The Caucasus and the Caspian: 1996-1997 Seminar Series

Harvard University
John F. Kennedy School of Government

Maps:

Map 1: The Caucasus Region.

Map 2: Existing and Potential Oil Export Routes From the Caspian Basin

Map 3: Former Soviet Union Crude Oil Pipeline and Port Constraints

Preface

Introduction:

Pipeline Dreams in the Caucasus, Fiona Hill

Perspectives from the New Independent States:

Georgian Politics and the Conflicts in Abkhazia and South Ossetia, Rusudan Gorgiladze

Georgia-Abkhazia Conflict: View From Abkhazia, Liana Kvarchelia

Conflicts and Prospects for Peace in the Caucasus, Jiriar Libaridian

Azerbaijan and the Caspian Basin: Pipelines and Geopolitics, Jayhun Molla-Zade

Dynamics of State-Building in Georgia, Ghia Nodia

Perspectives from the U.S. Government:

The Great Game: The Struggle for Caspian Oil, Jack Carter

Georgia and Russian Policy in the Caucasus., William Courtney

Azerbaijan: Oil, Domestic Stability and Geopolitics in the Caucasus, Michael Ochs

The Armenian Presidential Elections of 1996, Michael Ochs

Nagorno-Karabakh and United States Policy in the Caucasus, Joseph Presel

The Politics of Caspian Oil, Daniel Speckhard

US Interests in the Caucasus, Steven Young

Perspectives from the U.S. in the Region:

Samashki: Belief and Betrayal in a Chechen Town at War, Thomas Goltz

A Groundhog's View of Baku: An Inside View of the US Oil Industry in Azerbaijan, Charles Retondo

US, Iran, Russia and Turkey: "The Struggle for Azerbaijan", S. Rob Sobhani

Preface

The materials in this publication have been generated by the Strengthening Democratic Institutions Project's (SDI's) 1996-1997 seminar series on the "Caucasus and the Caspian" at the Kennedy School of Government's Center for Science and International Affairs, which was convened as a follow-up to the Project's 1995 report on conflict in the North Caucasus region: Russia's Tinderbox: Conflict in the North Caucasus and its Implications for the Future of the Russian Federation.

The purpose of the seminars is to explore broader strategic issues in the Caucasus and the Caspian basin, including: the war in Chechnya; the ongoing conflicts in Georgia, Nagorno-Karabakh, and North Ossetia-Ingushetia; the role of the Russian military; oil and pipeline politics in the Caspian; Russia's relations with Turkey, Iran and other regional powers; and increasing US engagement in the region.

This volume contains transcripts from the second series, offering perspectives from both the region and the US government. Each transcript includes a brief biography of the speaker, an abstract of the presentation, and an edited transcript of the individual presentation and subsequent discussion. The seminar by Stephen Young, Director of the Office of Caucasus and Security Affairs at the US State Department was off the record. Only the abstract from this presentation has been included.

The series is Chaired by SDI Associate Director Fiona Hill. The Rapporteur and Editor of the seminar series is SDI Research Associate Henry Hale. The series and the dissemination of the transcripts from the seminars will be continued in 1997-1998. Copies of materials from the first seminar series, and the 1995 report, are available on the SDI website at http://www.ksg.harvard.edu/csia/sdi/ or can be obtained in hardcopy by contacting Elena Kostritsyna at elena_kostritsyna@harvard.edu, fax: (617) 496-8779.

Harvard's Strengthening Democratic Institution's Project works to catalyze and provide support for three historic transformations taking place in Russia and the other republics of the former Soviet Union: to sustainable democracies, free market economies and cooperative international relations. The Project is a private, non-profit research initiative funded by the Carnegie Corporation of New York. Views expressed by individuals associated with the Project represent their own professional judgments and are not offered on behalf of any governments or other institutions.

Introduction

Pipeline Dreams in the Caucasus
Fiona Hill
September 1996

In 1994, the United States displayed a new interest in the Caucasus region of the former Soviet Union. High-level emissaries were dispatched and neglected regional leaders such as Geidar Aliev of Azerbaijan and Eduard Shevardnadze of Georgia were enthusiastically embraced. News stories about regional conflicts in the Caucasus that had previously been buried in the New York Times and the Washington Post were now featured in front-page articles and lead editorials.

The United States' new preoccupation with the Caucasus coincided with the disastrous Russian invasion of the secessionist Caucasian republic of Chechnya that occurred in December 1994. Prior to the invasion, Chechnya had been largely ignored by Moscow in spite of its persistent opposition to Russian rule in the Caucasus. From 1991-1994, the self-proclaimed independence of the republic of Chechnya-Ichkeria and the erratic behavior of its President, former Soviet General Dzhokhar Dudaev, were barely a blip on the international screen. The Byzantine rivalries of Chechnya's political factions were followed by only a few die-hard analysts and a handful of ethnographers in the US. Indeed, after the collapse of the USSR, the Caucasus region as a whole--consisting of Chechnya, the other autonomous Russian republics of the North Caucasus, and the newly independent states of Armenia, Georgia and Azerbaijan--was a mere "exotica".

International benign neglect notwithstanding, from 1988 the Caucasus was the proverbial "hotspot" of the former Soviet Union, a morass of ethno-political conflicts and bloody power struggles. Only two of a litany of small wars before Chechnya, in the Armenian enclave of Nagorno-Karabakh in Azerbaijan, and in the Georgian republic of Abkhazia, gained significant media and government attention in the United States--largely the result of the efforts of the influential US Armenian lobby and high-level sympathy for Eduard Shevardnadze, the former Soviet Foreign Minister who brought the Cold War to an end, and not an acknowledgement of the geopolitical importance of the Caucasus. The region's chronic instability was viewed in US Government circles as an issue of marginal concern.

Why then the US focus on the Caucasus in 1994, and Russia's almost simultaneous decision to launch a full-blown military operation in an obscure republic?

September 1994 brought the signing of the so-called "Contract of the Century": a $7.5 billion agreement between Azerbaijan's state oil company, SOCAR, and a consortium of major international oil companies--the Azerbaijan International Operating Company (AIOC)--to exploit Caspian Sea oilfields off Azerbaijan. This contract underscored the historic strategic significance of the Caucasus.

The Caspian Sea, bordered by Russia, Azerbaijan, Iran and the Central Asian states of Kazakhstan and Turkmenistan, has been a major commercial oil producing area since 1871. From the beginning, the region's oil industry has been dependent on foreign capital and technology. The Swedish Nobels and the French Rothschilds built considerable fortunes drilling wells and constructing railroads to carry oil from the Azerbaijani capital, Baku, to Georgian ports on the Black Sea. In World War I, control of Baku's oilfields was the goal of fierce competition among German, Turkish and British forces after the collapse of the Russian Empire. In World War II, the oilfields were a strategic objective in Nazi Germany's campaign against the Soviet Union.

The Caspian fields declined after the war, as the USSR concentrated on exploiting new resources in Siberia. In the late 1980s, however, expert estimates suggested that the Caspian still held somewhere in the range of 32 billion barrels of recoverable oil reserves. Only the reserves in the Persian Gulf are greater. Like the Nobels and Rothschilds before them, US oil companies were quick to appreciate the Caspian's potential. The AIOC was first established at the initiative of the US oil giant, AMOCO, in October 1991, while another major US company, Chevron, pioneered the development of Caspian reserves in Kazakhstan.

Caspian oil is, however, a difficult commodity to bring to world markets. The Caspian is a land-locked sea and transportation options inevitably lead across the territory of one the littoral states with a direct outlet to the major seaways. Only two states fall into this category: Russia and Iran, which respectively border the Black Sea with its outlet to the Mediterranean, and the Persian Gulf with its outlet to the Indian Ocean. The Iranian route to Persian Gulf ports is blocked by the US veto on trade with Iran. From Baku, that leaves the Russian option, the traditional Nobel and Rothschild route inland across Georgia to its Black Sea ports, and a new complex of pipeline routes across Georgia and Armenia to Turkey and its Mediterranean ports.

The Caucasus is the land bridge between the Caspian and Black Seas and all Russian, Georgian and Armenian routes lead through the region's most volatile territory: Chechnya and Nagorno-Karabakh. In September 1994, with the "Contract of the Century" signed and new Caspian oil scheduled for production, Caucasian instability became a major international problem for the first time. The question for the AIOC, and thus US oil companies, was which route across the Caucasus could ensure a reliable flow of oil to world petroleum markets? Russia was anxious to persuade the AIOC to favor its pipeline route across the Caucasus and Chechnya to the Black Sea port of Novorossiisk. In this context, Chechnya's declared secession from the Russian Federation became a major complicating factor.

Russia has protected its strategic interests in the Caucasus for three centuries. Since 1991, however, Moscow has seen its position in the region progressively decline. The independence of Armenia, Georgia and Azerbaijan, and their reorientation toward the West, have been accompanied by cultural, economic and political incursions by Turkey and Iran. Traditional geopolitical rivalries with Turkey and Iran, and Caspian oil were two of a number of compelling factors that focused Moscow's attention on reestablishing its dominance of the Caucasus.

Prior to 1994, Moscow had its eyes on a far more important Caucasian objective than Chechnya: Georgia, with its extensive Black Sea coastline, strategic bases, and land border with Turkey. Chechnya initially served as a useful counterweight to Georgia. Chechen mercenaries spearheaded fighting in Abkhazia that shattered the Georgian state. The Chechen republic provided a haven for deposed Georgian President Zviad Gamsakhurdia, whose surprise attack brought Eduard Shevardnadze to the point of capitulation in fall 1993. Georgia's eventual return to the Russian orbit coincided with the growth of international competition over pipeline routes. At this point, Chechnya became a liability.

Similarly, at this same juncture, the Caucasus became a concern of the United States. From the creation of the AIOC in 1991 to fall 1993, negotiations between the consortium and the Azerbaijani government had been stymied by political upheaval in Azerbaijan, including the forcible overthrow of two post-independence governments and the intensification of the war in Nagorno-Karabakh. In November 1993, an agreement in principle to proceed with the negotiations was finally initialed by a new Azerbaijani government under Geidar Aliev. The stakes for the United States in ensuring the signing of the final contract were high. US oil companies, including AMOCO, UNOCAL and Pennzoil, had a 44% stake in the agreement.

Oil and the security of energy supplies are a vital national and strategic interest for the United States which imports over 40% of its oil supplies. It was this vital interest that took the United States and the international coalition to war in the Persian Gulf to ensure the uninterrupted flow of oil from that region. Given the significance of the estimated Caspian Sea oil reserves, the United States government made the obvious connection that the exploitation of these resources would have a positive effect on the global energy balance--diversifying oil supplies and easing dependence on the volatile Persian Gulf--as well as bringing long-term commercial benefits. In the old US tradition, the flag eventually followed trade.

Three years of neglect of the Caucasus and Caspian had, however, taken their toll. With the exception of cordial, although hardly intense, relations with Armenia and Georgia, the United States' bilateral relations with the Caucasus and other littoral Caspian states were poor. There had been few high-level visits to the region, and relations with the crucial player in the proposed contract, Azerbaijan, were abysmal. In 1992, the US Congress excluded Azerbaijan from the Freedom Support act in response to its blockade of Armenia. The subsequent occupation of one fifth of Azerbaijan's territory by Armenian forces from Nagorno-Karabakh in Summer 1993 had not, however, led to similar sanctions against Armenia. The Azerbaijani government saw US policy in the region as partisan.

Since 1991, in the absence of US engagement, Turkey had operated as the West's surrogate in the Caucasus--ostensibly promoting the region's independent development and free interaction with the outside world. In practice, however, Turkey was more concerned with extending its own influence. Turkey's policy focused on securing the transportation of Caspian oil across its territory and affirming itself as the cultural and political model for the Turkish-speaking Caucasus and Central Asia. Turkish overtures in the Caucasus did little to further regional stability. Instead, they alienated Armenia and antagonized Russia.

The signing of the AIOC contract thus inspired a sea change in US government policy toward the Caucasus. This began with a state visit by Bill Clinton to the Caucasus and Azerbaijan in September 1994, and the participation of US Deputy Secretary of Energy, William White, in the signing ceremony for the oil consortium deal in Baku on September 20, 1994. Since fall 1994, the United States has acted aggressively to improve its bilateral relationships; mitigate the competition over pipeline routes that has threatened to exacerbate already tense relations among Russia, Georgia and Turkey; contain Iran's participation in the development of Caspian oil; and promote regional stability. These objectives have led the United States government to redress the balance in its treatment of Armenia and Azerbaijan; support the construction of multiple pipelines that offer every contender a stake in transportation; pressure Azerbaijan to exclude Iran from international oil consortia; and encourage international efforts to resolve the myriad Caucasus conflicts.

How successful has this new US policy been? On two fronts developments have been favorable to United States' interests. First, the Clinton administration has established a close relationship with Azerbaijani President Aliev, which has greatly facilitated the operations of US oil companies in Baku. Second, in October 1995, the AIOC agreed to transport the initial flow of Caspian oil through both Russia and Georgia in dual pipelines. This compromise decision prevented competition over routes from stalling the progress made in September 1994. On other fronts, however, there are a number of pitfalls for the United States.

Efforts to contain Iran, and the new US engagement in the region, have fostered a nominal alliance between Iran and Russia in the Caspian. In 1995, Iran was successfully shut out of the AIOC contract by direct US pressure on Baku, and US diplomacy was instrumental in preventing Russia from monopolizing the pipeline routes from Baku. In response, Iran and Russia have threatened to veto the further exploitation of Caspian oil if their interests are not taken into consideration. Both countries have challenged the ownership regime of the Caspian offshore oilfields, and asserted that the Sea is in fact a "lake," which implies that the Caspian is the common property of all littoral states and its offshore resources can not be divided into national sectors. In December 1995, Iran and Russia cemented the alliance by concluding a ten-year cooperation agreement in the specific issues of military, energy and oil, and declaring themselves "partners in strategic cooperation."

Both Russia and Iran have also established a presence in the international Caspian oil consortia. In April 1994, Moscow's political pressure on the Azerbaijani government secured a 10% stake for the Russian oil giant LUKoil in the AIOC. In June 1996, the Azerbaijan government also awarded the Iranian state oil company a 10% share in a new international consortium to develop offshore fields that did not involve US oil companies. So far, the US has managed to avoid any overt clashes with either Russia or Iran. In the case of Russia, since its heavy-handed treatment of Georgia in 1993, and the signing of the AIOC contract in 1994, Moscow's activities have been restrained everywhere except Chechnya.

US efforts to promote international mediation in regional conflicts have also met with mixed success. In Chechnya, repeated US admonitions and protests to the Russian Government were not a major factor in propelling the August 1996 peace process forward. In other Caucasus conflicts, US active support for the OSCE Minsk group process in Nagorno-Karabakh, and OSCE and UN initiatives in Georgia has yet to bring tangible results. United States unilateral and multilateral involvement in the mire of territorial claims and counter-claims in the Caucasus region has also been tempered by their complexity. The Caucasus is one of the world's most ethnically diverse regions, with its peoples spread across every state structure in the region, including Iran and Turkey. The ethnic mosaic, and considerable interaction between regional conflicts have traditionally bedeviled Great Power politics. Russia's experiences in the Caucasus in both the 19th and the 20th centuries, where "pacifications" turned into protracted and bloody wars, are a cautionary tale of attempting to play the various Caucasian sides against each other.

The United States, a new-comer to the region, needs to proceed with great caution, particularly since US security experts increasingly see the Caucasus as a major global trouble spot in terms of its instability, the potential export of terrorism, and its growing function as a conduit for arms and drugs. The war in Chechnya has already sparked terrorist acts in Turkey, and allowed for the infiltration of well-armed extremist groups from Iran and Afghanistan into the Caucasus. Investigative journalists in Russia have also alluded to a well-established narcotics trade route running from Pakistan and Afghanistan through Chechnya to European Russia and beyond.

Even though the Clinton administration has espoused a broader interest in the democratization and marketization of the Caucasus, as it has elsewhere in the former Soviet Union and Eastern Europe, the timing of US focus on the region implies that current US real interests are tied to Caspian Sea oil. Larger goals of promoting political and economic development are pursued in so far as they further oil security. Ironically, the drive to diversify energy resources has drawn the United States into a region as volatile as the Persian Gulf--and a region where the US has considerably less knowledge and experience in the rules of engagement.

Perspectives from the New Independent States

Georgian Politics and the Conflicts in Abkhazia and South Ossetia
Rusudan Gorgiladze
October 23, 1996

Dr. Rusudan Gorgiladze is Chief Staff Advisor to Eduard Shevardnadze and the Georgian President's Special Representative for Political Security and Conflict Settlement. She was trained initially as a psychologist, conducting the first part of her education in Tbilisi, the capital of Georgia, and then moving to Moscow for her Masters and Ph.D. degrees, which she completed at Patrice Lumumba Peoples Friendship University. She has been working for President Shevardnadze for four years. For the first two years, she was involved in furthering links with international organizations, particularly European organizations such as the European Union and the Council of Europe. For the last two years, she has concentrated on the conflicts in Abkhazia and South Ossetia. Dr. Gorgiladze visited Cambridge to participate in a workshop on conflict resolution with Harvard Law School's Program on Negotiation and the Conflict Management Group.

Abstract

Dr. Rusudan Gorgiladze began her talk by reviewing the different ways that conditions have greatly improved in Georgia since Eduard Shevardnadze came to power in March 1992. The problem of crime is finally coming under control, and the economy is emerging from the state of absolute collapse brought on by the disintegration of the USSR. The Georgian government has also made the important decision to settle all of its problems in a peaceful way. One approach has been participation in a program sponsored by Harvard Law School's Program on Negotiation and the Conflict Management Group. This Program has brought together leaders of Georgia and the separatist republic of South Ossetia in an informal setting, allowing the sides to build interpersonal understanding and a greater sense of mutual trust. Gorgiladze then turned to a discussion of Georgia's two main conflicts, in Abkhazia and South Ossetia. With Abkhazia, the two sides have recently begun to allow Russia a greater role in the peacekeeping process, with the UN moving more into the background, due to the belief that Moscow has the power to push the conflict to a close, if the Russian government applies itself. Nevertheless, the two sides remain at loggerheads, since Georgia rests on the position that internationally recognized borders should not be changed and that Abkhaz should join in a federation with Georgia, while Abkhazia declares that it will settle for nothing less that national state independence, or at the very most a confederation. The sides also agreed to station Russian-led peacekeeping troops in the region, but contrary to Georgian hopes, the effort to exchange some 300,000 refugees from the conflict to return has so far failed. Dr. Gorgiladze also noted that there have been problems in negotiations with the South Ossetians - just after an important memorandum was signed to further the peace process, the Ossetian side announced that it was holding its own presidential elections. Announcement that came as a surprise to the Georgian side. Abkhazia then announced its own elections one week later. Georgia is thus considering bringing the international community back in to play a stronger role in the conflict resolution effort. In concluding, Gorgiladze acknowledged that Georgia had effectively offered Russia the right to continue basing its forces in Georgia in return for preserving Georgia's territorial integrity and for bringing Abkhazia back into the Georgian polity. Also present at the seminar was Dr. Yanal Kazan, a representative of Abkhazia in the United States. The heated exchange between Dr. Gorgiladze and Dr. Kazan during the discussion section of the seminar reflected the persistent differences in the Georgian and Abkhazian positions and the current deadlock in bilateral relations.

Presentation

Gorgiladze: Thank you very much for coming, and thank you for giving me the chance to present my country to all of you. I want to express my deep gratitude to the Conflict Management Group and the Law School, with whom we have very worked very well over the last months.

First of all, I want to tell you how my trip here came about. I was invited by the Conflict Management Group, and then the UNDP representative in Georgia, with whom we are very close, to work on these issues. We thought that it might be useful for me to have a long trip to the United States, to have talks like this and to share our experience with academics and with officials. I started at Stanford University, CISAC (the Center for International Security and Arms Control). We had great discussions there. Since then, I have been in Houston, Orlando, Washington DC, and now here, and this is my last stop.

President Shevardnadze was very serious about this trip and the task of conflict settlement and gave me a short address to deliver to you. We have it on videotape; but we thought we would just read it to you. But it should be read in male voice and I have asked Keith Fitzgerald from the Conflict Management Group and the Law School to read it to you…

Fitzgerald: I'm not such a statesman, but I'll do my best. This is an address from President Shevardnadze. It says: "I would like to avail myself of this opportunity to extend my sincere greetings to you all on behalf of a country and people who have a three-millennia long history of statehood, and the last 2000 years of whose development is connected to the Christian faith and system of beliefs. My country is one of those which gained freedom and independence following the end of the Cold War and the collapse of the Soviet empire. You will know that freedom is the most costly prize, and Georgia, too, has made an enormous sacrifice to finally embark on the road of democratic development and market economy. Within a mere four or five years, we endured two civil wars - bloody conflicts in which thousands of the sons of my country died. In Abkhazia, real ethnic cleansing and genocide was committed against the Georgians. Nearly 300,000 of my co-patriots were expelled from their homes or executed. Chaos and war were raging when I returned to my homeland and received the unreserved support of the American people, my American friends and the US government. It was due to the assistance that you and my friends the world over provided that we have been able to heal the terrible wounds, create stability, achieve economic growth, and begin to revive Georgian ancient culture and science. The people breathe sighs of relief. It is true that we will suffer pain. Many of the wounds are yet to be healed. But the democratic process is irreversible, and the will of my people to build a truly independent and prosperous country is unwavering. Thank you for your support and help. Thank you for your glorious country.

Gorgiladze:
Thank you Keith. I want to express to the President great thanks since he was very busy, as all presidents are, but he especially because of our problems and our situation. However he was very nice to do this. This is his script in Georgian - he wrote it by himself, and I am going to sell it in thirty years.

I want to start not with history, since you mostly know the background of what is going on. My goal in being here is to share experience on how to settle the conflicts and how to proceed with democratic changes and democracy. My belief is that people have considerable problems in learning how to live in peace. It is much easier to live in war, since in war all human beings have one reaction, and it is much easier to react this way. This reaction is stress, very negative. But it is really very difficult for human beings and for nations to learn how to live in peace. This is the period that we are building now, and I think this is the most difficult and painful period, figuring out how to get all these things together and to go ahead with all the changes that we began so nicely. I will give you a general overview and then leave some time for questions.

First, what is going on right now in Georgia after five years of independence? It is generally recognized, by experts from all the organizations working with us and the whole international community that things are improving in Georgia. I mean by this, first, the settling of the criminal situation, which was terrible only two years ago. It was just terrible - I'm not afraid to express this. This was the result of the collapse and the situation in the whole of the former Soviet Union. We settled it, and I am very proud of this, because this is the background and basis for everything, for all changes, for all positive changes and normal conditions of life for people. It gave us the opportunity to think about the future in terms of real democracy, in terms of using the deepest values that we have and sharing these values with the rest of the world.

We understand that we are an independent country and that we love our motherland, but on the other hand that this universe is too small not to care about each other and not to take into account that we are dependent on each other. I am the representative of a small country, yet my belief is that what is going on there influences the rest of the world. I therefore want to put Georgia in the context of the whole Caucasus region. This is a very important region for all of us for many reasons which I will discuss briefly later.

What about other kinds of changes over the last two years? The economy has improved from a state of absolute collapse. It was suffering. I do not know how you can imagine it, but it was really very bad. We now get expertise from the IMF and the World Bank, and all of these structures which are helping us to rebuild, and things are improving a lot. I know that Mr. Courtney, the US Ambassador the Georgia, took part in an earlier seminar here and that this was the main subject of his talk. I want to thank him for allowing me not to address this issue in too much detail.

I also think that one of the most important changes has been the decision by the Georgian government to settle all of its problems in a peaceful way, by means of political settlements. This is the reality that we have now.

Now what about the main subject, the settling of the conflicts on the territory of Georgia? Georgia's territorial integrity is recognized by the whole World community, by all organizations which are able to express themselves. We have two conflicts, in South Ossetia and Abkhazia. I think that all of you know where these are on a map of Georgia.

What are the differences between these two conflicts, and what are the similarities, and what are the difficulties that we are encountering with them now? The Ossetian conflict is much older than the Abkhazian, in terms of the bloody stage of the conflict. I do not want to say that it is easier to settle than the other, but it seems that it can be settled in a shorter period of time for many reasons. Keith Fitzgerald is one of a number of people involved in a project working on this issue. They have held brainstorming sessions for us and the Ossetians in Oslo. The first session was in January, which I did not attend, but the second was in May. My personal opinion is that the informal nature of the sessions gave us the chance to be more sincere and to have a much more positive attitude because the environment enabled us to do this, even though all of us were decision-makers on our own stages. The first result, which I appreciate very much, is that we were able to establish human contacts between us, because the main deficit we have had is the absence of direct human contacts. Such contacts are very useful. I am not talking as a psychologist - I am saying this because all of us are human beings. It does not matter what we are doing - everything depends on our attitude and our will. The main thing in conflicts is the mistrust between people - not groups of people, but between people. The sessions were a great opportunity for us to show each other that we have no reasons to mistrust each other, and that we are human beings who have positive attitudes. Even though we had people who did not have such positive attitudes, the whole environment and the whole situation, and the strategy of brainstorming gave us the opportunity to be more useful in this process. I hope that this group will continue with the project, and perhaps they will pay more attention to the Abkhazian problem as well. We have had some results which are very useful, in my opinion. I do not want to connect them directly to this brainstorming, but they are part of it since this is only one of the kinds of activities that we have in settling this conflict. This is one of the activities which is informal, but which supports a lot of formal processes. I mean political processes, the negotiation process, and the work of expert groups on political and economic issues. As you know, we have a group of people working on four sides on economic issues. This is the joint control commission which meets every three months, dealing with the economic revival of this region, which is suffering a lot, and with things that might help settle problems.

There is another kind of activity, which is the political settlement process, the negotiation process. A couple of months ago, we had signed a memorandum of five sides (Georgia, South Ossetia, the North Ossetian Republic in the Russian Federation, the Russian Federation itself, and the OSCE, which acts as an observer-facilitator, since it has a mandate to be involved in the Ossetian conflict on a political level). Then we had this brainstorming session in May, and at the initiative of Mr. Chibirov, the chairman of the South Ossetian parliament, we set up a meeting between Mr. Shevardnadze and Mr. Chibirov in Vladikavkaz. We had the feeling that this was a very important meeting, and it concluded with a memorandum on concrete issues, expressing all the attitudes toward settling this problem, talks relating to status questions, and on concrete steps for creating special expert groups that will deal with the different issues we have between us.

Let me stop this story about South Ossetia right now in order to put together what I want to express about Abkhazia as well. What stage are we at in the Abkhazian conflict? We have two kind of activities. One is the effort toward a political settlement, working on protocol issues. In my opinion this is getting worse, but this is nevertheless an activity. There is another activity, the peacekeeping activity at the border. Previously, we had a lot of activities, for which I have papers where you can look for the dates and details - I do not want to present these to you right now, but if someone is curious about steps we took under the UN umbrella, they can take a look. One year and a half ago, all sides decided to make the Russian side more active in facilitating this process. The UN went more into the background, and became less active. This was the decision of all sides for many reasons. It is very clear that if Russia wants to settle this conflict, it can do this. So we trusted this and we believed it would be the best decision to give them a greater role in the settling of this problem. The decision was to bring in peacekeepers. Mostly, they are Russians even though they are called CIS country forces, and there are some people from the UN who are observers of this process.

What we have right now, at this stage, a couple of months ago, after the memorandum with the South Ossetians, is that work on the Abkhazian political protocol collapsed due to the Abkhazian side. This work stopped. What was the main issue? From our side, the main point of the protocol was that we are offering to the Abkhaz everything that a state can offer to another side in terms of what is recognized to be the highest standards of international law. This is a kind of federation. What are they speaking about? The Abkhaz are speaking about two equal countries which can have some agreement like a confederation. This is unacceptable to us. It is my opinion that we are justified in this for many reasons. The first reason is that this is political and juridical nonsense, since Georgia is recognized in its present borders by the international community, the UN and others. It means that it includes Abkhazia, as well. The state of Georgia, without Abkhazia, does not exist, de jure at least, and it is not recognized. This is the first and most broad argument.

What we have on the other hand is the peacekeeping forces. I am not afraid to acknowledge that the peacekeeping forces do not operate like bodyguards for the Abkhaz regime. The first issue, the first reason for keeping there, was to allow our 300,000 refugees (too many for our small country with only 5 million people, 3 million of which are native Georgians) to return to their homes. But this return collapsed.

One week after the South Ossetian and Georgian leaders signed and announced their memorandum, the Ossetian side made an announcement, which was a big surprise for us, that they were going to set a date for their presidential elections. During this same week, the Abkhazian side also announced that they would have elections to parliament. I want to direct your attention now to why these two things happened at the same time, and what was going on in the whole region at this time - to direct your attention to the papers which Mr. Lebed signed with Mr. Yandarbiev in Chechnya, what is going on around us, and so on. I know that there will be many questions on this, but I am not afraid to announce this. I also want to draw your attention to the organization named the Confederation of Caucasian Peoples, and when they were established as an organization, how they collapsed, and when they reanimated themselves. I want to direct your attention to all regional problems, and to take into account that everything that is going on in the Caucasus is connected with the goals, attitudes, and movements that surround us. This is because Caucasian wars, between Caucasian peoples, never existed. This was always nonsense. And I believe that these are not ethnic conflicts. These are political conflicts that are colored ethnically, since you always need an excuse, an explanation for conflict, and it is much easier to color it in ethnic terms.

What we have now in Georgia is the situation I referred to. The excuse of the Ossetians, when we asked them what was going on, and why one week ago we had a meeting and agreed to go ahead with these positive activities, was that they have a internal political crisis, and that it would be better to negotiate with an elected person, legitimately elected, who can act as a decision-maker. This is the situation we have now.

Our Parliament and our President, and our government, expressed their negative feelings toward this development, and we think that the credit we gave to the Russian facilitators for settling this conflict has now been spent. What could we have that is worse? Nothing. Now we are working on the issue of bringing back FOGs (Friends of Georgia), the international community, under the UN umbrella to settle this conflict. So one of the purposes of my trip is this, as well.

I also want to tell you about one major issue: the bilateral agreement between Georgia and Russia. You know that the main interest of the Russian Federation is to keep its military bases on our territory, and this has been openly announced. Our attitude to this has been that we understand the whole context of the situation, and we understand that we have to do something about settling all our problems and moving ahead with democratic changes. Thus we have an agreement like this, with a big condition. This condition is that these bases will be legitimized, on our territory, after the jurisdiction of Georgia is restored over the whole territory of Georgia. The reaction of the Russian Federation has been many-sided, as it always is, unfortunately, since some reactionary forces in Russia are doing one thing, while other people are doing other things and you never know how everything will be achieved. But the official explanation and the impression and expression of all these things are acceptable for us, and we are now proceeding with negotiations on all these issues. So this was the first time when our President and Parliament announced their straight attitude toward involving the Russians - we gave them credit, but it did not work in Abkhazia unfortunately.

So this is the situation. I do not want to finish my presentation with a negative feeling, but this is the situation that we have now. So if you have any questions.....

Discussion

Question: After the amount of killing that has gone on, is it really possible, practical, for people to go back to their homes in Abkhazia?

Gorgiladze: This is a problem for the peacekeepers. Our intent was to create conditions in which the people could go back. We did not succeed, and this is a big disappointment for us. Of course, we need security for them, and we need a normal situation and normal conditions for them to go back. This is the first issue in this problem. If the refugee problem is settled, everything will be settled, because the proposals we are offering the Abkhaz are the highest standards in terms of international law, and no other country can offer something better.

Question: But is it not true that the amount of killing that has gone on has produced such deep feelings, that it is unlikely that in the next 100 years you will really be able to have that kind of peace, that kind of stability? How can you erase the tragedy of the human rights abuses?

Gorgiladze: Unfortunately, this is not the first and last conflict on the earth, and this is not the first and last war on the earth. We have the experience and history of all nations. Everything can be settled. I can not agree with you about the next 100 years. Secondly, the attitude of people to this tragedy is very deep. As for me personally, my husband has cousins who are half Abkhazians, and who are living in Gagra. And even ethnic cleansing was recognized at a summit in Budapest, which was going on with Georgians there. I was worried, and a lot of Georgians were worried about all the things that were going on. This is a tragedy for all of us, and I think that our attitude has to be that this is the main problem that we have, somehow to change this attitude. Remember, I paid attention to the brainstorming session that the Conflict Management Group organized, and what they established. I remember the word "mistrust" and these things, and I think that this is the main issue we have to work on. Because to blame each other is a very easy thing, and to live in war is the easiest thing. How to live in peace, how to build this peace, how to build these new attitudes to each other after this bloody situation that we had there - I do not even want to think about its reality and the pain.

Question: To continue with the refugee question. You put the number of refugees at 300,000, but according to the last census, the Georgian population in Abkhazia was not more than 240,000, which is a big portion of the population. And I do not think that by 1992 the population could increase so significantly. But this could have happened, since it happened many times in the history of Abkhazia, when the population was artificially increased to great numbers so that the Abkhazians became a minority. But my question is: do you think it will be safe to bring back the refugees before a political solution is achieved, and do not you think that the refugees, and those who live in Abkhazia today, have the right to know what kind of relationship and arrangement is going to be in place between Abkhazia and Georgia before this process starts? As far as I know, and I think that the UN observer mission confirmed, and the Russian peacekeepers confirmed this figure, that around 60,000 people have already returned to the Gali region of Abkhazia.

Gorgiladze: I can give you papers, and you can read all kinds of numbers. I want to mention your reply concerning the Georgian attempts to make Abkhazians a minority. I will remind you of another story, when Abkhazians were like a minority, and the issue was not to enlist them in the Georgian army. Many Georgians were changing their names into Abkhazian names, artificially inflating the number of Abkhazians. We can play tennis like this. I do not want people to think that I have no arguments on this, even though my attitude is not to argue with you.

Your point of view reminds me of how things are so political, especially such arguments about which came first, the chicken or the egg. Of course, these problems are very connected - I mean, the political settlement and the return of the refugees. But my logic, quite understandable for me and for others, is: how can you settle this problem without the majority of your population. Whose representative is Mr. Ardzinba now? The representative of 50,000 people? And you know the percentage - how it was and what it was. Just tell me, by the way - I have this number of 50,000 from the same people that you have, that now there are only 50,000 people? So whose representative is Ardzinba now, and what elections is he going to hold? Do you think it's logical? Do think it's legitimized? Of course, we have to proceed in a parallel manner, but the main problem that we have to settle is to let refugees go back.

Question: My second question is: in recent statements the Georgian leadership quite bluntly offered its territory for military bases in exchange for Abkhazia. Do you think it is going to happen? Are you going to have the Russian military bases in Georgia, signing all kinds of further agreements with Russia?

Gorgiladze: This is not the correct formulation. I have already said what the correct formulation is. This is the restoration of Georgian jurisdiction over its whole territory. If you want to talk in these terms, we can, and I will remind you of the earlier stage of this, of how this was taken. I really do not want to do this, I say sincerely, so do not mention it like this because it's not true. The reality is that the condition, which was announced - and by the way, Russia agreed on this - was a bloody thing for us, for the state - can you imagine an independent state that offers another country territory for military bases? Of course, this is absolutely a bad thing. We understand it. This is the worst solution we can have. But this is the only one that we can see now because of the huge size of our neighbors and the use of force. We are not Kuwait and we know it very well. We are very realistic people. This is very painful for us, believe me. But unfortunately, this is the only way for us to do this.

Question: My name is Dr. Kazan. I am the representative of Abkhazia in the United States. I have been in the circles of the UN. I have met about 44 different missions of the UN, and am familiar with what kind of a Georgian lobbying machine exists at the UN level. I do not really have any questions for you. I serve Mr. Ardzinba in the same capacity in which you serve Mr. Shevardnadze, so I know the man very well.

Gorgiladze: We have to have dinner, I think!

Question: I hope so! But I really want to display one notion here. I like your presence. I welcome you here. I am a US citizen myself. But with all regret, I disagree with everything you said. Historically speaking, we are not Georgians. Historically speaking, we were annexed forcibly to Georgia in 1931. This is a fact - in 1931 it was wrongdoing by Stalin. In 1993, it was wrong to put us back with Georgia again. So we are not seceding from Georgia, and you can not make me feel cynical by labeling me in the halls of the UN as being separatist. You are in a country that prides itself for being separatist. England has claims on the 13 colonies and beyond that if your argument holds true. As far as the territorial integrity of Georgia, nobody supports it more than the Abkhaz forces because they stopped at the Inguri River when you were badly defeated three years ago. Never in the history of any military conflict, never, was a defeated party dictating peace after the defeat. And here you are, full of Georgian arrogance, lobbying all over, through the halls of the UN, through Western capitals, trying to gain politically what you have not been able to do militarily. I really sympathize with your cause here, but there is a much more direct way to settle this conflict. Instead of running scared all over the world, come direct to us. Direct negotiation is the answer to us. You do not trust the Russians. I do not know if you can label me as a Russian ally in this conflict - it is not true. You have been dealt a heavy defeat three years ago. We could straighten out our act by direct face-to-face negotiations, which is the only means to get out of this. As far as saying that our "claim" to sovereignty is political nonsense, this is a total display of Georgian arrogance. I am sorry. I still hope we can have dinner.

Gorgiladze: Thank you very much for this speech. I am not going to argue with you, because facts, as you mentioned, are the best arguments to all these things going on. International law is the best argument. The international community's recognition is the best argument. I want to agree with you totally concerning your last appeal for direct negotiations. Of course, if our "brothers" will let us, I am absolutely sure that we will settle this. Secondly, I do not think I have to argue on this, but what about this military war? 17 percent of Abkhazia's population kicked out the 52 percent of the population that is Georgian, plus all of the rest of Georgia....this is very naive, and even my 13-year old daughter is not ready to believe this. And what about this lobby? Who has a greater lobby than the Abkhazians? I appreciate this very much. I am just working on strategy - how do you do it? I want to have the lobby that you have in these circles. Thank you very much for this complement if you think that we are doing well, and we will go ahead with this. I am sure that one day we will reach the point at which we can go on the straight and level. Remember I mentioned about the Ossetians - what was the main thing there? That there were two of us, and we became friends. We created trust, and now we can work on many difficult issues that exist in the world because our attitude is to work, not to argue.

Question: I am from Azerbaijan, and I would like first to thank you for being here and for a very interesting statement. I appreciate you saying that all of these conflicts in the Caucasus are the result of the Russian hand. I have a couple of questions. Do you think that self-determination is the priority, or that territorial integrity is the priority for Georgia?

Gorgiladze: This is not a question for me - this is a question for the whole international community and international law. You know that these two principles are the main principles in international law, in the Budapest documents, in the UN documents, and all these things. You can look at it from both sides, but to me, and to all the rest of the world, the key is to preserve territorial integrity. And this is the attitude of the UN as far as I know their statements and their attitude. Otherwise, you would have Lilliputian countries all over the world. By the way, I want to draw your attention to how I understand territorial integrity. It in no way contradicts self-determination.

Question: My understanding is that territorial integrity is the top priority for Georgia, which I support as an Azerbaijani, because our own territorial integrity has been violated by neighboring Armenia, occupying 20 percent of the territory of Azerbaijan. My second question is: will Georgia demand that Russia remove its troops and military bases from Georgia if the territorial integrity of Georgia is not restored?

Gorgiladze: I think it is going to turn out like this. This is the last set of documents that I have received while I am here, expressing such an attitude. This is the decision of our Parliament, and this is the statement of our President.

Question: Azerbaijan and Georgia signed a treaty on regional cooperation which Armenia did not join. And Azerbaijan is the only country in the Caucasus that has no Russian troops. Although it is subject all the time to pressure from Russia to accept Russian troops into Azerbaijan. And Azerbaijan is developing its oil fields with Western oil companies. Do you think that regional economic cooperation between the three Transcaucasus republics could have a positive contribution to the settlement of conflicts in the Caucasus, and do you think that oil from Azerbaijan, which will go through Georgia, hopefully, and the oil that will come from Central Asia through Azerbaijan to Georgia and then to the Black Sea, could that oil, that economic cooperation, help the settlement of the conflicts in the Caucasus, and bring prosperity to all these countries?

Gorgiladze: Thank you very much for this question, since it reminds me that I forgot about one key thing I wanted to tell you. This is the initiative of the President of Georgia on the idea of the "Peaceful Caucasus." This was not the agreement which you mentioned, but this was the initiative of the Peaceful Caucasus. By the Caucasus, we mean all three Transcaucasian republics, all the northern republics of the Russian Federation, Iran, Turkey, and all the countries which surround us. This is the idea of the Peaceful Caucasus. I will give you these points. It needs a great deal of hard work, because it is a very powerful idea, and it includes everything you mentioned. By the way, there was a declaration signed, even by Armenia (but not the specific declaration you mentioned).

Question: If I may, I have a small comment rather than a question. I am a student here at the Kennedy School, mid-career program, and I am from Georgia; but I do not represent Rusudan's government and I do not have anything in common with Shevardnadze's government. But I would like to stress a few points. First of all, why does Georgia have the problems with the Ossetians and the Abkhaz? Second, I also want to respond to the point the representative of Abkhazia made - I did not know that Abkhazia had a representative in the UN. And third, I want to address my North Caucasian friends.

I strongly support, and I think that most Georgians strongly support, Chechen independence. For us it is not an issue of territorial integrity or self-determination - freedom is the highest value for Georgians. But I want to introduce a different aspect to the issue. Russia's history with Chechnya is completely different from Georgia and South Ossetia or Georgia and Abkhazia. It is an absolutely different story. Why has Georgia had so many difficulties in the Caucasus? The Caucasus is extremely important geopolitically, economically. If you manipulate Georgia, you can manipulate the whole Caucasus. That is why we have problems in Abkhazia and South Ossetia. The conflicts are finely tuned tool which Russia can use to destabilize Georgia - by encouraging the Ossetians, by encouraging the Abkhazians. Russia can tell the Georgians: "If you people do not obey us, you are going to have a problem in Abkhazia and South Ossetia." And unfortunately, all Caucasians should realize exactly who is using this tactic. We have a huge tradition of dealing with each other - why do we need a third party like the Russians to come and to teach us how to talk to each other. That is nonsense. We know each other's language. We come from the same historical roots and we can be very close to each other. That is the reason why Georgia has a conflict with the Ossetians and the Abkhaz, and also a refugee problem of 250-300,000.

To the point that was made earlier about the number of refugees, this is just cynical. What is the difference between 250,000 and 300,000? These people were deported from their homes, and they do not have any homes now, and they are in terrible shape. No food, no clothes, no hope. Nothing. And Georgia, with a population of 5 million, is keeping these 300,000 refugees in hotels, with relatives, and I do not know where else.

And you the Abkhazian representative in the US - and you said that you are a US citizen - I am sorry for your negative comments about Georgian arrogance. If this is arrogance, let it be arrogance. I want to find a common language with the new generation of Abkhaz. Not with you - you are lost. The most important thing is not to blame Georgian arrogance or whatever. The Abkhazians view themselves as the indigenous people of this territory. Georgians are also the indigenous people of that territory. How are we going to deal with this? We need to deal with hostility with love. That is the only cure. We need to talk to them. We do not need Shevardnadze. We do not need Ardzinba. I do not think that these two people represent Georgia or Abkhazia. We are the representatives of Georgia - and the young generation is the representative of Abkhazia. Georgians need to talk to North Caucasians. It is wrong to simply blame Georgia for everything, because we have to play to for our big neighbor, the big bear. It is also very important to find a common language with Azerbaijanis, with Armenians, with North Caucasians. The Caucasus can be a very dangerous place. We do not have a future without each other. If you continue to blame Georgian arrogance for all Abkhazia's ills, then I will in turn blame you - it is not going to work. You mentioned the Georgian military defeat, and you are proud of the fact that Rusudan mentioned - how can 50,000 people defeat 5 million? It was the Russian special forces that defeated, devastated Georgia. And now you are a blind weapon in Russia's hands. You need to understand this. And we need to start talking to each other. Georgia is not afraid to say that we are for self-determination. We are for the self-determination of the whole Caucasus. All Georgians are for freedom. We have 10 different nationalities in Georgia, but, in such a small space, how can each of the 100 nationalities have their own independent states and still live and work together.

Question: I am a linguist, and I was quite surprised when you said that these conflicts between Georgia and Abkhazia and the Ossetians and so on are political and not ethnic. As I understand it, at least Abkhazia is related linguistically and ethnically to the Western regions in the North Caucasus. And so not to recognize this fact is basically to try to erase a big part of where these people are coming from. To deny that they are related, and to deny that there is a dynamic through which they contribute to the situation, and to deny that the conflict has an ethnic basis, is to basically impose a kind of solution that is, perhaps, not correct. If you try to impose simply a political solution and to deny that there is anything else and to say that this is just Russian manipulation, you just forget something very important.

Gorgiladze: I, of course, recognize these linguistic problems and we have people working on them. But on the level about which I am speaking, concerning the settlement of these conflicts and the genesis of these conflicts, what you are talking about is not so important. I am sticking with my statement that this is primarily a political, not an ethnic issue. I am not alone in this opinion, although I wish I were wrong. The conflict is colored ethnically. As I mentioned, if you were listening to my impressions, which were full of emotions, all of these conflicts that you have, even those between husband and wife or between neighbors, they have to have some kind of motivation, they have to be colored, they have to be named by something in order to justify them. They were colored ethnically because this was the most bloody thing that one can do - to color some conflict ethnically, because it then becomes what we have all over the world now. So I can not agree with you.

Fitzgerald: If I could just comment on this... . This is a debate which is raging and has been raging for decades or centuries, depending on how you look at it. We seem to be very fascinated with the elements of the conflict - so fascinated, in fact, that we sort of overlook the point, which is: identity-based conflict (be it ethnic, national, religious, skin color, or whatever) is only ethnic, or is only national, or is only religious, to the extent that people use those differences somehow, either by denying them, or by appealing to them. We feel very strongly about parts of our identity, so those are the buttons we have that people can push. There is a prevailing idea now in international relations and conflict management that people are fighting over their differences and almost blaming their differences for the conflict, particularly violent conflict. The point is that whatever differences we have, everyone has differences. The point is how they are used. Difference doesn't create conflict - it is the way people deal with those differences, whatever they are, that creates conflict. That same debate is paralleled by another debate that is plaguing people in international law today. This is: to what extent is identity a criterion, or a basis, for the organization of political entities, for statehood, bilateral relations, minority rights, self-determination. There are no easy answers to these questions. There are some precedents in international law. There are some different conditions under which independence or sovereign statehood has been recognized as a result of turmoil - i.e. decolonization, the breakup of the former Yugoslavia, the breakup of particular empires, which are exceptions to the rule. But that is a debate (the self-determination/territorial integrity debate) that is going to continue to plague us. And one thing I would encourage people here to do, is to realize the situation that were are in, or that we are all in, that it is not useful to just fight over these points, because everyone is doing it. The question is: we are stuck in this ambiguous situation, where there are no easy answers, so what do we do about it? And that is where people have to get together, to meet as human beings, and to think. And to look forward, and not to look back. Because there are not many instances where there is complete and total military victory where one side can impose its will on another, and there are not many situations where one group of people is simply going to pick up and move to the other side of the world. People are going to have to live together as neighbors. The status of one relationship that they have is something that has to be worked out on its merits, issue-by-issue, in a very practical, pragmatic, forward-looking way. I just want people to keep that in mind when we debate these things, because it's a much larger question that is confusing all of us.

Question: Does the Georgian government actually recognize that 50,000 Georgian refugees have, in fact, been repatriated to the Gagra region? I have been working in Tbilisi over the last six months, and I get conflicting reports on this. So what is the official position?

Gorgiladze: This is the same right now - conflicting reports.

Question: Now regarding repatriation to South Ossetia. I am working with a number of projects in Tbilisi, and we work a lot with refugees everywhere, and whatever international support Georgia has been able to muster for the refugees has been far from sufficient. It is an absolute disaster. Has there been any repatriation into South Ossetia of Georgians?

Gorgiladze: There is not one report available right now. As for the Ossetian issue and the movements that you mentioned, it is much easier to compare it to other conflicts. Keith Fitzgerald has evidence as he travels to Tskhinvali, which is one hour and a half from Tbilisi, and the Gori region, which is between them, is absolutely open. People are starting to sell food on the market, and there is a street bus. There are many villages even up in the mountains, which were the location of the most difficult part of the Ossetian conflict, the high mountains, to which buses run. My colleagues, one month ago, went through this difficult region and were greeted there. What I want to say is that in this region, there is a very good backdrop against which refugees can go back. This situation in South Ossetia is much easier on the refugee topic. After five years, the movement has started, with direct communication between people. When I started, I said that the main reason for my being here, and the main point that I want to make, concerns the activity of this group.

Question: I also had a follow-up question for this gentleman representing Abkhazia. Aside from the official position from Sukhumi, on the political status of Abkhazia, with which I'm pretty well acquainted, what is actually happening in Abkhazia? I mean in terms of economic redevelopment, the state of the infrastructure. Are there any bilateral economic ties that the Republic of Abkhazia has been able to develop with any private sector concern or multilateral ones?

Kazan: At the present, our link to the outside world is related to people in exile in Turkey. We have almost 400,000 Abkhazians that live in Turkey at the present. We have the sea route that has been going on from Trabzon to Sukhum (we call it "Sukhum" now; it's not Georgianized any more, it's not "Sukhumi"). We have this link with Turkey at the present. But speaking of sanctions, here we are friends of Russia, according to "Georgian propaganda," and we're being punished severely by the sanctions imposed by corrupt Russian officers along the border from Sochi going into Abkhazia. The average civilian population in Abkhazia is being severely punished. There is difficulty for the civilian population to cross the border, and these are borders that are guarded by Abkhazian soldiers and Russian troops. So economically, we are not in the best position - I am being very honest with you. But we are a very self-sufficient country - it is a rich country. We are surviving, and we could survive for the next few years, probably. You have to understand one thing, here. Mighty Russia did not do anything, and they were defeated in Chechnya, to put it simply. We all know that. That's a fact. Yes or no? Now, mighty Russia, mighty Georgia, could do anything they want, and Abkhazia would still stand on its own. There is a lot at stake here. Freedom. Freedom is sacred to our hearts. My own aunt was burned to death as the Georgian forces were leaving one district.....

Gorgiladze: I suggest that you not go ahead with this, otherwise I have documentaries about ethnic cleansing - but I do not want to present this and I am not playing games with you. I want to let you know that I want to finish with the presentation on another level, please.

Question: I remember when Georgia declared its independence under Gamsakhurdia, when he took over the presidency. He declared that Georgia had been independent since May 26, 1918. Also, his government decided that all the Communist period was illegal, and that every decision taken by the power of Moscow was not recognized. Now, one of those decisions was Stalin's decree in 1931 when he reduced Abkhazia's status from a union state to an autonomous republic, and gave it to his country. Apart from this decree, can you introduce, or tell us, if there is any legitimacy for Georgia's claim that Abkhazia has been a part of Georgia throughout history?

Gorgiladze: Just 3,000 years.

Question: In 1801, Georgia gave its throne to the Russian Empire, and joined Russia voluntarily. Abkhazia was conquered, it never joined Russia by choice, and never joined Georgia by choice, and we have never had a person, or a referendum, legalizing Abkhazia's relation with Georgia. Now we call Abkhazians separatists - separatists from whom? Taiwan is separatist because they are separating from the Chinese people; but the Abkhaz are not Georgians.

Gorgiladze: This topic needs another talk, and I have plenty of documents. But today I wanted to present another topic. I offer to present another talk while I am here on the legal aspects of this issue and the question of legitimacy. I have already addressed the issue of separatism. I have nothing against separatism; but I have a big thing against aggressive separatism, and I would ask you not to manipulate my expressions but to understand what I mean. This is absolutely another level of interaction.

Georgia-Abkhazia Conflict: View From Abkhazia
Liana Kvarchelia
November 8, 1996

Liana Kvarchelia is a visiting scholar at the Harriman Institute of Columbia University. She holds a Ph.D. in English, and was the translator for the Abkhazian delegation in the early stages of the negotiations with Georgia. She is currently the Coordinator for the Center for Humanitarian Programs, a non-governmental and nonprofit organization working in Abkhazia that focuses on projects related to the rehabilitation of the survivors of the war and conflict resolution.

Abstract

Dr. Kvarchelia began her talk by observing that the West rarely hears an Abkhazian perspective on the Georgian-Abkhazian conflict, and as a result tends to have a skewed view of that situation. She disputed the notion that the conflict is one simply between the Georgian center and an ambitious group of provincial "aggressive separatists," as well as the idea that the conflict is simply the artifact of Russian manipulation. Instead, she argued, the conflict is clearly ethno-political in nature. The main issue in the conflict is that the Abkhazians were only joined to the Georgian Republic by Joseph Stalin in 1931 - prior to that, Abkhazia was a full-fledged "union republic," separate from and equal in status to Georgia. Now we call Abkhazians sepaGeorgia itself. Abkhazia, Dr. Kvarchelia noted, has a rich 1200-year-long history of statehood of its own. As Mikhail Gorbachev liberalized the USSR in the late 1980s, the leadership of Georgia began to pursue a harshly nationalistic set of policies, climaxing in the attempt to abolish the autonomous republics of Abkhazia and South Ossetia altogether and to create a unitary Georgian state. In 1992, the Georgians attacked Abkhazia, but ended up losing the military confrontation, with Abkhazia gaining de facto independence. According to Kvarchelia, during this war, international organizations declared that gross atrocities had been committed by both sides, and due to Abkhazia's victory, nearly 200,000 refugees had left Abkhazia, mostly Georgians. The task now is to overcome this history and come to a working compromise that both sides can live with. The basic problem, Kvarchelia suggested, is that while the Georgians are now making promises to defend the rights of the Abkhazians, recent history gives the Abkhazians little reason to trust them. Despite his international reputation as a man of peace, Georgian President Eduard Shevardnadze has not been open to serious give-and-take in negotiations, and has, among other things, surrounded himself by people who have called for the eradication of the Abkhaz nation. Nevertheless, the Abkhazian side has been willing to meet the Georgians halfway, agreeing to the principle of creating a union state with Georgia based on the principle of the equality of subjects. Georgia is unwilling to take this step, Kvarchelia claimed, and has in essence proved willing to sacrifice its own independence in order to maintain its territorial integrity - it has agreed to allow Russia to keep military bases in Georgia in return for Russia's efforts to seal its border with Abkhazia and to support Georgian attempts to regain control of the republic. Nevertheless, Russia has an interest in prolonging the conflict, and plays on Georgian ultranationalism to do so. Despite all of this, Kvarchelia stated, the international community has not accorded Abkhazia even the amount of sympathy given the Chechens, and has almost wholly backed Shevardnadze's Georgia. In fact, this is a major part of the Georgian strategy to gain full control over Abkhazia. Dr. Kvarchelia concluded by stressing that new "states-to-be," like Abkhazia, do not want to isolate themselves from the world, but want to integrate with the broader world community directly, without having to do so through other entities that misrepresent them and use membership in international institutions to suppress their demands.

Presentation

Kvarchelia: First of all, I would like to express my deepest gratitude for the wonderful opportunity to make a presentation at the Kennedy School of Government. Thank you to all who have come to hear about this most volatile situation. I would appreciate your comments and views on possible ways of responding to the Georgian-Abkhazian conflict, preventing a new escalation and finding ways for a fair, long-term solution.

As Coordinator of the Center for Humanitarian Programs, I am interested in developing conflict resolution projects. I have very much appreciated the opportunity to be at the Harriman Institute as a Visiting Scholar this term. It is a rare opportunity for someone from Abkhazia to have access to Western institutions to learn more about policy-making and what can help our situation.

Since I attended the previous presentation on the Georgian-Abkhazian and Georgian-Ossetian conflicts, I have become even more convinced that many misperceptions and misinterpretations which may exist in the West are to a significant extent due to the one-sided information about the situation. Without evaluating the positions of both parties, it is highly difficult to have a better understanding of the Georgian-Abkhazian conflict and to look for ways to resolve it. Today, I will try to outline the sources of the conflict, the main disputable issues and try to see what could help promote a peaceful resolution.

As you probably know, on August 14, 1992, the Government and the people of Abkhazia, as well as thousands of holiday-makers from outside Abkhazia, were taken by surprise when Georgian troops entered the territory of Abkhazia and launched a land and air attach on the southeastern part of Abkhazia and its capital city. Fierce fighting continued for 14 months.

September 1996 marked the third anniversary of the end of the war in which Abkhazia finally succeeded in regaining control over its entire territory. However, while Abkhazia was celebrating the end of the bloody war and its military victory, Georgia was observing a Day of Remembrance and Hope, in particular, the hope of bringing Abkhazia back into its fold even if the price was that of Georgia's independence.

During our previous discussion last week with Rusudan Gorgiladze, a question was asked about what the Georgian-Abkhazian and the Georgian-South Ossetian conflicts were about. This is an important question, and it deserves to be answered or, at least, an attempt should be made to answer it. Without going into the historical background of the Georgian-Abkhazian relationship, it is not possible to identify the roots of the current conflict. It would be simplistic and virtually inaccurate to say that the conflict between Abkhazia and Georgia is one between the center and an ambitious group of separatists over political sovereignty in one of Georgia's provinces (this is the most common version coming from the Georgian side), or to say that it is only the result of manipulation by a third party.

The Abkhazian-Georgian conflict is clearly ethno-political and the main issues of controversy are the following. The Georgian side claims authority over the territory, which was incorporated into Georgia by Stalin's decree in 1931. The Abkhazians are ethnically distinct from the Georgians, and they have a long history in which they had their own state with defined geographical boundaries, and they have a special claim to their territory and statehood. The outbreak of recent hostilities was preceded by years of tensions over political issues that started to develop along ethnic lines as issues of ethnic identity and the origins of the Abkhazians became the subject of political manipulation. The situation became further complicated by the involvement of other non-Georgian groups of Abkhazia in the conflict, who took the Abkhazian side overwhelmingly since the beginning of the war in 1992.

I do not want to overburden you with too much historical detail, but there are some important issues that need to be mentioned. Situated on the Black Sea Coast, fertile and picturesque Abkhazia has been an important Transcaucasian crossroads, and has historically always been a dainty dish for conquerors. Abkhazian statehood has existed for over 1200 years, and Abkhazians have had to defend themselves against invaders on more than one occasion historically.

For centuries, Georgians and Abkhazians, peoples with very different ethnic origins and languages, lived in neighboring territories. There were periods in their history when Abkhazia, as a separate principality, was under Georgian or Ottoman vassalage. There was also a period when western and some eastern areas of Georgia were part of the Abkhazian Kingdom.

However, the Russian conquest of the Caucasus brought both countries under the rule of the Russian Empire. Thousands of Abkhazians, along with many other peoples of the North Caucasus, were forced to seek refuge in Turkey. Today their descendants (the makhajirs) are scattered all over the world. In Turkey alone, the number of ethnic Abkhazians exceeds 400,000 people. Their lands and homes in Abkhazia were taken over by competing Georgians, Armenians and Russians. In 1887, a famous Georgian public figure, Jacob Gogebashvili, wrote in one of his articles that Abkhazia would never have her sons back, and therefore, it was time to begin thinking about which people were best fit for the climactic conditions of Abkhazia. In Gogebashvili's opinion, Mingrelians (a West Georgian tribe) were the first and the most suitable candidates to colonize Abkhazia.

At the end of the 19th century, a resettling process started in Abkhazia that continued throughout the reign of Soviet power. According to the population census, the Georgian portion in the total population of Abkhazia was 6.0 percent in 1886, 24.4 percent in 1897, and 31.8 percent by 1926.

After the Russian Revolution of 1917, Abkhazia joined the Republic of Mountain Peoples, thus becoming part of a union of North Caucasian republics. However, it was soon annexed by the Georgian Democratic Republic. When the Bolsheviks came to power in Georgia in 1921, Abkhazia was proclaimed a sovereign republic.

Until 1931, Abkhazia was a full union republic within the USSR, and it had a special treaty-based relationship with Georgia. Under Stalin's dictate in 1931, and over the strong protests of Abkhazians, the union republic was demoted to a mere "autonomous republic" to be incorporated into Georgia. This fact alone is the reason why 60 years later, the Georgians declare that Abkhazia is an inseparable part of Georgia.

The change in the status of Abkhazia, and the period that followed it, are historically remembered by Abkhazians as the policy of "Georgianization" and persecution. At that time, Abkhazian schools were closed and replaced by Georgian ones. Abkhazians could not speak the Abkhazian language. Similarly, Abkhazian geographic names were replaced with Georgian ones. The Stalin era was also a period when a new "theory" was invented by Georgian historians suggesting that Abkhazians were "newcomers" on Georgian land. On the whole, in the Abkhazian view, this period is one characterized by serious attempts to eliminate the identity of the Abkhazian people.

The years of 1937 to 1953 drastically changed the demographic situation in Abkhazia. A special office was set up by Stalin's henchman, Lavrenty Beria, to resettle new numbers of Georgians in Abkhazia. As a result, by 1959 the number of Georgians in Abkhazia had already increased, reaching 39.1 percent of the total population. In later years, on the pretext of bringing the necessary manpower and intellectuals in for industry and educational institutions, more Georgians were brought to Abkhazia to make up 45 percent of the total population by the year 1989.

In the decades that followed Stalin's death, Abkhazian schools were reopened, and the Abkhaz language was again used in publishing and broadcasting, but the policy of "Georgianization" continued in a more covert manner. Abkhazians were responding by mass protests that occurred almost every decade.

Georgian politicians often argue that Abkhazia had a more privileged position within Georgia than any other autonomous republic had within the Russian Federation. To substantiate the idea, they claimed that Abkhazians, whose number by 1978 had already decreased to 17 percent of the population, had a disproportionately large share of government posts. They, however, overlook the fact that all top officials in Abkhazia were appointed by Tbilisi, and even then, only after at least three years of good service in the capital of Georgia. The Tbilisi authorities made sure that the most important posts like, for instance, communist party first secretary, were given to "loyal" Abkhazians. Such instrumental positions as finance minister, or interior minister, or KGB head, were traditionally taken by Georgians, most often imported from Tbilisi.

In the years of perestroika and glasnost, Georgian nationalism reached its extreme form. The idea whereby the Georgians are the "hosts" and other ethnic groups are the "guests" (often "ungrateful" because they had no right to self-determination on the territory that historically "belonged" to Georgians) was propagated through the media and academic publications. One of the central Georgian newspapers, for example, went as far as publishing an article that suggested that restrictions be put on non-Georgian families to have no more than two children, because the birth rate among Georgians was allegedly the lowest at that time. The slogan "Abkhazia is Georgia" was surpassed in popularity only by the slogan "Georgia for Georgians." Frequently, at mass rallies, fighters for Georgia' independence demanded the abolition of the Abkhazia's and South Ossetia's autonomous status. Zviad Gamsakhurdia, who was soon to become the president of Georgia, disseminated an address to the West Georgians which, in essence, was a plan to assimilate or oust Abkhazians from their land. Gamsakhurdia's ideas found little criticism, if any, in the Georgian community. On the contrary, the image of the "enemy" was a strong uniting factor for the Georgian society which was torn by internal political struggle. The clashes in 1989 following the separation of the Georgian sector from the Abkhazian university brought the antagonism between Abkhazians and Georgians to a new level.

The assertive Georgian nationalism was echoed by national movements in South Ossetia and Abkhazia, which in the face of growing Georgian aggressiveness, felt extremely insecure. The Abkhazian people repeatedly demanded the restoration of union republic status for Abkhazia, or even the joining of Abkhazia to the Russian Federation. The war in South Ossetia, started by President Gamsakhurdia, as well as tensions in the Armenian and Azeri districts of Georgia, the unsuccessful bid of the Meskhetian Turks (deported from Georgia in 1944) to return to their historic homeland, and also the migration of several thousand of Lezgins from Georgia, further aggravated the situation in the region. However, to avoid a new confrontation with Abkhazia when the South Ossetian conflict was at its peak, Gamsakhurdia proposed a parliament in Abkhazia that would grant 28 seats to Abkhazians against 26 Georgian seats. The new Abkhazian parliament was virtually split into Georgian and non-Georgian factions. The Georgian parliamentary minority sabotaged the resolutions and acts passed by the Parliament of Abkhazia, while the rest of the parliament adopted resolutions that would safeguard Abkhazia's sovereignty.

The unilateral abrogation by the Georgian Parliament in Tbilisi of all legal instruments, including the Union treaty of 1922 and the restoration of the Georgian Constitution of 1921 when Abkhazia was annexed by Georgia, forced the Abkhazian parliament to reinstate temporarily the Abkhazian Constitution of 1925, when Abkhazia, as a union republic, had a treaty-based relationship with Georgia. The Georgian faction, which at that time already had internal divisions over the ousted President Gamsakhurdia, was, however, unanimous in boycotting the resolution. During the discussion of the right of peoples (including Abkhazians) to self-determination as one of the most basic human rights, a Georgian MP publicly stated that the rights of Georgians should be granted priority over the human rights of other groups.

The breakup of the Soviet Union triggered further tensions in the newly emerged states. Hasty recognition of the privileged 15 new states by the world community, on a selective basis, disregarded the fact that many of these states were composed of other entities, i.e. autonomous republics, regions etc. Their status, as well as that of the former union republics, had been arbitrarily established or changed by Stalin. When Georgia became a member of the UN, the state power in the country was in the hands of the Council that had seized it in a bloody coup that overthrew President Gamsakhurdia. Twenty days after Georgia's formal recognition by the UN, the Georgian troops attacked Abkhazia. New elections in Georgia were held amidst the war in Abkhazia. Neither South Ossetia nor Abkhazia, except for the Georgian controlled districts where non-Georgians were forced to vote at gun-point, participated in the election. Some areas in Mingrelia did not take part in the voting either.

Economically weak, polyethnic in composition, guided by ideas of building a unitary state, unwilling to accept ideas of federalism despite declarations of adherence to democratic principles, Georgia was a perfect example of what Andrei Sakharov called a mini-empire. Paying tribute to Sakharov's services, the Georgians never forgave him, however, for calling Georgia a mini-empire. The right of the Georgian people to self-determination, which was finally realized through the collapse of the Soviet Union, was generally viewed as only the Georgian prerogative.

The Abkhazians were extremely concerned by the developments in Tbilisi, and fearing a genuine threat to their statehood, they proposed to the Georgians to discuss a possible federative treaty to fill in the "legal vacuum" that had existed between the two entities since all Soviet agreements and acts were abrogated. The proposal was rejected by Tbilisi mainly on the grounds that Georgian society was not ready to accept any ideas of a federation. On 14 August 1992, on the very day when the Abkhazian Parliament assembled to discuss the draft treaty, the Georgian armed forces attacked Abkhazia. The parliament building was one of the targets.

