Armenia, Azerbaijan, and Georgia:
Political Developments and Implications
for U.S. Interests

Jim Nichol
Specialist in Russian and Eurasian Affairs
January 25, 2010
Congressional Research Service
7-5700
www.crs.gov
RL33453
CRS Report for Congress
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repared for Members and Committees of Congress

Armenia, Azerbaijan, and Georgia

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 former Bush
Administration supported U.S. private investment in Azerbaijan’s energy sector as a means of
increasing the diversity of world energy suppliers. The United States has been active in
diplomatic efforts to resolve regional conflicts in the region. 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 participated in stabilization efforts in Afghanistan and
Iraq, and Armenian and Georgian personnel served in Iraq. The South Caucasian troops serving in
Iraq had departed by the end of 2008.
On August 7, 2008, Russia and Georgia went to war involving Georgia’s breakaway regions of
Abkhazia and South Ossetia. Russian troops quickly swept into Georgia, destroyed infrastructure,
and tightened their de facto control over the breakaway regions before a ceasefire was agreed to
on August 15. The conflict has had long-term effects on security dynamics in the region and
beyond. Russia recognized the independence of Abkhazia and South Ossetia, but the United
States and nearly all other nations refused to follow suit. Russia established bases in Abkhazia
and South Ossetia that buttress its long-time military presence in Armenia. Georgia’s military
capabilities were degraded by the conflict, and Georgia has requested military assistance to
rebuild its forces. The conflict temporarily disrupted railway transport of Azerbaijani oil to Black
Sea ports and some oil and gas pipeline shipments, but no major pipelines were damaged.
Although there were some concerns that the South Caucasus had become less stable as a source
and transit area for oil and gas, Kazakhstan later began to barge oil across the Caspian Sea for
transit westward, and the European Union still planned eventually to build the so-called Nabucco
gas pipeline from Azerbaijan to Austria.
Among the key issues in the second session of the 111th Congress regarding the South Caucasus
are 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 may include the status of human rights and democratization in the countries; the
ongoing Armenia-Azerbaijan conflict over the breakaway Nagorno Karabakh region; and threats
posed to Georgia and the region by Russia’s August 2008 military incursion and its diplomatic
recognition of South Ossetia and Abkhazia. Congress will continue to 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.

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Contents
Most Recent Developments......................................................................................................... 1
Background ................................................................................................................................ 1
Overview of U.S. Policy Concerns .............................................................................................. 1
Post-September 11 .......................................................................................................... 3
Operations in Iraq and Afghanistan ................................................................................. 3
After the August 2008 Russia-Georgia Conflict ............................................................... 4
The South Caucasus’s External Security Context ......................................................................... 6
Russian Involvement in the Region ....................................................................................... 6
Military-Strategic Interests .............................................................................................. 6
Caspian Energy Resources .............................................................................................. 8
The Roles of Turkey, Iran, and Others ................................................................................... 8
The Armenia-Turkey Protocols of 2009........................................................................... 9
Iran............................................................................................................................... 10
Others ........................................................................................................................... 10
Obstacles to Peace and Independence........................................................................................ 11
Regional Tensions and Conflicts.......................................................................................... 11
Nagorno Karabakh Conflict .......................................................................................... 11
Civil and Ethnic Conflict in Georgia.............................................................................. 13
Economic Conditions, Blockades, and Stoppages ................................................................ 19
Recent Democratization Problems and Progress .................................................................. 20
Armenia........................................................................................................................ 20
Azerbaijan .................................................................................................................... 21
Georgia ......................................................................................................................... 21
U.S. Aid Overview.................................................................................................................... 23
U.S. Assistance After the Russia-Georgia Conflict............................................................... 24
U.S. Security Assistance............................................................................................................ 25
U.S. Trade and Investment ........................................................................................................ 28
Energy Resources and U.S. Policy....................................................................................... 28
Building the Baku-Tbilisi-Ceyhan and South Caucasus Pipelines .................................. 29
Regional Energy Cooperation with Iran......................................................................... 31

Figures
Figure 1. Map of the Region...................................................................................................... 34

Tables
Table 1. U.S. Foreign Aid to the Region, FY1992-FY2007, FY2008, FY2009, and the
FY2010 Request .................................................................................................................... 33
Table 2. The $1 Billion in Added Aid to Georgia by Priority Area.............................................. 33

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Contacts
Author Contact Information ...................................................................................................... 34

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Most Recent Developments
Armenian President Serzh Sargisyan and Azerbaijani President Ilkham Aliyev met in Sochi,
Russia, to negotiate a settlement of the Armenia-Azerbaijan conflict over Azerbaijan’s breakaway
Nagorno Karabakh region. Russian Foreign Minister Sergei Lavrov announced that the two
presidents had agreed on some sections of a preamble to a settlement. (See also below, “Nagorno
Karabakh Conflict.”)
On January 22, 2010, Russian Foreign Minister Lavrov asserted that Russia “recognizes
completely and respects Georgia’s territorial integrity, but ... without South Ossetia and
Abkhazia.” He claimed that Russia had planned after the August 2008 Russia-Georgia conflict to
discuss the status of the separatist regions, but that Georgian President Mikheil Saakashvili had
refused, forcing Russia to recognize the independence of the regions. Critics of this account note
that President Medvedev had agreed to the ceasefire provisions and that international law does
not support the recognitions. See also below, “The August 2008 Russia-Georgia Conflict.”)1
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 1991.2
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 ITAR-TASS, January 22, 2010. For criticism of the recognitions, see Council of the European Union. Report of the
Independent International Fact-Finding Mission on the Conflict in Georgia
, September 2009.
2 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.
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U.S. policy toward the South Caucasus states
The Caucasus Region: Basic Facts
has included promoting the resolution of
Area: The region is slightly larger than Syria: Armenia is
conflicts between Armenia and Azerbaijan
11,620 sq. mi.; Azerbaijan is 33,774 sq. mi.; Georgia is
over Azerbaijan’s breakaway Nagorno
26,872 sq. mi.
Karabakh (NK) region and between Georgia
Population: 15.83 million, slightly more than
and its breakaway regions of Abkhazia and
Kazakhstan; Armenia: 2.97 m.; Azerbaijan: 8.24 m.;
South Ossetia (resolving these latter conflicts
Georgia: 4.62 m. (CIA, The World Factbook, July 2009
became much more difficult following the
est.). Over a million people from the region are migrant
August 2008 conflict; see “The August 2008
workers in Russia and elsewhere.
Russia-Georgia Conflict,” below). Since 1993,
GDP: $114.17 billion: Armenia: $18.92 b.; Azerbaijan:
U.S. emissaries have been detailed to try to
$73.65 b.; Georgia: $21.6 b. (The World Factbook, 2008
settle these conflicts. Congressional concerns
est., purchasing power parity).
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.” Provisions in FY1996, FY1998, and
FY1999 legislation eased the prohibition by providing for humanitarian, democratization, and
business aid exemptions (on waiver authority enacted in 2002, see “Post-September 11,” below).
Some observers argue that developments in the South Caucasus are largely marginal to U.S.
strategic interests. 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.3
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 could benefit U.S. relations with other Islamic countries. 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 somewhat lessen Western energy
dependency on Russia and the Middle East (see below, “Caspian Energy Resources”).
Assistant Secretary of State Philip Gordon stated in June 2009 that U.S. policy toward Armenia
aims to assist it to “strengthen its security and prosperity by settling [its] conflict with Azerbaijan
over NK and by encouraging Turkey and Armenia to normalize their relations.... We also seek to
advance democratic and market economic reform in Armenia, including through the Millennium
Challenge Corporation.” He averred that “Azerbaijan is an important partner of the United States
on regional security (especially counterterrorism) and on helping our European allies diversify
their supplies of natural gas.... The United States has helped generate new progress toward a

3 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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settlement of the NK conflict [by] facilitating five meetings between Presidents Sargisyan and
Aliyev over the past year.”4 Some observers have raised concerns that U.S. policy toward the
rapprochement of Armenia and Turkey has complicated U.S. relations with Azerbaijan (see
below, “The Roles of Turkey, Iran, and Others”).5
Assistant Secretary of Defense Alexander Vershbow stated in August 2009 that U.S. policy
toward Georgia rests on continued support for its territorial integrity, independence and
sovereignty and rejects “any notion of spheres of influence in the region.... We stand by the
principle that sovereign states have the right to ... choose their own partnerships and alliances....
Most importantly, we will continue to stand by and deepen our support to Georgia and its people.
This support does not come blindly however, and we will calibrate our assistance to respect the
needs of the Georgian people, to strengthen regional security, and to support democratic and
economic reforms in Georgia.”6
Post-September 11
In the wake of the September 11, 2001, terrorist attacks on the United States, the former Bush
Administration 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. The waiver authority has been exercised annually.
Operations in Iraq and Afghanistan
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 multinational stabilization force for Iraq. In August 2003, both Azerbaijan and
Georgia dispatched forces to Iraq. Azerbaijan’s 150 troops pulled out in late 2008. Georgia
augmented its troops over time until 2,000 were serving in 2007-2008, the third-largest number of
troops in Iraq, after the United States and the United Kingdom. Virtually all of these troops were
pulled out in August 2008 in connection with the Russia-Georgia conflict. Armenia began sending
personnel to Iraq in January 2005. Armenia’s 46 personnel were pulled out in late 2008.

