(October - December 2002)

© Institute for Security and International Studies (ISIS), Sofia

Research Study 16

Hard Copy: ISSN 1311 – 3259


  1. Geopolitical, Geostrategic, and Geoeconomic Tendencies
  2. Sources of Conflict in the Black Sea-Caspian Sea Region
    a) Terrorism
    b) The Delimitation of the Caspian Sea and the Black Sea
    c) Oil and Gas Issues
  1. Chechnya
  2. Nagorno-Karabakh
  3. Transdnistria
  1. Ukraine
2. Russia

3. Azerbaijan

  1. Bilateral Relations
  2. CIS
  1. Economic Aspects of the Black Sea Cooperation: National and Regional Perspectives
  2. Political and Security Aspects of Black Sea Regional Cooperation and EU and NATO/PfP Activities

In the period October-December 2002, the area stretching from the Black Sea to the Caspian Sea and its adjacent territories was influenced by specific geopolitical, geo-economic and geo-strategic tendencies of a global and regional nature, including the fight against terrorism and mounting pressure on Iraq to comply with UN Security Council Resolution 1441.

The first group of influential factors were those of a geopolitical, geo-economic and geo-strategic nature. The growing energy needs of China, the United States, and Turkey influenced issues such as oil and gas production and transportation in the region. China is already in strategic competition with the USA. Military links between these two global actors, as well as their joint efforts in fighting terrorism, have developed against this background of competition. The start of the practical testing phase of America's National Missile Defence system (NMD) in cooperation with Japan has contributed to continental China's perceptions that Taiwan will be a beneficiary of this military build-up. The Chinese president's visit to the USA in October was important in politically balancing and regulating the complex relationship between Beijing and Washington. The launch of a strategic dialogue between China and NATO will contribute positively in the same direction. For its part, China is trying to induce a regional answer to the US challenge by giving more muscle to the Shanghai Cooperation Organisation (SCO), although without much effect.

Russia's Ministry of Foreign Affairs is implementing a concept of 'energy diplomacy'. Moscow is eager to make the most of Russia's natural resources; first, to compensate America's oil needs and reduce US dependence on the Middle East, and second, to increase the EU's dependence on Russia's oil and gas supplies. Russia is also trying to exploit its industrial base and intellectual potential as well as its G-8 membership and experience in energy-related international institutions. Russia is using these important economic instruments to further the country's bilateral and international relationships. The energy resources in the Caspian region no doubt form a significant part of a more complex Russian puzzle. US-Russian, EU-Russian and NATO-Russian relations have the dual purpose of stimulating constructive activity in the economic sector and preserving the usefulness of these relationships for the objectives of fighting terrorism and protecting regional stability in various parts of the globe.

The progress of the Baku-Tbilisi-Ceyhan (BTC) pipeline project continues to undermine Russia's dominance in the transportation of energy resources to various markets. However, it has also had the effect of uniting the common interests of different actors, including those from Russia, and motivating them to using the pipeline to their advantage. The eastern enlargement of NATO and the EU provide Turkey with the chance to make the best use of the BTC pipeline.

Mounting pressure on Iraq to comply with UN Security Council Resolution 1441 has created regional tensions as well as global expectations of new energy problems and intensified terrorist activity. Turkey's burden in this crisis has been compensated for by US military aid and the prospect of entry into the EU. Iran has declared it will be actively neutral if a war against Iraq breaks out. The pressure on Baghdad has really increased following a joint resolution from the US Congress and Senate authorising military action against Iraq. To ensure that its interests in Iraq are respected post-Saddam Hussein, Russia is preparing an 'exit strategy' out of its unconditional support for Baghdad. The UN and the US must ensure, however, that if a war with Iraq does break out, it isn't seen as a religious war or a clash of civilisations.

The hostage crisis in Moscow during 23-26 October has led to a higher level of Russian engagement in the war against terrorism. It was clear to Russia that the US, NATO and EU are all partners in this fight, but that its post-conflict rehabilitation policy in Chechnya has failed. It was also obvious that without reforming its armed forces, re-conceptualising national security and raising the morale of its security forces, Russia's contribution to the fight against global terrorism would never be effective. To this extent, Russia improved its anti-terrorist cooperation with India. Similar steps were made between the USA and China, Turkey and Georgia.

