Caucasus Report: May 17, 2002

SANCTIONS HIGHLIGHT U.S. UNEASE OVER ARMENIA'S TIES WITH IRAN. The United States's unexpected decision to impose sanctions on Armenian firms suspected of helping Iran develop weapons of mass destruction was an embarrassment for Yerevan and a sign that Washington is no longer willing to acquiesce to deepening Armenian-Iranian ties.

The Armenian government has moved quickly to investigate the American claims, stressing at the same time that it has not been directly implicated by the U.S. State Department in allegedly shady deals with Iran. But all the indications are that it will have to review its warm relationship with Iran in order to repair the damage.

"The Americans were never happy with our cooperation with Iran," an Armenian official familiar with foreign affairs told RFE/RL this week. "But until recently they were quite cautious in voicing their objections. They are now following Armenian-Iranian contacts more closely and have already narrowed our freedom of action on that front."

According to former Foreign Minister Alexander Arzumanian, Armenia will risk spoiling its vital relationship with the world's sole superpower unless it addresses American concerns. "The atmosphere of mutual trust in U.S.-Armenian relations has been undermined and that could lead to a revision of some aspects of those relations," he said in an RFE/RL interview.

The Bush administration has yet to publicize the names of those Armenian entities which the State Department says transferred sensitive technology and equipment to Iran. The department spokesman, Richard Boucher, said on 10 May that these items are listed on multilateral export control lists that seek to curb the transfer of longer-range missiles and prevent the spread of chemical, biological, and nuclear weapons.

The Armenian Foreign Ministry said later that day that it has started "an active dialogue" with Washington to try to "find solutions to the resulting problems." It did not deny the U.S. allegations.

"We should probably prove that that was not the case," President Robert Kocharian said for his part. "But if that was the case, then we should figure out why it happened."

The nature of activities for which the still unnamed Armenian companies are facing sanctions is also unclear. Of all the products made in the impoverished country, electronic items seem most likely to attract the attention of U.S. nonproliferation experts. Armenia used to be an important part of the Soviet high-tech defense industry, supplying microchips, semiconductors, computer software, and other electronic components for missile guidance systems.

About two dozen factories were involved in the sector. All of them are now either fully or partly owned by the state. This fact gives observers reason to believe that those enterprises, which have struggled to survive since the 1991 Soviet collapse, could not have sold sensitive products to Iran without the government's knowledge.

"There is no way any local company engaged in dangerous deals with Iran and our authorities were unaware of that," Arzumanian agreed. "I rule that out."

So, it appears, do the Americans, who slapped on the sanctions without warning Armenia beforehand. And although Boucher made it clear that the Armenian government has been "very helpful" in U.S. efforts to prevent Iran from developing weapons of mass destruction, it was quite an extraordinary move. It came amid a toughening U.S. policy toward America's number one enemy in the Middle East following President George W. Bush's charge that Iran is part of a global "axis of evil."

This policy change is bound to have implications for Washington's hitherto tolerant approach to the decade-old close ties between Armenia and Iran. Especially after the two neighboring states, which have a common interest in limiting Turkish influence in the region, agreed to tentative plans last March for the start of military cooperation. That agreement came two weeks before Defense Minister Serzh Sarkisian's official visit to Washington, during which he discussed use of the first-ever U.S. military assistance to his country. The delicate line epitomized Armenia's "complementary" foreign policy.

However, the latest developments could make it more difficult for Armenia to continue to pursue that strategy.

Just several days before the announcement of the sanctions, U.S. Ambassador to Armenia John Ordway issued what now looks like a veiled warning that Yerevan has gone too far in cementing its links with the Islamic Republic. In an interview with RFE/RL, Ordway said while his country "has nothing against" the Armenian-Iranian partnership, it expects Armenia's support in countering Iran's alleged plans to acquire weapons of mass destruction. Ordway noted that Armenia has "international obligations" to prevent the transfer of components for such weapons, and urged the Kocharian government to "add its voice to ours of concern about what Iran is doing."

