott.
Candidate registration has not begun. Many observers suggest that the opposition
parties will not be able to agree on a single candidate, so that several leaders of these
parties are likely to run. Incumbent President Ilkham Aliyev is widely expected to
win re-election despite the recent sharp rise in inflation and reported food shortages.
Some of the amendments to the electoral code approved by the legislature were
recommended by the Venice Commission, an advisory body of the Council of
Europe. However, other recommendations of the Venice Commission were not
considered, including those on eliminating the dominance of government
representatives on election commissions, clarifying reasons for refusing to register
37 The White House. Office of the Press Secretary. President Bush Welcomes President
Aliyev of Azerbaijan to the White House
, April 28, 2006; CEDR, May 2, 2006, Doc. No.
CEP-950092; Council on Foreign Relations. A Conversation with Ilkham Aliyev, April 26,
2006.
38 RFE/RL, June 23, 2006.
39 Committee to Protect Journalists. Special Report 2007: One in Six Jailed Journalists
[Worldwide] Held Without Charge
, December 5, 2007.
40 Open Source Center. Central Eurasia: Daily Report (hereafter CEDR), April 24, 2008,
Doc. No. CEP-950216.

CRS-18
candidates, and reducing the number of signatures necessary for candidate
registration.41
Georgia. Georgia experienced increased political instability in the early 2000s
as President Shevardnadze appeared less committed to economic and democratic
reforms. 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,
mostly pro-Shevardnadze candidates were declared winners. Demonstrators
launched a peaceful “rose revolution” that led to Shevardnadze’s resignation on
November 23. Russia and the United States appeared to cooperate during the crisis
to urge Georgians to abjure violence.
UD and NM agreed to co-sponsor NM head Saakashvili for a January 4, 2004,
presidential election. He received 96% of 2.2 million popular votes from a field of
five candidates. OSCE observers judged the vote as bringing Georgia closer to
meeting democratic electoral standards. Legislative elections were held in March
2004 involving 150 party list seats (winners of district seats in November retained
them). NM and the “Burjanadze Democrats” ran on a joint list and captured 67.2%
of 1.53 million votes, giving the bloc a majority of seats, seemingly ensuring firm
legislative support for Saakashvili’s policies. The OSCE judged the election as the
most democratic since Georgia’s independence.
President Bush visited Georgia on May 9-10, 2005, and praised its “rose
revolution” for “inspiring democratic reformers” and freedom “from the Black Sea
to the Caspian and to the Persian Gulf and beyond.” President Saakashvili hailed the
Bush visit as marking “final confirmation that Georgia is an independent country
whose borders and territory are inviolable” and stressed 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.42
Political Turmoil in late 2007. Increased political instability in Georgia in
late 2007 raised questions in the United States, NATO, and elsewhere about whether
the country could sustain its democratization progress. Oppositionist activities
appeared to strengthen after the detention on corruption charges of former Defense
Minister Irakli Okruashvili in late September 2007, in the wake of his sensational
allegations that Saakashvili had once ordered him to kill prominent businessman
Badri Patarkatsishvili. Several opposition parties united in a “National Council” that
launched demonstrations in Tbilisi on November 2 to demand that legislative
elections be held in spring 2008 (instead of in late 2008 as set by a constitutional
change approved by the NM-dominated legislature), and that Saakashvili resign. On
41 European Commission for Democracy Through Law (Venice Commission). Joint Interim
Opinion on the Draft Amendments to the Electoral Code of the Republic of Azerbaijan.
74th
Plenary Session, March 14-15, 2008, Opinion no. 390/2006, CDL-AD(2008)003, March
18, 2008.
42 The White House. Office of the Press Secretary. President and President Saakashvili
Discuss NATO, Democracy
, May 10, 2005. See also Saakashvili’s remarks in CEDR, May
4, 2005, Doc. No. CEP-26020.

CRS-19
November 7, police and security forces forcibly dispersed demonstrators, reportedly
resulting in several dozen injuries. Security forces also shut down the independent
Imedi (“Hope”) television station, which had aired opposition grievances.
Saakashvili declared a state of emergency for 15 days, giving him enhanced powers.
He claimed that the demonstrations had been part of a coup attempt orchestrated by
Russia, and ordered three Russian diplomats to leave the country.
U.S. and other international criticism of the crackdown may have played an
important role in Saakashvili’s decision to step down as president on November 25,
2007, so that early presidential elections could be held on January 5, 2008, “because
I, as this country’s leader, need an unequivocal mandate to cope with all foreign
threats and all kinds of pressure on Georgia.”43 At the same time, a plebiscite was
to be held on whether to have a spring or fall legislative election and on whether
Georgia should join NATO. Imedi renewed its broadcasts on December 12, and
became for a time the main television outlet for opposition candidates in the election.
Saakashvili ran against five other candidates. Georgia’s Central Electoral
Commission reported on January 13, 2008, that Saakashvili had won over 53% of the
vote, and he was inaugurated on January 20, 2008. In a preliminary assessment, the
OSCE stated that the election broadly met its standards, but that troubling
irregularities needed to be addressed. The plebiscite endorsed holding a spring 2008
legislative election and Georgia’s aim to join NATO (See also CRS Report RS22794,
Georgia’s January 2008 Presidential Election, by Jim Nichol).
A legislative election was held on May 21, 2008. Twelve parties and blocs were
registered to compete for 75 seats to be allocated by party lists and 75 seats by single-
member constituencies. The dominant NM pledged to reduce poverty and argued
that its stewardship had benefitted the country. The main opposition bloc, the United
Opposition Movement, called for President Saakashvili to resign from office and
claimed that NM was subverting the electoral process to retain power. On May 23,
the Central Electoral Commission announced preliminary results that NM won the
largest share of the party list vote and also 71 of 75 constituency races, giving it a
total of 120 out of 150 seats in the legislature. The United Opposition won a total of
16 seats, the opposition Christian Democrats six seats, the opposition Labor Party six
seats, and the opposition Republican Party two seats. Some observers argued that the
opposition had harmed its chances by failing to unite in one bloc and that the NM
also benefitted from several popular businessmen who ran on its ticket in
constituency races.
International observers from the OSCE and other European organizations
concluded that the Georgian government “made efforts to conduct these elections in
line with OSCE and Council of Europe commitments,” but “a number of problems
... made this implementation uneven and incomplete.” Among the problems were
wide variations in the populations of single-mandate electoral districts, which the
observers stated “undermines the fundamental principle of the equality of the vote,”
a ban on self-nominated candidates, the use of government resources for campaign
purposes, the lack of balance in media coverage, a “contradictory and ambiguous”
electoral complaint and appeal process, and troubling irregularities in vote-
43 CEDR, November 8, 2007, Doc. No. CEP-950428.