One issue that will continue to be tackled in 2003 will be the demarcation of the Caspian Sea. Progress in Russian-Iranian relations is crucial for a breakthrough at the 2003 Tehran summit of the Caspian littoral states.

Post-conflict developments in the Black Sea-Caspian Sea region marked certain shifts. The Chechen attack in Moscow showed how much needs to change in the rebellious province. A political solution, expected to guarantee progress in the republic, will begin with a referendum in March 2003. Armenian-Azerbaijani dialogue on the Nagorno Karabakh issues continued with no breakthrough. Russia has promised to finalise the pull out of its troops from the Transdnistria region of Moldova by the end of 2003 rather than the end of 2002 as originally expected.

In national developments, Ukraine changed its Prime Minister while Russia considered 2002 an economically successful year that led to the improvement of living standards for the Russian people. According to Russia's citizens, however, improvements were only very modest.

In the area of bilateral relations, Iran was particularly active, especially with neighbouring countries. Tehran is no doubt trying to avoid the same pressure currently being exerted on Baghdad.
Developments in the CIS proved yet again that this organisation is far from being effective. To date it has not displayed any real potential as an integration center for the former Soviet republics.

Armenia joined the World Trade Organization (WTO) and Russia was given the status of a market economy by the EU. The November EU-Russia summit in Brussels led to a formula for solving the Kaliningrad-EU deadlock and of increasing gas deliveries from Russia to Western Europe. Georgia's application for both EU and NATO membership marked a new geopolitical opportunity for the two institutions and also a promise for the Caucasian region to join the European mainstream. The Russia-NATO relationship was solidified after the visit of NATO's Secretary General to Moscow following the Alliance's Prague summit in November.

While US-Ukrainian relations registered their lowest level since 1993, US-Georgian, US-Moldova and US-Russian relations were all marked by positive steps during the last three months.


1. Geopolitical, Geostrategic, and Geoeconomic Tendencies
China's growing energy needs have put it in strategic competition with the world's current energy consuming giant, the USA. The International Energy Agency (IEA) considers China a major strategic buyer on world energy markets: oil from the Middle East and Western Africa and gas from the Middle East and South East Asia. China is also increasing the size of its imports from Russia, Turkmenistan and Kazakhstan. In a report to Congress earlier this year, the United States recognized the looming rivalry for the world's energy resources. Chinese leaders believe the US wants to contain China. Chinese President Jiang Zemin's visit to the US at the end of October and his meeting with US President George Bush underlined the importance of political ties between these two powerful states. Both leaders agreed to prevent the proliferation of weapons of mass destruction. On 12-17 December the head of the US Pacific Command, Admiral Thomas Fargo, was in Beijing. On 11 December the US Under Secretary of Defence for Policy, Douglas Feith, and the Deputy Chief of the Chinese People's Liberation Army, General Xiong Guankai, met and agreed on further exchanges in 2003.

China approached NATO to seek a strategic dialogue for the first time. On 14 November NATO reported that the Chinese Ambassador to Belgium, Guan Chengyuan had met Secretary General Lord George Robertson on 10 October and asked to begin regular contacts on strategic concepts, common threats and NATO activities in Central Asia. The North Atlantic Alliance is particularly active in its relations with the former Soviet republics that border northwest China and has recently been involved in the activities of the International Security Assistance Force (ISAF). NATO may eventually play a role if war breaks out with Iraq. The Alliance's enlargement to the Baltic and the Black Seas and the ongoing development of relations with Russia and the Caucasus is a signal for Beijing to start its own dialogue with NATO.

Japanese participation in the US National Missile Defence (NMD) programme caused fears in Beijing that this will destabilise the region. The establishment up of ten interceptor rockets at Fort Greely, Alaska, is expected to end by 2004 and may worsen global stability and damage regional security. China fears such a missile defence system may stretch to cover the island of Taiwan, considered a separatist province from the mainland. Tokyo, however, is cooperating with Washington to counter a possible nuclear threat from North Korea. Japan has cost, feasibility and foreign-political concerns about such a system, but developing a missile defence shield is still an option.