It was the first time that a U.S. official publicly voiced reservations about the Armenian-Iranian relations. Ordway, who was the number two figure in the U.S. embassy in Moscow before his posting to Armenia, must have closely watched Russia's arms exports to Iran, one of the thorniest issues in the U.S.-Russian relationship.

Some state-controlled Russian entities have previously been subjected to similar U.S. sanctions for assisting in Iran's nuclear programs and selling weapons to Tehran. That, however, has not deterred Moscow from signing more lucrative deals with the Iranians.

Tiny Armenia, by contrast, is not in a position to ignore U.S. worries. Not just because it is a major per-capita recipient of American aid. Armenian officials have indicated recently that global geopolitical changes caused by the 11 September terrorist attacks on the U.S. necessitate a pro-Western tilt in their foreign policy.

In the past they have succeeded in persuading Washington that their bilateral projects with Iran, notably the planned construction of a gas pipeline, do not contradict U.S. interests in the region.

Arzumanian, who headed the Foreign Ministry in 1996-98, said: "The Americans always presented their concerns regarding Armenia's relations with Iran. But our mutual trust allowed us to first talk about those concerns and then take steps to dispel them and make sure that there are no doubts that our ties with Iran harm any other friendly state."

It may still be possible to carry on with that policy. But that will likely require the Armenian leadership to exercise greater caution toward Iran by tightening export controls and possibly shelving bilateral defense projects. (Emil Danielyan)

FORMER RUSSIAN AMBASSADOR CALLS FOR RUSSIAN 'PROTECTION' FOR KARABAKH. Writing in "Nezavisimaya gazeta" on 13 May, Vladimir Stupishin, who served from 1992 to September 1994 as Russia's first ambassador in Armenia, advocated a new system of regulating relations between former Soviet republics and the autonomous formations they contained -- one that would give those currently unrecognized republics sovereignty under Russian "protection." He argued that by not challenging the right claimed by "mini-empires" (by which he clearly meant Georgia and Azerbaijan) to retain control over "the lands of neighboring peoples which never actually belonged" to them, Moscow is failing to make use of one of the key levers is has at its disposal to undercut the increasing U.S. influence in the former USSR.

Stupishin further expressed his concern that "pro-Azerbaijani" circles in Moscow (whose members he does not identify by name) are trying to drive a wedge between Russia and Armenia (which he designates a "strategic ally") by highlighting Armenia's alleged drift away from the Russian sphere of influence and into that of the West. Stupishin argues that "Yerevan is merely out to diversify its foreign ties, which is the only rational way for Armenia to survive, as Armenia needs not a pro-American or even a pro-Western, but a pro-Armenian policy. And if it wants to preserve its positions in the Transcaucasus. Russia should demonstrate understanding for the foreign policy ties of its ally especially in matters in which it is not able to come to Armenia's aid."

Stupishin listed other ways in which Russia could strengthen its position in the South Caucasus in general, for example by increasing military and economic cooperation with Armenia on terms that are advantageous to Russia but at the same time beneficial to Armenia. In that context, he argued that an independent Armenia that is benevolently disposed towards Russia cannot exist without Nagorno-Karabakh, and that without Armenia and Karabakh Russia will be stripped of its foothold in the Transcaucasus. For that reason, he went on, "we simply have an obligation to take Karabakh under our protection, to do everything possible to strengthen its security on its historic territory, the frontiers of which were distorted by the Russian Bolsheviks and require reinstating. The [territorial] integrity of the Nagorno-Karabakh Republic deserves no less respect than does the [territorial] integrity of other states."

While moving to strengthen Armenia, Stupishin continued, Russia should at the same time "divest itself of the stupid habit of taking Azerbaijan at its word. This is a state that swears eternal friendship with Moscow, then in Ankara behaves like an eternal vassal of Turkey and at home like a trusted conduit for pan-Turkism." But that inconsistency, Stupishin continued, does not justify giving up on Azerbaijan or imposing sanctions on it. On the contrary, Russia should strive to maintain good-neighborly relations with Baku, but at the same time "it should not close its eyes to [Azerbaijan's] true aspirations, especially when they run counter to Russia's interests." (Liz Fuller)

AZERBAIJANI GOVERNMENT UNHAPPY WITH IMF, WORLD BANK RECOMMENDATIONS? The independent Azerbaijani daily "Ayna/Zerkalo" claimed in an article on 8 May that many Azerbaijani government officials resent the advice and recommendations of the IMF and the World Bank, which they believe are intended simply to perpetuate Azerbaijan's status as a source of cheap oil.