CRS-20
counting.44 At a large rally on May 26, a leader of the United Opposition, Levan
Gachechiladze, reportedly declared that the election had been falsified and should be
annulled. Most United Opposition deputies have refused to attend legislative
sessions.
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, several developments since 2003
may have altered this assessment, including the “rose revolution” in Georgia,
NATO’s increased ties with the regional states, the completion of the Baku-Tbilisi-
Ceyhan oil pipeline (and an associated gas pipeline), Russia’s ongoing concerns
about security in its North Caucasus regions (including Chechnya), and Russia’s
agreement to close its remaining military bases in Georgia.
Recently, Russia has appeared to place its highest priority on exercising
influence in the region in the economic sphere (particularly energy) and slightly less
priority on influence in the military-strategic and domestic political spheres. 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. It has quashed separatism in its North Caucasus areas while
seemingly backing it in the South Caucasus. It is the main source of security and
economic support for separatist Abkhazia and South Ossetia.45
The South Caucasian states have responded in various ways to Russian
influence. Armenia has close security and economic ties with Russia, given its
unresolved NK conflict and grievances against Turkey. Georgia has attempted to end
Russia’s military presence and support to separatists. Azerbaijan has been concerned
about Russia’s ties with Armenia, has worked to ensure that its energy resources are
not controlled by Russia, and has limited Russia’s military presence. Until late 2006,
it appeared that Azerbaijan valued having some cooperative relations with Russia,
and criticized Georgia’s inability to maintain such ties with Russia. However,
Azerbaijani-Russian relations seemed to worsen in late 2006 when Russia’s demands
for higher gas prices and moves against migrant workers contributed to greater
solidarity between Azerbaijan and Georgia.
NATO’s September 21, 2006, approval of an “Intensified Dialogue” with
Georgia on reforms needed that might lead to membership appeared to contribute to
44 OSCE. International Election Observation Mission. Georgia: Parliamentary Elections,
21 May 2008, Statement of Preliminary Findings and Conclusions
, May 22, 2008.
45 “Separatist Abkhazia a Paradise for Russian Tourists,” Agence France-Presse, July 19,
2006; “Breakaway Region’s Fate in Limbo,” Agence France-Presse, July 19, 2006.

CRS-21
heightened concerns in Russia about NATO enlargement and about an increased U.S.
presence in the South Caucasus. At the end of February 2007, Russian Foreign
Minister Sergey Lavrov declared that Russia “will not permit” such NATO expansion
to its southern border.46
Georgia’s arrest of four Russian servicemen in late September 2006 on charges
of espionage and plotting to overthrow the government heightened tensions between
Georgia and Russia. Although Georgia handed over the servicemen on October 2,
Russia retaliated in a form viewed as troubling by many international observers,
including cutting off financial flows to Georgia, severing direct transport and postal
links (Russia had banned imports of Georgian wine, mineral water, and other
agricultural products in spring 2006), ending the issuing of visas, raiding ethnic
Georgian-owned businesses, expelling hundreds of Georgians, and compiling lists
of ethnic Georgians in the public schools. Russia sent its ambassador back to Tbilisi
in January 2007, but continued to restrict most trade.
Russia’s move to ease some visa restrictions in late July 2007 raised hopes of
a thaw in Georgia-Russia relations, but such hopes were quickly dashed in early
August 2007. Georgia alleged that some aircraft were tracked on its radars as they
entered the country’s airspace from Russia, and that one launched a missile which
failed to detonate. A group of experts from Latvia, Lithuania, Sweden, and the
United States concluded on August 14 that one aircraft entering from Russia dropped
a Russian-designed KH-58 (NATO designation AS-11 Kilter) anti-radar air to
surface missile. Another group of experts from the United Kingdom, Estonia, and
Poland similarly concluded on August 20 that one or possibly more aircraft had
flown from Russia into Georgian airspace, and that one had launched a KH-58U. A
group of experts representing the CIS, on the other hand, asserted on August 22 that
the incident was a Georgian fabrication. An OSCE emissary on September 6
declined to support either Georgia’s or Russia’s version of events, but he did
advocate a greater OSCE presence (an earlier OSCE presence along the Georgia-
Russia border, however, had been ended at Russia’s insistence in 2005).47
Caspian Energy Resources. Russia has tried to play a major role in future
oil production and transportation in the Caspian Sea region. 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 early 2004,
46 Kakha Jibladze, “Georgian-NATO Relations Receive Boost from Brussels,” Central Asia-
Caucasus Analyst
, March 7, 2007.
47 Report from the International Group of Experts Investigating the Possible Violation of
Georgian Airspace and the Recovered Missile Near Tsitelubani, Georgia, 6 August 2007
,
August 14, 2007; Second Independent Inter-Governmental Expert Group (IIEG-2). Report
Investigating Possible Violations of Georgian Airspace and the Recovered Missile near
Tsitelubani, Georgia, 6 August 2007
, August 20, 2007; States News Service, Press
Conference by Russian Federation, August 21, 2007; CEDR, August 8, 2007, Doc. No. CEP-
950011.

