BLACK SEA BASIN REGIONAL PROFILE:

I INTRODUCTION

II PROFILE BACKGROUND OF THE BLACK SEA BASIN

1. Geopolitical and Geostrategic Tendencies
2. Sources of Conflict: The Oil and Gas Issue

III CONFLICTS AND POST-CONFLICT DEVELOPMENTS IN THE BLACK SEA AREA

1. Post-Conflict Issues in Chechnya
2. The Abkhazian Conflict
3. The Nagorno-Karabakh Conflict 

IV THE NATIONAL PERSPECTIVES: SPECIFIC DEVELOPMENTS

1. Armenia
2. Azerbaijan
3. Georgia
4. Russia

V THE BILATERAL RELATIONS IN THE BLACK SEA REGION

1. Bilateral Relations
2. Multilateral Relations

VI THE STATE OF REGIONAL INITIATIVES

1. The Economic Situation in Black Sea Region Countries and Its Consequences on Black Sea Cooperation
2. Political and Security Aspects of the Cooperation

VII EXTERNAL FACTORS (STATES AND INSTITUTIONS) INFLUENCING THE BLACK SEA REGION

1. USA
2. NATO
3. EU

VIII THE SECURITY SITUATION AND REGION-BUILDING OPPORTUNITIES: CONCLUSION

I   INTRODUCTION

The last three months proved how dependent the security situation and the realization of region-building opportunities are on domestic developments in individual countries within the Black Sea-Caspian Sea area.  Internal developments in Russia were again of priority significance for the general stability of the broader region.  A terrorist act in the Moscow subway, the sinking of the Kursk nuclear submarine and the deaths of its crew, the fire in the Ostankino TV tower, and continuing terrorist attacks against Russian soldiers in Chechnya greatly burdened the first months of newly elected Russian President Vladimir Putin.  Pressed by the deep human tragedy, Putin said the poor technological state of the whole Russian economy and hardware had logically led to the suffering of recent weeks.

Issues concerning oil and gas transportation routes from the Caspian Sea region to world markets were a reminder of the many unsettled questions in relations between the former Soviet republics.  This conflict factor is still pending, with options to escalate tensions or to engage in mutually beneficial cooperation between the region's countries.

Post-conflict developments in Chechnya remained complicated, with very modest signs of political settlement, given the background of continuing scattered terrorist opposition in the rebel republic.

The dangers arising in Central Asia led to a joint Russian-US force to counter Afghan terrorist activity in the broader area.  The EU resumed its TACIS program with the Russian Federation.  The US continues to display its strategic interest in the region's stability.

II   PROFILE BACKGROUND ON THE BLACK SEA BASIN

1.  Geopolitical and Geostrategic Tendencies

US and Russian experts met in Washington, DC, on 1-2 August to review the threat posed to regional and international stability by Taliban support of terrorism.  The experts are part of a US-Russian working group on Afghanistan, and the meeting was convened at the suggestion of US Secretary of State Madeleine Albright and Russian Foreign Minister Igor Ivanov, to whom the working group reports.  During the June summit meeting between US President Bill Clinton and Putin in Moscow, they agreed to explore ways to stem threats to the international community from Taliban support for terrorist activities.  The two countries' experts explored bilateral, regional, and multilateral options for addressing the threat.  Both sides condemned terrorism emanating from Afghanistan and reiterated their determination to cooperate in countering it.  They called for full implementation of the United Nations Security Council Resolution 1267 and support for further measures against the Taliban, in view of the group's refusal to implement that resolution.  Both sides also jointly condemned Taliban promotion of illicit drug production and trafficking in territory under its control and use of drug profits to support terrorism.  The expert group members noted that a multifaceted approach must draw upon diplomatic, law enforcement, and other legal means to counter the threat of international terrorism from Afghanistan and to create conditions for Afghans to establish a broad-based government in that country.  They agreed that continued cooperation between the Russian and US governments was necessary to promote that approach.