4 U.S. House of Representatives. Committee on Foreign Affairs. Subcommittee on Europe. Hearing on Strengthening
the Transatlantic Alliance: An Overview of the Obama Administration's Policies in Europe. Statement by Philip H.
Gordon, Assistant Secretary, Bureau of European and Eurasian Affairs
, June 16, 2009.
5 Stephen Blank, “Nagorno-Karabakh: A Disaster in the Making?” CACI Analyst, December 23, 2009.
6 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Testimony of Alexander Vershbow, Assistant Secretary of Defense for International Security Affairs,
August 4, 2009.
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On November 16, 2009, Georgia sent 173 troops for training in Germany before their scheduled
deployment at the end of March 2010 to support the International Security Assistance Force
(ISAF) in Afghanistan, where they will serve with French forces. Reportedly, over 700 more
troops later will be sent to serve with U.S. forces. In January 2010, Armenia sent 40 troops for
training in Germany before their deployment to Kunduz, Afghanistan to serve with German
forces. Azerbaijan allegedly has declined to boost the number of its troops (90) currently serving
in Afghanistan.7
After the August 2008 Russia-Georgia Conflict
Strong U.S. support for Georgia is reflected in the U.S.-Georgia Charter on Strategic Partnership,
signed in January 2009, which states that “our two countries share a vital interest in a strong,
independent, sovereign, unified, and democratic Georgia.” The accord is similar to a U.S.-
Ukraine Charter signed in December 2008 and a U.S.-Baltic Charter signed in 1998 with Estonia,
Latvia, and Lithuania. In the security realm, “the United States and Georgia intend to expand the
scope of their ongoing defense and security cooperation programs to defeat [threats to global
peace and stability] and to promote peace and stability.” Such cooperation will “increase
Georgian capabilities and ... strengthen Georgia’s candidacy for NATO membership.” In the
economic realm, the two countries “intend to pursue an Enhanced Bilateral Investment Treaty, to
expand Georgian access to the General System of Preferences, and to explore the possibility of a
Free-Trade Agreement.” Energy security goals include “increasing Georgia’s energy production,
enhanc[ing] energy efficiency, and increas[ing] the physical security of energy transit through
Georgia to European markets.” In the realm of democratization, the two countries “pledge
cooperation to bolster independent media, freedom of expression, and access to objective news
and information,” and to further strengthen the rule of law. The United States pledged to train
judges, prosecutors, defense lawyers, and police officers.8 Former Deputy Assistant Secretary
Bryza stressed that the charter did not provide security guarantees to Georgia. According to some
observers, the Charter aimed to reaffirm the United States’ high strategic interest in Georgia’s
fate, to counter perceptions that the United States (and the West) had acquiesced to increased
Russian dominance in the South Caucasus.9
The first meeting of the U.S.-Georgia Strategic Partnership Commission was held on June 22,
2009, in Washington, DC, led by Deputy Secretary of State James Steinberg and Georgian
Foreign Minister Grigol Vashadze. The Security Working Group also met, co-headed on the U.S.
side by Assistant Secretary of State Philip Gordon and Assistant Secretary of Defense Alexander
Vershbow, and headed on the Georgian side by Deputy Foreign Minister Giga Bokeria. There
were other working groups on the economy, democracy, and people-to-people exchanges.
At the U.S.-Russia summit in July 2009, President Obama stated that one area where the two
presidents “agreed to disagree” was on Georgia, where he stressed that he had “reiterated my firm
belief that Georgia’s sovereignty and territorial integrity must be respected. Yet even as we work
through our disagreements on Georgia’s borders, we do agree that no one has an interest in
renewed military conflict.”10 Michael McFaul, the Senior Director for Russian and Eurasian

7 CEDR, December 9, 2009, Doc. No. CEP-950188.
8 U.S. Department of State. U.S.-Georgia Charter on Strategic Partnership, January 9, 2009.
9 David J. Smith, “US-Georgia Charter is Historic,” Potomac Institute for Policy Studies, January 12, 2009.
10 The White House. Office of the Press Secretary. Press Conference by President Obama and President Medvedev of
Russia
, July 6, 2009.
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Affairs on the National Security Council, reported that President Obama also argued that the
Russian idea of a “sphere of influence” in the Soviet successor states does not belong in the 21st
century. The two presidents did agree, however, that “no one has an interest in renewed military
conflict.”
In Georgia, many officials and others viewed the meeting positively as lessening the chances of
renewed Russia-Georgia conflict and as a reaffirmation of the U.S. commitment to Georgia. Some
in Georgia, however, have expressed concern that the “reset” in U.S.-Russian relations could lead
the United States to downgrade ties with Tbilisi, or even make concessions to Russia at Georgia’s
expense. Perhaps in order to calm these fears, Vice President Joseph Biden visited Georgia in late
July 2009 to emphasize the U.S. commitment. Appearing to also reassure Russia, he stressed that
the U.S.-Georgia Charter did not represent an effort by the United States to create a sphere of
influence in the region. While stating that the U.S.-Georgia “partnership rests on a foundation of
shared democratic ideals,” he called for further progress in democratization. The Vice President
also raised the hope that “a peaceful and prosperous Georgia” would encourage Abkhazia and
South Ossetia to enter into a federal relationship, and that in the meantime, the United States
would not extend diplomatic recognition to the breakaway regions.11
In September 2009, Assistant Secretary Gordon reported that Secretary Clinton “made clear” to
President Saakashvili during their meeting on the sidelines of the opening fall session of the U.N.
General Assembly that “there is not a short-term fix to the problems of South Ossetia and
Abkhazia, as much as we want Russian troops to leave those territories as soon as possible, but
that the best way forward would be one of strategic patience.” Gordon appeared to contradict this
by then stating that “we do believe that Russia should implement the conditions of the August and
September ceasefires of 2008. And that means, in specific, reducing Russian troops to the
position – pulling back Russian troops to the positions they were before the ceasefire.” Through
strategic patience, he averred, the United States and Georgia can “achieve our common goal of
seeing Abkhazia and South Ossetia not only not recognized by others, but integrated into Georgia,
which she made clear was our goal, was to strengthen Georgia as a more attractive place, as a
magnet for these people to come back to Georgia.”12
Some observers have called for a re-evaluation of some aspects of U.S. support for Georgia.
These critics have argued that many U.S. policymakers have been captivated by Saakashvili’s
charismatic personality and pledges to democratize and have tended to overlook his bellicosity. A
few also have suggested that the United States should not unquestionably back Georgia’s
territorial integrity, but should rather encourage reconciliation and the consideration of options
short of the near-term reintegration of the regions into Georgia. Other observers have called for a
more robust U.S. and NATO effort to re-supply Georgia with defensive weaponry so that it might
deter or resist Russian aggression (see also below, U.S. Security Assistance). At the same time,
most observers advise against extending diplomatic recognition to breakaway regions without an
international consensus.13

11 The White House. Office of the Vice President. Remarks by the Vice President at an Official Dinner Hosted by
President Saakashvili
, July 22, 2009; Remarks by the Vice President to the Georgian Parliament, July 23, 2009.
12 U.S. Department of State. Czech and Georgian Bilateral Meetings, press conference with Phil Gordon, Assistant
Secretary of State for European Affairs, September 21, 2009.
13 Alexander Cooley and Lincoln Mitchell, “No Way to Treat Our Friends: Recasting Recent U.S.-Georgian Relations,”
The Washington Quarterly, January 2009, pp. 27-41; Lincoln Mitchell, Uncertain Democracy: U.S. Foreign Policy and
Georgia’s Rose Revolution
(Philadelphia: University of Pennsylvania Press, 2009); “A Georgia-Russia War Discussion
between Gordon Hahn and Johnson’s Russia List,” Russia: Other Points of View, October 17, 2008, at
(continued...)
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The South Caucasus’s External Security Context
Russian Involvement in the Region
After Vladimir Putin was elected president in 2000, Russia appeared to place great strategic
importance on increasing, or at least maintaining, influence in the South Caucasus region. Several
developments over the next few years appeared to jeopardize these influence efforts. These
included the “rose revolution” in Georgia that appeared to usher in democratic reforms, 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. This declining Russian influence, however, appeared to be reversed as a result of the
August 2008 Russia-Georgia conflict.
The Putin-Medvedev leadership has appeared to place its highest priority on exercising influence
in the region in the military-strategic sphere and slightly less priority on influence in the
economic sphere (particularly energy) 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 backing it in the South Caucasus.
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 concerns
about Turkey. Azerbaijan has been concerned about Russia’s ties with Armenia and has limited
Russia’s military presence. At the same time, Azerbaijan has appeared to value having
cooperative relations with Russia to increase its options and leverage in diplomacy and trade.
Georgia long tried to end the Russian military presence on its soil (including the presence of
Russian “peacekeepers” in the breakaway regions).
Military-Strategic Interests
Russia’s armed presence in the South Caucasus has been multifaceted, including thousands of
military base personnel, border troops, and until 2008, “peacekeepers.” The first step by Russia in
maintaining a military presence in the region was the promulgation of the Commonwealth of
Independent States (CIS) Collective Security Treaty (CST) in 1992, which pledges members to
consult in the event of a threat to one or several members, and to provide mutual aid if attacked
(current members include Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and
Uzbekistan). 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 3,200. Armenia has argued that its
Russian bases provide for regional stability by protecting it from attack. About 88,000 Russian
troops also are stationed nearby in the North Caucasus, and some naval forces of the Caspian Sea

(...continued)
http://www.russiaotherpointsofview.com.
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Flotilla are located in Astrakhan in Russia.14 In 1993, Azerbaijan was the first Eurasian state to
get Russian troops to withdraw, except at the Qabala (Gabala) radar site in northern Azerbaijan.
(Giving up on closing the site, in January 2002 Azerbaijan signed a 10-year lease agreement with
Russia permitting up to 1,500 troops 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 April 2006,
Azerbaijan convicted 16 people on charges that they had received terrorist training from Al Qaeda
operatives in the Pankisi Gorge. In 2009, Russia renewed its allegations that the Gorge harbored
terrorists. Georgia rejected these allegations as false and raised concerns that they might serve as
a pretext for new Russian violations of Georgia’s territorial integrity.
Russian “Peacekeepers” and Bases in Georgia
Russia’s mediation of ceasefires between Georgia and its breakaway regions in the early 1990s
resulted in agreement by the parties on the presence of Russian military “peacekeepers” in
Abkhazia and South Ossetia. Russia’s “peacekeeping” role at that time received at least tacit
approval from world governments and international organizations, with the proviso that the U.N.
and the OSCE also provide monitoring. For many years, Georgian authorities voiced
dissatisfaction with the role of the “peacekeepers” in facilitating a peace settlement and called for
them to either be replaced or supplemented by a wider international peacekeeping force (see
“Civil and Ethnic Conflict in Georgia”).
In the early 1990s, Georgia was pressured by Russia to agree to the long-term presence of four
Russian military bases. By the late 1990s, however, many in Georgia were calling for the bases to
close, and this received support from European countries during talks over amending the
Conventional Armed Forces in Europe (CFE) Treaty. In 1999, Russia and Georgia agreed to
provisions of the amended CFE Treaty calling for Russia to reduce weaponry at its four bases in
Georgia, to soon close two of the bases, and to complete negotiations on the status of the other
two bases. NATO signatories hesitated to ratify the amended Treaty until Russia satisfied these
and other conditions. One base was soon closed and Russia claimed that it had closed another. In
November 2007, the Russian Foreign Ministry proclaimed that it had closed the last base and that
Russia had “fully” accomplished its obligations to Georgia on the withdrawal of military
facilities.
Not even one year had passed, however, when Russia announced—following the August 2008
Russia-Georgia conflict—that two army brigades, each consisting of approximately 3,700 troops
(later reduced, see below), would be deployed to new military bases in Abkhazia and South
Ossetia. Some of these troops reportedly were soon deployed in temporary encampments pending
the construction of permanent buildings. In addition to these army brigades, Russian border
troops reportedly were deployed along regional borders with Georgia, along which engineer
brigades were creating revetments, trenches, and minefields. A part of the Black Sea Fleet also
was planned to be deployed to Ochamchire in Abkhazia.15 In May 2009, Russia announced that