CRS-22
however, a Russian official stated that Putin wanted to ensure that the greatest
volume of Caspian energy flowed through Russia.48
In early 2006, Russia charged all three regional states much more for gas. In
May 2006, Armenia agreed to relinquish various energy assets to Russian firms as
partial payment for this price increase. Some critics have alleged that Russia now has
virtual control over Armenia’s energy supplies. In late 2006, Russia again requested
price hikes for 2007. In the case of Georgia, Russia’s state-controlled Gazprom gas
firm announced in late 2006 that it would cut off gas supplies to Georgia by the end
of the year unless Georgia agreed to a 100% price hike or sold its main gas pipeline
to Gazprom. However, Georgia negotiated an agreement to receive some Azerbaijani
gas via the new South Caucasus Pipeline (SCP, see below) and another small existing
pipeline. It also agreed to continue to purchase some higher-priced gas from
Gazprom. Russia’s requests for higher prices and reductions in the amounts of gas
and electricity supplied to Azerbaijan led President Aliyev to announce that the
country would no longer purchase Russian gas (however, agreement was reached to
provide the same amount of Russian electricity as in 2006, but at a higher price). In
the Winter of 2007-2008, Georgia again had to purchase some gas from Gazprom at
higher prices, to supplement that supplied by Azerbaijan.
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).49 Russia also secured permission for two military bases in Armenia and
four in Georgia. Russian border troops guard Armenia’s borders with Turkey and
Iran. The total number of Russian troops in Armenia has been estimated at about
3,500. Armenia has argued that its Russian bases provide for regional stability by
protecting it from attack. More than 100,000 Russian troops also are stationed
nearby in the North Caucasus.50 In 1993, Azerbaijan was the first Eurasian state to
get Russian troops to withdraw, except at the Qabala (Gabala) radar site in northern
48 The White House. Office of the Press Secretary. Joint Statement by President George
W. Bush and President Vladimir V. Putin on the New U.S.-Russian Energy Dialogue
, May
24, 2005. For the statement by Viktor Kalyuzhny, Putin’s Special Envoy to the Talks on the
Legal Status of the Caspian Sea, see CEDR, April 6, 2004, Doc. No. CEP-17.
49 According to Armenia’s former Foreign Minister Oskanyan, Article 4 of the CST (“in
case an act of aggression is committed against any of the member-states, all other
member-states will render it necessary assistance, including military, as well as provide
support with the means at their disposal through an exercise of the right to collective
defense”) pertains to aggression from outside the CIS, so does not pertain to the
Armenia-Azerbaijan conflict (since Azerbaijan is a member of the CIS). Interview, October
26, 2006.
50 The Military Balance 2005-2006. London: International Institute of Strategic Studies,
2005.

CRS-23
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 there.)
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 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 its northern Pankisi Gorge 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 those hiding in the Gorge and others that Russia
alleged were transiting Georgia to fight in Chechnya. In April 2006, Azerbaijan
convicted 16 people on charges that they had received terrorist training from Al
Qaeda operatives in the Pankisi Gorge. Russia’s security service reported at the end
of November 2006 that it had killed Al Qaeda member Faris Yusef Amirat (aliases
included Abu Haf and Amzhet). It alleged that he had hidden in the Pankisi Gorge
during the winter of 2005-2006, had operated in Chechnya in the summer of 2006,
and was returning to the Gorge when he was killed in Russia’s Dagestan region.51
At the June 2007 summit of the Group of Eight (G-8) industrialized countries,
President Putin proposed that President Bush consider using Russia’s Soviet-era
missile radar in Qabala as an early warning system. Putin claimed that the radar
would be able to detect possible tests by Iran of a missile that could target Europe,
and would render unnecessary or premature U.S. plans to build a radar site in Czech
Republic and an interceptor missile site in Poland.52 On June 10, Azerbaijani
President Aliyev reportedly stated that the possible joint U.S.-Russia use of the radar
might enhance Azerbaijan’s strategic ties with both countries. A U.S., Russian, and
Azerbaijani delegation toured the radar site in September 2007.
Russian “Peacekeepers”. The Georgian legislature in October 2005 called
on the government to certify by July 2006 that the activities undertaken by Russian
“peacekeepers” in Georgia’s breakaway regions of Abkhazia and South Ossetian
were contributing to peace settlements. If the government was unable to make these
certifications as stipulated, then it must request that the “peacekeepers” leave,
according to the resolution. A Georgian National Military Strategy document
released in November 2005 was blunt, terming Russian “peacekeepers” and bases
security threats.
In February 2006 Georgia’s legislature approved a resolution calling for the
president to revoke the 1992 agreement providing for Russian “peacekeeping” in
South Ossetia. The resolution accused Russia of aiming to annex the region and
urged greater international involvement in peacekeeping and a peace settlement. The
U.S. State Department has urged Georgia not to abandon the existing peace process.
51 CEDR, November 27, 2006, Doc. No. CEP-358003. For background, see CRS Report
RS21319, Georgia’s Pankisi Gorge, by Jim Nichol.
52 CEDR, March 5, 2007, Doc. No. CEP-358007; May 17, 2007, Doc. No. CEP-4009; May
24, 2007, Doc. No. CEP-950157; June 7, 2007, Doc. No. CEP-950369.