Another significant tendency in the Central Asian region adjacent to the Black Sea-Caspian Sea area was the removal of Russian troops from Tajikistan at the end of the third week of September.  Meanwhile, the Afghan Taliban carried out a successful military campaign in the northern part of the country against the Northern Alliance of Ahmad Shah Massud.  That posed a direct threat against Tajikistan. Russia failed to arrange its legal relations with this country in the newly arising situation at the Afghan border during the 10 days before the legitimate stay expired on 17 September.  If Taliban aggression persists, Russia will probably return its forces at a higher cost in both financial and strategic terms.

A third major trend gained momentum in the region after Romania declared its readiness to join GUUAM – an alignment of Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova.  The group was formed in 1997, and Uzbekistan joined in April 1999.  Romania displayed its interest in joining during the UN Millennium Summit meeting in September.  Obviously this country seeks a political guarantee on its future profitable participation in building up and exploiting benefits of the Trans-Continental Transport Corridor or TRACECA (the East-West Corridor).  As a prospective NATO member, Romania will bring specific content to the GUUAM grouping with repercussions on Russian attitudes, unless it assumes a more favorable stance towards NATO.  Politically Russia paved the way for this move after introducing a visa regime for its CIS friends.

2.  Sources of Conflict in the Black Sea-Caspian Sea Region

a.  Delimitation of the Caspian Sea

During the first week of August an official in Putin’s administration responsible for Caspian Sea regional issues and deputy minister of foreign affairs Viktor Kaliusin visited Iran and other coastal countries.  Putin discussed Russia's position on the legal status of the Caspian Sea.  Russia considers the undefined limits of the Caspian Sea the basic impediment to broader extraction of oil and natural gas in the region.  Russia declared its opposition to the notion of dividing the sea territory into national sectors, holding that this would drastically destabilize the region and intensify various problems and tensions among the Caspian Sea neighbors.  A conference of all Caspian states may provide the opportunity to discuss these fundamental issues comprehensively.  The need to transport oil and gas from the Caspian Sea area to world markets necessitates the convening of such a broad discussion but probably with the participation of other interested partners outside this region.  Similar issues are also not solved in the Black Sea.

b.  The Oil and Gas Issue

Construction of the Baku-Tbilisi-Ceyhan oil pipeline could progress after the Turkish government decision in late August to begin basic engineering work, route surveys, and environmental studies.  The pipeline would run from Baku, Azerbaijan, on the western side of the Caspian Sea, across Azerbaijan (some 465 kilometers) and Georgia  (about 255 km) to the Turkish Mediterranean port of Ceyhan, with 1'010 km on Turkish territory.  The cost of the project is estimated at US$2.4 billion.  According to the EuroPA Monthly intelligence bulletin of 13 July, to become commercially profitable in the absence of US subsidies the pipeline would need an estimated through-put of 1 million barrels a day – a figure beyond the immediate capacity of Azerbaijan.  Furthermore, proven reserves are below the 6 billion barrels on which banks are said to require a commitment before construction can start.  The letter of intent, signed by Kazakhstan President Nursultan Nazarbaev at last November's 1999 OSCE meeting in Istanbul, to ship 20 million tons annually through the Baku-Tbilisi-Ceyhan pipeline is non-binding.  Requiring access to the pipeline by the Kazakh side is not an urgent issue, since export of oil from the huge Tengiz on-shore field flows directly to the Russian port of Novorossiysk.  News of great hydrocarbon deposits at the East Kashagan concession in the northern Caspian, exclusively in Kazakh territory, re-ignited great expectations from this pipeline project, which is both of geoeconomic and geopolitical importance.  Despite the fact that experts are not hurrying to confirm the magnitude of this oil and gas reservoir, reportedly between 8 and 50 billion barrels at 4'000 meters depth, supporters of the Baku-Tbilisi-Ceyhan route have added value to the project by linking Kazakh energy resources to the opportunity to transport them through the pipeline under construction.  In criticism of the present US administration’s energy policy, the Republican candidate for US president, Governor George Bush, Jr, said at the beginning of September that he would favor transporting Caspian oil through Iranian and Russian territory, triggering outrage in official Baku and Tbilisi.  The governor’s argument is that this would be almost five times cheaper to construct.  This position perfectly matches the opinion of official Moscow.