14 The Military Balance 2009. London: International Institute of Strategic Studies, February 5, 2009.
15 Pavel Felgenhauer, “Georgian Officials Admit They Misread Russian Intentions,” Eurasia Daily Monitor, October
(continued...)
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the number of military troops would be reduced in each region because of economic problems in
Russia. Reportedly, about 1,500 Russian troops are based in each region. However, they have
been bolstered by the deployment of 1,300 border guards to each region.
Caspian Energy Resources
Russia has tried to play a dominant role in future oil production and transportation in the Caspian
Sea region. A major lever has been the prices it charges the South Caucasian countries for gas. In
2006, Russia charged all three regional states much more for gas. 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. Russia again
hiked gas prices in 2007. Georgia negotiated an agreement to receive some Azerbaijani gas via
the new South Caucasus Pipeline (SCP, see “Building the Baku-Tbilisi-Ceyhan and South
Caucasus Pipelines,” 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. In the Winter of 2007-2008,
Georgia again had to purchase some gas from Gazprom at higher prices, to supplement that
supplied by Azerbaijan. Following the August 2008 Russia-Georgia conflict, Gazprom’s
arrangement with Georgia involving the transit of Russian gas to Armenia remained in place.
Armenia pays a share of gas to Georgia as a transit fee. (See also, “Energy Resources and U.S.
Policy,” for information on Russia’s efforts to gain control of regional energy resources and
infrastructure.)
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, even though Turkey favors
Azerbaijan in the NK conflict. Critics of Turkey’s larger role in the region caution that the United
States and NATO might be drawn by their ties with Turkey into regional imbroglios. Turkey seeks
good relations with Azerbaijan and Georgia and some contacts with Armenia, while trying to
limit Russian and Iranian influence. Azerbaijan likewise long viewed Turkey as an ally against
such influence, and as a balance to Armenia’s ties with Russia (see below for recent
developments). 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.
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 have included Turkey’s rejection that there was an Armenian genocide in 1915-1923 and
its support for Azerbaijan in the NK conflict.

(...continued)
30, 2008; CEDR, January 22, 2009, Doc. No. CEP-548005; January 26, 2009, Doc. No. CEP-950277.
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The Armenia-Turkey Protocols of 2009
In September 2008, Turkey’s President Abdullah Gül visited Armenia, ostensibly to view a soccer
game, and this thaw contributed to the two countries reaching agreement in April 2009 on a “road
map” for normalizing ties, including the establishment of full diplomatic relations and the
opening of borders. After further negotiations, Turkish Foreign Minister Ahmet Davutoglu and
Armenian Foreign Minister Edvard Nalbandian initialed two protocols “On Establishing
Diplomatic Relations,” and “On Development of Bilateral Relations” on August 31, 2009, and
formally signed them on October 10, 2009.
The protocol on diplomatic relations calls for the two sides to establish embassies in each other’s
capitals within two months after the mutual legislatures have approved the protocols and after the
exchange of the articles of ratification of the protocol. The protocol on foreign relations calls for
the two sides to “agree to open the common border within two months after the entry into force of
this Protocol [that is, after ratification of the protocols by the legislatures of the two states]; agree
to conduct regular political consultations between the Ministries of Foreign Affairs of the two
countries; implement a dialogue on the historical dimension with the aim to restore mutual
confidence between the two nations, including an impartial scientific examination of the
historical records and archives to define existing problems and formulate recommendations; make
the best possible use of existing transport, communications and energy infrastructure and
networks between the two countries,” and undertake other cooperative efforts. The two sides also
agree to set up a bilateral commission to boost ties.16 Turkish President Abdullah Gül and
Armenian President Serzh Sargisyan attended an Armenia-Turkey soccer match in the Turkish
town of Bursa on October 14. On October 16, 2009, Azerbaijani President Ilkham Aliyev
reportedly stated that Azerbaijan “would not put up with” the end of Armenia’s isolation
(referring to the possible border opening). The Armenian government has reaffirmed that
obtaining international recognition of the Armenian genocide continues to be a element of foreign
policy and stressed that the settlement of the NK conflict is separate from the Armenian-Turkish
protocols. The Turkish government has asserted that the protocols will not be implemented to the
detriment of Azerbaijan’s interests. A ruling of the Armenian constitutional court on January 18,
2010 was criticized by the Turkish government as not being in conformity with the text of the
protocols. The Armenian government stated that the ruling did not affect the conditions of the
protocols.
The United States reportedly actively supported Switzerland in mediating the talks that led to the
signing of the protocols. Visiting Moscow in October 2009, Secretary of State Hillary Clinton
thanked Russia for its support for the talks. During Turkish Prime Minister Recep Tayyip
Erdogan’s December 7-8, 2009, visit to the United States, President Obama congratulated the
Prime Minister “on some courageous steps that he has taken around the issue of normalizing
Turkish/Armenian relations, and encouraged him to continue to move forward along this path.”
Reportedly, Armenia is delaying the ratification process until it sees Turkey moving toward
ratification, and Turkey is delaying ratification until there is progress toward a settlement of the
NK conflict.17

16 Ministry of Foreign Affairs of Armenia. Protocol on the Establishment of Diplomatic Relations between the Republic
of Armenia and the Turkish Republic and the Protocol on the Development of Mutual Relations Between the Republic
of Armenia and the Turkish Republic
, August 31, 2009, at http://www.armeniaforeignministry.com/pr_09/
20090831_protocol.pdf. See also The Turkish Weekly, August 31, 2009.
17 The White House. Office of the Press Secretary. Remarks by President Obama and Prime Minister Erdogan of
(continued...)
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Iran
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 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 has proposed
to build a railroad link to Armenia and another to Azerbaijan. The latter railroad will permit not
only greater trade with Azerbaijan but also with Russia. In 2009, Azerbaijan boosted its gas
shipments to Iran (see below, “Regional Energy Cooperation with Iran”).
Iran’s efforts to improve relations with Azerbaijan have appeared to be complicated, however, by
its reported suppression of rising dissent among “Southern Azerbaijanis.” Some Azerbaijani
media reported in June 2009 that hundreds of ethnic Azerbaijani supporters of Mirhoseyn Musavi
(an ethnic Azerbaijani who lost the presidential election in Iran in mid-June) fled to Azerbaijan to
escape government-sanctioned violence against peaceful protests and other persecution.
Nonetheless, President Aliyev congratulated Mahmud Ahmadinejad on June 16 on his election
victory, and the Azerbaijani foreign minister urged the “speedy return” of stability and order in
neighboring Iran. The Azerbaijani Azadliq [Freedom] opposition bloc on June 24 called on the
Iranian government to halt its violence against peaceful demonstrators. U.S. policy aims to
contain Iran’s threats to U.S. interests.18
Others
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 EU took the international lead in mediating the
August 2008 Russia-Georgia conflict and in deploying observers after the ceasefire (see “The
August 2008 Russia-Georgia Conflict,” below). The EU launched an Eastern Partnership program
in 2009 to deepen ties with the South Caucasus states. Under the program, the EU plans “deep

(...continued)
Turkey After Meeting, December 7, 2009; Hurriyet Daily News. December 18, 2009.
18 See CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman.
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and comprehensive free trade agreements with those countries willing and able to enter into a
deeper engagement, gradual integration in the EU economy, and ... easier travel to the EU through
gradual visa liberalization.”19
The South Caucasus region has developed some economic and political ties with other Black Sea
and Caspian Sea littoral states, besides those discussed above. Azerbaijan shares with Central
Asian states common linguistic and religious ties and concerns about some common 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 wider region.
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 ongoing 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). The borders of the countries do not coincide with eponymous ethnic
populations. Efforts by ethnic minorities to secede are primary security concerns for all three
states. 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 (UNHCR) has reported that at the
beginning of 2009, there were still about 4,000 people considered refugees or displaced persons
in Armenia. Armenia has granted citizenship and acted to permanently house most of the ethnic
Armenians who fled Azerbaijan. UNHCR has reported that at the beginning of 2009, there were
still over 600,000 people considered refugees or displaced persons in Azerbaijan.20 The non-

19 EU. European Commission. “Eastern Partnership,” at http://ec.europa.eu/external_relations/eastern/index_en.htm.
20 U.N. High Commissioner for Refugees. Armenia: Statistical Snapshot, at http://www.unhcr.org/cgi-
(continued...)
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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%).21
The Organization for Security and Cooperation in Europe’s (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.” In November
2007, then-Undersecretary of State Nicholas Burns, Russian Foreign Minister Sergey Lavrov, and
French Foreign Minister Bernard Kouchner presented the Foreign Ministers of Armenia and
Azerbaijan 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 principles, after the location where the draft
text was presented) that had resulted from three years of talks and to begin “a new phase of talks”
on a comprehensive peace settlement.22
The Basic Principles call for the phased return of the territories surrounding NK to Azerbaijani
control; an interim status for NK providing guarantees for security and self-governance; a
corridor linking Armenia to NK; future determination of the final legal status of NK through a
legally binding expression of will; the right of all internally displaced persons and refugees to
return to their former places of residence; and international security guarantees that would include
a peacekeeping operation.23
On November 2, 2008, Russian President Medvedev hosted talks in Moscow between Armenian
President Serzh Sarkisyan and Azerbaijani President Ilkham Aliyev on a settlement of the NK
conflict. A joint declaration signed by Aliyev and Sarkisyan (also termed the Meindorf declaration
after the castle where talks were held) upheld a continued mediating role for the Minsk Group,
but the talks represented Russia’s intention to play the major role in mediating the conflict, some
observers argue.
Presidents Aliyev and Sargisyan met to discuss NK peace settlement issues on the sidelines of the
May 2009 EU summit that launched the EU Eastern Partnership program of enhanced trade and
other ties with the South Caucasus and other former Soviet republics. Although the Minsk Group
co-chairs reported some progress in the talks, Nevruz Mehmedov, the head of foreign affairs in
the presidential administration, reportedly stated that the co-chairs were “misinforming the
international public and the president and secretary of state of the United States by speaking