China is trying to compensate certain regional deficiencies in the security situation by participation in the SCO, a regional organisation with Asian characteristics according to an official Chinese State Council document of 10 December. The SCO has initiated a new security concept, as well as a new pattern of regional cooperation and state-to-state relations. Regional security cooperation is central to Chinese policy. The Shanghai Convention on Combating Terrorism, Separatism and Extremism signed by the SCO states - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan - the joint communiqué of the defence ministers, the statement by the prime ministers, the statement of leaders of the law-enforcement and security departments, and the joint statement of the foreign ministers of the member nations are specially mentioned by the white paper, "China's National Defence in 2002".

The improvement in bilateral Russian-Japanese relations is yet another development. The two G-8 states have yet to conclude a peace treaty to mark the end of World War II and the Kuril Islands remain a contentious issue. The Japanese Prime Minister, Junichiro Koizumi is expected to visit Moscow on 10 January 2003 to sign a "Plan of Action" aimed at boosting bilateral ties in a practical way. For this purpose Japan's Foreign Minister, Yoriko Kavaguchi, visited Moscow in mid-October and met with President Vladimir Putin. A few weeks later Russia's Foreign Minister, Igor Ivanov, visited Tokyo and met with Prime Minister Koizumi. The northern version of the East-West transport and trade corridor from the Far East to Europe is highly dependent on Japanese investment. The old 'Silk Road', from China to Europe is the southern version of this communication link.

The eastern enlargement of NATO, announced in Prague on 21 November, will end in the spring of 2004. This will lead to the Alliance's improved geopolitical position in the space between the Baltic Sea and the Black Sea. Lord Robertson's visit to Moscow and the earlier visit by President George Bush to St. Petersburg, at the invitation of Russian President Putin, provided Russia with an opportunity to develop an active and positive relationship with the Alliance, short of membership. The war against terrorism brings Russia closer to NATO and the USA and creates more geopolitical interpretations than were possible before the appearance of this global threat.

Preparations for a war against Iraq constitute a second major factor influencing the security situation in the Black Sea-Caspian Sea region.

Preparations for a possible war on Iraq have put a great deal of pressure on Turkey. Iraq has insisted that Turkey not support a US military strike. Following intense bilateral contacts between Baghdad and Ankara, Iraq's Deputy Prime Minister, Tariq Azis declared on 10 October that if Turkey does support a strike it will never again be a friend of Iraq. Earlier, on 3 October, Azis said his country had no intention of attacking its neighbours if the USA attacks Iraq. However, Iraqi government officials gave a contradictory signal at the end of December - Iraq will retaliate against those neighbours who provide bases for an attack against their country. Turkey's support for a US-led war on Iraq is likely to damage the country's economy. A Kurdish independent state in northern Iraq is another Turkish preoccupation.

However, Turkey already has several hundred troops deployed in northern Iraq and Ankara has drawn up military plans to support its closest ally, the US.

On 1 October Iranian Defence Minister, Admiral Ali Shamkhani said Iran will not take part in any military action against neighbouring Iraq, even if approved by a UN Resolution. Even though Tehran opposes a US attack, it will adopt a position of "active neutrality" and will not cooperate with Baghdad. Iran rebuffed Iraq's efforts to gain Tehran's diplomatic support during a visit by the Iraqi Foreign Minister Naji Sabri at the end of September.
On 11 October the US Congress adopted a joint House and Senate resolution authorising the use of military force against Iraq. It also gave support to US efforts to find a diplomatic solution to the crisis.
Although questioning the US position on Iraq at the UN, Russia is actually negotiating its support for a possible military operation. Moscow is insisting on guarantees that the interests of its oil companies (some of which are rather well established in Iraq's oil fields) will be respected if Saddam Hussein's regime falls. During the visit of British Prime Minister Tony Blair to Moscow on 11 October, President Putin demonstrated his readiness to find common ground at the UN Security Council with Great Britain and the USA, including the return of weapons inspectors. At the same time, Tony Blair underlined that Russia has legitimate interests in defending its territory from extremists - a position supported even more strongly after the hostage crisis in Moscow on 23-26 October.
During President Putin's visit to China at the beginning of December he said it would be absolutely counter-productive to seek confrontation with the United States. He told his Chinese hosts the USA is Russia's biggest trading partner and a partner in the anti- terrorism coalition. In December, Iraq terminated a contract with the Russian oil giant LUKoil. Baghdad wanted to punish the company for negotiating guarantees with Washington if the present regime is replaced. Iraq already negotiates with two other Russian oil companies for working in the same oil fields.