CRS-24
Since the Georgian government did not certify that Russian “peacekeepers”
contributed to peace settlements in Abkhazia and South Ossetia, the Georgian
legislature in mid-July 2006 approved a resolution calling on the government to
replace the Russian “peacekeepers” with an international police contingent. No
deadline was specified. Russia’s Foreign Minister Sergey Lavrov denounced the
resolution as war-mongering and warned Georgia that Russian “peacekeepers” would
protect “our citizens” in South Ossetia and Abkhazia from attack by Georgia (Russia
has granted citizenship to the majority of Abkhazians and South Ossetians).
As part of conciliatory moves to improve Georgia-Russia ties, President
Saakashvili has stated that his government does not seek the elimination of the
Russian “peacekeepers,” but their possible inclusion in a larger internationally
mandated peacekeeping effort focused on refugee return.
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). NATO
signatories hesitated to ratify the amended Treaty until Russia satisfied these and
other conditions. 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.53 Georgia objects to this stance (see below).
The Georgian legislature in March 2005 passed a resolution calling for Russia
to agree by mid-May on closing the bases or face various restrictions on base
operations. This pressure, and perhaps the U.S. presidential visit (see above), spurred
Russia to agree with Georgia in late May on setting the end of 2008 as the deadline
for closing the bases. Putin explained that his military General Staff had assured him
that the bases were Cold War-era relics of no strategic importance to Russia.54 On
June 27, 2007, Russia formally handed over the Akhalkalaki base to Georgia’s
control. On November 21, 2007, the Russian Foreign Ministry proclaimed that the
Batumi base had been closed and that Russia had “fully” accomplished its obligations
to Georgia on the withdrawal of military facilities. Georgia continues to protest that
the Gudauta base retains some Russian forces and equipment and has not been
handed over to Georgia’s control.
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
53 A Russian military analyst reported in early 2007 that there also were nine aircraft and ten
helicopters at “airbase Gudauta.” CEDR, May 3, 2007, Doc. No. CEP-305001.
54 CEDR, May 24, 2005, Doc. No. CEP-378001. In June 2007, two Russian mountain
brigades consisting of about 4,500 troops began to deploy near Georgia’s borders, ostensibly
to enhance security after the base closures. RIA Novosti, June 26, 2007.

CRS-25
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 organization, along with Turkey, and the two states have
established consular relations. Obstacles to better Armenian-Turkish relations
include Turkey’s rejection that there was an Armenian genocide in 1915-1923 and
its support for Azerbaijan in the NK conflict. 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 is one of Georgia’s primary trade partners. New pipelines delivering
oil and gas westward from the Caspian Sea reflect cooperation between Azerbaijan,
Georgia, and Turkey.
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. 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. Some thawing in Azerbaijani-Iranian relations
occurred in 2005-2006 with the long-delayed opening of an Azerbaijani consulate in
Tabriz and various leadership summits.
In recent months, Iran has boosted its diplomacy in the region, perhaps to
counter growing international concern about its nuclear programs and to counter U.S.
influence. Iran’s efforts to improve relations with Azerbaijan have appeared to be
jeopardized, however, by its alleged suppression of rising dissent among “Southern
Azerbaijanis.” U.S. policy aims to contain Iran’s threats to U.S. interests.55
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. As part of its European Neighborhood Policy, the EU signed Action
Plans with the three regional states in November 2006 that it hoped would foster both
European and regional integration. 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
55 See CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth
Katzman.

CRS-26
linguistic and religious ties and concerns about some common neighbors (Iran and
Russia). The South Caucasian and Central Asian states are concerned about ongoing
terrorist threats and drug trafficking from Afghanistan. Central Asia’s increasing ties
with the South Caucasus 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 five Eurasian states that each have
received more than $1 billion in U.S. aid FY1992-FY2005 (the others are Russia,
Ukraine, and Kazakhstan, which have received sizeable Comprehensive Threat
Reduction funds). See Table 1. U.S. assistance to the region FY1992-FY2005
amounts to about 14% of all aid to Eurasia and 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. In Foreign Operations Appropriations for FY1998
(P.L. 105-118), Congress created a new South Caucasian funding category to
emphasize regional peace and development, and since then has upheld this funding
category in yearly appropriations. Congress also has called for humanitarian aid to
be provided to NK, which has amounted to $29 million from FY1998 through
FY2007. 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 global assistance program,
the Millennium Challenge Account (Section D of P.L. 108-199). A newly
established Millennium Challenge Corporation (MCC) signed a five-year, $295.3
million agreement (termed a “compact”) with Georgia in September 2005 to improve
a road from Javakheti to Samtskhe, repair a gas pipeline, create a small business
investment fund, set up agricultural grants, and improve municipal and rural water
supply, sanitation, irrigation, roads, and solid waste treatment. The MCC reported
in May 2008 that it had so far disbursed $48.8 million to Georgia.
In December 2005, the MCC approved plans to sign a five-year, $235.65 million
compact with Armenia — to bolster rural agriculture through road-building and
irrigation and marketing projects — but raised concerns about the November 2005
constitutional referendum. Following assurances by then-Foreign Minister Oskanyan
that Armenia would address democratization shortfalls, the MCC and Armenia
signed the compact, and it went into force in September 2006.56 The MCC reported
56 Millennium Challenge Corporation. Ambassador Danilovich’s letter to Armenian
President Robert Kocharyan
, December 16, 2005; Press Release: Millennium Challenge
Corporation Board Approves Armenia Compact but Expresses Concern Regarding
Irregularities in the November Referendum
, December 19, 2005; and Ambassador
Danilovich’s letter to Armenian President Robert Kocharyan
, January 18, 2006,
[http://www.mca.gov]. See also Armenian Foreign Ministry. Oskanyan Thanks MCC for
(continued...)

CRS-27
that as of May 2008 it had disbursed $18.8 million to Armenia. It reported that work
had just begun on road construction in the Gyumri region. After the political turmoil
in Armenia in March 2008, the MCC indicated that it might have to reconsider
assistance to Armenia. In testimony in April 2008, Deputy Assistant Secretary Bryza
stated that “we hope to see Armenia and President Sargisyan take dramatic steps that
restore the democratic momentum so that the Millennium Challenge program can
continue.”57
U.S. Security Assistance
The United States has provided some security assistance to the region, and
bolstered such aid after September 11, 2001. In testimony in March 2005, Gen.
James Jones, then-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.”58
EUCOM initiatives in the region have included the Sustainment and Stability
Operations Program (SSOP) in Georgia, the South Caucasus Clearinghouse, and the
Caspian Regional Maritime Security Cooperation program. The 16-month SSOP
was launched in early 2005 as a follow-on to the Georgia Train and Equip Program
(GTEP).59 SSOP was funded at $60.5 million in FY2005. SSOP provided training
for four battalions (2,000 troops), in part to support U.S.-led coalition operations. In
July 2006, the United States announced that the SSOP would be extended another
year and funded at $30 million.60 The Clearinghouse aims to facilitate cooperation
by sharing data on security assistance among both donor and recipient countries.
Gen. Bantz Craddock, Commander of EUCOM, testified in March 2008 that the
56 (...continued)
Millennium Compact, January 12, 2006 [http://www.armeniaforeignministry.com].
57 U. S. Commission on Security and Cooperation in Europe (Helsinki Commission).
Hearing, Armenia after the Election, Testimony by Deputy Assistant Secretary of State
Matthew Bryza, April 17, 2008.
58 U.S. Senate. Committee on Armed Services. Testimony by Gen. James Jones, March 1,
2005. See also CRS Report RL30679, Armenia, Azerbaijan, and Georgia: Security Issues
and Implications for U.S. Interests
, by Jim Nichol.
59 U.S. officials explained that the $64 million GTEP carried out in 2002-2004 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.
60 “U.S. Allocates $30 mln for SSOP Army Training Program,” Civil Georgia, July 17,
2006.