(...continued)
bin/texis/vtx/page?page=49e48d126.
21 International Crisis Group. Nagorno-Karabakh: Viewing the Conflict from the Ground, September 14, 2005; CIA,
The World Factbook. Azerbaijan, at https://www.cia.gov/cia/publications/factbook/geos/aj.html.
22 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.
23 The White House. Joint Statement on the Nagorno-Karabakh Conflict by U.S. President Obama, Russian President
Medvedev, and French President Sarkozy at the L’Aquila Summit of the Eight
, July 10, 2009.
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about progress.”24 However, there was some subsequent interaction between civil society
representatives of Armenia and Azerbaijan who met in NK in early July 2009.
President Medvedev again hosted Minsk Group-facilitated talks between the Armenian and
Azerbaijani presidents on July 17, 2009. On October 9, 2009, Presidents Sargisyan and Aliyev
held talks at the residence of the U.S. ambassador in Chisinau, Moldova, on the sidelines of a
summit of the Commonwealth of Independent States. The Minsk Group co-chairs participated
after one-on-one talks by the two leaders. New U.S. co-chair Robert Bradtke reported that the two
presidents discussed line-by-line details of a possible settlement. On December 10, 2009, the
Russian co-chair stated that “renovated” Madrid principles had been prepared and would soon be
presented to Armenia and Azerbaijan. Aliyev and Sargisyan are scheduled to meet in Sochi,
Russia in late January 2010.
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 argued that Russia’s increasing controls over South
Ossetia and Abkhazia over the years transformed the separatist conflicts into essentially Russia-
Georgia disputes. Most residents of Abkhazia and South Ossetia were granted Russian citizenship
and most appeared to want their regions to become independent or parts of Russia.25
U.S. diplomacy long appeared to urge Georgia to work within existing peace settlement
frameworks for Abkhazia and South Ossetia—which allowed for Russian “peacekeeping”—while
criticizing some Russian actions in the regions. This stance appeared to change during 2008,
when the United States and other governments increasingly came to support Georgia’s calls for
the creation of alternative peace settlement mechanisms, particularly since talks under existing
formats had broken down.
This U.S. policy shift was spurred by increasing Russian actions that appeared to threaten
Georgia’s territorial integrity. Among these, the Russian government in March 2008 formally
withdrew from CIS economic sanctions on Abkhazia, permitting open Russian trade and
investment. Of greater concern, President Putin issued a directive in April 2008 to step 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. A meeting of the U.N.
Security Council (UNSC) on April 23, 2008, 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.”26 (For other Russian actions during 2008 specific to a breakaway region, see either

24 Interfax, May 12, 2009.
25 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.
26 “Germany, Great Britain, France, U.S.A. and Germany Passed Communiqué,” Black Sea Press, April 24, 2008.
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“Developments in Abkhazia Before August 2008,” “Developments in South Ossetia Before
August 2008,” or “The August 2008 Russia-Georgia Conflict,” below.)
Developments in Abkhazia Before August 2008
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. Russian
troops (acting as CIS “peacekeepers”) were deployed in a zone between Abkhazia and the rest of
Georgia. The conflict resulted in about 10,000 deaths and over 200,000 displaced persons, mostly
ethnic Georgians.
The U.S. Deputy Assistant Secretary of State worked 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. Sticking points in talks 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 insisted on
recognition of their independence as a precondition to large-scale repatriation.
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. Georgia claimed that only police
were deployed in the Gorge, but Abkhazia asserted that military troops were present, in violation
of the cease-fire agreement. Regular Georgia-Abkhazia peace talks were suspended in October
2006. Abkhazia called for Georgia to remove the government representatives and alleged military
forces.
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. The
ministries claimed that the increases were necessary to counter a buildup of Georgian “military
forces” and police in the Kodori Gorge, which they alleged were preparing to attack the de facto
Abkhaz government. It was also troubling that 400 Russian paratroopers were deployed to
Abkhazia that Russian officials reportedly stated would be fully armed in order to repulse
possible Georgian attacks on Abkhazia.27 In late May 2008, Russia announced that about 400
railway construction troops were being sent to Abkhazia for “humanitarian” work. These
troops—whose role is to facilitate military positioning—reportedly left Abkhazia at the end of
July 2008 after repairing tracks and bridges. According to former Deputy Assistant Secretary
Bryza, the railway was used in August by Russia when its troops moved into Georgia.28

27 ITAR-TASS, May 6, 2008.
28 Pavel Felgenhauer, Eurasia Daily Monitor, June 12, 2008; U.S. Department of State. Foreign Press Center. Briefing:
The Situation in the Republic of Georgia and its Implications for the Caucasus, August 19, 2008.
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Developments in South Ossetia Before August 2008
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 set up base camps in a security zone around Tskhinvali, South
Ossetia. Reportedly, the units totaled around 1,100 troops, including about 530 Russians, a 300-
member North Ossetian brigade (which actually was composed of South Ossetians and headed by
a North Ossetian), and about 300 Georgians. OSCE monitors did most of the patrolling.
According to one estimate, some 45,000 ethnic Ossetians and 17,500 ethnic Georgians resided in
a region that, according to the 1989 Soviet census, at that time contained over 98,000 residents.29
In 2004, President Saakashvili increased pressure on South Ossetia by tightening border controls
and by breaking up a large-scale smuggling operation in the region that 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 November 2006, a popular referendum was held in South Ossetia
to reaffirm its “independence” from Georgia. After October 2007, no more peace talks were held.
The August 2008 Russia-Georgia Conflict
Simmering long-time tensions erupted on the evening of August 7, 2008, when South Ossetia
accused Georgia of launching a “massive” artillery barrage against its capital, Tskhinvali, while
Georgia reported intense bombing of some Georgian villages in the conflict zone by South
Ossetian forces. Georgia claims that South Ossetian forces did not respond to a ceasefire appeal
but intensified their shelling, “forcing” Georgia to send in troops that reportedly soon controlled
Tskhinvali and other areas.30
On August 8, Russia launched large-scale air attacks across Georgia and dispatched seasoned
troops to South Ossetia that engaged Georgian forces in Tskhinvali later in the day. Reportedly,
Russian troops had retaken Tskhinvali, occupied the bulk of South Ossetia, reached its border
with the rest of Georgia, and were shelling areas across the border by the morning of August 10.
Russian warplanes bombed the outskirts of the capital, Tbilisi, as well as other sites. Russian
ships landed troops in Georgia’s breakaway Abkhazia region and took up positions off Georgia’s
Black Sea coast.
On August 12, Medvedev declared that “the aim of Russia’s operation for coercing the Georgian
side to peace had been achieved and it had been decided to conclude the operation.... The

29 Georgia: a Toponymic Note Concerning South Ossetia, The Permanent Committee on Geographic Names, January
2007.
30 See also CRS Report RL34618, Russia-Georgia Conflict in August 2008: Context and Implications for U.S. Interests,
by Jim Nichol.
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aggressor has been punished and suffered very heavy losses.”31 Medvedev endorsed some
elements of a European Union (EU) peace plan presented by visiting French President Nicolas
Sarkozy. On August 15, the Georgian government accepted the French-brokered 6-point cease-
fire that left Russian forces in control of South Ossetia, Abkhazia, and “security zones” in
undisputed Georgian territory.32 The six points include commitments not to use force, to halt
hostilities, to provide full access for humanitarian aid, to withdraw Georgian forces to the places
they were usually stationed prior to the conflict, to withdraw Russian forces to positions prior to
the outbreak of hostilities (although they were permitted to implement security measures in the
zone of the conflict until international monitors were in place), and to open international
discussions on ensuring security and stability in Abkhazia and South Ossetia.
Much of the international community condemned President Medvedev’s August 26 decree
officially recognizing the independence of South Ossetia and Abkhazia.33 Nicaragua, Venezuela,
and Nauru34 are the only countries that have followed suit in extending diplomatic relations to
Abkhazia and South Ossetia.
On September 8, 2008, visiting French President Nicolas Sarkozy and Russian President Dmitriy
Medvedev signed a follow-on ceasefire accord that fleshed out the provisions of the 6-point peace
plan. Among its provisions, it stipulated that Russian forces would withdraw from areas adjacent
to the borders of Abkhazia and South Ossetia by October 11; that Georgian forces would return to
their barracks by October 1; that international observers already in place from the U.N. and
OSCE would remain; and that the number of international observers would be increased by
October 1, to include at least 200 observers from the EU, and perhaps more later. The EU called
for Russia to permit these observers to patrol in Abkhazia and South Ossetia. Russia’s position
has been that these observers cannot patrol in the regions without the approval of the regions, and
the regional leaders have refused to permit such patrols. Although Sarkozy strongly implied that
the international conference would examine the legal status of Georgia’s breakaway Abkhazia and
South Ossetia, Medvedev pointed out that the regions had been recognized as independent by
Russia on August 26, 2008, and stated that disputing this recognition was a “fantasy.”35