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

a) Terrorism

1) Russia-Georgia
Georgia handed over five suspected Chechen rebels to the Russian authorities on 3 October. The rebels were wanted by Russia for terrorism. On 6 October the presidents of the two countries met in Moldova for a CIS summit. Following this gesture by the Georgian authorities, Putin declared on 7 October that Russia would not launch threatened cross-border raids against Georgia.

2) USA/Turkey-Georgia

Turkey will help train Georgia's military servicemen under the US equip-and-train programme. Both countries are the largest donors of military equipment to Georgia. A key target of this cooperation is to bring Georgia's 11th Motorised Infantry Brigade up to NATO standards, forming a rapid reaction force capable of effectively dealing with terrorists.

3) Russia
On 23 October 50 Chechen terrorists armed with explosives and guns took over a Moscow theatre and captured over 650 hostages. The attackers threatened to kill the hostages and themselves if their demands for an end to the war in Chechnya were not met. On 26 October Russian counter-terrorist troops stormed the building leaving some 129 hostages and 41 terrorists dead. President Putin declared war on terrorism and vowed that Russia would take adequate measures to strike at terrorists, their infrastructure and their ideological and financial sponsors. In the aftermath of the hostage crisis in Moscow, Russia's army will have to revamp its Cold War strategy and methods if it wants to combat terrorism effectively. In a mirror-approach to the US president after 11 September 2001, President Putin asked several government agencies to draw up a new security strategy three days after the end of the hostage drama. In the opinion of the Russian public and the country's security experts, terrorism is the country's number one enemy. Legal restrictions have been imposed on the Russian media when reporting terrorist activities. Joint Russian-NATO counter-terrorist activities are looked upon positively as a necessary step in the fields of security and defence. President Putin continues to portray the Russian anti-separatist war in Chechnya as a Russian version of the global war against terrorism. During the hostage crisis NATO expressed solidarity with Russia while various intelligence services provided help. Other organisations appealed to the terrorists to surrender. On 5 November Russia signalled it would consider pre-emptive strikes using precision weapons against terrorist facilities, training camps and the ideological and financial sponsors of terrorism. It should be noted that serious mistakes were made by the Russian security services before and during the hostage crisis. The problem of fighting terrorism in Russia is further complicated by the fact that 20 million Muslims live in the Russian Federation. Any fight against terrorism must not be presented or interpreted as a religious conflict or a clash of civilisations.

4) China-USA
(1) US Attorney General John Ashcroft formally opened an FBI field office in Beijing on 25 October. The office will coordinate US and Chinese efforts in countering terrorism and organised crime. China plans to open a similar office in the United States. (2) However, on 18 December US officials said that the listing of a regional group as a terrorist organisation was not a blank check to suppress human rights in the Xinjiang province in northwestern China. Earlier this year the East Turkestan Islamic Movement (ETIM) was designated as a 'terrorist group' by the USA. This did not justify a long-running crackdown on dissent by ethnic Uighurs said US officials.

5) India-Russia
During President Putin's visit to India the two countries decided to establish a joint Russian-Indian Commission for fighting terrorism. Extremism and separatism, a major source of terrorist activity, are problems common to both countries.