According to the paper, those unidentified officials object in particular to international financial organizations' insistence on accelerating privatization and economic reforms, dismantling trade barriers and liberalizing prices. They argue that the experience of other countries in transition has shown that such policies inevitably result in sky-rocketing prices for raw materials, which in turn contributes to the collapse of the domestic machine-building, metallurgical and processing industries, and of the agricultural sector. They also categorically reject demands to raise rents and water, gas, and electricity tariffs which, they say, would only serve to increase non-payments by the impoverished population.

"Zerkalo" did not, unfortunately, name any names, or give any indication of how prevalent such sentiments are within the government apparatus. But the same paper in June 2000 quoted Ilgar Mamedov, who is deputy chairman of the opposition Azerbaijan National Independence Party and worked with the IMF mission in Baku from 1994-1998, as explaining that at that time the Azerbaijani financial establishment was split into two camps: National Bank chairman Elman Rustamov and Finance Minister Avaz Alekperov were enthusiastic about pushing ahead with structural reform and continuing cooperation with the World Bank and the IMF, while "conservatives" such as state adviser for economic policy Vakhid Akhundov argued that Azerbaijan could and should manage without any further IMF loans.

More recently, an Azerbaijani financial journalist pointed out in April 2002 that although in response to IMF pressure the Azerbaijani government embarked in early 2001 on a new round of reforms, including the leasing of the Baku energy supply network and abolishing privileges that exempted certain categories of persons from payment for communal services, opposition to those measures has strengthened at all levels of the government, while the parliament enacted legislation restoring some of the abolished privileges.

There is, moreover, a further reason for Azerbaijan's distrust of the World Bank, namely that some members of the government are convinced that it is biased towards Armenia. Speaking at a press conference in Baku earlier this month, the bank's outgoing representative for the South Caucasus, Judy O'Connor, said she is not aware of the existence at the World Bank of any forces lobbying Armenia's interests, "Bilik Dunyasi" reported on 8 May. (Liz Fuller)

DRAFT CHECHEN CONSTITUTION SELECTED. The Chechen commission charged with selecting a new draft constitution has decided to take as its blueprint the version authored by Chechen administration head Akhmed-hadji Kadyrov, the latter's aide, Taus Dzhabrailov, told Interfax on 24 April. But elements from several of the four drafts rejected may be incorporated into Kadyrov's draft. Chechen Deputy Prime Ministers Beslan Gantemirov and Musa Doshukaev both withdrew their drafts in favor of Kadyrov's, although Gantemirov stressed that he "would be glad if at least one proposal from my draft is included in the final version." Also not completely discarded is the draft authored by Abdulla Bugaev, who is an adviser to the presidential envoy to the South Russia Federal District, Viktor Kazantsev.

"The Moscow Times" on 11 April quoted Dzhabrailov as saying that the five drafts then still under consideration all defined Chechnya as a constituent territory of the Russian Federation, and each says that permanent residents in Chechnya and Russian citizens there temporarily (presumably meaning the Russian military) have equal rights. Kadyrov told "Argumenty i Fakty" in March that the major difference between his draft and Gantemirov's was that Gantemirov advocated a parliamentary republic, whereas he favors the presidential model. Kadyrov has made clear on other occasions that he will run for that post.

But Sergei Mikheev, in an article posted on politru.com on 27 April, characterizes Kadyrov's draft as a compromise between the presidential and parliamentary model. Under that draft, the supreme organ of power is a bicameral popular assembly composed of the Cabinet of Ministers, the president, and 120 popularly elected parliament deputies, which will be chaired by the president. The president is elected for a five-year term and may not serve more than two consecutive terms. The lower chamber of parliament will be comprised of popularly elected deputies who will enact legislation which the upper chamber, composed of the president and government, will then endorse. The president will chair the popular assembly; he will also head the government.