Fierce fighting continued until 30 September 1993, when the Georgian troops were ousted from the territory of Abkhazia. In the face of the advancing Abkhazian forces, large numbers of local Georgians, many of whom picked up arms and joined the Tbilisi forces, fled Abkhazia fearing reprisals for killings and atrocities perpetrated against Abkhazians, local Armenians, Russians and Greeks. A UN fact-finding mission which visited Abkhazia at the request of the Georgian side, blamed the Abkhazians for alleged ethnic cleansing. The mission, however, established that both sides, initially the Georgian and then the Abkhazian, were involved in human rights abuse and atrocities.

Throughout the three years of negotiations that have followed the defeat in Abkhazia, Georgia's leadership has been trying (not without success) to get the world community to pressure Abkhazia to accept a political settlement on Georgia's terms. Yet, even Abkhazia's consent to form a union with Georgia within Georgia's internationally recognized boundaries does not satisfy its aspirations.

By trying to play a balancing act between Russia and the West, Georgians leaders have now managed to get both to take a hard-line position on Abkhazia.

From the very beginning of the conflict, the official Western position on Abkhazia has been unambiguous in its double standard. At the time when the unexpected attack of the Georgian State Council troops was launched on Abkhazian towns and villages, the Western countries, blind and deaf to the numerous pleas and appeals of Abkhazians, declared that the conflict was an internal affair of Georgia, and that the Georgian government (i.e. the Provisional State Council) was the only legitimate power, able to restore law and order and to safeguard the railway lines in Abkhazia. Ironically, this and other official pretexts for the introduction of Georgian troops were later refuted by Eduard Shevardnadze himself in one of his television interviews. He actually put the blame for unleashing the war on his warlords Kitovani and Ioseliani. The same blind eyes and deaf ears were until recently turned by the Western officials to the Russian crusade in Chechnya. Though in the case of Chechnya, at least human rights were made an issue, and that, too, happened only due to numerous statements and exposures by Russia's human rights advocates and through the considerable efforts of the Russian and international media.

During the first months of the Georgian occupation of Abkhazia, serious human rights violations were perpetrated on an ethnic basis. Hundreds of Abkhazians and those who fell under suspicion for being pro-Abkhazian were tortured and executed. Practically the whole Abkhazian population and a large number of non-Georgians were ousted from the occupied territories. The Abkhazian State Archives and the Institute of History, Language and Literature, with irreplaceable documents and manuscripts, were intentionally burnt to ashes - a fact that Abkhazians describe as an evil symbol of Georgia's desire to eliminate the very identity of the Abkhaz people.

The Abkhazian government at that time unsuccessfully tried to bring the attention of the world community to the fact that the Abkhaz people were on the verge of annihilation by Georgia's aggression. The public threat, made on television, of the Georgian commander-in-chief, Kharakashvili, to eliminate the entire Abkhaz nation even if it took a sacrifice of 100,000 Georgian soldiers, did not evoke the slightest criticism of any international organization or government (with the exception of UNPO). On the contrary, soon afterwards, Eduard Shevardnadze promoted Kharakashvili to the post of Defense Minister and gave him the rank of general.

It was not until the Abkhaz forces retook the northwestern part of Abkhazia, reaching the Russian border, that the West made up its mind that it was time to take a more active stand in the conflict and probably to intercept the initiative in brokering a peace agreement that would unconditionally respect Georgia's territorial integrity. The overall military victory of Abkhazian forces in late September 1993 pushed the UN to take more resolute steps not to allow Russia to have control over the situation.

Russia, in turn, used the situation to make Georgia pliable in securing Russia's interests in the region. Obviously, it was not in the interest of Russia to have an independent Abkhazia as a precedent for its own subjects. Equally, it was not in Russia's interest to have on its southern border a strong, independent, disloyal Georgia, with South Ossetia and Abkhazia safely back, and to be left without instruments to exert pressure. The loss of Abkhazia forced Georgia to join the CIS, and today it continues bargaining with Russia over her military bases - Abkhazia again being a pawn.

It can hardly be argued that Russia's moves are dictated by a desire to preserve its influence and presence in the regions of her strategic interests. However, to say that the tensions between Abkhazia and Georgia are only a result of Russian manipulation is to admit only half of the truth. To control the situation, you have to have something to use to do the manipulating. And in this regard, Georgia's ultranationalism and its push for hegemony, as well as the responsive self-determination movement in Abkhazia, were perfect trump cards.

Russia's role in the conflict has been made a special issue by many analysts and the media, also, from the point of view of the degree of her military involvement in the conflict. Georgia was the first to insist that Abkhazians owe their victory entirely to Russia's direct military support. It is not easy for Georgia to acknowledge its military defeat in Abkhazia, much as it is hard for Russia to do the same with regard to Chechnya. One thing is clear, however - that both Georgians and Abkhazians (and the Chechens, for that matter) got their armaments from the same source. In one of his regular radio addresses, President Shevardnadze claimed that thousands of Russian citizens took part in the war on the Abkhaz side, and it was their assistance that "enabled full occupation of that part of Georgia." However, the bulk of the Abkhazian forces consisted of Abkhazians, local non-Georgians, and even Georgians - the rest being volunteers from the North Caucasian republics and Cossacks. North Caucasians are ethnically related to the Abkhazians, and they have been strongly supporting Abkhazia since the tensions and clashes erupted in 1989. The Cossacks, in their turn, were concerned with the fate of the Russians that made up 15 percent of the pre-war population in Abkhazia. However, it is sufficient to look through the lists of casualties to be able to judge who was actually resisting the Georgian assault.

The Western media and public has paid tribute to the Chechens, whose spirit has not been crushed by the Russian army, something that Abkhazians have been denied by the West. Serious concern has been expressed over Russia's policy in Chechnya. Abkhazians heard hardly a word of sympathy when they were forced to fight for their very survival, because they evidently had the "wrong" rival.

The recent developments in Chechnya have added a new dimension to the Georgian-Abkhazian peace process. Georgia is trying to avoid, wherever possible, any comparison between Chechnya and Abkhazia, which is quite understandable. The Georgian President was the first to give public support to President Yeltsin at the time of Russia's attack on Chechnya in December 1994, and called for joint efforts in suppressing any manifestations of "aggressive separatism" at any cost. Later, after the signing of the Khasavyurt peace accords, Eduard Shevardnadze stated that the Abkhazian and Chechen conflicts differed, and therefore, ways for their settlement should be different. Despite many similarities, however, there is indeed one important difference between the two situations: the Chechens had Russia fighting against them, while the Abkhazians had to confront Mr. Shevardnadze and his worldwide prestige as a champion of democracy and peace.

Apparently, the recent agreement between Russia and Chechnya have put Georgia in an uncomfortable position, since now Chechnya could create an undesirable precedent (from Georgia's point of view) for Abkhazia and South Ossetia. However, it is also possible that depending on the outcome of the political struggle within the Kremlin, Abkhazia may become, or may be forced to become, a precedent for the resolution of the Chechen conflict.

So far, Russia's economic and political sanctions against Abkhazia, including the closing of its borders with Abkhazia and the cutting off of communications lines, as well as considerable pressure from the "Friends of Georgia" (a group of leading Western countries), have forced the Abkhazian side, after three years of de facto independence, to agree to concessions to Georgia. The Abkhazians are ready to sign an agreement whereby Georgia and Abkhazia are uniting in a federative union. Still, Abkhazians demand that the relationship between the two entities should be based on an equal footing. They are prepared to delegate part of their responsibilities to a common body of jurisdiction and to insist that the political status of Abkhazia is not subject to negotiation. Only the people of Abkhazia have the right to determine their future. From the Abkhazian point of view, negotiations with Georgia should be focused on reestablishing relations between the two republics. Georgia, in its turn, is insisting on an arrangement that would enable it to preserve its role as a center which relates to a province, to which Georgia is prepared to delegate certain responsibilities. However, Georgia's promises to grant Abkhazia the broadest autonomous rights are not convincing for Abkhazians after what they have experienced. They will not accept such an arrangement, since it does not guarantee the security of their statehood. Georgia, on the other hand, is not capable of forcing its will on Abkhazia without outside help. Therefore, there has been a lot of maneuvering on the part of Georgia to get the third party to do the job.

One of the instruments Georgia is using to put pressure on the Abkhazian side is the issue of Georgian refugees. To ensure their prompt return, en masse, the Georgian side has insisted on entrusting the peacekeepers with police functions. However, that would mean that Russian forces will be directly involved in the confrontation since the return of refugees prior to a political settlement will inevitably trigger new clashes.

The last Security Council Resolution (for those who are familiar with UN documents, it is easy to note the difference between the more balanced reports of the UN Secretary General, based on the materials of the Observer mission and his special Envoy, and the Security Council Resolutions) strongly supported the Georgian demand to bring the refugees back to Abkhazia and insisted that it was inadmissible to link the refugee problem with the issue of Abkhazia's political status - i.e., with the problem which actually constitutes the core of the conflict. In several interviews, Mr. Shevardnadze practically acknowledged that sending troops to Abkhazia was a grave mistake, for which Kitovani was responsible. Georgian refugees from Abkhazia are paying a heavy price for that mistake. The mistake will be repeated if they are forced to come back to Abkhazia prior to a political settlement. Around 50-60,000 of them have spontaneously returned to the Gal region of Abkhazia, which is predominantly Mingrelian. A return of refugees to other areas with mixed populations will only increase the confrontation. The non-Georgian population will see them as a fifth column, manipulated by Tbilisi as before.

In recent months, the Georgian leaders have more than once announced a move for policy change. Along with threats to suspend the Russian peacekeepers' mandate, warnings have been made about the possibility of reviewing Georgia's military agreements with Russia, and even about seceding from the CIS if Russia does not help to settle Georgia's conflicts with Abkhazia and South Ossetia on Georgian terms. The above declarations were followed by a recent statement that the fate of Russia's military bases in Georgia depends on the way the Abkhazian conflict is going to be resolved. Not relying on Western assistance (which, though not entirely token, failed to provide security guarantees for Georgia so far), Georgia again appreciated Russia's geopolitical role in the region as the chief bargainer and is actually offering its independence in exchange for her former autonomous regions. Mr. Shevardnadze's prophetic words, that for Georgia the sun rises in the North, may after all come true.

Trying to "restore" Georgia's territorial integrity by greenlighting Russia's military bases is not going to solve Georgia's problems. Russia is aware of the fact that Georgia's loyalty will only be temporary and have predictable limits. On the other hand, coercive actions against Abkhazia will undermine any attempts for reconciliation. Abkhazia and South Ossetia have no grounds to believe that Georgia is building a democratic state and that they should seek the accommodation of their own rights within it. They are unlikely to support any kind of association with Georgia without genuine guarantees for their security. Any attempt to force Abkhazia into a pre-conflict arrangement with Georgia would not be viable. In essence, it would mean restoring the Soviet legacy, and this would have the potential to become a bomb that will explode at any time in the future.

As for the Western position, it seems that the oil pipeline interests, on the one hand, and the suspension of NATO's enlargement, on the other, contribute to the ambivalence over the West's possible role in the post-Soviet space. In the case of Georgia, an additional factor opposing Russia's influence is the support for Eduard Shevardnadze, who is seen as the key player in ending the Cold War. However, the unconditional support of the Friends of Georgia for Georgia's claims will only draw Russia and Abkhazia together. It seems that the level of Georgia's independence depends on the level of Abkhazia's sovereignty. Any solution to the problem that is recognized by the international community will contribute to long-term regional security and peace only if it does not fail to consider the claims of Abkhazia, South Ossetia, Chechnya or Nagorny Karabakh.

I would like you to examine the results of some sociological studies undertaken in Abkhazia and Georgia. The results of surveys conducted in Abkhazia in 1994 by a non-governmental organization called "Civic Initiative" showed that 45.5 percent of 10,026 respondents (67.3 percent of Abkhazian respondents, 21.3 percent of the Russians, 35.9 percent of the Armenians, 13.5 percent of the Georgians, 21.0 percent of the Georgian returnees to the Gal region, and 75 percent of the experts) wanted Abkhazia to be an independent state. Another 45.5 percent favored uniting with the Russian Federation (27 percent of Abkhazians, 68.7 percent of the Russians, 58.1 percent of the Armenians, 29.7 percent of the Georgians, 9 percent of Georgian returnees in Gal, and 15 percent of the experts). This survey was conducted before the attack of the Russian Federation troops on Chechnya, therefore I would expect that the attitude of the population toward a union with Russia could have considerably changed. Russia's sanctions against Abkhazia that followed the Chechen war are another factor that could account for a possible change of attitude. The idea of a Union State with Georgia on an equal basis found the support of 6.7 percent of respondents (3.8 percent of Abkhazians, 8.6 percent of Russians, 4.3 percent of Armenians, 37.8 percent of Georgians, 32 percent of returnees, and 10 percent of experts). Abkhazia becoming part of Georgia found support among 0.6 percent of the respondents (the only significant numbers being 8.1 percent of Georgians and 36 percent of the returnees, with 0 percent of Abkhazians supporting this).

A survey among the Georgian refugees conducted by the Norwegian Refugee Council shows that 74 percent of the respondents consider bringing Abkhazia back under Georgia's jurisdiction as the main precondition for their return to Abkhazia. This means that, firstly, they do not think that Abkhazia is under Georgia's jurisdiction, and secondly, that they do not consider themselves citizens of Abkhazia.

Another survey carried out by the Moscow Institute of Ethnology and Anthropology established that 44.2 percent of Georgian and 32 percent of non-Georgian respondents in Tbilisi would like to see Abkhazia as a constituent part of Georgia without the right of secession, while 28.8 percent of Georgians and 39.5 percent of non-Georgians found it hard to answer the question on the status of Abkhazia. Forty-two percent of ethnic Georgians think that Abkhazia and South Ossetia belong to Georgia, but that keeping them by force is not worth the sacrifice. Forty-four percent think that it is worth it. Only 6.7 percent of Georgians supported the idea of making Abkhazia a free economic zone.

It is evident that the bloodshed has divided the two nations to the extent that there is total mistrust for each other, which is further stirred up by massive propaganda. Georgians view Abkhazians as secessionists and "aggressive separatists" (the term introduced by Mr. Shevardnadze into the political vocabulary), while Abkhazians see Georgians as aggressive nationalists, an imperial force that has ungrounded claims on their land, as a party that bears the blame for unleashing the bloody war on the population, as well as the party that is behind the economic and political sanctions on Abkhazia.

The reconciliation of the two nations will come along with the political reconciliation. In this regard, the world community can and has to play a constructive role. Labeling peoples as secessionists, separatists and rebels with a negative meaning, as well as imposing solutions, will hardly persuade these peoples to give up their aspirations and rights. It is necessary to recognize that current international legislation is not in many cases equipped to deal with the new realities. Though even within the existing laws, it is possible to find ways of accommodating the two rival principles of territorial integrity and the right to self-determination. In the case of Abkhazia, an alternative to total independence from Georgia could be a confederation, the status of a protected state, etc., with access to international organizations.

The two current tendencies, self-determination movements to establish new states and an integration process among older states (which has problems of its own), are not in the long run contradicting each other. The new states-to-be are seeking independence not because they want to isolate themselves from the rest of the world, but because they want to be integrated into the world community directly and equally, not through other entities that misrepresent them and, moreover, use membership in international institutions to suppress their demands. The question is whether the world community should try to build security by looking into the sources of self-determination movements in each particular case, and by working out mechanisms to accommodate the rights of peoples to decide their destiny, or take coercive measures in most cases to protect vested interests under the banner of regional or even global security.

Discussion

Question: The picture you painted of the Georgian leadership seems to be one where this leadership is largely intransigent. Are there elements within the Georgian population, or in the leadership, or in any political circles in Georgia, which you would trust, or at least which seem to have a productive attitude, something that the Abkhazians could work with?

Kvarchelia: This is another way in which our situation differs from that in Chechnya. During the fighting in Abkhazia, and after the fighting, there have not been any statements made by Georgian politicians or public figures that would have openly characterized the situation as, at least, a mistake. Mr. Shevardnadze said it, but he gave his reasons and somehow tried to justify the whole thing. I don't know of any circles in Georgia that have tried to take some steps to find common ground with Abkhazia, or at least to take a more critical approach toward what has happened. There was one statement, however, by Asatiani. I think he was the Speaker of the pro-Gamsakhurdia Parliament, and he said that instead of agreeing to the Russian military bases, we should admit, acknowledge our mistakes in Abkhazia and try to talk to Abkhazians. He was the only figure to make such statement.

Question: I would like to hear your opinion on this subject. I'm involved in a project funded by the US Institute of Peace that researches the concept of an independent UN legion. The reason you would have this force would be to perform peacekeeping, police oriented duties. It could be rapidly deployed in places like, say, Rwanda, or Bosnia in its early stages. It would be integrated in terms of the nationalities involved, so that it would not be biased toward one versus another. If such a force had existed, say, in 1994, and had been used, say, as the force to be deployed in the region at that time as opposed to what eventually did happen, which was that the Russians were given a UN mandate, I'm curious as to whether you think that would have helped the situation or hurt it, or whether you think it would have been irrelevant, and so forth. The Russians originally asked that it be a multinational force there, and the United Nations was not very popular here in the United States at that time. You wouldn't necessarily have Russian peacekeepers who are biased in one way versus another - you'd have, say, Fijians and French and so on.

Kvarchelia: It's difficult for me to say how much difference this would have made. I don't think that it would have been much different. Maybe it would have developed into a different pattern, because these conflicting interests of the parties involved (very often incompatible), they would just create a new pattern. I don't think they would have been much help in resolving the problem. We still have Russian bases in Abkhazia, as Georgia has Russian bases there, so their physical presence is there. So I don't think things would have been very different. I think the important things are happening on the political level.

Question: I wanted to follow up on what you said about the role of Russian military support. I agree with you that certainly both sides were getting their weapons from the same source. But let me ask you two things that people often say about the situation, and see what your research has told you. One is that a crucial role was played by Russian air support, and that Abkhazia, obviously, didn't have its own air force - that there were key battles when planes flown by the Russian air force made a big difference. And a second thing that is often said is that the North Caucasian peoples that came to the support of Abkhazia were being helped and assisted by the Russian security service, and organized. Even, I think, this week, Basaev said something about how the Russians had helped them in the Abkhazian operations, and that they had since decided that this was a mistake because they shouldn't have been so divided against the Georgians. I wanted to ask what you thought about those points.

Kvarchelia: I think that it was Maskhadov and Yandarbiev that were reported to have said that, and the reference was made to some Georgian newspaper. So they reportedly said that to the Georgian newspaper. I prefer to hear it directly, perhaps in a television interview. As for Russia's support, I think that there was a lot of support from Chechnya, and Chechnya had an air force. The North Caucasians - probably if Russia had wanted to hold them back from Abkhazia, they could have sealed the border, they could have controlled all the mountain passes. Well, they said they did it, maybe not as effectively as it could have been done. But I can't agree with some speculations about how the Russian security service was training and assisting Basaev to get to Abkhazia. I don't believe that, because the conflict in Abkhazia was a very strong stimulant for the North Caucasian people, very much a uniting factor for them. So since 1989, when the Confederation was formed (at that time it was the Assembly of Mountain Peoples), Abkhazia's Sukhumi became the capital of that confederation. So there was a very strong feeling to support Abkhazia, because they saw Abkhazians as part of them, and likewise, Abkhazians see the North Caucasus as part of them.

Question: Following up on this question, I've heard that there was a lot of corruption among the officers who were stationed in the Caucasus, and that many of them were actually Caucasians, and that the order to let these forces through might not have come down from the very top - it may have been the initiative locally of the officers who were stationed in the Caucasus.

Kvarchelia: This is also true, and it is also true that many weapons were taken from the Russian bases both in Abkhazia and in Georgia. There were reports on television about alleged looting or attacks on Russian bases; but I think that this was corruption.

Question: Of the non-Abkhazian population who support and supported the move toward autonomy, why is this? Why do they continue to support it, and why did they do so in the past?

Kvarchelia: These ideas of the unitary state were very frightening to the non-Georgian population. Each group has its own reasons. We had Armenians. We had Russians, Greeks, and some other ethnic groups apart from Abkhazians, for instance, Estonians. But in Abkhazia, Georgians were the largest minority - they were 45 percent. But the majority of the population in Abkhazia, and that includes everybody else, voted at the time of the Soviet referendum for the preservation of the union, obviously because they saw this as a force that could possibly resist Georgia's domination and the push for hegemony. In Georgia's ideas of a unitary Georgian state, the non-Georgians were called "guests," and they did not want to be treated as guests. During this period, there were already tensions in Armenian enclaves, and the Azeri district of Georgia, as well as in Ossetia and Abkhazia. So that was not a very friendly environment for these people. And that is why it happened so, that non-Georgians in Abkhazia united in a group to oppose Georgia's hegemonistic policy.

Question: What percentage of the population before the war were Abkhazians.

.Kvarchelia: According to the last official Soviet census, 17 percent.

Question: You mentioned Gamsakhurdia who was, I completely agree with you, a nationalist and did much harm to both Georgia and Abkhazia. But, as you said, when he turned to the Abkhazians, he suggested a parliament where the Abkhazians would get 28 votes and where the Georgians would get 26. Meanwhile you said that the Georgians were only 45 percent. How do you explain this, that this very nationalistic Georgian leader is, before the war, suggesting that the Abkhazians, 17 percent, take 28 seats? That hasn't happened in any of the other parts of the Soviet Union. Plus, given that Abkhazia actually had an Abkhazian University, Abkhazian television, Abkhazian radio - which some of the large republics, not autonomous republics, did not have. How do you tie this up all together with the idea of being a guest in your own country?

Kvarchelia: Gamsakhurdia had enough problems to deal with during the parliamentary elections in Abkhazia when this model was used. So he had enough things to think about, and somehow to avoid the aggravation of the situation in Abkhazia, which at that point was tense enough, he was the one who proposed that plan. That was probably at that time a wise thing to do, because he had to stop the immediate clashes. But that didn't bring about any unity within the parliament.

Question: So you would suggest that 17 percent should have had more than 28 votes, where that constitutes something like 40 to 45 percent?

Kvarchelia: I didn't say that it was unfair or fair. I said that in terms of his strategy, probably that was a thing that he should have done in order to avoid the tension there. As for the things that you mentioned about the university, many things that Abkhazians achieved were achieved through protests, through considerable efforts. But, as a matter of fact, they had television broadcasting in Abkhazian only for an hour a day. They had their university which was open on the basis of the Pedagogical Institute, where the Georgian section was the largest. And, by the way, the opening of that university even brought more Georgians from Mingrelia and from Georgia into Abkhazia, and they also resettled there, and increased their numbers in the population. So some concessions were made; but very often when new industries were opened or the new university was opened, people were brought from Georgia to resettle and to be involved in these industries. So this promotion, to a certain extent, of the development of Abkhazia, always came along with the demographic changes in the population. So that was not, probably, accidental.

Question: Could you say more about the return of the refugees?

Kvarchelia: At the beginning of the negotiations, two basic documents were adopted - the joint declaration on the political settlement, and the quadripartite agreement on the refugees. At that point it was agreed that those processes should be implemented simultaneously, the comprehensive agreement and the return of the refugees. But then, the approach of the UN Security Council changed. And now, their last resolution insists that there should be no link whatsoever between the question of the refugees, and that of the political status of Abkhazia, as they called it. So they think that the refugees should come back, should start coming back, to the rest of Abkhazia (not only to the Gal region), and that that should happen before a political settlement.

Question: Do you think that there will ever be a return of the remainder of the internally displaced populations, or the refugees depending on your perception, if these political conditions are met? Is it possible to return?

Kvarchelia: The political solution, which is acceptable not only to Georgia but also to Abkhazia, that would be a very good step, but that would be only the beginning, because it is going to take some time for the people who were neighbors, and who were killing each other, to reconcile. The refugees in Georgia live in unimaginable conditions - this is a tragedy. Now, the situation is that the people in Abkhazia live as if in a prison, because they don't have the right to travel, the borders are closed. Both populations are suffering and are hearing each other's accusations, and this is only aggravating the tension and the hatred, this intolerance toward each other. Surveys show that 70 percent of the refugees (according to the Norwegian Refugee Council) will return only when Abkhazia is under Georgian jurisdiction. So obviously, after this bloody war, the two populations have absolutely polar positions. It will take time for them to reconcile to the political decision. The official Abkhazian delegation is talking about confederation or federative union with Georgia, but these ideas are unpopular among the Abkhazians, as much as, I believe, that the idea of an independent Abkhazia is unpopular among the Georgians. So, it's a long-term process. But, of course, we have mixed marriages. There are many Georgians who left Abkhazia immediately when the fighting started, and since then, they have been in Russia. So I think that maybe these people will be the first to come back to their homes, but that will take time.

Question: I would like to make a couple of comments. One, I think that a distinction should be made between what is happening in Chechnya and what is happening in Georgia with Abkhazia. The Chechens never voluntarily belonged to Russia and the Soviet Union. Whereas reading throughout the classic times about Georgian statehood, it is very obvious that at one point, during many centuries, Abkhazia did belong to the Georgian nation, and the Georgian state, voluntarily. The kings throughout the centuries, the kings of Georgia, were called the King of Abkhazia, of Gamphelia, of Igresi and so on. King Bagrat fought to form the Georgian nation in the 12th century. In the 11th century, the church (which was then part of Constantinople), the Abkhazian church seceded from Constantinople and they chose to belong to the church in Tskheta, which is very much part of the ancient capital of Georgia. I find it really strange that a part of a country that has had many, many different tribes throughout its history, a part which has voluntarily accepted belonging to the nation, now suddenly expects the Georgian nation, which is in tremendous need of all of its resources, to accept now that one of its provinces, namely Abkhazia, where the Abkhazians are only in a minority, is going just to let go and pretend that it never was a part of the nation. How do you expect to resolve the conflict when you throw, first, all the Georgians out, and now you are going to hold an election with the Abkhazians that are remaining in Abkhazia. As everybody knows, the United Nations has considered it an illegal election, and I think very correctly so. I think that instead of trying to secede, I think that you have a very good point that Georgians have made mistakes, and Gamsakhurdia especially; but I think that secession is something that is totally uncalled for. I mean, one should try to have the Georgians consider the Abkhazians within the Georgian nation in a better light. But to expect secession, I just don't see it. There are so many centuries in which Abkhazia has belonged to the Georgian nation, that you can't expect now suddenly say, "well, we don't feel like it any more." That's the only comment I want to make.

Kvarchelia: I'll leave the historical discussions to historians. To respond to all that you said, I'll have to start all over again, which I don't want to do. But I will respond to this point that you raised about elections. I have read the last statement of the Abkhazian parliament about the elections, and it says that the term of the current parliament has expired, and that with around 60,000 Georgians back in the Gal region, and, I think, 20,000 Georgians that have never left Abkhazia, and with the rest of the population which make around 300,000 people, they think that it is acceptable to hold these elections. And the United Nations, they don't recognize the right to self determination even if it is declared in their charter. They probably will not recognize many things. But anyway, your comment just shows how far apart the positions of the Abkhazians and Georgians are. And it's not a simple issue - it's not easy to decide who has the right to secede or to stay. I think that things should be negotiated.

Question: What gives you the right to secede? You're not even the majority?

Kvarchelia: I think that the Abkhazian people have the right to independence.

Question: Based on what? Historical facts? A majority?

Kvarchelia: I think that I have already said on what it is based, so I don't see the point of this.

Moderator: If I could just intervene here, there is a problem in the whole of the former Soviet Union where we have the setup of the titular nationality. The Abkhaz were the titular nationality of the autonomous republic of Abkhazia, which is, again, the same problem we had with Chechnya, who were the titular nationality of the autonomous republic of Chechnya. In many of the cases of the union republics of the former Soviet Union and the autonomous republics, the titular nationality was not in a clear majority. You have this problem, for example, in Kazakstan, where there is an extremely large population of Russians. So this is the dilemma that we're facing, as elsewhere across the whole post-Soviet space. It is a problem basically of the structure of the Soviet Union, rather than so much the problem of who is in the minority and who is the majority. The fact is that the construction of the Soviet Union set certain peoples up to be the titular nationalities of their particular areas. Technically, under Soviet law, the Abkhazians did have a right to secede if they did it in a correct manner, which would have then required a referendum. Now what actually happened was quite a different thing. It is the same in the Chechen case. Clearly the Soviet structure has been the problem here. Basically, I think that what Liana is trying to do is to get beyond this complexity and to look forward. The fact is that you can't now erase the last three or four years. Abkhazia seceded. She has said that the Abkhazian government is now moving towards looking at some way of being associated with Georgia, and the question is now: which form will that take?

Kvarchelia: I only want to add one thing. I don't think that it is very helpful to refer to this figure of 17 percent of Abkhazians without taking into considerations why Abkhazians became 17 percent. As much as it is not helpful to say that today the Abkhazians are the majority in Abkhazia, without looking into the reasons why they became the majority. Equally, I don't think that this is a very productive way to look at this.

Question: There is a little difference, if I can make a comment. I'm not a historian, as well, so this is probably what I've heard from others. As was mentioned, Abkhazians in general were Christians historically. Now the new group of Abkhazians, especially the secessionist Abkhazians, are Muslims. There is this school of thought that says that these people actually never lived there. The Abkhazian language doesn't have a word for "boat." And if you are a person, a nation, living at the sea, you have to have a word for boat. The Abkhazian word for boat comes only from the Russian word for it.

Kvarchelia: That's not true. There is Abkhazian word for it.

Question: My family, right now, have been living in the US for the last eight years, and my apartment is used by two Abkhazians. They are Christian Abkhazians who after the fighting went back to Georgia. As you know, there is a significant number of Abkhazians who did not run away to Russia, but ran away to Georgia. So when Georgians say that Abkhazians did not have a right to secede (and I'm not saying that this is right, but this is the way they are putting it), they are saying that these people, the Muslim population of Abkhazia, are later comers to the region who came from the North Caucasus and never actually lived there. Because there are significant differences between last names, and between the cultures and traditions of the Christian and Muslim Abkhazians.

Moderator: The question is, though: is this ultimately that relevant, to be perfectly frank?

Question: No, it's not.

Moderator: I'm British. I live on the border between England and Scotland. None of my family speaks Gaelic, although we are Scots who moved down. One or two percent of the population of Scotland speaks Gaelic. It's such a mixed population. There are centuries and centuries of interspersion of peoples. It is impossible to unpack these kind of things. And if you look at the United States, in these terms, none of us have a right to be here unless one of us is a native American, and I don't see too many here. So I do not think that these kinds of discussions help either the Georgians or Abkhazians now to reach a political accommodation in the 20th century looking forward to the 21st.

Question: May I make a comment about ethno-territorial disputes within the Soviet Union before its dissolution. In Central Asia alone, there were 63 such disputes. And there were a few hundred in other parts of the ex-USSR. And the majority of those are in the Caucasus. Now, in the Russian Federation alone, there are some 84 titular nationalities. The problem is that since the dissolution, it is not just ancient root causes that are causing various problems, but neighboring countries who would not dare make claims on the Soviet Union are now making ancient claims - the Poles are doing it, the Romanians are doing it, and so on. There must be some way - granted that Soviet policy exacerbated the situation - to reach at least a minimum of concessions, perhaps not acceptable to everybody, but at least some kind of a solution to at least make the majority - I wouldn't say happy, but at least to find a solution. Either through the payment of compensation for refugees who basically said that they cannot go back, or a return under some kind of conditions. But this cannot continue to focus the attention of the international community without some kind of dealing. Look at what's happening in Zaire. Look what is about to happen in Central Asia as a result of what has happened in Tajikistan, from which I've just returned. Somewhere there must be the possibility of negotiation.

Question: What do you see as the basis for negotiation now?

Kvarchelia: I think that negotiations now are at a deadlock. The Abkhazian position of a federative union with a division of responsibility, some common body, is not acceptable to Georgia, and vice versa. Probably, maybe, the solution will be not to pursue negotiations, but at least to try to rebuild the economy. After all, Abkhazia has been devastated by the war. It has been destroyed - I will not compare the amount of the humanitarian aid going to Georgia with that which comes to Abkhazia. Eventually, I think things will start happening. Like, for example, when Russia closed the border for goods to come in, what the Abkhazians did was to go to the Gal region where they bought products from the Georgians who brought them from Georgia. They just started trading, and economic issues will make these people work together, no matter whether they are going to be neighbors, or in one union state, a confederation, a federation, whatever. The economic interests will make them rebuild their relationship.

Question: Let me pour a little oil on troubled waters. Several people have said that they are not historians. I am a historian, and have done a lot of work on the 19th century Caucasus - immigration, forced emigration and so on. The Gortsy (people of the North Caucasus) left no statistical records. The Russian material, in the best cases, is informed guesswork, and the Turks who received them didn't have even that. So what I would suggest, as a historian here, is that the history of the region is useful for Americans to understand what the concerns of the parties that live there were; but it is a very dubious base for building any kinds of plans as to what should be actions in the present.

Question: I am curious about the fact that the Gal region has been proposed as a negotiation card, citing the land-for-peace agreement in Israel. Some people have said that this land might be exchanged in return in exchange for independence, or for a peaceful settlement.

Kvarchelia: Maybe people at the level of scholars, have talked about this, but there have not been discussions of this on a political level. Anyway, I don't think that Georgia would be satisfied with the Gal region. Equally, I don't think that Abkhazia would either. I don't think that this would be acceptable to either side. But at least, when this agreement on refugees was signed, it was agreed that this Gal (Gali in Georgian) region would be a starting point, since it is more acceptable for them to start going in this direction. But the situation is not very calm there, either. Of course, there are armed Georgian groups that penetrate the territory, although there are peacekeepers and UN observers there, and there are some terrorist acts happening. The last statement of the Interior Ministry said that 38 Abkhazian policemen have died as a result of these ambushes. And around 100 people since 1994 have been killed in the Gal region, either by mines with timers, or in direct attacks. The situation is not calm, although the people would want to work on the land, to do what they used to, and to try to rebuild their homes. But it is not in the interest of some Georgian politicians to have a very calm situation in Gal so that these negotiations could be protracted for another five years. What they want is to have all the refugees back - not just the Gal region. The Gal region without the rest of Abkhazia is irrelevant for the Georgians.

Conflicts and Prospects for Peace in the Caucasus
Jiriar Libaridian
9 April 1997

Dr. Jirair Libaridian is the senior advisor to the President of the Republic of Armenia and holds the rank of Extraordinary and Plenipotentiary Ambassador as well as an appointment as Ambassador at Large. His current responsibilities include the coordination of foreign and security policy. He is also responsible for coordination of negotiations regarding Nagorny Karabakh in the Office of the President and has been negotiator for Armenia on that and regional issues. Dr. Libaridian has held a number of positions in the government of Armenia since 1991. He was first the director of the Department of Research and Analysis of the Supreme Soviet of the Armenian SSR before the collapse of the Soviet Union. He then became an advisor to the President of the Republic, and then served as First Deputy Minister of Foreign Affairs from March 1993 to September 1994. He is a native son of Boston, and was the director of the Armenian archives in Boston starting in 1981, then the editor of the Armenian Review, and the director and co-founder of the Zoryan Institute for Contemporary Armenian Research and Documentation here in Cambridge. He holds a Ph.D. in history from the University of California at Los Angeles, has written very widely on issues related to Armenia and the Caucasus.

Abstract

Dr. Libaridian opened by noting the tension inherent in the concept of the nation-state when applied to ethnically diverse regions like the Transcaucasus. This region has experienced three major conflicts since the Soviet collapse - Nagorny Karabakh, Abkhazia and South Ossetia - and four if one includes Chechnya. All of these conflicts are linked, he said, since the conflicting parties watch what is happening in each of the other areas and since a solution in one can provide either a methodological or a substantive example for the resolution of the other conflicts. He pointed out that two principles of international law were clashing: the territorial integrity of states (Azerbaijan) and the right to self-determination of peoples (the Armenian side, i.e., Nagorny Karabakh and Armenia). He outlined three different methods to resolve this conflict on the level of principles: appealing to an international court of law, bringing in outside mediators, and political negotiations. The first option offers little hope for resolving the conflict over Nagorny Karabakh because the international community prefers to see the conflict as political rather than legal in nature. In particular, there is no single principle on which all agree a solution should be based. While Azerbaijan appeals to the norm of territorial integrity, Armenia bases its case on the right to self-determination and the norm of peaceful resolution of conflicts. Mediators have also proven unhelpful at times, since they tend to come with their own agendas. Armenia and Azerbaijan, Dr. Libaridian said, have at times found themselves mediating between the mediators. The OSCE's recent attempts to push a solution based primarily on the principle of self-determination have also not proven helpful for the reasons stated above. By removing the possibility of independence for Nagorny Karabakh from the bargaining table, mediators are reducing the incentive for Azerbaijan to offer real concessions to Nagorny Karabakh. Direct negotiations, Dr. Libaridian argued, have proven more successful than have mediated negotiations. Indeed, it was such an approach that has produced the cease-fire that has now lasted nearly three years. The key, he said, is to focus on the real issues facing the parties rather than on abstract principles. For Karabakh, the vital concern is a status acceptable to the people of Nagorny Karabakh, with international security guarantees. Azerbaijan has done little so far to inspire confidence to Nagorny Karabakh and has done everything to justify their demands for secession.

Presentation

Libaridian: First I would like to give you some characteristics of the region, then talk about the conflicts, focusing on the process of negotiations, and then focus on Nagorny Karabakh. At the end I will answer questions.

It is only recently that attention has been focused on this region. The more people know about it, the more complicated it looks, and in fact it is quite complicated. The equating of states with nations which was started with the French Revolution has run into trouble, but not as much in other places as in the Transcaucasus. That is, the number of ethnic and religious groups, the history of their relations and state formation is perhaps more complicated than in other regions. This makes mediators more wary of dealing with history. One thing is clear: in the negotiations on any one of these conflicts, whether it is South Ossetia, Abkhazia, Nagorny Karabakh, or Chechnya, while the parties to the conflict are deeply aware of, if not motivated by, history, mediators try to stay away it.

The ethnic and religious dimensions are significant, but I would caution observers to be careful regarding the importance they assign these factors, the phase in the conflict at which they become significant, and the role they play in the negotiations and for the mediators or the international community.

It is obviously an oversimplification to call any one of these conflicts ethnic and/or religious, because we see other factors taking over. The fact that the region has three major powers as neighbors does not facilitate things. Russia, Turkey and Iran each has had imperial traditions and, to different degrees, nostalgic memories of that past and current interests and ambitions. The historic model of the USSR, Turkish-Russian conflicts, and competition over the region all come back to haunt the observers and negotiators because they are all part of the mentality that must be dealt with in order to find solutions.

In recent years the three republics have stressed and the international community has recognized the significance of the region for transcontinental transportation and communications, not least of all for Caspian oil and gas, an issue I will address later. It is not all that clear whether the introduction of the latter as a factor has at this point helped or hindered negotiations.

In the background of all this, we have the issue of the difficult relations between the West and Iran, one of the three major powers of the region; the question of the absence of a new security system since the collapse of the USSR, particularly for Armenia, with whom Turkey, another major power, has refused to establish normal diplomatic relations. Given the difficult past of these relations, it is not yet clear that all three of the republics will resolve their security issues in a similar way or jointly. While the prospects of regional development and cooperation are often discussed, the regional security aspect has lagged behind.

One factor not peculiar to the Caucasus, but which I would say has added importance when we are looking at this conflict, concerns the change from a totalitarian system to democracy that is taking place following the collapse of the Soviet Union. Given the coupling of the goal of democracy with that of the free market on the Western model, the hopes and expectations and consequently the frustrations of people in the region make domestic issues much more significant for foreign policy and for the resolution of conflicts. That is, given the destabilizing effects of the bankruptcy of the old system, fragility of transitions and their impact on society, do governments feel strong enough to make the necessary compromises to resolve these conflicts?

Wars and military preparedness accentuate budgetary difficulties and make more difficult everything: political party development, the separation of powers, the implementation of a constitution, the establishment of the rule of law, etc. All these issues are affected by the fact that you have had conflicts, or may still have military hostilities renewed. The danger is used and, in some cases, abused by governments. They talk about maintaining stability, and say, "look - we may have a war, so the following principles and the building of democracy may not be applied yet, etc."

Changes in the economic sphere too are an important part of the political landscape within which the conflicts are played. Transformation from a centrally planned to a free market economy is difficult enough. The difficulties are multiplied when, as is the case all former Soviet republics except Russia, the center was Moscow, not the capital of the newly independent republic. The economies of these republics were the margins of another economy.

Furthermore, the infrastructure in these republics had collapsed. The Communist Party gave up power in these republics gladly not only because of the moral bankruptcy of government, but also because the budget and economic infrastructure - roads, bridges, airports, public utilities - were in ruins and the state could no longer be financed on the old basis. In most cases, the newly independent states cannot produce the resources required to correct the situation on their own either.

About regional conflicts. The first observation is that we have many. In the North Caucasus, the main one is Chechnya with the possibility of others. In the South Caucasus, in the three republics, you have South Ossetia, Abkhazia and Nagorny Karabakh. In dealing with prospects for solutions, one has to note the different phases of these conflicts. That is, how did they start? When did they become militarized and why? At what point did a conflict become a matter of concern to others, thereby determining, to a large extent, who becomes the mediator and in what way solutions are sought? Chechnya is in conflict with Russia; in that conflict Russia plays the main role, while the OSCE has a marginal contribution. The Abkhazia conflict involves Russia as the main mediator, with some role assigned to the UN and the OSCE. South Ossetia involves largely Russia, with some OSCE presence. Nagorny Karabakh has OSCE mediation, within which Russia plays the role of permanent Co-chairman of the mediating unit, the Minsk Group.

The mediator's own agenda makes a great deal of difference. At one point, for example, in the Karabakh negotiations, the strongest pressure on the parties to accept a deal did came from the need of the OSCE to see the first major conflict it took on resolved, so it could justify its existence. This affected the way OSCE leaders and the mediators on behalf of OSCE, and the Minsk Group Chairman, functioned and dealt with the question and the parties to the conflict. Eventually they discovered Bosnia, which saved them.

I would also say that the four main conflicts are related in the sense that all of us negotiating these issues watch each other. That is, we watch very carefully what is happening in Abkhazia, Chechnya, and South Ossetia. The Abkhazians and the Georgians watch us, as do the others. The reason is, first, that if one is resolved, it will make the resolution of the others easier and will also impact the way the others will be resolved, both as methodology and substance. Others will more or less follow, though not necessarily imitate it. That is, a solution in Chechnya may place a higher or a lower ceiling for the resolution of the others.

To the extent, of course, that Russia is a major player in all four conflicts and a party to the conflict in Chechnya, Chechnya becomes even more important. Russia will probably not, if it can, allow any solution of the other conflicts that it will not accept for itself in Chechnya.

What are the prospects for solutions? Of course, theoretically, you can go to arbitration, to an international court. I know that in at least two of the cases, Abkhazia and Nagorny Karabakh, there has been thought given to the idea, but the idea has been discarded because these conflicts are seen as political rather than legal conflicts and the mediators would rather treat them as political. Legal aspects are not really brought forth or given much significance. Then you have war, of course, and all four have gone through a military phase. In none of the cases war or its outcome has determined yet the status of the territory in question. Once war is stopped somehow, you have negotiations. We have had different models of negotiations. Some have involved mediators, and some have been direct. Russia and Chechnya have negotiated directly, with some help from the OSCE. We know that there have been direct contacts between Georgia and Abkhazia, parallel to the Russian mediation. I heard 10 days ago in Washington that direct contacts between them may be renewed.

In the Karabakh case, we have had the Minsk Group negotiations for the most part of the history of the conflict. Russia, Kazakhstan, and Iran have made efforts before and during the OSCE mediation. Before the military dimension became the most significant, Iran was able to broker a cease-fire in 1992, which was then immediately violated. But most of the mediation has come under the aegis of the OSCE Minsk Group. In 1996 direct consultations between Armenia and Azerbaijan did take place, with the understanding that Nagorny Karabakh would be joining in at some point. These contacts were broken off as a result of the debacle of the OSCE Lisbon Summit in December 1996.

Efforts at resolving these conflicts involve a decision on methodology, regardless of the format of negotiations. Should efforts concentrate toward reaching an agreement on intermediate measures aimed at alleviating the consequences of war, leaving the more difficult question of the status of the territory in question for a second phase of negotiations, or should negotiations include the status issue as part of an overall settlement? Nagorny Karabakh, Abkhazia and Chechnya have won the war, as far as that goes, but whether that fact becomes the determining factor in resolving the status issue in their favor remains to be seen. The international community, including Russia, is generally set against that in the name of the principle of territorial integrity.

In Chechnya, they broke through the impasse by postponing the status issue for five years, as had been done in the Palestine-Israel issue. In Abkhazia, small advances were made following the cease-fire, but the status is yet to be agreed upon. But if any one of those conflicts breaks through, a resolution to the others will be facilitated. I cannot say they will be resolved, but a solution will be facilitated. It seems to me that once Azerbaijan gets over the euphoria of Lisbon, there will be a realization that Lisbon was a failure as far as the peace process was concerned.

In the case of Nagorny Karabakh, the conflict started in 1988 as a political conflict; the Azerbaijani response was the anti-Armenian pogroms in Sumgait. Then Azerbaijan militarized the conflict in 1991 after imposing a blockade of Nagorny Karabakh and Armenia. The current Foreign Minister, Mr. Hasanov, was Prime Minister; the President was Mr. Mutalibov. The two ordered Interior Ministry forces, assisted openly by the Soviet army, to begin the successful deportation of the population of 14 Armenian villages north of Nagorny Karabakh. This was to be just the beginning. That forced Karabakh Armenians to begin a resistance movement; the rag-tag group of volunteers became eventually the formidable army that defeated Azerbaijan.

There were mediation efforts by Russia, Russia and Kazakhstan, and Iran before the OSCE (CSCE then) assumed the responsibility for mediation in 1992 with the goal of inviting a Conference that would determine the status of Nagorny Karabakh, while an Azerbaijani blockade of Armenia and Nagorny Karabakh was in place. Military operations and changes on the ground forced the mediators to deal with the question of occupied territories and refugees as well as the blockades. This produced the "step by step" approach. The second approach is the "package deal," where the issue of the status is resolved along with the questions dealt with in the "step by step" approach. This was tried when the main parties to the conflict, Nagorny Karabakh and Azerbaijan, refused to move forward on the "Big Political Agreement" that embodied the "step by step" approach without at least having an agreement on the parameters of the solution to the status issue. Recently OSCE began to shift methodology and has tried to compel the Armenian side to recognize territorial integrity as the basis of the solution of the status issue, before any other agreement is reached, without much success.

Now, whenever a mediator begins to unravel the knot by trying to impose a legal basis by isolating it from or by creating a hierarchy within the body of international principles, we end up in trouble. That is, the OSCE tried to impose the principle of territorial integrity in isolation from the rest of principles relevant to the conflict - always in the name of international law or, at best, of international stability. Territorial integrity is, of course, one of the precepts of the OSCE, the Helsinki Final Act of 1975. But it is one of OSCE's 10 principles. Another relevant principle is the peaceful resolution of conflicts. The right of self-determination of peoples is yet another. The tenth principle insists that the previous nine principles are to be taken as a whole; there is also no hierarchy recognized by the OSCE.

When we move the conflict to the level of principles, we end up having to deal with the conflict between principles.

How do you reconcile the apparent conflict between the principle of the territorial integrity of states and the principle of the right to self-determination of peoples? One possibility is, again, to refer it to an international court and agree to an arbitrated solution. There has been some thought given to this. But no one is certain what a court would do, so everyone stays away from that route. Besides, to take this option would assume that the parties and the mediators see the problem as a legal one, when the fact is everyone sees it as a political one.

The second option is for the OSCE to revisit the ten principles and resolve any conflict between them. That has not happened. The OSCE has avoided that route. Instead there have been some attempts at reinterpretation, but not a frontal attack on the conflict.

The third way to resolve the difference is to take the conflicts case by case and to negotiate the actual relationships between the parties on the basis of real interests, leaving aside principles and labels and terminology that project and stress rigidity while clarifying nothing.

This we attempted to do last year but Azerbaijan interrupted the exercise. The latter thought that it had enough "oil friends" to impose the principle of territorial integrity without any negotiations or concessions. In return Azerbaijan offered some kind of "autonomy" to Nagorny Karabakh and "security." This was the Lisbon Summit formula. We said that territorial integrity is a principle of international law, and it is recognized and understood - we know what it is. We don't know what an "autonomy" is; that is strictly a political terminology. The formula and words have become obstructions to negotiations rather than facilitators.

We know that the solution will have to based on a compromise. But a compromise that is negotiated, not imposed, a compromise that requires clear concessions from all sides.

When in Lisbon the various countries placed territorial integrity above self-determination; they did so as a political decision, not as a matter of international law.

The question remains, How does the practical approach proceed with a background of principles apparently in conflict? Let me try a different approach then what has been tried.

What is territorial integrity? It is a principle that governs interstate relations. Let us not assign it functions, which it was not supposed to have. And what is self-determination? The right of a people to determine its own future. It is also clear that this is all it means - it does not mean independence, necessarily. It can mean independence, but not necessarily. A nation can determine for itself that it wants to be part of - rather then separate from - a given state. In defining these principles, let us not assign them definitions that they do not have in and of themselves.

The next question is, is territorial integrity an absolute principle? The examples of the USSR, Yugoslavia and Czechoslovakia indicate otherwise. We may see secession in Canada. You have seen Ethiopia, out of which came Eritrea. So it is not an absolute principle. And even where that principle has been asserted, as in China with regard to Hong Kong and Taiwan, there has been a special status granted to Hong Kong and the principle has yet to be applied to Taiwan. It seems that territorial integrity becomes the paramount principle when the center decides to use military force against the party wishing to secede, instead of convincing the latter to stay or negotiating a friendly divorce.

What will happen in Canada, a neighbor of the US? It is interesting, is it not? If Quebec has a referendum next time that favors independence, will Ottawa send tanks and planes in as Russia did against Chechnya and as Baku did against Nagorny Karabakh to force people, who don't want to be part of Canada, to be part of it?

The international community has also argued that the principle of territorial integrity as a basis for the solution of the conflict is necessary for the sake of the evolving European security structures. That is, Armenians are being asked to forego their rights and their security in order not to upset the security of Europe. This is vesting the issue with too much responsibility. We are asking our friends not to do that. Is it up to the 150,000 Armenians of Nagorny Karabakh to ensure the "security" of Europe? Is it Armenians again who will pay with their lives for the principles which somehow in the last century have failed to protect them? We have difficulty taking upon ourselves, as Armenia and as Nagorny Karabakh, the burden of making the world right, if the world is unwilling to do us right. The last time that situation was created the result was the Genocide of 1915 which the world has as yet to recognize.

If the principle of territorial integrity is essential to world order and is expected to be part of the solution, then the international community must make Karabakh an offer Karabakh cannot refuse. It cannot tell the Armenians of Karabakh, the Armenians of Armenia or Armenians around the world that, once more, it should set aside its security needs and its rights in order to prove something or other to the world. That would not be real peace anyway. It comes back to haunt you if you do not have a just solution. If it wishes to resolve this conflict, the international community must keep in mind three essential ingredients: the full participation of Nagorny Karabakh in the negotiations leading to an agreement; an agreement that has an international status and cannot be changed unilaterally; and security guarantees both for the agreed upon status and the physical security of the people of Nagorny Karabakh. Any country that wants to impose anything will be asked the following question: can you guarantee the lives and rights of the Armenians in Karabakh? If the US, Russia, France or Finland want us to sign a piece of paper, will Russian, American, French, Finnish soldiers go and protect our people if Azerbaijan decides to change things once it has the means?

Azerbaijan refuses to talk to Nagorny Karabakh today; what will it do tomorrow? Everything Azerbaijan has done so far has strengthened in the minds of the Karabakh leadership and people the belief that return to Azerbaijani jurisdiction is tantamount to suicide. In the name of what principle can they be asked to commit that act?

All indications are that Azerbaijan views Nagorny Karabakh as a runaway colonial possession. This is both a mentality and a psychology, and dangerous ones at that. It is exactly the kind of view which does not encourage the people of Nagorny Karabakh to think of being part of Azerbaijan as a step forward, to say the least.

It would be a mistake, therefore, to preclude the possibility of independence from the right of self-determination, as was tried in Lisbon, for many reasons. First, because that would no longer be self-determination. Secondly, because that would take away the motivation of the center to negotiate seriously. Thirdly, because there may be no alternative to independence if differences are such that the forced continuation of the "marriage" may constitute an unacceptable risk of massive violations of human rights and a festering source of instability and insecurity.

This brings us to the kind of state Azerbaijan is and is likely to remain for the foreseeable future. The best way to talk about this is to tell you a story that in fact happened, I think in 1994, during one of the OSCE Minsk Group negotiating sessions. Finland occupied then the position of Co-chairman of the Minsk Group with Russia. The co-chairmen thought it might be a good idea to convene one of the sessions in the Aaland Islands, which are populated by Swedes but were awarded to Finland in 1921 by the League of Nations and given a special status. During those negotiations, one of the Co-chairmen took aside the head of the Nagorny Karabakh delegation and said to him, "My friend, do you see these islands? Do you see a problem here? Look how well they live. They are Swedes, but they are part of Finland, and they have all these rights. What can't you accept a solution like that for Karabakh?" The Nagorny Karabakh leader responded, "I accept that kind of arrangement immediately - I'll sign an agreement right now: Nagorny Karabakh as part of Finland."

But Azerbaijan was not and is not Finland. And the more things develop, the more difficult it becomes to look at Azerbaijan as potentially a Western style democratic state. It is looking more and more like a very authoritarian state that relies dangerously on one single natural export resource to resolve all of its problems and to build a state, and that is not very promising.

On the strength of that resource, oil, Azerbaijan expects to obtain the guarantees of its territorial integrity before even it sits down to serious negotiations on the issues of interest to the Armenian side: status and security guarantees. In fact, Azerbaijan wants to resolve the issue of status before it negotiates it.

We have had a cease-fire since May 1994, a fragile, unmonitored cease-fire that has lasted because it is based on a modicum of balance of forces and of strategic military positions. This cease-fire is the greatest asset we have. This is not only because it sets a record and says that we can agree on some things, but also because people get used to peace. It is very difficult to get people back to fighting. They will fight if necessary. But there will be psychologically an easier time for people to accept a peaceful resolution of the conflict.

Why did Azerbaijan reject the "step by step" approach and opted for a non-starter. Azerbaijan seemed to be arguing the following: "If we have withdrawals and the return of refugees now without a clear idea of what the status of Nagorny Karabakh will look like, that would mean freezing the situation with Karabakh's de facto independence, after which Karabakh will not have an incentive to negotiate its status." That position has not changed as of now. The Azerbaijanis complain about the refugee situation and I sympathize with that situation completely. There is not an Armenian who will not understand the situation of the refugees. But Azerbaijan treats it as a political issue and not a humanitarian issue. That issue could be resolved if you accept the step-by-step approach which Armenia proposes. That is, since the status is a more difficult issue to resolve, let us see of we can resolve the other issues first. This will give Azerbaijan two very important things: return of most of the occupied territories (Lachin is a separate issue), and the possibility for the return of the refugees. The deal would provide for OSCE international peacekeeping forces for Nagorny Karabakh and other temporary security measures, and for the end of the blockades.

Nagorny Karabakh too ended up rejecting a "land for peace" deal, insisted on "land for status," and argued along lines similar to that of Azerbaijan: "We have security now with the occupied territories. Our villages and towns are not being bombarded because we are holding the territories adjacent to Nagorny Karabakh. You want us to give back the territory. Azerbaijan will then return to our borders, start shelling as they used to do, and over a period of time that can result in the depopulation of our towns and villages. Once Azerbaijan has obtained its territories back, it will have no incentive to negotiate status seriously. Why should we return these territories, won with the blood of our soldiers, before we have a clear idea of what our status will be like?"

In this manner both Nagorny Karabakh and Azerbaijan hardened their positions, making the same argument. That is when Armenia tried direct and preliminary and exploratory consultations with Azerbaijan, with the understanding that Nagorny Karabakh would join in, on the matter of the status. This efforts was killed by Azerbaijan, when it decided to get what it wanted through pressure tactics at the OSCE Lisbon Summit rather than through negotiations.

There are two problems with the Azerbaijani position. First, as I said earlier, it wants to define the parameters of the status before sitting down to negotiate. Secondly, while it knows it has to make concessions on the status, Azerbaijan believes time is on its side and what concessions it may have to make today it may be able to avoid later; Azerbaijan does not, therefore, have a clear idea of the solution, unless it is total domination over the people and over the territory.

Azerbaijan relies heavily on the blockades of Armenia, by Azerbaijan and by Turkey, when it concludes that time is on its side. Armenia has overcome most of the impact of the Azerbaijani blockade, though not completely. The impact of the blockade by Turkey may be the more serious one at this point. Turkey, in a fit of ethnic solidarity with Azerbaijan, has made the opening of its borders and establishment of diplomatic relations with Armenia conditional upon the adoption of a framework for the solution of the Nagorny Karabakh conflict. This has made bilateral relations a hostage to Azerbaijani intransigence, while strengthening the position of the hard-liners in Baku. The latter believe that Armenia can be brought to its knees by economic strangling. Very few blockades in recent history have worked, and the people of Armenia and Nagorny Karabakh are not ready to make concessions just to see blockades lifted.

If President Aliev does not have to make a decision today, he will not make any decision. Why accept a solution, he thinks, if it may be interpreted in history as humiliating if he can wait a year or two or five and have a different situation. In particular, he thinks the world owes him something, particularly the West. After all, he went against Russia, he signed away the oil wealth to Western consortia; the West owes him Nagorny Karabakh. The result is that Azerbaijan is not ready to negotiate seriously.

Nagorny Karabakh, on the other hand, wants independence from Azerbaijan. Its leaders argue that the region had the legal right under the USSR Constitution not to be part of Azerbaijan. If Azerbaijan declared independence, the USSR Constitution and the Law on Secession gave it the right to decide on its own future. The people of Nagorny Karabakh had a legal referendum and voted for independence. The leaders also argue that they defended their choice successfully in a war they won.

Azerbaijan's response is that it is not war that will determine the solution of the conflict, although it is a war it initiated, a war the outcome of which would have determined the solution of the conflict had its outcome been different.

Where are we now? The Minsk Group has resumed its activities with three Co-chairmen: Russia, France and the US. France could be seen to represent Europe. Russia is essential to the process. The involvement of the US is welcomed by everyone because all of the parties in all the conflicts take the US very seriously and the US is capable of pushing negotiations, as you can see with the Middle East, Bosnia, and elsewhere.

During these negotiations of the last three to four years, on occasion the mediators became a problem, and we, the parties to the conflict, have had to mediate between the mediators. And every one of the mediators, at some point or other, has been an obstacle to an agreement. Those mediators that are or will be effective usually have their own agenda. Even if they do not make that agenda a determining factor, Azerbaijan has an inducement for them, oil. We do not know as yet whether the three Co-chairmen will be able to set aside their differences and work in a manner as to preclude the parties from exploiting those differences.

The Minsk group had its first meeting in Moscow at the beginning of the month. It was not too successful, but there was no backward step either. I think that they may or may not go to another round before the Co-chairmen decide on a clear strategy as to what to do differently to make the process work.

We have proposed direct negotiations between Azerbaijan and Nagorny Karabakh, with Armenia participating if need be, as a means to give the process a new push. The Co-chairmen should join in as arbiters or facilitators.

At the end one cannot escape the conclusion that oil, or rather its prospect, has come to distort Azerbaijan's perspective, and the linkage of oil and pipelines with the resolution of the conflict has diminished the chances for a just solution of the conflict. Oil can be a wonderful thing, and it can also be a bane. We view the pipeline not only as something that will bring economic benefit to the region, but also something that can potentially contribute to regional security, once it is built. But to turn oil into a weapon is a mistake. That is, if, instead of negotiating a solution, the Azerbaijanis have their "oil friends" try to impose a solution on Armenia and Nagorny Karabakh, we will have a tragedy on our hands. But that is being attempted.

To think that Armenia does not want Azerbaijan to be wealthy is absolutely a mistake. We want Azerbaijan to prosper because we will benefit from it. There is no question about that. But to turn oil into a weapon can have an adverse impact; it can produce reactions that are unpredictable. The oil and oil pipeline issues are complex enough in and by themselves. If you link the two, you are likely not to get a resolution to either issue. It is also a mistake for anyone to think that economic development and prosperity in the region depend solely on Azerbaijan's oil.

On the issue of regional cooperation and integration, we have two different approaches in the three republics. Georgia would like to see very grand and immediate steps to form regional structures, even if nothing concrete is accomplished at this time. At the other extreme, Azerbaijan shuns every step until the problem of Nagorny Karabakh is resolved. I understand the Azerbaijani position: how can it cooperate with a country, Armenia, with which it considers itself to be at war.

But we find that position shortsighted and dangerous for a number of reasons. First, some issues do not recognize war and peace: communicable diseases, natural disasters, drug trafficking, international terrorism. Those are issues that will not wait; everybody has something to lose - time is no one's side - and everybody has something to lose in the absence of cooperation.

Armenia says that it is dangerous to start structures if there are no real projects, if you don't put something under it. We say it is also not very healthy not to have any kind of cooperation at this point. It is better to begin with very concrete, very specific joint projects and gradually to build mechanisms and then structures for regional cooperation and integration.

Furthermore, some of the issues where the positions are very much apart are related to the total lack of trust in each other. When we are negotiating, we are projecting the worst possible scenario of the subsequent actions of the opponent, and they are doing the same with us. Some of these could be more easily resolved if the atmosphere within which they were discussed was more constructive. We must begin by chipping away at those issues.

To conclude, I do think that as bleak as the situation looks at this time - the Minsk Group negotiations not moving, direct negotiations in serious trouble - we do have possibilities to make progress. We have three presidents in the Caucasus conscious of their historic responsibilities and wishing to move ahead. The leaders of the Transcaucasus today conduct a more or less balanced foreign policy and share a sense of urgency for regional stability and peace, without which it is difficult to imagine the solution to these conflicts and, further down, regional cooperation and development. The time when Gamsakhurdia was President of Georgia and Elchibey ran Azerbaijan was a horrible time to do business. And I do believe President Aliev is capable of making peace.

Armenia achieved stability very early and has avoided civil war and civil unrest. It is true that the events of last September constituted a negative phenomenon. But I do not believe that this will be a very substantial issue - that is something that happened and I don't think it will happen again. Where it did make a difference was in Azerbaijan's mistaken assessment of its impact on the negotiations. Azerbaijan thought that a destabilized Armenia would have to make more concessions on Karabakh. The fact is only a strong president can make compromises.

Russia wishes to see stability in its southern flank. We have the direct involvement of Europe and the US. The US and Russia can extend the cooperation started elsewhere to this area.

What has been achieved in the negotiations, while not tangible, is in my view significant. But whether these can be pushed to the end, we will have to see. I think there is enough experience now in all the capitals and enough consolidation in the domestic situations to make settlements possible.

Discussion

Question: How does the appointment of Nagorny Karabakh's leader, Robert Kocharian, as the Prime Minister of Armenia fit into the scenario you lay out for the possible resolution of the conflict?

Libaridian: A very brief answer would be that I think, in the end, we will have to wait and see. I would caution against a very quick conclusion. The reason for the appointment was strictly domestic - it was not related to the conflict. He needed someone who could do certain things, and Kocharian was the man to do it. Very few people know Kocharian well: he is an extremely intelligent, balanced, forceful, disciplined, organized leader, and that is the kind of Prime Minister Armenia needs at this point.

As for the impact on the negotiations, some people think that he will bring his more rigid positions and impose it on Armenia. Foreign policy in Armenia is the President's prerogative, and the Prime Minister is an appointed official. He will, of course, participate in the decision-making process.

Question: What is happening with the Armenians in the South of Georgia?

Libaridian: There are about 150,000 Armenians living in the South of Georgia. This was one of the problems in the first republics of 1918-20. I think that there is a lot of provocation going on. In Gamsakhurdia's times, there were extreme nationalist attitudes, which in that region translated into anti-Armenian policies. Since then, we have seen what we interpret as being small bureaucratic aggravations, being used by local officials and the like to settle local scores, which we do not believe reflect Georgian policy. So we are extremely careful with that. President Ter-Petrossyan went to Georgia, and with President Shevardnadze they visited the region, and the President's policy is very clear: these issues have to be settled in Georgia. That is, some of these problems seem to be legitimate, but they are not so much a problem with Tbilisi as with local officials, and maybe some leftover nationalist thinking in some segments of Georgian political circles. Armenia and Georgia have excellent relations and nothing can come between these countries and peoples.

Question: What should be the role of Armenia in the security guarantees provided to Karabakh in a settlement?

Libaridian: We feel morally responsible for Karabakh and for the security of Karabakh. No government of Armenia can allow another genocide to take place, or to see Armenians be deported again. So this is a matter of faith. It is not a matter of politics. We have had one genocide. You cannot be a government of Armenia and see other Armenians be deported again. It is as simple as that.

How do you institutionalize this in a solution, in a peace treaty is the question. We have offered that Armenia be one of the guarantors. We don't need to have another five years of protracted negotiations to make that point.

Question: Can you please rank for me Armenia's national interests on the scale from vital interests, extremely important interests and just important interests?

Libaridian: First of all, to achieve peace and normal relations with our neighbors. These are vital interests. I could even stop there. Economic development, state development and private development all come 1918-20. I think that there is a lot of provocation going on. In second to peace. Without peace, you will not be able to achieve any of these things. You may be able to have economic growth, but you will not be able to achieve economic development. We will not be able to achieve a higher standard of living, full integration with the region and the international community.

Once you move beyond peace, you can mention just about every sector of life. Education: you cannot have a future without education, right? There are no countries that are educated and are poor. There are no rich countries that do not have an educated people. Where are we in Armenia now? You can do more than what is being done, but that is not the point. The point is that you will not have the means to do it. Just about every one of those sectors requires radical changes. You think education reform is simple, but you have to rewrite all the history books and all the textbooks and reeducate all the teachers, reform the mentality.