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Caspian Regional Maritime Security Cooperation program aims to “coordinate and
complement U.S. government security cooperation activities in Azerbaijan and
Kazakhstan. U.S. Naval Forces Europe continues to promote Maritime Safety and
Security and Maritime Domain Awareness in the Caspian Sea through routine
engagement with Azerbaijan. These efforts are targeted to create an organic ability
within Azerbaijan to ‘observe, evaluate, and respond’ to events in their maritime
domain.”61 (This program appears to combine elements of the former Caspian Guard
and Hydrocarbons programs.) The United States acknowledged in late 2005 that it
had supplied two maritime surveillance radars to help detect and direct interdiction
of illicit weapons of mass destruction and other trafficking in the Caspian Sea.62 In
November 2004, Gen. Charles Wald, then-deputy head of EUCOM, suggested that
the Administration was exploring the establishment of “cooperative security
locations” (CSLs) — sites without a full-time U.S. military presence that would be
used for refueling and short-duration deployments — in Azerbaijan or Georgia.63
All three regional states joined NATO’s Partnership for Peace (PFP) in 1994.
The June 2004 NATO summit pledged enhanced attention to the South Caucasian
and Central Asian PFP members. A Special Representative of the NATO Secretary
General was appointed to encourage democratic civil-military relations, transparency
in defense planning and budgeting, and enhanced force inter-operability with NATO.
In 2004-2005, all three states agreed with NATO to participate in Individual
Partnership Action Plans (IPAPs) for military and civil-military reforms. On
September 21, 2006, NATO approved Georgia’s application for “Intensified
Dialogue” with the alliance, ostensibly because of Georgia’s military reform
progress, although NATO also emphasized that much more reform work needed to
be done before Georgia might be considered for NATO membership.
Although the United States reportedly urged that Georgia be considered for a
Membership Action Plan (MAP; preparatory to membership), NATO’s Riga Summit
in November 2006 reaffirmed support for an intensified dialogue to assist Georgia
in implementing reforms.64 A MAP for Georgia was a matter of contention at the
April 2008 NATO Summit. Although Georgia was not offered a MAP, the Alliance
pledged that Georgia would eventually become a member of NATO, and stated that
61 U.S. Senate. Committee on Armed Services. Statement of General Bantz J. Craddock,
March 13, 2008.
62 “Two Radar Stations Become Operational in Azerbaijan under the U.S.-Funded Caspian
Guard Initiative,” International Export Control Observer, Center for Non-proliferation
Studies, Monterey Institute of International Studies, November 2005.
63 Vince Crawley, Army Times, November 22, 2004.
64 NATO. North Atlantic Council. Riga Summit Declaration, November 29, 2006.
President Bush stated that the United States supported Georgia’s NATO membership.
“Remarks By President Bush In Riga, Latvia,” PR Newswire, November 28, 2006. Sen.
Richard Lugar urged soon granting Georgia a MAP and suggested that NATO’s energy
security would be facilitated by eventually offering NATO membership to Azerbaijan and
Kazakhstan. “Senator Lugar Delivers Remarks at the Riga Summit, Latvia,” Congressional
Quarterly Transcripts
, November 27, 2006.

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the issue of a MAP for Georgia would be revisited in December 2008.65 The NATO
Freedom Consolidation Act of 2007, signed into law in April 2007 (P.L. 110-17),
urged NATO to extend a MAP for Georgia and designated Georgia as eligible to
receive security assistance under the program established by the NATO Participation
Act of 1994 (P.L. 103-447) (see also below, Legislation). Troops from Armenia,
Azerbaijan, and Georgia have served as peacekeepers in NATO-led operations in
Kosovo, and Azerbaijan supports NATO-led operations in Afghanistan. In mid-April
2008, Georgia withdrew its 150 peacekeepers from Kosovo as it prepared to focus
on troop deployments to Afghanistan.
Until waived, Section 907 had prohibited much U.S. security aid to Azerbaijan,
including Foreign Military Financing (FMF), and International Military Education
& Training (IMET). Under 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. Since the waiver
provision to Section 907 was enacted, some Members have maintained that the
Armenian-Azerbaijani military balance is preserved by providing equal amounts
(parity) in IMET and FMF assistance to each country. In FY2005, the conference
report (H.Rept. 108-792) on H.R. 4818 (P.L. 108-447; Consolidated Appropriations)
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.
Apparently in anticipation of similar congressional calls, the Administration’s
FY2006 foreign aid budget requested equal amounts of FMF as well as IMET for
each country. However, the FY2007 and FY2008 budget requests called for more
such aid for Azerbaijan than for Armenia. Under enacted appropriations provisions,
equal amounts of such aid were provided in FY2007. Consolidated appropriations
for FY2008 (P.L. 110-161) specified equal amounts of FMF ($3 million) for each
country. The FY2009 budget request calls for $3 million for FMF for each country
but $300,000 for IMET for Armenia and $900,000 for IMET for Azerbaijan.
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
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
65 See also CRS Report RL34415, Enlargement Issues at NATO’s Bucharest Summit, by
Paul Gallis, Paul Belkin, Carl Ek, Julie Kim, Jim Nichol, and Steven Woehrel. In testimony
on April 23, Deputy Assistant Secretary of Defense Daniel Fata praised the status of military
reforms in Georgia, but suggested that the country needs to move further on democratization
before it is offered NATO membership. House Foreign Affairs Committee. Subcommittee
on Europe, Hearing, The Bucharest Summit and the Way Forward for NATO, April 23,
2008.