6) Russia-NATO
During his visit in Moscow on 9 December, Lord Robertson, Secretary General of NATO, called for a security coalition with NATO and Russia as essential partners. Robertson pointed to three areas for a coordinated military response: anti-terrorism (defensive measures to reduce vulnerability to attack); counter-terrorism (offensive measures to deter terrorist activities); and consequence management (measures to support civilian authorities in stabilising a post-attack environment).

b) The Delimitation of the Caspian Sea and the Black Sea: The Caspian Sea

(1) On 2 October Iran opposed any unilateral, bilateral or trilateral deal on the Caspian Sea. Any piecemeal attempt to resolve border limits in the mineral-rich Caspian Sea in the absence of an overall deal of the five littoral states will be rejected by Iran, said government spokesman Abdollah Ramezanzadeh. Russia has already concluded bilateral arrangements with Azerbaijan and Kazakhstan on the Caspian Sea demarcation problem. The Iranian position also includes the understanding that the Caspian Sea belongs to five coastal states and that no other country should interfere in this region.

(2) Russian-Iranian consultations on the legal status of the Caspian Sea began on 3 December in Tehran. The Russian delegation, led by Viktor Kalyuzhny, President Putin's Caspian Sea envoy, included MPs and experts. Iran's Special Representative on Caspian Sea Affairs, Mahdi Safari, headed the Iranian delegation. The Russian delegation presented its position to one of the sessions of the Iranian Parliamentary Commission for Security and Foreign Policy. The two sides agreed to work on the joint drilling of the Southern Caspian Sea if, and when, approved by the Iranian authorities.

(3) The second summit of the five Caspian states (Russia, Azerbaijan, Kazakhstan, Turkmenistan and Iran) could be convened in Tehran in 2003, said Viktor Kalyuzhny on 10 December. The suggestion was made by the Iranian President and is supported by Russia. Top-level meetings will take place ahead of the summit. The document drawn up during the first summit in Ashgabad during April 2002 will probably be amended and will take into account the progress reached during the negotiations since then.

c) Oil and Gas Issues

1) Russia-USA
(1) On 1 October Russian Energy Minister Igor Yusufov said at the US-Russian Commercial Energy Summit in Houston, Texas, that Russia plans to create a strategic oil reserve to help stabilise international oil prices. By 2007 Russia will be ready to supply 1.1 million barrels of oil per day to US markets, reaching 13 per cent of US oil imports. (2) On 5 December US Congressman, Curt Weldon told a press conference in Moscow that the US would cooperate with Russia in the energy sector. The US needs Russian oil to decrease dependence on supplies from the Middle East and as a result of inadequate production in Alaska.

2) Russia-Ukraine
The two neighbouring states will register a gas transportation consortium in January 2003. This was agreed to on 9 December in Moscow, following an agreement of 7 October by the countries' prime ministers for a 30-year strategic partnership in gas. They also set up a consortium for managing Ukraine's gas transportation system. European gas companies may also join the project.

3) BTC Pipeline Project
(1) Georgia officially approved the BTC pipeline on 2 November. Together with earlier approvals by Azerbaijan and Turkey, this marked a significant milestone in the development of the project. (2) India is trying to become a player in the world energy market and seeks the partnership of Turkey. On 10 November New Delhi reported that an Indian company had won the bid to construct 332 km of the BTC pipeline whose total length of 1,750 km will stretch from the Turkish town of Ulas to Ceyhan on the Mediterranean Sea. British, Azerbaijani, French, Turkish and North American companies are also involved in the BTC pipeline. (3) An oil pipeline will be constructed from Kazakhstan to Azerbaijan under the Caspian Sea, said the President of the State Oil Company of the Azerbaijan Republic (SOCAR), Natiq Aliyev. The announcement was made in London on 10 December after talks at the US Embassy with a Kazakh delegation on Kazakhstan's joining of the BTC pipeline project. Kazakhstan considers this project one of its main interests. The next round of talks will be in January 2003 in Almaty, Kazakhstan. (4) Contractors started work on the BTC pipeline on 15 December in Turkey. Pipes from Japan are expected in January 2003 both in Turkey and in Azerbaijan. Actual construction work will begin in mid-March 2003.

4) Turkey-Iran
Turkey negotiated lower prices for exported Iranian gas on 18 November. A drop of 9 per cent in the price of Russian gas has probably led to a 20 per cent cut in the price of Iranian gas. Turkey is expected to become a major gas-transit country for Europe from both Russia and Iran.