A similar big project, the Trans-Caspian gas pipeline, is proceeding in a different way from that initially planned.  Turkmenistan received pre-financing of some US$500 million to join Azeri and Turkish partners in constructing and transporting gas resources.  The problem arose when Azerbaijan, becoming a potential gas exporter in 1999 after a surprise discovery of a large deposit of natural gas at Shah Deniz, demanded a 50 per cent share of the pipeline capacity, which Turkmenistan President Sapamurat Niazov expected to have entirely for his country.  Niazov proposed to Moscow an increase to about 50 billion cubic meters in five years in the hope of obtaining transit rights for Turkmeni gas through Russian territory.  The US Secretary of State’s special adviser to the CIS, Stephen Sestanovich, visited Ashkhabat, the capital of Turkmenistan on 10 July but failed to get Niazov to change his position on the Trans-Caspian gas pipeline.  However, the project will proceed in transporting Azeri gas with the agreement of Azerbaijan, Turkey, Georgia, and the US.  The practical transportation is expected to start at the end of 2002 or the beginning of 2003.  US ambassador John Wolf, special advisor on Caspian energy to the US president and secretary of state, said in Ankara on 25 August that the region's countries remained ready to include Turkmeni partners if and when they were ready to join.  While waiting for the decision of Ashkhabat, economic development of the East-West corridor will not be delayed.

In August and September the Russian-Ukrainian dispute on pumping of some 1 billion cubic meters of the 130 billion cubic meters of natural gas transited through Ukrainian territory to Central and Western Europe Russian by Ukrainians with highest governmental protection intensified.  Russia's Gasprom holds that the quantity is more than twice this amount.  Russia already has four options to bypass Ukraine and transport its gas supplies to Poland, Slovakia, and elsewhere in Europe.  At the beginning of September the prime ministers of Russia and Slovakia – Mikhail Kassyanov and Lubomir Charach – discussed one of these options and agreed to proceed with construction of the new pipeline.  The Russian-Ukrainian dispute on gas routes and gas supplies for Kiev has broader geopolitical and geostrategic dimensions, linked particularly to Ukraine's policy of closer ties with the West, NATO, and the US.

For its part, Ukraine is in a hurry to build the Odessa-Brodi oil pipeline.  Some 500 km of this pipeline that would provide Ukraine with Azeri oil are ready.  The scheme is a pipeline that transports the oil from Baku, Azerbaijan, to Supsa, Georgia,  where it is loaded in tankers bound for Odessa and then transited to Brodi and the broader European oil-pipeline network.  The system's capacity is expected to be 40 million tons a year.  Construction is expected to be completed in 2001.

The US oil company Frontera Resources announced proof in mid-September that Taribani oil deposits in Eastern Georgia are immense and of very high quality.  The prediction is of 230 million barrels of oil during the next 25 years.  Processing of the deposits will proceed in three stages, the first by 2007, the second by 2015, and the third in 2025.  Frontera Resources and the European Bank for Reconstruction and Development (EBRD) have already invested US$30 million and have pledged another US$60 million.  The Georgian oil company Gruzneft is a major participant in the project.

III. CONFLICTS AND POST-CONFLICT DEVELOPMENTS IN THE BLACK SEA AREA

1.  Post-Conflict Issues in Chechnya

Chechen separatists attacked neighboring Daghestan a year ago (during summer 1999), thus launching a dramatic effort to construct a powerful Islamic stronghold in the area between the Caspian and the Black Sea – the state of Great Ichkeria.  In a war with Russian federal forces Chechen separatists, claiming they defend the rights of the Chechen people, waged a cruel terrorist campaign that targeted Russian civilians.  A year later more than half the Chechen fighters had been killed and their heavy arms destroyed.  According to Russian military estimates, some 12'000 Chechen fighters and 500 to 600 foreign mercenaries from Central Asia, Africa, and some Slavic countries continue their anti-federation activities.  Many Russian soldiers were ambushed and killed or wounded in July and August.  The war goes on at a lower level of intensity.