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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 was terminated with respect to Armenia
in January 2005.
Energy Resources and U.S. Policy
The U.S. Energy Department reports estimates of 7-13 billion barrels of proven
oil reserves, and estimates of 30-48 trillion cubic feet of proven natural gas reserves
in Azerbaijan.66 U.S. policy goals regarding energy resources in Central Asia and the
South Caucasus are reflected in the Administration’s 2001 energy policy report.67
They include supporting the sovereignty of the states, their ties to the West, and 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. The report recommended that the President
direct U.S. agencies to support building the Baku-Tbilisi-Ceyhan (BTC) oil pipeline,
expedite use of the pipeline by oil firms operating in Kazakhstan, and support
constructing a gas pipeline to export Azerbaijani gas. Since September 11, 2001, the
Administration has emphasized U.S. vulnerability to possible energy supply
disruptions and has encouraged Caspian energy development. Critics argue that oil
and gas from Azerbaijan will amount to a tiny percent of world exports of each
resource, but the Administration argues that these exports will nonetheless boost
energy security somewhat for European customers currently relying on Russia.
The United States in 1995 encouraged the building of one small oil pipeline
(with a capacity of about 100,000 barrels per day) from Azerbaijan to a Georgian
Black Sea port as part of a strategy of ensuring that Russia did not monopolize east-
west export pipelines. As part of this strategy, the United States also stressed
building the BTC pipeline (with a capacity of about 1 million barrels per day) as part
of a “Eurasian Transport Corridor.” In November 1999, Azerbaijan, Georgia,
Turkey, and Kazakhstan signed the “Istanbul Protocol” on construction of the 1,040-
mile long BTC oil pipeline. In August 2002, the BTC Company (which includes
U.S. firms Conoco-Phillips, Amerada Hess, and Chevron) was formed to construct,
own, and operate the oil pipeline. Azerbaijani media reported at the end of May 2006
that the first tanker began on-loading oil at Ceyhan. A gas pipeline to Turkey
(termed the South Caucasus Pipeline or SCP) was completed in March 2007, and
exports initially are planned to be 233 billion cubic feet per year. The joint venture
66 U.S. Department of Energy. Energy Information Administration. Azerbaijan Country
Analysis Brief
, December 2007.
67 The White House. The National Energy Policy Development Group. Reliable,
Affordable, and Environmentally Sound Energy for America’s Future
, May 16, 2001.

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for the SCP includes Norway’s Statoil (20.4%), British Petroleum (20.4%),
Azerbaijan’s Ministry of Industry and Energy (20%), and companies from Russia,
Iran, France, and Turkey. Some in Armenia object to lack of access to these
pipelines.
Some observers argue that the completion of the BTC and SCP and the decision
to build a railway from Azerbaijan through Georgia to Turkey has boosted awareness
in the European Union and the United States of the strategic importance of the South
Caucasus.68 In mid-November 2007, Greek Prime Minister Kostas Karamanlis and
Turkish Prime Minister Rejep Tayyip inaugurated a gas pipeline connecting the two
countries. The ceremony was attended by Azerbaijani President Ilkham Aliyev
(some Azerbaijani gas will flow through the pipeline) and U.S. Energy Secretary
Samuel Bodman. If a pipeline extension is built to Italy, this TGI pipeline could
permit Azerbaijan to supply gas to two and perhaps more EU members, providing a
source of supply besides Russia.
In March 2007, Azerbaijan and the United States signed a memorandum of
understanding on energy cooperation that called for discussions on the proposed TGI
pipeline and a potential EU-backed Nabucco gas pipeline from Turkey to Austria.
In June 2007 and at subsequent forums, Deputy Assistant Secretary Bryza has urged
building the TGI and Nabucco gas pipelines and a trans-Caspian gas pipeline, so that
Azerbaijani and Central Asian gas could be transported to Europe. He has argued
that these routes would be more economical than routes through Russia. In August
2007, the U.S. Trade Development Administration granted Azerbaijan $1.7 million
to fund feasibility studies on building both an oil and a gas pipeline across the
Caspian Sea to link to the BTC pipeline and the SCP. The Nabucco pipeline has
faced numerous delays, some of them attributable to Russia's counter-proposals to
build pipelines that appear to reduce the efficacy of the Nabucco pipeline and
questions about supplies for the pipeline (see below). Latest EU planning calls for
construction on the Nabucco pipeline to begin in 2010 and be completed in 2013.
Some analysts raise concerns that without a trans-Caspian gas pipeline, there
will not be enough Azerbaijani gas to fill either the TGI or Nabucco pipelines, and
argue that Iran also should be considered as a gas supplier.69 Others suggest that
Azerbaijan will be able to supply at least most of the needed gas for both the TGI and
Nabucco pipelines, because of recent promising indications that there may be a huge
new reservoir of gas off the Caspian seacoast. Highlighting this point, Deputy
Assistant Secretary Bryza stated in March 2008 that “we now believe as an official
U.S. Government view ... that Azerbaijan has enough gas to fill TGI, to launch
Nabucco, and perhaps even to fill Nabucco.” He stressed, nonetheless, that the
68 Jaba Devdariani and Blanka Hancilova, “EU Broaches Peacekeeping Possibility in
Georgia,” Central Asia-Caucasus Analyst, March 7, 2007; Rovshan Ismayilov, “Azerbaijan,
Georgia and Turkey: Building a Transportation Triumvirate?” Eurasia Insight, February 7,
2007.
69 U.S. Department of State. Transcript: U.S. Official Discusses Energy Security Agreement
with Azerbaijan
, March 22, 2007; Associated Press, June 6, 2007.