1. Chechnya
(1) Bombings and ambushes continued to kill government militia and regular Russian troops in Chechnya. Two Chechen suicide-terrorists blasted the government building in Grozny on 27 December, leaving 250 dead and wounded. The Moscow hostage crisis of 23-26 October marked a failed Russian policy in Chechnya. The cost of reconstructing the republic after the second Chechen war has already risen to US$5 billion but with no results other than a Chechen administration. (2) On 28 October the Organization for Security and Cooperation in Europe (OSCE) said it would reduce its mission on the Georgian-Chechen border from 54 to 42 personnel - a common practice during the winter months. (3) On 13 November Mikhail Babich, a Russian businessman was appointed as Prime Minister of Chechnya. (4) On 14 November Russia ruled out any reduction in troop levels in Chechnya until the security situation had drastically improved. Although the Chief of the Russian General Staff, Anatoly Kvashnin, said the military phase of the conflict was over, conditions for the reduction of forces were still far off. Violence in the province continues and 80,000 Russian troops are deployed in Chechnya. According to a peace plan by the Russian president, a referendum for the approval of a new constitution will be convened in March 2003. Chechnya will have increased autonomous control while firmly remaining in the frame of the Russian Federation. Negotiations with terrorist factions, including with former president Aslan Maskhadov, have been ruled out by Russian authorities. On 7 December in Moscow, Russia's NATO partners delicately hinted that a political strategy was the key to defeating extremism in the province. Lord Robertson told a Moscow conference on combating terrorism that poorly trained troops who fail to respect civil rights or use excessive force only exacerbate the problem they are sent to contain.

2. Nagorno-Karabakh
During the CIS summit in Chisinau, Moldova, on 7-8 October, the presidents of Armenia and Azerbaijan, Robert Kocharian and Geydar Aliyev discussed the Nagorno Karabakh conflict. They continued this difficult dialogue during NATO's Prague summit of 21-22 November.

3. Transdnistria
The Operational Group of Russian Forces in Transdnistria removed another trainload of military materials on 6 November from the Transdnistrian region of Moldova. In October two more trains transported similar loads; a third departed from Tiraspol. According to a commitment made at the 1999 Istanbul OSCE summit, Russia should have fully withdrawn its forces from Moldova by the end of this year but has shifted this deadline to 31 December 2003.


1. Ukraine
W ith the support of parliament, Ukrainian president Leonid Kuchma replaced Prime Minister Anatoly Kinakh with one more loyal to him, Viktor Yanukovich (52), governor of the Donetsk region. Mass street demonstrations have called for the resignation of Kuchma, but he insisted he would stay in power until 2004. The United States have accused Kuchma for approving the sale of an advanced "Kolchuga" aircraft detection system to Iraq.

2. Russia
President Putin dismissed the Black Sea Navy Commander, Admiral Vladimir Komoedov, at the start of October and appointed Vice-Admiral Vladimir Massorin, former commander of the Caspian Sea Navy, to this position.

3. Azerbaijan
Speaking to the ruling party's tenth congress at the end of November, the President of Azerbaijan, Geydar Aliyev, said he is ready to participate in the October 2003 presidential elections. Former president Ayaz Mutalibov, persecuted by Baku and hiding in Russia, also declared his readiness to participate in the presidential contest.


1. Bilateral Relations

a) Iran-Azerbaijan
Top energy officials from the two countries expressed their readiness to boost energy cooperation on 2 December. According to the deal, Iran will export electricity to Azerbaijan as well as set up a power plant there. A broader economic cooperation agreement was concluded on 29-30 October in Baku during the bilateral Joint Economic Commission meeting.

b) Iran-Armenia
(1) According to the Caspian News Agency, high level transport officials from Iran and Armenia met in Yerevan on 5 December and agreed to build the Kajaran tunnel in the south of Armenia to provide a year-round transport corridor between the neighbouring states. The project is strategically important for countries in the region and also for TRASECA project participants and for those in the North-South corridor. (2) On 15 December the Foreign Minister of Iran, Kamal Kharazi, and the Head of the President's Office of Armenia, Artashes Tumanian, signed an agreement on development affairs in Tehran. The two sides called for the settlement of the Nagorno Karabakh conflict, an issue in which Tehran wants to be involved as a mediator.

c) Georgia-Azerbaijan
On 16 December the Defence Minister of Georgia, David Tevzadze, met his Azerbaijani counterpart, Safar Abiev, in Tbilisi and agreed to hold joint military exercises.

d) Romania-Moldova
On 26 November Moldovan President Vladimir Voronin accused Romania of becoming the biggest commercial partner of the separatist Transdnistria republic. Romanian authorities responded by saying that trade relations with Transdnistria were conducted by private firms.