31 ITAR-TASS, August 12, 2008. On September 11, Prime Minister Putin stated that Georgia’s aggression was answered
by “a well-deserved mighty punch” by Russia. ITAR-TASS, September 11, 2008.
32 See CRS Report RL34618, Russia-Georgia Conflict in August 2008: Context and Implications for U.S. Interests, by
Jim Nichol, August 29, 2008.
33 The EU fact-finding mission on the causes and outcome of the Russia-Georgia conflict stated that according to
overwhelmingly accepted principles of international law, “only former constituent republics such as Georgia but not
territorial sub-units such as South Ossetia or Abkhazia are granted independence in case of dismemberment of a larger
entity such as the former Soviet Union. Hence, South Ossetia did not have a right to secede from Georgia, and the same
holds true for Abkhazia.... Recognition of breakaway entities such as Abkhazia and South Ossetia by a third country ...
runs against Principle I of the Helsinki Final Act which states “the participating States will respect each other’s
sovereign equality and individuality as well as all the rights inherent in and encompassed by its sovereignty, including
in particular the right of every State to juridical equality, to territorial integrity and to freedom and political
independence.” The fact-finding mission also pointed out that the founding documents of the Commonwealth of
Independent States, to which Georgia belonged from 1993 to 2008, called for upholding the territorial integrity of the
members. Council of the European Union. Report of the Independent International Fact-Finding Mission on the
Conflict in Georgia
, September 2009, Vol. 1, p. 17; Vol. 2, pp. 127-146.
34 Nauru (a 15-square-mile island in the South Pacific with a population estimated by the World Factbook at 14,000)
recognized the independence of Georgia’s breakaway Abkhazia and South Ossetia regions in mid-December 2009. The
island allegedly solicited aid as a quid pro quo for recognition, and a few days before the island’s emissaries flew to the
regions, Russia reportedly proffered it aid. Open Source Center. Open Source Branch, December 18, 2009, Doc. No.
OSB-225721.
35 Open Source Center. Central Eurasia: Daily Report(hereafter CEDR), September 28, 2008, Doc. No. CEP-950425;
(continued...)
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Many observers have argued that Russia aimed both to consolidate control over South Ossetia
and Abkhazia and to depose Georgian President Mikheil Saakashvili when it launched the August
2008 military incursion into Georgia. Russia hoped to achieve this latter goal either directly by
occupying Georgia’s capital of Tbilisi and killing or arresting Saakashvili, or indirectly by
triggering his overthrow, according to these observers. They state that Saakashvili’s survival as
the popularly elected president is a major accomplishment of the diplomacy led by the EU that
ended Russia’s offensive. They also suggest that the current political stability may indicate that
Georgia has made at least some democratization progress.36 Others warn that democratization is
halting and could face setbacks (see “Recent Democratization Problems and Progress”).37
The EU Monitoring Mission (EUMM) deployed over 200 monitors by October 1, 2008, and
Russia announced on October 9 that its troops had withdrawn from buffer zones. Georgia has
maintained that Russian troops have not pulled out of Akhalgori, a district that Russia asserts is
within South Ossetia’s Soviet-era borders, and the Kodori Gorge. In December 2008, Russia
objected to continuing a mandate for about 200 OSCE observers in Georgia—including some
observers authorized before the August 2008 conflict and some who were added after the August
2008 conflict—and they pulled out on June 30, 2009. Similarly, in June 2009 Russia vetoed a
U.N. Security Council resolution that extended the UNOMIG mandate, and they pulled out of
Abkhazia. The EUMM is now the sole international group of monitors. It reports that the number
of staffers in 2010 is 320, that France and Germany are the largest contributors of monitors, and
that the monitors are based in four field offices near the contested borders.38
According to Assistant Secretary of Defense Alexander Vershbow and Assistant Secretary of State
Philip Gordon, the EUMM has been effective at debunking several allegations made by Russia
and the separatist regions that ceasefire violations have been committed by Georgia. The United
States and the EU continue to call for unrestricted access to Abkhazia and South Ossetia in order
to monitor the ceasefile. Vershbow and Gordon have praised Georgia’s cooperation with the
EUMM, including Georgia’s agreement with the EUMM at the beginning of 2009 to report all
movements of its security forces near the administrative borders and to permit unannounced
inspections of its military facilities. They contrast this cooperation to the refusal of Russia,
Abkhazia, and South Ossetia to permit patrols in the regions.39
Assistant Secretary Gordon warned in August 2009 that “Moscow continues to strengthen its grip
on [South Ossetia and Abkhazia]. Thousands of Russian forces remain in both regions, a
significant increase from pre-war levels, and in April [2009] Russia signed an agreement with the

(...continued)
CEP-950440.
36 U.S. House of Representatives. Committee on Foreign Affairs. Hearing on U.S.-Russia Relations in the Aftermath of
the Georgia Crisis. Testimony of Daniel Fried, Assistant Secretary of State for European and Eurasian Affairs,
September 9, 2008. Saakashvili also highlighted this Russian aim during his testimony to the Georgian legislative
commission investigating the causes of the conflict. See “Saakashvili Testifies Before War Commission, Analysts
Comment,” The Messenger (Tbilisi), December 1, 2008. Georgia’s Ambassador to the United States, Davit
Sikharulidze, argued that Russia’s “aim was to overthrow the [Georgian] government and it would have come true but
for the U.S. interference.” CEDR, December 1, 2008, Doc. No. CEP-950233. Russia officially has denied such an aim.
37 International Crisis Group. Georgia: The Risks of Winter, November 26, 2008.
38 EUMM. Mission Facts and Figures, at http://www.eumm.eu/en/about_eumm/facts_and_figures.
39 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Testimony of Alexander Vershbow, Assistant Secretary of Defense for International Security Affairs, and
Testimony of Philip H. Gordon, Assistant Secretary for European and Eurasian Affairs, August 4, 2009.
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separatists whereby Russia will guard the administrative boundaries for the next five years. South
Ossetian and Abkhaz economic dependency on Russia also continues to grow.”40
An international conference to discuss security, repatriation, and status issues related to the
conflict held its inaugural session in Geneva on October 15, 2008. Facilitators at the talks include
the U.N., the EU, and the United States. Russia has insisted at these meetings and elsewhere that
Georgia sign a non-use of force agreement with the breakaway regions and that the international
community impose an arms embargo on Georgia.
Among significant Geneva conference meetings:
• In February 2009, the sides agreed to set up an “incident prevention and response
mechanism” along the South Ossetian border with the rest of Georgia in order to
defuse tensions before they escalate. On April 23, the first meeting of the incident
team was convened in the Georgian town of Ergneti, with the participation of the
Georgian and South Ossetian sides, as well as representatives of the Russian
Ministry of Defense, the OSCE and the EU. Meetings have been held
sporadically since then.
• The May 2009 Geneva conference meeting almost broke up, with Russia
delaying proceedings until a report was issued by the U.N. Secretary General on
Abkhazia. The report, issued after the Russia walkout on May 19, was deemed
suitable and proceedings resumed on May 20. At issue was a Russian demand
that the acronym UNOMIG not appear in the report. Although dropping the
acronym, the U.N. Secretary General nonetheless stressed that “the ceasefire
regime ... has continued to erode. Heavy military equipment and military
personnel [from Russia] have remained in the Mission’s area of responsibility.”41
• At the July 2009 Geneva conference meeting, the sides discussed setting up an
incident prevention office along Abkhazia’s border with the rest of Georgia. A
meeting in Gali to establish the office was held on July 14, 2009. Meetings are
held at roughly 2-3 week intervals.
On September 30, 2009, a special EU fact-finding mission led by Swiss diplomat Heidi Tagliavini
released a report on the origins and outcome of the August 2008 Russia-Georgia conflict. On the
one hand, the mission concluded that “open hostilities began with a large-scale Georgian military
operation against the town of Tskhinvali [in South Ossetia] and the surrounding areas, launched in
the night of 7 to 8 August 2008. Operations started with a massive Georgian artillery attack.” The
mission also argued that the artillery attack was not justifiable under international law. However,
it also argued that the artillery attack “was only the culminating point of a long period of
increasing tensions, provocations and incidents” by the parties to the conflict. On the other hand,
the mission suggested that “much of the Russian military action went far beyond the reasonable
limits of defense,” and that such “action outside South Ossetia was essentially conducted in
violation of international law.” In Abkhazia, actions by Russian-supported militias in the upper
Kodori Valley “constituted an illegal use of force ... not justified under international law.” The

40 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Testimony of Philip H. Gordon, Assistant Secretary for European and Eurasian Affairs, August 4, 2009.
41 U.N. Security Council. Report of the Secretary-General Pursuant to Security Council Resolutions 1808 (2008), 1839
(2008) and 1866 (2009) S/2009/254
, May 18, 2009. See also Georgian Ministry of Foreign Affairs. Information for the
Press on the Issues Discussed During the Fifth Round of the Geneva Discussions
, May 19, 2009.
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mission likewise asserted that actions by South Ossetian militias “against ethnic Georgians inside
and outside South Ossetia, must be considered as having violated International humanitarian law
and in many cases also human rights law.”42 Commenting on the release of the report, a U.S. State
Department spokesman stated that “we recognize that all sides made mistakes and
miscalculations through the conflict last year. But our focus is on the future....”43
Economic Conditions, Blockades, and Stoppages
The economies of all three South Caucasus states greatly declined in the early 1990s, affected by
the dislocations caused by the breakup of the Soviet Union, conflicts, trade disruptions, and the
lingering effects of the 1988 earthquake in Armenia. Although gross domestic product (GDP)
began to rebound in the states in the mid-1990s, the economies remain fragile. Investment in oil
and gas resources 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 émigrés have provided major support
for the remaining populations.
The global economic downturn that began in 2008 has hampered Armenia’s economic growth and
added to Georgia’s economic stresses in the wake of the August 2008 conflict. Azerbaijan claims,
however, that GDP grew 9.3% in 2009. The influx of international assistance to Georgia has
ameliorated to some degree the impact of the conflict and the world economic crisis.
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. 44 According to the U.S. Embassy in Baku, Azerbaijan’s Nakhichevan
exclave “is blockaded by neighboring Armenia.” Since 2006, Russia has severely restricted
agricultural trade and land, air, and sea links with Georgia. Russia hinders Azerbaijan’s use of the
Volga-Don Canal to reach world shipping channels. Russia has at times cut off gas supplies to
Georgia. During the August 2008 Russia-Georgia conflict, Russia’s effective blockade of
Georgia’s Black Sea ports disrupted trade shipments to and from Armenia. In the wake of the
conflict, gas transit from Russia to South Ossetia via other Georgian territory was disrupted, with
each side blaming the other, until service was restored in late January 2009. In late August 2009,
Russia completed construction of a 110-mile gas pipeline from North Ossetia to South Ossetia to
avoid transiting Georgia. Trans-border road traffic between Georgia and the regions of South
Ossetia and Abkhazia is severely restricted. Armenia criticizes Georgia’s refusal to reopen a
section of railway transiting the country to Abkhazia and Russia.