One significant negative consequence of this war is the 170'000 Chechens that face the prospect of a second rough winter in tents and other uncomfortable shelters outside the province.  In mid-August the World Food Program sent two food convoys to Chechnya to help 31'000 internally displaced people who faced starvation in this conflict, mostly elderly, ill, and disabled Chechens, as well as single mothers with children.

The main challenge for the federal government since the end of the military campaign has been to find a political settlement.  One main aspect of this solution has been to establish an adequate and flexible local government, adapted to the mentality and the family and clan connections.  The government formula in Chechnya creates opportunities but also a lot of problems.  Muslim cleric Akhmad Kadyrov, who was appointed by Putin president as head of the administration in Chechnya, has long had  tense relations with his deputy and chief of the internal forces, Bislan Gantamirov.  Together with 13 other contenders, they clashed in the election to represent single-seat constituency No 31 in the State Duma.  Elections were held on 20 August in Chechnya amid a continuing conflict and without the presence of international observers.  The winner appeared to be Major-General Aslambek Aslakhanov from the Russian militia who headed the association of servicemen in law-enforcement agencies in Russia.  Aslakhanov won about 30 per cent of the popular vote, expressed by 60 per cent of eligible voters.  The message of the elections was that people want new faces in politics and wish to stay with the Russian Federation.

Moscow is working on three other lines of post-conflict arrangements:  appointing judges; proclaiming amnesty for ending armed resistance; and providing adequate money to revitalize the economy for 2001 and to bring about social rehabilitation.  The Chechen diaspora in Moscow is actively supporting the creation of a consultative council to support the constitution of the province's governing bodies including the municipal militia (police).

2.  The Abkhazian Conflict

Zurab Achba, a former member of parliament and a consultant to the OSCE office in Sukhumi, was assassinated in that city on 15 August.  Another ethnically motivated terrorist act took place on 12 August in Sukhumi when the monument of the founder of the Abkhazian language, Dmitriy Gulia, was damaged substantially.  The Abkhazian conflict remains a permanent source of tension in Georgia and between Georgia and Russia.

3.  The Nagorno-Karabakh Conflict

Armenian President Robert Kocharian and Azerbaijan President Geydar Aliev met in mid-September in New York during the ongoing UN Millennium Summit and discussed the Nagorno-Karabakh conflict.  Both leaders expressed their will to peacefully resolve the conflict by mutual compromise and defined the meeting as very important and useful.  However, they think it would be premature to declare concrete results.  They agreed on the need to continue discussing the problems of the enclave in Azerbaijan, populated mainly by Armenians.  Nagorno-Karabakh unilaterally declared its independence from Baku in 1988 and sought union with Armenia.  During the military crisis 30'000 people were killed and about a million Azeris were displaced.  A ceasefire was negotiated in 1994, but there is no final agreement on the issue.

IV   NATIONAL PERSPECTIVES: SPECIFIC DEVEOLPMENTS

1.  Armenia

The Armenian government has asked international organizations and foreign governments for help after the devastating drought in the country that compromised the wheat and potato crops.  Forests and pastures also suffered from the drought.  The situation in the food-supplies sector created grave threats to national security, according to governmental sources.  Armenian agriculture provides 60 to 65 per cent of the southern Caucasian state's yearly food supplies.

2.  Azerbaijan

Parliamentary elections in Azerbaijan will be held on 5 November.  The threat of an opposition boycott continues because the opposition sees the new election laws as unfair.  The opposition protest was intensified after the arrest of Rauf Arifoglu, editor-in-chief of an opposition newspaper Eni Musavat, and after a court decision to close another opposition newspaper Uch Nogta.  These acts have been assessed both in Azerbaijan and abroad as a crackdown on independent media.  The arrest lacked grounds, and international reactions, including those of the Council of Europe (CE) and the OSCE, have been very negative.  The law covering the media falls short of international standards and easily leads to de facto governmental censorship of the press.