2. CIS
The CIS summit was convened in Moldova on 7-8 October. Twelve presidents participated in the meeting. No improvement in the effectiveness of the CIS could be reported and declarations for the need to intensify security and economic cooperation were adopted. The highlight of the summit was president Putin's 50th birthday. Problematic bilateral relations overshadowed the integration ambitions of the CIS. The next summit will be in held in Ukraine in October 2003.


1. Economic Aspects of Regional Cooperation in the Black Sea: National and Regional Perspectives

a) Russia
Russian economic growth in 2002 is expected to be 4 per cent. The real income per head is expected to grow by 8.5 per cent while inflation will be 15 per cent. President Putin concluded that living standards in his country had started to rise.

b) Bulgaria-Moldova
The second meeting of the bilateral inter-governmental Commission for Trade, Economic, Scientific and Technical Cooperation was held on 27-29 October. The next meeting will be held in October 2003 in Chisinau. The recommencement of bilateral relations after a three-year break was the main topic of the meeting.

c) WTO-Armenia
Armenia's membership to the WTO was formally approved in Geneva on 10 December. The negotiations had lasted ten years. Armenia applied for membership after bringing its legislation within WTO requirements. The Protocol of Accession will become effective after the Armenian parliament passes a set of 19 WTO agreements. Direct foreign investment in the Armenian economy is expected to increase.

d) EU-Russia
The Russian State TV and Radio Company will control 16 per cent of the share value of EuroNews TV from the start of 2003. France controls 24 per cent, Spain 18 per cent and Switzerland 9 per cent. Moscow's share will enable it to manage the station's output.

2. Political and Security Aspects of the Black Sea Regional Cooperation and EU and NATO/PfP Activities

a) Russian Black Sea Navy
During October and November, Russia's Black Sea Navy sent two cruises out into the Mediterranean Sea. The first tour visited the Syrian port of Latakia and the French naval facility in Toulon. The second was to the Greek ports of Corfu and Pylos as well as to the Croatian port of Split.

b) EU

1) EU-Russia
(1) The EU formally recognised Russia as a market economy on 7 November. This recognition took place in the context of trade defence. Consequently, European anti-dumping and anti-subsidy laws will be amended. The new regime will be applicable to all cases initiated after 8 November 2002. (2) The regular EU-Russia summit in Brussels was convened on 11 November. The two sides adopted a joint declaration on fighting terrorism, found a formula for dealing with the Kaliningrad issue, and agreed to increase Russian natural gas deliveries to Western Europe.


1) NATO-Georgia
(1) A Turkish-built military academy opened in Tbilisi on October 10 with a view to bringing Georgia's military closer to NATO standards. The academy will play an important role in Georgian security. Two hundred and fourteen students were enrolled this year and successful graduates will become officers. (2) At NATO's Prague summit the Georgian President officially requested that his country be considered an aspirant to NATO membership. The request was made earlier than originally expected; in 2000 Edward Shevardnadze pledged to make a bid for membership in 2005. NATO is considered the only organisation capable of guaranteeing Georgia's security and opportunities for development. Georgia has to deal with various internal challenges on its way to NATO membership; its chances, however, are good. The Chairman of the US Joint Chiefs of Staff (JCS), General Richard Myers, visited Georgia on 23-25 November. He reaffirmed US plans to support Georgia's military modernisation. Britain is expected to send instructors to Georgia to train the country's security services in intelligence and counter-terrorism. A regional, Caucasian security framework with NATO at the core will probably be a good option for Georgia and other countries in the area. The Georgian Ministry of Defence discussed new army regulations on 20 December. They were drafted on the basis of documents concluded by the United States, Romania, the Czech Republic and Bulgaria.