CRS-32
United States also backed a trans-Caspian gas pipeline as an additional source of
supply for TGI and Nabucco.70
Putin reached agreement in May 2007 with the presidents of Turkmenistan and
Kazakhstan on the construction of a new pipeline to transport Turkmen and Kazakh
gas to Russia. This agreement appears to compete with U.S. and EU efforts to foster
building a trans-Caspian gas pipeline to link to the SCP to Turkey. It also appears
to compete with U.S. and EU efforts to foster building the Nabucco gas pipeline from
Turkey to Austria.71
In the winter of 2006-2007, Russia greatly boosted gas prices charged
Azerbaijan and Georgia. Azerbaijan stopped importing gas from Russia and relied
on its own resources, while Georgia tried to secure alternative and cheaper sources
of supply. Azerbaijan agreed to supply some gas, but Georgia was forced to purchase
some Russian gas. This situation was repeated in the winter of 2007-2008.
On March 19, 2007, Armenian President Robert Kocharyan and Iranian
President Mahmoud Ahmadinejad inaugurated an 88-mile gas pipeline from Tabriz
in Iran to Kadjaran in Armenia. Initial deliveries reportedly will be 14.1 billion cubic
feet per year of Iranian (and possibly Turkmen) gas. The Russian-controlled
ArmRosGazprom joint venture operates the Iran-Armenia pipeline. Work has started
on the second part of the pipeline, a 123 mile section from Kadjaran to Ararat. When
it is completed in early 2009, 88.3 billion cubic feet of gas per year will be supplied.
Some of this gas will be used to generate electricity for Iran and Georgia, but the
remainder may satisfy all Armenia’s other consumption needs, removing its
dependence on Russian gas transported via Georgia.72
70 U.S. Department of State. Trans-Caspian and Balkan Energy Security: Matthew Bryza,
Deputy Assistant Secretary of State for European and Eurasian Affairs, On-the-Record
Briefing with Greek Media
, March 18, 2008.
71 According to some observers, Russia's efforts to discourage the building of a
trans-Caspian gas pipeline included an agreement with Turkey in December 1997 that
Russia would build a trans-Black Sea pipeline (termed "Blue Stream") to supply gas to
Turkey. By building this pipeline, Russia hoped to discourage Turkey from importing
Caspian Sea region or Middle Eastern gas, which could be trans-shipped to Europe,
according to these observers. Despite these Russian efforts (the Blue Stream project was
completed in 2005), Turkey still signed a framework agreement in 1998 and a gas supply
agreement in May 1999 with Turkmenistan that envisaged the building of either a pipeline
traversing Iran or a trans-Caspian route through Azerbaijan and Georgia (a gas pipeline from
Tabriz to Ankara began operating in 2001, but Turkmen gas is not being sold to Turkey
through this pipeline). In September 1999, Turkmenistan also joined Azerbaijan, Georgia,
and Turkey in signing a declaration on a trans-Caspian gas pipeline. Plans at that time for
a trans-Caspian gas pipeline, however, were derailed in 2000 by a clash between
Turkmenistan and Azerbaijan over how much gas each nation could ship through the
Baku-Turkey leg of the prospective gas pipeline, and by Turkmenistan's rejection of
proposals from a consortium formed to build the trans-Caspian leg of the pipeline.
72 Platt’s Commodity News, May 31, 2007.

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110th Congress Legislation
P.L. 110-17 (S. 494, Lugar)
The NATO Freedom Consolidation Act of 2007. Endorses NATO enlargement
and the timely admission of new NATO members. Urges NATO to extend a
Membership Action Plan for Georgia. Designates Georgia as eligible to receive
security assistance under the program established by the NATO Participation Act of
1994 (P.L. 103-447). Introduced on February 6, 2007. Ordered to be reported
without amendment by the Foreign Relations Committee on March 6, 2007 (H.Rept.
110-34). Passed the Senate on March 16, 2007. Passed the House on March 26,
2007. Signed into law on April 9, 2007 (P.L. 110-17).
P.L. 110-53 (H.R. 1, Bennie Thompson)
Implementing the 9/11 Commission Recommendations Act of 2007. Introduced
on January 5, 2007. Passed the House on January 9, 2007. Passed the Senate with
an amendment in the nature of a substitute on July 9, 2007. Conference report
(H.Rept. 110-259) agreed to in the Senate on July 26 and in the House on July 27.
Signed into law on August 3, 2007 (P.L. 110-53). Title 21 calls for the executive
branch to promote democratization and respect for human rights in nondemocratic
and democratic transition countries. Sec. 2033 calls for expanding scholarship,
exchange, and library programs in predominantly Muslim countries to enhance
respect for democracy and human rights.
H.Res. 102/H.Res. 155 (Crowley)/S.Res. 65 (Biden)
Condemning the assassination of Turkish-Armenian journalist and human rights
advocate Hrant Dink. H.Res. 102 was introduced and referred to the Committee on
Foreign Affairs on January 29, 2007. H.Res. 155 was introduced and referred to the
Committee on Foreign Affairs on February 12, 2007. S.Res. 65 was introduced and
referred to the Foreign Relations Committee on February 1, 2007. Ordered to be
reported with an amendment in the nature of a substitute on March 28. 2007. Placed
on the legislative calendar on March 29, 2007.
H.Res. 106 (Schiff)/S.Res. 106 (Durbin)
A resolution calling on the President to ensure that the foreign policy of the
United States reflects appropriate understanding and sensitivity concerning issues
related to human rights, ethnic cleansing, and genocide documented in the United
States record relating to the Armenian Genocide. H.Res. 106 was introduced on
January 30, 2007. S.Res. 106 was introduced on March 14, 2007. H.Res. 106 was
ordered to be reported by the House Foreign Affairs Committee on October 10, 2007.
P.L. 110-161, H.R. 2764 (FY2008)
Consolidated Appropriations Act for FY2008. On December 17, 2007, the
House considered two amendments to H.R. 2764 as received from the Senate. The
first amendment inserted a Consolidated Appropriations Act covering eleven regular
appropriations bills, including Division J: Department of State, Foreign Operations,
and Related Programs. The 2nd amendment dealt with emergency supplemental
military funding. Agreed to in the House on December 17, 2007. The Senate offered
an amendment to House amendment 2, and concurred with House amendment 1. On
December 19, the message on the Senate action was received in the House. The