3.  Georgia

In July the Georgian people commemorated 17 centuries of Christianity in the lands of the present state.

Former Polish finance minister Leszek Balzerovic agreed to become financial adviser to Georgian President Edward Shevardnadze, according to an 11 August announcement.  The US Agency for International Development will subsidize the Polish expert's activity.

Georgian Defense Minister David Tevzadze told the Bulgarian press in  mid-August that the chances of a political solution to the Abkhazian conflict were better than that of a military approach, though the Georgian army can deal with the situation.  He does not expect NATO intervention in resolving the Abkhazian issue.  The defense minister reminded the press of the dominating opinion in Georgia that foreign military bases are unacceptable on its territory.  Russia is closing two of its four military bases.  The other two are expected to remain there for some time.

4.  Russia

Russia adopted its new foreign political concept in the second week of July after Putin signed it.  Foreign policy is expected to be of major support to the federation's domestic reforms.  Russia will endeavor to preserve the UN as the center of regulating international relations in the 21st century as well as towards formation of a multi-polar international system that would better reflect the diversity of interests in the world.  According to the new concept, Russia maintains its negative attitude towards NATO.

Putin and Chinese President Jiang Zemin met on 17-19 July in Beijing.  They both pledged to work as strategic partners for a multi-polar world and adopted a joint statement denouncing the proposed US national missile defense (NMD) program.

During the last days of July Putin succeeded in bringing to life a law reforming the Council of the Federation, diminishing the power of regional governors.

A terrorist bomb blast on 8 August killed 12 and wounded more than 100 people in a metro station in downtown Moscow.  Many of the victims were children and women.

A few days later the Kursk submarine tragedy showed the vulnerability of Russia’s under-funded, unreformed, and oversized armed forces.  Putin made a grave mistake by not asserting his presence at the scene immediately, but he had initially not been fully informed.  The minister of defense and commander of the Russian navy reportedly tendered their resignations after the tragedy, but Putin did not accept them.  An open inquiry and drastic changes are needed to repair Putin's image as a decision-maker.

The Russian Security Council decided in mid-September to cut the armed forces from 1.2 million to 850'000 over the next three years.  The reform still remains locked in the numbers stage, and less attention is devoted to improving civil-military relations, including social integration of the thousands of former officers.

The Presidium of the Supreme Court of the Russian Federation rejected an appeal on 13 September by Russia's general prosecutor to reopen espionage charges against Alexander Nikitin.  Nikitin is a renowned environmental and human-rights activist who has done valuable research, exposing the dangers posed to the environment by the Russian Navy’s handling of nuclear materials.  Nikitin's research highlighted the environmental and health risks posed by the Northern fleet’s dumping of nuclear materials and other debris along the Kola Peninsula.  There are expectations that the court’s ruling will help strengthen the rule of law, freedom of expression in Russia, and the role of NGOs in creating a civilian society.

V   THE BILATERAL AND MULTILATERAL RELATIONS IN THE BLACK SEA BASIN

1.  Bilateral Relations

a)  Bulgaria-Georgia

General David Tevzadze, Georgian minister of defense, made an official visit to Bulgaria on 11 July.  He met with Bulgarian President Petar Stoyanov and Minister of Defense Boyko Noev.  The Georgian defense minister visited the navy base in Burgas.  Bulgaria and Georgia are partners in NATO's Partnership for Peace (PfP) program and in its Black Sea navy exercises.  They also cooperate in the framework of Black Sea coast guard relations.

b)  Bulgaria-Ukraine

Ukrainian Prime Minister Victor Yushchenko visited Sofia on 28 July and met with Bulgarian Prime Minister Ivan Kostov.  They cleared a long list of pending bilateral economic issues and agreed to create better education conditions for the Bulgarian minority in Ukraine.

c)  Bulgaria-Azerbaijan

In early July Azerbaijan Vice-Prime Minister Abid Sharifov visited Varna and its port, including the ferryboat complex.  He said the equipment and tariffs are acceptable for Azerbaijan's transportation needs.  He was accompanied by Bulgarian Minister of Transport Antony Slavinsky.