No matter what you do, this will require a generation or two. Judicial reform, especially, will require one or two generations to get to the point where you have judges who know what separation of powers in the way you understand in the West. You cannot manufacture those people. These are matters of education from childhood to graduate schools, and actual experience as lawyers, so there are some things you cannot do. But none of these are possible, even a generation from now, if you do not have peace. I am talking about a just peace, of course.

Question: How are relations between the Diaspora and Armenia?

Libaridian: If I was to compare today's relations to those of 10 to 20 years ago, they are excellent relations. They are open, not state managed. It is not Armenia who decides who comes in, who goes out, who opens an office. Businesses, investment, artists coming in and out, poets, dance groups, scientists, writers, and so on come in and out and this is the main difference.

If you take it on a more institutional level, I think there have been disappointments on both sides, particularly after the earthquake in 1988 when there was some kind of an opening, while Armenia was still Soviet. When the "Karabakh" movement started in 1988, it kind of scared the Diaspora, which was not used to mass political movements; but the movement did unsettle the minds. The earthquake of 1988 facilitated the movement of people.

There was a period of euphoria, I would say, based on unrealistic expectations and romantic views of each other. Armenians in Armenia thought that the Diaspora was all made up of rich individuals, very well organized communities, great poets, patriots, etc. Armenians in the Diaspora thought that Armenians are ideal beings, that Armenia is something like a museum where you go in to visit, to get inspired.

When in Armenia on business, the businessman forgot what made him a good businessman: two cognacs, a toast to Mt. Ararat, and the contract was signed. It doesn't work that way. You do not forget your business acumen by crossing the border to Armenia. And you do not expect the Diaspora to save you. Neither should the Diaspora expect that it would decide Armenia's future. Presently the two are adjusting to each other's realities and a much healthier atmosphere is emerging.

I do not think the Diaspora has much of an impact in the negotiations. Where there is an Armenian community, such as in the United States, where the government is also involved, the community can be useful in bringing to the attention of Congress and the executive branch concerns which Armenians here have with regard to their brothers over there, security issues etc.

Of course, the Diaspora has been extremely helpful in transferring technology, technical know-how in various fields, from business to administration to medicine to engineering. That can continue if we have business investments. Gradually humanitarian assistance should be replaced with technical assistance and investments. Armenia has a very highly educated labor force, just as Georgia and Azerbaijan do. Investments could work miracles over there, and contribute to the rising standard of living.

At any rate, the news of major problems between the two are greatly exaggerated. It is just that the field is changing and both sides need to adjust.

Question: What about conflicts of interest between the Diaspora in the United States and the Government of Armenia or people working in Armenia who are native to former Soviet Armenia? The Armenian community in the US consists largely of Armenians from Anatolia, and to some degree from the Middle East, rather than from the area that was Soviet Armenia.

Libaridian: First, I should say that half the population of Armenia today is made up of post-1915 genocide survivor immigrants, their children and grandchildren. The majority of the national movement leaders and many in the current leadership of the government belong to that category, including President Levon Ter-Petrossyan, whose family immigrated in 1946 when he was a year old.

It was this same generation that produced the illegal demonstrations in Yerevan in 1965 demanding the recognition of the Genocide and territories from Turkey. Many served jail sentences for that, including Ter-Petrossyan.

But these same people also evolved. Now for most the current leadership genocide is seen as a historical and moral issue but not as the foundation of foreign policy. This is the difference. This leadership, this government, does not believe so. Many in the Diaspora agree. Most understand the difference but may have difficulty overcoming the pain. The genocide has a larger role in defining those who live in the Diaspora than those who reside in Armenia, with all the consequences this entails. Whether this represents a conflict of interest. I am not sure.

With regard to members of the Diaspora going to work in Armenia, there were never that many. I think I was the first to take up any position, and that was in January 1991. We had the first Minister of Foreign Affairs of independent Armenia, Raffi Hovannisian, from Los Angeles, start work at the end of 1991. He served until September 1992, I believe. He brought into the Foreign Ministry a number of Diasporans, young energetic people. Right now we have a Deputy Minister of Foreign Affairs, Vartan Oskanian, also from the US. We have a French Armenian who is the Deputy Minister of Agriculture, who also started in early 1991, Ishkhan Mardirossian. We had Sebouh Tashjian, also from the US who served as Minister of Energy, subsequently State Minister for Energy Development, until 1995, I believe. There have been and are others at lower echelons. But the number is far smaller than imagined. In general, I believe, the role of the Diaspora is exaggerated. So is the antagonism between Armenia and the Diaspora. In dealing with the Diaspora, you have to distinguish between the very vocal and the more thoughtful.

Question: It seems to me that the most effective way to ensure the long-term security of the Armenians in Karabakh is to have Armenian troops sitting there on the border. I don't understand why Armenia has not yet annexed Karabakh.

Libaridian: For a very good reason. When the issue came up in 1988, the demand was for union with Armenia. But that was when the Soviet Union was still one state, one country, and a transfer of Karabakh from Azerbaijani jurisdiction to Armenia's would have been an administrative change. When the two republics became independent, any such transfer would have been territorial expansion, and that was not the policy of Armenia. Therefore Armenia's policy was to ensure for Karabakh the right to self-determination, wherever it led. Eventually, Karabakh decided to go independent. Now you negotiate as to how you reconcile this, and Baku dissolves the autonomy. Armenia is saying, "If we are going to negotiate a solution that is acceptable to everyone, then we have to negotiate and we cannot predetermine." Baku has predetermined. Karabakh has predetermined. We are trying to say, "We are negotiating. Let us find a solution that is negotiated that is acceptable to everyone." Of course, ideally it should be united or become independent. We have no reason to be optimistic about the prospects of a Karabakh as part of Azerbaijan. Negotiations remain the only reasonable path. Any unilateral solution provides the seeds for future conflict. We need a solution that is acceptable, a political solution that is acceptable to Karabakh and to Baku, based on the real interests and concerns of all parties. It is difficult. But I don't think it is impossible.

Azerbaijan and the Caspian Basin: Pipelines and Geopolitics
Jayhun Molla-Zade
April 4, 1996

Jayhun Molla-Zade is the President of the US-Azerbaijan Council in Washington, DC. He is also the Editor-in-Chief of Caspian Crossroads, a publication dealing with a range of issues in the Caspian region, from oil to politics. Dr. Molla-Zade received his initial academic training in Baku in the Department of Oriental Studies at Azerbaijan's state university as a specialist in the Middle East. He then received his doctorate from the Institute of Philosophy in Baku. He was the first Azerbaijani diplomat sent to the US in 1992 to the Azerbaijani mission. In 1993 he became the Deputy Chief of Mission and Political Counsel at the Embassy of Azerbaijan, and he has been President of the US-Azerbaijan Council since 1994. He is an expert on the Caspian region. He is also a consultant on business and legal issues for members of the US government and companies currently active in Azerbaijan.

Abstract

Dr. Molla-Zade discussed the development of the Azerbaijani state as it has developed following the collapse of the USSR, focusing in particular on the importance of oil in the Caspian Sea. He began by discussing the Azerbaijan Democratic Republic of 1918, which he argued has served as a model for modern Azeri state-builders. The year 1988, when the Nagorno-Karabakh conflict broke out, was a turning point for Azerbaijan. This conflict sparked the rise of a strong independence movement which eventually produced the independent state that now exists. After the resignation of Azerbaijan's first president, the pro-Russian Ayaz Mutalibov, the Popular Front, which had organized the independence movement, took power under Abulfez Elchibey. Elchibey also lost power in the face of internal turmoil and Russian pressure, opening the way for Geidar Aliev, the former Politburo member who consolidated power in Azerbaijan and was able to resist Russian pressure to bring Azerbaijan into Russia's orbit. Aliev has been able to play the region's great powers off against one another, especially Russia and Iran. He has supported the creation of two pipelines to ship the vast expected reserves of Caspian Sea oil, one going through Russia and the other through Georgia. He has been careful not to anger Russia, giving its oil giant LUKoil shares in the consortium created to develop Azeri oil. Molla-Zade concluded with an optimistic view of Azerbaijan's future, envisioning that a second oil boom will enable that country to get back on its economic feet.

Presentation

Molla-Zade: Thank you for inviting me here to talk about Azerbaijan in the regional context, the foreign policy of Azerbaijan and issues related to oil and the pipeline. I will try to present an overview of developments in the country and in the region.

Azerbaijan, as part of the Caucasus region and Central Asia, has been over many centuries a kind of arena for confrontation and was the object of disputes and wars between many powers, especially the three regional powers, Iran, Turkey and Russia. Western players have always had an interest in the region; they came to the region for a short period of time and left it. What is known today as Azerbaijan, Armenia and part of Georgia was once a part of Iran and the Persian empire. In 1813 and later in 1828, two Russo-Iranian peace treaties were signed. As a result of these agreements (the Turkmenchai and Gulistan Treaties) what is today Azerbaijan, Armenia and part of Georgia became part of the Russian Empire. Before that, on the territory of Azerbaijan and Armenia, there were mainly khanates, the small feudal kingdoms, warring amongst themselves, such as the Baku Khanate, the Karabakh Khanate, and the Yerevan Khanate. All of them were to a certain extent controlled by the Iranian king or shah. After 1828, a new administration was imposed on the whole territory and Russian governorships were established. The main ones were Baku, Yelizavetpol (which included what is today Gyandzha and the whole of Karabakh, both lowland and highland), and the Armyanskii Rayon which was established formally in the Yerevan Khanate. In this way, in the 19th century, a new phenomenon came to the whole region: the influence of and total control by the Russian Empire.

In the mid-19th century, Baku oil was found. Many entrepreneurs from around the globe came to this city, which was small and unknown to the world, actually just an unknown town on the coast of the Caspian Sea. The period including the end of the 19th century and the beginning of the 20th is known as the oil boom. The development of Baku really began during this period; the whole downtown was built, designed by French, German and Italian architects who were invited to the city by oil barons. Most importantly, the oil boom brought cultural and intellectual development.

The liberalization of Nicholas II within the Russian Empire served to benefit many Azeris who were able to establish political parties. About 160 newspapers and magazines were published in Baku alone, and this figure reflects the intensity of political and intellectual life in Baku at that time. In 1911 the Musavat Party, the main national democratic party, was established. It actually came to power with the collapse of the Russian Empire in 1917 as a result of the October Revolution. In 1918, Azerbaijan proclaimed itself the Azerbaijan Democratic Republic, which was a very historic event for the whole Muslim people and for the whole Middle East because it was the first republic which had ever been established in the whole Middle East. Some of the political parties formed a coalition government as a result of the first democratic parliamentary elections in 1919, and the first multiparty parliament was established.

When the British General, Thompson, arrived after World War I and was sent to Baku by Allied forces, he came and said 'I am commander-in-chief. I was sent here by Allied forces, and I am going to govern, and I don't recognize any government here.' The leaders of the young Azerbaijan Democratic Republic, who had received their degrees from Oxford and the Sorbonne and other places (they were very fluent in English and other foreign languages), said that this was fine and that they should hold free and fair parliamentary elections and let the people choose who will govern this state. General Thompson was shocked by the liberal approach that they took, and after that he said 'I totally support your government, your ideas, and your European and liberal attitude towards the governance of the country.'

This government was strongly backed by the British troops and government, and General Thompson himself was actively lobbying in the Paris-Versailles Conference for the recognition of the Azerbaijan Democratic Republic. It finally got that recognition in early 1920, including recognition that the area now known as Nagorno-Karabakh was a part of the Azerbaijan Democratic Republic, as well as the area known as Zangezur which divides Nakhichevan and Azerbaijan into two. Nakhichevan's fate was not actually resolved, because the Ottoman troops were still stationed there, and this issue was left for the peace conferences in Lausanne and the peace conferences related to the Turkish question.

I have given you a very short historical overview. A full talk about the historical development of the region would probably take several lectures and meetings; but the importance of bringing that overview in is that the model of the Azerbaijan Democratic Republic, the secular state model, is very important for Azerbaijan today. When the Russian Empire embarked on liberalization in the Empire, this time with Bolshevik and Communist rulers, the same kind of pattern was witnessed as at the beginning of the century. Conflicts repeated themselves as a battle between Azerbaijan and Armenia and massacres involving the two ethnic groups. As you know in 1918, Armenia had been in a short war with Georgia and a longer war with Azerbaijan over the three disputed areas. Thus we see the collapse of empire and the creation of independent states amidst chaos, massacres, anti-Semitism, and all kinds of things which were common to the historical processes of the beginning of the century within the Russian Empire.

The year 1988, when the Nagorno-Karabakh conflict started, was a turning point for Azerbaijan. The protest against the secessionist and irredentist movement in Nagorno-Karabakh actually brought people to the streets, and this became the smaller part of a larger cause for the Azerbaijani people, which was to seek independence. A national liberation movement began. At the beginning it was kind of a return to the roots, the culture, the language of the people, and later on the issues of control over our oil, our wealth, our destiny and our fate were raised. The first oppositionist movement, and the group which actually initiated the national liberation movement, was the Popular Front of Azerbaijan, which was actually registered only in 1989. It was suppressed and many of its leaders were arrested in 1990 after the bloodbath which the Soviet troops orchestrated in the capital Baku.

The model of the Azerbaijan Democratic Republic of 1918-20 was actually picked up by the Popular Front and by many intellectuals in Azerbaijani society as a model for the future. The leaders of this republic, Mamed Amin, Rasul Zade, and some other political figures became extremely popular along with their ideas. Under these kinds of slogans, under this image of the republic, the whole movement started.

As you know, in 1991, the Azerbaijani parliament declared independence. Before the Belovezhskaya Pushcha agreement between the leaders of Russia, Ukraine and Belarus, Azerbaijan had been recognized only by Turkey. Even this caused irritation in Moscow. In the fall of 1991, Turkey became the first country to recognize Azerbaijan's independence, and after Belovezhskaya Pushcha, that process continued. In 1992, the Popular Front came to power and was conducting many liberal policies. The Popular Front itself, as happened with many national liberation movements in the Middle East and some other places, split into different political parties: the National Independence party, the Musavat Party, the Popular Front itself, the Social Democratic Party and many others. Thus began the process of building this political spectrum of parties, and almost every party had its own newspaper. Different public organizations emerged. Azeri society acquired a new environment, quite different from that which it had experienced during the 70 years of Soviet rule. With the Elchibey government, in domestic policy, about 110 laws were adopted, and only 40 of them related to the economy. The rest were on political parties, the media, and some other very important issues.

The Nagorno-Karabakh conflict, the lack of experience of some government officials, the instability of the region as a whole, and Russia's policy on Azerbaijan all led to the fall of the Elchibey government. Geidar Aliev, the ex-Communist leader of Azerbaijan, had been invited from Nakhichevan by Elchibey. This was a surprise for many people because Elchibey had been imprisoned for 3 years for anticommunist activities at Baku University in 1974, a time when Aliev was the first secretary of the Communist Party of Azerbaijan. But being in Nakhichevan, Aliev did his best to change his old image. He was able to cooperate with the Popular Front in Nakhichevan because the coup d'etat against Elchibey was designed to bring ex-president Ayaz Mutalibov back from Moscow to Azerbaijan, and the latter's policy was known to many Azeris. If the policy of Elchibey was known to be pro-Turkish or pro-Western, Ayaz Mutalibov's policy was known to be purely pro-Moscow and pro-Russian.

Thus now we have a third president, Geidar Aliev, who has actually been able to conduct a foreign policy that is more balanced between Russia, Iran and Turkey. Many Western analysts had expected that Aliev would turn and move close to Russia. Although he brought Azerbaijan back into the Commonwealth of Independent States, he nonetheless did not go far beyond establishing dialogue with Russia. On very many occasions, there has been pressure to bring Russian troops back to Azerbaijan. The fact is that under President Elchibey, Azerbaijan became the first former Soviet republic to rid its own territory of all Soviet and Russian troops -- and this before the Baltic states and even Germany had achieved that goal. The border troops, the military bases, and the Caspian Fleet were all gone. The last stronghold was in the second-largest city of Azerbaijan, in Gyandzha. When the airborne division left the city, they transferred weapons to the rebels who toppled Abulfez Elchibey.

Within the short period of its reign, the Elchibey government, with many mistakes, facing many problems, was able to build a foundation for independence and to establish a certain trend in Azerbaijani politics which President Aliev was able to continue and by which he was even strengthened to a certain extent. The people who toppled Elchibey were closely linked to Russian military intelligence, to the Russian army. Aliev was able to crush these groups. He was able to take control of all paramilitary formations within the government, and he was also able to bring under control those outside government structures. Despite the pressure from Moscow to bring border troops into and to establish a military base in Gyandzha, he was able to resist and carefully maneuver between Russia and Iran, signing the $8 billion oil contract with the Western consortium. In effect, he almost returned to the foreign policy of Elchibey in terms of having good relations with Turkey, the United Kingdom, the United States and even Israel, which actually was the second country, after Turkey, to recognize Azerbaijan's independence.

Despite all kinds of pressure from Iran and the Iranian government, the Israeli government even opened an embassy in Baku. But on many occasions the Azeri president was even blackmailed and threatened that if he traveled to Israel he would meet the fate of Anwar Sadat. Nonetheless, recently the foreign minister of Iran, Velayati, and the foreign minister of Azerbaijan, Hasan Hasanov, held a press conference in Baku, an event unprecedented in diplomatic practice since Velayati began to criticize Azerbaijan openly for having diplomatic relations and any kind of ties with Israel. The answer from Baku was that Israel did not occupy Iran's territories and Azerbaijan is trying to build good relations with countries in the region and the world; but the fact is that Armenia has occupied 20 percent of Azerbaijan's territory and created more than a million (the UN estimates 1,100,000) Azeri refugees in their own homeland, and Iran has full-scale relations with Armenia -- diplomatic and economic, and there was even some evidence under Elchibey that Iran was supplying Armenia with fuel and weapons.

Relations with these countries at the present time are such that the government of Azerbaijan maintains the same kind of relations with the government of Turkey as had Elchibey. Maybe under Elchibey his government had greater expectations from Turkey. But maybe it was unrealistic to expect this, since there are limits to what Turkey can and cannot do for Azerbaijan and generally for the region. But in a situation where Armenian forces were actually receiving strong Russian military backing, Elchibey was expecting the same kind of military backing from Turkey. But Turkey is a NATO member and was of course not able to provide that kind of assistance. Further, it had many of its own domestic and other problems and was unable to commit itself to the kind of assistance that the Russians rendered to the Armenians of Nagorno-Karabakh and generally to Armenia.

Relations with Iran were tense under the Elchibey government, as well as when Aliev came to power. Despite this tension, Iran, even under Elchibey, became Azerbaijan's second largest trade and economic partner. Even with Russia, the Elchibey government signed more than 20 agreements, seeking relations based on an equal partnership and the recognition of Azerbaijan's sovereignty. The point is that Russia at that time was not seeking an equal partnership and was pursuing a policy of domination in the region. The Russians still wanted to dominate the region and they did not want to view Azerbaijan as an equal neighboring state. Nonetheless, Aliev was able to improve relations with Iran to a certain degree, and to improve relations with Russia. But still there was enormous pressure from the Russian government to bring Russian troops back, as well, of course, as Russian influence, and the Aliev government was able to resist Russian plans to deploy Russian troops even as peacekeepers on a unilateral basis in Nagorno-Karabakh. The US initiative was to deploy multinational forces to the region, because Russian so-called peacekeeping was very dangerous to Azerbaijan at that time and Aliev was able to go in the same direction.

In September 1994, the Aliev government signed an $8 billion oil deal with the International Oil Consortium despite claims that Moscow raised on the status of the Caspian Sea. The Russian position on this issue is that whatever is in the Caspian Sea does not belong solely to one state -- all Caspian states have a stake in the oil resources, denying international maritime law and practice on the use of natural resources in seas. In this way, objections were made by the Russian Foreign Ministry to the oil contract. As a result, Aliev invited Russia's LUKoil company to join the consortium, in order to give it more legitimacy. He was able to play different forces in Russia itself off each other. The oil lobby, which is quite powerful, is behind LUKoil, and it immediately began to lobby for the recognition of the contract and became kind of a positive force countering the pressure of the Foreign Ministry and the Russian military whose objectives were to look at Azerbaijan not as an economic partner but as a sphere of influence, satisfying their geostrategic military goals.

Turning now to the issue of the two pipelines -- the government of Azerbaijan signed a pipeline agreement with the government of Russia: specifically Aliev and Chernomyrdin signed an agreement on the transport of early oil through Russian territory to the Black Sea port of Novorossiisk, through Chechnya, which is quite unsafe. This happened because there was insistence from Russia and the Aliev government wanted to give more legitimacy to the contract. Some Western countries looked at this very pragmatically. If Russia does not get a chance to transport at least some amount of oil through its territory, then Russia would not allow any oil to be shipped from Azerbaijan. That's why the pragmatic decision made by the AIOC (the Azerbaijani International Operating Company), which consists of nine oil companies, on October 9, 1995, was to ship oil both through Georgia and Russia to the Black Sea. The government of Turkey made a commitment to buy all of the Azeri early oil, and even to help to finance the Georgian route which could be extended later on to the Mediterranean Sea port of Ceyhan, through the territory of Turkey. Such an agreement was signed between the government of Turkey and Azerbaijan. The Elchibey government and the Demirel government signed that agreement in earlier 1993, and neither country has annulled this agreement yet.

For the oil consortium, one priority is also to transport the main oil, the peak of which will be in the year 2004, to the Mediterranean Sea. This is important for a variety of reasons. Number one, it is cheaper to ship oil to the world market from the Mediterranean Sea than from the Black Sea; in terms of economics, the Mediterranean is less expensive. Number two is the quantity of oil, which will be difficult to transport, especially with supertankers, through the Bosporus Straits and the Dardanelles. Further, it makes sense for geopolitical reasons since it balances Russia and Russian influence in the region. However, for the consortium, the priority right now is not the main oil; the priority is early oil. As the president of AIOC, Terry Adams, mentioned in a recent briefing in Washington, Western oil companies should demonstrate that they are able to take at least a drop of oil out of Baku, which is very important for the main oil and future development.

The government of Azerbaijan has also signed some other agreements. A new consortium has been established to develop the Karabakh oil fields, where again LUKoil was invited and received quite a substantial percentage in that field, as did the Italian company, Agip and America's Pennzoil. So oil and transportation are extremely strategic and important for Azerbaijan's independence both politically and economically. If a second oil boom occurs in Azerbaijan, it will really help people to look positively on market reforms, democracy, and Azerbaijan itself, with all of its problems -- the refugee problem, the humanitarian disaster, and the economic decline.

Seventy percent of the main manufacturers are currently shut down due to the disruption of the economic ties with the former Soviet republics and the blockade imposed by Russia during the war in Chechnya on Azerbaijan, as well as some blockades which have been imposed on Azerbaijan by Iran from time to time, especially when Iran was pushed out of contention for participation in the AIOC consortium by the US government (under US government pressure Azerbaijan denied Iranian participation). In addition, of course, Azerbaijan is, as we say here in America, in a bad neighborhood, and whether Azerbaijan will be able to survive as an independent state, keep its secular pattern in the society, and build a real multiparty democracy will largely depend on the presence of the West in Azerbaijan, the support of Turkey, and the support of other countries which look favorably on Azerbaijan. Although they are distant, they have enormous power and a big say in world politics (I mean the United States, of course).

The oil money inevitably will let Azerbaijan rebuild its economy, bring in new technology, and send its young people to study abroad as the case was at the beginning of the century and bring new, progressive ideas back. This is kind of a Ňgood caseÓ scenario.

There are several other scenarios, including the Ňbad caseÓ scenarios, and on such a lovely spring day I don't want to talk about bad scenarios. But I hope there will be questions.

Discussion

Question: What is your understanding of the state of the pipeline that goes through Chechnya today?

Molla-Zade: The state of the pipeline is very complicated, because the fighting is still going on. The recent cease-fire agreement does not mean that there will be a permanent cease-fire; several cease-fire announcements have been made before. So as long as this war is going on, I think that the Russian route will be in danger, and there could be (and probably would be) different terrorist acts, explosions. On the other hand, nothing has been done to the existing pipeline yet. Maybe the Dudaev people do not want to touch it because they still feel that one day they will come back to Grozny and govern Chechnya, and they will want to have good relations with Azerbaijan and they would benefit from the passage of the pipeline through their territory. So the Russian route really depends on a variety of issues related not only to Chechnya, but to the Russian elections and Russian domestic politics, whether Yeltsin will be reelected, whether the Communists come to power, whether there will be war or a settlement in Chechnya.

In this way, I think that the Georgian route, with some degree of stability (which Shevardnadze has been able to achieve), looks more attractive for the oil community. The main problem in Grozny was the paramilitary groups, different kinds of armed gangs, and Georgia itself was also in turmoil and chaos. It seems to me now that this is not the case anymore. There is a hope that both pipelines will work, and the Russian pipeline will ship, I think, 3 million tons of oil annually, and the Georgian pipeline about one million tons per year. But the importance of the Georgian route is that later on it could be extended to Turkey and to the Mediterranean.

Maybe there was no need for the Russian pipeline, because it is expensive to have two pipelines for the oil, but I think that the geopolitics of the region dictated that we should not anger Russia. That, probably, was the very strong position of BP and the British government within the consortium, and the Azerbaijani government too. People like Chernomyrdin, who are more pragmatic (and because of LUKoil's involvement in the consortium, they are sympathetic to Azerbaijan and Aliev generally), have sent the message that if the pipeline does not go through Russia, they will be very weak and unable to do anything to promote it.

Question: Do you see any evidence that Russian oil interests, in connection with the Russian military, will essentially try to undermine the Yeltsin cease-fire proposal, since their interest really is to have total control over Chechnya?

Molla-Zade: In terms of the oil lobby, I think they are very seriously looking at the oil in the Caspian Sea, especially LUKoil and its president, who is Azeri, Vagit Alekperov. They are not even looking at Siberia as seriously as they are looking at the prospects and the future of Caspian oil. If you compare Caspian oil with Chechen oil, Chechen oil is really of small importance, and it does not have a future. So for the oil lobby, it is better to have good relations with Azerbaijan, Turkmenistan and Kazakstan, and cooperate and take advantage of that cooperation, both directly participating in the project and collecting tariffs on the passage of oil through Transneft. So for them, stability in Chechnya in some way is a guarantee of access. And we know that Chernomyrdin was very moderate on this war in Chechnya, and he is one of the voices in the Russian government who was and is calling for some kind of peaceful settlement, and he is known as the head of this oil-gas lobby in Russia.

As far as the military is concerned, I think you are absolutely right that the military wants to take Chechnya under control; they want to take the borders of Azerbaijan under control; they want to seal the whole southern tier and have Russian influence there. But the problem is, can they do this? Do they have enough power to do that? Of course they have high ambitions, but the reality is that the Russian army is weak; its soldiers are deserting and attacking their commanders because they don't want to serve in Chechnya. They are running, escaping. So I think the Russian army's inability to conduct any competent operations has been revealed in Chechnya; it was total humiliation. And this is the only reason Yeltsin is talking about peace. Even yesterday, there was a news report from the Moscow program Vremya; they were calling to Dudaev: come to peace talks, come talk peace. Now they are begging Dudaev to come to peace negotiations. Thus, ideally they want to control it. I know Zhirinovsky wants the Russian army to wash its soldiers' boots in warm waters, but there is a different reality here.

I think that members of the oil community also have personal stakes in these projects. They are very wealthy people. They are thinking more pragmatically, more realistically, and they understand what is going on and what Russia needs. Not all of them, of course, but most. But even within the military, there are different kinds of disagreements and there is not any concept of Russian military doctrine or whatever. The most important thing is that their ability to control things does not correspond to their ambitions.

Question: What could Moscow actually do to undermine projects with which it does not agree?

Molla-Zade: As I already mentioned in my presentation, Russia was against the contract which the government of Azerbaijan signed with the all-Western consortium. The negotiations with the Western consortium started even before the collapse of the Soviet Union. Even at that time Moscow recognized that sector of the Caspian as part of Azerbaijan, and the Azerbaijani government under the Soviet Union started the negotiations with the Western consortium under ex-president Mutalibov. The main reason why the Elchibey government was toppled was because he was supposed to sign that contract in London on his official visit to the UK at the end of June 1993; in June he was toppled with some direct or indirect participation on the part of Russian intelligence and the military. The point is that there were objections. When Aliev signed this contract, there was some kind of coup attempt even against Aliev. While Elchibey proved unable to withstand such efforts, Aliev was able, due to his experience or whatever, to suppress this coup attempt. So yes, there were such attempts, and especially on the issue of the Caspian Sea.

In this case, if the Communists come to power in Russia and they decide to intervene, again, we are talking about a Ňbad caseÓ scenario, and in the bad case scenario, Russia will be able really to bring troops back in and impose itself politically and militarily on the region. Then they will bring their puppets to power, and through their puppets they may influence the decisions on the business side.

But right now I don't see any serious difficulties for Azerbaijan or for the Westerners in bringing in their technologies and establishing joint ventures. The most important thing for now is for us to get rid of our own bureaucratic hassles, within Azerbaijan itself, in order to open the doors for Western businesses, to get rid of corruption and bureaucracy and change the mentality of the people concerned. This is still the main difficulty for Azerbaijan, the mentality of the past, the old Communist bureaucracy, and that kind of thing. But that, I think, time will change. I hope that this oil development, this consortium will somehow push the deal forward. International financial institutions like the IMF and the World Bank are allocating loans to Azerbaijan, and they have put forward some preconditions and rules of the game by which the bureaucracy, whether it likes it or not, must try to abide.

Question: Earlier you addressed the possibility of sabotage with the pipeline going through Chechnya. I wonder also if Azerbaijan has any worries about economic sanctions, the possibilities of cutting off the flow of oil that way, through any of these routes. And which routes are better from that perspective and which are worse?

Molla-Zade: As I already mentioned, Russia has imposed some blockades on Azerbaijan, especially with the railroad and the passage through the Volga-Don Canal which links the Caspian to the oceans. There is a possibility that at some point a Russian government may decide to shut down the pipeline. That is why the Georgian alternative was very important for Azerbaijan and for the Consortium. But on the other hand, if you look at the contract which the government of Azerbaijan signed with Transneft, which is the main pipeline company in Russia which deals with these issues, Transneft (or the Russian government) has made a commitment that if the pipeline is sabotaged for any reason, and if the oil that is supposed to come from Azerbaijan is not able to pass through Chechnya or some other part of Russia, the Russian government is obligated to make a swap -- to provide that same amount of its own oil to the Consortium. This is a provision of the contract. But it is for emergency situations, not because Russia will decide to impose any blockade. But if they impose sanctions, it will backfire on them, because they have that agreement which they signed which obligates them to give this exact amount of oil to the Consortium.

There are also some other ways to refine oil in Baku, in the refineries, especially for this early oil, and to get it to the market through, perhaps, the Volga-Don Canal, or by train coming to Georgia, in case even the Georgian pipeline does not work. But the best solution for the consortium was, especially for the early oil, to take it to Iran, to the port of Bander-e Abbas. And then we would use the Iranian pipeline network or obtain a swap for oil in the Persian Gulf. There were some negotiations with the Iranian government on that, and just for that reason the state oil company of Azerbaijan, SOCAR, invited the Iranian oil company into the consortium. But then there were objections in the US. And you know what happened to Conoco in Iran. So Iran disappeared from the picture.

I think Russia is trying to take advantage of this US policy in terms of the pipeline, in terms of influence in the Caucasus. Although there is some kind of Russian-Iranian alliance to contain the West in the Caspian basin, when it comes to reality, that alliance is unstable because both Iran and Russia want to take advantage of this pipeline and this oil. So while they say, 'oh no no no, the Caspian Sea is the sea of the Soviet Union and Russia and Iran,' this is not a strong claim. They are pushing it, but not very strongly, pushing it as leverage to gain a greater stake, to gain advantage.

Question: How do you see the future of political development in Azerbaijan? Politicians are discussing whether it will be a presidential or a parliamentary republic. You even mentioned the model of the democratic republic in 1918, and in this parliament there were even representatives of the Armenian Dashnaks. How do you see this future? Can we apply this model today?

Molla-Zade: When I mentioned this Azerbaijan Democratic Republic, I really meant the idea which was behind it and not so much the political structure. Azerbaijan, in my view, would do best to be a parliamentary republic with some kind of coalition government, as it was during that period of time, because this presidential rule came to Azerbaijan and some other former Soviet republics when Gorbachev decided to be elected as a president and then Yeltsin became a president. All of a sudden all of these republics decided to have presidential rule. Whether it suited these political realities, mentalities, or not, everybody decided to have a president or their leaders decided to be elected as presidents.

It is difficult to say -- at this stage of the transition, with such a strong president as Aliev, maybe it is better to have that presidential rule and that person in power who is experienced, tough, smart and knows how to operate in this very difficult situation in Azerbaijan's history. But in the future, when things settle down, there will be more economic development. The private sector will be stronger. Then, I would say that I am probably in support of a parliamentary republic rather than a presidential one. But if the presidential system works well, and works to the benefit of Azerbaijan, then why should one change it? Any form which is sufficient, which works, which reflects the mentality, culture and law of the people, and which helps development, is a good model or system.

But one important point is that presidents in Azerbaijan have failed. They have been toppled. If you look at the period since 1988, when the Karabakh conflict started, Kyamran Bagirov, the first secretary, was replaced by Vazirov. Then after January 1990, Vazirov was replaced by Mutalibov, who was elected later as president on a non-competitive basis. Then Mutalibov fled; then Elchibey was toppled. So we see how many leaders have failed.

But if you look at the parliament which was elected in 1990 under the state of emergency, it consisted mainly of Communists (90 percent), the nomenklatura, and only 10 percent were representatives of the Popular Front, some independents and supporters of the so-called Azerbaijan Democratic Bloc. But this parliament, from 1990 to 1995, a five-year period, survived, although it was shrinking (from a 365-member body to the 50-member National Council). But when there was chaos in Azerbaijan, the parliament was making the decisions. Parliament was very important -- a stable political institution where different politicians of different groups came and discussed events and the fate of the country. When there was a problem with Mutalibov, the parliament one day announced his return and then the next day elected another speaker from the Popular Front, Isa Gambar. The same happened when Aliev came to power.

And I would just want to make one more very important point, that Russian intelligence forces (including the military intelligence organization, the GRU) tried to create more mess and chaos in Azerbaijan. But somehow some mechanisms or some instinct did not allow events to go far beyond some line, as had happened in Georgia or Tajikistan. The main goal was to frighten Westerners. No oil companies were to come; the idea was to create mass turbulence, to get people to say 'these very barbaric people are killing each other; stay away; we know the region, we know how to handle it; we will fix things, and then we will invite you to come and build with us.' But that didn't happen. Azerbaijan was able to become independent despite this mess, chaos and instability. It was still able to gain its independence and a government of its own. Elections were not perfect -- indeed, they were bad -- for the parliament last year. There is no justification for that. But still the country is striving for its independence.

I think that the Georgian and Azeri people believed in independence very seriously, and their punishment was the dismemberment of both. Armenia, on the other hand, was able to develop a more pragmatic foreign policy involving some restrictions on its sovereignty vis-à-vis Russia, looking to Russia as a guarantor of its security. Regionally, I think Armenia was able to play very carefully with Russia, having Russian bases, not pushing the Russians out, cooperating with them, and even establishing good relations with Iran. This Armenian-Iranian alliance is designed to contain Turkey in the region, and these relationships between Armenians and Russians, and Iranians and Armenians have some historical roots. So there is a triangle of some kind of cooperation between Iran, Armenia and Russia, and some struggles are taking place for influence in Azerbaijan. Of course, all this is related to oil. On the other hand, we have Turkey and the United Kingdom and the United States. Some Middle Eastern countries take different approaches. For example, Syria backs Armenia and Lebanon backs Armenia (the Armenian community is there). On the other hand, we have a good alliance for cooperation with Israel. Azerbaijan also has good relations with Saudi Arabia and Egypt.

Dynamics of State-Building in Georgia
Ghia Nodia
May 6, 1996

Dr. Ghia Nodia is the Chairman of the Board of the Caucasian Institute for Peace, Democracy and Development and one of the foremost scholars in Georgia. He is also the head of the Political Philosophy Department at the Institute of Philosophy at the Academy of Sciences in Georgia, and a professor in the Department of Sociology at Tbilisi State University. He is currently a visiting fellow at the International Forum for Democratic Studies which is part of the National Endowment for Democracy in Washington DC. Dr. Nodia is a prolific writer and his current research focuses on democracy and nationalism, and the post-communist transition in Georgia and the other states of the former Soviet Union.

Abstract

Dr. Nodia discussed the process of state-building in the former Soviet republic of Georgia. Georgia, he argued, had to undergo three massive transformations simultaneously as the USSR collapsed: democratization, marketization, and the creation of an independent state out of what had been essentially a Soviet province. He argued that internal Georgian political developments (not relations with Russia or ethnic minorities) are the key to understanding all events in Georgia. He discussed five periods in Georgian history. The period 1988-90 is the period of the rise of the national independence movement, during which this movement's agenda came to dominate local politics. The second period covers the independence movement's time in power under the leadership of Zviad Gamsakhurdia from the fall of 1990 to the winter of 1991-92. This period, argued Nodia, reflects a failed attempt to build a nation-state. The third period lasted from Gamsakhurdia's ouster to Georgia's effective loss of the break-away Abkhaz republic in 1993, and was characterized by virtual anarchy. Ironically, these failings created the conditions for a new president, Eduard Shevardnadze, to build a true power base, one which has enabled him to usher in a new period of stability in Georgian politics. The story of the consolidation of his power spans the fourth period of Georgian history, from 1993 through 1995, when Shevardnadze escaped an assassination attempt and used it to destroy his political enemies and win a landslide victory in the November presidential and parliamentary elections. The fifth period, from 1995 to the time of this talk, represents a new state of "normalcy" in Georgia. Nodia thus explained why a leader that took power as an extremely strong figure (Gamsakhurdia) ultimately suffered a crushing defeat, and why a politician who was later essentially brought in as a powerless puppet (Shevardnadze) was able to consolidate power and build a reasonably stable democracy.

Presentation

Nodia: It is my pleasure to be here at Harvard to speak about Georgia. It was a great experience for a political scientist to live through recent Georgian developments, but it is also an intellectual challenge to present a coherent picture of Georgian attempts at state-building. It includes several stories, in a sense, because in the period which I will cover since 1988-89, Georgia had to undergo several rather important transitions which rarely coincide in time in a nation's history, but which did coincide in the case of the post-Soviet republics. These transitions were, first, the break-up of the old communist system and the transition to democracy, which is itself a very important thing; second, the break-up of the communist economy, the centralized command economy, and the transition to some kind of market; and third, the creation of an independent state out of just a Soviet province.

When you try to tell the story of Georgia in these last years, it is really, I would say, three story lines which run parallel to each other but sometimes meet -- three different types of dynamics (although I do not mean here the same three problems which I have just outlined which Georgia has faced). One of them is the story of the creation of the new Georgian political elite, the story of the battles between the different political factions of Georgia, of the attempts to build new political institutions, and so on. This is the story of Georgian political life per se. Another story is that of ethno-territorial conflicts in Georgia, the conflicts between the Georgian majority, the Georgian political elite, and those political elites and respective ethnic groups which did not want to be part of the new Georgian state and which pursued separate arrangements for themselves, namely the Abkhazian and Ossetian minorities. Then there is a third story, the story of relations between Georgia and Russia. Each of these themes has its own internal logic, so we have to think about each separately.

Each of these stories alone is crucial to our understanding of what has happened in Georgia, and which of these three themes you choose as the leading one depends on who you are and what your perspective is. If you are a Western scholar, you are more often expected, I think, to choose the story of ethnic conflict as the leading one. Most Western research projects on Georgia in the last year have been about ethnic conflict in Georgia, and ethnic conflicts are things for which we are sort of famous and interesting; it has become a trademark of Georgia. If you are a Georgian, you are likely (at least that is what I would expect from a lot, though not all Georgians) to choose relations with Russia as the factor that determines everything else. According to this school of thought, you can only understand what has happened in Georgia by means of looking at specific relations with Russia and how they have developed; you have to demonstrate how ethnic conflicts arise out of this, and how all internal Georgian political conflicts come from this. Contrary to these perspectives, I tend to think that internal Georgian political developments are the leading events, in the sense that they are the key and crucial events for understanding everything else which has happened in Georgia. Thus I will single out this story line as the leading one, having in mind, of course, that you cannot speak about any of these topics without somehow touching on others.

To speak of some peculiarities of Georgia as compared to other post-soviet countries, I want to say that Georgia has been notable for especially tense developments in each of these directions. I mean, there were and are problems in all post-soviet countries, but Georgia has had extremely tense conflicts within each of these three spheres. We have had two ethno-territorial wars which have continued for a long time. Apart from them, we had a coup and sort of civil war (not along ethnic lines), and we have had extremely difficult and controversial relations with Russia. So if Georgia is noted for something, it is noted for very dramatic developments in each of these directions.

Now I will propose some kind of periodization of our political developments. Just naming these periods, or stages of our development, means mentioning major events that happened in Georgia. I think we have very clear landmarks which divide these periods from one another. The first is the time between 1988, roughly, and the fall of 1990. This is the stage of the rise of the Georgian independence movement, when this movement gradually came to dominate Georgia's political discourse and its political scene. It ended when one of the coalitions which represented this movement, the Round Table, led by Zviad Gamsakhurdia, became the government of Georgia as a result of democratic elections. The second period is the first attempt, an unfortunate and failed one, to build a nation-state of Georgia. This period covers the rule of Zviad Gamsakhurdia and his Round Table coalition from the elections of Fall 1990 to his ouster as a result of two weeks of fighting in December-January 1991-92. The third period is one of disorder, mess and chaos which resulted from the Georgian coup, or insurrection, when Georgian statehood experienced an almost complete breakdown of state institutions and order. This story continued from this coup through the fall of 1993, and the climax of this was losing Abkhazia and the anti-Shevardnadze insurrection in western Georgia.

Paradoxical as it is, losing the war in Abkhazia prompted a period of gradual stabilization in Georgia. Different warlords which were really in charge of the country after the coup were gradually pushed to the margins of political life and the civil government headed by Eduard Shevardnadze gradually solidified its base thus becoming a real government. The end of this process is marked by the failed assassination attempt on Shevardnadze in August 1995. Having survived this attempt, Shevardnadze turned it into an opportunity, getting rid of his last armed adversaries. He then finalized his victory in the elections of November 1995. November 1995 ushered in a period of relative stability and normalcy, so you can say that the second attempt at state-building was held to be successful. This is a general outline, a framework of recent Georgian history. Now I will just try briefly to characterize the peculiarity of each of these periods, and this will be my talk today.

As for the period of the rise of the national independence movement, there was one thing for which Georgia was notable more than any other Soviet republic. Georgia was the only place among these republics where the pro-independence movement was dominated by its radical factions. There were radical groups like this everywhere (their trademark was a refusal to take part in any official elections until Soviet rule had been formally abolished), for instance in the Baltic states: I single them out because Georgians tried sometimes to model their movement on them. But nowhere save for Georgia did the radicals become the predominant opposition force. This very much determined everything that happened after they came to the fore. The domination of the radicals explains the extremely confrontational character of Georgian politics and the feature that I would define as revolutionary aestheticism. Political struggle (for whatever cause) was interpreted as a set of heroic-aesthetic gestures, and anything like pragmatism or political calculation was considered to be a disgrace, hence unacceptable. Notional rejection of any compromise with the projected "enemy" (Russia, or "the Kremlin") practically resulted in failures to achieve any compromise between different factions of the national-independence movement (whether between radicals and moderates or between various radical groups). It was this confrontational character of political discourse and activities that was primarily responsible for the different kinds of conflicts that eventually developed in Georgia: those between various political groups or factions which in due time led to a kind of civil war, as well as the ethnic-territorial wars and, in part, especially strong tensions with Russia.

Turning to the period of Gamsakhurdia's rule, the most important fact about him is, of course, that he failed. This requires explanation. He was a popularly elected president who came to power as a leader of the national independence movement whose slogans definitely dominated the political agenda. Here, one has to keep in mind another feature which was specific to Georgia: at that time, there was really no political agenda in Georgia other than independence and democracy. Unlike the Baltic states, there was no organized political force which would say in public that Georgia should not be independent, or that it is good to retain a communist state. There was the Communist Party to be sure, but after the massacre of April 1989, when Soviet troops killed 20 peaceful pro-independence demonstrators, it became impossible for anybody to say anything in favor of Communism or the Soviet Union in public. One can say that although the Communist Party was nominally in power until the fall of 1990, the legitimacy of Soviet rule in Georgia really ended in April 1989, and the agenda was being completely and definitely set by the nationalist movement. Gamsakhurdia came to power as the leader of this movement, so his legitimacy seemed to be extremely strong.

Yet it was quite soon that everything ended up in a crushing defeat for him. Why? One may refer to many different factors, but I will highlight certain crucial dilemmas which Gamsakhurdia failed to handle. This is important because the government after Gamsakhurdia, that of Shevardnadze, had to face the same dilemmas, but handled them with much greater success. One was the dilemma between democracy and autocracy, and the other was that between idealism and pragmatism. These problems were objective ones, and whoever would be the leader of Georgia has to face them.

In the revolutionary situation involving the fight for independence, there was no chance for anybody to avoid using some autocratic methods and being blamed for that. But at the same time, there was a consensus that only a democratically elected government could be a legitimate one. The exclusive legitimacy of the democratic idea was not so much based on a commitment to democratic values on behalf of the public or the new political elite, but rather on the general pro-Western orientation of Georgia. There was not much in real life on which the new political elite could base its attempt to build a new society or a new state; there was only ideology, or allegiance to a national project, the idea that Georgia should follow the Western model. Democracy, alongside the nation-state, is another element of this model, so it was taken for granted that Georgia should be a democratic state, a democracy. On the other hand, the logic of revolutionary struggle with a very strong enemy image brought about a siege mentality and calls for unconditional national unity, which legitimized autocratic methods as well.

When Gamsakhurdia was ousted, his removal was legitimated by the claim of the liberal elite that he was a dictator, and this claim was not altogether groundless. His supporters, on the other hand, said that he lost because he was too mild really to crush his opposition. He was a legitimate authority and anybody who fights against a legitimate authority, with illegitimate methods, with arms, should be crushed. But he failed to do that. There was a good element of truth in that, too. Of course, it was part of his strange personality that he alienated everybody, or almost everybody who had stood by him, and his character has lots to do with his failure. But part of the problem with his character was that he could not find the right middle way between the poles of a democratic leader and an autocrat. He sounded like a dictator and did things that provided grounds for accusations of dictatorship; but in reality, he thus instigated stronger resistance instead of building up a strong power basis for himself.

A second dilemma was that between idealism and pragmatism. Being a tough one for any Georgian leader, this was particularly challenging for Gamsakhurdia. When he came to power, the radical faction of the independence movement dominated political discourse; but he now was the head of state, not an opposition figure. In his new position, he had to make lots of concessions and compromises. Once he tried to act in this way, however, he came into contradiction with his previous image. He was elected as a hero, as a person who sacrificed a lot for the fight for independence, who had been in jail and suffered for his cause; a politician who had to maneuver and make compromises did not fit in into this image.

One has to remember that his legitimacy was undermined in the first place not by his being a radical nationalist, but by his not being radical enough. The breakdown of his legitimacy began with the August putsch in Moscow, during which he failed to take the stand which was expected of him. He behaved like a coward. And on exactly the next day, part of the national guard broke away and this was really the beginning of the Georgian coup d'etat. He was ousted not because he was too radical a nationalist, but vice versa. The people who deposed him were nationalists in their own right, with their often-idealist nationalism and democratic idealism. The claim by the liberal intelligentsia that he was not democratic enough was the idea on which this insurrection against Gamsakhurdia was based. Of course, the people who actually took arms and fought, they might have their own personal interests in power, and it is extremely difficult to call them "democrats." But they who had really vested personal interests in getting rid of Gamsakhurdia were too few and weak to succeed without a reasonable element of popular legitimacy and political idealism. Gamsakhurdia failed because he could not live up to his image.

Here comes Shevardnadze and his new attempt to build a Georgian state. The comparison between the two leaders and their records is extremely ironic: contrary to Gamsakhurdia with whom it was hard to understand how a person who had been so strong in support and legitimacy came to such a fast and crushing defeat, Shevardnadze had an extremely weak power base initially. He was really invited by a group of warlords who were not intending to give him real power. They just wanted a visiting card in their relations with the West; they knew he had powerful friends and was a famous person there. After Kitovani, one of those warlords, developed an open conflict with Shevardnadze about one year later, he publicly complained that they had invited this guy to handle foreign policy, while now he wanted to meddle in real things, which was unacceptable. But this person who had no power base eventually acquired real power. That's another paradox of recent Georgian history.

Again, personalities play a very important role in this. If Gamsakhurdia was very good at alienating people and making enemies out of friends, Shevardnadze was the opposite -- he was very good at attracting people and making friends (or allies, at least) out of enemies. He really showed himself to be an extremely skillful political gambler.

In the mean time, the political agenda, the mentality and the expectations of the public changed a lot, and this was very important for his success as well. While Gamsakhurdia was brought to power in the period of romanticist revolutionism, Shevardnadze had to deal with the new mind-set for which stability and order became the major political values. This change was not something peculiar to Georgia, but the great shock of the coup and the following breakdown of legitimacy fostered it very much. Shevardnadze quite skillfully appealed to these values in his fight against his adversaries.

Another thing which paradoxically helped him was losing the war in Abkhazia. He had always kept saying that if Georgia lost the war in Abkhazia, he would resign and that his forces could not afford to lose Sukhumi. To be sure, it was a big shock for Georgia to lose Abkhazia, and to have over 200,000 refugees as a result of it. It was not only losing Abkhazia which was a shock, but making concessions to Russia in its aftermath. This war is a very complex thing and it could be definitely the topic of another talk, but at least for the Georgian public it was primarily a war with Russia. The majority of the Georgian public believed that as a matter of fact it was Russia which waged war against Georgia, making use of local separatist forces. The rationale of that war appeared to be punishing Georgia for its pro-independence orientation. Joining the CIS does not really mean much in real terms, because the CIS does not involve too much that is real. But Georgia's joining the CIS, which happened immediately after losing the war in Abkhazia, was perceived in Georgia as a sort of dismantling of the national project. It implied giving up -- it was just kneeling down and asking Russia for pardon. Thus, after that, Georgia's signing of the agreement on Russian military bases on its territory, which is of course a much more substantial concession than joining the CIS, was accepted much more easily because the first recognition of fundamental defeat, the dismantling of national project, in essence was believed to have already occurred, and this was the joining of the CIS. So after taking this defeat in Abkhazia, and defeat at the hands of Russia, symbolically giving up the national project, you have Shevardnadze's gradual rise to power, real power, not nominal power which he had possessed before that.

To understand this paradoxical development, one has to have in mind, first, that losing the war actually shattered not so much Shevardnadze as those paramilitary formations or groups which claimed to be the Georgian army, and which had actually fought the war. They shattered themselves in a material sense because they lost their arms and people and everything. But they also lost legitimacy; they were the primary losers of the war, and this helped Shevardnadze.

First, Shevardnadze got control of the Ministry of Internal Affairs, which he did not control before the fall of 1993. Having this ministry as a base of support, he used the slogan of order which was extremely popular, and for very good reason, because the country was a mess and had suffered from very high criminality for several years. He gradually played one person off against the other, managing to weaken and eventually to imprison his major adversaries. Of course, it was an immense task, as one can imagine the several layers of conflict which he had to handle at the beginning. There was a Georgia which had very difficult relations with Russia. There was a Georgian political elite at large which had to handle this conflict with the ethnic separatist elites of Abkhazia and Ossetia. It was the part of the Georgian elite which ousted Gamsakhurdia against those people who supported him. Within this victorious part of the political elite there was a coalition between Shevardnadze and Ioseliani, the leader of the powerful Mkhedrioni militia, which went against Kitovani and other warlords. And then, of course, there was some bottom line conflict between Shevardnadze and Ioseliani as well. He had to make all kinds of very sophisticated Byzantine political steps, to make friendships and break them in time, and he succeeded. It is still a kind of miracle for me how he did it, but he did it.

He was of course very lucky as well, especially to survive the assassination attempt in August 1995. That attempt turned out to be so fortunate for him that, of course, many people claim it was he himself who organized it. I am not an expert on ballistics and the like, but at least those experts with whom I have talked do not believe that it was possible. If he could really organize that much, then he really is a genius and so he deserves what he has.

As a result, we have this sort of "return to normalcy" period. I think, that it is only over the past several months that one could say that Georgia is a sort of state. Now it is not only a legal entity in international relations; but it meets at least some qualifications for statehood. Number one, of course, is that the government enforces a monopoly on the legitimate use of force, which is, as you know, the classic Weberian definition of the state. After more than 200 members of Mkhedrioni were imprisoned during the fall of 1995 in the aftermath of the assassination attempt, the Georgian government first became able to enforce this monopoly. I don't mean, of course, the break-away regions of Abkhazia and South Ossetia, but that part of Georgia which is under the control of the central government.

There are also some attempts to raise taxes, a function which is also one of the features of government of the state. Of course, two or three years ago, the government would not dare to ask for taxes because it did not exist, and why should anybody pay for government if there is no state? Now there is relatively great progress, keeping in mind that it is easy to have progress when one is starting from almost zero. But there is definite progress in the sense that there is some state budget. While last year's state budget was 53 percent foreign credits, loans, and grants, there was still some budget and there were some state revenues which the Georgian state itself raised. This represents great progress.

Another new thing which exists now, unlike two or three years ago, is some kind of economic policy. Before, Georgia was the freest market in the world because there were no restrictions on anything at all. Now there are some restrictions, like, for instance, that we have one currency. You can only trade in that currency, and it is quite stable. Of course it is stable because of IMF loans, but you can have IMF loans and still not have a stable currency. The Georgian government has succeeded in taking advantage of this loan and enforcing monetary stability.

One of the features of political normalization is that, as a result of the last elections, moderate forces definitely dominate the political scene. Neither neocommunists nor radical nationalists made it into the parliament. There are now three parties in the parliament. The ruling one is Citizens' Union, or Shevardnadze's party. First it was just a movement in support of Shevardnadze, without any political agenda other than the support of Shevardnadze. Now, within this party, there is a core group of people who are not former nomenklatura; most of them are former Greens, or people from other young and new political elites which are trying to make the organization into a real party with a real agenda centered around making Georgia a Western-type state. And they are actually now making the parliament the most viable working institution in Georgia, a competent institution in its own way. There is also a relatively small nationalist opposition faction. It is the National-Democratic Party which used to be a radical one but has now become a fairly moderate political force. The third one is the Union of Revival of Georgia, a regional party from the Ajarian Autonomous Republic, which, however, claims it is going to become a national force. Communists and radical nationalists (followers of the late president, Gamsakhurdia) still play certain roles, and I think if we had really fair elections, both of them would make it into the parliament, overcoming the five-percent cut-off. Despite clear violations in a number of regions, however, the Georgian elections were considered to be reasonably free and fair, at least by the standards of the region. The result is that we now have a reasonably moderate, stable parliament which is oriented to making Georgia a Western-type democracy.

If we speak about democracy, Georgia is of course far from meeting full democratic standards. Like most post-communist countries, it has some of its elements but lacks others. Most Western experts who travel in the Caucasus say that Georgia is a freer place than its neighbors, although this may not be a particularly high measure. I can say that after years of turmoil and mess, one could expect worse since there was much pressure to have an iron hand introduce law and order. I think Shevardnadze should take some credit not just for succeeding in his fight against different warlords, but also for winning without becoming a real dictator, although he is sometimes accused of that, too. I cannot be sure that he is a committed democrat; but it is very important that he has a certain prestige, a certain background, which is not only the background of a Communist leader of Georgia, but also of a person who in some sense is responsible for destroying the Berlin Wall. Having an international image as a democrat, he wants very much to live up to it, first, because he likes it, and second, because it is a very important part of his political capital.

One more recent development is that the economy is becoming the major political issue. When you speak professionally in an American political science environment, you are supposed to speak a lot about the economy and how important it is for politics. Of course, there was some economic element in the background of Georgian political developments, but it did not dominate people's minds, and definitely was not the central thing on the political agenda. Georgia did not have a division between left-wing and right-wing political parties in the conventional sense because the issue number one, almost the sole issue in Georgian politics, was the relationship with Russia. The kind of relations with Russia you supported defined where you stood politically. It may be the foremost feature of "normalcy" that the economy has become the major political issue in Georgia. New political divisions which are developing now depend on one's stand on economic issues.

Discussion

Question: You have talked about the return of stability, normalcy, to Georgia. Is Georgian society still polarized between pro- and anti-Gamsakhurdia forces, in your opinion, or is that gradually disappearing?

Nodia: I think that polarization continues in some sense, but the problem is not so acute or important as before. Time heals. First, this is because politically the Zviadists have divided into several factions which have problems with each other. Of course, the Zviadists are politically still a very special group. They have their own agenda, their own newspapers, and they have a fairly closed community. It is not a problem which has been overcome, but it is not so important anymore.

On this subject there is one thing I should have mentioned earlier. There has been a major change in the Georgian political agenda, and this is reflected in the constellation of political forces in Georgia. Earlier, before last summer, the major fight had always been between the government and forces which criticized the government for not being nationalist enough. This was more or less true with Gamsakhurdia, and it was clear also with Shevardnadze, who was accused of being pro-Russian by his opposition. Shevardnadze's supporters said he was just pragmatic or was a realist; but his opponents called him pro-Russian.

But last summer, things turned out to be very different. Now the main challenge to Shevardnadze comes not from the nationalist, but from the neocommunist opposition. In the last elections, Jumbar Patiashvili, who was the candidate of the neocommunists and who criticized Shevardnadze for being too pro-Western, was the major opposition candidate in presidential elections. This put the nationalists in a difficult position. If the main challenge to Shevardnadze comes from the neocommunists and genuinely pro-Russian forces, and Shevardnadze is the proponent of independence, who are they then, and what is their agenda? All of this eases this tension between the existing government and the more nationalist opposition of Gamsakhurdia's type.

Question: I was wondering if you have changed somewhat your thesis about the role of nationalism in the process of democratic transition for post-communist societies, the thesis that you mentioned in your article in the Journal of Democracy. Do recent developments not show that nationalism is not the positive element in the transition that you described in your article?

Nodia: I don't think I have changed my view. I have never claimed that the main thing is whether nationalism is positive or negative. The key is that it is inevitable, and you have to deal with it as sort of an inevitable thing in democratic transitions. That's what I claim.

Question: I wonder if you could tell us something about the role of Georgia in Caspian oil politics and the activity surrounding the oil pipeline.

Nodia: When Shevardnadze came back to Georgia, his favorite subject was his vision for Georgia as a transit country and as the crossroads of East and West, North and South. Shevardnadze is often criticized for being a politician without a vision, possibly with some good reason, but this was the vision by which he is sometimes too driven, I think. His major hope for turning Georgia around was in communications and transport, especially oil pipelines, highways and railways. Of course, in 1992-93 Georgia would not have been taken very seriously, especially as a transit country, because it was a mess. But as soon as there was some movement towards greater stability there, this oil pipeline became the number one issue for Shevardnadze. Of course, he understood that this was very upsetting for Russia because many Russians saw this pipeline through the Transcaucasus as undermining their monopoly on the transportation of oil from the Caspian area as well as their domination of the Caucasus. So he tried to be very cautious; but putting through this oil pipeline was definitely the number one issue on his foreign policy agenda. Now the issue is much more complicated. The oil consortiums made a decision last fall that there should be two pipelines, one through the North Caucasus and the other through Georgia. The Georgian pipeline requires much more initial investment than the Russian pipeline; but in the long run the Georgian one might make more sense. Turkey also has high hopes, because once the pipeline goes through Georgia, eventually one branch of it could go to the Mediterranean Sea, to the port of Ceyhan in Turkey. Turkey would thereby gain greater control over Azeri oil. Of course, Georgia, Azerbaijan and Turkey have lots of common interests in this pipeline, and this would especially be true if the Russian communists come to power and do not have a very friendly attitude towards Shevardnadze. Shevardnadze is thus, in a sense, pushed to look in other directions as well. Aliev came to Georgia in February, and then Shevardnadze went to Turkey. Shevardnadze's trip to Turkey was not simply a visit -- the symbolics of the visit, the red carpet treatment he was given, made people feel that Shevardnadze is becoming more daring in conducting a more independent policy vis-à-vis Russia. This is based on greater stability in Georgia as well as on this oil pipeline project.

Question: Could I ask you a little bit more about the broader geopolitical situation in the Caucasus and the Caspian, and what kind of role you see Georgia playing in the long run if the current trends of stability continue? I mean its relations with Turkey, Azerbaijan, Armenia and Russia, as well as further afield.

Nodia: As I have mentioned, Georgia, Azerbaijan and the West in general are essentially allies when it comes to the oil pipeline project, which is an important part of Georgia's future role.

In addition to the pipeline project, Georgia may be a natural peacemaker, or mediator, within the Caucasus. The Armenians and Azeris are embroiled in a conflict and, clearly, these two countries will not become friends soon. Georgia is thus sort of a natural meeting place for the conflicting parties. Of course, Shevardnadze is aware of this fact and he tries to use it. In a geo-economic or geopolitical sense, Azerbaijan is a natural ally; but the Georgian government tries not to be one-sided and develops relations with Armenia as well. It seeks to play a mediating role and Shevardnadze is frequently given credit for the fact that Georgia has actually had quite good relations with all of its neighbors. It is indeed quite an achievement, and it makes sense for him to try to capitalize on that. Of course, Shevardnadze's recent peace initiative in the Caucasus may be seen as a charm offensive, a purely symbolic gesture. I don't know what specifically he can do right now; but at least it is sort of a claim, a statement that we are here, that we are working in that direction and that we are going to play an active role in the region. And that is the right thing for him to do, I think.

Question: Including Chechnya?

Nodia: Chechnya, no -- it is more difficult. Chechnya is too alienated, and Shevardnadze was terribly cautious not to upset Russia in any way about it. He was criticized by his opposition over this, and I think for good reason, because he never dared even criticize Russia for its methods in dealing with civil population; he just politely said that this was OK, that Russia had the right to protect its territorial integrity, and things like that. So, of course, with that, and with the history of Gamsakhurdia's being the guest of Dudaev, this makes Shevardnadze a very unlikely mediator for the Chechens.

Question: It seems to me that Georgia has chosen democratization over economic growth. What do you think determined that choice? And in the future, should this democracy prove incapable of delivering economic growth, might democracy itself be undermined?

Nodia: As I understand it, you mean that a country might choose economic progress as sort of a key element over democratization; first, the country might have some economic reforms and economic progress under an autocratic regime, and then later it would proceed to democratization. This was a popular idea in Russia and in Georgia, and Pinochet was a very popular person, and frequently mentioned. At some point perhaps Gamsakhurdia tried to use this idea, and sometimes some of Shevardnadze's supporters have said that we do not have time for an opposition now, and things like that.

But in reality it did not work out like that, and I think there are several reasons why. Of course, there is some pressure from the West to be democratic. If you are not democratic, you are not acceptable. But another thing, I think, is that the choice in favor of democracy was based primarily on identity orientation, as one would say. For Georgians, the idea of civilization and their identification with Christianity, being part of the Christian world, were very important. And the Christian world today is the Western world, and the West does not now have models available other than the model of democracy. So the only way to be Western is to be democratic. This was not true until just recently. In the 1960s, for instance, you could be Western, but follow the model of Franco. Some people, some Georgian politicians, might have liked Franco, but modern circumstances make following a model like this impossible. There is only one way to try to be Western, and that is democracy, democratization.

Perspectives from the US Government

The Great Game: The Struggle for Caspian Oil
Jack Carter
March 13, 1996

Jack Carter is the Senior Advisor for International Affairs with the US Department of Energy. Mr. Carter received his Bachelor's degree from Princeton University, and then went on to get a law degree at the University of Texas. He has served in the US military, saw action in Vietnam, and was in the US Special Forces. He has been with the Clinton Administration since October 1994 working on international energy affairs. He travels widely, not just within the Caspian region, but also throughout the rest of the former Soviet Union, Latin and Central America and Asia, dealing with energy issues for the US Government.

Abstract

Using the metaphor of a board game, Jack Carter explored issues surrounding the development of oil in the Caspian Sea. The first problem, he stated, is the name of the game itself. Experts do not even agree that the land-locked Caspian is in fact a sea, and this has produced a dispute on whether the sea can be divided into national shares for each littoral state or whether the sea must be jointly owned and managed. He then turned to a discussion of the game's players. Most obviously, this includes those states that abut the Caspian, including Russia, Kazakstan, Turkmenistan, Iran and Azerbaijan. Georgia and Armenia are also crucial, because they lie along natural pipeline routes from the Caspian region to the Black Sea or the Mediterranean. Turkey is another player, important because much of this oil will have to go through its Bosporus Straits. Turkey wants to limit the amount of oil passing through these straits for ecological reasons, and is positioning itself to build a pipeline from the Caucasus to its Mediterranean port of Ceyhan. Oman is a player because it is part of the Caspian Pipeline Consortium that is developing Kazakstan's Tengiz oil field. Afghanistan and Uzbekistan are also players. The United States is also an important player despite its distance. The primary US goal is to diversify its energy supply, finding sources other than the Middle East. A second prong of US policy is to support the development of the new independent states of the former Soviet Union. Their development will be driven largely by their ability to sell natural resources on world markets. The US has worked to convince Russia that this is in its interest, since these states will be more stable and better able to pay for Russian goods and services. A third aspect of US policy is to support US companies that are trying to invest in the region, pushing for them to be included in the development deals. Carter then discussed what he called the Ňopening gambit,Ó which is the early oil. The early oil is the production from the initial wells that can be quickly marketed in order to finance ongoing development and to show companies whether the deal is going to work. The US has pressed for the use of multiple pipelines to get the early oil out, favoring the construction of one through Georgia to the Black Sea as well as the use of the existing pipeline going north from Azerbaijan to Russia. The US has also tried to get the littoral states to put together an experts conference to help resolve the legal status of the Caspian and to develop a regime for balancing the requirements of the environment and commercial exploitation. Carter then discussed the Ňendgame,Ó which is the struggle over who will control the pipelines for the larger flows of oil that will come from the region. Turkey has been particularly active here, pushing for a route through the Caucasus that will allow it to build its planned pipeline to Ceyhan. The development of Kazakstan's Tengiz oil field has been particularly problematic, since bankers have been refusing to finance the deal until it is restructured. A solution appears to have been reached, with the oil going north through Russia. The US has also encouraged the construction of a Turkish pipeline route from the Caspian, although this has not been resolved yet.