42 Report of the Independent International Fact-Finding Mission on the Conflict in Georgia, Vol. 3.
43 U.S. Department of State. Daily Press Briefing, September 30, 2009.
44 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.” 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. The signing of the Armenia-Turkey Protocols reportedly has not affected work on
the railway, which reportedly will be completed in 2011.
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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)45 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 were designed to convince Turkey to allow the transit of
U.S. aid to Armenia. (See also above, “The Roles of Turkey, Iran, and Others.”)
Recent Democratization Problems and Progress
Armenia
Armenia’s presidential election was held on February 19, 2008. Prime Minister Sarkisyan was
nominated by the Republican Party and endorsed by outgoing President Robert Kocharyan. He
ran against eight other candidates. According to final results issued by the Central Electoral
Commission, Sarkisyan was the winner with 52.82% of 1.67 million votes cast, followed by
Levon Ter-Petrossyan with 21.5% and Arthur Baghdasaryan with 16.7%. Election observers from
the OSCE, Council of Europe (COE), and European Parliament (EP), issued a final 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....”46
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. 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 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. The state of emergency was lifted on March 21, but a new
law limited 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, Sarkisyan 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 Sarkisyan as the prime minister, and announced that a new
coalition government would be composed of the four parties.47 The Armenian Revolutionary
Federation left the coalition in April 2009 in opposition to the negotiations on Armenia-Turkey
rapprochement. A legislative commission issued a report in September 2009 that although police
had made some mistakes, they had generally acted responsibly during the March 2008 incident.
Some opposition leaders and families of casualties disputed this finding.

45 P.L. 104-208, Sec. 559, amends the Foreign Assistance Authorization Act of 1961.
46 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.
47 ITAR-TASS, April 9, 2008.
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Azerbaijan
A presidential election was held on October 15, 2008. In early June 2008, the legislature approved
changes to the electoral code. Some of the changes had been 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.48 The opposition Azadliq (Freedom) party
bloc decided on July 20 that it would boycott the election on the grounds that the election laws
were not fair, their parties faced harassment, and media were constrained.49 Incumbent President
Aliyev won a resounding victory, gaining nearly 89% of the vote against six other candidates.
According to a report by election monitors from OSCE/ODIHR, the Parliamentary Assembly of
the Council of Europe (PACE), and the European Parliament (EP), the voting process was
peaceful, well organized, and efficient, but there was a “lack of robust competition and of vibrant
political discourse facilitated by media.” The observers also raised concerns that there appeared to
be “significant procedural shortcomings [in vote counting] in many cases, and manipulation in
some instances.”50
Proposed amendments to the constitution were overwhelmingly approved by citizens in a
referendum held on March 18, 2009. According to a small delegation from PACE, the voting
“was transparent, well organized, and held in a peaceful atmosphere.” They criticized the dearth
of discussion in the media of the merits of the constitutional amendments and voiced regret that
some changes to the amendments proposed by the Venice Commission were not made before they
were voted on. Some opposition parties had in particular objected to an amendment lifting term
limits on the presidency during a “state of war,” and had called for a boycott of the referendum.
After the vote, they claimed that the government’s report of turnout and results was
exaggerated.51
Georgia
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 Central Electoral Commission announced that NM won the largest share of the party list vote
and also 71 of 75 constituency races, giving it a total of 119 out of 150 seats in the legislature.
The United Opposition won a total of 17 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 had made efforts to conduct free and fair elections, but that “a number of
problems ... made this implementation uneven and incomplete.” Among the problems were a ban

48 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.
49 Open Source Center. Central Eurasia: Daily Report (hereafter CEDR), April 24, 2008, Doc. No. CEP-950216.
50 OSCE/PACE/EP. Republic of Azerbaijan Presidential Election, 15 October 2008: Statement of Preliminary Findings
and Conclusions, October 16, 2008.
51 CEDR, January 23, 2009, Doc. No. CEP-950024 and Doc. No. CEP-950276; February 23, 2009, Doc. No. CEP-
950103; March 19, 2009, Doc. No. CEP-950277.
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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-counting.52 Most United Opposition and Labor Party
deputies refused their seats. Two constituency seats were subsequently filled by Christian
Democrats in by-elections, but 13 seats remain unfilled.
In his address at the U.N. General Assembly on September 23, 2008, President Saakashvili
announced new democratization initiatives as a means to strengthen Georgia’s sovereignty and
independence and thereby prevent Russia from subverting Georgia’s statehood. He stated that the
judicial and legislative branches of government would be strengthened, that state funding would
be increased to opposition parties and they would have greater access to media, that trials by jury
and lifetime judicial appointments would be implemented, and that private property rights would
be expanded. In November 2008, Saakashvili stated that reforms in the appointment of judges
were being worked out, that judges were beginning to be appointed for life, and that trial by jury
soon would be introduced.53
At an opposition demonstration on April 9, 2009, several parties called for Saakashvili to resign
and for new presidential and legislative elections to be held. Prominent oppositionists leading the
protest included former legislative speaker Nino Burjanadze, head of the Democratic Movement-
United Georgia Party, and former U.N. ambassador Irakly Alasania, head of the Alliance for
Georgia bloc. The demonstration was the beginning of continuous rallies that included the
blocking of transport routes. Police forcibly broke up the blockades and dispersed the protesters
just before Vice President Biden visited Georgia in July 2009.The law on assemblies also was
amended to forbid protesters from blocking transport routes.
After lengthy attempts, President Saakashvili met with a few opposition leaders in April 2009 and
again in May to discuss setting up a constitutional commission to work out changes to the
political system. At the May meeting, he proposed that the constitutional commission be headed
by an opposition-approved representative; that oppositionists be appointed to ministerial posts;
that oppositionists receive equal representation on the board of public television, and that the
electoral code and judicial code be reformed. In June 2009, President Saakashvili formed the
constitutional commission and the former president of the Constitutional Court, Avtandil
Demetrashvili, was appointed chairman. Demetrashvili and others called for moving toward the
creation of a bicameral, “European-style” parliamentary form of government.54 In July 2009,
President Saakashvili called for the commission to limit the president’s ability to dissolve
parliament. He also called for electoral reforms to be completed by the end of the year, for the
date of local elections to be moved up, for penalties for interference with the judiciary to be
increased, and for opposition and civil society representatives to have seats on the public
broadcasting board. Some of these changes are being implemented. The work of the
Constitutional Commission appeared disrupted in November 2009 when Demetrashvili and other
members denounced Saakashvili for failing to consult it before he announced an “Economic

52 OSCE. International Election Observation Mission. Georgia: Parliamentary Elections, 21 May 2008, Statement of
Preliminary Findings and Conclusions, May 22, 2008.
53 In late 2008, the International Crisis Group (ICG), a non-governmental organization, warned that government-
opposition tensions could rise and that Georgia might lose international donor support for rebuilding unless Saakashvili
stepped up his democratic reform efforts. ICG. Georgia: The Risks of Winter, November 26, 2008.
54 EIU, Georgia Country Report, June 4, 2009. Open Source Center. Central Eurasia: Daily Report, May 11, 2009,
Doc. No. CEP-950119; May 18, 2009, Doc. No. CEP-950073; June 4, 2009, Doc. No. CEP-950186; June 8, 2009, Doc.
No. CEP-950139.
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Liberty Act,” which would alter the constitution by setting limits on budgetary spending, taxes,
and other matters that presently are under the purview of the legislature.
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-FY2007 (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-
FY2007 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 about $34 million from FY1998 through FY2009. In the
Omnibus Appropriations Act for FY2009 (P.L. 111-8) and the Consolidated Appropriations Act
for FY2010 (P.L. 111-117) up to $8 million is made available for NK.55 Actual aid to NK has been
about $2 million per year since FY2002. 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) deemed that Georgia was eligible as a democratizing country for assistance,
even though it did not meet criteria on anti-corruption efforts. In September 2005, MCC signed a
five-year, $295.3 million agreement (termed a “compact”) with Georgia 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. In the wake of the August 2008 Russia-Georgia conflict, the MCC
announced plans for an extra $100 million for road-building, water and sanitation facilities, and a
natural gas storage facility. The MCC reported in June 2009 that it had so far disbursed $114.5
million (39% of the compact amount) 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

55 Several Azerbaijani legislators protested the conference agreement to H.R. 3288 (P.L. 111-117) to direct up to $8
million in humanitarian aid to NK. Some legislators and the Azerbaijani presidential administration reportedly
suggested that such aid be shared with those who had fled the region. An Azerbaijani Foreign Ministry note to the State
Department said that the aid “decreases confidence and trust toward the United States in Azerbaijan.” CEDR,
December 16, 2009, Doc. No. CEP-950112; December 20, 2009, Doc. No. CEP-95002; January 4, 2010, Doc. No.
CEP-950063; OSC Report, January 12, 2010.
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
(continued...)
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After the political turmoil in Armenia in March 2008, the MCC indicated that as an expression of
its “serious concern,” it would halt contracting for road-building. In response, the Armenian
government stated that it would devote $16.8 million of its own funds to carry out initial road-
building. In December 2008, the MCC Board reiterated its concerns about democratization
progress in Armenia and decided to retain the suspension of some road work, while moving ahead
on other projects. In June 2009, the MCC Board announced that it was cancelling $67.1 million in
funding for the road building project because of Armenia’s halting democratization, although
other projects would continue.57 The MCC reported that as of June 2009 it had disbursed $37.9
million (15% of the compact amount) to Armenia.
U.S. Assistance After the Russia-Georgia Conflict
To address Georgia’s urgent humanitarian needs in the wake of the August 2008 Russia-Georgia
conflict, the U.S. Agency for International Development (USAID) and the Defense and State
Departments provided Georgia with urgent humanitarian assistance. The Defense Department
announced on September 8 that it had completed its naval and air delivery of these urgent
humanitarian supplies to Georgia.
On September 3, 2008, then-Secretary of State Rice announced a multi-year $1 billion aid plan
for Georgia. The Administration envisaged that the proposed $1 billion aid package would be in
addition to existing aid and requests for Georgia, such as FREEDOM Support Act assistance. The
added aid was planned for humanitarian needs, particularly for internally displaced persons, for
the reconstruction of infrastructure and facilities that were damaged or destroyed during the
Russian invasion, and for safeguarding Georgia’s continued economic growth.58
Congress acted quickly to flesh out the Administration’s aid proposals for Georgia. The
Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (H.R.
2638/P.L. 110-329), signed into law on September 30, 2008, appropriated an additional $365
million in aid for Georgia and the region (beyond that provided under continuing appropriations
based on FY2008 funding) for humanitarian and economic relief, reconstruction, energy-related
programs and democracy activities. Of that amount, $315 million was actually budgeted for
Georgia.
The State Department announced in early December 2008 that $757 million of the pledged $1
billion in new assistance had been provided or was in the process of being provided to Georgia,
with the balance to be appropriated by the next Congress. The Supplemental Appropriations Act
for FY2009 (P.L. 111-32; signed into law on June 24, 2009) provided an additional $242 million