d)  Georgia-Russia

The Russian Ministry of Defense announced in mid-July that it is suspending the exit of Russian troops from Georgia for financial reasons.  The initial agreement required a full pullout from two of the four military bases on Georgian territory by this 1 August.  In early August the Russian troops continued their withdrawal from Georgia.  According to the 1995 bilateral agreement, Russian bases in Georgia will remain till 2020, and Georgia can rely on Russia’s support in dealing with the Abkhazian issue.  The first bases to be abandoned are those in Viziani and in Gudauta.  The Georgian side has certain claims on the way the pullout takes place, and it will raise the issue at the fourth round of negotiations this October.

Georgia stated in mid-September that it would establish three additional peacekeeping stations in the secessionist region of Southern Ossetia.  The reason for this act was said to be increased crime in the area.  Ten years ago Southern Ossetia seceded, and a joint peacekeeping force of Georgian, Russian, and Ossetian armed forces was later instituted to keep the region under control.  The lack of reciprocity in behavior of the South Ossetian forces and the rise of crime and need for protection are given as reasons for the Georgian move.

e)  Armenia-Belarus

Armenian Prime Minister Andranik Margaryan told the media during his 19 July visit to Belarus that his country did not intend to join the Russia-Belarus Union.  The context of relations between Armenia and Russia will continue to be the Commonwealth of Independent States (CIS).

f)  Russia-Armenia

The presidents  Putin and Kocharian met in Moscow, where they concluded an agreement for visa-free movement of their countries' citizens.  After Russia’s withdrawal from the Bishkek Agreement for CIS visa-free movement, Armenia became the first commonwealth country to regulate its relations with Russia on a bilateral basis.  The two presidents also signed a declaration of cooperation in the 21st century on 26 September.  Putin called Armenia a traditional ally of Moscow.

g)  Russia-Moldova

In early August Moldovan President Petru Luchinsky made a short visit to Moscow and met with Putin.  They discussed a broad range of bilateral trade and economic issues, including Moldova's obligations to pay Russia regularly for natural gas supplies.  Moldova has mounted a US$681 million debt to the Russian Gasprom by failing to pay for energy supplies from the Russian company.

2.  Multilateral Relations

a)  Meeting of the Shanghai Five

State leaders of five countries – Russia, China, Tajikistan, Kyrgystan, and Kazakhstan – met in the Tajikistan capital Dushanbe on 5 July as the Shanghai Five group, named after the city of their first meeting. Together with the president of Uzbekistan they adopted an anti-terrorist plan.  They agreed to join forces in fighting Islamic extremists and terrorism and to set up an anti-terrorist center in the Kyrgyz capital Bishkek.  Separatism and religious extremism are major security threats in this region.

b) The Commonwealth of Independent States (CIS)

An unofficial forum of CIS leaders, without the presidents of Kyrgystan and Uzbekistan, convened in Crimea on 18 August, engaged with military operations against Islamic extremists on their territories.  The president of Turkmenistan preferred to stay out of the meeting, during which a dispute arose between Ukraine and Russia on the natural gas issue.  Economic issues and the eventual CIS free-trade agreement were the main discussion topics.

Russian Foreign Minister Igor Ivanov declared on 30 August Russia’s withdrawal from the Bishkek Agreement of 1992 for visa-free movement of citizens on CIS territory.  The danger of international terrorism and extremism posing grave security threats to Russia were the motives for this decision.  Another reason was the rise of immigration to Russia from CIS states.  In the future Russia will regulate these issues on a bilateral basis with CIS members.  Russia has signed bilateral agreements with Armenia, Azerbaijan, Turkmenistan, and Ukraine.