Presentation

Carter: I entitled this talk "The Great Game: The Struggle for Caspian Oil" because of the obvious analogy and because this term was used by many writers to describe the struggle some hundred years ago between the two great powers of the time -- Britain and Russia -- for access to and perhaps dominance over India. During the Clinton Administration I have been fortunate enough to go to the Caspian region three times. I have not been in Tajikistan or Kyrgyzstan, but I have been to all the rest. I've not been to Iran, obviously; I've also not been to Iraq, obviously. I also can't get anybody to let me go to Afghanistan, but that may come.

The main reason we travel there is to conclude deals, to conduct related business, and to engage the leaders of the countries in the region, explaining our US policy there, talking about transit rights to the extent that they relate to that policy, and urging on them the kinds of frameworks that will allow, encourage and promote investment by US and other companies in the region. I spend a fair amount of time in Russia as well, because those same issues are salient there, with some greater level of sophistication than in the other states because the Russians have been the leaders on these issues and the others simply used to take orders from the north.

As a parenthetical aside, the countries of the Caucasus and Central Asia both lack advice -- good, solid, independent advice for which one pays, as well as advice in which the allegiance is to the client or customer. There is just not that much available yet. The US and others have been encouraging it, but it is a slow process. The countries of the region are starting to build a repertory of investment bankers and lawyers and accountants; it is not that those are crucial on a continuing basis, but they do give the national leaders the ability to deal with foreign companies which are coming in and trying to invest and conduct similar activities. The ability to conduct these negotiations is one of the greatest needs I found in this area, and it is something which we stress in our many trips over there.

During those trips I have had the pleasure of sitting in private meetings with the heads of state of all of the Caspian states, and most recently with Ter-Petrosian, Aliev, and Shevardnadze. I have a great fondness for the Caspian region, and particularly for the Caucasus. In addition, each of the Central Asian states I have visited has a distinctive personality type; Turkmenistan, Kazakstan, and Uzbekistan are very different. Each has its own characteristics, which is something I am afraid my American friends and myself tend to forget. We have a tendency to lump countries together without respect to their ethnic and religious backgrounds and experiences and cultures and heritage. You make a great mistake if you don't know something about the history of some of these regions, because they are not all friends, and historically they have not been.

I would like to conduct this discussion for a while as if discussing a game board, a parlor game, if you will, because I've found that this gives me a more effective means of going through some of the issues I want to talk about. But the title -- The Great Game -- was really something from which I worked backwards, because I have this marvelous map (see Map 2). It has gotten a little old now, but it does give you a pretty good shot of most of the region that we talking about. The only ‘player' not on here is Mongolia, and I think the Ulan-Bator government is very interested, as everybody is, in having pipelines come through Mongolia. That is one way to get to the markets of the East.

But I wanted to start with this map as the game board, if you will. I don't have little pieces which everybody could have and move around the board, but I use this for reference and will be referring to it from time to time.

Continuing with the game analogy, I think we must start with the name of the game. This presents the first curiosity about the region in my mind, which is that we're talking about the Caspian Sea. There is a dispute about that. Is it a sea? Can a land-locked inner body of water be a sea? The experts suggest not. Some experts say, "Yes, of course." But the consequence to the region is that there is a furious debate over how to share the sovereignty of the Caspian. And it has become part of the political struggle, and I will return to that after a bit; but I will just point out that there is some conflict even over the title of the game in the region because of a lack of unanimity on whether it is even a sea and what that means, owing the fact that it is a questionable sea. You see the players, and the players are all the countries abutting the sea: Russia, Kazakstan, Turkmenistan, Iran, and Azerbaijan. The players who do not abut, but are crucial, are Georgia and Armenia. The players who are not even close, but still important, are Turkey, Oman, because of some money and some interest, Afghanistan, and, from a natural resources standpoint, Uzbekistan as well. As you move around the West, South and East you see most of the players; obviously, the most dominant player is directly to the north, in the form of Russia.

One small fact, which I have discovered in my trips to Kazakstan, has given me an idea of the difficulty that we face when we talk about the relationship between Russia and these countries. And I am not talking about the fact that the geologists from Russia were the ones who found the Tengiz field in the Northern Caspian. I am talking about the very practical point that the former Soviet republics were considered the supply line for natural resources to Moscow, and were not truly independent in the sense of seeking their own natural or economic benefit. It was all part of a whole, and the center of the whole was in Moscow. As a result, if you look at Kazakstan, you will see some symbols for oil producing regions that go from Tengiz north -- huge oil reserves. Those lines from that area, the pipelines, move north to Russia. Those have been in place for many years. In the East, over toward Almaty and up in that region, are refineries. The refineries are operating all the time. The pipelines that supply the crude to those refineries come south, from Russia. There has not been any pipeline from the oil fields in the West to the refineries in the East. And there haven't been any refineries in the West. So, recently, the Kazaks have started realizing that they do not want to bring Russian crude into Kazakstan and pay world prices simply so they can use their own refineries, when they are already producing a great deal of crude in the country, which they have to sell to Russia at below market prices or without due regard for the quality of that crude.

So you fly into Almaty and climb the mountains up to the ski lift outside of Almaty, you start asking questions about the relationship with Russia It gave me some insight to realize that not only is it a place that Russia considered "its own," but it also was reflected in the way the entire system worked to deliver products between those regions. So, Russia is clearly a dominant and very important player.

Turkey is a player mainly because of the Bosporus, and because of their own sense of the economic benefits from the oil lines that could come to them through Ceyhan, which is marked there on the map. And I'll get into that a little bit more, as we go through the next phase of this game.

Armenia and Georgia are players because they happen to sit between the Caspian and the routes to the West for shipping, either through the Black Sea or through the Mediterranean. And so they are more true transit states. In addition, absent the situation in Nagorno-Karabakh and US policy toward Azerbaijan through the Freedom Support Act's Section 907, there would be a possibility for a regional development in Georgia, Armenia and Azerbaijan that would unify them and make them probably stronger then they are individually. Georgia, of course, as you see and probably know, also has a port on the Black Sea. Armenia is the one without any port, and still, they are between Azerbaijan and Turkey, and could and want to play a role in that respect.

Kazakstan is obviously a major player, and a dominant player in Central Asia by virtue of its natural resources -- the North Caspian is very rich, as Azerbaijan is in the south with its offshore resources. Turkmenistan, of course, has a lot to develop offshore, and I think that it is the fifth (or so) largest gas producer in the world.

Iran and Iraq can't even be described outside of the context of the United States policy when I am talking. From other people's vantage point and from a purely geographic standpoint, and maybe economic, the straightest line from the Caspian Sea is due south to the Persian Gulf. So, absent the difficulties between Iran and the United States and others, that would be a very logical transit route for oil and gas from the Caspian Sea. Iraq, similarly, is not a player, as far as the United States is concerned and as far as the funding mechanisms in which we have a voice are concerned, and that, of course, is by virtue of the UN. This clearly takes them out of play for the Caspian. As you know by reading those great discussions about humanitarian assistance, an exemption from the prohibition of selling crude, provided that the proceeds go to humanitarian aid, has been proposed. That is currently being debated in the United Nations. While the amount of that oil that this brings into the market could be quite large, it will not be a significant part of the long-term game that I am talking about, because we still won't be able to use Iraq as a transit route for the oil from the Caspian.

Turkmenistan and Uzbekistan are interesting to me for one reason I mentioned -- the gas. Turkmenistan, of course, would be the route for gas, and possibly the oil, that would go toward Afghanistan and Pakistan and India. Turkmenistan is very interested in, and, as a littoral state, has a voice in and will be involved in, the debate on how the Caspian will be utilized by the littoral states. When that debate is concluded, it may be by means of the five agreeing, or it may be by means of some super-multilateral organization that tries to urge some solution.

When I am mention the problem with delimitation for the littoral states of the Caspian sea, I am only talking about energy side of the issue. There are also significant environmental concerns. Obviously, there are fishing and commercial concerns, and those will be addressed. What I am talking about is whether the countries will decide that offshore gas and oil development can occur in someone's offshore zone or region without obtaining the consent of any other littoral state, and whether a pipeline could cross the Caspian without requiring all five countries to agree.

From an energy standpoint, these are pretty important issues. I wanted to mention the environment, the fish -- for those who can afford caviar -- and the commercial activity surrounding these that is so important to so many people in that region. These interests might be addressed in a way that is different from addressing the development of the Caspian natural resources, except where they come into conflict, obviously, from an environmental standpoint. The final resolution of these disputes will take some time.

We, in terms of US policy, have been urging the countries to get experts together, to talk about how this could be resolved by reference to other examples and about how it could lead to the development of the Caspian's natural resources and develop the countries of the region. Some of that may come about through an experts' conference, although it is difficult to get all of these countries together for an experts' conference on the issues of delimitation, the environment, and commercial exploitation of the sea. But that's one thing. We do not think that it is in any one country's best interests to lose the right to develop its own offshore region, and we have applauded those attempts to develop the offshore regions as a means to provide what somebody characterizes as "facts on the ground" -- I don't like that phrase, but it is used -- which means that if you go ahead and do it, then who is going to come in later and undo it? Probably no one. So maybe you include de facto exceptions or different routes for energy development in the region. Some people get some comfort out of the fact that LUKoil is involved in offshore Azerbaijan.

So, I think I have covered the players generally. Before I go too much further, I think I should talk a little bit about the role of Turkey, and the route across the Black Sea and through the Bosporus. I don't know how many of you have flown over the Bosporus or taken a ship through it, but it's quite wide. There have been very serious accidents there, and the Turks are serious in their opposition to increasing the amount of crude passing through because they see millions of dollars a day going through there to their environmental detriment. Correspondingly, however, there is an economic benefit, from their perspective, to developing the pipeline going through the northeast to Ceyhan. Therefore, much of this debate is internal, and much of it involves environmental concerns with regard to the Bosporus.

Obviously, in each of the players about which I am talking, the state of politics makes it more interesting. As you all know, Turkey has just reached a rotational compromise for Prime Minister. In Afghanistan they did the same thing. The problem there was that when the Prime Minister got in and sat in the chair, they could not get him out, and they continue to have a war just to get him out. The real challenge for the Turks is to see whether there will be any willingness to get out of the chair and to let Ciller sit back into the chair she once had. But because of those political issues, everything in the region gets played a little differently. Needless to say, we have Russia going through presidential elections, and a lot of the things that we hear and see will be played through that very difficult political prism. So keep that in mind as you are looking at the overall game in the region.

As for other players, obviously the United States is one. Now, why the United States? Russia reminds us often that we are not a Caspian littoral state and, therefore, have no business there. We publicly dispute that assertion for several reasons. The first reason comes from the energy standpoint, and is the need to diversify our energy supply. This is an entirely different lecture that could take up the afternoon, with respect to energy supply and diversification of that supply. And it could get you into a discussion about world oil markets, demand and supply, estimates for the year 2010 and 2005, pricing, and all the rest. But suffice it to say that our national policy is: "We want to diversify our energy supply." We import seven million barrels of oil a day mas o menos, and that is more than half of our total crude needs. It is not more than half of our total consumption, because we have other refined products that are coming through that are consumed, to reach a total value of around 16 million barrels. But of the total amount of crude in the country provided by domestic and foreign sources, over 50% has been from foreign sources for many months now. So, our interest is to try to diversify that supply, because we think that our demand will continue, and that supply needs to come from many sources, so that we don't become vulnerable to disruption in any one region. Since the Middle East is currently the dominant supplier, we would like to find other sources. The Caspian could be one of those sources, if not to the United States, then at least to the world market, thereby diversifying the supply.

In addition to the entirely different seminar that we could have on world oil markets and supply, we could also talk about where those supplies are going to come from, which would get me into my visits to South America and our interest in building sources of supply there. This is because a logical question, it would seem to me, might be: "If you are really interested in diversity and are trying to get rid of the dependence on the Middle East, which is a volatile place, you're going to Chechnya? or to Turkmenistan? or the borders of Iran, Iraq, and Afghanistan?" I think that's a fair inquiry, but again, if the discussion is just on this, I can explain, I think, that in a true policy position, we are urging and supporting the increase in crude oil production in places like Venezuela, which is our main supplier of crude and products, exceeding Saudi Arabia by a small amount.

Mexico, as well as Canada, are also major suppliers to the United States. Sources of supply which are closer to home do offer a certain comfort level as well. But the diversity of supply is the first prong of the US policy. The second is to encourage and support the development of the New Independent States (NIS). In this case, it happens to be those on the Caspian, and it happens to be ones whose development will be driven in large measure by the ability to sell their natural resources to world markets for money.

That is very important for them, and therefore it is important as a vehicle to realizing our policy of encouraging those countries' independence and prosperity. This includes the likes of Ukraine, where we spent extraordinary amounts of time trying to help them. And implicit in that, is giving them the ability to be their own bosses and to control their own policies and more of their own destiny. Given the fact that until 1991 they were a curious appendage, a "resource provider," as I described Kazakstan, to Russia, this can present particular problems. Giving them the means to build infrastructure and laws is important -- I mean, we take for granted a lot of stuff, like parking tickets. They have lost the very basic things that were handled and provided by Russia; now they have to be handled and provided by the governors, or the local ministers, and city mayors, and the central governments of these countries.

US policy, then, toward the region is to help these states develop and become stronger and more prosperous. And of course, as you all know, I don't want to get into the third lecture which belongs in another building, and that is American politics and the Administration line on the need for a global economic community and free trade. That's a debate that Buchanan and Dole can have, much to my pleasure. But frankly, we do need to build markets where people will be stronger trading partners, and part of that policy in supporting these countries in the region, and the most difficult aspect of it, is to convince the Russians that trading with and supporting these countries is in their best interests. The Russians have a little bit of a catch when we preach that. But frankly, given the region, the stronger some of those countries are in the longer term, the better it might be for the stability of the region and particularly for Russia. And it certainly will not do Russia any harm to have those countries able to pay in cash for products and other goods and services that Russia could supply to them. So we think it's a "win-win" opportunity for everybody on that.

The third prong of the policy is support for US companies that are trying to invest in the region. We have the Commerce Department and, to a lesser degree, the Energy Department, supporting that kind of thing all over the world. In the ways that we can, we both engage the governments, in terms of our policy, and urge that a US company be picked over a non-US company. I guess the most recent example was in having Exxon as the partner in the Azerbaijan international oil operating company over a French concern. And there was a major effort by the US urging President Aliev to take a US entry into that, which he did, and Exxon became a partner.

Those are the players. The next thing I want to talk about very briefly is what I call the opening gambit, though it's not truly the only opening gambit; there are plenty of them. It is the one that is most obvious, however, and it is the one that helps people see the transit issues, the energy issues, and the geopolitical issues coming together in a true opening gambit sense, not an end-game sense. The end-game will come at the end of my talk.

The opening gambit, in the oil jargon, goes under the name of "early oil." Early oil is simply the production from the initial wells, production platforms that can be quickly marketed without the need for large-diameter oil pipelines, and can be used, in the case of this region, for two purposes. One is to help finance ongoing production and development activities, which cost a lot of money. Striking oil and finding it is just the beginning. That's when you really have to come up with the money to develop it. So the early pipeline, early oil, serves that function.

Secondly, early oil allows the companies to see whether or not further production is going to work. Will the region permit oil to flow to markets and allow money to come in? How will they be taxed? Will the contracts be honored by the various governments? And the like.

That early oil has consumed most of our work for about a year and half, because it became the focal point for a lot of reasons, which I'll try to reiterate, for the entire game. There were two routes, one obvious and a second alternative, for the early oil. There is a line that goes from Baku, north through Chechnya and over to Tikhoretsk and Novorossiisk. It's an old line. Some of it flowed south -- there are some gas lines, there are easements, but it is an identifiable thing. And since I mentioned Chechnya, I will just quickly say, just to put the whole thing in perspective: having looked at this and thinking about what you know about each of these countries, you can quickly determine that there are no good routes. That is the only common denominator. They all have problems, whether you are going through Armenia and Georgia, through the Bosporus for reasons I cited, through Chechnya, through Afghanistan, because of our foreign policy rift, through Iraq and Iran, or through the regions in Russia. As I mentioned before, with respect to Russia's almost paranoiac look at the former resources, they feel compelled to keep control, as much as they can, of the flow of the resource. So they have been very clear in wanting early oil to go north, as we say, through Russia out to the Black Sea.

Enter Turkey, enter Georgia, and enter the United States companies.

Before we get there, I just want quickly and parenthetically to mention the line from Tengiz to the Black Sea. This is a line that goes around from Tengiz through Kazakstan, and goes to Tikhoretsk, called the "Planned Kazakstan-Caspian Route."

This is an example of something which Russia can control. That line has not been concluded, and as a result the oil from Kazakstan-Tengiz has to go north to Samara and then into that main line down to Tikhoretsk to be sold to the markets, or through the friendship line that is going out to Belarus and elsewhere. For this reason, Chevron, who is the major US investor there, has put approximately $800 million into that project, and they still don't have a pipeline that they can call their own, to get that oil out. And I will get back to that in a bit. But I wanted to mention it in the context of understanding why the US companies were a little apprehensive about having only one early oil route out of the region. They have seen what has happened to Chevron and its having to access the Russian pipelines to sell its crude, even though the entity is a Kazakstan-Chevron joint venture called Tengiz-Chevron. And so, the argument was not difficult to make that the companies would be in better shape if there were multiple routes for early oil.

The United States policy on this is very clear. We have said it to everybody, and I think it has been in the press, that we supported (I'll explain why I use the past tense) multiple early oil routes. For all the reasons that I have sort of covered, in terms of making the Russians see some benefit, i.e., we would be supporting an early oil route through Russia, it does make some sense and it goes into their line. Also, the Turks were interested in not having all of that early oil go through the Black Sea, although, as you will see, it basically does. The Georgians were particularly interested because an early oil route going West would help the Georgians, and perhaps the Armenians, with whatever benefits really accrue when you have a pipeline of this kind going through your country.

So the United States announced to all the people who were interested that we were supporting multiple early oil routes. And we talked to a lot of people about that, and at first there were some objections -- the Russians seem intent on having just one. But at the end of the day, the AIOC (which is a consortium of many companies, British companies, Norwegian, one Saudi, and up to recently, five US, now down to four, and LUKoil from Russia) met, talked it over, and for a lot of reasons, with the encouragement of our government, decided that multiple routes sounded good to them. And the negotiations began. The negotiations wound up with the parties agreeing, and in fact, they are in the process now of reaching the final financing and other arrangements to begin the construction of a route to the north, to and through Russia, and a route to the west, through Georgia.

That early oil gambit, in which all the parties came in and started applying a little bit of pressure on where it was going to go, and expressing their interests in it, produced a good result, I think. And, of course, it all remains to be seen, because no oil has flowed through either one yet. But it will -- I feel pretty confident that it will.

Quickly, then, we move to what I call the endgame. The early oil, as I said, is modest -- 80,000 barrels a day up to maybe 130,000, 80 going north and 50-plus going west. But the thinking is that where the oil flows will dictate where the large-diameter pipelines go. And that nexus is what makes the early oil so important to all the players, and why Turkey was in there, even willing to try to find ways to finance the early oil line that would go to the Black Sea, to the Bosporus, through which they don't want oil to pass, because if it flows west, there is a chance it will be the line that will eventually go south to Ceyhan. And that really is what it's all about, as candidate Dole would say, the main pipelines out of the region.

I mentioned before the line from Tengiz. This is a story in and of itself. There is a consortium, the Caspian Pipeline Consortium (CPC). It was made up of Kazakstan, Russia, and you remember my reference to Oman. Those three countries had signed documents. It's been ongoing for many, many years, at least three and some. They could need international financing for a number of reasons. United States policy, with respect to this, was that we took the position, with respect to the larger diameter pipelines, that there should be multiple lines out of the region for those too. Not just for early oil, but for the ultimate lines there should be multiple lines, and we think one of them should go to Ceyhan or at least traverse Turkey. And as for the other one, there is really no choice other than Russia, unless we were going south. So basically we are saying: "We, too, think that the lines should go: one to Russia and one to Turkey, and somewhat follow the early oil route."

So that is, again, our announced policy, and we have stated it over and over. The northern line, the CPC line, has been the source of a lot of difficulty, because, as I said, they were not able to get financing from the World Bank or the EBRD, for a variety of reasons. But one of the main reasons was that it was done as an oil promotion deal in which somebody would put in a lot of sweat, they would organize it, and they would get half the deal back. The half of the deal was for a partner who was not contributing as much, was in the Middle East, had no shipping role, and was not the country across whose territory the pipelines went. Russia, and Kazakstan, and Chevron, the main shipper, a US company, which got our interest, all said "Wait a minute. This does not seem quite right." And the multilaterals said: "We don't like the way it is structured proportionally, and some of the other problems. We think that in order for it to get our financing, it needs to be restructured."

This is a huge subject, and I will not take you into it at this point, except to say that through a multitude of efforts by a lot of people (such as the Russians, including the new Russian Foreign Minister, the Kazakstanis and many others), and perhaps thanks more to the Omanis themselves than to anyone, they have restructured this thing. They restructured it last week; I think March 7 was when the documents were actually signed. And we will very probably see the pipeline from Tengiz to the Black Sea go forward in a restructured manner, with shippers involved, and with the involvement of Oman, to some degree, and certainly Kazakstan and Russia, who have the primary interest in it because it is crossing their land, and, in the case of Kazakstan, taking their oil out.

With respect to the South, that has not been resolved yet except for statements that the US policy is to encourage these dual routes or multiple routes. And a lot of that is working towards a conclusion now. The Turks are very interested in this, obviously, the early oil getting to Tbilisi, and then on to the Black Sea. But they are very strong to argue that the heavy volumes, the large-diameter line, should come through Turkey and down to Ceyhan and out that way. So that is the next major step, figuring out how that is going to be designed, where it is going to go, how it is going to be financed and how much volume will be running through that area.

The Caspian North-South total and the regions abutting it have a large quantity of oil. I have seen various estimates, but all agree that the total is very large. I read in a paper somewhere that somebody has said it will be in excess of 5 million barrels per day in 10 to 12 years. That's a lot; that really is a lot. As I said, we are importing 7 million barrels a day right now. So, we are talking about total exported oil from this region, North and South, being just a million or two barrels shy -- actually, less than a million is the best figure that I've seen -- of the total that we import today. And it will mean a great deal to the entire region where these lines go through. And again the rationale was to aid these countries' longer term efforts in developing their own resources and in finding the revenues to do the things that they need to do: education, public service, and infrastructure development. The rationale was also to provide more stability and to diversify the supply of energy. And it was also clearly to help Russia as it develops its pipeline structure to the Black Sea and perhaps north, as you see, to Finland and elsewhere, where they need to upgrade their pipelines.

So, in summary, it is not over. We have seen developments, we have seen some successes. The countries seem to have found a pragmatic solution, generally speaking, that is in all of their best interests. The US has supported these efforts for the reasons I gave you, and so far the outcomes have been pretty close to what we hoped would happen. If there is a line to Ceyhan, and the larger line is built that goes from Tengiz into the Black Sea, then I think it will be a successful conclusion. But the region is so difficult that there is no assurance that that will occur. But we are hopeful, because it is in each party's own interest.

With that, I will call the game over, and maybe we can open it up for questions and comments.

Discussion

Question: What is the impact on these proposed lines through Tikhoretsk if the Russians aren't able to calm down the Chechen situation, if that remains a festering war?

Carter: First of all, with respect to the early oil, they are probably not going to be able to get it through if the Chechens decide that they don't want it to go through. But, except for some instances in some places like Colombia where they believe that it is violating their own sovereignty, their patrimony, most countries do not seem to want to blow up the ticket to revenue. And they will be able negotiate some benefits from this. This is like stage coaches and going through the Kaiber Pass: you have to pay your tariff to go through, or they cut off some part of your body you don't want to lose. And so, I think, as we have seen recently in some other countries, the money from the pipeline going through Chechnya will be guaranteed, or at least some portion of it will be guaranteed, to flow back to the area through which it goes. Thus if you are the mayor of Grozny, you are going to be trying to keep that oil flowing because it means some revenues for you. So I think that pragmatically it will go through. They can blow it up, but they can also repair it. Colombia has had such damage almost daily, but they get it repaired; however, they have lost $60 million of oil flow from Colombian pipelines because of harassment and sabotage. So, such activities can result in harm. But I think generally, as long as you position the benefit to the region correctly, the oil will flow there.

Now, if it doesn't, and let's say that we also don't have the line yet built to Tbilisi and to the Black Sea and Poti, then we are where we are right now, which is: find other ways, certainly for the North. Kazakstan has been able to ship, and Tengiz has been able to ship, oil to Samara. And that has flowed. Not nearly as much as they would like, but some is flowing. So, they were able to use that route.

As for the southern part, Baku, there is an exception to the Iran policy that permits on application and in limited short-term events something called "swaps," where you can take some oil, say from Baku, ship it to the south, in the northern part of Iran, and then Iran would ship something similar out at some other exit port, and there would be an adjustment for the amount that would be in transport, although the oil would be transported and you net back whatever it is. That is possible. It is not very practical, however, and I am not sure even Iran will want to do it. And it is in Russia's interest, clearly, to make sure that this pipeline to the north goes, because this game is truly still under way. Russia has not given up attempting to ensure that the bulk of the oil from the Caspian, even all of it, will travel through Russia. That, I believe, strategically would be their goal, but they are not going to go to war about it, although the economists a year ago suggested that there was an oil-control aspect to the very war which was going on in Chechnya. So, we don't know how serious they would be, but if it's just dual routes, I don't think so. To keep the route open, I think they could get much tougher.

Question: Can I follow up on this northern route issue? Novorossiisk -- the main Russian terminal for the oil there -- has had some very serious problems. I just saw in the last few days that extremely high winds had prevented tankers from leaving the port, and the port is frequently closed. So even if the oil gets to Novorossiisk, there doesn't seem to be a guarantee that the port can physically handle the flows.

Carter: There are two main parts to the project which have been discussed. First, you see Tikhoretsk, which is a huge point where big lines come into one spot and then to try to keep moving through a line out at the sea. It is a bottleneck of tremendous proportions which has to be addressed. And that will be addressed. As that line is opened and more volume is permitted, they will also be building some offshore terminal facilities to allow ships to come in and take out the crude in higher volumes. That is all part of what the total project is -- to "unbottleneck" that portion from Tikhoretsk to Novorossiisk, and also to upgrade the terminal and facilities.

The weather problems -- they are probably valid, but you need to check. Occasionally, when the Russians get mad at the Kazakstanis, suddenly there is a problem and they cannot not take the oil because there is a storm or because something else happened. It becomes sort of humorous, except that it is so serious, that these were means that they utilized to stop buying or shipping the crude. So I do think it closes for a portion of the year, but not enough not to allow it to be a major export area.

Question: You mentioned that $800 million was being spent by Chevron on the pipeline and exploration. Can you give us an estimation of the amount of investment needed to reach the 5 million barrels per day mark? The reason I am asking is that there was an article in Foreign Affairs about three years ago which mentioned that Russia, in order to maintain its level of productivity at that time, 7 million barrels per day, needed an extra $50 billion. And in order to build new fields, they needed another $50 to $70 billion. So we are speaking about $120 billion. How many billions are we speaking about, and what is available?

Carter: The amount for Kazakstan from Tengiz to the Black Sea is not as large. They have the line that today goes from Tengiz around the horn, if you can have a horn up top. That line goes around the north of the Caspian. So they have to build this line from that sea on the western side to Tikhoretsk, and they have to upgrade the Tikhoretsk facilities and the port. My recollection is that the total cost is somewhere in the high nine to a billion, mainly because some things are already there.

The cost of the line to the south has been estimated at about $1.5 billion. The difficulty you are raising is that the useful life of the Russian pipeline system has been over for several years. They did not build them, perhaps, to standards as high as they could have; they did not realize that there would be corrosion on the outside as well as from salt water on the inside. So their whole pipeline system needs to be reworked and upgraded, and new lines built and things like that, to allow them to export, though their current production is now under half of what you said before, because of the diminishment of the exports.

The amount of money that is going to go into that is maybe not as great as you stated, but it is huge. The World Bank has begun a series of feasibility studies to see what is needed and where it is needed. There is the "Druzhba" line which needs to be upgraded, their main line. There is a new line that they would like to have up to Finland, for the Baltic, that would come from the northern region in Timan Pechora. The whole infrastructure needs to be rebuilt, and I do not even want to guess how many millions of dollars that would cost. In order to get that money, either Russia is going to have to generate it internally, which I do not think they have enough to do, or somehow the system has to be providing incentives for investors in these pipelines.

If we get that, what will come along with it will be significant reform, in terms of a legal framework, a regulatory framework, and all the rest, and an opening that will be beneficial for all of us. But the problem is immense. It is probably their biggest dollar drain over the next 15, 10 years, because they already had a spill in Komi -- I guess it was in the October of 1994 -- that was awful and very difficult to clean up. I've flown over Western Siberia, and you can see the pipelines that are underground like lines on a map, because the oil seeps to the surface, and you can just see it stringing. So it is a big problem. But I am sorry, I do not have the exact number, but it is a lot. But for these pipelines, it is being done on an investment basis, and equity and return on equity, with financing provided, hopefully, by the EBRD or others. Those things are in a range you can put your arms around.

Question: It seems to me that difficulties are far greater than you have mentioned. Let us begin with the Turkey line. Let us begin with Georgia, for instance. I am very glad that you have mentioned latest policy, but it seems to me that you have not even touched the surface of the major problems. Batumi and Sukhumi at the present time are completely controlled by Russia. This is the route that is the bastion of Kurds, and President Aliev has repeatedly suggested the danger of Kurds blowing up the pipelines, but we have always ignored that, obviously.

Carter: As I said, there are no good choices out of that region, they're all fraught with danger.

Question: Furthermore, the Russians have signed a 30-year military agreement with Georgia, and with Armenia, to provide military assistance. That is obviously dangerous; 20% of Azerbaijan's land is taken by the Armenians, and the idea, suggested by Turkey, that maybe a pipeline going through Armenia would be accepted by Azerbaijanis.... And most important of all, countries like Azerbaijan, Turkmenistan, etc., no longer have control. Control is with the consortium. And the fact is that countries like Azerbaijan literally have to borrow money from other countries, from Western countries, in order to be a player, or at least to have some kind of share.

Carter: Let me just quickly respond to one part of what you said. I will agree that if something happens to President Aliev, there is a serious problem in Azerbaijan. As long as he is there, he has played this game as well as anybody I can see. He has been under terrible threat from the Russians. They have shut the borders off. Every time that a vote has come up that would offend the Russians, something happens -- either a little bombing up here or an assassination attempt over here. I don't know who is behind it all. But there have been terrific problems and pressures on Aliev. Notwithstanding that, he has been a very, very good friend of the United States -- he has been a leader in the region. He has an interest in the AIOC, but more importantly, he is the final voice with SOCAR. He is the final voice on a lot of things that happen there. And the country knows that they will benefit from the development of these resources.

Most recently, when Pennzoil, Agip, and LUKoil signed, Pennzoil and Agip paid quite a nice sum of money. So the Azeris are getting some money. They also have difficulties, immense difficulties: they are not able to pay for some of their gas. I can go through a string of reasons why I consider the Azeris to be the leaders and heroes of this whole enterprise. But I was trying to just give you a general view of all of the pressure points. I think Georgia, similarly, has been very, very courageous, because, as you know, President Shevardnadze, with whom we met just a couple of months after his assassination attempt, has been extraordinarily good, and he and Aliev talk all the time. They see the possibility of regional development, which we would support if we could. We have a little bit of a problem with needing to settle the Nagorno-Karabakh conflict, and that is underway I hope. But clearly, those three countries (if they could get together, and that's something we can't decide for them, but if they could get together, with their various attributes and resources) would be a very strong regional force and we would like to see that, frankly. I do not mean to diminish any of these problems -- it's just you make a shopping list and you put down everything that you can, and maybe something is missed.

Question: May I suggest something? President Aliev, correctly, has always mentioned that the only way to keep Azerbaijan semi-independent is to keep the Western investment in there. So he's given the carte blanche, virtually, and justly so, because he always argued that if Western companies, and particularly the United States, will pack up and leave, Russia will move in, so that Western investors are the only hope for semi-independence because Azerbaijan is the only one that is now sort of independent in this whole region. But speaking of development, everybody is all for Western assistance, particularly for American investments there; they have been crying out for years and years and we did not hear them at the beginning. But the fact is that two years ago at a conference I spoke to the presidents of Pennzoil and Brown & Co., which is there to clean the water. They all suggested that they had no interest in putting together any kind of deal to develop this region. None of those companies is willing so far to do anything to foster development. And you speak of development. People are starving to death because not only the oil has been reduced substantially. This whole game we are talking about is the 19th century game, when the Nobel brothers came and so on.

The fact remains that we and our companies are interested basically in just taking what they have and taking the crude oil out. In fact, President Aliev has suggested that perhaps we can build some kind of structure, invest in some kind of refineries, so that at least his country will benefit a little bit. But that has been rejected. So what is going to happen?

Carter: I am afraid that your information may be a little stale. I deal with these companies every day. I was just with President Aliev in his country, and then met with President Shevardnadze and with Ter-Petrosian. Those people aren't looking at the United States companies in that region simply to get in, take their money, and get out. They are trying to use them as best they can to assist through education, through local projects, communities and schools, and other things. And we are doing the same from the side of United States government, reminding these companies that they can be the best long-term partners if they take a stake in the building of the infrastructure, the education, and other aspects of these countries, and do not simply come through as tourists for revenues.

But more importantly, when you are talking about the percentages and how much interest these companies have in these things, remember that their take is a just a profit take. The taxes are paid by AIOC, and it provides a great deal of money. It is certainly not overly generous to the companies, under the recent deals that I have seen, and the one that was signed between Pennzoil, LUKoil, and Agip with SOCAR is a very competitive deal. They are putting a lot of money in; they have to develop it, and then when the revenues flow from it, the country gets the taxes. The taxes in some places, most recently in Venezuela, approach 90%. Now, 10% is maybe more then somebody wants to give to a private company, and I will not get into free-enterprise arguments with you, but I would tell you that there are not many countries in this world that are getting taken advantage of as the revenues flow from oil sales. They are doing very well. And Azerbaijan is also. They need more. But they are doing very well.

Question: Could you say a little bit about the China option?

Carter: I am intrigued by that. First of all, the original discussion was about gas. And the Turkmens, as I said, have huge amounts of gas. Uzbekistan has some, Kazakstan has some, and Russia has more than we can imagine. And so, the idea is that you have got to get the gas to market, and you need it to get there at a price at the end of the pipe that will allow people either to use it as a fuel or convert it into electricity through power generation. And those distances make it very difficult to keep the electricity that is created at the end reasonably priced. But as some of the technology develops and they can force this stuff through, it is possible, but the cost of the product, once it has traversed the line (it goes about 5,000 kilometers, something like that).... It is very hard.

Now, crude. We were talking before about the crude situation. That is a little different. The Tearum basin in Western China apparently is so big that it boggles the mind. I do not have figures, but it is big -- many billions of dollars are in the Tearum basin. Kazakstan borders China; you can see a little of bit of China that comes in from the right side of the page (see Map 2); but right there along Kazakstan's eastern border, that is China. And the Tearum basin is a bit further in from that, but just miles and miles from the east. And so, how and where are you going to get it out? It could possibly go the other way.

I guess if I were in private business again, I would, say, "Why not" rather than, "Why" or "How? Why not look?" And so, I think what is happening with Exxon and BP, or British Gas, and some others who are doing feasibility studies on these lines going to the East, are just saying, "Why not look at it?" I think that as a result, you are going to see a gas line that is being planned to run from Uzbekistan and Turkmenistan to Pakistan. And then maybe to India, if Pakistan and India get together, which is as difficult as the smaller countries we were talking about. But you have to cross Afghanistan with the pipelines to get there. That one again is, "Is it possible?" And rather than some of these planners saying "No," I think there is a tendency now to look at it and to think that anything is possible, at least to look at. But I think the major burden is just the cost of transportation. And that is why going to the Persian Gulf, going to the Black Sea, is so appealing because you can get it on a big tanker and off it goes.

Question: It's too bad, I think, that your vision of the Caspian is looking at only three-fifths rather than the full picture. The shore on the Iranian side is very large and very attractive, I am sure, like the other areas. It is such a closed environment and subject to all the changes, environmental damage, that could happen. I see that as one of the biggest problems; even as revenues might mount, the cost of cleanup might be far greater than what the revenues are estimated at now. I think that as any person who undertakes a project, you would like to do it in a legal manner first. When you buy a condominium, you do a title search, you find out what the legal issues are. Why is it that the legal problem of this is always being pushed aside, as to what are the liabilities, who are the owners, in what fashion are they going to be liable for the future damages? Taking into account that oil is the immediate gain that they are going to have, but also having that vision (I will grant you that in Iran there are also many people who are also thinking along that line), how is that whole thing, the whole picture going to be worked out now?

Carter: I'm going to offer a couple of comments which sort of combine to answer the question. The first is, I think that at least the American oil companies (and I think the British, too, and the Norwegians, who were working so much offshore in the North Sea -- and we're offshore as well in the Gulf of Mexico, particularly) have got standards of drilling that have become very high. In fact, I have been told, though I do not have any facts to provide you with to show you that it is true, that the amount of pollution from oil drilling offshore is minimal, but is even smaller still when it is compared to accidents that have caused spills from the transport of oil by ship. Now, we have oil pipelines that spill, and that's a problem that I have already alluded to in Russia, but the standards of drilling in offshore waters have been so high that there is, I am sure, some pollution, but it is fairly modest, though of course it always can be improved upon.

But I think that all of the US companies have been employing US standards, and, in fact, what we are urging through these experts' conferences that will involve Iran and others is that the standards be employed at the highest levels possible, the US and other levels, for two reasons. First of all, clearly if you are drilling at the high standard the chances of a spill, or disruption, or danger, or hazards to the coast of Iran and the rest will be minimized. But from a selfish standpoint, it allows the US companies to compete with these other companies on the same technical safety and environmental basis because they do it anyway, and the other ones can bid less because they do not have to do it. So, what we are trying to do is lift the environmental and health and safety standards to highest level that we have, so that all that effort in that region is done on a consistent basis, and hopefully on a safer basis and a better basis for the environment.

These companies have seen, at least the US companies have seen, what happens when you cause any kind of damage. They get sued by somebody, someplace. And they have no interest in spending money defending those kind of cases. They do not want to pay lawyers to do that. They would rather do their job, get the oil out, sell it and make their profit, reasonable or unreasonable, as the case may be. That part of the question, I am pretty comfortable, is being addressed by US companies and by others, to ensure environmental standards that meet the highest type of standards.

With respect to Iran being such a large portion of it, this gets us into absolute US policy and the prohibition against dealing with Iran at this point. Unfortunately, that restricts us in our flexibility and in some of the practical approaches that you would like to employ whenever a company goes into a region and says, "OK. Where is the best way to go? What is the cheapest, what is the most practical?" and everything else. We have basically removed a huge portion of the territory from that consideration.

Question: When you use the figure of 5 million barrels, does that exclude Iran or include Iran?

Carter: Yes, everything including the waters of the Caspian. What they know, in terms of the reserves in the Caspian.

Question: If production could go up to 5 million, does that include the portion of the Iranian coast?

Carter: I think so. The number I saw was 7.5 million barrels of production: 1.3 used in the region, leaving 6.2 for export. I guess I assumed it included Iran's portion from the Sea, but I am not sure. Maybe I could find that out and clarify it for you, or if you find out before I do, then we can talk. I assumed it did, because it is talking about Caspian as a whole. When you look at the fields, there are some that Iran is actually developing out there. We do not have any access to them; we are not partners.

Question: Can you discuss the possibility of the oil pipeline going though Armenia? How does the US government feel about this route?

Carter: The government is somewhat constrained by the problem in Nagorno-Karabakh. I think what we would like to see is the Armenians and the Azerbaijanis reach some kind of a resolution with respect to Nagorno-Karabakh, so that the region could be developed as a region. In addition to the conflict there, we also have the Congressional restraint in United States on Azerbaijan, which does not allow us to be of assistance to Azerbaijan except for certain humanitarian things, which hamstrings us a great deal. From all of our standpoints, if a solution could be found to allow commerce, oil, gas, electricity and other things, to go through the region from one country to the other, and through or around Nagorno-Karabakh and into the region to the south, that would be ideal for us. The problem that we have is that a few people have said and suggested: "Why don't you have a peace pipeline?" where the pipeline is the vehicle to peace.

I think most of the foreign policy people dispute that ordering of things, thinking that if there is going to be peace, the parties have to see the economic benefits and bring that about, and only then should the commerce can proceed, at least when dealing with something so entrenched as the difficulties in those three regions. So, I think that we would find, absent some kind of accord between Armenia and Azerbaijan, that there would have to be some resolution there before governments would support such a line and the companies would want to traverse those countries.

In the meantime, the line that has been endorsed goes from Georgia to the Black Sea. We have been urging that there be a spur that would go down into Armenia and that someone actually try to find some money to build a refinery there, so that they would have access to that crude and be able to process and refine it there and supply some of their own needs, even though the pipeline does not go through. There were some suggestions to create a ‘banana line,' if you will -- one that goes through Georgia, and one that goes through Armenia -- so that they can answer all regional interests. But again, the difficulty between the parties is a bit of an obstacle there.

There has been consistent urging that the parties resolve their difficulties and that, I think, would simplify matters a great deal. And frankly, I think the same thing could happen if Iran and the United States resolve their difficulties.

Question: Just going back for a minute to the environmental question, you were talking about the impact the American companies have, and can have, and that the American government has tried to have, in raising standards for the drilling. Does the same hold true in terms of raising standards for the construction of pipelines, and the reconstruction of the Russian pipelines, if there is foreign investment money and money from the international financial institutions involved in that?

Carter: Yes, absolutely. Both the World Bank and the Export-Import Bank, which finances US exports -- almost everybody that is involved does that. I mean, it would be building it on the standards that we build in this country and in other parts of the world. I do not want to blame the Russians too much but, I mean, I think if they were starting over they would have been more careful too. Some of the technology they just did not have and did not understand at the time, but there will be very high standards, because nobody wants to revisit this issue in the future. In fact, there is a lot of innovation going on now, how better to protect the pipelines from spills and things like that.

Question: I had a question about US motives in this whole game. It seems to me that the US conservative policy seems to be winning in this game. For one thing, Turkey is trying to be a regional superpower, and that's clearly in the US interest in order to counter Iran. In addition, you mentioned that having a dual pipeline is in the US interest in order to diminish Russian influence in the region. But one thing I was curious about in this whole picture, and one thing I was concerned about, was jeopardizing US-Russian relations. One thing that you sort of alluded to was that you did not think Russia would go to war over this; however, clearly we have seen assassination attempts, as you have mentioned, Russia also looking to Iran, and trying to make other different types of connections with other countries in order to get what it wants to maintain its influence in the region. I am wondering if the US should really think twice about what it is doing, in terms of Russia, because it seems to me that it is a really important relationship to maintain.

Carter: I agree with that. I did not want at all to leave the impression that our policy is in any way intending to threaten or cause Russia to feel threatened. On the contrary, as I said, what is difficult is convincing them that letting these former Soviet states prosper is in their own good interest. It's a tough sell. But we have some evidence, in this hemisphere, about our own neighbors, and how we benefit in terms of trade and other things by letting them develop and not being the big brother, the big neighbor up in the north or in the south, as the case may be.

I think the difficulty we have is the nature of the relationship with Russia, the historic relationship of lack of trust and literally being at each others' throats, and the fact that war was possible several times. And then suddenly they are supposed to be like Britain to us. That cannot happen. So what we have done is to establish a series of points of contact. The most significant regular ongoing one is the Gore-Chernomyrdin commission, which we just concluded in the United States. Our main involvement is through the energy side, but Victor Chernomyrdin was here. He met with Vice President Gore. Shafranik, the Minister of Energy, Fuel, and Mines was here. He met with Hazel O'Leary. We met with the deputy ministers. We met with the oil generals: LUKoil, YUKOS, Transneft, Gazprom. So there is both on the government level and the private sector level an extensive continuing dialogue, where we are trying to show our interest in Russia which, I believe, is as sincere as the United States can be. We are nervous about nuclear warheads and security. And I am sure the Russians are too. I mean, they do not want to have these things sailing around without control. They want to have control over them themselves. And I think, on a commercial basis, I just got back from where the Commerce Department, State and Energy were all talking about how to open it up.

And again, as I said, it is a political year, so it gets kind of tough when people are trying to run for office. You don't run for office generally by showing how friendly you are with the United States, if you are trying to win in Russia. So, it is a difficult time. But what we are trying to do is maintain as many levels of relationship as we can, have them be personal, have them be grounded in the logic of actors' own economic interests, trying to urge those things by examples in other places in the world, not just saying: "Do it as we do it." We need to show them other examples of how other people have done it, for whatever goal they have in mind. And one of their goals is to bring money in; they want to have joint ventures to develop these various projects; they want to develop their resources.

And we explain to them some of the things that need to be done in terms of the legal regime, the contracting. They have gone through an immense step to get passed a law on production-sharing agreements, which allows the oil companies from outside to invest in the oil companies inside under secure and predictable conditions. We counsel the American companies not to criticize the result; work toward improving it, but do not make them feel like they did not accomplish anything. Because they felt that they had taken a really significant step. And in fact, the Russian advisor, a fellow named Konoplyanik, who is the working group chairman, drew up a graph. He showed where they were before all this stuff started, where it would have gone if we had gotten everything they wanted, and it was about an inch to the left and four inches to the right of the starting point, where they wound up. And so we showed this to our American companies and said, "The glass is half full. Talk positively. And work with them on what your problems are, but don't say ‘this isn't any good.' Say what is good and what needs to be done."

I cite this as evidence that no matter how important this region is, the US-Russian relationship is bigger than it all, in my book. And the only way we can engage them in a constructive and positive way is when we go into regions like that and they do not think that we are trying to undermine their future. We have to try to convince them from a stability standpoint, from the fact that there is a benefit to be had from these countries being more prosperous, from trade and investment. So we keep repeating that, and keep trying to make sure that our policies, as in our two-line policy for early oil, and in our two-line or multiple-lines policy for the later and bigger pipelines, involve Russia in each case. And we have urged them to do things like that which we think are beneficial to them. It's just that we are also saying, "Let's have alternatives and let's have multiple rather than single choices."

But you have hit on something very, very important and that is that I think the bulk of the planners (National Security Council and the White House, State Department), without exception, view our relationship with the Russian Federation as the number one relationship that we have to maintain where it is good and improve where it is less good.

Question: On this question about the relations with Russia, can you give us just a brief picture of how the Western companies are involved in helping Russia and ex-Russian companies (or whatever you actually call them at this point) extract their own resources from within their own borders? There is an oil and gas situation there as well, and I do not have a picture of that.

Carter: The joint ventures have been working there for some time, trying to get an agreement where they can ship to world markets, not be taxed too much, and make a profit. The main ones have been CONOCO, Anderman Smith, Occidental, Phibro, and one or two others. They have been there the longest. They have exemptions; they are all in joint ventures with Russian companies; and they are all screaming all the time because they pay the taxes, which anybody who knows the Russians and the Russian tax systems knows only certain people pay. And they do not police that nonpayment enough, so there is a shortfall in revenues that causes them to raise taxes to get the needed revenue from those who do pay. So, they actually have people going over from Treasury explaining how we collect taxes and how you create an incentive for people to pay, and all that kind of business. But the US companies are partners in almost all those examples because that is the way the system is set up.

I have been to one joint venture. I mentioned how the rig is a standing lawsuit, and that is between Occidental and a local oil company -- they are trying to increase production, and Occidental gets paid as it increases. I thought that was a good example of a logical kind of joint venture; but unfortunately the tax system gets in the way, and Occidental is not able to make any money, so I am not sure how that is going to proceed. But I think all of these production-sharing agreements will involve the Russians and outside companies -- the Timan Pechora, which is a big one up north, the Sakhalins, which have already been approved -- all are with various Russian and foreign companies (Japanese, US, and others). So, almost all of the development involves multiple companies. And now, the emerging sort of semi-state-owned oil companies, like LUKoil, YUKOS, Rosneft and the others, are becoming very important players because they were given the assets, basically, and the management, and they are trying to do this as nearly-independent oil companies, and are doing it pretty successfully, Gazprom being the best example.

Question: If you are an American or Western oil company, given the politics, where would you go to launch a joint venture? Do you go to Kazakstan? Do you try to do this Caspian thing, or is Russia a safer bet? Also, is the oil in Russia itself more significant than in the Caspian Basin?

Carter: Probably, but it is very hard to recover because of the way they went around, kind of digging holes and screwing up the reservoirs and losing the ability to extract. And so, one of the main things that will need be to be done in Russia is to find appropriate recovery techniques. And we have tremendous technical resources that we are exploring with them, where they can use this technology with US companies and without them. To get more than 25% recovery from these huge oil fields will take some effort -- they are bigger than almost anything, but they just do not look like they are going to be able to reach the recovery rates.

It is a good question: where do we invest? Let us say that this was a board meeting of a new oil company. And as you can do these days, I guess, we have had an initial public offering and raised $500 million based on everybody's curriculum vitae. So, we have $500 million and we have some experts on geology for oil and gas. And we say: "Where do we go? Where do we invest?" And you look at the Caspian and you see the Chevron example: $800 million and no return. You look at the Russian example, taxed almost up to the top, and then you start looking at the other parts of the world. And our message to all of these countries is that there is competition for these investment dollars, and you need to put in a fair tax regime and to put in international arbitration and other kinds of predictable, stable, transparent procedures to allow people to invest and know they will get what they intended to get. Those kinds of systems have to be in place if you are going to win the competition.

I would say, generally speaking, that some of the newer areas, like Vietnam, might be more secure then those that are trying to wrestle with this change in an environment of weaning themselves from the mother, the mother not wanting to let the children go -- "I am still going to tell you what to do." They are having a lot of problems, and they did not rely on themselves, as I said at the very beginning. Vietnam seems to be working a little better, and companies are going there because they can kind of measure the return. Venezuela just opened their upstream. It is very expensive -- companies came in and paid the premium, but they can measure the return. And so, they are putting money in there and, in fact, I probably would have suggested that one of our investments go in the Apertura in Venezuela, because we could get some reserves and we could measure our return pretty predictably. For most of these companies, that is what they need. They need to have some reserves, and they need to measure their return with more predictability then you can get in some of these regions of the Caspian and Russia. And then you go to China and India -- who knows? So, I think, you are going to see a lot more investment going into this hemisphere then you will in Russia. If the Russians, after this election in June, start showing evidence of regulatory, legal and other kinds of framework reform, where they are encouraging investments and are leveling the field between the big domestic companies and the foreign companies, there is, according to one source, $60 billion in investment dollars waiting to flow into Russia.

And so, if you look at the Times this morning, and at the investment in various regions of the world, it is mind-boggling to think how these numbers would change. It is the World Bank comparison of investments in different parts of the world. Of course Asia, China particularly, is leading the way. This hemisphere is big. Russia and Central Asia are relatively small, compared to Asia, and China particularly. That number could go up by four times if they put in place some of these things that are necessary. And some of these problems in the Sea will be resolved, and you will find this money coming in. The $800 million that is in Tengiz is not being replicated by anybody else until they have a pipeline. Nobody is going to put their money in there until they know how they are going to get the oil out. It is the Chevron lesson; everybody cites it, and Chevron wishes it wasn't having to be cited.

Georgia and Russian Policy in the Caucasus
Ambassador William Courtney
July 26, 1996

William Courtney is the United States Ambassador to the Republic of Georgia. Before receiving his current appointment, he served as Ambassador to Kazakstan. His knowledge of the former Soviet Union extends well beyond the frontiers of Georgia, the Caucasus and Central Asia. He has also worked for many years in the Foreign Service. Since 1972 he has served in the US Embassy in Moscow, and beyond the former Soviet Union in Brasilia. He has worked on the National Security Council, and has served as a negotiator in many talks regarding strategic issues such as nuclear weapons. He graduated with a Ph.D. in Economics from Brown University. He has also been a Fellow at the Council on Foreign Relations, and is still a member of the Council.

Abstract

Ambassador Courtney began his talk by noting the remarkable progress which Georgia has made on the road to democracy and a market economy. If just four years ago some academics were referring to it as an example of a "failed nation-state," today it is one of probably only two states making very rapid progress toward these ideals (the other being Moldova). Georgia has eliminated its armed marauding gangs, and the only remaining vestige of its violent post-Soviet rebirth is the separatist movements in Abkhazia and South Ossetia, which are effectively semi-independent now. Georgia's November 1995 elections were the freest and fairest in the Caucasus and Central Asia, and its parliament is the most reformist in the former Soviet Union, starting even to privatize land. If in September 1994 its monthly inflation rate exceeded 60 percent, in October 1995 it introduced a new national currency, the lar, which is now more stable than the US dollar. In fact, the US expects to end its large-scale humanitarian assistance programs to Georgia in 1997, since the country is making such a great economic turnaround. Georgia has also made good use of its position along what it calls the "Eurasian Corridor." Now that Georgia has stabilized, it is able to open the first major trade route, most notably featuring a planned oil pipeline, that will run from Europe to Central Asia to China, bypassing Russia. This is particularly important for the export of Caspian Sea oil. Trade is burgeoning, with trucking routes, for example, growing quickly. Georgia is also the only state in the region that has managed to establish good relations with all of its neighbors. Georgia has even normalized relations with Russia, which had been sour due to the extreme nationalist orientation of the Gamsakhurdia regime. Georgia's main task now, Ambassador Courtney said, is to privatize its state assets faster so as to combat corruption and even organized crime. Georgia also needs to move ahead on law enforcement reform, since problems still seem to occur there, but the US thinks that Shevardnadze will probably do this. US-Georgian relations could not be better, and the US is heavily supporting Georgia's economic reforms. The Ambassador said that he believes a deal is even in the making to settle the Abkhazia conflict. In supporting the Abkhaz, Russia cut off one of only two rail links to the Caucasus region, and it lost the other one during the course of its war in Chechnya. As Russia sees the wave of trucks coming from Turkey and the increasing presence of US oil companies, it is getting frustrated and becoming more willing to make a deal. The Georgians, for their part, want Abkhazia back, and they will be in a better position to negotiate as their state improves both economically and in legitimacy due to democratic reforms. The Abkhaz themselves, it is now clear, understand that they will have to cut a deal and be part of Georgia.

Azerbaijan: Oil, Domestic Stability and Geopolitics in the Caucasus
Michael Ochs
March 4, 1996

Michael Ochs is Staff Advisor to the CSCE Commission of the US Congress, where he concentrates on Transcaucasia and Central Asia, as well as on Russia's relations with its neighbors. He was the Co-Coordinator of the OSCE/UN Joint Electoral Observation Mission in Azerbaijan from September 15 to December 1, 1995, representing the Office of Democratic Institutions and Human Rights (ODIHR). He has also observed elections in Azerbaijan in 1990 and 1992. He received his Ph.D. in Russian History from Harvard University.

Abstract

Dr. Michael Ochs examined politics in Azerbaijan since the parliamentary elections of 1995. He began with a discussion of the republic's recent political history. The conflict with the separatist enclave of Nagorno-Karabakh remains the dominant issue in Azerbaijan, distracting the latter's leaders from the state-building process. As a result, Azerbaijan has been the most unstable former Soviet republic. Moreover, the republic has been polarized between government and opposition, unlike the Baltic states where many people were simultaneously members of the Communist Party and the Popular Fronts. He then described Azerbaijan's parliamentary elections, which the OSCE dubbed Ňunfree and unfair." Ochs then turned to his main subject, politics in Azerbaijan after these elections. His main argument was that Aliev benefited tremendously from these elections, although in many respects they just reinforced what was already the case: that Aliev was far and away the dominant player on the Azerbaijani political landscape. He is head of government, head of state, and commander-in-chief of the armed forces, appoints all regional governors, and rules by decree. In these elections, he obtained a large majority in parliament, yet was able to quote a Council of Europe report to the effect that these problematic elections were at least Ňa step forward." While he can technically be impeached, this is practically impossible. In any case, few politicians dare to challenge Aliev, whose political skills, honed during his long tenure in the KGB, are unrivaled in the republic. Even the opposition tends to see in him the only likely guarantor of stability in the republic. He has systematically replaced elites from power centers like Baku and Gyandzha with cadres from his own native Nakhichevan. The opposition has been marginalized, obtaining only a few seats in the new parliament. The political system, however, is unlikely to survive Aliev, according to Ochs. Ochs proceeded to examine the Nagorno-Karabakh conflict. There has been a cease-fire (more or less observed) in effect since May 1994, and Russia's behavior at the January 1996 CIS summit suggests that it is ready to push for a settlement whereby the disputed region stays in Azerbaijan but has autonomous status. In addition, the new status given to the Azeri region of Nakhichevan, that of an Ň autonomous stateÓ within Azerbaijan, could prove to be a precedent for the settlement of the Nagorno-Karabakh conflict. Ochs concluded with a discussion of US-Azerbaijan relations. The US, he said, officially does not have a position on how ownership of the Caspian Sea and its oil resources should be structured, although it tacitly supports Azerbaijan's position that the sea should be divided rather than jointly owned. The US has also taken steps enabling it to increase the amount of aid it provides to the country. The US sees Aliev as the best guarantor of stability in Azerbaijan and the best way to develop economic and political relations with the new state.

Presentation

Ochs: Before I begin, I should explain what I did in Baku and how I got there. When I was in Baku in July 1995 for a brief visit, I had no expectation whatsoever that a couple of months later I would wind up back in Baku for a long-term project. In August 1995, the State Department called and asked whether I would be interested in representing the OSCE in a joint electoral observation project with the UN. It was the second such observation project, the first having been in Armenia in July. The third was in Kyrgyzstan in December 1995. Thus there seems to be developing a pattern of joint electoral observation between the OSCE and the UN.

What's most important about this is that once the UN got involved (not a foregone conclusion because of disappointments relating to the Armenian election), we had the highest level access that could have been imagined in the country through the person of the UN representative in Baku who had been there from 1992 to 1995. That is, because we had been invited by the president and the government of Azerbaijan, because they were interested in this project, we had frequent communication with Geidar Aliev, and with Rasul Guliev in particular, the two most powerful men in the country.

Thus, because of the UN's close involvement and its close working relationship with Geidar Aliev and Rasul Guliev, the leadership of the country was always very well informed about what we were thinking about the election, how it was going, and about what they could expect from us. I wanted to avoid all surprises and so did the UN. I say this because I had been in Kazakstan for the March 1994 parliamentary election, and I was present when the OSCE Parliamentary Assembly distributed its assessment of that election, declaring that it did not correspond to international standards. I was there to see the look on the faces of the Kazak diplomats, who had expected that they were going to get a clean bill of health, and saw how they were absolutely flabbergasted when it became clear that they were not going to get one.

That having been said, I don't actually plan to spend a lot of time talking about the election. I'm just going to give you a brief bit of background, talk to you a little bit about the election, and then discuss Azerbaijani politics after the election (that is, Geidar Aliev, the parliament, Nagorno-Karabakh, Russian-Azerbaijani relations, and US-Azerbaijani relations).

Since 1988, of course, Azerbaijan has been involved in a conflict over Nagorno-Karabakh. Both the military and public relations aspects of this conflict have gone badly for Azerbaijan. As a result, today about 20 percent of the country's territory is occupied. According to the UN High Commissioner for Refugees, there are about a million refugees and internally displaced people, and this conflict has distracted the leadership and society. In other words, that which other states in more stable circumstances might have gotten around to doing, in terms of state-building, institution-building, and the like, has been much more complicated in Azerbaijan. Moreover, the conflict has been a very powerful factor in the remarkable political instability in the country. I think it's fair to say that Azerbaijan has been the most unstable former Soviet republic, even more so than Georgia. When you consider that since 1990 you have had three essentially extra-constitutional changes of leadership, and that you have three people today who claim the presidency of Azerbaijan, this outdoes even Georgia.

In addition to this, all of these extra-constitutional changes of power have been accompanied by, to some degree or other, foreign intervention. The most blatant and flagrant of these instances took place in the June of 1993, when Surat Huseinov (at the time a warlord based in Gyandzha) made common cause with the local Russian military commander who up and left a year before the Russians were supposed to leave Azerbaijan and, according to all the accounts I've seen and heard, left all of his weapons to Huseinov who promptly mounted an armed rebellion. The second such instance was in the March of 1995. The first deputy foreign minister, Rovshan Dzhavadov, was involved in what the authorities described as an attempted coup d'état (which it may have been -- it's a complicated issue). Immediately after this coup was put down, the Turkish ambassador left in a hurry. Thus you will not find anyone in Azerbaijan who will tell you that the country's fate is decided exclusively in Azerbaijan.

Another thing that's worth pointing out as a backdrop to the election is that because of the Nagorno-Karabakh conflict's refugees, the economic decline, and the occupation of Azerbaijan's territory, the necessary state-building that I mentioned essentially has not taken place. Therefore a division of powers in Azerbaijan, though often proclaimed, essentially does not exist. In other words, the election was, from the very beginning, under the very heavy influence of the executive authorities.

Now I'll give a little background on government-opposition relations in Azerbaijan. If any of you either traveled to or followed the Baltic states in the late 1980s, you know that there was an interesting process of intermingling between the leaders of the Communist Party and the membership of the Popular Fronts that were formed at the time, and in some instances there was even coalescence. You may remember that in Estonia, Latvia and Lithuania, a lot of people were members simultaneously of both organizations, and this interaction lubricated the slide into what at the time was just embryonic electoral politics for these communist leaders, many of whom went on to become elected.

In Azerbaijan none of this took place. There was never any close interaction between government forces and the opposition. I'm not saying that there wasn't negotiation between them, sometimes overt, sometimes covert. I'm talking about institutional merging. This did not take place, and therefore when the Popular Front in Baku seemed in 1989 to pose a very serious threat to the Communist regime at the time, Moscow (in the person of Mikhail Gorbachev) proved willing to do in Baku what it was never willing to do in Vilnius -- it sent in the Army to keep a Communist regime in power.

From the perspective of domestic politics, this means that there has been a tradition in Azerbaijan of extremely polarized politics. The sort of easy interaction between Communist leaders and the opposition that was characteristic of the Baltic states in the 1980s is not at all characteristic of Azerbaijan. The one exception -- and he's not a real exception -- to this might be Etibar Mamedov who is the chairman of the National Independence Party. He's not a real exception to this general statement because he negotiates with the authorities; he is not part of the authorities and they are not part of him. (He negotiates actually quite badly with the authorities, but that's a different matter.)

As a result of this very polarized atmosphere between government and opposition in Azerbaijan, the lead-up to the election was polarized, characterized by extreme mutual distrust. Both sides had the worst possible expectations regarding the other, and not undeservedly. This was the drama of the election, because it wasn't clear who was going to be allowed to take part in the election.

Now, with that as a backdrop, what was this election supposed to do? From the government's perspective, from Geidar Aliev's perspective, the mandate of the previously elected parliament had lapsed. There was a parliamentary election in 1990 and that parliament's mandate was up. So you would think it was obvious that you had to hold a new election. It was not an obvious thing, however, because the authorities often said that given the objective circumstances they were in, given that the territory was occupied, that there were so many refugees and the like, they should get a lot of credit for holding elections. What really was involved here was an attempt on the part of the authorities to create what might be called viable and legitimate structures of government which did not exist, essentially. The parliament that was functioning up to that time was a sort of ad hoc body that had no real constitutional basis, nor could it have had one because no Constitution had been adopted after Azerbaijan's declaration of independence.

From the perspective of the international community, the invitations to the UN and to the OSCE and to many other international observers (invitations that were made bilaterally through the parliament) were obviously designed to get international legitimacy as well as the domestic legitimacy that the creation of these viable structures and permanent structures would and should have brought. From the opposition's perspective, the elections offered a chance to get back into politics, from which they had been largely excluded.

Now I'd like to spend a couple of minutes on the election. Azerbaijan's new parliament has 125 seats; 25 are distributed proportionally among the political parties, and 100 were contested in 100 electoral districts. A few points about the electoral law are worth making, and I'll give you a basis for comparison here with Armenia and Georgia. The law created extremely harsh requirements for participation. I wouldn't say they were prohibitive, but they were very high hurdles. Let me give you an example. The ratio of the population of Armenia to that of Georgia is about 1:2. In Armenia, for an individual candidate to run in July 1995, she or he needed to gather 500 signatures. In Azerbaijan, with a population about twice the size, candidates needed 2000; in other words, four times as many. In Armenia, a political party could field a party list with 10,000 signatures. In Azerbaijan, with twice the population, they needed 50,000, in other words five times as many. In addition, in Armenia, five percent national representation was enough to get you into Parliament. In Azerbaijan, you needed eight percent.

Georgia is a very interesting anomaly here, because with a population of something over five million, political parties also needed 50,000 signatures. However, in Georgia, it being a typically Georgian election, there were 54 parties participating. Now it's true that about 27 of them didn't need to gather the 50,000 signatures because they were already in Parliament and the Georgian parliamentary electoral law stipulated that if you were already in Parliament, you didn't need to go through the process again. Nevertheless, that means that we are talking about another 30 parties that managed to gather 50,000 signatures.

At the same time that the Azerbaijani law mandated very harsh requirements for participation, it mandated that very high voter turnout was necessary for the election to be valid. In Armenia, only 25% participation was necessary, as, for example, in Russia's parliamentary elections. In Azerbaijan they needed a 50% turnout. So the law placed both political parties and candidates in a difficult situation. It was difficult for them to participate, and at the same time it put an awful lot of pressure on electoral authorities to see to it that the election would be valid, given the high turnout requirements.

What happened eventually is that out of approximately 1,000 candidates who tried to run, about 60 percent were eliminated on the grounds that their signatures were invalid due to a very questionable process of signature verification. The signature sheet is a big sheet of paper with voters' names, addresses, information, etc., and at the end of it there is a signature. Since the law specified no methodology for the verification of signatures, what they did was to get "handwriting experts" from the Ministry of Justice, and a couple from the Ministry of Internal Affairs, who claimed to be able, literally on the basis of a purely visual examination, to say, "this is a good signature," "this is a bad signature," "this is a forgery," "three people wrote this one," etc. On this basis, 60 percent of the individual candidates were excluded, as well as four of the twelve parties that tried to field party lists.