CRS-34
House agreed with the Senate amendment to the House amendment 2, and the bill
was cleared for the White House. Signed into law on December 26, 2007. Calls for
$58.5 million in Freedom Support Act aid for Armenia, $19 million for Azerbaijan,
and $50.5 million for Georgia. Also provides equal amounts of $3 million each for
Armenia and Azerbaijan in Foreign Military Financing (all amounts are subject to
a budget rescission of .81%, to be applied with some discretion on a
country-by-country basis). Restates exceptions to Section 907 of the FREEDOM
Support Act. Provides that funds made available for the Southern Caucasus region
may be used, notwithstanding any other provision of law, for confidence-building
measures and other activities in furtherance of the peaceful resolution of the regional
conflicts, especially those in the vicinity of Abkhazia and Nagorno Karabakh.
H.R. 2869 (Pitts)
The Central Asia Education Enhancement Act of 2007. Directs the Secretary
of State to establish a pilot program of public policy internships in the United States
for undergraduate and graduate students from Armenia, Azerbaijan, Georgia,
Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.
Introduced and referred to the Foreign Affairs Committee on June 26, 2007.
S.Res. 33 (Lugar)
A resolution urging the U.S. government to open negotiations on a free trade
agreement with Georgia to eliminate tariffs and non-tariff barriers on trade in goods.
Introduced and referred to the Committee on Finance on January 18, 2007.
H.Con.Res. 183 (Hastings)
A concurrent resolution calling on the Azerbaijani government to release Farhad
Aliyev and Rafiq Aliyev from detention pending a fair and open trial. Introduced and
referred to the House Committee on Foreign Affairs on July 12, 2007.
S.Res. 391 (Lugar)
A resolution calling on the President to express support for the planned
presidential election in Georgia with the expectation that such election will be held
in a manner consistent with democratic principles. Introduced and referred to the
Committee on Foreign Relations on December 6, 2007. Agreed to by the Senate on
December 13, 2007.
S.Res. 439 (Lugar)/H.Res. 997 (Wexler)
A resolution expressing the strong support of the Senate for NATO to enter into
a Membership Action Plan with Georgia and Ukraine. Senate version introduced on
January 31, 2008. Agreed to by the Senate on February 14, 2008. House version
introduced on February 25, 2008. Passed the House on April 1, 2008.
S. 2563 (Lugar)
A bill to authorize the extension of nondiscriminatory treatment (normal trade
relations treatment) to the products of Azerbaijan. Introduced and referred to the
Committee on Finance on January 29, 2008.
S.Res. 523 (Biden)
Expressing the strong support of the Senate for the NATO declaration at the
Bucharest Summit that Ukraine and Georgia will become members of the Alliance.

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Urges the foreign ministers of NATO member states at their upcoming meeting in
December 2008 to consider favorably the applications of the governments of Ukraine
and Georgia for Membership Action Plans. Introduced on April 21, 2008. Passed
the Senate on April 28, 2008.
H.Res. 1166 (Wexler)/S.Res. 550 (Biden)
Expressing the sense of the House/Senate regarding provocative and dangerous
statements and actions made by officials of the government of the Russian Federation
concerning the territorial integrity of the republic of Georgia. Condemns recent
decisions made by the Russian government to establish ‘official ties’ with the
breakaway regions of Abkhazia and South Ossetia, calls upon the Russian
government to disavow this policy, which gives the appearance of being motivated
by an appetite for annexation, and calls for all countries to eschew rhetoric that
undermines the peace process. The House version also calls for a NATO
Membership Action Plan for Georgia and for the United Nations to investigate the
shootdown of unmanned aerial vehicles over Abkhazia. House version introduced
on April 29, 2008. Passed the House on May 7, 2008. Senate version introduced on
May 2, 2008. Approved by the Senate on June 3, 2008.
H.Res. 1187 (Shuster)
Promoting global energy supply security through increased cooperation among
the United States, Turkey, Azerbaijan, and Georgia, by diversifying sources of
energy, and implementing certain oil and natural gas pipeline projects for the safe and
secure transportation of Eurasian hydrocarbon resources to world markets.
Introduced on May 13, 2008, and referred to the House Committee on Foreign
Affairs.
H.R. 6079 (Schiff)
Calls on the President and Secretary of State to urge Turkey to immediately lift
its ongoing blockade with Armenia. Directs the Secretary of State to submit a report
outlining the steps taken and plans made by the United States to end Turkey’s
blockade of Armenia. Introduced on May 15, 2008, and referred to the House
Committee on Foreign Affairs.

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Table 1. U.S. Foreign Aid to the Region,
FY1992-FY2008, and FY2009 Request
(millions of dollars)
FY1992-
South
FY2006
FY2007
FY2005
FY2008
FY2009
Caucasus
Budgeted
Budgeted
Budgeted
Estimateb
Requestb
Country
Aida
Aida
Aida
Armenia
1,581.09
89.53
72.64
62.388
27.9
Azerbaijan
588.72
88.72
74.49
26.345
24.7
Georgia
1,611.17
152.72
125.08
64.308
67.05
Regional
38.73
11.1
2.0
— —
Total
3,819.71
342.07
274.21
153.041
119.65
Percent
13.6
18
14
33
29
Sources: State Department, Office of the Coordinator for U.S. Assistance to Europe and Eurasia,
January 2008; State Department, Congressional Budget Justification for Foreign Operations, FY2008.
a. FREEDOM Support Act and Agency budgets.
b. FREEDOM Support Act and other Function 150 funds. Does not include Defense or Energy
Department funding, Peace Corps funding, funding for exchanges, or Millennium Challenge
Corporation programs in Armenia and Georgia.
Figure 1. Map of the Region