VI   STATE OF THE REGIONAL INITIATIVES

1.  The Economic Situation in Individual Countries and in the Region

a)  Russia

Prime Minister Mikhail Kassyanov of Russia wrote in an article for the Financial Times in July that it is in everyone’s interest for the Paris Club of official creditors to reduce the burden of Soviet-era debt on Russia.  He writes that the Russian government adopted an ambitious economic program in July, calling for urgently needed structural reform that will lay the groundwork for sustained economic growth and development of an open and democratic society.  Russia’s ability to implement this program will depend largely on solving the debt burden inherited from the Soviet Union.  Russia has suffered massive economic dislocation as a result of the USSR's dissolution.  Russia has accepted responsibility for the former Soviet Union's debts and forgiven a significant portion of its Soviet-era claims on other countries.  It is time for the Paris Club to put a financial end to the Cold War by agreeing to a comprehensive solution to Russia’s Soviet-era debt comparable to that already agreed with Russia’s London Club creditors.

The Russian Duma created a subcommittee at the beginning of July that will draft legislation for electronic trade, including the issue of electronic signatures.

The Russian prime minister announced 1 per cent inflation for August and 12.6 per cent for the first eight months of this year.  Although the Russian economy is doing well in some sectors, the key to recovery – investment – is still lacking.  Foreigners need more persuasion.  Domestically, the banks are unable to attract a satisfactory volume of savings, which nearly all go into the state-backed Sberbank for the short term.  The sum of investment money (US$ 2 billion to US$3 billion a year and just 1 per cent of the investment money crossing international borders) is very low.

b)  Ukraine

Ukraine's debt to the Russian Gasprom continues to mount.  Ukraine authorities threaten to stop Russian gas supplies and to negotiate with Turkmenistan for new supplies.  Ukraine's problem is that it has a US$100 million debt towards Turkmenistan for previous gas deliveries.  Even if a new deal is reached, Ukraine will have to pay transit tax to Russia.  A realistic continuation of gas supplies to Ukraine may be through re-scheduling payment to Gasprom.  However, Ukraine’s claim is to pay by fixed prices, and Gasprom disagrees, insisting on payment of fines.

c) Black Sea Coastal States’ Cooperation on Protecting the Environment

The US Department of Energy sponsored a second workshop with Black Sea countries on 25-27 July in Constanza, Romania.  The workshop's aim was to encourage environmentally responsible energy development in the region.  Representatives from Russia, Turkey, Ukraine, Romania, Georgia, and Bulgaria attended the workshop.  More specifically, the workshop tried to formulate better response capabilities in the event of an oil spill.  The workshop provided an excellent opportunity for Black Sea coastal countries to work together in sharing technology and building stronger plans for preventing spills and protecting the environment.

2.  Political and Security Aspects of Black Sea Basin Regional Cooperation

The Black Sea naval cooperation group continues at the expert level of drafting an agreement.  While there is a full agreement on the areas of cooperation (rescue and humanitarian contingencies), there are still disputes on who will participate in the agreement.  There are two opinions – participation by the coastal states’ navies and participation of navies outside the Black Sea area.  Considering the universal nature of the rescue and humanitarian operations, it would limit the cooperative effort if only locals were involved.  Furthermore, Organization of Black Sea Economic Cooperation (OBSEC) membership covers a greater number of states and observers whose involvement should not be discarded.  There are also navies in the Mediterranean whose support may be decisive in certain situations.

VII   EXTERNAL FACTORS (STATES AND INSTITUTIONS) INFLUENCING THE BLACK SEA BASIN

1.  USA

(1)  USA-Armenia.  US Secretary of Defense William Cohen and Armenian Defense Minister Serzh Sarkisyan signed an agreement in Washington on 24 July for US help to Armenia to improve its customs and border patrol services controlling the spread of weapons of mass destruction.  The US will provide Armenia with training and $300'000 of equipment, including kits to detect nuclear and contraband items.

(2)  USA-Georgia.  After his visit to Georgia, the US ambassador-at-large and special adviser to the Secretary of State for the New Independent States (NIS), Steven Sestanovich, told reporters in Tbilisi on 14 July that he and President Shevardnadze reviewed bilateral cooperation, including the withdrawal of Russian forces from Georgia.  The US has resources that can be made available to Russia in support of the withdrawal.  After the talks, Sestanovich said he was confident the Baku-Tbilisi-Ceyhan pipeline project would be implemented.  At the end of July the US president sent a letter to the Georgian president in which he confirmed the readiness of the US to support Georgia in overcoming economic difficulties and dealing with the issue of separatist Abkhazia.