I have to say, having seen an awful lot of these signature lists, that there were times when the Central Electoral Commission had a point. I saw many signatures that looked suspect even to my untrained Western eye. I don't know whether you've ever tried to look at signatures of Americans and decide whether these are actual, real signatures. It is very difficult to do in Azerbaijan, where, for example, you don't know in what language the people are actually writing (they could be doing it in Russian; it could be Azeri; and the alphabets have changed). In any event, on the basis of this methodology, quite a lot of candidates were excluded, and one third of the political parties.

Of the parties that remained, most were pro-Aliev; there was one strongly oppositionist party, the Popular Front, and one moderate opposition party, the National Independence Party. Musavat, an opposition party closely allied with the Popular Front, was excluded in the most controversial decision of this election. All four parties that were excluded appealed to the Supreme Court. The Supreme Court turned down all of the appeals.

Let me give you a little more comparative information concerning Armenia and Georgia. In the November election which took place in Georgia one week before the election in Azerbaijan, there were 38 appeals to the Supreme Court. The Supreme Court heard 32 of them and registered 17. In Armenia, of the appeals that were made to the Supreme Court protesting exclusion, in not one instance did that Supreme Court overturn the ruling of the Central Election Commission that excluded particular people or parties from the electoral process. In Azerbaijan, not one of the parties that appealed was reregistered, and in only 2 cases of individual candidates' appeals, according to the chairman of the Supreme Court, was the exclusion overturned.

Let me now turn quickly to the results of the election. I'm not going to get into the voting day problems, but there were very serious problems on voting day, as a result of which our mission decided that the elections did not meet international norms for free and fair elections. The OSCE Parliamentary Assembly, which had characterized the Armenian election in July as "free but not fair," characterized the Azerbaijani election as "neither free nor fair." In other words, of the three Transcaucasian countries, Azerbaijan got the worst grade. I want to stress at this point what I said at the beginning, which is that the authorities (I have in mind President Aliev and Rasul Guliev) were throughout aware of all of the concerns of the international monitors since we met with them frequently and told them. They knew that this was coming. You can draw your own conclusions as to what that means.

Where do we stand today after this election? Let's start with Geidar Aliev. Geidar Aliev stands pretty tall after this election. In the first place, from his perspective, nothing bad happened. Now, you could argue that having an election that is deemed "neither free nor fair" is a bad thing. But the fact is that having international observers characterize your elections as "neither free nor fair" or something like that doesn't really mean very much. If you look at the comparative spin control that was performed in Kazakstan in 1994 (I'm leaving Uzbekistan and Turkmenistan and Tajikistan off the continuum entirely), Armenia in 1995, and now Azerbaijan, it is evident that these governments have basically come to realize that if you get a bad grade from the international community as far as the election goes, it is not so terrible. They understood this all along, of course, but now it's very clear.

This was really the only bad thing that happened, and Geidar Aliev played it very well. On November 24, at the first session of the new parliament, he got up and said: "Look, I understand that there were problems with this election. Anyone who thinks that there might have been an absolutely fair election doesn't understand anything. But, on the basis of what we've done and what we've accomplished, it is a step forward." And here he had the opportunity to use the assessment of the Council of Europe which gave him what he needed, that is, what happened in Azerbaijan was "a step forward." So this is a very small minus, and here I am about to give you a bunch of very powerful pluses.

What does Aliev get after this election? Let's start first with the Constitution. There is a general tendency throughout the former Soviet Union toward strong executive power and weak parliaments. This is very much the case in Azerbaijan, with one important qualification, and I'll get to it when I talk about the parliament. Geidar Aliev is the head of government, the head of state, and the commander in chief of the Armed Forces. He appoints all the regional governors; they are not elected. He can rule by decree. He can declare a state of emergency. He can declare martial law. He appoints the justices to the not-yet-formed Constitutional Court which is supposed to be the organ that will rule on the constitutionality of laws and government actions. Further, you may know that Azerbaijan, like any number of other former Soviet Republics, has a law that criminalizes words or actions that insult the honor and dignity of the president. This law has, in fact, been used in Azerbaijan. When I showed up in September, a bunch of journalists had been in jail since March for a silly cartoon which apparently offended Aliev. They were amnestied shortly before the election. Nevertheless, that law is on the books and now has been strengthened by a constitutional provision. It says in the Constitution that the honor and dignity of the President shall be protected. As it now stands, Geidar Aliev, or any president of Azerbaijan, can be impeached, but you would need to get 95 of the 125 members of the Parliament to go along. (You should know, incidentally, that among the members of Parliament are: Geidar Aliev's son, Geidar Aliev's son-in-law and Geidar Aliev's brother. Those are just immediate family, and I understand that there are a bunch of somewhat more extended relatives.)

As far as the Parliament goes, Geidar Aliev has now done what Eduard Shevardnadze has done in Georgia, and Levon Ter-Petrosian has done in Armenia. That is, he has established his party, New Azerbaijan, as the ruling party formally. That is, they have a large majority in Parliament. Thus he stands on the same level as his counterparts and can hold his head essentially on the same level. I am not saying that this is the reason the election turned out this way, but it is not an unimportant point.

What kind of role does Aliev play in this political system? Yesterday, I happened to be looking at David Remnick's book, Lenin's Tomb, and he describes what Aliev did for Brezhnev when Brezhnev came to Baku. Remnick describes a ring that Geidar Aliev had made up for Brezhnev; it had a star in the middle and 15 stars all around. In other words, it represented the Sun King and all of his minions gravitating towards the center of the universe. Well, I do not want to make such a florid analogy for Geidar Aliev, but he is sort of the fulcrum of this political system and its bulwark in a number of respects.

I mean that his having obtained all of this constitutional power, his having established his party as the ruling party, confirms and strengthens what essentially had been de facto the case, namely, his preeminence in Azerbaijan's political system. Moreover, he has a unique persona and CV, and that means, among other things, that people are afraid of Geidar Aliev in a way that they will not be afraid of anyone who comes to power after him. In fact, I do not see the political system currently being formed as one that can survive Aliev. Aliev is the necessary anchor of political stability at the moment both because of his reputation for skill in bureaucratic infighting, and because, to a certain extent, he also represents what Ned Keenan (Professor Edward Keenan of Harvard's History Department, from whom I took courses here many, many years ago), when talking about Ivan Grozny, describes as a "conspiracy against chaos." This means that among would-be rivals, the struggle is muted. No one is interested at present, at least as far as I can tell, in getting rid of Geidar Aliev within the country. I am not talking about individual plotters who may be involved with foreign governments. I am talking about people who are in Azerbaijan's political elite. Moreover, I do not think anyone expects that they would be successful even if they tried. He is much better at this game than they are. He is, after all, a Major General in the KGB. In addition to this, they are afraid. Everyone, even people in Musavat and in the Popular Front who hate Aliev, is afraid that if he were not around, there would be a civil war or serious chaos. So while they resent greatly his primacy, in a sense they are glad to have him around because he provides an element of predictability and stability which has long been absent in Azerbaijan and which everyone wants. In addition, Aliev has now installed his own supporters throughout the country in local positions and, incidentally, local elections will be coming up fairly soon, or so I am told. They will give Aliev a chance to strengthen his position even more.

Let me turn to the opposition, in particular, the Popular Front and Musavat. They, as I say, deeply resent Aliev's return to power, and essentially see his tenure in office as a great injustice. I'll talk about their position a little bit. First, and most interesting, is the situation regarding regional politics. Geidar Aliev is himself from the region of Nakhichevan. Originally his family is from Armenia, and there is a group of politicians in Azerbaijan who are called "Yerazeris" -- that is, they came from Yerevan, Armenia, to Nakhichevan, and these are the people closest to Geidar Aliev. People from other power centers in Azerbaijan, like Gyandzha or Baku, are largely out of the political game. This I knew before I went to Azerbaijan; what was interesting in Baku was to find out that even on a very local level, even in institutions, essentially there have been purges. For example, I met a woman who told me that her husband worked in a hospital, and the director of the hospital had been replaced by a Nakhichevani. I don't know where this is going to lead, but it is important to keep in mind that those who are not Nakhichevanis, those who are not favored in terms of regional appointments and politics, are, like those who are out of the political game for reasons of political affiliation, also deeply resentful of Aliev. That's not to say that they are in a position to act on this. That's not to say that they are in a position to get rid of him or to cause serious trouble. But it is a weak point of the system.

In addition, the entire political system is based on personalized politics. Institutions are very weakly developed, and to the extent that anything works, well, there are powerful people in the country and they can get things done. It's not as if officials in a ministry can make things work. In fact, because of Aliev's reputation, because of the fact that the people are afraid of him, even ministers will not make any sort of decision, if they think it's important, without checking with the guy at the top. It remains to be seen whether Aliev will pursue, or is at all interested in pursuing, the creation of the stable structures and institutions that will be critical to Azerbaijan's democratic statehood.

Now I'll turn to Aliev himself. In a couple of months, he is going to be 73; but I can vouch for his mental sharpness. I can also vouch for his physical endurance. On the day that Musavat and the Communist Party and several other parties were excluded by the Central Election Commission, we went to see him. He called the meeting. We had expected an hour-long meeting with Aliev. We showed up at the presidential building at 6:00, and we left at 10:30. He never moved from the table; he barely shifted position. Those of us on the other side of the table, who were twenty, thirty, and forty years younger than he, were dying, I can tell you. So he seems to be really in quite good physical condition. Nevertheless, he has had a couple of heart attacks, and he works a punishing schedule.

The Constitution has a mechanism worked out for succession. That is, if Aliev were unable to continue in office, the speaker of the parliament would become the acting president, as in the Russian Constitution, and he would have to call elections within three months.

Let's turn to the Parliament. I only want to say a couple of words about this, because politics in Azerbaijan is not going to develop in the way that, for example, Russian politics developed between 1991 and 1993 (that is, a battle between the executive and legislative branches over issues, power, personalities, etc.). This a different kind of system. The most important thing about this parliament, first of all, is that it will be a very supportive parliament for Aliev. But more important is the fact that the Speaker of the Parliament was reelected unopposed on the first and only ballot on November 24. That is, Rasul Guliev, who had been speaker of the previous parliament, is now speaker again. This was interesting because Rasul had given any number of interviews before this in which he had said: "Well, I don't really want to be Speaker." Rumors were flying around Baku that Aliev was not going to seek his reappointment, and that he in fact had come up with a replacement for him, namely his chief of staff. Nevertheless, Rasul Guliev is back as Speaker, which fact confirms and affirms again that he is the number two guy in Azerbaijan, someone who has to be reckoned with, someone whose interests Aliev must accommodate.

Why don't we move from here to four issues. Let's start with government-opposition relations. Where does the Popular Front, where does Musavat stand today, as far as relations with the government go? It is not hard to conclude, on the basis of what happened in an election that was so heavily influenced by the authorities, that the latter never had any intention of creating what might be called a forum for political competition with clear rules of the game in which all of the parties could participate. The Popular Front and Musavat have described the elections as unfair, undemocratic, illegitimate, have rejected their legitimacy and have called for new elections. There is no chance of that, unless something really extraordinary happens. They are in more or less the same position as after the 1990 elections. Essentially, they are marginalized and do not have much of a role in the political process. From the results of the party voting, in other words, of the 25 seats of Parliament for which political parties could contend, the Popular Front wound up with three seats, Etibar Mamedov's party wound up with three, and Musavat, as I said, had been excluded and was not allowed to field a party list, so they are out entirely.

I don't have the results of the February 4 repeat voting; I heard that one Musavat guy has made it into the Parliament. But think about what this means: a party that, when I showed up in Baku in September, first, was widely respected, and second, was widely thought to be one of the leading parties in the country, has one person in a 125-seat Parliament, if in fact that one person got in. It's hard, therefore, not to conclude, at least as far as Musavat goes, that there was an intention on the part of powerful individuals or parties to remove them from the political process. To some extent you could argue that Musavat played the role that the Dashnaks played in Armenia.

Now how does this affect relations between the Popular Front and Musavat? (Incidentally, I don't imagine you get Zerkalo here -- Zerkalo is probably the best newspaper in Azerbaijan. It comes out on Saturdays in Russian and Azeri editions. It's not a party newspaper, and it's really quite interesting.) On November 25, Isa Gambar, who is the chairman of Musavat, gave an interview. I have seen the translation since then in FBIS, so if you come across it I recommend it to you. In it, he talks about relations between Musavat and the Popular front. These are allied parties, both in terms of program, doctrine, etc. Moreover, there are very close personal relations among all the leaders of these parties. Ali Karimov in the Popular front and Isa Gambar, Asim Molla-Zade -- all of these people are old friends; but they are nevertheless at the same time representing competing political parties. I expect the following process to take place: the consolidation and merger of small political parties, of which there are many in Azerbaijan, with some larger party which is more successful electorally, it would seem. In such a process, the Popular Front, which rather surprisingly found itself in the parliament, may be in a better competitive position than Musavat. After all, the Popular Front has representation, Musavat does not. The parliament has a five-year tenure, and if you are a politician and want to have some influence, you have to make a choice about whether you are going to go with the party that seems to be out of Parliament and out of decision-making for five years, or whether you are going to go with the Popular Front.

Now I'd like to speak about these two opposition parties in general. Despite their having characterized the elections as illegitimate, unfair, undemocratic and so on, they nevertheless fielded candidates in the February 4 repeat elections. What does this mean? It means that essentially they are demonstrating to Aliev, to Azerbaijani society and to all of us that they understood that they had no options and no choice. In other words, Geidar Aliev makes all the rules in this game. Even though they reject the process as unfair, they take part in it; and by their very participation, they validate the process. Moreover, by being forced into this position, they reveal themselves to Azerbaijan and everyone else as weak actors. What Geidar Aliev is going to do with these parties is also unclear and remains to be seen.

Turning to the Nagorno-Karabakh conflict, you probably know that there has been a cease-fire since May 1994. For the most part, it is holding, though it is violated on a fairly regular, if occasional, basis. This is interesting in itself, because it means that the situation before 1994, when the authorities in both capitals (well, in three capitals if we include Karabakh) did not necessarily control the people who had guns, is no longer the same. In addition, we now have a situation in which the leaders of the three parties to the conflict appear very much interested in coming to some sort of resolution.

The most important recent event in the Karabakh conflict was the CIS summit in January, when some very interesting things happened. First, sanctions were introduced on Abkhazia. In fact, the Abkhaz question was one of the most important questions addressed at this summit. Second, Boris Yeltsin ordered newly appointed Foreign Minister Yevgenii Primakov to "step up" Russian diplomacy in the Karabakh conflict. Even before the summit, and even before Primakov's appointment, Vladimir Kazimirov, the Russian negotiator in the Karabakh conflict, had already been announcing new Russian initiatives and proposals. Thus it seems that, at the end of 1995 or the beginning of 1996, it had been decided that Russia was going to become more involved. We'll get to what this might mean in a moment.

The most concrete and interesting thing relating to Karabakh that was done or said at the CIS summit was a remark by Boris Yeltsin. In it, he said something like this, according to an FBIS account: "The best Karabakh can get is autonomous republic status." And then, being Yeltsin, he said something like: "What more do they want? They want to be like the United States?"

I understand from people who have recently come back from the region that people in Baku are very pleased about all of this. People in Yerevan are unhappy. On the basis of what Yeltsin said and on the basis of what was done and said with Abkhazia, people seem to have concluded that Moscow has decided, after its disastrous involvement in Chechnya, that it is better to back away from separatist movements and to be much more serious about territorial integrity. The funny thing about this, though, is that I am not aware of any Russian government, as opposed to the Russian Duma or individual Russian legislators, that has ever said anything other than "We respect the territorial integrity of the former Soviet republics." Now, it is true that they have not yet signed a treaty with Ukraine. It is also true that Andrei Kozyrev in the June of 1993 gave an interview to Le Monde in which he talked about the possibility of holding referenda in areas where people might not want to be part of those new republics. Nevertheless, I have never seen any government official outside of Moscow talk about anything that would place in doubt Russia's commitment to the territorial integrity of its neighbors, regardless of the fact that, at the same time, things were going on, especially in Georgia and in Azerbaijan, which would indicate that they had no intention whatsoever of respecting the territorial integrity of their neighbors. Therefore, I would submit that, rather than get very excited about the apparent reinforced commitment to territorial integrity on part of Moscow, we should be a little more cautious here.

Much more interesting in what Yeltsin said, it seems to me, was his comment that: "The best they can hope for is autonomous republic status." Now this is interesting, because the status of Karabakh is not an issue, according to the OSCE Minsk Group rules, for any of the individual members of the Minsk Group to discuss. This is a Minsk Group discussion. And I'm not aware of any other government that is involved in the Minsk Group that has made any public statements about what the future limits of Karabakh's status might be. I do not know exactly what that means. It could be that maybe someone gave Yeltsin bad talking points, that maybe Yeltsin did not like the talking points, that maybe he made an impulsive remark. But let's assume that there is a certain reason for what he said. What kind of deal might be in the works and what are the problems with this deal?

You're going to have Joe Presel up here at some point, are you not? Ambassador Joe Presel is the US negotiator in Karabakh. He gave a talk in Washington a couple of weeks ago, and basically, the sort of deal that he thinks most people see coming is a deal that would maintain, de jure, Azerbaijan's territorial integrity and give Karabakh some sort of autonomous status. There will be the corridor that exists now (the Lachin corridor between Karabakh and Armenia), and maybe some sort of divided control of Shusha; but it's not clear yet. In any event, the general idea is that de jure and nominally Azerbaijan will maintain its territorial integrity.

This is not necessarily the view of any of the parties, except for Azerbaijan, whose bottom line is that no Azerbaijani government can make a deal that would give up sovereignty over Karabakh and in any way violate the current territorial integrity of the country. Incidentally, the constitution affirms the country's territorial integrity, describes it as a unitary state and, in fact, does not even mention Nagorno-Karabakh. Everything else, as far as I can see, from Baku's point of view, is negotiable. But not territorial integrity.

Here we come upon an interesting possibility, because if you've read Azerbaijan's constitution, you will come to a section that discusses the new status of Nakhichevan which is the "exclave" separated from the rest of Azerbaijan by Armenia. Nakhichevan used to be an autonomous republic. It is now "an autonomous state" within the borders of Azerbaijan. This was a very controversial provision in the new constitution. Musavat, for example, and Etibar Mamedov's Party of National Independence were very much against this. They were afraid, first of all, that creating this sort of status for Nakhichevan could lead to the ultimate federalization of the country. Second, they were afraid of precisely this, that it would create a precedent for the status of Karabakh which they didn't like. I saw an interview in Zerkalo with one of the guys who drafted the constitution. He acknowledged at a press-conference that this might be an option.

Here is a quick bit of information on what Nakhichevan has, what sort of prerogatives it has, according to the new constitution. It has its own parliament, its own cabinet, its own constitution, although this constitution can't contradict Azerbaijan's constitution. It has no president, which Robert Kocharian, the leader of Nagorno-Karabakh, will not find very palatable. And most of the rights it has deal with socio-economic questions and environmental questions, taxes, etc. It does not have foreign policy prerogatives, and it certainly has no armed forces.

I do not know whether the Nakhichevan formula will be or would be a precedent, because I am not sure that Baku is planning to offer this to Karabakh in the negotiations. Nevertheless, it is there on the table, and everyone knows it. Thus it is something that they can offer above what they have been offering for several years, which is cultural autonomy, what the previous Elchibey government in Azerbaijan was offering. It is more than autonomous republic status. So, if you want to play a game of names in terms of sovereignty ("we're not giving you the old names, we are giving you a new name"), here is one option.

I want to be sure to make this point: if there is going to be a deal on Karabakh, if we take seriously the notion that Russia is more interested in a deal now than it was before, we run into questions of election deadlines. As you all know, Russia is holding a presidential election in June; but Armenia is also holding a presidential election, in September. If they come up with a deal that Boris Yeltsin thinks might enhance his prospects (although I don't think that foreign policy in general is going to play a role in the election -- certainly not an issue like Karabakh, where Russian soldiers aren't dying), if they can cut a deal that will make Russia look good, then it would seem to me that Boris Yeltsin would want very much to have this before the June election. By "making Russia look good," I mean the following: that Moscow is seen as the deal-maker, or at least that it gets the credit for being the deal-maker; that CIS forces, which would mostly be Russian forces, predominate in any international peacekeeping; and if Moscow can get what they have been trying to get in Azerbaijan for some time: military bases, joint border controls, and a common air defense system. On the other hand, if this is a deal which for some reason is not very palatable in Armenia, then I would think that Levon Ter-Petrosian would prefer to have it concluded after the September election. Thus we could come up against a sort of conflict of interest here.

One quick thing. Up until now Aliev has been resisting very strenuously Russian demands for the kind of security guarantees and physical assets in the country that Moscow has been wanting. That does not mean necessarily that if a deal could be cut on Karabakh, he would continue to resist. I am not saying that he is going to make a deal with Primakov; but he may. And in that connection, it's worth pointing out that Azerbaijan's new constitution does not explicitly bar foreign military bases.

I'll now move on to the last topic, which is US-Azerbaijan relations. I assume that most of you are familiar with the Caspian Sea controversy, that is, the dispute about the legal status of the Caspian Sea. You know that Russia's Foreign Ministry has contested Azerbaijan's right to dispose of the resources in its "sector of the Sea." Russia's Foreign Ministry does not accept that the Sea has been divided into sectors, or that it can be or should be. Washington has not adopted a public position on the status of the Caspian Sea. American oil companies, however, are involved in all of these deals, and Bill Clinton called Geidar Aliev in early October, several days before the October 9, 1995 decision on the dual pipelines, expressing support for a multiple pipeline solution to the problem. In other words, even though no one at the State Department will tell you this, essentially, and tacitly, the US government has come out on Azerbaijan's side in this controversy. After all, our oil companies are already there, and we are on record as favoring a multiple pipeline solution. If you call them on this, what they will say is: "Well, what we mean by this is once agreement is reached on the status of the Caspian Sea, we favor multiple pipelines." But I leave you to draw your own inferences on what the US position is.

In other words, US oil company involvement in Azerbaijan -- and indeed growing involvement, considering that Mobil and Chevron are now getting into the act -- has obviously accentuated the geostrategic and economic importance of US-Azerbaijan relations.

In this connection, you may also know that in October 1992, the Freedom Support Act was passed in Congress. Section 907 forbids direct US government-to-government assistance to Azerbaijan. The language reads something like this: until Azerbaijan's blockade of Armenia is lifted and until Azerbaijan ceases all aggressive action and "improves its human rights record," Washington is not allowed to send any official assistance to the government of Azerbaijan. Washington can, however, send humanitarian assistance or other assistance not through the Azerbaijan government, but through NGOs. According to Senator Mitch McConnell, who has recently sent a letter to Warren Christopher about this, we have sent $80 million over the last several years to Baku for distribution through NGOs.

The new Foreign Aid Bill, which President Clinton signed in January, now enables the president to send direct government-to-government aid to Baku for humanitarian purposes if he decides that existing arrangements, that is NGO arrangements, are inadequate to deliver this aid. In other words, along with the US government -- the Bush and Clinton administrations were always against Section 907 -- the US Congress has now diluted the implementation of Section 907 of the 1992 Freedom Support Act.

In this respect, if you compare the post-election statement that was read over at the State Department after the Azerbaijani election to the post-election statement that was read in July after the Armenian election, you will see that they are remarkably similar. In fact, some of the sentences were literally lifted out of the earlier document. In other words, it's pretty clear that the executive, and to a somewhat different degree the legislative, branches are trying to treat Armenia and Azerbaijan as equally as possible under the influence, and growing influence, of oil and its strategic implications, especially in an American presidential election year.

Now, what that means to me (and I'll end on this and open the floor to discussion), is that Washington sees Geidar Aliev as the best guarantor, at least at the moment, of stability in Azerbaijan, as the best way to develop US-Azerbaijan economic and political relations.

Discussion

Question: You said that you kept Aliev very well informed as to what your thinking was during the election; but you never told us what his reactions were. How do you think he felt personally about your statement that the elections were not fair and not free? I also wonder if you could comment on the problems surrounding the verification of signatures during the elections. Is this usual? How is it done in other places?

Ochs: Let me start with the actual methodology of verification of signatures. In the United States, practically every state apparently has its own rules for these things. It turns out that as a general rule, in the US, when you have an election or a referendum, signatures that are gathered are not challenged unless a specific challenge comes up, in which case they find the people in question and they check it out. What happened in Azerbaijan is, as I said, they had six or seven "experts" from the Ministry of Justice and at least two people (they always told us one, but I later found out that it was two) from the Ministry of Internal Affairs, in other words, the police. They did not, as a rule, go and check with people on whether they had signed.

Thus, when the whole thing exploded as a powerful issue, the joint OSCE/UN operation called the electoral assistance division of the UN, which suggested spot-checking for the excluded political parties and, to the extent possible, candidates. So I and my counterpart from the UN got signature lists from the four excluded parties, and spot-checked excluded signatures. The most interesting, revealing, and controversial results took place with Musavat's spot-checking. We went to the office of the Chairman of the Supreme Court and they brought all of the signatures, some 53 thousand signatures in boxes, and with the participation of the chairman of the Supreme Court and a Musavat representative, we picked a couple of sheets of signatures. What the guys who had allegedly verified the authenticity of the signatures would do is to mark off a whole bunch

Question: You said of signatures and say: "These are all no-good signatures." Since we had very little time, it could only be done in Baku. So we found thirteen people whose signatures had been excluded. All thirteen people confirmed having signed for Musavat. In one case we found an elderly woman who acknowledged to us that her granddaughter, who was present in the room at the time, had signed for her because she was illiterate. Obviously, it's not the most scientific methodology; but you do the best you can in a very short period of time, and this was just a spot-check to begin with. But the spot-checking confirmed all of our doubts about the entire methodology.

Moreover, I didn't get into what happened on election day. The election law forbade people, when gathering signatures, to sign for anyone else. And during voting, the election law forbade anyone to vote on behalf of anyone else. But the authorities implemented very rigorously the strictures on signing for someone else; but they did not implement at all the prohibition on voting on behalf of anyone else. So they wound up exploiting, by inconsistent application, the law in order to exclude inconvenient parties; but they let everyone vote for family members on election day so that they could meet that minimum 50-percent required turnout, so that the election would be valid and the Constitution would pass.

Aliev was told about all of this, as was Rasul Guliev, as was Jafar Veliev, the chairman of the Central Election Commission. They defended the methodology. Although Aliev and Guliev and everyone else agreed to the spot-checking, in fact, they claimed to have done their own spot-checking on Musavat. During the Supreme Court hearings on Musavat, which I and others in the international diplomatic community attended from the beginning to the end, they defended their methodology and approach very unconvincingly. It was actually sort of embarrassing. But they claimed to have done their own spot-checking in various regions; they claimed to have received a huge wave of spontaneous telegrams from people claiming: "I never have signed for Musavat. How did my name wind up on this list?" And when the decision was eventually read out by the judge with television cameras all present, he was reading some of these telegrams.

Let me give you some background. In July, after leaving Armenia I came to Baku and I talked to very high-level government officials about the Armenian election and what had gone wrong with it. One of them listened very carefully and then said: "All right, so what's going to happen to them now?" I said: "What do you mean?" "Well, Armenia has just run unfair elections -- what's going to happen to them?" "Well, you know, their image is different from what it used to be..." He said, "Look, don't give me that. What's going to happen to them?" I started talking about image again, and he said: "I understand you to have told me the following: Armenia just ran unfair elections, and there are not going to be any sanctions, no cut in aid, no disgrace, no dishonor, no consequences." I can't say for sure, but it's impossible to escape the conclusion that this approach influenced the Azerbaijani government's attitude toward the elections.

In March 1994, after the OSCE said that Kazakstan's election did not conform to international standards, President Nursultan Nazarbaev resorted to an interesting "dual spin control" approach. First of all, the Kazakstani officials were shocked. They had no idea this was coming, and so they had to recover very quickly. Nazarbaev said: "Of course, these were good elections." And he dragged out the French, who said: "we disassociate ourselves from the OSCE Parliamentary Assembly assessment; we think these were fine elections." But then at the same time, he would go on television a day later and say: "What do you expect from us? How could we possibly hold good elections? You know, given our circumstances, we are a new country," etc.

Aliev played this, as I said, really quite well and the only way he could. He said in Parliament that these were not perfect elections, they could not have been, but as the Council of Europe said, they were "a step on the road." Moreover, he had previously given himself a way out, as well, blaming everything on executive authorities in the regions. At one of our meetings, Aliev said: (this is all on television the next day and all over newspapers) "I give the strictest orders to all the executive authorities throughout the country not to interfere in the electoral process," because this was the nature of many of the complaints we had been getting, "and in no way to influence on behalf of any individual candidates or parties anything else." In other words, before our assessment was made public, he left himself an out: "I have called for free and fair elections and if this is not what happened, it is the fault of local authorities." Once the assessment came in, he said: "Well, we did the best we could. 20 percent of the country is occupied, and we have all these refugees. It is a step forward. We are on the road to democracy." This has been the general line since then.

Question: I would like to return to the oil issue. Could you give us a little background on this dual pipelines issue, where they run, when they're expected to be functional? And what are the implications of this two-pipeline system for players' abilities to impose sanctions in the future by shutting off oil in some way? Who could do that sort of thing?

Ochs: Basically, it comes down to this: the deals that have been made with the oil companies relate to two separate oil flows. One is the "early oil," and the other is called the "later oil." The deal that was made on October 9, 1995, the announcement that was made on the basis of talks between Azerbaijan's Government and the AIOC, the oil consortium, calls for a dual-pipeline solution for the early oil.

There are two routes: the northern route and the western route. The northern route goes from Baku up through Chechnya to Novorossiisk. The Western route is supposed to go through Georgia to the port of Supsa, at least this is the understanding right now, and from there it will go to Turkey.

The timetables. It was originally thought that the early oil was going to start flowing in 1996, by the end of this year. About a week and a half ago the AMOCO people were in Washington and they told me that everything has been pushed back another year. Thus the early oil probably won't flow until 1997, not 1996. This is important for a number of reasons. First of all, to the extent that Baku, in a very difficult economic situation, is hoping for revenues, they have longer and longer to wait.

The early oil is supposed to go through both pipelines. It is a dual solution. In January, Aliev was in Moscow for the CIS Summit and he signed a deal with Viktor Chernomyrdin, essentially finalizing the details of that northern route. My understanding was that the Turks were supposed to finalize the deal on the western route in February. I am not sure that it was done; but they pledged $230 million or $240 million for the construction of the pipeline. The northern route requires much less initial investment because the pipeline already exists. What they have to do is build it up and reverse some of the flow. As for the pipeline in Georgia, sections of it have to be built and it's going to be more expensive.

In terms of sanctions and insurance policies. Look -- Geidar Aliev has to deal with Moscow, and essentially has to placate Moscow. And even if you aren't motivated by the desire to see to it that Russia is not so angry at you for cutting them out of the deal and the transit fields and everything else that they might do some very nasty things, you would want some sort of insurance policy. The general idea is that if you have one pipeline and it goes bad, you need more pipelines. In fact, you may have noticed, about a week and a half ago, for the first time I have seen, a pipeline heading from Dagestan to Chechnya was blown up. In other words, anyone who thinks that the pipeline north (the pipeline goes through Grozny) is a simple thing to secure and protect is misguided. Anyone can blow up the pipelines. They're very hard to defend.

Essentially, it is a two-route deal so far, and the question that has not been determined and is not supposed to be settled until 1997 is the route of the later oil, which is much more voluminous. I think the early oil is 450,000 tons. But there is much more of the later oil, and most people assume that if either one or both of the pipelines for the early oil works, this will influence the decision on the later oil. In other words, if you have a pipeline that is already working, and say, for example, the war in Chechnya does not go away and the northern route is being blown up all the time, obviously this would enhance the attractiveness of the Western route. Although at the same time, if you are General Grachev, or his replacement, and the northern route is not working and the western route is working, I would be very nervous if I were Eduard Shevardnadze.

These are not the only possible pipelines and, in fact, some of the scenarios for the resolution of the Karabakh conflict call for a pipeline that would go through Armenia. In many ways, from our perspective and also, I think, from the perspectives of Armenia and Azerbaijan, that is the best of all possible worlds. It's the shortest route, and it would bind the two countries together economically so that they have a stake in peace and good neighborly relations. On the other hand, unfortunately, it is absolutely the worst outcome for Moscow. If such a pipeline were built, Moscow would have much less leeway in manipulating the two countries against each other. It would be yet another pipeline that could be operating in case the northern one doesn't work very well. And it would be yet another one that might be getting transit fees which might otherwise be going to the northern route.

Thus, at the moment, without a settlement of the Karabakh conflict, there is no possibility of such a pipeline. Every now and then some Azerbaijani official says: "Of course, this is a possibility." And they explicitly will say: "I hope politicians in Yerevan take note of this." It has been held out as a carrot that does not have any chance of being eaten unless there is a settlement in Karabakh; let's put it that way.

Question: Do you think that the elections represented a chance for Aliev simply to consolidate power, to get rid of the roughly 25 Popular Front members of the former parliament?

Ochs: I would prefer, as far as this is concerned, to let you draw your own conclusions and inferences about what I have said. But to fill in some of the details, in answer to your question, the de facto functioning parliament, which the new parliament replaced, came into being at the end of 1991 and it featured approximately 50:50 representation of the old Party elite and the opposition. In fact, by the time of this new election, a lot of the 25 opposition members had already been eliminated anyway. Even to the extent that they hadn't, this was a parliament that was very much in Aliev's pocket.

The election does, of course, consolidate his control, that is, the executive control over Parliament. It does eliminate, except for essentially nominal representation, the Popular Front and it totally eliminates Musavat. Etibar Mamedov also got his nominal three seats. Thus, you have a parliament in which supporters of Geidar Aliev are in the overwhelming majority and the opposition is barely represented. So if you want to say "we held elections, we didn't get a good grade but we're moving forward, we are taking steps," you can. Since no one pays that much attention to grades for elections anyway, you can argue that the entire thing had been done for this purpose.

But what I was trying to argue is that this was also an attempt to create functioning structures of government. You have to remember that Rasul Guliev has to be accommodated. He is a very powerful man, he is the speaker of parliament. If you create a parliament that has no powers whatsoever, you will offend Rasul -- that's his power base. He has other resources; but this is his power base. It's also his international exposure. In this connection, it's worth pointing out that in Azerbaijan, unlike Armenia and unlike Russia, there are no provisions in the constitution for the president to dissolve parliament.

I have been to Turkmenistan and Uzbekistan for elections, and, by that standard, Azerbaijan's was fantastic. But even though the election was unfair, this does not mean that the parliament is going to be a powerless body. It depends to a large extent on Rasul Guliev, necessarily. And you can't tell how members are going to behave once they are in a position in which, first, they have a job for five years unless there is a catastrophe, and second, they have immunity. It could be that actual political parties with parliamentary factions could develop that work the way parliamentary factions do in countries more developed institutionally in the political sense. I don't know. But I think there is more to this in terms of possible implications than would follow from simply seeing the whole thing as a farce.

There were a lot of international observers at the election, and one of them was a Pole. He was with the Council of Europe delegation, and at the post-election press conference, he said: "Well, there were a lot of things wrong with this election, but I remember our election in Poland in 1989 to be the same. There were a lot of things wrong with that election; but that Sejm ended up doing some very good things."

Question: Could you talk a little bit about the relationship between Turkey and Azerbaijan?

Ochs: First of all, Turkey and Azerbaijan are ethnically and linguistically linked. During the Popular Front government, the president, Abulfez Elchibey, was extremely pro-Turkish. The impression has become widespread that he is anti-Russian and anti-Iranian. I would qualify both of those assessments. In any case, it's fair to say that the Popular Front was and remains extremely pro-Turkish.

I'll give you one interesting example. The new constitution calls the state language of Azerbaijan "Azerbaijani." This was a very controversial provision in the constitution because under the Popular Front government in 1992 and 1993, the state language was called "Turkish" or "Turkic." Apparently the Azeri word does not really distinguish between the two. This was a reflection of the Popular Front's ideology, which sees Azerbaijan as a Turkish or Turkic society and people, in the sense of a nation.

After Geidar Aliev came back to power, Azerbaijani-Turkish relations had their ups and downs. As the boss from Nakhichevan, after he came back from Moscow, he had been doing his own negotiating with the Turks because the exclave of Nakhichevan has a connection to Turkey. Geidar Aliev, based in Nakhichevan, had been essentially doing his own wheeling and dealing and negotiating with Iran, with Turkey, and with many other people, while in Baku they were worried about what Geidar Aliev was doing in Nakhichevan.

Here, however, I have to draw an inference myself; I can tell you what everyone thinks in Azerbaijan. As I said, in March of 1995 there was an "uprising" that was put down. There was a first deputy Interior minister named Rovshan Dzhavadov who had his own paramilitary group, and he and about 50 of his supporters were killed in a shoot-out with government forces. After the coup attempt was put down, the Turkish ambassador left the country. Everyone in Azerbaijan assumed that the Turks were somehow involved in this coup attempt. Incidentally, Tofiq Gasimov, the former foreign minister who served under the Elchibey government, is now charged with treason. He's been released recently, but he was arrested in September and charged with having been involved in the March events.

I can tell you that it is widely believed that someone in the Turkish Embassy or in Ankara (and I have never heard a very convincing explanation of this) was involved in an attempt to get rid of Geidar Aliev in the March of 1995, and that it didn't work. As a result, once the ambassador left and a new ambassador came (and I had regular dealings with him as part of the diplomatic community that was monitoring the elections), the Turks now are extremely supportive of Baku and of Geidar Aliev.

As far as Karabakh goes, Turkey has always been very supportive of Azerbaijan. They have never established diplomatic relations with Yerevan. They recognize Armenia's independence but they have not established diplomatic relations.

The Turks, of course, are also very supportive as far as Azerbaijani relations with Russia are concerned. The Turks, for their own reasons, of course, want the pipeline for later oil, the big pipeline, to go through Turkey. The US government has actually come out in favor of this. Clinton has said that we want the pipeline to go through the Turkish port of Ceyhan. But, keep in mind that this gives Azerbaijan possibilities and a leeway that it would not have, geostrategically and economically, if their route for getting the oil out was through Novorossiisk. So, the Turks are close allies, with what may be a very funny bump in bilateral relations in early 1995.

Question: I wondered if you might say a few things about the status of the Caspian sea, and how that changes the relationship between Russia and Azerbaijan?

Ochs: The status of the Caspian Sea, or the Caspian Lake, or the Caspian, is in dispute. Everyone knows it as the "Caspian Sea;" but the Russian Foreign Ministry says that the Caspian is not a sea, but is instead a lake, and therefore all the littoral states (there are five of them: Turkmenistan, Iran, Kazakstan, Azerbaijan, and Russia) have a say, and decisions about the resources of the Caspian have to be made jointly.

Azerbaijan argues to the contrary, and incidentally, the new constitution has a provision, Article 12, stating that its sector of the Caspian Sea is part of Azerbaijan's territory. The Russian Foreign Ministry has sent at least one, and probably many more, formal notes protesting this provision of the constitution.

I am not aware that any sort of decisions have been made about a court or venue of arbitration. At the moment it's a dispute. What's interesting to note here is that Iran is very much on Russia's side, although this could change because, after all, Iran was cut out of the first consortium deal. Its very open support of the Russian position on the status of the Caspian came after, at US government insistence, it was cut out of the consortium deal. You may know that Geidar Aliev has now offered Iran participation in a new oil field deal, so they might rethink their attitude on whether the Caspian is a sea or a lake.

Kazakstan is also in Azerbaijan's camp. The Turkmens, as always, are somewhere in the middle. No one can figure out where they are because the Turkmens come out very often and say something that clearly would put them in Russia's camp, and then privately say: "We didn't mean any of it; don't worry about it." So we have no idea where they actually stand on this issue.

The position of the American oil companies, so far as I can tell, since they have already obligated themselves to invest an awful lot of money, is such that they think, if the issue ever came to international arbitration, that their money would not be lost.

For what it's worth, I know someone in Washington who was told privately by a Russian diplomat: "Look, we understand that we can't win this battle, but we have to fight because essentially it's a bargaining chip." And I said before that this point of view does not appear to be shared by the entire Russian government. The best evidence is that LUKoil is involved in the consortium. LUKoil is involved in the deal that was signed in November 1995 for the Karabakh field, and LUKoil will insist on participation in the other deal and on being involved in any future Azerbaijani deals.

So the Russian Foreign Ministry claims that all of these deals are illegal, that they are unilateral actions, and last year, at the United Nations, it warned in very harsh terms of severe consequences if Azerbaijan went ahead with this. Yet you have the Russian Minister of Energy and Fuel, Shafranik, in Baku two days before the election signing an agreement on LUKoil's participation in the Karabakh field. You also have Chernomyrdin, the Prime Minister, signing an agreement with Aliev in January on the northern route, on the details of that route. So, you have a very confusing situation, which is not very surprising to all of us who follow, as best we can, what goes on in Moscow.

My reading is that they will continue to push the Caspian Sea controversy, for as long as they can get away with it, as a negotiating chip, because there is no reason for them to give it up. But they will find themselves in an awkward spot if Aliev can tempt Tehran by giving it some section of a very nice field. Then it will be awkward for Tehran to continue to follow Moscow's line on the status of the Caspian.

Question: In your view, how likely is it that a provision for bases and Russian border patrols will be a part of a settlement for Karabakh? Is it likely that Russia will insist on this given the balance of power?

Ochs: That is a very tough question. It depends a lot on what motivates Geidar Aliev. I was hoping, while I was in Baku at some point, to have a private conversation and ask him: "Why not make a deal with Moscow?" The best that I can figure is that there are a number of factors here, and a lot of it has to do with the personality of the man. You have to remember that, first of all, he is 73, and these people who are in power in Moscow, apart from Yeltsin -- they're kids, from his perspective. In fact, he refers to the Azerbaijani opposition as the "dyeti" -- they're the kids.

Secondly, his relations with Yeltsin are terrible, of course. In Yeltsin's first book he describes how, when he came to Moscow -- I don't remember how it goes word for word, but something like: "It was disgusting for me to be in a room with Geidar Aliev, in the same Politburo." So, when they hug and kiss in public you know what they're actually thinking.

Moreover, he was personally humiliated by Gorbachev. His son was personally humiliated. I was told that his son (who is now a deputy director of the Azeri oil company, SOCAR) was prepared to be a Soviet diplomat. When the USSR fell apart, they told him "ubiraisya" -- "get out of here, we don't need you." So there is a certain sense of personal grievance in Aliev which, I think, probably plays a not-inconsiderable role in his manful resistance to Russian pressure.

That is just a personal, subjective side of it. If you look at it as a political calculus, I have to assume that Geidar Aliev knows very well the people in Moscow. After all, he was there for many years. And he has chosen a very risky course -- Eduard Shevardnadze was almost killed in August, after all. Geidar Aliev constantly complains, "They're trying to kill me, they're trying to kill me," and they're constantly announcing new assassination attempts. Now, people in the opposition say this is just his way of building up an atmosphere of terror and his own indispensability. But this is Azerbaijan. All of these claims could be real, after all. Aliev may well have concluded that, as risky as it is to fight the Russians, it is even riskier to let them in. Thus, at least as of today, he has resisted demands for bases, joint border controls and the common air defense system, of which Armenia and Georgia are part.

Now, what is interesting here is that Yeltsin may not be President in July. To the extent that personalities count in politics, Aliev could rethink this policy. I am not saying we will hear an announcement that Geidar Aliev is going to make a deal with Moscow. But it's not impossible. I happen to think that it is unlikely, and that he is a very proud man. And he is the only guy in the CIS who has ensured that, as he likes to claim: "We don't have Russian troops." (Actually, this is not entirely true because Russian troops are manning a radar station at Gabela.) So, I don't think that it is likely, but if the Russians are really eager to make a deal, and they can deliver Karabakh, Aliev may not give them everything, but he may be tempted to give them something.

Here is where the election plays a role. Aliev will not have a parliament that will say "no." The worst that could happen is that, say, the Popular Front and Musavat try to protest in the streets. What can they do? They have almost no parliamentary representation. But it is not such a simple thing in Geidar Aliev's Azerbaijan, I can assure you, to hold a street demonstration. Musavat has tried several times, always without success. If he decides to make a deal, one of the things that makes the election important is that he will be more or less confident about parliamentary ratification of any deal on Karabakh and, if necessary, if it is part of that deal, any deal with Moscow.

Question: Maybe he is afraid that Russia will not deliver in good faith, and maybe that's why he's not willing to do it.

Ochs: You know, when he came back to power in 1993, a lot of people assumed that he was going to do what Shevardnadze gave every indication at the time of doing, although he hadn't done it yet -- namely, take Azerbaijan into the CIS and make some kind of a deal with Moscow so that Karabakh can be resolved in a way favorable to him. None of that happened. Assuming the original assumptions are correct, it's not clear whether none of it happened because Moscow could not deliver Karabakh, or because he began to see things differently in his relationship with Moscow. It could also be because, again, Geidar Aliev is not the kind of guy who will take orders from Moscow.

If he were not in power, it is not clear that someone else would have the same attitude toward the Russian presence and involvement in Azerbaijan, or would resist the way he has resisted. Further, it is not clear, for example, if he decided to make a deal, that his successor would like that deal. But these are very hypothetical questions.

The Armenian Presidential Elections of 1996
Michael Ochs
18 November 1996

Dr. Ochs has been on the "election circuit" in the former Soviet Union. From September to December 1995, he was the co-coordinator of the joint election observation mission in Azerbaijan for the OSCE and the UN. He has been a professional Staff Advisor at the Helsinki Commission of the US Congress since 1987. He has now just returned from Yerevan and side trips to Tbilisi and Baku, having observed the September 1996 Armenian presidential election. He is a graduate of Harvard, receiving his Ph.D. in Russian History here.

Abstract

Dr. Ochs began by describing his own activity as an international observer for the Armenian presidential election of September 1996. He then presented an analysis of events leading up to and during the election. Dr. Ochs noted that going into the election, the entire international community had very high expectations. Having received a bad "grade" on parliamentary elections in 1995, which the OSCE dubbed "free but not fair," and fully expecting to win the presidential vote handily, Armenian incumbent President Levon Ter-Petrossyan took steps to make the election free and fair. These efforts included the appointment of a well-respected official to chair the Central Election Commission and revisions of the old Soviet-era electoral law. All major opposition figures were allowed to run. Yet expectations were turned on their head when three opposition figures unexpectedly announced that they were withdrawing from the presidential race in favor of a single candidate, former Prime Minister Vazgen Manukian. Suddenly, the opposition, in this surprising display of political maturity, was revitalized and the incumbent began to feel himself on the defensive. The election itself was fairly close, with official results holding that Ter-Petrossyan had been re-elected, clearing the required 50-percent hurdle by only around 22,000 votes, defeating Manukian who received 41 percent of the vote. While the OSCE's preliminary assessment was that there was no reason to question the outcome, further analysis prompted the OSCE and other organizations to declare that there was indeed strong cause to doubt the results. Most prominently, there were about 22,000 more votes than people who properly registered at the polls - nearly the same margin by which Ter-Petrossyan claimed victory. In addition, international observers witnessed numerous violations of electoral law in favor of Ter-Petrossyan. Ochs then discussed the implications of these events. For one thing, Armenia's image as a relatively democratic state has been seriously tarnished, and this reputation had been an important source of influence in the international arena. These events have also damaged government-opposition relations even further, forcing the Armenian opposition to face the prospect of complete political exclusion, in which circumstances some might consider stronger forms of protest. In addition, events surrounding the election have greatly complicated the peace process in Nagorny Karabakh conflict. The Azerbaijanis and others had hoped for an overwhelming Ter-Petrossyan victory, since this might have given him the mandate he would need to make a controversial concession on the status of the disputed region. Now, however, the Armenian President has no such mandate, and is in no position to make concessions, especially since his main opposition takes an even harder line on the conflict. The election also may give cause for the US Congress to rethink its approach to Armenia and Azerbaijan.

PRESENTATION

OCHS: I was in Yerevan for about a week during the election period. On the Helsinki Commission, I'm responsible for the Caucasus and Central Asia. I also follow Russia's relations with its neighbors. This was one in a series of trips that I make periodically, usually when there's an election, but not necessarily. During these visits, I will meet with high-ranking government officials, opposition leaders, independent journalists, and representatives of the international diplomatic community in the capital. I did all that in Yerevan.

What I am going to talk to you about are not only impressions based on a constant following of the situation in the Caucausus, and Armenia in particular, but also what people are saying and my attempt to analyze it. As you undoubtedly know, dispassionate, non-partisan information in Armenia or in Georgia or in Azerbaijan is hard to come by.

I have brought you, as a present, your tax dollars at work, primary sources on this election which you may find very useful. These include the OSCE observer delegation statements, the preliminary report, the final OSCE report, the Armenian Central Election Commission response to these reports, and an intervention at the OSCE Permanent Council meeting about these reports. I have brought you also a report by IFES, the International Foundation for Election Systems based in Washington, which works with countries all over the world to help them run elections. They are technical elections specialists, and they have been in Armenia since February. In addition to this, there is also correspondence between IFES and the Central Election Commission about an issue which we will get to in a little while. Then there are other documents here which I will explain when I get to that point.

What I propose, is first to talk to you for about 15 or 20 minutes about the election itself, what happened, and then to spend the rest of the time talking about what it means, what is important about it, and what it might mean for the future.

Let me start with a couple of points about media coverage. I assume that all of you have read the New York Times reports on the election, the Washington Post maybe, and the Financial Times. Incidentally, Steve LeVine, who is the New York Times correspondent and the Newsweek correspondent, was with me in a polling station on election night from 10 until 6 in the morning, so I can vouch for some of the things he says in his report. If you read Western press reportage, and you look at the headlines, you get a strong sense that this was a very bad election, to judge by, particularly, some Financial Times reports, which portrayed the entire election in rather negative terms. On the other side of the ledger, you can read an op-ed by the Armenian Ambassador to Washington, in the Washington Post of October 14. Let me quote this to you:

"The opposition alleged fraudulent balloting, but the international observers, while noting breaches in the election law, did not doubt the election outcome. The incumbent president, Levon Ter-Petrossyan, won the election with almost 52 percent of the vote."

The letter is dated October 14, 1996. I do not know when Ambassador Shugaryan wrote this letter - I only know when the Post published it.

Let me clarify two things about this election, against the background of the very negative media coverage you would have read, and the occasional point of view which you will see not only from Shugaryan but occasionally in the pro-Ter-Petrossyan American-Armenian press, namely that the assessment of the election was that there were problems, but that the election results were not in doubt. That is not the case. I have brought here, as I said, the final OSCE report. The preliminary assessment from the OSCE, on which basis Ambassador Shugaryan has made that statement, said, in conclusion, that "serious breaches in the law do not in themselves constitute a systematic attempt to deny the will of the people. Furthermore, it is the opinion of the observers that although very serious, these breaches in the law do not seem to have materially affected the outcome of the election at this stage in the process." This was made on September 24, at 3 or 4 o'clock in the afternoon. It was the OSCE preliminary assessment. The final assessment reads as follows: "Irregularities observed do raise questions about the integrity of the election process." It goes on to say the following, "Particularly given the fact that candidate Levon Ter-Petrossyan only passed the 50-percent threshold by 21,941 votes, the inaccuracies in the verification process can only contribute to a lack of confidence in the overall electoral process, and could even question the results of the first round of balloting." This was October 1.

Basically, what Simon Osborne, the head of the OSCE election observation mission, is saying is that there is very good reason not to take seriously the results as officially announced by the Central Election Commission and the Armenian government. So should you see anywhere reports to the effect that election observers said that there were problems with the election but that they did not affect the outcome, that is not so. They are referring to the preliminary statement, not to the final statement. The assessment in the final statement was confirmed and elaborated on at some length in the final report, which was issued two weeks later, a copy of which I have here, and I will leave all of these documents here with Strengthening Democratic Institutions Project.

On the other hand, the negative reports that you have seen obscure the fact that up until the vote count, up until September 22, this was not a bad election. Everyone said so. And when I say everyone, I mean Vazgen Manukian, Paruir Hayrikian, Sergei Badalyan - the other presidential candidates, the international diplomatic community, and IFES as well. In other words, what happened on the 22nd, and the events of the days immediately following, ruined what would have been, in most people's opinion, a much better election than anyone reading the press would have expected.

That having been said, let me at the outset give you my view on this so that there is no misunderstanding. Having done a lot of research and investigation on this, I share Simon Osborne's view. I'm not going to take the position of Manukian and the opposition that they won, or that Ter-Petrossyan should not have won in the first round and that there should have been a second round. I do not know, and we likely never will know. My position is that there is good reason to doubt the officially-announced results, and that we will not know unless there is a fair and transparent process of investigation by the Armenian Constitutional Court.

Now, let me give you a little bit of background on this. I assume that in this audience of people who follow what goes on in the Caucasus there is no need for a long introduction of Armenian domestic politics. Armenia has been quite a stable place, relatively speaking. There have not been any pre-term elections, no coups or coup attempts, although, of course, some people are in jail on charges of trying to organize one. There has been no civil war, no major instability. When you compare the situation in Armenia since 1991 to what has happened in Georgia and Azerbaijan, Armenia looks pretty quiet and stable.

Still, in December 1994, relations between President Ter-Petrossyan and the loudest, if not the leading, critics of his administration, namely, the ARF, the Armenian Revolutionary Federation, also known as the Dashnaks, reached their low point when the President banned the party, having accused them of harboring within its upper ranks a small conspiratorial organization that was intending to commit murders, assassinations, drug running, terrorism and to destabilize the government. The Supreme Court then banned the party. This was in January 1995. The party remains banned. They have occasionally resubmitted an applications in accordance with the recommendations and suggestions made by the Ministry of Justice. But they remain outside the political spectrum legally.

In July 1995, there were parliamentary elections in which the ARF did not participate, not being a legal party at the time. The assessment of the OSCE parliamentary assembly, and the OSCE/UN joint observation mission, at the time, was that the election was "free but not fair." As a result of the banning of the ARF, as a result of the harassment and intimidation of journalists of various newspapers in 1994, and as a result of that election in 1995, Armenia, which up until then had a much better reputation than most of the other former Soviet republics, underwent a substantial image-change. Consequently, the government very much wanted to get a better grade on the presidential election to refurbish its tarnished reputation. In addition, partly because of the election in 1995, relations between government and opposition, particularly between the government and the ARF, the Dashnaks, were about as bad as you could imagine. In fact, shortly after the election, one of the leaders of the Dashnak Party, Vahar Hovanessyan, was arrested later in July and charged with treason and attempting to organize a state coup.

With that as background, what were the expectations and hopes coming into this September 1996 presidential election? As I said, first of all, Ter-Petrossyan himself and his government wanted to get a better assessment from the international community. The Armenian Embassy in Washington contacted various people in Washington, myself included, in the spring and summer, and asked: "What can we do so that we won't have these kinds of image problems in September?" Many suggestions were made. Memos were written. And in the summer of 1996, it seemed as if Ter-Petrossyan was not in a bad position at all. Consider, for example, that after the terrible economic decline of 1993 and 1994, at least according to official statistics in 1995 and 1996, the economy had rebounded. The country remained stable. The opposition was fractured and fractious - there had been at least half a dozen announced candidacies. Moreover, that there had been a ceasefire in Karabakh for two years, more or less. So it seemed that President Ter-Petrossyan was in pretty good position to be reelected without much difficulty. This is an important point: without much difficulty.

Now, because they wanted to get a better grade, and because they seemed to be relatively confident, they undertook a series of reforms which, in fact, created the groundwork for a much better election. For example, they revamped the Central Election Commission - the previous Central Election Commission had been very strongly criticized by Armenian political parties and international observers. They got rid of the chairman, an unpleasant man, and replaced him with Khachetour Bezirjian, about whom nobody had anything bad to say, and I include Manukian, Badalyan, everyone - everyone thought that he was a very professional and nice person. Everyone thought that there were grounds to hope that the election would be run much better. Moreover, the law that they passed had within it various safeguards. For example, they got rid of mobile ballot boxes. Throughout the former Soviet Union, they had the system of small ballot boxes so that if someone was sick and could not come to the polling station, they would send a couple of people from the polling station with the ballot boxes to his house. Eliminating mobile ballot boxes means that various people who were too ill would not be able to vote, but on the other hand, it reduces the possibility of very serious vote fraud. Moreover, the opposition was represented in the Central Election Commission, and in local commissions, and there were various other safeguards.

So it seemed that this was going to be not a bad election, especially compared to what had happened in Azerbaijan in November 1995, and what had happened in Armenia in July 1995. No major opposition candidate was excluded from running. A couple of people dropped out of the race, but they were not very well known. And the people who, in fact, contested the election (I have in mind when they first registered to run), Paruir Hayrikian, Sergei Badalyan of the Communist Party, and Vazgen Manukian, were the leading opposition politicians. Now it is true that the Dashnaks did not have a candidate (they are not, as I said, a legal party at the moment); but they did in fact wind up participating in this election. So unlike Azerbaijan last year, where the Musavat Party was excluded on very dubious grounds, everyone who really was considered a serious candidate had a chance to run against Ter-Petrossyan.

What were the opposition's hopes and expectations? To judge by their public statements, they assumed, or at least they said in public, that Ter-Petrossyan and his people would not be able to run the sort of fraudulent election, as they put it, that they had run in July 1995. It was their assumption that the public would not stand for it, that the international community would not stand for it, and so, at least to judge by public statements, they were expecting something better. My own suspicion is that, because of the deep level of distrust between government and opposition, they were, in fact, expecting fraud. And for those who were thinking that there could not be a good election, there were probably those among them who thought: "let us have the worst election possible that we can have, because then Ter-Petrossyan's reputation will get even worse, and we will look even better by comparison." I can't prove this - this is just a sense that I have from talking to a lot of them and to a lot of independent analysts.

I should be honest up front, and tell you that my own expectations were that Ter-Petrossyan would win in the first round. In fact, I wrote a draft of the executive summary of my report on this election in Washington before I even left. Of course, the whole thing had to be changed. And this is important: I, like everybody else, was surprised by what happened. And I don't have any doubt that the participants themselves were surprised. Jirair Libaridian, Ter-Petrossyan's senior advisor, has publicly said so, and I don't have any reason to doubt him on this. I don't think anyone expected what actually happened.

The thing that threw the whole thing off kilter, and changed everybody's expectations and the dynamics of this race, is that on September 10, to everybody's amazement, three of the opposition candidates withdrew in favor of Vazgen Manukian. Now, Lenser Aghalovian and Aram Sarkissian were not very prominent, comparatively speaking, but Paruir Hayrikian was very well-known - he was the best known Soviet-era Armenian dissident, a man who spent 17 years in the gulag for the idea of Armenian independence. He returned to Armenia after he was kicked out of the Soviet Union by Gorbachev in 1987 - I think he came back in 1990 or 1991. He ran in the October 1991 presidential election, and to this day, incidentally, maintains that he won that. I have to tell you that I was astounded when I learned that he had withdrawn his candidacy. This indicated a level of political maturity and realism which I had not come to expect from the opposition in Armenia or any other of these countries. This formation of a unified candidacy absolutely turned everything on its head. The Dashnaks - as I said, they are not a legal party - also came out in favor of Manukian's candidacy. So what had been created here was a unified opposition front to run against Ter-Petrossyan.

Now, Ter-Petrossyan last year and this year, when he was feeling more confident, would occasionally give paternal advice to the opposition: "you guys should unite if you want to be serious political forces." But I suspect that he was shocked and horrified when, in fact, it actually happened on September 10. To judge by what everybody told me when I arrived (I showed up in Armenia on the 16th), the entire opposition had been really emboldened by this - they were in a great mood. They thought that they were really going to make progress, and that things looked good. Ter-Petrossyan and his team, on the other hand, seemed rather nervous and unhappy.

This was reflected in the campaign. In much the same way that no major opposition candidate was barred from registering, no major opposition candidate was barred from campaigning. They, like Ter-Petrossyan, traveled around the country. They all got their 90 minutes of free air time on television.

A number of independent journalists told me an interesting thing, that it was during Ter-Petrossyan's campaigns around the country, when he was heckled and booed and asked unpleasant questions, that people in the ruling party first began to get the impression that maybe things were not as good as they were led to believe, or had expected.

And this, then, was reflected in a change in the campaign themes. In the very beginning of the campaign, the leading target was Badalyan, the Communist. Then for a while, everyone more or less was attacked equally, while, on the other hand, the notion of the inevitability of Ter-Petrossyan's victory was both implicitly and explicitly covered in the media. After September 10, though, all of Ter-Petrossyan's campaign's attention was focused on Vazgen Manukian. This led to the following speech on September 20 or 21, a couple of days before the election, Ter-Petrossyan went on television. He did the same thing last year, before the parliamentary election. He made a speech about what would happen if the opposition won and came to power. Let me read to you how the President of the country foresaw the consequences should he lose:

If Vazgen Manukian came to power, the following would happen, according to Ter-Petrossyan. Relations with Russia would sharply worsen, and Russian-Armenian military cooperation would be jeopardized. Use of Armenia's atomic energy station would come into question, according to Ter-Petrossyan, if Manukian won. There would either be less gas or no natural gas from Turkmenistan. Credits from international financial institutions would either be cut or would be stopped entirely. Relations with Georgia would become complicated. The army's military capabilities would fall, which would mean the resumption of hostilities in Karabakh. A tough Armenian position on Karabakh negotiations would lead to a breakdown in the talks and the international community would intensify pressure on Armenia. Ultimately, "the very existence of Nagorny Karabakh and the sovereignty of Armenia would be in serious danger."

And in the domestic sphere, Ter-Petrossyan warned that the contradictions in a coalition government would lead either to nobody being in power, bezvlastiye, or to the establishment of tyranny, with all the anti-democratic consequences. In sum, this election came down to a choice between war and peace, security and alarm, safety or chaos. If Manukian won, said Ter-Petrossyan, Armenians would get as difficult as life as they would have under Ter-Petrossyan, but they would also suffer war and "the de-Armenianization of Nagorny Karabakh" at the cost of "the blood of your children." In conclusion, Ter-Petrossyan said the following: Armenia has known monarchy. Armenia has been under foreign occupation. Armenia has known Soviet occupation and also democracy (namely, Ter-Petrossyan). But Armenia has not yet seen "fascism, the shadow of which is knocking at our door."

You should also know that in a May 1995 speech, Ter-Petrossyan accused the Dashnaks of being fascists and terrorists. He has not backed away from that statement or from this assessment of the opposition.

So on the eve of the election, the President came out and said: "If you vote for me, you'll have a difficult life, but we'll be heading towards reform with continued stability. If you vote for the opposition, there will be chaos, disaster, and everything terrible that you can imagine".

On the campaign itself, the European Institute for the Media provided the following figures for television coverage. On Channel 1 Levon Ter-Petrossyan got 1050 minutes on the air, Vazgen Manukian 65 minutes, Ashot Manucharyan, one of the candidates, 48, and Sergei Badalyan, the Communist candidate, 37.5. Somewhat more interestingly, at the very end of the campaign, in addition to the time that candidates were supposed to get free of charge from State Television, they were also able to buy a certain amount of time - at the very end, however, they refused to let Manukian buy a certain amount of time on television.

There are two points worth making about the election law itself. First, there was no minimum turnout requirement. For example, in Azerbaijan last year, there was a 50 percent minimum turnout requirement. In former Soviet republics where people are sick to death of politics, it's not such a simple thing to get 50 percent of the electorate to come out. So, as happened in Azerbaijan and as happened elsewhere, election officials are under very great pressure from local authorities to pad the voter rolls, to show that, in fact, 50 percent came out. That was not necessary in Armenia. The winning candidate just had to get 50 percent plus one of the electorate that had come out for the election. That's the key figure to keep this in mind when we get to the results.

Now, as for the voting and the vote count , it was the view of the international observer delegations that the voting did not go particularly badly, with one exception, and that is military voting. As in Azerbaijan, the number of soldiers in Armenia is a state secret. Of course, this creates problems if you try to organize an election. Unlike Azerbaijan last year, where soldiers voted in their units, where they set up polling stations and units refused to let observers come in there, in Armenia soldiers voted in regular polling stations. However, first, no one knows how many soldiers there are. Second, they were supposed to provide, right before the election, the voters' list for the soldiers who were going to be voting in a particular polling station to those chairmen. Sometimes that was done, sometimes it wasn't, sometimes it was amended on the day of voting. More importantly, according to the OSCE observers, in 40 percent of cases where international observers witnessed soldiers voting, international observers saw officers directing soldiers how to vote, namely, for the President. This is done in a variety of ways - they would either tell them how to vote, or, in some cases, they literally would stand by the ballot box and have the soldiers show them their ballots, marked off for Ter-Petrossyan, before they would deposit them.

The vote count, though, is where things really begin to fall apart. Let me tell you briefly where I was, in a polling station in Yerevan. I chose this polling station because I had been there early in the day - it was my driver's polling station, and I had met the Chairman of the polling station, who was an extraordinarily unpleasant man, so I decided to go back later that night for the vote. This was in Shengovitsky rayon. When we showed up he was very unhappy to see us. In fact, for a while, he refused to let me stay. He tried to argue that my accreditation was good only for voting, not for a vote count. But we called the higher-level election authorities, who came and straightened it out. So we stayed until 6 am.

Among the improvements made in the voting law was a provision stipulating the way that the votes were counted. I don't know if you have ever been to one of these elections, but usually what happens is that they pick up the ballot box, they throw the contents on the table and then they begin to sort them. This was different - they put the ballot box horizontally on the table, and the chairman of the polling station would, one by one, pull out the ballot, read it out loud, and then show it to everyone so that there would be no dispute for whom this ballot had been cast. Now, once you have this kind of system, of course it's going to take a long time - there's nothing you can do about it. On the other hand, there are ways that you can do this well, or you can do it not well, you can do it quickly, you can do it not quickly. In our precinct, it became clear after about five minutes that they were deliberately counting as slowly as possible, presumably so that all of the American observers would leave. At some point a member of the polling station came up to me and whispered, "they want you to leave - please don't go." At that point, we were very angry and we would not have left under any circumstances. And so at 3 o'clock, when they had managed to count only about 200 ballots, some guy came in and conferred with the polling station chairman in another room. Afterwards, they must have concluded we were not going to leave, and the count went faster. And by around 5 o'clock in the morning, Manukian had won the precinct as he had won most of Yerevan by about 3-400 votes. At around 5 or 6 o'clock in the morning, a lot of unidentified people showed up, conferred with the election people in the other room, and they refused to do what the law obligated them to do, namely to provide an official protocol of the election results to the candidates, to the representatives of the opposition candidates. By the time we left at around 6:15 am, these proxies for Manukian and Badalyan were writing official protests to the Central Election Commission.