(...continued)
Expresses Concern Regarding Irregularities in the November Referendum, December 19, 2005; and Ambassador
Danilovich’s letter to Armenian President Robert Kocharyan, January 18, 2006, at http://www.mcc.gov. See also
Armenian Foreign Ministry. Oskanyan Thanks MCC for Millennium Compact, January 12, 2006, at
http://www.armeniaforeignministry.com.
57 Emil Danielyan, “Armenia to Finance Road Project Frozen by U.S.,” Armenia Liberty, July 14, 2008; U.S. Embassy
in Yerevan. Background Information on the Status of the MCA-Armenia Program,” December 16, 2008; MCC. Press
Release: MCC Board of Directors Meets to Address U.S. Government Global Development Priorities
, June 10, 2009.
58 U.S. Department of State. Secretary Condoleezza Rice. Remarks On U.S. Economic Support Package for Georgia,
September 3, 2008; Briefing On U.S. Economic Support Package for Georgia, September 3, 2008.
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in Freedom Support Act assistance to Georgia, “the final portion of the $1 billion pledge.” See
Table 2.59
U.S. Security Assistance
The United States has provided some security assistance to the region, and bolstered such aid
after September 11, 2001. Gen. Bantz Craddock, then-Commander of the U.S. European
Command (EUCOM) testified in March 2009 that the “Caucasus is an important area for the
United States and its partners. Caucasus nations actively support Operation Iraqi Freedom and
ISAF by providing both with troops and land and air access for critical supply lines from
EUCOM to the CENTCOM area of responsibility. They provide alternative energy sources from
the Caspian Sea basin and alternative routes of access to Central Asian energy reserves. It is an
important region for European energy diversification.”60
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).61 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, including $6.5 million in Section 1206 funds to help Georgia with
equipment and operations in Iraq.62 SSOP was again extended in FY2008 and funded at $71
million, including $11.5 million in Section 1206 funds for special forces training and equipment.
Prior to the Russia-Georgia conflict, the U.S. was providing initial military training to Georgia’s
4th Brigade for its eventual deployment to Iraq in Winter 2008.63 U.S. training for 730 troops for
deployment to Afghanistan was launched in late August 2009 using $24 million in Coalition
Readiness Support Program (CRSP) funds, and included an October 2009 bilateral training
exercise termed “Immediate Response.” The first 173 Georgian troops left for training in
Germany in November 2009 prior to deployment to Afghanistan.
The Clearinghouse aims to facilitate cooperation by sharing data on security assistance among
both donor and recipient countries. Gen. Craddock testified in March 2008 that the 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

59 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Statement of S. Ken Yamashita, Acting Assistant Administrator for the Bureau for Europe and Eurasia,
United States Agency for International Development
, August 4, 2009.
60 U.S. House of Representatives. Committee on Armed Services. Testimony by Gen. Bantz J. Craddock, March 24,
2009. See also CRS Report RL30679, Armenia, Azerbaijan, and Georgia: Security Issues and Implications for U.S.
Interests
, by Jim Nichol.
61 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.
62 “U.S. Allocates $30 mln for SSOP Army Training Program,” Civil Georgia, July 17, 2006.
63 Senate Armed Services Committee. Hearing on the Georgia-Russia Crisis: Implications and U.S. Response.
Testimony of Eric S. Edelman, Under Secretary of Defense for Policy, September 9, 2008.
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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.”64 (This program appears to combine elements of the former Caspian Guard
and Hydrocarbons programs.) In FY2008, $1.7 million in Section 1206 funds were supplied for
naval counter-terrorism training for Azerbaijan. The United States acknowledged in late 2005 that
it had supplied two maritime surveillance radars to Azerbaijan to help detect and direct
interdiction of illicit weapons of mass destruction and other trafficking in the Caspian Sea.65
In the wake of the August 2008 Russia-Georgia conflict that severely damaged Georgia’s military
capabilities, Gen. Craddock visited Georgia on August 21 to survey the destruction of
infrastructure and military assets. According to Assistant Secretary of Defense Vershbow,
EUCOM carried out a “comprehensive multi-month assessment of Georgia’s Armed Forces.” In
October 2008, the Defense Department also held yearly bilateral defense consultations with
Georgia. Vershbow testified that as a result of these assessments, “many previously unrecognized
or neglected deficiencies in the various required capacities of the Georgian Armed Forces and
Ministry of Defense [came to light]. In practically all areas, defense institutions, strategies,
doctrine, and professional military education were found to be seriously lacking.”66
In March 2009, Gen. James Cartwright, the Vice Chairman of the Joint Chiefs of Staff, visited
Georgia to further assess its defense needs. He stated that “the United States remains committed
to the U.S.-Georgia charter on strategic partnership and to provide training and other assistance to
the Georgian military in support of their reform efforts and continued independence.” He pledged
added training that would be “focused on the defense of Georgia, on its self and internal defense,”
and equipment transfers that would be based on “what equipment needs to be upgraded and then
what new types of equipment that are necessary for their homeland defense.”67 Assistant
Secretary Vershbow similarly testified in August 2009 that “we are focusing on building defense
institutions, assisting defense sector reform, and building the strategic and educational
foundations that will facilitate necessary training, education, and rational force structure design
and procurement. We are assisting Georgia to move along the path to having modern, western-
oriented, NATO-interoperable armed forces capable of territorial defense and coalition
contributions.”68 He stressed, however, that “the United States has not ‘rearmed’ Georgia as some
have claimed. There has been no lethal military assistance to Georgia since the August [2008]
conflict. No part of the $1 billion U.S. assistance package went to the Ministry of Defense.”69 In
addition, no FMF, IMET, Section 1206, or Section 1207 assistance has been provided. Some in

64 U.S. Senate. Committee on Armed Services. Statement of General Bantz J. Craddock, March 13, 2008.
65 “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.
66 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Testimony of Alexander Vershbow, Assistant Secretary of Defense for International Security Affairs,
August 4, 2009.
67 Air Force Master Sgt. Adam Stump, “U.S., Georgia to Continue Strategic Partnership,” American Forces Press
Service
, March 31, 2009; CEDR, March 30, 2009, Doc. No. CEP-950352; Giorgi Lomsadze, “Georgia: Pentagon to
Start Military Training Program,” Eurasia Insight, March 30, 2009.
68 Vershbow, August 4, 2009.
69 U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One Year After the
August War. Testimony of Alexander Vershbow, Assistant Secretary of Defense for International Security Affairs,
August 4, 2009.
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Congress and elsewhere have criticized this dearth of lethal security assistance to bolster
Georgia’s territorial defense capabilities.70
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.
• Troops from Armenia, Azerbaijan, and Georgia have served as peacekeepers in
the NATO Kosovo Force (KFOR). Although Azerbaijan and Georgia have
withdrawn their peacekeepers from Kosovo, 70 Armenian peacekeepers continue
to serve in KFOR.
• All three regional states have deployed troops to support ISAF in Afghanistan.
Azerbaijan’s cooperation with NATO allegedly may have cooled in recent
months. It reportedly joined Turkmenistan in denying overflights for AWACS
aircraft bound for Afghanistan, and declined sending more troops to
Afghanistan.71
Although the United States 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.72 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 the issue of a MAP for Georgia would be revisited later in the year.73
After the August 2008 Russia-Georgia conflict, several allies raised heightened concerns that
Georgia was not ready to be granted a MAP because of the destruction of much of its military
infrastructure by Russia, the uncertain status of the breakaway regions, and the uncertain quality
of conflict decision-making by Georgia’s political and military leadership. At a NATO foreign
ministers’ meeting in early December 2008, then-Secretary of State Rice appeared to
acknowledge these allied concerns by embracing a proposal to defer granting a MAP. The allies
instead agreed to step up work within the Georgia-NATO Council (established soon after the
Russia-Georgia conflict) to facilitate Georgia’s eventual NATO membership, and to prepare
annual plans on Georgia’s progress toward eventual membership. The first annual national plan
was worked out during meetings of the Georgia-NATO Council and started to be implemented in
May 2009.

70 U.S. Senate. Committee on Foreign Relations. Striking The Balance: U.S. Policy And Stability In Georgia, a Report
to the Committee on Foreign Relations
, S. PRT. 111–37, December 22, 2009; Joshua Kucera, “Georgia: Senate Staff
Report Stokes Unease in the Caucasus,” Eurasia Insight, January 5, 2010.
71 Open Source Center. Europe: Daily Report, November 17, 2009, Doc. No. EUP-85004.
72 NATO. North Atlantic Council. Riga Summit Declaration, November 29, 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.
73 See also CRS Report RL34701, NATO Enlargement: Albania, Croatia, and Possible Future Candidates, by Vincent
Morelli et al.
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The U.S. Congress approved the NATO Freedom Consolidation Act of 2007, signed into law in
April 2007 (P.L. 110-17), to urge NATO to extend a MAP for Georgia and to designate Georgia as
eligible to receive security assistance under the program established by the NATO Participation
Act of 1994 (P.L. 103-447).
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. The Congressional Budget Justification for Foreign
Operations for FY2010
, however, called for $3 million in FMF and $450,000 for IMET for
Armenia, and $4 million and $900,000, respectively, for Azerbaijan. The Consolidated
Appropriations Act for FY2010 (P.L. 111-117), sets FMF for both countries at $3 million. In
addition, the conference agreement calls for the Administration to continue to follow
Congressional conditions on assistance to Azerbaijan.
U.S. Trade and Investment
The former Bush Administration and others have maintained 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 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.74 Critics argue
that oil and gas from Azerbaijan will amount to a tiny percent of world exports of oil and gas, but
successive U.S. administrations have argued that these exports would nonetheless boost energy
security somewhat for European customers currently relying on Russia.
U.S. energy strategy in Eurasia aims to encourage the development of new oil and gas resources;
promote efficiency and conservation; assist Europe in boosting its energy security; and help