2) NATO-Russia
NATO Secretary General, Lord George Robertson visited Moscow on 9-10 December. NATO and Russia will sign agreements on rescue at sea, air transport and mid-air refuelling in 2003. Lord Robertson told President Putin that NATO was ready to assist Moscow to modernize, downsize and professionalize its armed forces. It is crucial for the two partners to fix precise areas of cooperation.

2) EU-Georgia
President Shevardnadze of Georgia told his country's parliament on 11 October that one of Georgia's long-term objectives was to join the EU.


1. USA-Georgia
(1) A group of US Congressmen visited Georgia on 1 December for talks on US-Georgian cooperation in combating terrorism and other security issues. Greg Weldon headed the delegation. It met with the Georgian President and visited a military base where counter-terrorist troops are being trained. The construction of the BTC oil pipeline will require proper protection and the 2,000 Georgian special force troops are expected to do this job. This was the first congressional level visit after NATO's Prague summit and Georgia's application for membership to the alliance. (2) The first counter-terrorist battalion on a US-designed training programme graduated on 15 December. Georgian President Edward Shevardnadze congratulated 558 Georgian soldiers and thanked US military instructors from the four-month course. The US training program included instruction in anti-terrorism techniques as well as supplies of weapons, ammunition, uniforms and other equipment. It is part of the global counter-terrorism effort launched by the USA after the 11 September terrorist attacks.

2. USA-Ukraine
On 8 November US Deputy Assistant Secretary of State, Steven Pifer, said that US-Ukrainian relations had hit a crisis of confidence over what the US sees as Kiev's failure to disprove charges that it sold arms to Iraq. According to the US State Department's assessment, the two countries are in a very difficult period of their relations, probably the most difficult since 1993. NATO downgraded its meeting with Ukrainian officials from a presidential to ministerial level at its Prague summit.

3. USA-Russia
(1) US President George Bush visited Russia for three hours after the NATO summit in Prague and met with President Putin in St. Petersburg. The United States considers its strategic partnership with Russia crucial in its fight against terrorism. (2) The US Chairman of the JCS, General Richard Myers, visited Russia on 11-12 December and met with Defence Minister Sergei Ivanov and the Chief of the General Staff, General Anatoly Kvashnin. They discussed the operation in Afghanistan, anti-terrorist efforts, Iraq, arms control, missile defence and Russia-NATO relations after the latter's decision to enlarge the alliance by seven more countries, some of them former Soviet republics, at its Prague summit.

4. USA-Moldova
(1) The Overseas Private Investment Corporation (OPIC) will provide nearly US$1 million in political risk insurance to two US companies that are investing in telecommunications and agricultural projects in Moldova. (2) Moldova's President Vladimir Voronin visited Washington, D. C. on 17 December. In a declaration with President George Bush, President Voronin reaffirmed their countries' relationship based on a "shared commitment to promoting prosperity, freedom and security in Moldova and throughout the region." Both leaders agreed that there is a difficult "debt situation" in Moldova and there is need for privatisation, energy sector reform, and improvement in the investment climate. They agreed to continue promoting regional security, combating the proliferation of weapons of mass destruction, trans-national crime, and human trafficking as well as to cooperate in the war on terrorism.

The increased consumption of oil and natural gas in the world have resulted in intensive political and economic interaction in the Black Sea-Caspian Sea area, both of a conflicting and cooperative nature. Energy projects hitherto on the drawing table or in the planning phase will finally be launched in the coming months and years. The political and strategic influence of the US and NATO are increasing. Opportunities for the EU to be more closely involved in the modernisation of the region have generated positive trends from which Russia is most keen to take advantage of. The war on terrorism and the preparations for a possible war against Iraq are strongly influencing the political and strategic situation in the area. It is likely that the five permanent members of the Security Council will exercise a higher level of coordination and understanding on these issues in the coming months than was shown three or four years ago. The convergence of interests in the Black Sea-Caspian Sea region is an important factor in this development.




Dr. Plamen Pantev, Editor–in–Chief

ISSN 1311 – 3240

Dr. Tatiana Houbenova-Delissivkova

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