I have already told you briefly what the OSCE assessments were. I am not going to go into them now, nor am I going to go into (with one exception) the reasons for their having concluded in their final, not their preliminary statement, that there was reason to doubt the officially announced results.

Ter-Petrossyan got his 50 percent plus one, which he needed to avoid a runoff, by 21,941 votes. There is a disparity of 22,013 between the number of people who voted and the number of voter coupons, which were supposed to be deposited. Let me explain. Again, as a measure of transparency, to avoid vote fraud, they created a ballot that had on the bottom a sort of tear-off, detachable "talon," a coupon. Voters were supposed to sign the register and this talon, and their voter identification number was on this thing. The ballot went into one box; the coupon went into another, and the two numbers, of course, were supposed to coincide. There is a disparity of 22,013 coupons (fewer coupons than votes). Moreover, according to Simon Osborne, the head of the OSCE mission, there were, at least as of October 14, when his report was handed to the OSCE, 21,128 ballot papers (ballots, not coupons) unaccounted for.

The Armenian government and the Central Election Commission have argued the following. Here is a copy of a letter, a statement by Khachatur Bezirjian on October 2: The reason for the 22,000 disparity is that it incorrectly compares the number of signed coupons with the number of people who signed the voters list. The number of signed coupons should have been compared to the number of people who actually voted. They claim that about 22,000 people got coupons, but didn't deposit them. Now, there was one highly publicized case of a voter not depositing his ballot. Some guy got his ballot, and instead of depositing it, he ate it. On the other hand, the OSCE had observers in, I think, 28 percent of precincts all around the country, and there were candidate proxies in many of these precincts. Apart from this one guy who ate his ballot, there were no reports of anyone receiving a ballot or coupon and not depositing it. But that is the argument which the Central Election Commission is making to explain the disparity which was a critical reason the OSCE reached the conclusion -that there was reason not to take seriously the officially-announced results.

That, in brief is the story.

Let me now talk about several issues, starting with image and democratization. I said at the outset the Armenian government very much wanted to get a good grade for the election. Armenia, unlike other countries, or some other countries in the CIS, is a small, resource-poor country. Even Kyrgyzstan has gold, not to mention oil in Azerbaijan, or gas in Turkmenistan. Armenia has very few natural resources, and one of the things that was a real national asset was, until 1994 and 1995, its reputation. That reputation has certainly not been improved as a result of the September 1996 election. In fact, what happened in September 1996 essentially compounds the negative publicity of July 1995, and places a shadow on democratization in Armenia.

Let me read to you what the President of Armenia now thinks about the level of democratization in Armenia. In July 1995, in that election, the then-Foreign-Minister, who has now been replaced, told international observers (after the Dashnaks had been banned and were not going to be allowed to participate in the election) that they should compare Armenia not only to other CIS republics, but to Syria, Iraq, Iran, and Turkey - in other words, "compare us to our neighborhood," he said. "And compared to our neighborhood, we are a relatively democratic country." Now, this may or may not be true but considering how Armenia is portrayed and has been portrayed in Washington, this is a huge step backwards. It is a very conscious attempt, obviously, to lower expectations. The president gave an interview, published in Respublika Armeniya, October 26, 1996 in which he criticized American "formal approaches" to democracy that "do not take concrete conditions and the concrete situation into consideration. Nowhere in the world can democracy be established in the way they [namely, America] understand it, in six years. I have never said that Armenia is a democratic country. Several decades shall pass until we can speak about democracy in Armenia because we have no strong democratic institutions which do not depend on accidental influences, though we have parties and freedom of speech." In short, the President of Armenia, which had been considered until 1994 and 1995 among the most democratic countries in the CIS, now has this opinion of democracy in Armenia.

Then the President said: "In addition to this, there is also an aspect of politics. Someone is interested in presenting us in this light." This is a very interesting remark, because various Armenian government officials have attacked the OSCE and especially international press coverage of the election. The pro-government proponents of this view (for example, Babgen Araktsyan, the speaker of parliament, and Shamiran, which is a women's party created in 1995) have accused the international community of promoting a negative image of Armenia so that Armenia can be pressured in the Karabakh negotiations because of all the Western oil interests in Azerbaijan. The Dashnaks take the opposite approach. They say that everyone in the West supports Ter-Petrossyan because of American and Western oil interests in Azerbaijan, and therefore, no matter what happens in Armenia, everyone will support him. What is more important from our perspective, is the apparent conspiratorial attitude toward what should be treated as an election and not an international or cosmic conspiracy about an election.

Now, about Levon Ter-Petrossyan. Up until December 1994, like Askar Akaev in Kyrgyzstan, Levon Ter-Petrossyan had quite a good reputation, especially when you compared him to the Dashnaks because of their reputation for extremism, alleged connections to terrorist activity, and their territorial claims on neighboring states contrasted to the apparent willingness of Ter-Petrossyan to compromise. The predominant image of Ter-Petrossyan was of a low-key, quite rational, moderate reformist statesman with pretty reasonable democratic inclinations. After all, up until December 1994, no parties had been banned, and there was a relatively free press in Armenia. There had been no coups. As a result of this election, after what happened in the 1995 parliamentary elections, it is hard to escape the conclusion that his reputation (1) as a democrat, or (2) as a legitimate President are in question, if not in doubt. In any case, whatever conclusion people in this room might come to, in Armenia there are a lot of people, obviously, who do not think that he was fairly elected.

On September 30, 1996 he gave a speech on television in which he acknowledged all kinds of problems, particularly poor economic conditions. He said that he understood that people were living in very bad circumstances, and he promised, among other things, a shakeup in the government, a battle against corruption, and the hope that the second term would be better than the first. He did not in any way extend his hand to the opposition. Everything he said was aimed at the voting public, but not to the opposition. He said there would not be a witchhunt, but everyone who was involved in the events of September 25, when demonstrators stormed the parliament and so on, would be punished.

Apart from changing policies, since people complained so much about the economy, it has already been announced that there will be a re-emphasis on social issues and a shakeup in the cabinet. But I think it will be much more difficult for him to try and change his political personality. Journalists in Yerevan told me that Ter-Petrossyan has not had a press conference in years. He rarely meets with the public, and every now and then he shows up on television and gives a talk. For someone who is, as he is, a scholar, this may be reasonable, depending on whether you have to deal with students. If you are an elected politician, though, this is a difficult kind of personality to have. Even his closest advisors acknowledge that he is a very reserved man. It may be that if he is willing to change policies and cadres, he might be willing to rethink his own personality, his approach to the media, and his approach to contact with the public. But that is the least likely of the possible changes he might make.

The last thing I want to talk about here is the possibility of a third term. Armenia's Constitution was passed in July 1995, but Ter-Petrossyan has been in office since 1991. The Constitution stipulates a maximum of two consecutive terms. For example, this is the same situation as in Russia - Yeltsin has been president since 1991, and the Constitution has only been in effect since 1993. Does that therefore mean, that he might be able to run again five years from now? Nobody knows the answer to that question. It is almost certain to come up eventually, unless there are some extraordinary events in Armenia. Otherwise, five years from now, or sooner than that, this question will come up before the Constitutional Court. The Constitutional Court is run by Gagik Harutiunian, the former Vice President and a loyal Ter-Petrossyan ally.

Now, about government-opposition relations. If after the July 1995 elections, when the Dashnaks were excluded, all of the opposition charged fraud and the international community said that the elections had not been fair, relations might have been described as abysmal, today you have to look for a even worse adjective. Ter-Petrossyan has not retreated from his characterization of the opposition as "fascists," and I use the word advisedly. Let me quote to you what he has to say:

"There is fascism indeed. The initial postulates of Manukian's party are: Armenians are a world nation. The Armenian people have a historic mission. A national organization shall be created from the Armenian people."

Asked whether the opposition became fascist only after the election, Ter-Petrossyan said, "no, I used to call them fascist before."

He then offers his own views on his nation: "I believe that the Armenian nation is an ordinary nation, like all nations in the world. It has an equal right to a normal life like other nations. But Armenian society is still behind many societies. I say this in public and many people criticize me for this."

What is important here is that it is very difficult to compromise with people you consider, and more importantly publicly characterize, as fascist, especially in the former Soviet Union. It is one thing to call them ideologues, another thing to call them wrong, still another thing to call them criminal or corrupt. It's quite another thing to call them fascists.

Moreover, even according to official figures, Manukian got 41 percent of the vote. Does that mean that the President considers the 41 percent of the people who voted for Manukian to be either fascist or pro-fascist? It goes without saying that this sort of attitude toward the opposition greatly complicates any sort of possible conciliation or reconciliation between government and opposition greatly.

From the opposition point of view, Ter-Petrossyan has now twice, in July 1995 and September 1996, retained power by means they consider to be fraudulent, illegal, and they consider him illegitimate. From their perspective, the established structures of government offer them nothing. They have no stake in the political process. They have no recourse to judicial avenues for redress of grievance, no expectation of any sort of reasonable hearing of their complaints. And moreover, a very important point that is not always mentioned, large-scale privatization has not yet taken place in Armenia. What has been privatized is land and small enterprises, restaurants and things like that. In Armenia, as everywhere else in the former Soviet Union, if you are not in power, your prospects for getting a piece of the privatized pie are very small or nil. So the opposition is completely out of the political game, and is going to be out of the economic game as well. In other words, they have no stake in this system.

Now I do not want to be understood to say that in any way I approve of what happened on September 25, when they stormed the parliament and beat up speaker Araktsyan and his deputy. This is absolutely beyond the bounds, there is no justification for it. But in addition to having broken the rules, they also committed what can only be described as a stunning tactical blunder on the 25th. They gave Ter-Petrossyan and the Minister of Defense and Vano Siradeghian, the Minister of Internal Affairs, an excuse to crack down, to arrest the leaders, to describe them as terrorists plotting a coup d'etat, as opposed to frustrated opposition activists, or just voters who had thought that the will of the people had been denied.

So both have decisions to make here, both Ter-Petrossyan and the opposition. What are Ter-Petrossyan's options, if he wants to reach out? As has been raised by some members of parliament, he could call pre-term parliamentary elections. Even if you use the official statistics, 41 percent of the population voted for Manukian - if you add another 6 percent for the Communists, and those 7 percent who voted against everyone, about 50 percent of the population does not support Ter-Petrossyan and his government, whereas about 80-90 percent of parliamentary re

PRESENTATION is pro-Ter-Petrossyan. Obviously, there is a discrepancy here. If one wanted to reach out, one could call pre-term parliamentary elections so that there would be some rebalancing of political forces. However, in the past, Ter-Petrossyan has strongly made the argument that holding elections on time is a hallmark of democracy, stability and state-building. He has taken pride in this in the past, and there has been no indication so far that they are willing to consider early elections.

Another thing he could do is to bring the opposition into the government. But again, I have seen no indication that this might be possible. Moreover, I am not clear that even if they offered, anyone in the opposition would accept.

The one thing that might shake things up is if the Constitutional Court, which has now been given the opposition's appeal, really shocks everyone and comes out with some sort of ruling that the opposition agrees with. You may know that on the 24th, Manukian appealed to the Constitutional Court to annul the election and to order a repeat vote. Now, as I said, the court is chaired by Gagik Harutiunian, Levon Ter-Petrossyan's former Vice-President. From the opposition's point of view, the only thing that might change their attitude towards the political system and their possibility of getting a fair hearing would have been had Ter-Petrossyan lost or, now, if something really unexpected happens in the Constitutional Court. If not, and the court procedures are considered biased, then the reputation (1) of the court, (2) of Ter-Petrossyan, (3) of the legitimacy of the President and his government, will remain in question.

By the way, on Thursday or Friday, someone at IFES told me the Constitutional Court is now going over the protocols. At a session on Thursday or Friday, the opposition came in with 1,000 protocols, in other words protocols from polling stations which had the results of the voting marked down, threw them down on the table and said "match them - where are your protocols?" In other words, seeing if there is a disparity between the opposition's and official results. According to what I heard on Thursday (I don't know if this has changed), the Chairman of the Central Election Commission said: "we don't have to do that according to the law - we don't have to show you the protocols."

Incidentally, here is a letter from the Chairman of the Central Election Commission to IFES explaining why they have refused to show up with the protocols, claiming that, among other things, "so many people have asked us for protocols that we can't possibly make copies for everyone, so we have decided to make copies for no one."

The Chairman of the Central Election Commission has also said that "we can only vouch for the documents that went through us - we can not vouch for the documents that went through the lower levels of the electoral hierarchy." To which, IFES has sent a letter asking, "if you cannot vouch for their results, how could you have issued election results to begin with?"

Anyhow, that is, at least as of Thursday or Friday, the state of play in the Constitutional Court's hearing. They have to come up with a verdict by November 24, which is less than a week from now. What's likely is that they will say that, yes, there were some problems, but not enough to invalidate the election. In other words, I expect that we will never know for sure, because there will never be that smoking gun, the disparity of ballots - this ballot, that ballot - to show one way or the other. Most likely things will remain as they are today.

Which means that the opposition itself has a decision to make. Do you live with this state of affairs? Do you get out of politics entirely? At least, according to official Armenian government figures, 400,000 people have left Armenia in the last couple of years, mostly for economic reasons, but presumably, there may be some political disappointment in there as well. The opposition claims the figure is over a million. The UN's figures are about 700,000, but in any case the population is only about 3.5 million - imagine what that means.

So both government and opposition have to decide whether it is worth trying for some conciliation, and if so, how to go about it in an atmosphere of the deepest imaginable distrust, and even hatred between them.

Let us now talk a little bit about Karabakh, and how this election may affect Karabakh. The first thing that is worth saying is that Karabakh was not an election issue. It was not a point in dispute or under discussion in the campaign. Most of the campaign centered around economic issues, economic misery and the like. Remember that there has been a ceasefire in effect for about two-and-a-half years now. There hasn't been any large-scale bloodshed. And most people seem to think that if the issue is not resolved, at least it is quiet and no one is getting killed, so they can concentrate on issues closer to home.

The current status of the negotiations and the OSCE talks can be fairly described as a stalemate. Really no progress has been made for quite a long time. The most problematic issues remain the status of Nagorny Karabakh, the status of the city of Shusha, and the status of Lachin, the corridor that links Armenia and Karabakh. Outside the OSCE Minsk Group, there have been somewhat more productive meetings between Jirair Libaridian, Ter-Petrossyan's advisor, and Vafa Gulizade, who is Geidar Aliev's advisor on Karabakh.

I talked before about hopes and expectation from the government and opposition perspectives before the election. What were hopes and expectations with respect to Karabakh? All this year, people have been waiting for the election to be over, so that some progress could be made on Karabakh. This, at least, was the expectation. For example, in 1995, there was the Russian parliamentary election, and then the Azerbaijani parliamentary election. Then there was the American presidential election, and then there was this Armenian presidential election. With all of these elections coming up, with so much at stake, and the need to appeal to electorates, there was really no chance for anything to get done. So various capitals were assuming that once Ter-Petrossyan had been re-elected (as I said, that is what people expected), maybe some progress might be made.

The Azerbaijanis were hoping that Ter-Petrossyan would win big and win fair. They wanted him to get a big mandate because they think that he is more likely to compromise on Karabakh, have to "moderate our negotiating stance." And his advisor Jirair Libaridian has publicly said in Washington that "of course we would like Karabakh to be independent. However, we have to negotiate for the best we can get," always adding that Armenia will not make any deal not accepted by Karabakh. So the Azerbaijanis were hoping that a re-elected Ter-Petrossyan, with a large mandate, would be able to make the following concession: they were hoping that they would recognize Azerbaijan's territorial integrity, which would then allow the two sides to negotiate about the specifics of autonomy for Karabakh. In any case, those were Azerbaijan's hopes and expectations from the Armenian election.

Instead, from Baku's perspective, they got the worst of all possible worlds. They got confrontation in Armenia, instability, and a President who now no longer has any mandate to make the kinds of concessions which they were hoping for, especially considering that his rivals in the presidential campaign had accused him of being too soft on Karabakh to begin with. In a position of weakness, it would be much more difficult for him now to make some kind of concession of the sort that Baku was hoping for.

So as a result of the Armenian presidential election, an early statement from the Armenian side, which would have acknowledged Azerbaijan's territorial integrity, which would then have allowed negotiations on the specifics of autonomy, should not be expected. Ter-Petrossyan has been too greatly weakened politically. Nevertheless, at this very moment, in Vienna, at the OSCE review meeting, the Azerbaijanis are trying to come up with a statement of principles that would acknowledge their territorial integrity.

Finally, a bit about US-Armenian relations after the election. The US government, of course, had no officially-stated position on the election (even during the Russian election, they never came out and said we want Boris Yeltsin to win, although they did everything possible to ensure that he did). With respect to Armenia, what they said, and what the US government will say about any such election, is that "we don't have a candidate, it's not our place to express a preference, we want and expect the process to be open and fair." However, after all, Ter-Petrossyan has been in power since 1991, and since 1990 as chairman of the legislature. Governments generally have a tendency to prefer people they know to people that they do not know, unless it is Saddam Hussein.

Nevertheless, I left Yerevan on September 24, and the day before there had already been demonstrations outside the US Embassy. There were placards in three languages that said "the US is supporting dictatorship in Armenia." In other words, among sections of the Armenian opposition, if not the entire opposition, it was widely believed that Washington wanted Ter-Petrossyan to win.

Now, one document I have forgotten to bring you was the first State Department statement immediately after the election. Basically, it strongly criticized the opposition for storming the parliament, for beating up Araktsyan and his deputy, and for the disturbances, arguing that such behavior has no place in a democracy. That statement was largely based on the OSCE's preliminary statement, which had argued that there was no reason to think that irregularities had materially affected the outcome at that stage of the process.

However, after the final OSCE statement, and the OSCE final report, the State Department issued on October 22 a statement which is very interesting. First, it did not congratulate Ter-Petrossyan. There is a report in a California newspaper that Clinton has sent Ter-Petrossyan a letter of congratulation. I do not know if that is true. But in any case, in the US government's public statements, no expression of congratulation has been conveyed. The statement also notes that the problems described in the OSCE reports, and I am quoting here, and emphasizing, "remain a source of deep concern." This is important, because should the Constitutional Court go through its proceedings in a way that cannot be taken as credible, it could be that at some point, maybe a stronger statement might have to be issued, because at that point, the opposition will certainly appeal to the US government, and to all OSCE member states, saying that, "look - we had an election, the OSCE said that there was reason to doubt the official outcome, and the only judicial recourse we had was an unfair hearing - is there any reason for us to believe this or any reason for you to believe the results?" In any case, the State Department has left itself an out in case it is necessary.

So much for the US government, because it is not clear what the Constitutional Court will say, nor is it clear whether the US government will issue any more statements after this. They have already issued their statement on October 22. I'm not sure that they will want to again, especially considering how much difficulty they had coming up with the text for this one. And unless it absolutely becomes necessary, I suspect that they would prefer to remain quiet.

Now, let us turn to Congress for a second. I have brought you here two statements on the Armenian election, one by the Armenian Assembly, which is a lobbying organization in Washington which is ostensibly non-partisan, but which has generally been quite supportive of Ter-Petrossyan. Another is by the ANCA, the Armenian National Committee of America, which is the American branch of the Dashnak Party in Washington. These two organizations are sometimes at loggerheads, because, as I said, the Armenian Assembly tends to be supportive of Ter-Petrossyan, and the Dashnaks can't stand him. But there are two things they are united about. They are united about US aid to Armenia, and they are united about initiatives in Congress against Turkey and Azerbaijan. With respect to US aid to Armenia, I asked representatives of the Dashnaks if, on the basis of this election, which they consider to be completely fraudulent, and last year's election, which they also considered to be completely fraudulent, and the fact that the Dashnak party is banned and that their leaders are in jail, whether the Dashnaks, whether the ANCA, would lobby Congress either to diminish aid to Armenia or in any other way introduce some sort of sanctions for Yerevan's behavior. Their answer was: "under no circumstances would we ever do anything like that." So it would appear that you can hardly do anything to the Dashnaks in Armenia or elsewhere which would induce Dashnaks in Washington to take the step of lobbying Congress (and they have a lot of influence) to lower or diminish aid to Armenia. In other words, this sanction, or this leverage, is not going to be in play. That does not mean necessarily that Congress will go along with what it has done up to now, in the wake of this election. But in any case, the Armenian organizations in Washington, including the Dashnaks, are not going to be pushing for that.

Now, the last point I wanted to make has to do with section 907 of the 1992 Freedom Support Act. That is that part of American law which bars direct US government assistance to the government of Azerbaijan until Azerbaijan lifts blockades and ceases all offensive actions against Armenia. That has been in effect since 1992. In 1995, that law was weakened late at night in Congress, giving the President the option to waive the restrictions if he thought that humanitarian aid was not being delivered adequately through non-governmental organizations, which got permits. The President, to my knowledge, never exercised that waiver. After all, we had our own election campaign in 1996. What happened in June, though, was that the Foreign Aid Bill passed in the House, contained an amendment introduced by Congressman Porter which would have done two things. It would have mandated direct US aid to Nagorny Karabakh, and it would have mandated this aid in the proportions of 7:1. That is, for every seven dollars that went to Azerbaijan, one dollar would go to Nagorny Karabakh directly. This amendment, the so-called Porter Amendment in the House version of the Foreign Aid bill, elicited a firestorm. In Baku, this gentleman can tell us about it in great detail, I'm sure. By the way - you should introduce yourself:

Rauf Husseinov: I am a student here - my name is Rauf Husseinov. I am from Azerbaijan. I study here at Harvard University. I am applying to the Kennedy School of Government, but am now a special student in the GSAS.

Ochs: Perhaps more relevantly, Rauf, whom I have known for several years, was President Aliev's interpreter.

Rauf: Several times, I had an opportunity to translate for Mr. Ochs, who is very famous in these Caucasus republics.

Ochs: Anyhow, that Porter Amendment elicited a firestorm in Baku. When the Senate was discussing the Foreign Aid bill, their version contained none of this language, none of the Porter Amendment's language. The two bills then went to a conference committee.

I should backtrack a little and explain that the reason that the Azerbaijanis were so upset about the Porter Amendment was that by mentioning Karabakh apart from Azerbaijan, the Azerbaijanis had understood it to be an implicit challenge to Azerbaijan's territorial integrity and sovereignty over Karabakh. They were very unhappy about the 7:1 proportion too, but much more important was the first point.

The Senate version did not include any of this language, and the conference committee also did not include any of this language, and in fact, the conference committee did something that had not been done before. American USAID representatives had been complaining about 907 for a long time because they say that 907 makes it impossible for them to do certain things. Because it bars direct government-to-government assistance, it can be interpreted to mean that, for example, you can't even use government hospitals to distribute vaccines to people. But the report language in the Foreign Aid bill that was passed in September and signed by the President now explicitly allows Azerbaijani government facilities to be used in the distribution of US humanitarian aid delivered through non-governmental organization - the ban on direct government-to-government assistance remains in effect.

This election debacle, and the serious image problem that Armenia continues to have as a result of this election, may embolden some people in Congress to try to weaken 907 further. I know that the Armenian organizations in Washington are expecting that to happen - presumably they will be gearing up for a counterattack. The next Foreign Aid Bill will come under Discussion in the spring of 1997, by which point, who knows? A lot of things can happen both in Azerbaijan and Armenia.

By the way, last Sunday, on November 10, local elections were held throughout Armenia which the opposition boycotted. They have also been boycotting sessions of parliament since September 25.

Discussion

Question: What about Georgia?

Ochs: I told you a little bit about what the Azerbaijanis had been hoping for and what their attitude was after the election. The Azerbaijanis had a mixed reaction to what happened in Armenia. There is an ongoing public relations war between the two countries - not only a war about Karabakh, and they both see it as a zero-sum game, so since Armenia lost as a result of this election, the Azerbaijanis were pleased in the sense that Armenia looks worse than it used to look, and maybe some Azerbaijanis think that "they look worse than we look." More important, though, and certainly for the people in the Foreign Ministry and people who deal with negotiations about Karabakh, as I said, they were very unhappy about this election because they think it will complicate their negotiations with Armenia.

In Georgia, they also were very unhappy about this because there are 3-400,000 Armenians living in Georgia. Some of these 3-400,00 Armenians in Georgia have been agitating for "autonomy" within Georgia. Last June, Ter-Petrossyan came to Georgia, and he and Shevardnadze together went to Akhalkalaki, an Armenian inhabited region, and Ter-Petrossyan told them "we have enough problems without this." Remember that Armenia basically is cut off from much of the world. It is blocked by Azerbaijan. It's blocked by Turkey. Its only real outlets to the world are through Iran from the South and Georgia through the West. And so, from Ter-Petrossyan's perspective, the last thing he needs is problems with Georgia which perhaps will cut off another avenue.

Question: Can I just add to this - is Akhalkalaki the region where the train is going to go through, the rail route from Georgia into Turkey?

Ochs: The gas pipeline, which often was blown up in 1993-1994, goes through Marnevli, which is the Azerbaijani-inhabited region of Georgia.

The Georgians were worried that Ter-Petrossyan's standing has been weakened, because they see him as someone won't support Armenian demands for autonomy within Georgia. And they also see him, generally speaking, as his reputation would have it: a rational guy with whom you can talk and with whom you can compromise, not a nationalist. They don't really know Manukian or the others very well, although they know the Dashnaks and don't like them. The Dashnaks have territorial claims against Georgia, Turkey and Azerbaijan, so for obvious reasons they are not popular in these countries.

So Tbilisi was unhappy by Ter-Petrossyan's weakened position, and in general, they were worried about instability that had already taken place in Armenia, and the possibility of future instability in a neighboring country where they need stability. They have enough problems of their own in Georgia. I think they probably are glad that things have quieted down since then. And Eduard Shevardnadze, like Boris Yeltsin, almost immediately after the election sent Ter-Petrossyan a letter of congratulations.

Husseinov: When you said that now, after the elections in Armenia, the so-called democratic image of Armenia is damaged, and the Congress, or the attitude in the US, might change regarding Armenia, I believe that it is also obligatory to mention that in Congress, in the United States of America in general, people have started to understand better what is Armenia and what is justice, where objectivity lies. It is clear that Armenia has occupied 20 percent of the lands of Azerbaijan, and there is increasing American economic interests in Azerbaijan, and Azerbaijan and Ukraine are the only two countries in the former Soviet Union which have no Russian troops deployed on their territories, whereas Armenia has 35,000 Russian soldiers, Russian military bases, deployed in Armenia. And Armenia's borders with Turkey and Iran are being protected by Russian troops. And when Azerbaijan signs an oil contract with Western oil companies for 30 years of joint development and cooperation, Armenia signs military agreements, with Russia, for 25 years. Also, maybe our friends here do not know that Armenia is enjoying very friendly relations with Iran now - relations with Iran are increasing now because Iran now has some problems with Azerbaijan. I wonder, what will be the destiny of negotiations? How do you expect these peaceful negotiations to go? In other words, I want to understand: President Ter-Petrossyan is a very smart man, but do the Armenians realize that in the long run, they are going to lose? How long can you call on old Russia, and when Azerbaijan increasingly integrates into the world, its economy? I want to see whether the Armenians are still planning to hold a constructive position in these negotiations or not? Obviously, the US President, President Clinton, will not need any more Armenian votes to be elected for a third term as President, so hopefully he will hold an objective position. Unfortunately, the US Congress can fall under the influence of various lobby groups very easily. You just pay an American Congressman, and he will come and do whatever you want for you. He won't think about justice.

Question: Why doesn't Azerbaijan then pay its people to go and do the same in Congress if this is so easy to do?

Husseinov: This is what we have started to do. That is why the Porter Amendment could not pass. Not Azerbaijan, but this was the interest of US businesses in Azerbaijan that started to say that there should be justice. The US talks about the human rights of 100,000 Armenians who live in Nagorny Karabakh, but never talks about human rights for 1 million refugees who have been ousted from their homes from the provinces surrounding Nagorny Karabakh, which are outside of Nagorny Karabakh. When you talk about the blockade of Armenia, it is not a blockade. It is simply that we have stopped trading with Armenia. In other words did you expect us to trade with Armenia when they are continuing to occupy our land? Did you expect us to give more fuel or energy to Armenia to fill their tanks? Anyway, I want to know about increasing Armenian-Iranian relations, and how the West looks at that, including the US Congress. Secondly, will Armenia hold a constructive position in negotiations? Thirdly, what was the result of the recent US delegation headed by Mr. Collins, and what was the letter which Mr. Collins took from President Clinton to President Aliev? What do you expect to happen in these negotiations on the eve of the Lisbon summit of the OSCE? And how will all this work out?

Ochs: I'm going to give you short answers to all of these questions. Let me start with Congress. Obviously, there is a new Congress coming in. Congress has been in recess since September, and a newly elected Congress will come back in January. There was a delegation during the summer (I think it was in August) from the Committee on International Relations from the House, which visited all three countries and issued a report. In that report, they talk about the rapprochement between Armenia and Iran, and between Armenia and Russia, as an issue for members of Congress to keep in mind when deciding policy toward the region. They talk also about the relationship, the economic and strategic relationship, between the United States and Azerbaijan. That does not necessarily mean that the newly elected Congress will take a different view toward Armenia than Congresses up until now. Members of Congress tend to respond to their constituents - that is the way the system was devised. And there are all kinds of reasons to think that members of Congress will continue to support aid to Armenia. Although, the Dashnaks in Washington have told me, when Discussions for foreign aid come up, they will suggest that aid to Armenia not be diminished, but that it be retargeted to focus on democracy-building, and that it be distributed not through the government, but that it be distributed through an NGO in Armenia. They intend to ask for more money, not for less money. With respect to 907, however, it could be that Armenia's public relations problems will, as I said before, move members of Congress, maybe more members of Congress than before, to take a new look at 907.

As for the negotiations, you talked about time. You asked: don't they see that they are going to lose in the long run? If you go to Yerevan, or if you go to Stepanakert, and then you go to Washington and you talk to people who are involved directly in negotiations on Nagorny Karabakh every side you talk to will tell you that "time is on my side." Azerbaijanis say that "time is on my side" because "we have oil, we have Western interests, we have Western investments, we have Turkey's help, we have twice the population, we have all of these natural resources, we can feed ourselves, and sooner or later we'll get richer, we'll get stronger, we'll develop an army, and if we haven't made a deal we're going to take it back by force. Time is on our side." If you go to Yerevan, they'll tell you the exact opposite. And Robert Kocharian said: "no, time is on our side. Look at what we have. We have Armenia. We have a very influential diaspora all over the world. We have influence in the United States Congress. The only advantage that the Azerbaijanis have over us is oil, and that "oil has brought them nothing but grief. They have had all of this trouble, all of this external interference because of their oil - it's an unstable country. And, even if they ever succeed in getting money from the oil, it is all going to end up in Switzerland anyway - the Azerbaijani public is never going to see any of that money. If you even out all of the pluses and minuses, we are better off than they are. Time is on our side."

I am not actually in a position to say on whose side time is, although I do know that we here have about five minutes left. But my conclusion is that because of the problems connected to the election, I do not expect any sort of breakthrough in the foreseeable future because Ter-Petrossyan is not in a position now to make the kind of concession that Azerbaijan was hoping he would make.

On the other hand, I had been surprised about this election to begin with, so maybe something will be reached at Lisbon.

As for Collins, you may know that Jim Collins is the Ambassador-at-Large for the Newly Independent States (NIS), I don't know any more than you know about it. I have not seen the letter that he is purported to have brought. He did talk about support for multiple oil pipeline routes, and for US interests, and economic interests in Azerbaijan, etc., etc. But I do not know if there is anything more than that. And I do not know what the tenor of his conversation was with President Ter-Petrossyan.

Nagorno-Karabakh and United States Policy in the Caucasus
Joseph Presel
May 20, 1996

Ambassador Joseph Presel is the coordinator for regional affairs for the New Independent States (NIS) in the US State Department. He has the rank of Ambassador and is the special negotiator for Nagorno-Karabakh. His office is responsible for US policy toward conflicts in the former Soviet Union, and for consideration of all issues related to more than one of the NIS countries. He is a senior foreign service officer, having entered the foreign service in 1963. For most of his career, he has concentrated on the Soviet Union, Europe, and East-West relations, with a particular emphasis on security issues and arms control. In addition to having had a number of assignments in the State Department and the Arms Control and Disarmament Agency, including as its Executive Secretary, Ambassador Presel has also served abroad in Moscow, Belgrade, Vienna, Paris, and Ankara.

Abstract

Ambassador Joseph Presel discussed US policy towards the new states of the Caucasus region. The US, he stated, tends to focus on the individual countries rather than to look at the region as a whole. Further, it tends to look at each state in terms of one defining issue. For Georgia, the key is to support Shevardnadze, in essence rewarding him for his role in ending the Cold War and the reunification of Germany. For Azerbaijan the issue is oil, and for Armenia it is a serious energy shortage. Presel then turned to an examination of the two major conflicts in this region which are the focus of State Department peace efforts. He began with Georgia's two conflicts, the secessionist struggles in Abkhazia and South Ossetia. He suggested that the Ossetian problem will probably be solved only after the Abkhazian conflict ends; but that at present the Abkhazian crisis showed no signs of abating. Turning to Nagorno-Karabakh, Ambassador Presel stated that everyone already knew what the settlement of that conflict would look like. It would involve the nominal preservation of Azerbaijani territorial integrity with de facto independence for the region of Nagorno-Karabakh. The latter would retain guaranteed access to Armenia proper through the Lachin corridor, but would give up the rest of the occupied Azerbaijani territories. An OSCE peacekeeping contingent would enforce the agreement. He proposed that the leaderships of all three parties (Armenia, Azerbaijan and Nagorno-Karabakh) had accepted this intellectually, but not emotionally, although progress was evident. US policy thus far has been to pressure the sides into coming to such an agreement. The precedents set by these peace efforts might also prove helpful in solving conflicts in other parts of the Caucasus region. Presel then touched on US policies towards the states that neighbor this region. He noted that the US has intentionally ignored Iran and has encouraged Turkey in its efforts to improve relations with Armenia. He further suggested that the key player in the region, Russia, currently does not have a single policy in the Caucasus, as many of its political actors have different agendas, making interpretation of Russia's actions difficult for the US government. Nevertheless, the United States respects the legitimacy of Russia's historical, economic, political and psychological ties to the region.

The Politics of Caspian Oil
Daniel Speckhard
May 22, 1996

Daniel Speckhard is the deputy to the Ambassador-at-Large and the Special Advisor to the Secretary of State for the New Independent States (NIS). He is responsible for the development of foreign policy and the day-to-day management of US bilateral relations with Ukraine, Belarus, Moldova, and Central Asia. He is also responsible for advising the Ambassador-at-Large and the Secretary of State on Caspian energy development and export issues for all of the NIS. Prior to his current position, Mr. Speckhard was the director of policy and resources for the Deputy Secretary of State, and was responsible for the coordination of international affairs resources and foreign assistance programs of the US government. He has also worked for the Office of Management and the Budget, the Agency for International Development, and has been on the staff of the Senate Small Business Community. He is an economist by training.

Abstract

Mr. Speckhard analyzed oil (and gas) politics in the Caspian Sea region and US policy relating to it, highlighted the most interesting and pressing problems and discussed the US role in promoting solutions. He began with a discussion of Russia, which faces the basic problem that the richest deposits of oil are not located off its shores. Mr. Speckhard noted that the Russian government has thus pursued a two-track policy: first, pushing to have the Caspian Sea recognized as indivisible common property, and second, using its near monopoly on key transport infrastructure to pressure other regional governments into giving Russia a "cut" in the development of these resources. Meanwhile, Russian companies (especially LUKoil) have been actively pursuing shares in the development of this oil and gas, actions which sometimes appear to be at odds with official Russian foreign policy. Speckhard then discussed the role of Turkey, which wants to be a main transport route for this oil, but also wants to curtail the amount of oil shipped through its Bosporus straits. As a result, Turkey has pushed for the construction of an oil pipeline that would run from Baku, on the Caspian shore, through the currently unstable Caucasus region (probably Georgia, but possibly Armenia) and eventually to a pipeline which would bring the oil across Turkish terrain to its port on the Mediterranean Sea, Ceyhan. This plan, which is backed by Azerbaijan and Georgia, has created tension with the Russians who want the oil piped through Russia. Speckhard also described US policy, arguing that it is driven by four major interests: reinforcing the independence of the former Soviet states of the region, diversifying world oil supplies, promoting US commercial interests, and containing Iran. Among other things, he stated that this policy has led the US to support the construction of multiple pipelines (one through Russia, another through the Caucasus, and possibly even one through Afghanistan), and described how the US has effectively blocked Iran from participating in oil deals, although this policy has driven Iran into a weak alliance with Russia on some key regional issues. The US, he noted, has also promoted the idea that everybody wins in these economic projects, and that cooperation is a "win" for all parties concerned. Importantly, the US has endeavored to prevent political wrangling from delaying the development of the Caspian Sea oil. Speckhard then argued that events seem to be developing strongly along the lines which the US government prefers, although this did not appear to be the case just a year ago. He concluded by drawing attention to developments that one can follow in order to evaluate the future success of US policy.

US Interests in the Caucasus
Steven Young
October 28, 1996

Dr. Steven Young is the Director of the Office of the Caucasus, and Security Affairs of the Newly Independent States, at the US State Department. He has been a foreign service officer since 1980. He has served in Moscow twice, as well as in Beijing and Taipei. At the Department of State he has worked on both the Soviet and the China desks. Two years ago, he was an International Fellow here at Harvard's Center for International Affairs. Since leaving the CFIA, he has been stationed in Moscow at the US Embassy and then returned to Washington, DC. Dr. Young received his doctorate in Russian History from the University of Chicago in 1980, and his BA before that from Wesleyan University.

Abstract

Dr. Young began his talk by noting that the West tends to know little about the Caucasus, but that its geopolitical importance to the United States and other countries is great. Not only does the region contain vast reserves of oil, but it is a potentially vital link between the East and West, which could serve as a modern-day "silk road." In addition, this region is a pivotal in determining whether or to what extent Russia re-extends its domination over the Eurasian continent. US policy in the Caucasus region has five main directions, which Dr. Young described in some detail. First, it seeks to promote democratization, human rights, and market economics in the newly independent states. He discussed the three Caucasian states in this regard, arguing that all need work on human rights, that Azerbaijan and Armenia require improvements in democratization, and that Azerbaijan is lagging in terms of economic reform - despite its efforts to lure foreign investment for its oil sector. Second, the US encourages the rapid integration of these states into the international political and economic community, as well as emerging European security structures such as NATO's Partnership for Peace. Third, the US is keenly interested in resolving the ethno-territorial conflicts that have plagued this region and complicated relations between these states. Fourth, the US has promoted the reduction of armed forces among these states. Finally, the US has sought to advance American business interests in the Caucasus, with oil being the most visible but certainly not the only commodity to be traded. Dr. Young concluded by giving a positive assessment of these efforts, discussing how US policy has indeed had a significant impact in promoting peace and prosperity in the region, although much remains to be done, and many of these processes (especially democratization and the peace process) are likely to be quite drawn out. He argued in closing that the US should be investing significantly more money in promoting the development of this region, given its importance to US interests.

Perspectives of the U.S. in the Region

Samashki: Belief and Betrayal in a Chechen Town at War
Thomas Goltz
30 April 1997

Thomas Goltz is one of the best known free-lance journalists operating now in the Caucasus. He is a 1985 graduate of the New York University School of Middle Eastern Studies. He speaks Arabic, Turkish, Azeri, and what he terms "war Russian." He worked as a journalist and editor in Turkey and the surrounding region in the 1980s for publications such as the Washington Post, Business Week, and other newspapers from both the US and Great Britain. After the coup in 1991, he received a fellowship from the Institute of Current World Affairs to Study Turkic societies in what was then Soviet Central Asia. In August 1991, he changed locales to Azerbaijan. He was then based in Baku for the next three years, and the research that he had initially intended to conduct there turned into war correspondence in the various conflict zones of the Caucasus. Since then, he has been published in magazines as diverse as The New York Times Magazine, Foreign Policy and Soldier of Fortune. He has undertaken television projects on Chechnya, and his work has been shown on PBS. In 1996, his work was nominated for the Rory Peck Prize. In early 1997 the BBC sent him back to Samashki to do a documentary on the aftermath of the Chechen war, which is the program that forms the basis of this

PRESENTATION. He is also currently working on a trilogy of the post-Soviet Caucasus, the first book of which is on Azerbaijan.

Abstract

Thomas Goltz presented two short documentary films, one on the Russian-Chechen conflict and the other on the Ossetian-Ingush conflict, and then fielded questions about those two conflicts. The first film, "Return to Samashki," documented Goltz's return to the village of Samashki, which had been the victim of a particularly brutal Russian assault. Goltz called it the "My Lai of the Chechen War." Goltz had been in Samashki shortly before it had been attacked, and had also been on the Russian side of the lines during the second major assault. In the film, Goltz returns to the village and surveys the human and physical aftermath of the attack and the Chechen war in general. While there, he finds that the former military leader of the Chechen village, a man named Hussein, had been branded a traitor because of events during the attack and had fled to Kazakstan. Goltz traveled there, to find him plotting his revenge both against the Russians and against those Chechen "cowards" who had assailed his honor. Goltz then answered a wide range of questions based on his extensive first-hand knowledge of both the Chechen and the Russian sides in that conflict. He also discussed how many locals had come to believe that Goltz himself was a Russian agent, since the town was bombed shortly after he had been there filming. In fact, he said that Hussein had been suspected of treachery in part because of his association with Goltz, adding special significance to Goltz's willingness to return to Samashki and confront the accusers. The second film represented an international project designed to bring together two pairs of journalists from both Ossetia and Ingushetia to produce a short documentary film about the conflict between these two peoples which would be acceptable for viewing simultaneously in both of the Russian republics. Goltz acted as the mediator in this venture, and the result is a documentary film based on five days of travel to various flashpoints in the region and on conversations with the people they found there. He then answered questions about this conflict and the prospects for peace, ending on a hopeful note.

Presentation

Goltz: I would like to give you a mixed bag today. I just got back from a curious triangular project involving the Russian-American Press and Information Center in Moscow, the Center for War, Peace and the News Media in New York, associated with the journalism school there, and the Institute for War and Peace Reporting in London. I do not know how they all managed to find each other, but they came up with what sounded to me like the most insane project I had ever heard of - finding two young journalists from Ingushetian and Ossetian televisions, and getting them to work together on a joint venture film about their mutual conflict that would be then be simultaneously broadcast in both republics. But they had to find somebody foolish enough to come in and be the mediator and my name came up. Well, I nearly killed the project because I thought it was just so stupid. But I needed the money, so I took it on and flew off to Moscow to meet the organizers. There I was told that if we could get the two groups even just working together, we could call it "training" and it would be a success. Well, I did not like the sound of that at all, because I like "product." But things were set, so I flew down to Nazran, met the two teams and we started working, meaning I started knocking heads, I guess. Because the remarkable thing was that at the end of the day, when we got up to St. Petersburg to edit the piece, we actually had come up with a small documentary that was not only mutually acceptable for both parties involved, but mutually acceptable for me, too, in the sense that I want to show it to you all. Sadly, I have not had the voicing done on it yet, so I will have to torture you and read the script as it goes along, but you will get a good idea about what happened. I am actually quite proud of it. I showed it at the Association for the Study of Nationalities conference at Columbia University last Thursday night (April 24). Everybody seemed to be very pleased with it. I showed it yesterday at New York University, and the response was the same. While I have done my fair share of reporting on war and ethnic conflicts, this is the first time I have worked on a post-conflict resolution thing, actually getting people to work together. As I say, I went into it with great trepidation and doubt, but it actually ended up being very successful from my point of view.

The primary thing that I wanted to share with you today is my most recent video on Chechnya, which I put together for the BBC. It concerns my return to the town of Samashki. It might help to provide some background information. In early 1995, I was subcontracted to ABC Nightline to produce a documentary for Nightline on the "Chechen spirit." I traveled alone, because I prefer to do this when I work as a TV reporter. It may be more dangerous, but you get a lot more things done. I went in illegally from Azerbaijan through what I call "the pipeline" up through Dagestan and then into Chechnya. By purest chance, I ended up in a town called Samashki. At first, I wondered what the hell I was doing there, because the war was in Grozny and elsewhere and Samashki seemed rather quiet. Then I took a look around and I said, "this place is Grover's Corners à la Chechnya." So I stayed and started to work while things got more and more intense and the situation began to seriously deteriorate, security-wise. After several weeks, I thought I had enough material so I left, and managed to get out of Chechnya via Dagestan to Azerbaijan, once more via the smugglers "pipeline," doing lots of fun things like walking through minefields in the middle of the night. Actually, I was caught on the border by the Russian guards but my bribe was not big enough the first time and they refused to take the second, so I had to find other means across.

Once back in Baku I sent the tapes, but the agency I was working for said they wanted more material. I flew to Moscow to get legal accreditation, and then went back to Samashki, which was by that time surrounded. I managed to get across the lines with my press pass, and then stayed for another week or ten days, during which time the Russian military mounted what the locals call the "first storming" of the town. Once again, I managed to escape, this time in the company of about one hundred Russian mothers against the war and Russian Buddhist monks, who had managed to cross the lines during a lull in the action. These incredibly brave people were altogether the weirdest component of the war in Chechnya for the two years. As result of my departure, I found myself on the Russian side of the lines when the Russians decided to make Samashki into the My Lai of the Chechen War.

There were great problems with getting the documentary aired. The television agency (Video News International, now owned by the New York Times) that had brought me to ABC basically left me in the lurch. A really nasty fight ensued that had nothing to do with the war or even television journalism, that included their making posters of me that described me as one "Thomas Stalinsky Goltzkoi, the chief Russian agent of propaganda in the Chechen War." Finally, Danny Schechter of the "Rights and Wrongs: Human Rights Television," which is tied in with Charlene Hunter Gault and PBS, picked up the material, did a re-edit and broadcast it. I do not think it was ever broadcast up the Boston area, because it was one of these programs that appeared in New York City at 11 o'clock on Thursday night and 7 o'clock in the morning in Chicago. I saw the thing in Spanish in Seattle at noon on Saturday. It remained pretty obscure. Despite that, it got nominated for the Rory Peck Award in London - Rory Peck being an ace camera man who worked the lands of the former Soviet Union plus Afghanistan for years before getting killed in front of Ostankino in Moscow during the great shoot-out in 1993. I was first put on the candidates list, then the long list, then the short list and finally announced as a finalist for the 1996 award. Although I did not win, the BBC thought I should have, and rather than just saying "better luck next time" they put their money where their mouth was and said, "here's another camera, here's a bunch of money, here's institutional support - now go back to this place that you have deemed so important and find out who is alive, who is dead and what the aftermath is all about." I think that in terms of journalism as a whole, and specifically television journalism, this was a very important thing to do, because so often reporters go in and do what we in the trade call "wham, bam - thank you ma'am" sort of reporting. You get there, you shoot, you get out and report, possibly distorting everything - and you never go back to take responsibility for your actions. This is a major component of the program I am about to show you, although there was one major element along these lines that was just too complicated to put in given the amount of time that I was allowed to have this time around to tell the story. I will tell you what that element was after we see the thing, because it impacts directly on reporters taking responsibility and going back.

On that note, here is the "Return to Samashki" piece. It was supposed to air on BBC on May 3, but because of the elections in the UK, the program has now been bumped back to May 10, in order to make room for high-powered Discussions about voting patterns and all that. So you are actually seeing what we might call a "premiere showing." I have been given permission by the BBC to use this tape in this sort of setting. I hope it will come on American television, probably PBS, but that is between PBS and the BBC. After this, and before the showing of the Ingush-Ossetian conflict-resolution joint-venture video, feel free to ask me any questions you want about Chechnya, journalism, Azerbaijan, Armenia-Karabakh, ethnic conflicts, or anything else you want.

First Video Presentation:"Return to Samashki"

Samashki. The word in Chechen means "the place of deer." To me, it meant the horror of war. The place is indelibly carved on my memory. I was inside a killing zone - and have never been so frightened in my life. I was there as the farm town was turned into the symbol of Russian brutality, when Moscow tried to re-assert what it called "constitutional order. I often wondered if I'd get out alive.

The waiting is over....We are taking hits here and there, by the railway station and the road. Let us see if the defenders can hold this town and if I can get my ass out at the end of it.... I'd like to remind anyone watching this that Samashki is a surrounded town.

I managed to escape before the final assault, and found myself on the Russian side of the lines. There I was perfectly and horribly positioned to see people I had known stumble out of their burning town.

Bodies, bodies, everywhere! Nearly 200 people were killed. It was the worst massacre of the Chechen war. I was haunted by the experience, and vowed to return to find who among my many friends were alive or dead. In going back, I had to steel myself to face the physical and psychological scars carved by the knife of war. The aftermath is often more cruel than the moment.

It had been almost two years since I had been there. The Russian soldiers may have gone, but their signature of destruction is everywhere to be seen. Samashki was used as a test firing range for artillery shells and vacuum bombs. It is a miracle that anyone survived. I went to the graveyard to look for fallen friends. I was shocked to see how many fighters had died, their graves marked by flag poles, lest future generations forget their sacrifice. The graves were maintained with care.

That first night back, I attended a Zikr, or ritual dance of remembrance for the dead. This was the first time I had seen the village elders and youth perform it together. During the war, the elders tried to surrender Samashki - while the youth wanted to fight on.

Now the war is over - and with no outside aid or international assistance, unity is required to rebuild. Shattered homes have become quarries, and bricks salvaged from the rubble - the building blocks of the future.

Weirdly, many people were surprised to see me alive.

Everyone was saying, "You had been shot and killed - that means you will live a long life! We thought we had lost you, that you were dead."

Sometimes, it was almost as if I were a prodigal son returned. I found children back in school, using old Russian textbooks. Strangely, they were using Soviet textbooks. The children had all been through hell, judging by their art work.

There were other changes, too. This woman has broken the new law that prohibits trafficking alcohol. Theoretically, she could have been flogged - but instead only lost some 50 bottles.

Islam may have come to Samashki. But the town is not completely dry. At a wedding reception that same evening, vodka flowed freely. I could scarcely belief my eyes and ears. Old friends coming out of the wood-work to say hello. People dancing, people smiling and laughing!

Samashki, the town synonymous with destruction and sorrow, seemed to have come back to life! The only thing to do was join in and celebrate

But something nagged at me. I still had not learned of the fate of the Samashki commander, Hussein. He had sheltered me during the darkest days of the siege, and even made my escape possible. You might say I owe him my life.

I went to his house and found his father and brother hard at work, loading potatoes. To my delight and relief, they told me Hussein had survived the assault, but was at present out of town. Last time I was here I helped them push a rocket warhead up a truck, so I may as well help load the potatoes now!

But my mood changed abruptly when they told me Hussein would not, could not return. The village elders had branded him a traitor, and said he had been working for the Russians all along. The elders came and said that Hussein had brought war to Samashki. They told him he had to leave.

"He did not want to, god he did not want to go. But they made him. How can my older brother be a traitor? How could he sell out his own people?"

I was staggered - the man I had seen mount devastating raid on Russian armor accused of collaboration? I had to learn the truth.

When Hussein left Chechnya, he traveled 3000 miles East to the village of Nadezhdovka in Kazakhstan. I went there to find him. Ironically, this area is where Stalin had banished the Chechens in 1944, unjustly accusing them of collaboration with the Nazi enemy.

I found Hussein on a broken-down collective farm. "This used to be a fine place, Thomas, a really nice place… (disembodied voice)...fantastic place." Hussein knew about the charge of collaboration. He dismissed it as disinformation spread by the elders. He said they were cowards, who forced him to abandon the people he had vowed to defend. But he saved his real rage for the Russians. Under failing lights, he told me how drunken soldiers had attacked Samashki to the music of Shostakovich.

"...over the screaming there was that music - and with that music, they killed a village. It was the first time I saw a village killed. Not individual people, Thomas, but a village.…"

Hussein is now plotting his revenge - against the Russians who murdered his people to music, and the Chechens who tarnished his name. He showed me his arsenal, including a heavy machine gun customized for mobile use. His son, Ruslan has become an expert marksman with the weapon - and ready to avenge his father's honor.

"We have made our preparations for our return there...[pause]...it is not over. It is merely a little pause in the action".

Hussein is going back to Samashki - and he is not alone. During our last evening, I was re-acquainted with a number of men I had met before - hard core veterans of the Samashki front. All of whom had been branded with the same charge of collaboration with the enemy.

It was all too depressing. Who was the betrayed and who the betrayer? Hussein's rejection by his own people had turned into a bitter rage. The invisible scars on his soul still bleeding.

As I left him, I had to wonder and worry about the process of reconciliation and reconstruction in Samashki, and indeed in Chechnya as a whole. The war in Chechnya is not over. Perhaps it has just begun.

Discussion

Question: When did you make this film exactly? This winter?

Goltz: Yes, February. Not a lot of fun, huh? Shall I ask the rhetorical questions that I asked before the showing? "What was the element you left out?" Answer: One of the reasons that Hussein came under a cloud of suspicion was because he allowed a certain journalist to come and shoot video of all the defensive positions, and after the journalist left, the positions were bombed. Ergo, the journalist was working for the Russian troops all along. That journalist, of course, was me. When I got back this time, I got death threats. But people soon realized that had I been guilty as charged I would have had to have been really insane to return once all the Russian troops were gone. Also, I chose to confront the issue head on - and I even managed to get it all on camera. The usual response to the question of whether people I knew actually thought that I was a Russian agent was "Yes, we heard these rumors about you, but we never believed them because you have always been a true friend." My understanding is that there is still one wildman up in Bamut who is determined to kill me.

Question: How do think that this happened, in terms of the coincidence of their perceived cause and effect?

Goltz: In any conflict zone, it is very common for people to be very paranoid of journalists, because journalists can often be spies or perceived as being spies. I have encountered this many times, in Azerbaijan, in Abkhazia and elsewhere. "Oh, you are a journalist, here to take photographs of the defense positions and then give them to the enemy.... Last week some other journalist came and took pictures and the next day we were bombed." You try to explain, "Well, look - your positions are getting bombed all the time for the very good reason that they are positions, and you shoot from them and thus attract attention - the fact that you are getting bombed has nothing to do with a journalist having taken pictures." No matter how illogical, such paranoia is fairly standard. The difference in this instance was the level of intimacy. It was not "a journalist came, took pictures, left, and then we got bombed." It was "Our friend Thomas came, lived with us for weeks on end, left, and then we got really whacked." So there was a level of intensity about the otherwise standard paranoia that was quite different from other situations.

There is another strange element about this as well. Many people thought I was dead, and then come back to life and thus were deeply confused. Has anybody here been following the case of Fred Cuny? In the New York Times Magazine piece about him every reference to Fred Cuny being in Samashki is actually about Thomas Goltz being in Samashki. And the author (Scott Anderson) knew it when he wrote it. For example, a woman in the piece you just watched says "We heard you were dead." The reason for that emerged during the course of a conversation. It seems that when the journalist in question was looking into the Cuny case, he came to Samashki and said he was looking into the case of the missing American, and people thought they were asking about me. "Our American got killed, Thomas got killed? Thomas is dead?" "No," said the journalist, "His name is Fred." "Well, our American is named Thomas." "No, his name must be Fred," the journalist insisted. Even the photographer who was traveling with Scott Anderson, said, "Look, I know Thomas Goltz, I know he was living here - do not put a spin on this." But Anderson did it because Samashki was a resonant symbol of the war and he had to get Fred Cuny into Samashki, whereas in reality Fred Cuny was not there. It was a pretty good example of shabby journalism.

Question: What about the reports that Fred Cuny was in Bamut?

Goltz: I do not think there is much doubt about that. But Bamut is the other direction.

Question: I understand that you got quite a warm reception there when you came back, so if people thought that if you were actually...

Goltz: The initial reception was very strange. The morning after the first night I was back, my host, an old man, came and sat on my bed to have a little chat. Chechen elders do not come and sit on the bed at 6 o'clock in the morning - so I knew something was up. Then he spelled it out to me - and I did not want to leave the house. Then I said that the only way to get through this one is confrontation. So I went out and I confronted it. Then, as I say, by the very fact of having been there, I spiked all of this stuff about my being a spy for the Russians.

Question: But how then did that affect the perception of Hussein? Do you think you did?

Goltz: I hope so. He had been put into an untenable situation. The style of negotiations between the Russians and the elders, the attempt to split the community, was played out with a vengeance in Samashki, where immense pressure was put on the elders to demilitarize the town. The elders would go off to meet with the Russian command at a command post about 5 miles outside of Samashki before the attack, and the local militants (I hate that word, but let's just use it) said, "Hussein, you are our commander. We do not know what they are discussing out there. We need one of our people to go along to these various meetings. You go." But the moment that Hussein started to go to these meetings, he became associated with the negotiations and the onus of potential collaboration started to come down on him. Finally, a deal was struck with the Russians, which was that all the fighters had to leave the town aside from a 10-man armed police grouping or something like this. The fighters, including Hussein, went into the surrounding forests, and at that moment (as I was coming back down to Samashki), there was an announcement that all the elders, or this group of negotiating elders who were still out of town, had all been killed by the militants. It was total disinformation. But it allowed the Russian military to go in and start whacking the town, allegedly in revenge for the killing of the elders - every one of whom is alive today. I knew every one of them who was involved in this negotiating process.

Hussein thus earned the double onus of having been associated with the elders negotiating group - which had so patently failed in saving the town - and then at the moment when he might have fought off the attack - because of the demilitarization deal that had been struck - he and his men were off in the surrounding forest and unable to defend it. After that, his situation started getting very, very dubious and untenable indeed. A couple of times, he was shot at in the town, and that is the time that he decided to leave and to go back to Kazakstan. And the third strike against him, which is really horrible, is that there was the second storming of Samashki in March 1996, this time after the attack on Sernovodsk. This was, at least on the Chechen news, reported as the time that the Russians were using the so-called vacuum bombs, which are air-fuel bombs. These are the poor man's neutron bomb. It explodes over the ground, maximum collateral damage, and it usually kills by internal bleeding. Anyway, after hitting the town with artillery and the air-fuel bombs, the Russians made another infantry assault - but this time, the fighters stayed in town, got most of the civilians out, and then gave the Russian military the battle of their lives. Chechen estimates of dead on the Russian side range from 1,000 to 4,000. Whatever the truth may be, the Russians were unable to take a town they had already surrounded. And Hussein was not there to help defend it.

Question: Have you tried to talk to the Russian military about the Samashki events, and how do they react to you? Do they talk to you?

Goltz: Yes, I have. After I got out, I spent time on the other side of the line, and I "rode with the Russians" later on, in a manner of speaking. But after the initial massacre of April 7, 1995, I got back to Moscow and attended a press conference held by Internal Minister Kulikov, where he uttered the most incredible distortions and lies. I was so outraged. I went over to Steve Coppen at ABC news, and I said, "Give me your best contact in Russian television." He said, "Well, here is Yevgeny Kiselev's telephone number." So I called up Kiselev, and I said, "I have got material from Samashki. You can use what you want." And Kiselev used it all. He used it first as a news spot on Sevodnya and after that on Itogi, where they did a big out-take on Samashki, more or less based on my material. I gave it to them free of charge because I thought the Russian people should know. Using that, they directly contradicted Kulikov's various statements and basically blew the whistle on their own military. They were able to take it a lot further than I was able to take it in the Western media.

Question: As someone who has been in the Caucasus, is it safe to say that the Russians are behind every ethnic conflagration, in terms of exploiting them for their own advantage?

Goltz: Yes - but... I have been singing that song for a long time, and I continue to sing it today. Yes. But first, which Russians are we talking about? Which Moscow? Is it the Yeltsin camp? Is it the former Grachev camp? Which one is doing what? I know of cases where we had Russian mercenaries fighting against each other in various conflicts in the region. The history of mercenary warfare is a fascinating thing, I mean, who was Xenophon? A Greek mercenary fighting other Greeks down in Persia. Is there a master plan? Well, to read this famous article that came out in Nezavisimaya Gazeta about a month ago, there is indeed a plan to destabilize countries like Azerbaijan and Georgia and elsewhere, using ethnic conflict to do so. So, if there was not a plan before, now it is becoming increasingly official.

Question: I am in the US military, and I have heard some characterizations of the way the Russians treated their own dead, leaving them in the streets of Grozny for weeks at a time, and just incredibly barbaric and callous behavior vis-à-vis not only the dead, but the relatives and loved ones of the dead. Can you attest to this? You said these troops were drunk who were attacking Samashki.

Goltz: I can attest to it.

Question: I am just astounded that a military (that calls itself that) could act in such a way and expect to be operationally capable.

Goltz: Clearly, you are not a reader of Soldier of Fortune. Otherwise, you would have had a chance to read an article of mine sometime in 1995, I believe entitled, "Diesels, Destruction and Drunks." It began and ended with a wild adventure I had in the so called "mountain war" in Chechnya. There were just so many elements of the war that were so surreal. A Reuters cameraman from Azerbaijan, an old friend of mine, was picked up at a crucial checkpoint and was about to be thrown into one of the "filtration centers," and the filtration centers were not pleasant areas. There were a couple of other reporters around who heard about this, so we sallied forth and got to the check point to find and save our colleague. Talk of weird coincidences! The chief of the Military Police there was a regular Ninja Turtle, mask and all. But he had very bushy eyebrows. So I engaged him in a conversation about Armenia. He started asking me about California. Artur Kinjaliyan was his name. We became buddies of a sort, and I managed to extract the cameraman (he was there without papers, and might well have been put into a filtration camp because he was there illegally.) Anyway, we got the cameramen.

His driver was a Chechen youth from Ingushetia, and he looked the wrong way at the Armenian commander and Kinjalian grabbed him and threw him in the BTR - that is the Russian armored personnel carrier - and off they sped off. Now we had to go save the Chechen. So we went back to Grozny and the high command, got some sort of official papers and then sped back to the front, somehow stopping the BTR before it deposited our Chechen friend in the horrible place. It helped that the Reuters cameraman decided to give his body armor to Artur as a sort of trophy of war or something - there went $1,500 worth of kevlar - but that was all right.

Then I thought, "Hmm. Things are about as friendly as they can possibly be right now. This is my chance." So I said, "Artur, take me with you." All of his guys laughed. "Hah! the American wants to go with us, yeah..." But to the shock and chagrin of all the other correspondents, I climbed aboard the BTR and went speeding back off through Grozny and up another road, heavy with military traffic, shooting it all on video camera as I sat on top of the transport drinking beer with Artur. We turned a corner, and went down another road, speeding along. Then I noticed a number of T-84s changing positions and starting to move into the mountains. Suddenly one of them turned around. I kind of nudged Artur, and I shouted over the roar of the engine, "Isn't that tank going in the wrong direction?" He said, "son of a bitch!" The tank came roaring over the field, up and over a ditch and straight for us - there was nowhere else for us to go. And the tank driver apparently sees nothing. BANG! - A road accident between a BTR and a T-84. We were pretty lucky that we did not tip over and get crushed. Later, Artur said to me, "I bet that was the first time you had a car accident with a tank!" I said, "You're damn right!" I have it all on film.

Anyway, Artur's BTR was only partially destroyed. It hobbled into Shali, which is the town where I was going to. He drops me off about a mile outside of town because of curfews - even though Shali is allegedly pacified, it is not a good idea to go in at night or even at evening, as the sheep and the shepherds are coming home, and because nobody knows which shepherd is actually a shepherd by day and guerrilla by night. So we say our good-byes and about ten minutes later, suddenly, in comes the same damn T-84, roaring into town. It points its barrel at various houses while the commander goes around in the great shakedown: "Give us vodka." Again, I have got this all on film. The soldiers make their score, try to hide the bottle from my camera, climb back up on the tank and roar back out of town. An hour later, they were back - but this time they were stoned out of their minds, roaring around like a bull elephant that had been fed dope or something. The tank smashed into one house, killed an old lady there, ran over the cemetery and so on and finally turned back down the road. The rumor was, the next day (although I have never had this confirmed), that Artur Kenjalian, as the main MP, picked these guys up and shot them. That was the state of the Russian military on the front.

Question: Can you explain why the Russians performed so badly in the struggle against Samashki? The only thing I heard was that they were poorly coordinated, there were units that did not know each other, but was there anything more than that? Why were there so many casualties and why were the Russians so bad at what they were supposed to do?

Goltz: I can answer it from the other side - namely, the activities of my friend Hussein. Hussein acquired an arsenal of anti-tank mines, and I accompanied them around the potato fields (without coordinates) as they planted them here and there. He had even acquired a rocket warhead, or five rocket warheads, from some disused base, that he was using as another massive anti-tank device which could basically lift a column of tanks into the sky. Again, it is a pity that you do not read Soldier of Fortune, because they got very excited about this when they asked me to do a piece on exactly this QUESTION:
how the hell did the Chechens win against these overwhelming odds? And the answer is to be found in one word: dukh. Spirit. And their incredible ability to improvise everything. For example, the Soldier of Fortune editors - people who pride themselves on knowing everything about military ordinance - could not figure this thing out. They took the still pictures made from the video tape and passed them around to all of their military friends, and they finally decided it was the warhead from an S-22G missile (or something like this.) No one, apparently, in the American military had ever heard of anybody doing anything like this before - using a rocket warhead as a mine. This is the sort of thing that the Chechens are capable of doing. A friend of mine, Lawrence Sheets from Reuters, based in Tbilisi, who has spent a lot of time in Chechnya, ran into a guy who was using a rocket pod from a downed military helicopter. They would strip off the rocket, develop a uniquely padded coating with wax or something on the outside so they would not incinerate when they fired these things, and created, in effect, a poor man's Stinger missile. That was the defensive side. From the Russian side, it was basically chaos, drunkenness, dereliction, lack of training, lack of coordination. Higher up, to believe Arthur Martirosian from the Conflict Management Group and the Discussion that we once had via e-mail, the Chechens were masters of radio intercepts as well as radio infusion, disinformation feeds to the Russians to get the Russians to start firing on themselves. In one battle I was in with Hussein, he managed to do this without a radio. There were two columns, he hit one, the other one thought it was the other one, and we sat back and laughed as they destroyed themselves outside Samashki.

Question: You were talking about picking up odd bits of missile here and there from downed helicopters and the like. But were the Chechens being supplied with proper armaments from other sources outside?