74 U.S. Department of Energy. Energy Information Administration. Azerbaijan Country Analysis Brief, December
2007.
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Caspian regional states develop new export routes, so that they “can increase competition for
their resources and demand a higher price,” according to Richard Morningstar, the Special Envoy
for Eurasian Energy. He testified to Congress in July 2009 that the strategy may be summed up as
focusing on increasing the “diversity of suppliers, diversity of transportation routes, and diversity
of consumers.” He denied that the strategy is aimed against Russia, but endorsed the building of
regional export pipelines that compete with those proposed by Russia, including the EU-backed
“southern corridor to bring Caspian natural gas to Europe. This corridor should include [the
planned Nabucco gas pipeline from Turkey to Austria and the Turkey-Greece-Italy (TGI) gas
pipeline], both of which we support. These projects will form a long-term bond between the
countries of the Caspian region, Turkey and Europe.”75 According to this strategy, the
construction of such pipelines will bolster the strategic importance to the West of stability and
security in the Caspian region.76
Ambassador Morningstar has argued that Azerbaijan will be able to supply at least some if not
most of the needed gas for both the TGI and the first phase of the Nabucco pipeline. In March
2007, Azerbaijan and the United States signed a memorandum of understanding on energy
cooperation that called for discussions on the proposed TGI and Nabucco gas pipelines. 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 Central
Asia to the BTC pipeline and the SCP.
Building the Baku-Tbilisi-Ceyhan and South Caucasus Pipelines
During the Clinton Administration, the United States in 1995 encouraged the building of one
small oil pipeline (with a capacity of about 155,000 barrels per day) from Azerbaijan to the
Georgian Black Sea port of Supsa 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
Baku-Tbilisi-Ceyhan (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. The first
tanker on-loaded Azeri oil at Ceyhan at the end of May 2006. SOCAR reported in June 2009 that
the BTC pipeline had transported 621.8 million barrels of oil to Ceyhan since 2006. Reportedly,
some Azerbaijani oil reaches U.S. markets.
A gas pipeline from Azerbaijan to Turkey (termed the South Caucasus Pipeline or SCP) was
completed in March 2007. Exports to Georgia and Turkey were 53 billion cubic feet of gas in
2007 and more than 160 billion cubic feet in 2008. The ultimate capacity of the SCP is about 706
billion cubic feet per year, according to British Petroleum. The joint venture 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 the BTC and SCP pipelines.

75 U.S. Senate. Committee on Foreign Relations. Hearing on Instability, Terrorism, and Economic Disruption in
Relation to Oil. Testimony by Richard Morningstar, Special Envoy for Eurasian Energy, July 16, 2009.
76 Sedat Laciner, “Turkey’s Pipeline Politics,” The Journal of Turkish Weekly Online, International Strategic Research
Organization, September 16, 2009.
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The August 2008 Russia-Georgia conflict did not result in physical harm to the BTC pipeline or
the SCP. The BTC pipeline was closed due to other causes. The SCP and the small Baku-Supsa
oil pipeline were closed temporarily as a safety precaution. Russian gas shipments via Georgia to
Armenia decreased in volume for a few days at the height of the conflict. Rail shipments of oil by
Azerbaijan to the Kulevi oil terminal (owned by Azerbaijan) on Georgia’s Black Sea coast were
disrupted temporarily.
At the end of October 2008, the first oil from Kazakhstan started to be pumped through the BTC
pipeline. Reportedly, about 70,000 barrels per day of Kazakh oil is being barged across the
Caspian Sea to the BTC pipeline. In addition, some Kazakh oil is barged to Azerbaijan to be
shipped by rail to Georgia’s Black Sea port of Batumi. Kazakhstan plans to increase its shipments
to Azerbaijan to 500,000 barrels per day by 2012.
Some observers argue that the completion of the BTC and SCP has boosted awareness in the
European Union and the United States of the strategic importance of the South Caucasus.77 In
mid-November 2007, Greek Prime Minister Kostas Karamanlis and Turkish Prime Minister Rejep
Tayyip inaugurated a gas pipeline connecting the two countries. Since some Azerbaijani gas
reaches Greece, the pipeline represents the first gas supplies from the Caspian region to the EU. If
a pipeline extension is completed to Italy, this TGI gas 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 the potential
Nabucco gas pipeline. In June 2007 and at subsequent forums, former Deputy Assistant Secretary
Bryza 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 may reduce the efficacy of the Nabucco pipeline and to
questions about supplies for the pipeline. Latest EU planning calls for construction on the
Nabucco pipeline to begin in 2010 and be completed in 2014.
Some analysts raise concerns that there will not be enough Azerbaijani gas to fill either the TGI
or Nabucco pipelines (deliveries will be 406 billion cubic feet per year for TGI and 158 to 459
billon cubic feet per year for Nabucco) without a trans-Caspian gas pipeline or Iran’s
participation.78 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.
At a meeting in early May 2009 in Prague, the EU, Azerbaijan, Georgia, Turkey, and Egypt
signed a declaration on a “Southern [energy] Corridor” to bolster east-west energy transport. The
declaration called for cooperation among supplier, transit, and consumer countries in building the

77 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.
78 U.S. Department of State. Transcript: U.S. Official Discusses Energy Security Agreement with Azerbaijan, March 22,
2007; Associated Press, June 6, 2007.
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Nabucco gas pipeline, finishing the Italian section of the TGI gas pipeline, and other projects.
Richard Morningstar, the U.S. Special Envoy for Eurasian Energy, stated that the Obama
Administration supported the “Southern Corridor” program and endorsed an EU proposal to
consider forming a private “Caspian Development Corporation” to assist Turkmenistan in
developing gas fields and pipelines to transport Turkmen gas across the Caspian.79
One difficulty hindering construction of Nabucco appeared to be worked out in late June 2009,
when the EU announced that it had reached an agreement with Turkey and the members of the
Nabucco consortium that permitted Turkey to drop its demand for the right to 15% of the natural
gas pumped through the link at preferential prices, reportedly in return for some assurances on the
security of supplies. An intergovernmental agreement on transit arrangements for Nabucco was
signed in Turkey by five countries on July 13, 2009.
In recent months, Azerbaijan has stepped up its efforts to diversity the routes and customers for
its gas exports beyond the SCP and the planned Nabucco route. President Aliyev has attributed
some of this increased interest in added gas export routes—including to Russia and Iran—to the
country’s difficult negotiations with Turkey over gas transit fees and prices (excluding the agreed-
upon arrangements for Nabucco).80 In October 2009, Azerbaijan’s State Oil Company (SOCAR)
and Russia’s Gazprom gas firm signed agreements that SOCAR would supply 17.7 billion cubic
feet of gas per year to Russia beginning in 2010. The gas would be transported by a 140-mile gas
pipeline from Baku to Russia’s Dagestan Republic that was used until 2007 to supply Azerbaijan
with up to 282.5 billion cubic feet of gas per year. Reportedly, the amount supplied will double in
2011. The small amount of gas initially involved is not expected to impact plans for supplying
Nabucco.
Regional Energy Cooperation with Iran
On March 19, 2007, Armenia’s then-President Robert Kocharyan and Iranian President Mahmoud
Ahmadinejad inaugurated an 88-mile gas pipeline from Tabriz in Iran to Kadjaran in Armenia.
Work was completed on the second section of the pipeline, a 123 mile section from Kadjaran to
Ararat, in December 2008. The Russian-controlled ArmRosGazprom joint venture built this
second section and operates the pipeline. Initial deliveries reportedly are 10.6-14.1 billion cubic
feet of gas per year, with plans for more gas deliveries in future years. Some of this gas will be
used to generate electricity for Iran and Georgia, but the remainder eventually may satisfy all
Armenia’s consumption needs, alleviating its dependence on Russian gas transported via
Georgia.81
At the end of 2005, Azerbaijan began sending about 7 billion cubic feet of gas per year through a
section of Soviet-era pipeline to the Iranian border at Astara, partly in exchange for Iranian gas
shipments to Azerbaijan’s Nakhichevan exclave. On November 11, 2009, Azerbaijan signed an

79 U.S. Department of State. Press Release: Remarks at the EU Summit “Southern Corridor-New Silk Road,” May 8,
2009.
80 Vladimir Socor, Eurasia Daily Monitor, October 21, 22, 29, 2009; “SOCAR and Gazprom Sign Small But Strategic
Gas Supply Deal,” Global Insight, June 30, 2009; Jennifer DeLay, “Bolstering the Case for Nabucco: Germany’s RWE
is Working to Resolve Doubts About the Nabucco Project’s Access to Funding and Gas Supplies and about
Competition from Other Gas Pipelines,” FSU Oil and Gas Monitor, December 9, 2009.
81 Platt’s Commodity News, May 31, 2007.
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accord with Iran to supply 17.7 billion cubic feet of gas annually through the pipeline. These
boosted gas supplies may begin in the winter of 2009-2010 and could increase in coming years.
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Table 1. U.S. Foreign Aid to the Region,
FY1992-FY2007, FY2008, FY2009, and the FY2010 Request
(millions of dollars)
South Caucasus
FY1992-FY2007
FY2008
FY2009
FY2010
Country
Budgeted Aida
Actualb
Estimateb
Requestb
Armenia 1,746.08
62.634
52.3
34.86
Azerbaijan 753.26
26.841
24.946
30.135
Georgia 1,898.64
378.85c 309.2d 83.05
Regional 38.73
---
---
---
Total 4,436.71
468.325
386.446
148.045
Percent 13.6
64
67
29
Sources: State Department, Congressional Budget Justification for Foreign Operations, FY2010, May 12, 2009.
a. FREEDOM Support Act and Agency budgets.
b. FREEDOM Support Act and other Function 150 funds. Does not include Defense or Energy Department
funding, funding for exchanges, Peace Corps, or Millennium Challenge Corporation programs in Armenia
and Georgia.
c. Includes Economic Support Funding of $315.0 million (P.L. 110-329).
d. Includes $242 million in FREEDOM Support Act funding (P.L. 111-32).

Table 2. The $1 Billion in Added Aid to Georgia by Priority Area
(millions of dollars)
Area Level
Restoring Peace and Security
28.337
Strengthening Democracy, Governance, and
the Rule of Law
23.2
Economic Recovery and Growth
334.64
Aid to Internally Displaced Persons and Social
Recovery
123.323
Management Support
2.0
Direct Budget Support
250.0
Not Yet Al ocated
242.0
Total 1,003.5
Source: U.S. Senate. Committee on Foreign Relations. Subcommittee on Europe. Hearing on Georgia: One
Year After the August War. Statement of S. Ken Yamashita, Acting Assistant Administrator for the Bureau for Europe
and Eurasia, United States Agency for International Development, August 4, 2009.

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Figure 1. Map of the Region

Source: Map Resources. Adapted by CRS.

Author Contact Information

Jim Nichol

Specialist in Russian and Eurasian Affairs
jnichol@crs.loc.gov, 7-2289


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