(3)  USA-Azerbaijan.  Clinton sent a message to the US Senate on 12 September asking for approval of a bilateral investment treaty with Azerbaijan.  The Fourth Annual Conference of the US-Azerbaijan Chamber of Commerce convened on the same day in Washington.  A major conclusion of this meeting was that the energy sector will be the main engine for economic development in Azerbaijan for the foreseeable future, but other industries must be developed to prevent another example of citizens living in extreme poverty in an oil-rich country.

(4)  USA-Georgia, Armenia, Azerbaijan.  70 US Special Forces troops and supporting personnel were deployed in Georgia on 14 September to train Georgian, Armenian, and Azerbaijani troops in humanitarian mine-sweeping techniques.  The training takes place at a military base near Tbilisi and is intended to create real conditions for peace and prosperity in the southern Caucasus as called for by the Organization for Organization for Security and Cooperation in Europe (OSCE).  The landmines were laid during the war between Armenia and Azerbaijan and continue to cause casualties in these countries.  Landmines were also set during the separatist conflict in northwest Georgia and pose an ongoing threat to the people of Abkhazia.

(5)  USA-Russia.  In continuation of joint efforts to combat international terrorism, the American Federal Bureau of Investigation (FBI) and the Russian Ministry of the Interior created a joint working group in mid-September.  Alongside anti-terrorist activity, the working group will deal with financial and computer crimes.

(6)  USA-Ukraine.  US Labor Secretary Alexis M. Herman and Ukraine’s Minister of Labor and Social Policy Ivan Sakhan signed an agreement In Washington on 26 July that launches a technical assistance program.  The program includes five projects in the areas of mine safety and health, dislocated worker services, child labor, industrial relations, and gender equity.  The budget for the project's first year is US$3.75 million.

2.  The United Nations

The UN Security Council decided in a formal meeting on 28 July to extend the mandate of the UN Observer Mission (UNOM) in Georgia by six months, until the end of January 2001.

3.  Council of Europe

President of the Council of Europe (CE) Lord Russell Johnston sent a letter to the Speaker of the Azerbaijani Parliament, Murtuz Alasgarov.  It states the CE concern about treatment of journalists and newspapers, especially in light of the upcoming parliamentary elections on 5 November.

4.  NATO

 NATO secretary general Lord George Robertson made an official visit to Tbilisi, Georgia, on 25-27 September.  He attended an international conference dealing with regional cooperation and the partnership with NATO.  Lord Robertson highlighted the regional peacekeeping role of the United Nations, the OSCE, and GUUAM.  A significant step in improving the region's security is the withdrawal of Russian troops from Georgia.  Visits by the secretary general to Azerbaijan and Armenia were cancelled due to developments in Former Republic of Yugoslavia.

5.  EU

The European Union (EU) resumed financing Russia through TACIS – the program for technical assistance.  The decision was taken by the Council of Ministers at the foreign ministers' level during the first week of July in Brussels. The TACIS program was suspended because of the war in Chechnya.  The European Commission was assigned to propose TACIS measures by the end of 2000 that would support political, economic, and social reforms in Russia.

VIII   THE SECURITY SITUATION AND REGION BUILDING OPPORTUNITIES: CONCLUSIONS

Domestic stability in Russia continued to be a major security factor in the broader region.  Alongside continuing terrorist acts in Chechnya, there are efforts of post-conflict reconstruction, including political settlement of Chechen problems.

Cooperation in the region continues to be linked with activity of outside states and institutions in the region, especially the US and the EU.  Oil and gas resources continue to create both opportunities and tensions among states of the region.

A promising regional sign is the rising cooperation between outside states and institutions in fighting international terrorism.  US-Russian cooperation is of major significance.  The southern Caucasian states' rising interest in cooperation with NATO is another major factor strengthening stability in the region.