Goltz: No. The main contribution from people like the Circassian Diaspora in places like Turkey was money. Getting armaments of any sort into Chechnya was hellishly difficult. However, going from Rostov-on-Don on down to Grozny or elsewhere with several million dollars in your pocket, you could buy up quite a bit of good stuff from the various deserters or potential deserters and so on along the way, or you could even have it delivered to you by Russian units who wanted to get out once you were in Chechnya. So the greatest weapon of the so-called Chechnya Diaspora was cash, and not any sort of sophisticated weaponry. My suspicion is that they were also dropping in things like communication packages and radios, which are pretty essential to performance. But weaponry? No. That was bought on the spot usually from Russian units or reconstituted or cannibalized from destroyed equipment.

Question: The tape shows how you would be with the Chechens and then you have related times where you are with the Russians. How, as a reporter, do you go between the two without having them say to you, "Well, you were with them before, how do we know that you're not going to betray us?" Because you are obviously trying to see both sides, regardless of how you might feel about the conflict.

Goltz: This is not a joke. I have two caps. With the Russians I would wear my OMON cap, which was given to me on May 9, and then I would wear my signature Kurdish beanie when among the Chechens. Usually I travel alone, but once I was traveling with a BBC correspondent, and he said, "you're going to forget to change hats sometime and get us killed." Yes, it was dicey, always dicey. Physically as well as emotionally. Sometimes during the mountain war in June 1995, we would cross the front lines three times a day -it got really crazy. Finally, you did not know where you were.

Question: What is the spirit among the people now? Can they rebuild a new nation?

Goltz: I hope they can stick together, but there are some real wild men out there right now. The first name that comes to mind is Salman Raduev. And then behind Salman Raduev, there are others who are scarred by this conflict, who are still in place, who disagree with Maskhadov's policies or Basaev's policies, who are agents who are out of control. Then we have what look like provocations like the Red Cross murders in Novy Atagi. I hope they can keep it under control, but it is a society that is still penned in from all sides, has far too much weaponry, has far too much hatred adrift in the atmosphere. I do not want to be pessimistic because I am very, very fond of the Chechens. The only thing I can say is that I hope they can keep it together. That's one of the things I found to be so depressing about being with Hussein.

Question: I wonder what will happen with the oil pipeline going through Grozny. I heard recently that the AIOC President went and negotiated with the President of Chechnya. Could you comment on that?

Goltz: As for the pipeline, about a month ago I posted a piece on the David Johnson's Russia List on the Internet entitled "A Contrarian View of the Caspian Oil Sweepstakes." I went through all of the various pipeline options that are being discussed right now, and then I offered my own. That is, the pipeline in the sky. (Haha!) It would add billions of dollars to the project cost. But if you could build it high enough, kind of like all those gas pipelines you see in village and towns throughout the lands of the former Soviet Union, you would get rid of the problem of the "petrol-kleptos" who are drilling into the line along the ground. You could even build it over Iran and straight down to the Gulf. Or, possibly, you could build it over Armenia, touching the ground once or twice in Turkey before arriving at the East Mediterranean terminal. That's my pipeline idea. (Hahaha!)

Seriously - anybody who thinks that they are going to be controlling Chechnya, especially oil in Chechnya, in the immediate future, is out of their minds. It is just as simple as that. I stopped in with Hussein's brother Usam, and we filled up on diesel in a nifty little place in the mountain which they had been tapping into for quite some time. It is just going to be impossible for the authorities there (although they allegedly have made the attempt to stop the so-called petrol-kleptos) to be capable of controlling it because it is one of the few ways for most people to get gas or make money, and stopping it now would lead to a revolution.

Question: Do you think that this is going to be a flashpoint for Chechnya with Russia again? It seems unlikely that the Russians are going to send in the troops in large numbers again. But for Russia, this is big stakes. If the oil does not flow through its pipeline from Baku, and instead goes across to Georgia and then down into Turkey, there is no prospect of the agreed dual pipeline. The Chechens are going to keep insisting, in the way that they are now, that they are a party to the negotiations of the AIOC, and that nothing will pass through Chechnya otherwise. If, for example, Russia tries to by-pass Chechnya with a pipeline through Dagestan, doing the same thing they are trying to do with the railway right now? Dagestan is now in a very unstable situation and it is very easy for the Chechens to destabilize the areas of Dagestan where this might pass through. This seems to be a fairly untenable position as far as Russia is concerned, since it is going to be Russia losing out on the main pipeline, and not just on the "early oil." Could this be another spark for renewed conflict?

Goltz: I have an even more contrarian view about all of that. It is not a very popular, but it is my considered opinion that Russia does not want that oil to get out at all. So all this talk about this or that pipeline route is just so much smoke. Make a little conflict here, a little conflict there...Okay, let's forget about this route and propose another one, this time up through Dagestan...A new surveyor team is dispatched, more studies are conducted - and project costs mount along with each delay. First there was the Turkish route, then then Georgia route, then the Chechen route, then the Dagestan route - and now there is even the China route. It just goes on and on and on. That is why I think that even my Pipeline in the Sky idea is perfectly tenable (haha).

Question: If, as you say, the Russians and the Chechens had come to this agreement about Samashki whereby the militants left, does that mean that the attack was purely punitive? What was the point of attacking the town if all of the soldiers had left?

Goltz: I say (and not just me) that Samashki was the My Lai of the Chechen War. There is a difference, however. My Lai did not come out, was not news, until some army photographer allowed some local newspaper in Indiana to publish the first picture and then after that it snowballed and finally it became the scandal and the end of Lieutenant Talley and all. In other words, there was an attempt to cover it up, or at least not to let the news out. The difference with Samashki is that the Russians wanted that news out. They wanted to give terror a name. They wanted the resonant word "Samashki" to roll through the hills and the other villages so that people would say, "Let us submit, let us not become another Samashki." It was selected as a symbol to give terror a name. My evidence is circumstantial. After the initial assault of April, 1995, I was on the Russian side of the lines trying to get in (the authorities would not even let the Red Cross go in for some five days) when one day I promised Sasha, the Colonel at the main checkpoint, a cigar (for those of you who read my New York Times article on cigars as bribes, that is an incident I did not mention) if he would let us go to Samashki, and he did. I was traveling with my colleague Lawrence Streets, and we got the first footage of bodies in the streets, burnt girls, just charred ash, et cetera, et cetera. It was a lovely time, I can assure you. We thought it was such a lovely time, that when we came back out, we picked up an old Chechen woman and asked her to hide our tapes in the folds of her clothes. She understood perfectly well why we were asking her to do so, and she was obliging. When we got back out to the checkpoint, Sasha looked in the car window and said, "I bet you got some good material," and let us go.

Question: How many people were in Samashki before the war, and how many are there now? And how many new graves did you see?

Goltz: The numbers are about 15,000 before the war. At the time of the siege, they were down to somewhere around 5,000 or 6,000 or something like this. Right now I would say there are about 10,000, but it is pretty hard to get a really hard estimate. There were hundreds of new graves. In the first storming of the town, there were about 200 killed, of whom only two or three bore arms. Everyone else was old men, women, children hiding in basements. The second time around, there were about 60 killed or so, because they were better prepared. Andrei Mironov, who has done a study on Samashki for "Memorial" that produced a booklet on Samashki, maintains that the majority of the 50 or 60 fighters killed during the second storming all died of internal implosion associated with a fuel-air bombs, as opposed to direct shrapnel or bullets. As for the civilian population, most were able to get out before the storming, although a lot of people just stayed in their basements, too.

What is of interest here is how the Chechens reacted. Unlike other ethnic groups that I have had to deal with in serious conflict situations, they do not run away, and if they run away, they do not run away very far - and they come back immediately to start reconstruction. Some of the people I know rebuilt their houses three times in two years. It is an obsession with place, with land. "We are not going to become refugees. No, no, no." The moment the fighting stops, people pick up bricks and start to rebuild.

Question: What are your speculations about the origins of the war, and why the decision was made by the Russians in December 1994 to proceed with this? Which Moscow was doing this, and who was calling the shots?

Goltz: I can speculate. The first time I was in Chechnya was at the 50th anniversary of the so-called "Day of Chechen Genocide," and at the burial of Zviad Gamsakhurdia, on February 23-24, 1994. On both those days, and especially on the Day of Chechen Genocide, Dzhokhar Dudaev trotted out his army. It was clear from that day, at least for me, that Moscow had to do something and was going to do something. It was known that the Chechens had weapons, and of course the place was being criminalized in the Moscow media (and also the Western media) to a degree that I always thought was just fantasy. This disinformation was lapped up by people without imaginations or brains to think through the various numbers being churned out in Moscow. One statistic that appeared in the New York Times out of a Moscow report was that there were an average of two train robberies a day in the first six months of 1994. Say what? The same train being robbed twice a day the moment it comes through Chechnya? Anyway, it was evident at that time that something would happen.

You might think this is a silly anecdote, but I think it kind of wraps up this situation at that time and anticipated the future. After all the parades, after Zviad was buried, after all the eulogies, Dzhokhar Dudaev threw a little party to show off the new uniforms for the new Chechen military. It was a real fashion show. Can you imagine Chechen men marching up and down a cat walk, preening in their new uniforms, prancing up and down? My favorite outfit were the new dress togs of the new Chechen Navy. (Haha...) It sounds kind of silly, but that was the atmosphere that was developing there - and it was down the tube toward war after that. But why Boris pulled the trigger precisely in December 1994, I do not know.

Question: There was a report the other day that the Chechens just had their first public execution under Shariat law. The murderer was executed. Are they Islamic fundamentalists, for lack of a better term. What is the deal here?

Goltz: Let's get rid of that term right away. I hate that term. The majority of Chechens are profound believers in Islam. The majority of that majority have their own, well, I do not want to call it a "version" of Islam, but it is a very specific individual connection between the individual and Allah. During Ramadan, people were coming up to me and basically forcing glasses of vodka in my direction because I was not a Muslim and they wanted me to feel perfectly at home. Interestingly, among most Soviet Muslims that I know, the Chechens are unique in that from a very young age they are aware of the tenets of belief. They know their Islam, or at least their traditional version of it.

Now, because of the war and because of the influence of the Diaspora from places like Turkey, Jordan and Syria, where there are Chechen communities which have become quasi-Arabized and are much closer to that Arab way of looking at Islam - and especially that Saudi way of looking at Islam - we are seeing a sort of "Wahabbification" of Chechen Islam, an expression of Islam that I myself, although I am not a Muslim, do not find attractive. A good example is Khattab, a wild man in the mountains. Do you all know Khattab? He's like the Geronimo of the Chechen War - a huge, beautiful Saudi who fought in Afghanistan who is now married to a Chechen woman and lives up in the mountains. He was the guy who intercepted the Russian column right before the death of Dudaev, blasting off a mine in front of the lead vehicle and then cutting off the back and thus trapping about 10 or 15 armored vehicles, which were then picked off one by one. I think one vehicle managed to escape somehow by going down a ravine. The death toll was somewhere between 80 and 150 Russians - I forget the numbers exactly. Because he brought along his own private cameraman, you can buy that video (and other "Greatest Hits of the Chechen War") down in the Grozny bazaar. It is a rather stunning film in the true sense of the word. There is Khattab shouting "Allah ul-Akhbar!" while missiles rain down on the column. In the aftermath of the battle, the victors pick through the ruins of armored vehicles, and there is Khattab with what appear to be human entrails on the end of his bayonet. Another of the "Greatest Hits" available for purchase in the Grozny bazaar (I believe it is Khattab, but I could be mistaken) is the execution of a number of particularly vile and nasty Russian soldiers that had been taken captive. I did not see this one myself, but I have been told on very good authority what it consists of. Two guys who were known as murderers had their throats slit on camera. Two others who were known for their brutality were executed by shooting. Anyway, this is the situation that exists in the mountains, populated by individuals like Mr. Khattab, whom I guess we could call fundamentalists in that overused American sense of the word, which in this case fits.

Question: Could you talk a little bit about Dudaev and how he died?

Goltz: Who killed Dudaev? No one really knows. There was all sorts of speculation. Was it because of the telephone link? There was a picture that was published in Nezavisimaya Gazeta (I believe; I could be mistaken; I have seen the picture but forget which publication) that depicts a hapless Dzhokhar Dudaev with a telephone in his hand looking up into the cross-hairs of a smart missile like those we saw on CNN during the Gulf War. The caption read: "The Last Seconds of Dzhokhar Dudaev's Life." Interestingly, the digital markings on the crosshair frame were in English, thus suggesting that it was an American satellite, or possibly even an American missile that was going down that telephone pipeline to get Dzhokhar. Some go further. Some say that Dzhokhar was waiting to speak with Bill Clinton. You recall that Clinton was in Moscow. The idea is that Dudayev was put on hold while these coordinates were locked in, and then the fire and forget missile was sent down the pipeline. There is a problem with that theory, though, because Clinton had been in Moscow two days before, taking the occasion to describe Boris Nikolaevich as the "Abraham Lincoln" of Russia, which is when he lost my vote. But Bill was not in Moscow and Dzhokhar was not put on hold waiting to chat with him when the missile came in.

There was another account that came from Paul Goble, that Dudayev was waiting to speak to the emissary of King Hassan II of Morocco, who kick-started the Palestinian-Israeli dialogue in Norway. There is whole range of speculation. Do you remember that play, The Bridge of Roshoman, where the truth of the central event changes according to the perspective of the narrator?

It is all very confused and confusing, aside from one thing. The Chechens believe the Americans had a hand in it somehow. And as a result, whether it was an American satellite, an American missile, this or that or the other thing, they believe that the Americans had a hand in the death of their president. And I can assure you that right now in Chechnya the level of anti-American sentiment is very high. There is toleration for individuals like myself, but anti-Americanism is very high. Remember those bricks (in the film)? I had one thrown at me. I started to take pictures and they said stop. I said, "I am an American correspondent," and they threw a brick at me and said, "You did this! You and your IMF! You funded this war!" That attitude goes all through Chechen society. Thus, whether by default or design - who knows? - the Chechens believe the United States had a hand in the death of their president and the destruction of their country, and are not feeling friendly towards the United States of American right now. They have no more illusions and they do not, as we would say in Montana, expect "jack shit" from us anymore. And I think that is a scandal and a shame.

Second Video Presentation: "Check Points of the Mind"

Borders and Check Points...

With burned and shattered buildings, they have become the icons of ethnic strife in the post-Soviet Caucasus. When the Soviet Union collapsed in 1991, the West said the Cold War was over. But for many people in the USSR, the "hot war" had just begun. The smoldering embers of ethnic hatred, often stoked by Moscow, soon erupted into flame. The world knows about the wars over Karabakh in Azerbaijan, Abkhazia in Georgia and, of course, the carnage in Chechnya. But few know about the short, brutal war that erupted between the Ingushetians and Ossetians in 1992. The facts about who started shooting first remain a question of bitter dispute. When the smoke cleared, hundreds had been killed and thousands driven from their homes. Many on both sides say the mainly Muslim Inguish and nominally Christian Ossetians are eternal enemies. Today, two small peoples, are divided along ethnic lines.

To try and break through the cycle of mutual distrust, the Russian-American Press and Information Center and the Institute of War and Peace Reporting joined together to attempt what many said was impossible: to make a joint television program on the conflict, using Ingushetians and Ossetian reporters and cameramen. The project editor was American journalist Thomas Goltz, who had final veto power over content. Our Ingush reporter was Yaqub Mankiev, a young reporter from Nazran. He was joined by his Ossetian colleague, Elbrus Dzabeyev, to explore cultural and political subjects in both republics that were normally taboo. Of fundamental importance was the agreement of the two television teams to broadcast the resulting documentary simultaneously. Border crossings might remain on the ground, but the idea was to start lifting the check points of the mind.

Our first stop was Chermen in the Prigorodny district in Ossetia, scene of the worst fighting in 1992. Chermen still appears to be a ghost town. Chermen - this was where the events of the Ossetian-Ingush conflict erupted in 1992. But time heals all wounds and today the village is rising from the ashes. People are returning to their lives before the conflict. To our surprise, we discovered that not all the Ingushetians had left Chermen - or that many had chosen to come back. Down a side street, we found a school where young Ingushetian children were on recess break. In stark contrast to the bleak, burnt out scene observed from the main street, here there was activity and life.

We asked the Ossetian authorities to allow us to interview an Ingushetian family, and were directed to the house of Leila Mirjoieva. We worried that due to the need for "clearance" by the authorities, that Mrs. Mirjoieva would be less than frank about her views on the current situation. But it became evident that Mrs. Mirjoieva had plenty to say.

Journalist: "Were you afraid to return?"

Leila: "Of course we were afraid... to tell you the truth we would lie awake at night, and think..."

Journalist: "Can you remember the day you returned?"

Leila: "Of course I can."

Journalist: "Did you meet with your Ossetian neighbors?"

Leila: "Of course I spoke with them - they were my neighbors."

Journalist: "How did they accept you?"

Leila: "We were well received, and our fears about returning diminished. We feel safe, or pretty safe."

Journalist: "Have your relations with your neighbors changed?"

Leila: "Things are pretty much as they were when we left. Maybe that's because everyone wants to forget about the bad times and focus on the future. We need to make peace."

Our joint Inguish/Ossetian team then paid a visit to Leila's Ossetian neighbor, Bella Kundukhova. She described the fear that had gripped the Ossetian community then and the fear that continues to haunt it today.

Bella: "To be honest, no one here is confident enough to say that all of this madness has come to an end."

Journalist: "Are there fears that all of this might start all over again?"

Bella: "Where is the guarantee that it is not going to happen again? Neither side can say so. Still, what is done is done... But I don't want to pass this conflict down to our children. I hope that the next generation can live together normally."

Ingush and Ossetian housewives, living side by side in Chermen? It was not what we expected. But saying that peace and mutual understanding had arrived was far too early.

You can't find this border on any map. Cherman is divided into two sections: Ossetian and Ingushetian. Only time can guide the villagers across it. Someday, it may fade away...

The next venue was Nazran, capital of the tiny Republic of Ingushetia, the smallest of the 21 republics that make up the Russian Federation. Almost a fifth of its three thousand citizens are refugees from Ossetia. Some blame the previous government for the conflict, others blame Moscow. All want peace. An anonymous man we encountered on the main square explained why the Ingushetians want peace.

Man: "We Ingushetians know perfectly well that we must live in peace with our neighbors. As small nation that lost half its population in the deportations in 1944, we are well aware of the perils of ethnic conflict."

Meet Akhmad Pliev. Indeed, it is impossible to understand the Ingushetians without regard for so-called vysyl (or deportations of 1944.) Accusing both Inguishetians and their Chechen cousins of collaboration with the Nazi army, Stalin sent them all to the wastelands of Central Asia. Half died in route.

Eighty year old Akhmad Pliev remembers the years of exile and the return in 1957. He invited us into his house to explain.

Akhmad: "I lived in Kyrgyzia....I came there from Northern Kazakhstan..."

Interestingly, his family name - Pliev - is also shared by many Ossetians. But he has lost all contact with his Ossetian relatives due to the present conflict. He agreed to a joint interview to explain why.

Akhmad: "This conflict has so torn us apart; we are now completely disconnected. I am 80 years old and I want to visit my relatives before I die. But that seems impossible. Why? Divisions, divisions... In fact, we could have formed one republic - yes - one Ossetian-Ingushietian republic. But no. The governments inspired hatred in the Ossetians against the Ingushetians and vice versa. So we started hating each other while in essence we are related to each other. Perhaps this is the naive opinion of an old man, but it is what I think..."

We told him that we would try and convey his message to the Ossetian Plievs, if we could find any.

Ingushetia may be beset by an influx of refugees from Ossetia as well as Chechnya, but it is clear from the red brick houses going up that the people have faith in the future the government has set out on ambitious agenda including the construction of a new capital city, called Magaz. The unusual sight of road repair is a direct result of Moscow's determination to keep Ingushetia happily within the federation - and to prevent the Ingushetians from following their Chechen kin into secession.

By coincidence, our visit coincided with the last days of the Muslim month of Hajj. Judging by the number of sheep along the roads, a record number of Ingushetians intended to comply with the ritual sacrifice. We encountered a man who said that the Ossetians in our team could not understand Islam because there were "no Muslims" in Ossetia - a fact hotly contested by our Ossetia reporter. We let the slightly unsavory incident behind, and continued our journey of exploring contradictions.

A far better reception was afforded our group by Mr. Ali Tangiev. Describing himself as a small businessman, Ali said he wanted to make money and do good works at the same time. He said he was seeking an Ossetian business partner with the aim of exporting to Georgia and beyond - even to America. His factory was a wild labyrinth of interests and activities. In one room he manufactures stools and chairs. In another, men were making windows and doors. In still other rooms, he was making bread and even kolbasa sausage.

Ali: "I am ready to do anything, no matter how small, that will contribute to the friendship of our two peoples. There is nothing to be gained by conflict; let there be peace; let there be mutual understanding; we do not need this conflict."

Our next stop was to the Ossetian capital of Vladikavkaz. The name means "power in the Caucasus" and it has been the major center of Russian power-projection for over 200 years. It is also one of the last places where statues of Lenin still stand. The contrast with Nazran in Ingushetia was dramatic, both in terms of architecture and the sort of people one meets on the street. In addition to the Ossetians, the new Republic of Ossetia/Alanya is home to Armenians, Greeks, Russians and Balkarians. As a people, the Ossetians have traditionally allied themselves with Moscow. But nearly everyone we met said that the time had come for peace between Ossetia and Ingushetia and for the two republics to engage in Discussion about the future, and not the past. As Professor Anzour Khachirov says: "Peace must come from the Ossetians and Ingushetians themselves, it cannot be imposed from Moscow... The two people must solve this problem themselves..."

We managed to track down a household where two people have established peace of a different kind. Ruslan and Tamara Tolparobi describe themselves as a sort of a Romeo and Juliet couple. He is Ossetian and she is Ingushetian.

Ruslan: "I saw her at the street car stop, and asked to walk her home... It was fate, love at first sight. I told my father that I wanted to marry her and he told me that it was my decision. But my mother… She said I had to chose a wife from among my own ethnic group."

Tamara: "They said: an Ingush bride, really!..."

But love conquered all…

We had not forgotten our pledge to Akhmad Pliev in Ingushetia to find one of his distant Ossetian kin in Vladikavkaz. Finally, we discovered the poet and intellectual Grigori Pliev, who agreed to talk about the past, the future - and the larger family Pliev.

Grigori: "Whoever came up with the idea of promoting peace between our two nations through exploring the connections between the family Pliev in Ossetia and Ingushetia is a true man, a humanist. Such an effort is long over due. Let the family Pliev, with roots in both Ingushetia and Ossetia, be a mirror to us all. I am for such practices as a means of promoting peace and understanding between our two nations. We are Ossetians and Ingushetians by nationality, but we are both Plievs..."

On the last day of our project, we discovered another missing link between the two peoples - Muslim Ossetians. Today is the Muslim feast of the sacrifice, or Kurban Bayram. The location of the celebration is the main mosque in Vladikavkaz. Built in 1908, it was closed until last year, but it is now again open for prayers. Today North Ossetian Muslims greet each other with the words Salaam Aleykum which means "peace upon you." We asked some of the Ossetian Muslims what they thought of the conflict that had torn them apart from their co-religionists in Ingushetia.

Woman: "Dividing humankind into nationalities only leads to confrontations, which is anathema to Islam."

A young man: "God helps us achieve things outside of our own power. Solving the national conflict between the Ossetian and Ingush is an example of this. If we have faith in him, we can achieve a peaceful solution. And, God willing, the children of both the Ingush nation and the Ossetian nation will never experience such a conflict again."

War is easy to make; peace is far more difficult to sustain. As we left the fertile lands of the North Caucasus, we hoped that our small, joint project had met its main objective - breaking down at least a few check points of the mind.

...And maybe even sewing a few seeds of peace.

Discussion

Goltz: Before any questions, I just want to say one thing about this film. We hit the wall in the editing studio, where the real difficulties of trying to make a mutually-acceptable product occurred. I was working with an editor by the name of Jenna there who was worth his weight in gold. But working with the two reporters was becoming so frustrating due to having to balance input that I finally asked them to leave while Jenna tried to figure out what to do. The problem, Jenna said, was that the two lads needed a way out, lest they be blamed back home for making propaganda for the other side. I stayed up all night thinking about this, and then I had it - they needed an exit, and that exit was me. Thus, I had to go back and insert myself throughout the program to make it as if it were my own, and that they were merely trying to help me understand their conflict. It changed the initial thrust, but it made the project doable in the sense that it got the boys off the hook.

Question: Could you please make a quick comparison of the post-conflict stage in North Ossetia and Ingushetia and the post-war stage we see now in Chechnya? Where do you see that progress has been made in one case and not in another? Where do you see the main differences in these two cases?

Goltz: The first is that the Ingush are relatively small compared to the Chechens. Due to their population base, the Chechens have what I would call critical mass, whereas the Ingush do not. There is also all this murkiness about the Ingush and the Chechens, and what the difference is between the two. Aside from a handful of phrases, I do not speak Chechen and, aside from a handful of identical phrases, I do not speak Ingush. But I am assured by Ingush and Chechens that this is the difference between English English and American English, in effect. The initial division had to do with divide and rule policies of Russia - which, I hasten to add, are not unique to Soviet Russia or Tsarist Russia. I am from Montana, where similar artificial divisions were effected among Indian groups. What's the difference between a Cheyenne and a Lakota? Names given by the US cavalry... Anyway, at the Association for the Study of Nationalities convention in New York, I ran into John Colarusso, an anthropologist from McMaster University in Canada. He has an interesting theory, wherein he divides the North Caucasus up into three vertical zones. According to this theory, the Western zone includes the Circassians, Abkhaz, the Kabardins, who were oriented to Ottoman Turkey because of Black Sea politics. The central section includes the Ossetians and the Ingush who traditionally looked North toward Moscow. The Chechens, Dagestanis, Avars traditionally looked down the Caspian toward the traditional Middle East via Iran. I had never thought of it in those terms before, but it was always a great mystery to me why the Ingush were more assimilated and self-assimilating into Russia and did not whole-heartedly join the Chechens when they decided to separate in 1991. There is an interesting legal question about that date brought up by Ned Walker from Berkeley's Program in Soviet and Post-Soviet Studies at the same conference. In the course of his presentation on the legal status of Chechnya according to the Russian Constitution, he tabled the question of the legality of the Ingush split from the Chechen-Ingush Autonomous Republic, and asked rhetorically if this secession, sanctioned by Moscow, was not itself a violation of the Constitution. But Moscow encouraged the Ingush to create their own state and even new capital city, with the building funds coming from Moscow. It is an interesting legal point which nobody has been able to adequately explain. On the ground in Ingushetia, however, the feeling for the Chechens was and is very, very high. When I asked, "What is the difference between you and the Chechens?" the answer again and again and again is, "Nothing at all."

Question: What do you see as the prospects now for the long-term reconciliation between the Ossetians and the Ingush?

Goltz: The Ingush realize they lost their own little war. At the same time, they are infiltrating their way back into Chermen and other places. The Ingush team in the joint venture were rather surprised to find their compatriots back in Chermen and living in Oseestia. I was rather surprised to find them there, too. But it seems that the Ingush are at the point between the rock and the hard place. They can either actively try and rejoin the old Chechnya-Ingushetia, which I do not think they are going to be doing, or they are going to have to align their fate to the largest and most dynamic republic in the North Caucasus, the republic of Ossetia/Alania, whether they like it or not. From the top on down, the documentary project would never have happened if the authorities in Ingushetia, who feel like the offended party, had not said "yes." The businessman, Ali Tangiev, would not have been so open to talking about doing business with an Ossetian partner had the stage not been set for some kind of reconciliation. Out on the street there is still plenty of animosity and bad feeling that we were unable to put into this film, aside from that one little chunk at the beginning. But most of that animosity - surprise, surprise - is not directed at the Ossetians so much as it is at Moscow! Time and time again people said, "This is not an Ossetian-Ingush conflict. It is a conflict between Ingushetia and Moscow." Accordingly, I think that unless something really dramatic happens with Chechnya, slowly but surely Ingushetia is going to be moving even further away from Grozny and closer to Vladikavkaz and thus Moscow.

Question: What about returnees to the Prigorodny district? That was one of the sticking points at one point. You said you found people when you went back there, but what about the other refugees from the region? Are they still in Ingushetia?

Goltz: They are still in Ingushetia, and it is one of the big questions in Ingushetia: What to do? Why can not all-powerful Moscow deal with 40,000 miserable refugees? The question is asked again and again. In Chermen, there are about 5,000 individuals who have come back - but I can not pretend to be able to explain the dynamic of who is allowing them back. Are they sneaking over the border? Are they coming in buses or in groups of one and two? If illegal, what are the Ossetian authorities are doing about it? I do not know. But the fact remains that on the ground you have 5,000 Ingush back in Chermen, and others who are waiting at the border to return. There is still shooting at night and other incidents. People who were rebuilding their houses would show me the bullet holes in newly laid bricks, made the night before. "Who was shooting?" I would ask, and receive a shrug for an answer. Well, the only people with guns around there are the security checkpoints in the outer part of Chermen, and some of my interlocutors would point down the road to the checkpoint.

Question: North Ossetia became one of the main bases or points for launching attacks into Chechnya for the Russians. Mozdok was pretty much the headquarters for the Russian military. How has that affected the situation, if at all? Was there any kind of reaction to that in Ingushetia and North Ossetia?

Goltz: If we can assume, and I think we can, that although the Ingush did not get involved in the Chechen war in a dramatic way aside from some volunteers, public feeling was clearly on the side of the Chechens. Women would block roads used by military convoys, and fighters would use Ingushetia as a sort of R & R place of temporary refuge. In Chechnya, meanwhile, there is a great hatred of the Ossetians because of Mozdok and the use of bases. There is even (though I have not confirmed this, but it comes from a very good source) evidence that the units that went in to do Samashki were actually ethnic Ossetian units who were preselected because of their own animosity toward the Chechens. When I later met survivors, fighters, in the mountains from Samashki, one guy looked at me and said, "There is no future for the Ossetians in the Caucasus." Now, that is strong stuff and a lot stronger than anything an Ingush would say, but due to the level of communal feeling between the Chechens and Ingush, there is going to be at least some transfer of that attitude over to the Ingush.

A Groundhog's View of Baku: An Inside View of the US Oil Industry in Azerbaijan
Charles Retondo
December 9, 1996

Charles Retondo is an American contract consultant who has had extensive experience working with American corporations in the former Soviet Union. He left Pennzoil Caspian Corporation in the Spring of 1996 after having worked for three years in the areas of material and administrative logistics. Before that, he worked on a project for Kaiser Aluminum in Krasnoyarsk. He was also in charge of coordinating material logistics for White Nights, one of the pioneering US oil joint ventures in the former USSR, working out of the Siberian city of Raduzhnyi. Mr. Retondo has also acted as the on-board company representative for Marine Resources Company International on a fishing trawler in the Bering Sea. Mr. Retondo earned his MA in Regional Studies: Soviet Union at Harvard, received his BA in International Studies from Reed College, and studied at the Pushkin Institute in Moscow.

Abstract

Charles Retondo made two main arguments in his talk, drawing extensively on concrete examples from his long experience in the region. First, he discussed two factors that he saw as being decisive for producing successful cooperation between an American and a (post-) Soviet partner in a joint venture. The first of these two factors is whether or not the American firm has a hard budget constraint. Those firms that tended simply to throw money at problems tend to fail, he argued. The second factor is whether or not the Soviet or post-Soviet side establishes clear rules of engagement. Where goals and rules are clear, projects are much more likely to succeed. Mr. Retondo then turned to his second major argument, which was that post-Soviet and American entrepreneurial cultures work in fundamentally different ways, and that if American firms are not willing to adapt themselves to the local practices, the future of economic cooperation is grim for the near future. American corporate culture stresses procedural correctness, the importance of keeping a paper trail of all transactions and being sensitive to issues of legality and risk. It tends to produce a dual character on the part of the business person - one's personal life is kept separate from one's business role. In addition, it is formal in nature - US companies generally have clear lines of authority, recorded on paper, and firms' core processes are well-defined. In contrast, former Soviet business culture might be characterized as a "brotherhood." Procedures are not nearly so important as people, and formal rules are much less important than personal connections. The means of exchange can be seen as favors done for others, although no specific list of these needs to be kept. The norm is reciprocity. Accordingly, there is no distinction between private and professional life, since in order to remain an effective member of society, the post-Soviet entrepreneur must show that he or she can satisfy the professional/personal needs of those in his extended "families" of reliable people. Likewise, when one hires a person, it is better to think of it as hiring a whole network of people, since it is this network that will help this person to be effective in his or her job. Thus the organization of post-Soviet firms is extended, informal, and based on personal relationships. The successful entrepreneur is charismatic, creative, yet tough. The problem occurs when the two cultures "clash." If an American employee did what the post-Soviet official wanted, they would be fired. Yet if the post-Soviet employee did what the Americans wanted them to do, he would be fired. This explains, Mr. Retondo argued, why so little progress has been made in cooperation in joint production ventures in the (former) USSR. Given this deeply rooted cultural difference, American business is best advised to be flexible, to allow officers autonomy and leeway in dealing with Azeri and other post-Soviet entrepreneurial networks. Such a strategy promises to be much more productive than the current deadlock.

RETONDO: I would like to thank the SDI Project for giving me this opportunity to come out here. First, I'll say a little about the concept of the groundhog. I do not know if any of you are familiar with a movie Bill Murray put out a couple of years ago called Groundhog Day. The essence of the story is that this cynical weatherman has to go out to Punxsutawney, where the groundhog comes out in the spring, and he hates the assignment. What happens is that the day ends, he's miserable, he's complaining about it, and he wakes up the next morning and the same day starts over again and this becomes a pattern which just repeats and repeats. So every morning the alarm clock goes off, and he runs to check the paper, and it is the same day all over again and the same things happen. The moral of the story was that, through the successive iterations of going through this one single day, this one cynical guy acquires wisdom, comes to peace with his life and the people around him and becomes a much better person for it.

This applies to the theme of my talk, which is this repetitive cycle which I have seen played out in several Western and Soviet and former Soviet joint ventures where you see the same cycle of events occurring. I hope that through this process we do reach a point where the two sides can actually have productive cooperation, and come across the same epiphany that Bill Murray did in the movie.

Another connotation to this is that the Pennzoil negotiating crew back in Baku used to refer to Groundhog Day - they even had a T-shirt even made up. They would come in for a round of talks with the State Oil Company of the Azerbaijan Republic (SOCAR), and then they would think that they had an agreement and would go back to Houston. Then they would come back to Baku for the follow-up meeting and would start at exactly where they were at the meeting before.

The gist of what I would like you to take away from my talk here is an appreciation for the difficulty in synthesizing US and former Soviet entrepreneurial systems and the respective cultures that those systems generated. Really, what I see is this underlying dynamic between these two cultures, which is really, at the present stage, dysfunctional. People are working at cross-purposes in a lot of ways.

A little about my background. At Reed College, back in Portland, Oregon, in International Studies, I focused on Russian language and economics. But oddly enough, what I took away from the program, which has been most applicable to me in my own thinking on my various jobs, was the anthropological insights I acquired. It was an interdisciplinary major at Reed, so we were able to take a lot of anthropology. Then coming to the Soviet Union Program here at Harvard, it was a little bit different. Reed has a motto - it is a little agnostic - it is called "we learn how to learn." At Harvard, we have this positive "veritas," that there is a Truth out there, and if you just work hard enough you'll find it. In keeping with that, the Soviet Union Program through the Russian Research Center did not really offer that anthropological point of view - it was not quite structured that way. But the one course that I did take which I got a lot out of, and which used this approach, was Professor Edward Keenan's "Medieval Russian History," where he uses quite a lot of anthropological methodologies to derive a model of Russian development. His thesis, of course, is that there is a lot of continuity in the deep structures of the culture, and I subscribe to that. I see a lot of continuities and the same deep structures playing out again. It is nothing unique to the former Soviet Union, I do not think. I have spent some time in other "Third World" countries, and I am talking in terms of the informality of how things get done, as opposed to how we do things in the West, with a state of law, automatic teller machines and neat stuff like that.

You can take a look at my handout [see page 85]. There are two tables. The first one lists the projects that I have worked on, in the left-hand column, and then I include certain dimensions which I have found to be most interesting in analyzing why the project failed, in almost every case, I hate to say. You can see Marine Resources Corporation International, Kaiser Aluminum, White Nights Joint Enterprise (which was the first stage of that). The second stage was when the financial partner bought out the operatorship from Anglo-Suisse, that's WNOPCO (White Nights Operating Company). Then the Pennzoil Caspian Corporation. Then we went through a phase, "PCC/Veco" - we brought in a management company, Veco, to do a gas-utilization project. And the final one, PCDC, which was the entity which Pennzoil formed for the negotiations to go into the Karabakh field, with Agip, LUKoil, and SOCAR.

Going across these four columns (agendas, budget restraints, rules of engagement, and cooperation). Cooperation is a derived column. But those other three seem to me to be the main determinants of how the evolving joint culture in each one of these entities played out on the ground. It also gives you a good overview of what the projects were about.

The MRCI was basically created in the 1970s in response to economic protectionist legislation, sponsored by Senator Magnusson of Washington state, which created a special economic zone for fishing, to keep the Japanese, Chinese, Koreans, Russians and Poles out of our territorial waters so that our fisherman could take the fish. There is a loophole whereby foreign boats could process the fish, but not take them, so they created this joint venture. The year I was up there, on the Bering Sea, we had about 20 Russian factory ships and about 35 American catcher-boat trawlers. I was on one boat, the Danko, out of Nakhodka, and I was also dispatcher, to help pairings work out.

This is an interesting place to start, since this is the one project I worked on that was in the zastoinoe vremya (the time of stagnation), that reflected that Brezhnev synthesis of society. That was back in the winter and spring of 1988. Gorbachev was in power, but this was still before the major changes began to occur.

It was really a basic deal. When you go down the agendas, the US agenda was simply countertrade. They would get credit from the Russians for the fish that were delivered. Part of the money would go to the bank accounts of the fishermen. And for the rest, they would do deals around the Pacific Rim to pay off their accounts. It was fairly profitable, as far as I could tell. And the Soviet side was very straightforward - they wanted fish. There were not a whole lot of hidden agendas. This was a very straightforward economic agreement. It was ongoing and the deal was 50:50.

We get to the next column, which is budget restraint. I did not work as an accountant in any of these projects, but when you are working in the administrative and materials areas, you get a really good feel for what the home office is willing to spend on things. You go through these periods of lavish spending, and then the panic button gets hit, and then the company goes back into needing four signatures to make a five dollar expenditure. You are throwing thousands of dollars into it one day, and the next day it is like that. It is part of US corporate culture. There is a hard and a soft budget constraint. What I mean by "hard" is "penny-pinching," and "soft" is "throwing money at a problem." These are two modes of operation.

The next column I like. "Rules of Engagement," I call it. There are two statuses: clear rules and unclear rules. What this really relates to are the ground rules that the Soviets, the former Soviets, set regarding the ability to operate in their culture. I suppose that a lot of you were in the Soviet Union back in the late lamented days, and if you are American, you were aware that very strong parameters were put around your ability to move or do things. From a business point of view, this is not so bad, since you do not have any choice - it removes a lot of noise. You also know exactly who has authority to do what in those situations. This was back in that time, so those rules were clear. The American fisherman caught the fish, and the Russians processed the fish, end of story.

The cooperation, as a result, was very good. That is my thesis here. If you have a normal economic agenda which both sides understand, if you have hard budget restraints from the Western side so that you are not feeding money into a system, and if the rules of engagement are clear, you have good cooperation between the two sides - you are able to achieve a kind of synthesis between the two cultures.

Having set that up, I do not want to spend too much time on this. If anyone has any questions on this, I would be very happy to answer them. The question marks on "PCDC" down there at the end are there because that is a new entity, and I was not too involved in it, other than seeing through the negotiations that resulted in the Karabakh agreement.

The interesting thing to me here is the section below that, the "Culture Wars," I like to call it. I am trying to be a little bit provocative - I do not want to be too provocative, and I would like to make a disclaimer that, as Russians like to say, lyudi est' lyudi, people are people, and that very much unites Western and former Soviet or Soviet managers in personal characteristics.

But the essence of what they have to do to succeed in their systems, and to survive in their systems, are quite different. The rules are quite different. I would like to use the analogy of a champion football player and a champion basketball player. They share a lot in common, they are probably dedicated individuals, etc. etc., but the things that it takes to rise to the top of the NBA are different than the things that it takes to rise to the top of the NFL, and very few people can cross over, except maybe Danny Ainge. But the specifics of each game stress different strengths, and the egos that form from those strengths naturally think that their particular strengths are the good ones, their scale of values.

So the second little table I have on there is a quick comparison of what I call the US "country club" (I use it as a generic name for US organization) and the Soviet Union/former Soviet Union "brotherhood." Then I outline certain characteristics that determine managerial behavior. The first one is the skill background. If you look at the US, and I am sure that all of you who have worked in the US are familiar with US office procedures, to really succeed, you have to be very procedurally oriented. You have to know what the go-by's are. It is transparent. The rules are open. Now we all have experiences in our offices, I am sure, where you would take issue with that, but I am talking about the underlying, the fundamental, dynamic there. And when a person gets to the top of, say, Pennzoil, they know investor relations really well, they are very sensitive to legal and risk issues, in the sense of having an absolutely iron-clad paper trail documentation on every transaction.

Going down the table, this generates a certain character, which I call a "dual character" in American society. Incidentally, this is one of the key things. In the former Soviet Union they do not really have that division between personal and business that we have here. And a lot of the culture clash comes from that fact. The Americans are saying, "well, this guy is taking a subjective, personal approach to this - he's trying to get this friend hired," or "he's not showing up for work during these times," not realizing that given the way their entire society works, they have to do that to maintain their positions and be effective operators in their own system. Americans were very strong on the whole deal of, "I put my tie on, I come to the office, what I do at work is to sit in this office and to represent these interests, and that's who I am. Here's my business card." The office is more important than the office holder, and your personal life is something completely separate.

That just does not exist in the Soviet Union. And it is not going to happen soon either, as far as I can tell.

Moving down, "organizational type" fits along with these parameters. The US company is a formal organization; it has a charter. You can go grab the book from the library and you can read the rules and regulations. You can go down and grab the 10K from the library and see what all the financial reports are, who the officers of the company are. There are very well-defined authorities, official authorities, signing authorizations, core processes. Sometimes they will take issue with this, but the core processes of the companies are very well defined. Pennzoil Exploration Production Company explores and produces oil and natural gas.

This is not true of, say, Vareganneftegas, which is involved in pretty much everything that goes on in the Khanti-Mansiisky raion, where not a whole lot moves there, not a whole lot happens, without going through that filter. An interesting anecdote on that comes from my work with Kaiser Aluminum Corporation. We were in Krasnoyarsk, and this was before the fall of the Soviet Union. It was still pretty stable at this point, nobody really expected anything. The Gorbachev referendum, which was for the Union, as opposed to the next referendum which was against the Union, had just taken place. In the mindset of the people managing the factory, they were not even vaguely conceiving the idea that the Soviet Union was really going to fall apart. One of my favorite co-workers there, the chief engineer of the factory, a man named Petukhov, was Belorussian and his wife was Ukrainian, and they had lived in Krasnoyarsk for 20-30 years. And he said that we cannot conceive of the situation whereby I am going to be a foreigner in my country, and a foreigner in my wife's country. So that was the thinking back then. I am making this point to say that even back then, before the dissolution of the Soviet Union, these people were coming up to Kaiser and saying that one of the ways they wanted to pay back the deal was to have Kaiser import a brick factory. But this is an aluminum plant, right? If it had been a private company, it would have been the fifth largest aluminum company in the world, a huge complex. And the deal was that, as a part of their social contract with their workers, they would provide housing. And they were having trouble getting bricks because the supply system was falling apart. They were trying all of these reforms, and they were causing more harm than good, as far as the managers were concerned. And so they were looking at these deals as a way to take care of their workers. In other words, the whole life of the workers would center on the factory - you could stand in line to get the sausages at the store, but a lot of people got all of their stuff through the company buffet. You would go down there and get a couple pounds of sturgeon when it was in, or whatever was in, you would grab it from the company store. And the company is trying to build a brick factory to build new housing - it was everything. They had their own collective farms, of course; this was a pretty common practice, to attach collective farms to a large industrial enterprise.

So they were involved in everything. That is what I am saying by the well-defined core processes being a distinguishing aspect.

I am going to skip back up now, and work on the Soviet side of the table.

So where our organizations are formal and well-defined authorities and processes, their way of doing business is to have networks of friends, and, sort of what I was saying with regard to Krasnoyarsk Aluminum factory, what I call an extended family of activities. I chose that word as an analogy, in part, but also because it really is an extended family. The way things get done, and this is something where you get a constant clash.

A good example of this involves some pipeline, or perhaps some compressor stations, coming through the Volga-Don Canal. And we had this Indian fellow from Houston that had arranged this for us with Kaspiiskoe Parokhodstvo. And as always happens in transporting materials in the Soviet Union, there is this big scandal - somebody was shipping a bunch of cars on our ships. The fact of the matter was, that to get the ships, this guy (and he's an Indian, so he's used to dealing this way) had to make five or six other side deals. And one of these side deals was getting a fleet of cars somewhere. But in order to make the thing work, you had to do this. You are either going to go in there and have the 101st Airborne come in and seize the Volga-Don Canal, like we did in the Persian Gulf which worked very well, or you are going to have to meet them half way on some of these things. Because they can neither get the boats nor get the boats through unless they take care of all of these networks, they have to allow them to do what is necessary. The Caspian shipping people - they can not just do it - they don not really own the boats. They have to make about 50 deals to get them through Russia.

An organization that is dealing in oil is not necessarily dealing primarily in oil, even. Their true enterprise may be a racket of kiosks in Baku selling cigarettes. It is very hard for the Western mind to comprehend this. It took me quite a long time, and I do speak fluent Russian. And when I am over there, I speak Russian 90 percent of the time, and all my friends there are basically citizens of the former Soviet republics.

So, when you come back to look at the Soviet column as a whole, what kind of person do you get? As opposed to having this dual organization man (impersonal office holder vs. personal life) you come up with a charismatic guy who is very creative, and if someone here could help me, I do not really know how to say "krutoi" in English. Tough. Cool. Sort of a gangster chic, almost, is the way I like to think of it. And a patron in the Latin sense of the word. So he is in his office, and he has got 15 telephones, and he is going all day making telephone calls, and probably 10 percent of them have to do with his actual business. Let us say, if his business is offshore oil construction, 10 percent of those calls are directing organizations underneath him to weld that part, put that thing on that boat, get that thing out. The other 90 percent of his calls are upstairs. "OK, how are we doing on that cotton shipment? What's happening? Do I need to take care of this guy today? Do I need to take care of that guy?" All of these other collateral relationships that really have nothing to do with his supposed job. But, if you did not do them, you would be out of a job like that. If a man walked into an office like that and said, "well, we are just going to deal with offshore construction," he would be gone in 30 seconds, because he could not generate the cash necessary to pay off all of his various connections. He just could not work. It would be suicide.

So it requires a completely different personality. And it is a real entrepreneurial personality. In fact, one of the things that shocked me, that shocked the Soviets/former Soviets I work with, is that they always talk about "biznes" and they thought that Americans were these freewheeling capitalists. But it turns out that we have this almost monasterial corporate bureaucracies. We are saying, "oh, no - do not talk to me about a deal like that! Turn off that recorder - you can not say things like that to me in my office!" You know, proposing various mutually lucrative ventures, potentially lucrative. It is just a completely different concept of entrepreneurship that goes on there.

A big part of that, in fact, has been exacerbated by the fall of the Soviet Union because, if in the old days, there is a certain virtue in zastoi, or stagnation, in the sense that somebody's career is no longer dependent on what they do in the next 24 hours, they have a certain position in society and a status and their perspective becomes more long-range. They are thinking ahead 10, 20 years in terms of how to do their careers. With the political chaos that occurred with the dissolution of the formal structures of the Soviet Union, leaving only the informal structures, what happened is that a person will get thrown up on the beach of success by the political storm, and while there he is going to grab everything he can. It is like, "today I am a customs official, because so-and-so beat so-and-so, who killed so-and-so, and they want me here right now. I know nothing about customs, but I know a lot about kormlenia, about looking out for Number One. And I am going to make as much money as I possibly can until somebody either shoots me, or I get fired. But in the meantime, I have got my bank account in Istanbul, I have got my dacha in Bursa, and I have my escape route all planned out through the Caucasus, and we are set here." And what that does is to drive the agenda, going back to the table above, on the former Soviet side, much more toward immediate gains. And it is not that they are greedy, bad, evil people - they may or may not be. That aside, they could not exist in their position, they could not survive, they could not occupy that chair in that office, if they acted otherwise. And that is a really critical thing to keep in mind.

So coming back up to the skills, we have this charismatic, creative, free-wheeling, very tough, guy.

One of my favorite things here - my father grew up in Chicago in the Depression. He was half Irish and half Corsican. He went into the US military in 1941, so we got out of that neighborhood. But my grandmother worked in the wards in Chicago, and a lot of the stories from my father's youth are very applicable. The ward politics concept of Chicago, and the whole patronage system, is very applicable to the former Soviet Union, because like the former Soviet Union, and unlike Third World countries, you have this huge industrial society, this massive industrial society, that is being run by pre-modern means, by very informal, networking means. This really boggles the mind, when you stop and think about it. Any major transaction in the Soviet Union, the former Soviet Union, has to go through all of these informal networks, nothing written down. This is very much like the rackets in Chicago - you do not write that stuff down. Not if you want to stay amongst the living. Although you can continue voting after you are dead. But that is not much consolation, I suppose.

So you have these telephone calls, personal contacts, meetings in restaurants at 2 o'clock in the morning, or parties that go on for four hours, and in this way these major transactions are conducted whereby a huge aluminum factory continues to operate and export huge quantities of aluminum, all off the books. When you think about it, it is really pretty amazing. There is no legal enforcement of anything. I am exaggerating the picture because I want to underline the dynamic of it, and when you really stop and look at some of these deals, it is mind-boggling. And this is something which existed very strongly under the Soviet system as well. It was one of the factored-in corrections to the planned economy. It is just that with the dissolution of the Soviet Union and the lack of the ability of Moscow to be a clearinghouse to arbitrate all of these parochial interests, it has really come out much more; it is much more visible and accessible to Westerners. It is really an amazing system. My deputy manager in the materials department in Raduzhny, Yakov Dmitrievich, used just to say "Russian systems." I would say, "Yakov, how did you do that?!" And he would just say, "Russian systems." And to get him to do things for me, I had to do things like get the big Western bosses to come to his birthday party - that's the way it works. So that his mafia buddies would see that the Americans liked him, although they hated him - they thought he was stealing all the time, which in a sense he was, but if he was not stealing, he could not have brought wellhead equipment up from Baku, etc. etc. It is obviously a long story.

So this person is, in terms of skills, really good at free-wheeling, ad hoc, decision-making, and very good, like a ward boss in Chicago, at personal relationships. Shaking hands with everybody. It used to drive me crazy in my office in Baku at the old Intourist Hotel. I had about 30-40 Azeris working around me, and I would come in early to get some work done. When they would start coming in, every single employee would walk up to my desk to shake my hand and say good morning. And I am sitting here with a mouse operation going on, and I would have to stop and say hold on so that I do not drop a document somewhere where it is not supposed to go, and they would just stand there with their hand over my computer screen until I shook it. Which is very warm and friendly and nice, but that is the way you have to be if you are the boss. You do not have to be empathetic, but you have to project empathy to your people on a personal level. Again, this gets back to this American bifurcation of the personal-professional, versus the former Soviet management, which does not have this line. Your driver at your job is going to do your groceries as well - that is just taken for granted. They are part of the inner circle. They are trusted. This is why you get these stories about Yeltsin's bodyguards and drivers having undue influence because they are part of that inner circle. Which, again, goes back to the informality of the relationship, because if you do not have what the Westerners have, this legal and risk sensitivity and contracts and laws etc., the only thing you can rely on is personal trust. And that trust has to be earned, and it has to be continually reinforced through transactions.

Now, if I move on to the specific case of Pennzoil's operations in Baku. In the early phases of the project, Pennzoil ascribed to a management theory called "cloverleaf out-sourcing," a very flat organization chart with just one boss. Everybody else reports directly, and you have teams. It is a very fluid, as opposed to a rigidly hierarchical, organization chart. They were onto that particular bandwagon at the time. That is actually very amenable to the Soviet way of doing business, because it is flexible - you can make these little teams, make these personal relationships, have personal responsibility.

I want to stress, when I say this, that I think Pennzoil were about as good as anybody, if not better, in meeting Azeri culture halfway. But, still, they would come back in the office extremely frustrated. I do not know if anyone is familiar with the Pennzoil project, but this would be a good point for me to step back and say what we were doing at that point.

There are three offshore fields in Baku: Azeri, Chirag, and Guneshli. These are the three major ones, the ones in which everyone is interested. When I first got there in the January of 1993, the major players were Amoco, Pennzoil, and BP. I think that Amoco was negotiating in the Azeri field, BP on Chirag, and Pennzoil on Guneshli. Now Guneshli is the only one that was currently under development. There was a shallow-water section that was under development, and the old Soviet operators had a problem. With the fall of the Soviet Union, they were no longer able to continue their construction project, the development of the field. They had ongoing projects.

If you are familiar with oil, petroleum reservoirs have natural gas associated with them, which is important for a number of reasons. When you bring the petroleum out, the gas comes out, as well. If it is not captured, it is (a) a waste of a resource, (b) it pollutes the environment, and (c) it can destroy the formation pressures that are essential for the exploitation of the reservoir (gas-drive). You just have to keep the pressure right, and being in control of the way the gas escapes is critical to that.

So the operators had started the project, and they were venting all of the gas right out into the atmosphere - it was just going right up. But they are not stupid people - they had 70 years of experience in the oil business, the Soviet Union was the number one producer of oil. They did not do it efficiently, they did not do it pretty, but they got the stuff out there, and they know what they are doing. And they also know what they are not doing, and that's where they want the Westerners to come in and solve their problem for them.

Pennzoil, unlike oil companies from other Western countries, is constrained by the Corrupt Foreign Practices Act. It has to be very careful about bribing, to call a spade a spade, and to be perfectly honest, these societies run on bribes. So how do you get this project going, this Guneshli project?

Pennzoil offered to come in and complete this project, this gas utilization project, which is really a very immense undertaking. It was not supposed to be. This is a good illustration of the dynamic I am trying to illustrate. You have got these people at SOCAR, the Azerbaijan State Oil Company, and they are all part of the oil mafia, and they are all doing quite well, thank you, without any help from the Westerners. They are producing oil; they show you the books and it is not on the books, but it is going somewhere, and Rasul Guliev is not doing too badly, and he's spreading it around, he's taking care of his people, and his people are spending a lot of money in town, and this informal system is working by its own internal rules and its own internal dynamics.

Pennzoil comes in here and says, "you are having to import gas, Azerbaijan is a net importer of natural gas, and we'll take over this project for you - we'll finance it and we'll manage it." The Azeris were saying, "no, no, no - just finance it, we'll manage it." But that, because of the Corrupt Foreign Practices Act, would look too much like a bribe to provide comfort to the Pennzoil guys. So insofar as we were negotiating this deal with the Guneshli field, and insofar as the production of gas and the control of gas is an intrinsic part of the overall reservoir development plan, the idea was to go ahead with this project. Pennzoil would finance it and manage it, do this great thing for the Republic of Azerbaijan, and then, when the deal with the production-sharing agreement on the field was finalized and production began, the cost would be recovered out of that project. This was a very profitable deal - the payback period was only a year and a half, even with all of the cost overruns which I can get into later. But it was just an incredibly sensible thing to do.

Now the problem is that all the Azeri structures that we had to engage to do this were actually not interested in that gas. Some people were even making the argument that "but we are deferring the hard currency payments that they have to make to Turkmenistan to import gas, and to Iran." But I firmly believe that they were not making those payments anyway, and they never intended to. They were doing things for the bosses in Turkmenistan, and the bosses in Iran - sort of these little projects I am talking about, get a little cotton there, a little oil expertise there, send a drilling rig down here, some scrap metal over there, take care of the whole problem. And the guys in Turkmenistan are going, "you owe us $140 million," and the Azeris are going, "yeah, right." They never intended to pay, and it was just like an official paper game. For anybody who has read Ilf and Petrov, it is that kind of a Kafkaesque, a sort of surreal bureaucracy that nobody really takes seriously. It is a pro forma exercise.

When you look at it from the Azeri manager's point of view, this is really a threatening thing. These Americans are coming in, and are really threatening to displace them, in a way, or are taking up so much of their time that they cannot take care of their real job inside their informal networks, in which case they are not being able to keep that profit-sharing agreement with the higher management going, in which case they are gone. It is really a Catch-22 situation.

So you get these people from Pennzoil coming back, frustrated - they would start smoking again, all these people who had quit smoking, myself included. They would come back with lines like, these guys (1) do not appreciate what we are doing for the country; (2) they are corrupt; and (3) I wish they would just get out of our way and let us help them.

But the SOCAR people have a different view. Of course, they would not say this, especially in Azerbaijan - much less so with Russians, but with Azeris, you have that kind of Central Asian situation where you are actually considered to be a guest when your in those countries. There are certain deep structures of hospitality in their culture holding that no matter how integrated you are into their society, you are always going to be a guest if you are an American. And you just do not say something to the face of a guest that you think that they do not want to hear. You just do not do it. It is not done. It is bad form. And Azeris, especially Bakintsy, the real Bakuvites, are extremely sensitive to matters of form, of proper social etiquette. So they would not say this, but they would say this to some of the people that I worked with that were Azeri - when the Americans leave, they go back to our Azeris. They would say, "where did this guy grow up? Where does he come from? Does not he understand what's going on in my office?" Their line was basically, first of all, "it is easy for you to say, because it is not your country, if you are trying to say that we do not appreciate what you are doing. Or you do not appreciate what we are doing." And secondly, "we have our job to do, and we do not need a bunch of high-priced Western bean-counters in telling us how to run our business. Look at my 600 Mercedes - do I need your help?!" And finally, "you are really making it impossible for us to do our jobs, because you are getting into our networks and causing people dual loyalties and dual alliances in a system that's implicitly based on networks of personal trust and loyalty.

Really what you have here are two distinct entrepreneurial cultures that are just failing to communicate. If you think of any business in the free market sense, free contracts freely arrived at, or whatever the Adam Smith formulation is, it is a matter of "everybody wins," a win-win situation is a voluntary contract. Or you go to the Soviet-style command economy, where instead of incentives you have negative sanctions, where not fulfilling you plan is actually breaking the law, kind of like unfree contracts, unfreely enforced, unfreely arrived at. These are sort of negative images of each other. But in either case, in any economic activity, you are dealing with positive and negative sanctions, carrots and sticks.

So here you have got a dynamic developing where the American side is trying to provide these carrots that are poisonous to the Azeri side in the form of these large projects. And in the meantime, they are floating all this cash around and inflating the local economy and also making it impossible for smaller entrepreneurial structures to rise up because they just can not compete with that threshold. If BP walks in there and wants to drop a little dime, no small operator is going to be able to compete with them, because they are going to inflate everything right up to where you can not do it. So you have cut out the small mid-range players, and you have got the big corporate giants in there. I do not know if that is going to change soon.

And for the US side, the carrot is to get these profits back out of the country. Well, their counterparts are not really interested in letting the profits go back out of the country, and it is very easy to stop them from going back out of the country. I'll give you an example, when we worked up at White Nights, in Siberia, in the first phase of the project, we were really dealing with these directional drilling rigs and this expensive drilling program, bells and whistles, hi-tech and everything. It turned out that the Russian drilling rigs were just working a lot more efficiently than the Western rigs were, for a number of reasons. Looking back at it, the management of White Nights drew the proper conclusion, and said we have got to go over to a work-over program, which is a simpler technology based on trying to increase production of existing wells rather than drill new wells. It worked with reservoir recovery technologies, water-driven - it is a little bit complicated - but basically getting away from using the hi-tech Western stuff and going back to letting the Soviet engineers run the field working through them as much as possible. And at the same time, the financial partner, Phibro Energy, was very concerned about the incredible cost overruns in the expensive phase of the program. They panicked, which was the smart thing to do. They tell you not to panic, but sometimes it is the best thing to do. So they panicked, but one thing they did very poorly was, instead of closing off the spigot in one shot, they sort of ratcheted it down slowly, the "spigot" meaning all of this cash flowing into Western Siberia, and pickup trucks, and expensive food, and the whole Western seduction. So they started doing it slowly, and the people at Vareganneftegas, they have been trained in Marxism, they looked at it objectively and they drew the proper conclusion. They saw a dialectical process at work and they said, "OK, we are not going to get anything more out of these suckers, time to run ‘em out." So, basically, all of a sudden, articles in the press about wild American parties with champagne, and about the American oil workers partying and sleeping with our women, while our oil workers, who are doing the real work, are eating gruel, and living in unheated camps, and this, that and the other. Eggs would start to get thrown at the company cars. Stuff would get lost in Customs. And what does the American manager do, he walks in there and says, "But we have this contract!" And his counterpart says, "you take that contract....and you leave with it, right now." It is unbelievable that these people, these sophisticated Western businessmen, actually expected that to work. To my naive mind, it was amazing. Or that they would even care to make the argument. I do not even think they expected it to work, but for their system, they had to go on record with the home office in Houston that, yes, we got them to sign this. It is like the Emperor's new clothes. Even if everybody there knows that this piece of paper is worth just about the recycle value of the paper, nonetheless the man's file is complete back in Houston, and he is happy, is covered.

They basically have all of these little negative incentives they can use to just basically run the Americans off, like all of a sudden a transportation tax on the oil of 150 percent. In fact, I met later with one of our accountants at White Nights and he had done a little project. When he went down and checked all the applicable taxes to our activity in Western Siberia, it turned out that for one dollar of revenue, we owed a dollar and a half of taxes. Something like that. Gross revenue, not profit, according to the rules. Of course, nobody plays according to the rules. That's the way the system works. And you are not supposed to play by the rules. You would be dead if you played by the rules in the Soviet system. You would not be able to physically sustain life calorically on your legal incomes. So you have to break the rules to survive. This is true of the Soviet Union and true today. That's an essential support of the regime, because then you have a dossier on anyone. You can say, "Comrade Bukharin, you are a Trotskyist, admit it." And if you break one of the unwritten rules, then they just pull out your file of all the written rules you have broken and you are history. That's the way that the system works. But as long as you are a nadyezhnyi paren', as long as you are doing what you are supposed to do and you are not creating problems for people, you can break all of the written rules and do quite well, thank you. In fact, you can become President of the Russian Federation, if you stop and think about it.

So, extrapolating from this, the Azeris are coming up to the Americans and saying, "well, let's forget about this deal. Look, if we move this cotton out, I can move $500 million into this bank account tomorrow." They are ready to wheel and deal; but the Americans can not do that or they would be fired. The Americans are offering this other long-term, structured organizational solution to their problems. The Azeris can not accept that or they would be fired inside their system. On the other hand, the Americans are able to use negative sanctions against the Azeris by calling out the "bigwigs". For example, Pennzoil brought in the Board of Directors, people like Brent Scowcroft and Howard Baker, and really put a little fear of God in them, and it worked. It did work. But you can not do that too much. First of all, because Brent Scowcroft and Howard Baker are not going to agree to go flying over to Baku every time you have a little problem. So the Americans do have a stick that they can use, but it is very unwieldy, and it just does not make economic sense to mobilize that kind of effort just to bail out Pennzoil in Baku. On the other hand, the former Soviet side has all of these little things that they can do without you even knowing what you did wrong. They can pretty much run you off their turf, and you will never be the wiser, even as to whom you offended - you offended someone you did not know you offended, and that's why you are out of there. You do not even know what deal you messed up for somebody. But because you did that, you are run out of the country on all kinds of pretexts. Not necessarily "run out," but your business will not be profitable.

So that is really what I call the impasse that I see we have come to. Really underlying it is the fact that the Western corporate structures are fine dealing in other Western countries or in Third World countries that do not have a preexisting social contract between their working class and their engineering class and the regime. This goes along with having a huge industrial base in the former Soviet Union. So Western companies were able to move into Dubai 30 years ago, and basically the people that are running Dubai, the princely families, literally a couple of generations before were Bedouins, who are not going to try to get too involved in the operational decisions. You move in there, you build your "ex-pat" city, you have your compound, fine. Do not drink outside the compound, do not mess with the women - just stay here, do your job, and we'll get you the leave to Bangkok. And a Western city grows up and exists in this kind of cultural ghetto. Nobody in Dubai society is really getting displaced by that. In fact, they are getting positive goods out of it. The ruling family is getting their sweetheart deals, and the American companies, to their great credit, are very much trying to train indigenous professionals. They are sending people to study at Texas Tech, at the University of Houston, and then they are bringing them back in as English-speaking engineers, pretty much as facsimiles of the American engineer.

When you go into the former Soviet Union, you have all of these guys who have been running an oil field for 10-15 years, and who are an intrinsic part of that society and that culture of networks. So even if you could somehow pay them, you can not really pay them off just to get them out of the way without really damaging the social fabric of the whole town. And this is really the bad part about it, because the Western companies come in and they create this dual culture with a huge gap in between. It is not that we are to blame, or they are to blame (although if anything, the Azeri side is more to blame on this because they are incredibly indifferent to problems in their own society), but due to the way the system works, you have people who are reservoir engineers that know how to perforate wells and read logs and develop reservoir models, and they are doing what? They are selling cigarettes in a kiosk on Prospekt Neftyanikov. They are just hustling any way they can. You have a 45-year-old guy, with 15 years offshore experience, who had enough money in the bank in 1990 to buy two Zhigulis, small cars, and then overnight that turned into going out to dinner one night. And now he's out there on the street trying to hustle a living. There's an official salary - he's still working because you have to be propisan (registered) somewhere, you have got to have a job. He's still working, but he gives half of his salary to his boss, a salary of about $40 a month so that his boss keeps him on the books while he goes off and earns much more money selling cigarettes. And it is the same deal with this working class, the Soviet industrial class.