Kadyrov's draft constitution designates both Chechen and Russian official languages; it also provides for the banning of "radical Islamic organizations." (Speaking on Chechen television on 15 May, Mufti Hadji Shamaev similarly called for banning "extremist Islamic trends," according to ITAR-TASS.)

Mikheev points out that Kadyrov's model must have been approved in Moscow, with the tacit assumption that when elections are finally held Kadyrov will become president. But the timeframe for elections remains open. Russian Central Election Commission chairman Aleksandr Veshnyakov said in February they could take place next year, while Kadyrov in March advocated waiting at least two years after military operations in Chechnya end. (In April, he suggested in the interim convening a "permanent roundtable" on which "all real forces" could discuss the revival of Chechnya, the drafting of basic bills, and preparing for republic-wide elections.) Chechen Premier Stanislav Ilyasov said elections should be delayed until all Chechen displaced persons return home; the planned date for completing the repatriation to Chechnya of displaced persons currently in Ingushetia is "the end of the summer," he told ITAR-TASS on 15 May.

Meanwhile, in late April, the Russian Justice Ministry prepared and submitted to the Security Council two alternative presidential decrees on holding a referendum in Chechnya. (Liz Fuller)

THE SEARCH FOR A 'MODERATE' CHECHEN PRESIDENT. An article published in "Rossiiskaya gazeta" on 15 May suggests an intriguing alternative to Akhmed-hadji Kadyov as the next Chechen president. The paper claims that field commander Ruslan Gelaev, who according to Russian media reports is currently attempting to return from Georgia's Pankisi gorge to Chechnya via Daghestan, has forged a deal with oil magnate and former Chechen Deputy Premier Khozh-Akhmet Nukhaev, whom it characterized as "one of the richest and most influential people in the Caucasus."

Under that deal, Nukhaev will provide Gelaev with financial backing in his bid to persuade Moscow to agree to divide Chechnya into a lowland zone that would remain within the Russian Federation, and an independent highland Chechen Republic Ichkeria. Gelaev reportedly aspires to the presidency of the former, and Nukhaev of the latter.

In 1997-1998, Nukhaev succeeded in recruiting an influential group of western political figures and businessmen to invest in his proposed scheme to create a Caucasus Common Market -- a scheme that was effectively dashed by the Chechen incursion into Daghestan in August 1999 and the ensuing Russian onslaught on Chechnya.

"Rossiiskaya gazeta" claims that Georgia, which would stand to benefit financially from a peace settlement in Chechnya that would pave the way for resurrecting the Caucasus Common Market idea, supports Nukhaev's plan to split Chechnya with Gelaev. Georgian President Eduard Shevardnadze incurred harsh criticism from Russia earlier this year for describing Gelaev as a reasonable and conscientious individual, and as someone whom Russia could accept as a leader. (Liz Fuller)

QUOTATIONS OF THE WEEK. "There is some progress. However, the style of work of Georgian officials has not changed in general and our good intentions continue to be just intentions." -- The outgoing World Bank regional director for the South Caucasus, Judy O'Connor, speaking at her farewell meeting with former Georgian Finance Minister Zurab Nogaideli (quoted by Caucasus Press on 13 May).

"Daghestan is Russia's Achilles heel. Thousands of young men living in Daghestan's mountain villages cannot find any outlet for their intellect and physical strength. The vacuum is filled by extremists." -- Russian Deputy Prosecutor-General Vladimir Kolesnikov speaking in Makhachkala on 12 May (quoted by Interfax).

"These meetings are going to be fruitless. There is no reason to be so excited about them. Nothing will happen, and Karabakh cannot be liberated this way." -- Former Azerbaijani presidential adviser Vafa Guluzade, commenting on the Prague talks between the Armenian and Azerbaijani deputy foreign ministers ("Sharg," 14 May).