The whole society has really disintegrated. I was shocked when I found this out, and I could not believe that I was so ignorant, but a year and a half into the project, or even two years in, we were working on a technology transfer (this was with Pennzoil Caspian) in which the Azeri side was supposed to take over the compression station operation. We had to bring in these language specialists from the British Council to teach them how to speak English. One of my jobs was to bring in these specialists, these trainers, and they would come into the office and sit and have a cigarette, a cup of coffee, and chat about what was going on out there. And one trainer, a really nice man, Adrian, was discussing the situation and said: "well, the problem is that nobody knows how to do any of the technical terms in Azeri." I would say, "why do you really need to do it in Azeri? I know it is good politically, maybe, but the Soviet industrial worker is used to reading industrial manuals in Russian his entire life, they are all printed in Russian - all the training, all the tekhnikums, everything, the army - it is all Russian. If you are an industrial worker, you deal in a Russian-speaking environment. Not when you are on break, but when you are in the factory. And it is a whole culture of the Soviet working class. And the guy says to me, "yeah, but Chuck, but about half of them can not read Russian." And my jaw just dropped. I was amazed and aghast that this could be going on in a country that has this huge unemployed industrial working class.

Well guess what? The industrial workers, who were making, again, $20-30 a month, are out selling cigarettes on the street, or they go up to Siberia to work for LUKoil for $300 a month. They can actually live on that salary. And the engineers are making $600-700 a month, on which you can survive. (The minimum survival for a middle-class family in Baku is $350 for a man, wife and two children). So what has happened is that all these industrial workers who can perform, who have worked in factories their whole lives, are all gone. And what SOCAR has done is to send Azeri refugees offshore. These people who were the greatest farmers in the world. If you take them back to their kishlak out in the countryside, they will grow you the best tomatoes and cucumbers and have the best lambs and chicken, and the whole thing - a beautiful clean courtyard, fantastic homemade wine and everything. They have that down pat. But you put them in a factory, and they are just totally lost. It takes generations to develop a real working class consciousness. Moreover, they are Azeri speakers, not the Russian-speaking urban working class.

It just struck me like a bombshell, what was actually going on in the Azeri oil industry there. Which does not look good for the overall development of the society - the skilled industrial class has almost disappeared.

The last point I will make are my thoughts toward what would work for a US company trying to do business over there.

The first thing I have put down on my handout (see Figure One) is, "this ain't Kansas, Dorothy," if you have seen the Wizard of Oz. You do not go over there with your preconceived ideas of what the Soviet Union was, and do not go over there with your preconceived ideas of how great Dubai was. You really have to go over there with an open mind.

The second one I put down (and the last three are all the slogans we used to put up in our office) is "kadry reshayut vse," or "people are everything." The most important thing that you can do is to get people from Baku on your inner circle team. Not as valets, drivers, servants, but as part of your decision-making process. And this is very difficult because this is where you have to make the tradeoff that is absolute poison to the American corporate mind. This is letting this guy take the company car and get his wife to the hospital, because if he does not do it, she dies, and they are going to do it any way. If you tell them not to do it, they will just do it and lie about it. You might as well just face it. But that same guy, if you treat him right on three or four of those occasions, you can call him up at 11 o'clock at night and get him to come in and fix your generator. It is just a tradeoff - what goes around comes around. So you need really loyal people, and you need to give them some leeway.

I almost went crazy when the cost-cutting phase at the end of Pennzoil Caspian for me began, when people were telling me, how can we pay this guy $300 a month when the President of the republic is only making $50 a month. Seriously, people were telling me this. What do you say when somebody comes up with a remark like that? Obviously, all the person is trying to do is to get me to cut salaries and to bring them down to the minimum level of survival. This is very unlike the original Pennzoil philosophy, which was that we were going to pay fair-plus, and we are going to make it to where these people were physically comfortable at home and at work, and we are going to work with them if they had to take some time off. We are not going to have hard and fast rules about it like a Western office, like a time-clock.

Then the next item, "tishe yedesh, dal'she budesh," which is that it is really a mistake to go in there and throw around all these carrots in the beginning, which is what the American companies do. They walk in and say, we are going to do great things for you and spend a lot of money up front. Wrong. This goes back to the chart up above, where you get the hard budget constraint, combined with clear rules of engagement, and this gives you good cooperation. What happens, is that you are just pouring gasoline on the fire of the former Soviet perception that all we are, are just a bunch of stupid idiots with a lot of money there to have it taken from us, and then to be sent on our way as soon as we start to ask for something in return.

So really what you need to do is develop a project that has very good internal controls and develops very slowly. Put the money up front into administrative material control systems. Put the money up front into getting a local core of people that you trust that are your inner team, and take on a small project. And never go on to Phase 2 until Phase 1 is completed and is profitable. Never do it. This is the big mistake all these Westerners go through. They start getting driven by their report to their stockholders, where they have to show some kind of "what are you people doing on Russia?" They reply, "well, we are moving aggressively forward." Yes, what you are doing is that you are losing a lot of money.

And the final point there is: "luchshe menshe, da luchshe," which is Lenin's slogan against the proletarianization of the Party in 1923, but we always liked to put it up on our wall. What it really means to me, is that although you would think that you would want to invest relatively more in labor rather than in capital in Russia as compared to the US, given that labor there is relatively less scarce than in America from a strictly economic point of view, the problem is that there are so many associated expenses with labor, some of which I touched upon, beyond the salary, in terms of accommodating people and taking care of people, on the one hand. And secondly, every time you are hiring a person, you are hiring a network of people. You are hiring an extended family, really. You really need to be very careful how and where you expand on that. This is one thing on which I really took issue with a lot of Western managers who thought that some of the Azeris in the personnel department were promoting favoritism in hiring, which they were. But the reason that they were is because you do not bring anybody into your collective who is not a tried-and-true person. Otherwise, you are going to have competing networks in one department, and they are going to spend all their time trying to destroy each other and take over. So it is almost better to recognize up front the fact that you are in Azerbaijan, you are not in Kansas anymore, and really to work that system. Be aware of what is going on, and then it can be greatly to your benefit if you do it right.

The final thing, the other slogan, and this will be the absolute last thing, our favorite slogan, which we would hear over the radio all the time and we would have up in the office in big bold letters, was, "nashe delo pravoe, vrag budet razbit, i pobeda budet za nami." This was from World War II: "our cause is just, the enemy shall be destroyed, and we will have victory." I want to leave you with that optimistic thought, because it does apply to the situation. In the long run, there is a very strong and fundamental affinity between Americans and Azeris in this particular course, and former Soviets in general. And there is a very strong potential for mutually profitable cooperation if we can get out of this cycle of over-inflating their markets and allowing some smaller, mobile structures to survive in a healthy way.

Discussion

Question: What is the role of the Nagorny Karabakh conflict in Azerbaijan?

Retondo: Obviously, this is geopolitics, which is really not my area of competence, and I try to stay away from it since it is dangerous to get involved in areas where one is not really competent. But obviously, the pipeline route is critical here. If there was a way to get the oil to the Turkish part of Ceyhan without having to go through Russian-controlled territory, that would be a very significant development in the region. Now with LUKoil in Azerbaijan, this changes things significantly. And I think that it was very naive to think that Russian interests could be excluded from Baku. When you look at what Baku is surrounded by, and when America excludes going through Iran categorically, the Volga-Don Canal goes through Russia. I really do think that the Nagorny Karabakh conflict in the context of the region has served Russian purposes to isolate Baku from the West quite effectively. There is no way you can cut the Russians out as a result of that.

Other than that, the social impact has been very dramatic. All of the Armenians have left Baku, and they were an intrinsic part of Baku society. A great story on that - a friend of mine is the number two at Aeroflot in Baku airport, and one day some high-ranking Armenian came into Baku to talk with President Aliev. The pilots of the Armenian plane were former Bakintsy, they were from that otryad of Aeroflot. The refueling crew and everyone - they all got up and hugged each other and kissed each other, and it was a very emotional reunion, apparently. And that is the way that the true Bakintsy look at the people who were displaced. The Azeri refugees in Baku look at the situation a little bit differently. But the Bakintsy, sort of a separate nation, are very pained by the loss of the Jewish and the Armenian segments of Baku society. Obviously, the fact that the Armenians depopulated the regions around Nagorny Karabakh of Azeris has been catastrophic in its impact on society. Bakintsy do not recognize Baku any more. They have lost their city. There is a very high refugee population density. You might see someone herding turkeys down the boulevard today. And they are two very distinct cultures - the countryside culture and the Baku culture. Women are afraid to walk unescorted, because in the countryside that is not done. The Bakintsy have a bit more modern of a view of it, but they are no longer in control of their city at night.

Thus, to answer your question, Nagorny Karabakh is definitely a major factor in the overall story of the region. It impacts the oil only in that sense. In a lot of senses, the war has a farcical side to it, too. If you look at it aside from human tragedy, it is a very strange conflict. There is a lot of corruption on both sides, where you get these freebooter corps or Azeri fighters fighting freebooter corps of Armenians. They would make a deal for who was going to blow up a town, and they would not even blow it up. They would go and take everything out of it, and then the other side would send back a message to Yerevan and say, "well, the Azeris wiped out our town, we need 50,000 blankets and this and that." It was really very strange. And President Aliev put a stop to it, sort of like a Brest-Litovsk in World War I, he "pulled a Trotsky", saying ‘we are not fighting any more, we are pulling back'. Kind of admitting defeat, in a way, just to stabilize the situation. But that does not discount the fact that it is a huge disruption of their culture. The Azeris have definitely suffered a lot.

Question: What is the Russian role here?

Retondo: Again this is not really my main area of expertise, but I do have my own opinions. You are not going to be able to get any significant kind of profit out of the Caspian Basin without the Russians being satisfied that their interests are not threatened. There are basically two ways Russia can view the question. One - the Soviet way - go back in, take it over, it is all ours, no questions asked. Two - to look at the development of the integration of Baku as a local, very strong regional center linking the Western economy, like Hong Kong was to southern China. A conduit - a win-win situation. Russians can then invest. They have comparative advantages in Baku. They speak the language. A lot of them are Bakuvites in Moscow - Alekperov, who runs LUKoil, is from Baku and is a genuine Bakinets - well-spoken, the whole thing. And if they view it as an opportunity that a healthy, cosmopolitan Baku is good for Russian interests, then we are set. But unless there is some way, some mechanism, whereby they can realize benefits from the development of the region, they may just block the canal. It is very simple. Or they may continue the Armenian conflict, which I think they are able to do.

Question: I have three questions which I will state briefly. (1) What is the role of Iran in Azerbaijan? (2) What is the role of Turkey? (3) What is the status of the pipeline that goes through Chechnya?

Retondo: I'll answer the third one first because it is very easy - I do not know. As for Iran and Turkey, Baku is a fascinating city because it has historically, since the beginning of the oil boom in the last century, had a fusion from its ancient past with Turkey and Iran. They have quite a bit in common. Then from the Russian colonial period, there is a Russian element, there is the Armenian component, there is a very strong Jewish component in the make-up of the ruling class of Baku in their connections. And there has always been a very strong European Union, getting back to the Rothschilds and the Nobels. So really, Baku has no power, in a way, it does not have a big army where it can boss people around. But what it can do is provide a venue where all of these conflicting interests get together. By being the element that can sort of marginally affect the struggle, it can be quite effective. This is what President Aliev is brilliant at diplomatically - keep the Russians involved but do not let them take over; keep the Americans involved but do not let them take over; play the Turks off against the Iranians; play the Europeans off against the Americans; and in doing so, be the person who sits on top and collects all the benefits thereof.

A lot of people in Baku will come up to me (say, they are renting an apartment - part of my job was to deal with that) and they would say, "please do not let any Turks or Iranians get into this apartment." They have a really bad reputation in town for being worse than Azeri employers, in a sense, in terms of things like sexual harassment, and really ripping off the people that work for them, and paying extremely low wages, and not really being very pleasant people, all in all, while making extremely large amounts of money. The thing is, going back to that paradigm I was trying to build, that Iran has a large Azeri component since 20 million Azeris live in Iran, and a lot of the "ex-pat" operators in Baku are guys that left Iran in the late 1970s, but they are Azeri-speaking and they grew up in Germany or San Diego or New York, and now they come back to Baku and they still even have relatives from the extended families there. They are able to come in and they do not have to play by the same rules as the Western Corporations, so they are able to make a great deal of money. But again, they make it the same way that the SOCAR petroleum mafia makes it. So that is the way they are seen in the society.

This is a big change with Turkey, since when the first thing happened, when former President Elchibey and the Popular Front took power in Azerbaijan, there was a really significant pan-Turkism movement, based on strong Azeri chauvinism. Elchibey, in fact, made a law that said that there was no difference between Turkish and Azeri as languages. Which there is not, so much; they really are very close. So the Azeris were sort of in the utopian phase, and they wanted the Turkish big brother to come in and build a pan-Turkic empire, and they would invest in those countries because they are brother Turks and we all want to flourish together. It turns out that the Turks were coming in, making payoffs, getting sweetheart deals, and just raking in money, basically giving nothing back to the country. So there was eventually a very strong disillusionment with Turkey in Baku. And there is always a big suspicion of Iran. But they are big players because they play by the same rules that the Azeris play by, as do LUKoil - they are able to do the same, although LUKoil pays much better. LUKoil's actually a pretty dynamic group of people.

Question: What about Georgia's influence on Azerbaijan?

Retondo: I really do not know too much about Georgia. There is not a big Georgian influence itself in Baku. In other words, through my circles of acquaintances and their extended circles of acquaintances, we often have people visiting from Moscow, people visiting from Siberia, people visiting from Israel, people visiting from Germany, from the Azeri diaspora and the Jewish diaspora, as well as the Russian and Ukrainian diasporas. But I just do not see a lot of Georgians staying in Baku.

Question: I am interested in Iran. As an American company working in Baku, how do you deal with people who are also dealing with Iran? Are there legal limits from the American side that limit their actions? And how would you evaluate the performances of the various Western oil companies working there?

Retondo: There was a big scandal when the first big consortium was signed. By the way, I did not mention that after all of these companies had been independently negotiating for the three separate offshore fields, the regime change occurred and consolidated it all into one deal. So the whole rationale behind Pennzoil's gas utilization project flew out the window. Just another little stochastic event. But with the big consortium, the first one was signed by Chevron, BP, Amoco, Pennzoil, Ramco, the Turkish company TPAO, and LUKoil, and the Iranians wanted a share. And the SOCAR people wanted to get the Iranians into it, because they had a relationship in Iran. But they were cut out at the insistence of the Americans. I do not know if that had to do with a particular law, but it was definitely American State Department policy, that we are not going to allow the Iranians in, end of story. If the Iranians are in, we are out. All of the American companies are going to be forced to pull out - we are going to force them to pull out, whether they want to or not (and the American companies would just as soon have stayed - they are not quite so Catholic in their choices of relationships). What the Azeris did instead, was to give the Iranians a share in the Shakh-deniz field which was being developed by BP, and BP does not have a problem working with the Iranians. I think, in fact, that BP started with the Anglo-Iranian company, if I am not mistaken. Basically, Americans just steer clear of Iranians on any kind of direct contact.

As for the second part of your question, Pennzoil is a much smaller company than the others, and they had also withdrawn from of international production in the 1980s. This was going to be their flagship for reinsertion into international operation. That was really on their agenda - to become a player again. So they had to do a lot more. Amoco and BP and Chevron and UNOCAL have this big reputation, have a lot of funds, have a lot of personnel to devote to it. Pennzoil had to staff up and prove themselves at the same time. That was another reason why they did this project, to prove that they were back as an operator, that they could do something like that. I think that, basically, the outlays of the other majors in Azerbaijan were significantly less than Pennzoil for what they got out of it, and I think that it is almost that Pennzoil would have to write that off as a startup cost for getting back into the international business again. They did not have the reputation and the resources that these other guys had to lean on.

Basically, in terms of being part of the deal, there was a big signing bonus for the Azeri government, a $5 million hospital. What ever happened to that $5 million hospital? There were all of these group benefits that the Western side of the deal provided to the government of Azerbaijan and the State Oil Company of Azerbaijan (SOCAR) that made signing these agreements a little more interesting for them. Pennzoil's way of doing it was just to build this gas project (which is, by the way, responsible for 18 percent of Azeri gas production, that one project).

Question: Can American companies do business there? What is the prognosis?

Retondo: Well, that is kind of the million-dollar question - can we get there form here? It is sort of a dysfunctional relationship, it is like the prisoner's dilemma in game theory. You are danged if you do and you are danged if you do not. If you try to get around these guys, they'll run you out of the country. If you try to cooperate with them, it can destroy the profitability of your venture, from your point of view, and will not bring a lot of wide benefits to Azerbaijan. Although, in fairness, Rasul Guliev made out very well. Rasul is an international player. I understand he has had some health problems recently, but we are hoping he'll recover. However, in his favor, and a lot of my friends in Baku would say this while also saying that this man is stealing the country blind, they would say that they would miss him because he was spreading around a lot of his wealth. Obviously, his entire extended family was taken care of, and all of his casinos and so on. He would also pay LUKoil-type wages to people in various enterprises. And he built a huge patronage network. That is why Baku was not big enough for the two of them. Rasul had a lot of political and economic clout among the people at large, and there was a trickle-down mechanism at work. It is fair to say that a lot of their activities are damaging to the economy, but you have to look at them, again, as the only people that are putting money back into the community, as well. They are taking it out; but putting some of it back in. And to deal with them, and to try to transform it into a situation where the small, middle guy is able to make a decent living for an honest day's work, that really is the tough question. And what I am saying is that the more that the Americans put gasoline on the fire, and encourage Rasul to behave like Rasul, he's only doing a rational thing. We are basically making it in his interest to behave in this way. As long as that obtains, there is no reason to try to get an entrepreneurial spirit going, and to buckle down and to get a lot of little enterprise going, to start creating some wealth, generating some jobs inside the country. As long as he gets his signing bonuses....

Question: What about long-run cooperation?

Retondo: Well, what is this going to grow into in the long run? It is hard to say. I am going to withhold judgment on that. I think that there is no way to tell at the moment whether these projects are going to work out or not, regardless of the status of the pipeline. It still goes through Grozny. So you have this big random variable called "former Soviet politics" that completely washes all of the other variables out. If it is thumbs up, it is thumbs up - if it is thumbs down, the whole thing is kaput. Thinking about what is going to happen in 20 to 30 years, whether or not these projects are going to take root, how they are going to take root is what's of interest to me, because I have a feeling that with these groups of people you are talking about in Azerbaijan, all you need is this little condominium at the top with the oil companies and a few of the families. Everybody else is cut out of the deal - it is not going to do much for the country. That is one way it can go, and that is the way the dynamic is working right now. And a big reason for that is that big players like to work with big players.

People call them mafia - I hate that word. The Russians use the word mafia. To my mind a mafia is a society that engages illegal activities inside a society which is overwhelmingly legalistic. In Russia there are no rules, so it is not really fair to call them mafia. But they use the word, and it has something to do with kinship and relationships and families, so in that sense it has a certain point.

But these "structures" (that's a good word in Russian), or formations (formirovania), are interested in Baku, and if they become interested in a flourishing Baku, then they are going to support a flourishing Baku with money and with resources and with people, and then the whole thing can work. They can solve all the problems. If, somehow or another, these structures feel cut out of the situation, then you have one problem after the other.

Question: Do they really have such power, to solve all of the social problems?

Retondo: They have got a veto power. It is not that they can solve the problems, but they can forestall any attempt if they are not comfortable with their role in society. And they can control things in their own area.

Question: Azerbaijan is the only country in the former Soviet Union facing an embargo from the US Congress. On one hand, you have increasing American economic interest in Azerbaijan, in millions of dollars - American companies are trying to profit from this. On the other hand, "legal corruption" in the US Congress system, where contributions, lobbying influences legislation. The US Congress passed a law placing an embargo on Azerbaijan. As an American company, do you see any difficulty in doing business from Azerbaijan arising from section 907 of the Freedom Support Act, or do you feel ashamed as an American for your Congress to pass such a law, unjustly, unfair, when you talk about human rights for 100,000 Armenians but never thought about human rights for one million refugees who have been ousted from their homes? You were talking about Armenians who have fled Baku, but there are 1.2 million.....

Retondo: Well, you missed the earlier part of my talk.

Question: Sorry. In other words, do you see any difficulty when you do business in Azerbaijan? Do not you think that the reason why Azerbaijan cannot develop is because all of the other former Soviet Union countries receive aid from the US government for their infrastructure, welfare, insurance, reform, the democratization of society, to become a more free country. But Azerbaijan doesn't receive that. So one part of my first QUESTION:
what should American companies do in order to change that injustice? And secondly, what can you say about increasing economic cooperation between Iran and Armenia? When Azerbaijan signs oil contracts for 30 years with Western oil companies trying to integrate with the West, Armenia signs military agreements with Russia for 30 to 35 years and has 35,000 Russian troops on their soil, while Azerbaijan and Ukraine are the only two countries without them.

Retondo: Well, I can not speak to a lot of that, but I understand the question basically as being how do I, as an American working for an American company in Baku, feel about the restricting embargo. In my own personal opinion, I see the unfairness in foreign policy in favor of Armenia and against the Azeris - I partially consider myself a Bakinets and I share the prejudices of Bakintsy in that respect. So do I feel guilty? No, not really, because I do not expect America's foreign policy to be particularly long-sighted or intelligent. It is a very complicated world, and there are a lot of people in the State Department who do not understand what is going on. You have lobbying groups, and the Armenians are very well-organized. Thus it is quite logical to believe that they have a much stronger influence in the US Congress. In the long run, it is embarrassing, and if people were to ask me at a party, what can I say? I am against embargoes in general - unless a country is doing something aggressive, and serious aggressors do not tend to lose a chunk of territory, as Azerbaijan has, and also do not tend to have huge amounts of refugees living in their cities. But, on the other hand, trade is good. The other important thing to keep in mind is that Americans, even with that restriction of official government aid, have provided a lot more to Azerbaijan than any other competing power bloc. They put more profits and more money into the economy, and I do not mean just investments - I mean also humanitarian projects, non-governmental organizations that are giving humanitarian aid, and there is a very strong American component to that. They are working around what Congress tried to do. Basically, I just go back to the basic dictum of life, which is that life is unfair, and you have to deal with the hand that you are dealt. And it is going to be hard for Azerbaijan to affect Washington, to be able to compete with the Armenians in that respect. That is just the way it is. There are other cards Azerbaijan has to play, and they are playing them effectively, and hopefully there will be a good outcome and the region will stabilize. I can not really speak to the bigger questions. I am not going to defend the US Congress. I voted Democrat, and the Congress is Republican. It is what pluralism is about.

US, Iran, Russia and Turkey: "The Struggle for Azerbaijan"
S. Rob Sobhani
11 March 1997

Dr. S. Rob Sobhani is a lecturer at Georgetown university, the President of Caspian Energy Consulting, and a consultant to Amoco - a major US partner in the development of oil in Azerbaijani oil. He received his Ph.D. from Georgetown in International Relations in 1989 with a concentration in Middle East politics. He has written widely on Azerbaijan and Iran, and also on regional politics and oil issues in the Caspian region. He is a frequent traveler to Azerbaijan and the other Caucasus and Caspian states.

Abstract

Dr. Sobhani opened by describing the passions behind Azerbaijan's initial struggle for independence. He noted the symbolism in the graves of the people who died in Moscow's ill-fated 1990 assault on Baku - Muslims were buried next to both Christians and Jews, demonstrating that the Azerbaijani people were driven not by Islamic fundamentalism, as Soviet leader Mikhail Gorbachev had claimed, but by the simple desire for independence. Sobhani then discussed the ways in which Azerbaijan is important to the US and the rest of the world. It possesses vast oil reserves; occupies a strategically important position between Russia, Iran and the oil-rich Caspian Sea; is a potentially large market for US exports; provides a good example of how aid targeted primarily at the private sector can work; and has a President of true international stature, able simultaneously to provide critically important domestic stability and to preserve his country's independence vis-à-vis both Russia and Iran. Russia is quite active in interfering in Azerbaijani domestic politics, Dr. Sobhani argued. It is pushing for military bases on Azerbaijan's border with Iran, is fomenting trouble in Nagorny Karabakh, is trying to obstruct the development of Azerbaijan's oil resources by contesting the ownership of its Caspian Sea oil and by using the Russian company LUKoil to obstruct progress, and has actually been involved in attempts to overthrow Azerbaijan's President, Geidar Aliev. Iran has also been active in the region, aiding a local Islamic party through its Embassy until 1995, and currently forging close relations with Azerbaijan's enemy, Armenia. Turkey has also been involved in Azerbaijan, but is primarily interested in developing commercial ties. The United States, however, has been much less active in Azerbaijan than it should be, Sobhani argued. The United States alone has the power to force a solution to the bloody Nagorny Karabakh dispute, yet it has so far not sought to use this power. In addition, it could benefit greatly if it were willing to encourage investment by its major companies in Azerbaijan - instead, it is losing out to Europe and other countries that are willing to back their companies. In fact, the US has even imposed an unjustified and harmful ban on aid to Azerbaijan, in the form of Section 907 of the 1992 Freedom Support Act, and this should be repealed, Sobhani contended.

Presentation

Sobhani: I want to start out by doing what I did in London some time ago. I brought with me some bumper stickers and I will explain the reason for them in a moment, but they basically capture the essence of what I am about to talk about here.

Let me start off by saying that the subject of my talk is the struggle for Azerbaijan. I would like to, if I may, start out with a personal history of what leads me into the struggle. I came to Azerbaijan at a very tragic moment in that country's history. It was 1990. Russian troops had just entered and left Baku. In fact, it was Mr. Lebed who had led those paratroopers into Baku, and a lot of people were killed. I was taken to visit what is today called the Martyrs' Cemetery in Baku. If we were to compare, I guess we could compare it to our own Arlington cemetery. It has become a national shrine in many respects. What really struck me there was that, buried one next to another, were young people, and what struck me was the indiscriminate killing that had gone on, and that the struggle of these people for independence had in one night been crushed by Russian troops. And the official reason that Mr. Gorbachev gave was Islamic fundamentalism. But what was striking to me was the pictures of the individuals. When I asked who they were, they turned out to be a Jewish doctor who was helping a victim whom the tanks had rolled over; a priest who had been shot and killed; and then of course there were the Muslims. These people were buried one next to each other. A Shiite Muslim buried next to a Jew, buried next to a Christian. This country's struggle for independence was brought to me personally in a sense that there was no Islamic fundamentalism. It was this people's desire for independence that had provoked this kind of reaction from Moscow.

I just want to start out by giving you a feel for the country itself. When we talk about the struggle for independence, Azerbaijan is really struggling to maintain its independence. And it has shed blood to have its independence. The struggle has, obviously, a history behind it. The first struggle was between Iran and Tsarist Russia; the Russian Revolution then led to the secession of Azerbaijan from the Russian Empire. Then the first two years that Azerbaijan enjoyed its independence came to an abrupt end when the Bolsheviks sent troops into Baku. Then, of course, there were Hitler's designs on Baku, which were stopped in the desert of El Alamein. Had Hitler been able to win that battle, his sights were on the oil fields of Baku.

Of course, since the collapse of the Soviet Union, a new struggle has now emerged for Azerbaijan. The key question is: why Azerbaijan? Why all of a sudden is this small country the size of Portugal getting so much attention? What really makes Azerbaijan important, if you strip away all of its romanticism, all of its history, is the fact that it is oil rich, from an American perspective. Azerbaijan and the Caspian region has probable reserves of 200 billion barrels of oil. That is roughly second to the Persian Gulf. And Azerbaijan specifically, at the peak of production in the year 2005, will be producing from just one project alone, 2 million barrels a day. That is the equivalent of what we import from the Arab members of OPEC. Clearly, Azerbaijan, and the Caspian Basin, is an alternative to Persian Gulf oil. There is no doubt about it. That is why it is important. That is why we are struggling over it. That is why the Russians are struggling over it. That is why a lot of people have an interest in Azerbaijan - for its oil resources.

The second important factor is geography. If you look at the map, it is sitting right at the heart of the nexus between Russian and Iran. For Russia, from an Azerbaijan standpoint, it is checking Russian ambitions in the region, because Azerbaijan is the only country that is saying no to Russia. There are no Russian troops in Azerbaijan. It is the only country among the former Soviet republics that has no Russian troops on its soil other than the Baltic states.

Another factor that makes Azerbaijan and its geography important is because it is sitting north of Iran. It is also a bulwark against Islamic fundamentalism in that sense. Also, it is potentially an element in our containment policy regarding Iran. A third element in the geography of Azerbaijan is that it is indeed the route for pipelines coming out of the Caspian region to the West. It is in many ways the cork in the bottle. If you open up Azerbaijan, if Azerbaijan is successful, then the vast riches of the Caspian region will reach the Mediterranean very quickly. This is why we have devised these bumper stickers that say "Happiness is Multiple Pipelines." To the extent that you have multiple pipelines coming out of the Caspian, everyone can be happy, we hope.

Another reason, other than oil and geography, why Azerbaijan is important is that it is a market for US exports and it is ready for business. The fact of the matter is that Azerbaijan is the only country in the former Soviet Union that has signed five production sharing contracts. These are actual contracts that have been ratified by the Azerbaijan parliament and that are law in Azerbaijan. In other words, irrespective of government changes, they will be there. So it is open to business.

In addition to that, $16 billion worth of oil services contracts are awaiting Japanese, US and French firms. For every one dollar that the oil industry invests into countries, it generates three dollars of service-related work. So if the company that I consult, Amoco, goes in, just the fact that it is in there means that it is going to require someone to provide it with cereal from the states, maybe, cars, helicopters to go offshore. These are all services. So Azerbaijan is a market, just from this one project that we are working on, for $16 billion of service related work. This makes it important. There is a great debate in our country today about the direction our foreign policy should take - should we be crusaders, should we be Wilsonian? Well, strip it of all of its theories, and I suppose you can argue that the search for markets could also be an element of US foreign policy.

Another reason why Azerbaijan in important, and this is something that is going to be increasingly important in Washington, is that it is a very good example of what can be done with reference to our foreign assistance. Let me give you an example of what I am talking about. Azerbaijan is barred from receiving direct US assistance because of a Congressional sanction called Section 907 of the 1992 Freedom Support Act. Since its independence, Azerbaijan has not received any direct US assistance. However, since then, British Airways, KLM, Lufthansa fly direct from Europe into Baku. American corporations, private sector America, private sector Europe, private sector Japan is investing in Azerbaijan and creating private sector jobs. Since 1994 $700 million has been poured by the private sector into Azerbaijan. So instead of making Azerbaijan a welfare state by providing it with foreign aid, what is happening is that the private sector is taking over. This is a very good example of what could be done in terms of our foreign assistance - that you do not necessarily have to give handouts to countries. What they really need is investment.

Finally, what makes Azerbaijan important is its President. I say this not because I visit with him frequently and we exchange thoughts, but because since 1990, when I visited Azerbaijan and I saw the instability, I can assure you that since his election as President Geidar Aliev has provided the leadership and the stability that is required for these investments to pour into Azerbaijan. So the fact that he is there, his personality, has provided the international community and the international business community with a sense that they can go into Azerbaijan and invest and that their investments will be guaranteed. I can assure you that when we sit around the table in Chicago, whether it is at AMOCO or at other companies, that is one of the major factors that they look at, the fact that this is a stable country and that it has a leader who says "I am going to provide stability." That is one element of it. The other element of it, of course, is that he is standing up to Russia and Iran. This is one country in the former Soviet Union that is saying, "listen, I am independent, my foreign policy is going to be independent, and I am not going to allow the Iranians or the Russians to interfere." He [Azerbaijan's President] has allowed the US an opportunity to come in and take advantage of this.

These, in essence, are the reasons why Azerbaijan is important: its oil, its geography, the fact that it is a market for US exports, the fact that it provides a very good case study of what foreign assistance can look like in the future, and finally, its leader.

The struggle, however, continues, because you have Russia, Iran, Turkey and the US vying for influence. I just want to go into a little detail as to what the Russians are doing in terms of trying to influence Azerbaijan.

Let me just go into a few examples of what the Russians are actually doing in Azerbaijan, with and without the cooperation of the Clinton Administration, I must add. Number one, the CFE Treaty. The Russians are insisting that they be allowed to have troops on the border between Azerbaijan and Iran. This obviously would be a violation of Azerbaijan's sovereignty. However, it is something that the Clinton Administration is pushing Azerbaijan to accept because the CFE is an important treaty for the Clinton Administration. But the fact of the matter is that the Russians are using vehicles to try to get back into Azerbaijan, and the CFE Treaty is one example of that.

Another issue is their support of the Armenians in Nagorny Karabakh. Just recently, it was revealed by the Russian military establishment that 84 T-72 tanks had been transferred to Nagorny Karabakh, in addition to 50 infantry combat vehicles. There is clearly a Russian hand in the Nagorny Karabakh conflict, and there clearly is Russian assistance to the Armenians of Nagorny Karabakh.

A third meddlesome issue, as it concerns the Russians, is the Caspian boundary issue. The Russians insist that the Caspian Sea belongs to all the littoral states and that Azerbaijan and the international consortium working in Azerbaijan has no right to that. and I can tell you that Russian officials have come into the consortium offices in London, threatened the consortium, saying "you are working here illegally." So they are trying to use this issue to stop the work of the international consortium from moving forward. Now, President Clinton, instead of supporting the Azerbaijan position on the sectoral division of the Caspian, has made it clear that he supports the position of all the littoral states. Well, the littoral states include Russia and Iran, and to the extent that Russia and Iran have veto power over what happens in the Caspian, it really precludes the US from access because Iranian involvement in the Caspian essentially means that the US cannot get involved because of the current laws we have on the books.

A fourth element of Russian meddling, and this is a fact, once again, three of the coup leaders that tried to overthrow the government of Geidar Aliev, are currently in Moscow. Former President Mutalibov, former Prime Minister Surat Husseinov and the head of the internal security forces. All three are in Moscow, and all three are waiting to come back to Baku.

Another long arm of Russia, another meddling element of Russia, is LUKoil. LUKoil, despite the fact that it is a partner in Azerbaijan, is there because the President of Azerbaijan clearly understands that there has to be a way to appease the big bear. And one of these means of appeasing the big bear is LUKoil. LUKoil was given 10 percent of the first consortium. It was given another working interest in another consortium. They have 50 percent, almost, of the Karabakh Consortium. They have not been able to change Russian policy in a positive way. It is very clear, and all indications are, that LUKoil is actually the long arm of the Russian government. To the extent that this is now becoming clear, LUKoil, in the last production sharing contract that was signed, was excluded for the first time from any activity in Azerbaijan.

The Iranians are also not laying low. The Iranians are active. According to the Azeri sources, the Iranian Embassy, from 1993 to 1995, was funneling money to the Islamic Party of Azerbaijan. The Ambassador was responsible for this effort. What they were trying to do was essentially to buy refugees with $100, bring them into Baku, and organize demonstrations on religious holidays such as the holy month of Ramadan. However, the essence of Iranian policy is to be anti-American, and to the extent that Azerbaijan is pro-American, Iran is anti-Azerbaijan. Another element of Iranian foreign policy is that it is anti-Israel. To the extent that Azerbaijan is a friend of Israel, Iran is anti-Azerbaijan. Incidentally, when President Aliev was sworn in, the chief Rabbi of Baku was presiding over that ceremony, in addition to the religious leaders of the Christian church and the Muslim community.

Another factor that irritates Iran is that President Aliev, and the people of Azerbaijan, adopted a Constitution that says that "Islam is not the official religion of our country." There is clearly a separation of church and state. The Iranians organized demonstrations in Tabriz, put pressure on the President of Azerbaijan. The President of Azerbaijan said, "Listen, we are an independent country. We will do as we please. We are not going to be an Islamic republic."

Finally, because of the fact that Azerbaijan has relations with America, has relations with Israel, Iran has now adopted a strategy of embracing Azerbaijan's enemy, Armenia. There is a very, very strong relationship between Armenia and Iran, where Iran supports Armenia with gas, supports Armenia with fuel oil, and is now Armenia's second largest trading partner.

Turkey is also vying for influence and power. However, the Turkish influence and the Turkish element in all of this actually has more of a commercial tilt. The Turks are mostly interested in building roads, building hotels, selling Turkish goods from Kleenex to mattresses. That is their interests, that is what drives the Turkish policy. It has mostly commercial elements to it. However, it goes without saying that Turkey wants a piece of the "pipeline action", and to the extent that they are competing with Russia, they have an interest in Azerbaijan because Turkey would like to see that pipeline eventually end up at the Turkish port of Ceyhan. It is also in competition with Iran, because Turkey does present an alternative to Iran. Turkey does try to win the hearts and minds of the people, and is in competition with Iran over that. But if I were to sum up the Turkish interest, the Turkish interest for the most part is a commercial interest.

Finally, there is the United States. The official State Department policy toward Azerbaijan is to ensure that Azerbaijan remains independent, to make sure that US energy security is provided for, that those cars that are going to travel on that bridge to the 21st century have gasoline to travel on, and the third is the peaceful resolution of the Nagorny Karabakh conflict, and finally it is to work with Congress to remove Section 907 of the Freedom Support Act. What the US has not done, however - I alluded to this earlier - is make a clear policy statement vis-à-vis Azerbaijan that goes beyond the niceties of "we want to support independence, we want to have energy security," and is constantly cautious because of what it says (and I am quoting a State Department official here) "we cannot provoke Russia." This is the Russian Caribbean. We cannot provoke the Russians.

So what we find is a frustration on the part of American companies working in Azerbaijan who see that the Japanese have the support of their government. The French companies come in with the support of their government. The Europeans in general come in with the support of their government. LUKoil comes with the support of the Russian government. Yet we have to drag the Clinton Administration every step of the way, and there are concrete things that the US can do to win the struggle in Azerbaijan. I am sounding like Teddy Roosevelt here a little, being jingoistic, but the fact of the matter is that there is an opportunity for the United States, and there is a struggle and we can win the struggle if we do certain things.

Those certain things are very simple, but the Clinton Administration seems to be hesitant. First, and foremost, is to invite President Aliev to Washington. This would be a clear signal to Russia and to Iran that we value our relationship with Azerbaijan and that Azerbaijan is a partner. Instead, John Huang gets 60 visits to the White House, and President Aliev gets zero. For now, the priorities of the Clinton Administration seem to be elsewhere.

A second thing that the Clinton Administration can do is lift Section 907 of the Freedom Support Act. Madeleine Albright can certify to Congress as such, and that can be done. So far, the President has decided not to exercise that option. In fact, in 1995, when Congressman Charlie Wilson, Democrat from Texas, passed legislation to allow the President a waiver to provide humanitarian assistance to Azerbaijan, he refused, for whatever reason.

Another, third, factor, is that the United States is the only remaining superpower, and it can invite the parties to the Nagorny Karabakh conflict around the table and start the process of a peaceful resolution of this conflict.

What the Administration has done, and you have to give credit where credit is due, is to have listened very carefully to what the American oil companies have said, and they are now very supportive of a multiple pipeline solution. So what the US is doing is to promote a multiple pipeline route out of the Caucasus. In fact, when the consortium was struggling over what the next option was in terms of a pipeline, the President called President Aliev, and urged President Aliev to support a pipeline to Georgia in a telephone conversation. President Aliev agreed to that. Today, the Administration is supportive of a pipeline from Baku to Ceyhan. So the Administration has been supportive in that sense.

There is a lot of talk about the 21st century, and we have a new Secretary of State, and I suppose that you can argue that what we do with Azerbaijan will say volumes about where we are headed in terms of our foreign policy. Are we going to act as a superpower, be aggressive, be bold, with deference to our host country, in this case Azerbaijan, and not feel guilty about going ahead and doing these things? Or are we going to allow the struggle just to continue, because if the struggle continues, and Russia wins the struggle, Azerbaijan is going to lose. If Iran wins the struggle, Azerbaijan loses. But if the United States wins the struggle, I firmly believe that Azerbaijan wins, America wins, and all of the other countries can win because there is enough oil in the Caspian, there are enough dollars to be spread around, for everyone to win.

I would like to close by making a point here, which is sometimes lost both on academicians like myself and policymakers. The one project that we are working on right now in Azerbaijan that is moving forward will bring to Azerbaijan, over the life of the project, $94 billion. These are in 1993 dollars. You are looking at the next Kuwait of the former Soviet Union. The key question is, who is going to be a partner, and who is going to be dancing with this new partner? Is it going to be Russia? Is it going to be Iran? Is it going to be Turkey? Or is it going to be the United States? The fact of the matter is that this partner is pretty rich. The fact of the matter is that if the US does not attempt to try to win the struggle, the $94 billion will go elsewhere, and the US will ultimately lose.

There is a lot more that can be said, particularly on the details of the oil project, the pipeline routes, which I would be more than happy to discuss in the question and answer session. Now I would like to open it up to questions and answers.

Discussion

Question: You said that the Clinton Administration supports the multiple pipeline plan. These negotiations for different pipelines have gone on for years now. Is there something more that Clinton could do to actually get the pipe laid? If he woke up in the morning, and said, "I really need to get some oil out of the Caspian to world markets," what more could Clinton do to make sure that these negotiations get settled and the pipe gets laid?

Sobhani: What he can do specifically is to call Ruth Harkin at OPIC and say, "we are going to provide financing for the building of a pipeline from Baku to Ceyhan, because as it stands today, the financing of that pipeline will require additional financial assistance, and US guarantees are absolutely important. So what Bill Clinton can do is tomorrow to wake up and say, "Today I am announcing that we are providing financing for the pipeline between Baku and Ceyhan."

Question: Is it really in the US interest to have a relationship with Azerbaijan given the fact that it is in the Russian Caribbean. We are pressing the Russians on other issues, particularly NATO expansion, which is certainly a more important US interest than a relationship with Azerbaijan or other states of the Caucasus. Given these structural constraints, given the fact that we are making great demands on Russia at this point in time (we are asking them to give up a lot and to accept a lot), maybe it is not such a bad thing for the US simply to turn a blind eye to Russian hegemony in the Caucasus, in the "near abroad."

Sobhani: I am of a different school of thought. I believe that what Moscow did to the former Soviet republics was unconscionable. The environmental devastation that was wrought, the seven billion barrels of oil that Moscow took out of Baku without paying them a cent for it, is unconscionable. What they have done to the environment in Kazakstan, the nuclear waste they have left behind in Kazakstan, what they have done to these former republics does not give Russia any reason for wanting to be the hegemon. They had their opportunity to be a good partner, yet they wasted that, in my opinion, on taking advantage of these republics to their own advantage. They never gave back what they took from these republics. Yes, they provided an education system, you cannot deny that. But the fact of the matter is that Russia took over these countries forcefully. We keep thinking about the Baltics, but the fact of the matter is that the Bolsheviks went into Baku and basically put an end to their independent experience. Azerbaijan could have been an independent country since 1918. Yet it was squashed. They could have been producing that oil for themselves. So when Mr. Primakov tries to negotiate with Madeleine Albright or the President and says, "OK, if you expand NATO, then we should be the boss here," the answer to that is "nyet, no can do."

Another way of looking at it, however, and this is something to which I think Jack Matlock recently referred to, is that no one has actually challenged the Administration on why we are expanding NATO? Why do we need to expand NATO? We can have bilateral relations with all of these countries without needing to expand NATO. Some more cynical than I would say that this is a campaign ploy to win the Polish vote, to win the ethnic vote in America. The less cynical would say, "OK, the vacuum in Central Europe has to be filled, but you do not have to fill it necessarily with NATO."

I come to this question from a different perspective because I do not feel Russia has any right whatsoever when you have killed 20 million of your own people, and you have committed the atrocities they have throughout 70 years of Communism. There is a town in Azerbaijan called Sumgait. It is a half-hour drive from Baku. When walk into that city, you feel like you have smoked two packs of cigarettes. Twenty percent of children born in Sumgait today will die before the age of one. There are birth defects. And this is because of the Soviet Union.

One more historical note and I will finish. When the Chernobyl accident happened, Gorbachev invited the whole Politburo to the Kremlin. Yeltsin was there, Ligachev was there, everyone was there including President Aliev. Gorbachev opened the meeting saying, "We have had this accident, what are we going to do about it?" The consensus was to put a damper on it, to try to keep it hush-hush. President Aliev said, "No, you can't. This is an environmental devastation that needs to be coordinated with the rest of the world." The long and the short of it is that Russia does not deserve to be treated as an equal. They have done too much damage and harm to too many people including their own, at least in my opinion.

Question: What leverage does Azerbaijan hold vis-à-vis Russia?

Sobhani: Azerbaijan's leverage over Russia is its oil and the pipelines. To the extent that Azerbaijan says no to a pipeline to Russia, that is leverage. To the extent that it says no to the LUKoils of the world, that is leverage. To the extent that Azerbaijan invited American companies into Baku and gives them an opportunity to work in Azerbaijan's oil fields, that is leverage. So Azerbaijan has leverage, and it has exercised that leverage. However, its expectations of the US response have not been met. I think that is where the gap is right now, and I am sure that one gap will be filled.

Question: Does not Aliev's past as a Soviet Politburo member and a KGB general cause problems for Azerbaijan, particularly in the possibility of a transition to democracy?

Sobhani: My own observations of Azerbaijanis, going there now since 1990, is that they view Geidar Aliev as kind of an Ataturk figure. They call him "Geidar Baba." Yes, they understand his background. Yes, they understand that he might be tough on certain issues, and yes, President Elchibey was softer on many, many issues. But the fact is that since President Aliev's assumption of power, there has been a cease-fire in the war, the economy is gradually coming out of its slump, and people are seeing a gradual improvement in their daily lives.

But there comes a point in each country's history when you have to choose between democracy or stability. In Azerbaijan's current situation, I think it needs stability, because that stability will eventually provide it with the wherewithal to become a democratic society. But if you open up the system today, there are so many Russian agents in that country, so many Iranian agents, that the process of democracy becomes bastardized, and the politicians become prostitutes all of a sudden. Today, in the situation that Azerbaijan faces, Geidar Aliev is the man of the hour. and that is what the people in the street feel, as well. I must say, this is not just people in the government. I always visit the suburbs. I always visit the refugee camps. These are refugees who have been living in refugee camps now for three years. Pretty miserable situation. Without exception, they have praise for Aliev, they like Aliev. They do not necessarily like the people around Aliev. But they like President Aliev and he has the respect of the people.

Question: I am surprised you have not mentioned the European Union among the stakeholders of the region. The European Union is devoting $1.5 billion out of its yearly budget, and the Caspian Sea occupies a substantial part of that total. There is even the suspicion that the EU might be using that assistance as leverage. How do you regard these EU initiatives which might eventually lead to a challenge in the US role in mediating the conflict?

Sobhani: In answer to the question about what leverage Azerbaijan has, Azerbaijan's one source of leverage was America. Yet it also has Europe. I think that to the extent that the US leverage has not fulfilled Azerbaijan's requirements, the Europeans have filled in the vacuum. Since 1994 when the first oil consortium was signed, every contract since then has been given to European companies. And European companies are now far more active than American companies. Despite the fact that only 17 percent of the first consortium belongs to BP, for example, the British have won 30 percent of the overall contracts that have been awarded by the consortium. When President Aliev's expectations of America fell short, the Europeans recognized that. He has now been invited as a head of state by Mr. Kohl, he has been invited by Chirac, he has been invited by John Major. So you are absolutely correct that there is frustration on the part of Azerbaijan with America. To the extent that Europe can fill that role, they are allowing the Europeans to do it. It is obviously helpful to the European commercial interests. The latest winners were Elf and Total. On January 14, they signed a production sharing contract. An American company was supposed to have been included, but it was excluded. That was a clear signal to the United States that it needs to do more. So I would agree with you that the European Union, and individual European countries, have recognized that there is a struggle going on and that the US is not doing its job, and they are filling the vacuum.

I do not think it will be possible for the European Union to take on the role of brokering the conflict. This is because there was enormous frustration and anxiety when the French assumed the co-chairmanship of the Minsk Group for the Resolution of Nagorny Karabakh. The Azeris objected, and they made their objections very clear, because there is a perception that France, at least, is not necessarily going to side with America on the Nagorny Karabakh issue, and that the Europeans in general, while they may be able to assist on the margins of the Nagorny Karabakh conflict, cannot replace the US, which needs to take an active role. Aliev recognizes that. And I think that the European Union's role is going to be limited to that as well.

Question: How does Armenia fit in to this mix?

Sobhani: Armenia has an excellent historical opportunity, as well, to benefit from what's happening in Azerbaijan and Georgia because to the extent that pipelines have to be built, whether it is gas lines or oil lines, Armenia has a vested interest and can be a beneficiary. However, whether reluctantly or not, they have sided with Russia and Iran because they view Russia as a protector, because of their history, and they view Iran as such. So if Armenia and the Armenian leadership decide to withdraw from the occupied territories, settle their conflict the way President Aliev has outlined, they will certainly benefit from investments in the region because this oil has to get out somehow. Georgia is one option. But Armenia could be another option. Yet it will never be considered because Armenian policy still is very much pro-Russian and it has a very strong relationship with Iran. To the extent that Armenia and Iran have relations, it precludes the US from involvement.

Question: What leverage to sustain Azerbaijani physical security does the US have? It seems that the Russians are willing to play with ethnic conflicts, to retaliate against the pipelines, to propose coups and the like and to have that constantly on the agenda. As it is situated between Iran and Russia, it does not seem that we have any leverage outside of your statement about our strong commercial interest. How would you suggest that the Clinton Administration go about reinforcing Azerbaijani physical security.

Sobhani: I think that all seven million of the people of Azerbaijan, for starters, would stand up and fight if the Russians decide physically to invade Azerbaijan. I do not think that that is necessarily an option the Russians are contemplating; I think that they learned their lesson in Chechnya. Azerbaijan is a proud nation. Despite the losses in the war with Armenia, it is a very proud nation. And any physical attempt to grab territory is going to be met with a lot of resistance. However, having said that, if I were the US, and I were Bill Clinton, and I had a policy called dual containment, and Azerbaijan was an element of that, the physical way to support that would be to sign a treaty with Azerbaijan which would allow my F-15s to land in Azerbaijan from Turkey. I would have a Turkish corridor with Azerbaijan where my F-15s could go back and forth. That is one way.

Question: Before I ask my question, I would like to comment on Elchibey. President Elchibey obviously was elected democratically. But before that, the Popular Front, headed by Elchibey, fired with the tanks that they owned on the Parliament that is still there, and they came to power by overthrowing the Communist leaders. Secondly, it was Elchibey who made Surat Husseinov, who later on turned out to be the leader of a rebellion, a national hero of Azerbaijan. It was Elchibey and his party, the Popular Front, who kept military armed groupings. When he became President, instead of dissolving these armed groupings of the Popular Front, they still kept all their tanks. Finally, the national hero created by Elchibey, Surat Husseinov, pulled back his army, his tanks, from Karabakh, and said, "I am going to settle my dispute with Elchibey by means of the army, by launching an offensive operation on Baku, the capital city. It was Elchibey who appointed as Defense Minister, his right-hand man, Rahim Gaziev, who later on turned out to be an agent of Russia, as was stated by Elchibey, and who fled from the KGB prison in Azerbaijan and found shelter in Moscow. It was Elchibey who was saying that we need to dissolved the Communist Parliament, that we need to hold free elections. But he was in power for one year, and he did not dissolve the Parliament. He worked with the Communist Parliament.

President Aliev has now held an election in Azerbaijan, adopted the first Constitution of Azerbaijan, and did not come to power with Surat Huseinov. It was Elchibey who invited President Aliev to come to Baku when there was a civil war in June 1993 in Baku. Brother was killing brother, and it was during Elchibey's rule that Azerbaijan lost six provinces outside of Nagorny Karabakh because there was a political game. Everybody was fighting for power in the cabinet of Elchibey. When there was a civil war, instead of making a courageous stand, the President fled the country. Elchibey fled the country. He called Aliev to come from Nakhichevan, and asked him to become Speaker of parliament. Then overnight, secretly, he fled the capital city to Nakhichevan. For three months President Aliev asked for Elchibey to come back. Only after three months did the Parliament say, "If the President cannot head the nation, if the head of the family is not at the helm, then we should go for elections." Only after three months was there a general election, in which Aliev became President.

As for his past, President Aliev used the system to serve his nation. He could not change the socialist system, but he served his nation, and 70 percent of Azerbaijan's economy was built during his time.

My question is about the influence of Armenia's lobby in the United States of America, particularly Armenian influence on congressmen and congresswomen in the United States. What can you say about this matter?

Sobhani: There is no doubt that during the formative years of Azerbaijan's independence, when there was very, very little information about Azerbaijan, about the activities of the oil companies in Azerbaijan, that the Armenian lobbies and the friends of Armenia were able to influence members of Congress (one from this particular state, Senator Kerry) to pass legislation banning any direct assistance to Azerbaijan. This happened in August 1992. It happened at midnight, frankly, where John Kerry, with the help of Paul Sarbanes (I hate to say, my Senator, from Maryland), got together and tagged on this 907 amendment to a budget bill. And it got passed, over the objections of President Bush. And when President Clinton came to office, President Clinton objected as well.

The activities of the two largest Armenian groups in Washington, the Armenian National Committee, and the Armenian Assembly, have clearly had a negative impact on US policy. There is no doubt that they have had an influence on the way the administration views this whole region.

I will give you one concrete example. When Congressman Charlie Wilson, Democrat, passed (at the subcommittee of the House Appropriations) a waiver to allow President Clinton to provide direct humanitarian assistance to Azerbaijan, Mitch McConnell immediately, wrote a letter to Warren Christopher, not the most charismatic Foreign Secretary we have had in quite some time, and threatened him, basically saying, "you will not provide assistance to Azerbaijan. They do not need it." This is a time when refugees were dying, where according to the centers for disease control, 30 percent of the children are anemic because of the lack of assistance. Mitch McConnell did this because of lobbying efforts by various Armenian groups. Another Congressman, Frank Pallone, received $32,000 and did the same thing. He co-sponsored a letter threatening the administration with X,Y and Z matters if they went ahead and provided assistance to Azerbaijan. There are congressmen and senators who, for a campaign contribution, will do what you ask them to do. That is a weakness of our system, unfortunately, and maybe that is part of what a democracy is all about. People have interests and they try to get together to influence policy.

However, in the case of Azerbaijan, I think it is absolutely un-American, immoral and unjust for any congressman or any senator, including John Kerry of Massachusetts, to have done that. It is short-sighted. It is hurting America. But more importantly, it is not American. We as a country do not have any law banning assistance to Iran, Iraq, North Korea, Cuba and Libya. We can provide humanitarian assistance to these countries. All direct assistance. Yet Azerbaijan, which has opened up its doors, its hearts, to us, has been told "no, we cannot do that."

But I do not blame the Armenian lobby. The Armenian lobby is doing what any lobby does, what the Ukrainian lobby is doing today, pushing for NATO expansion, what the Polish lobby does, pushing for NATO expansion, what the National Rifle Association does, which is to make sure that everyone has guns. It is the fault of the congressmen who have prostituted themselves, who have come down to a level where for every buck, they will turn around and kiss your cheek. It is the fault of our system. We are a democracy. It is the right of an Azerbaijani to give money to their congressman, or an Armenian to give money. It is the job of the congressman to make sure that they do not change policy because of that.

Question: I wonder if you have not underplayed the importance of the Russian presence, not just in closing off the border and in independence. For over 150 years Russians have been influencing the area. Many Azerbaijanis, as you know, speak Russian, they know how to deal with Russian politicians and businessmen. So I am a little troubled by that disengagement from Russia, from the Russian economy, from the Russian regional economy. It is a much tougher business than we think.

Sobhani: Azerbaijan has not disengaged from Russia. Nor has President Aliev ever decided to stop relations with Russia. In fact, it was the Russians that cut the border off with Azerbaijan, and they have not allowed goods and services from Russia to go into Azerbaijan. The President of Azerbaijan wants friendly relations with Russia. It is the Russians who are trying to impose themselves. And you are absolutely correct - Azerbaijanis speak Russian, they have Russian friends, and those friendships will continue. And that is good, and it is healthy to have those relationships.

What's not healthy is when you have assassination attempts against the President, and it turns out that the Russians were involved. What is not healthy is when you have the Russian Ambassador saying, "We are going to close the Volga-Don River to any Azerbaijani ships that are going to bring material to build these platforms. That is what I call the "thuggish" Russian policy. But there is a benevolent Russian policy that they could administer. We have yet to see it.

I suppose that your point is that Russian commercial interests have a natural role to play in Azerbaijan, correct? And they do.

Question: Certainly the Azerbaijanis have a very positive attitude towards the West, and in particular toward Americans. It is just that by "disengagement" or the "neutralization" of commercial relations, it is going to take a much longer period of time in the face of everything that they have done, the degradation of the environment.

Sobhani: Absolutely. That is why MOST-Bank is now in Baku. That is why the Moscow insurance companies are in Baku. Their commercial activities are vibrant and thriving. And they are the ones, actually, that want to practice that benevolent diplomacy. It seems like their government has a different idea. But there is certainly room for Russian commercial interests, and President Aliev has provided for that, frankly. There are many, many Russian businesses that are in Azerbaijan.

However, I think that there was a psychological blow to that relationship that occurred on January 20, 1990. The fact of the matter was that you had Russian troops killing innocent people. That was a watershed. That was a turning point. And Azerbaijan and Azerbaijanis will never forget that night and those events for many years to come. And I think that single event changed the whole dynamic between Russia and Azerbaijan.

Question: Could you say just a few words about the relationship between the people in Azerbaijan and the Azerbaijanis in northern Iran?

Sobhani: Well, you see a lot of Azerbaijanis from Iran in the nightclubs of Baku, drinking, watching naked women dance. I hate to be so crude, but that is what they want - that is what they come for. Rest and Relaxation. In Baku you see these kinds of things because they are so limited in Iran itself. However, those that advocate, or those that suggest, that Azerbaijani Iran is a prime target or a candidate for separation are misguided and need to go read history a little more. The history of Azerbaijani Iran suggests that over the past 200 years, it has remained part of Iran, and its secession is a very remote possibility despite the fact that they share a culture and a language with the Azerbaijanis from Azerbaijan proper.

When I talk to businessmen from Iran, who are Azerbaijani who visit Baku, I do not get any indication from them that they would like somehow to join Azerbaijan proper and unite the two peoples together. I do not get that sense at all. There are individuals, however, who advocate that, there is no doubt about it. But I think that at this point in time, Azerbaijani Iranians have been Iranianized, and many leadership positions both under the Shah and today in Iran are held by Azerbaijanis, actually.

I am a minority on this subject, buy the way - will argue that Azerbaijani Iran is a prime candidate for secession. So I am a minority on this issue in terms of what I think is going to happen. But these are not based on, I admit, any academic study that I have done. It is purely based on conversations that I have had with a lot of Iranians that happen to come to Baku and visit the city, and just talking to them.

Question: Since Iran is so important, should not Azerbaijan have a carefully considered policy toward it, as opposed to rejecting it simply as an Islamic fundamentalist state?

Sobhani: President Aliev has always maintained that Iran should play a part in Azerbaijan's economy. President Aliev has never, ever suggested that they should not have relations with Iran. In fact, every government official from Iran that has visited Baku gets an audience with President Aliev, even the deputy governors from the various provinces of Iran that come to Baku. The problem arises when the Iranian Foreign Minister Velayati comes to Baku and starts criticizing Azerbaijan for its relations with Israel. That is where you all of a sudden have the tensions. It is more an Iranian-activated issue than an Azerbaijani issue. Azerbaijan is an independent country. President Aliev has said, "We want to have good relations with Iran. They are a neighbor." You have to have relations with your neighbor. I think the problem arises, as I said, when Iran tries to politicize and inject its own ideology into Azerbaijan's foreign policy.

Question: I have a question concerning the current status of the oil pipelines. Could you just briefly tell us which pipeline you think is most viable? And would you invest your own money in one of these pipelines? And do you have confidence that this oil is eventually going to get into Western hands?

Sobhani: Absolutely. There is no doubt about it. There will be a Georgian pipeline, come hell or high water. There will be a Georgian pipeline. The question is, however, will there be a main export pipeline from Baku to Turkey, Ceyhan? That will also happen because we need it. The capacity of the Russian pipeline and the Georgian pipeline combined cannot satisfy what the Caspian countries are about to produce. There is a deficiency of 150,000 barrels a day. Somehow, you need an alternative.

Question: You mention that $700 million of private investment has gone to Azerbaijan, which sounds like great news. But my understanding is that that is mostly oil or oil-driven investment. Even Hyatt or KLM or Lufthansa, those are all oil-driven investments. Also, it is a little bit disturbing that many of the deal are cut on the government level, almost like on a personal level, if the deal is sufficiently big, with Aliev or his surroundings. And if you look at the broad level privatization, which basically has been nonexistent in Azerbaijan, in contrast with what has been done over the last four years in some other countries, you start thinking that the market economy comes to Azerbaijan not through the market, but through some other means. That brings me to my question, because if you look around at some other countries where heads have fallen and people in governments have changed, and Azerbaijan could be one of the examples, the businesspeople who were in Georgia during Gamsakhurdia's time - you would not find one of them there after Gamsakhurdia was removed. My question is, how much of the Azerbaijani stability (which is undoubtedly there, and we are all grateful to Mr. Aliev for bringing it to the country) rests in Aliev, and what would happen tomorrow if for some reason Aliev had to exit the government, or retire or whatever? Would the contract hold, as there is no contract law, or really no acceptable contract law?

Sobhani: The last time I visited President Aliev, he told me his blood pressure is good, he has low cholesterol, and he is going to be around for another 10 years. But you make a very good point. What will happen to Azerbaijan if, for whatever reason, President Aliev is removed from the scene? The oil contracts that have been signed are now the law of Azerbaijan, so any other government which comes afterwards would be in trouble with the international courts of law if they tried to change that. And all the indications are from all of the opposition parties in Azerbaijan that they do not want actually to make any change - they do not want to meddle with what they have already got.

On the other issue of the excess of oil dollars, and the lack of non-oil dollars, I think that President Aliev, given the fact that he has now five production-sharing contracts signed, he is now giving increasing focus to the non-oil sector. The World Bank recently signed an agreement with Azerbaijan to privatize Azerbaijan's agricultural sector - it is a $48 million project. So he is now focusing attention increasingly on the non-oil sector, and I think that over time, you are going to see a balance. If that is $700 million in the oil sector, maybe I am projecting that by 1998, next year, you will see $200 million of direct investment in the non-oil sector. But that is something that the President is very worried about. He does not want, and rightly so, to have these farmers and peasants to come from the villages looking for jobs in the oil sector in Baku and then be left unemployed. So he recognizes that.

Question: What about political stability if he is not around?

Sobhani: That will largely depend on what type of reaction the countries of the region have towards Azerbaijan. If the Russians decide, "OK, this is our opportunity," then it is going to be a difficult position. On the other hand, if the US jumps in, fills the vacuum, then there might be some stability in a transition. The current Speaker of the Parliament would automatically assume the leadership for three months. After that, elections have to be called. In that case, who knows? There are many contenders out there. But as I said, I think that even the American Embassy would tell you the same thing that I am about to say, which is that President Aliev is going to hang around for another term, and let us hope he does hang around for another term.

Question: What do you think about the possibility of Georgia stepping in to broker peace between Armenia and Azerbaijan? What kind of regional cooperation between Georgia, Armenia and Azerbaijan will be possible in the future? How can Azerbaijan accommodate Armenia so we can keep peace going?

Sobhani: My first reaction is to say: read the current issue of Foreign Affairs, the article by David Rieff, who recently visited Nagorny Karabakh. You will find a very well-written piece, but not a hopeful piece, about a people, in this case the Karabakh Armenians, who are hell-bent on independence and have blinded themselves to a particular strategy which is going to hurt them ultimately and is not going to benefit them at all. The only way, or the only mechanism that I can see, is economics. Congress recognized this a long time ago, and established the Transcaucasus Enterprise Fund. It is funded now with $30 million, ready to go. These are initiatives, interregional, inter-Caucasian initiatives that need to be established from a practical standpoint if these countries are going to put aside hatreds which are sometimes historic but are sometimes Russian-made, frankly, and to be able to understand that they have a vested interest together. That is why President Aliev told the Armenians, "Listen, withdraw from my territory. Let us resolve Nagorny Karabakh and you can have an oil pipeline." But the Armenians for centuries have felt that Russia has been a guarantor of their security, and maybe the Russians do not want that scenario, either, because to the extent that Armenia all of a sudden becomes dependent on an East-West nexus, it does not have the North-South nexus, and maybe that is something that the Russians do not want to see.

I think to the extent that you have an Armenian lobby which has a natural tendency to demonize Azerbaijan, to demonize Turks, it is going to be difficult to get the Armenians in Armenia to negotiate, because what the Armenians in America oftentimes do is to go to Armenia and say, "Do not worry, we will get you the money, we have got it covered, stand firm, stand firm, stand firm." That may work for a while, but after a while, something is going to give. I think Ter-Petrossyan has recognized that, and has now made a decision with President Aliev that they are going to solve this thing cooperatively.

Now, what happened was that Russia, which was the co-chairman of the Nagorny Karabakh Minsk Group, was running the show until recently. Then the French got into the act and Azerbaijan protested. So now what you have is a three-way leadership where you have Strobe Talbot finally on the same panel with the Russians, talking about a resolution of the Nagorny Karabakh conflict. So what you have is maybe the beginning of a process where the United States and a key friend and advisor to the President is now the point man on Nagorny Karabakh. Maybe after all this campaign finance issue is taken care of, and NATO expansion is done with, they will come around to this issue of resolving the Nagorny Karabakh conflict. But unless and until the United States actively engages, it is going to be very difficult because the Armenian history of 1915, the recent history of bloodshed, is always going to make them leery of anything that creates a distance between them and Russia. There needs to be another guarantor to fill that vacuum. And I do not think that they are going to accept any guarantee other than that of the US, frankly, if they give up the Russians.

Maybe it is not the right analogy, but just like in Bosnia, they need someone to bring them around the table and sit them down and say, "OK guys - let us hammer it out." Because they need guarantees, the US is the one that they are looking to, rightly or wrongly, to provide those guarantees. It is a tough, tough issue. A tough road ahead.

Question: I think I want to object to what you are saying here because I lived in Armenia two years and I know the Armenian perspective, and I think that the Armenians in Nagorny Karabakh would not say that you are close to an agreement at this point, nowhere near an agreement, because they want to be recognized as a third party in these negotiations which have been stalled for a long time. I was wondering, in your Discussions with President Aliev, is he willing to recognize the Karabakh Armenians as a third party at the negotiating table?

Sobhani: No, I do not think so. I think indirectly, maybe, but look at it this way - I guess I look at it from a very simple perspective. If the Cubans in Miami wake up and decide just because they are a majority in Miami that they want to declare independence and join Cuba, should not the rest of Florida object? Absolutely.

The President of Azerbaijan, if you look at what he is saying, is now offering the Karabakh Armenians enhanced autonomy. And that is, outside of foreign policy, they can have everything.

Maps