Energy Security In The South Caucasus

April 7, 2016 by Elizaveta Egorova

Great Expectations Or Lost Illusions:
Energy Security In The South Caucasus

The difference between reality and a pipe dream is the effort
– Peter Franco

By Elizaveta Egorova, Ph.D.

Today, the subject of energy security is vital in foreign policy, as much as global terrorism, weapons of mass destruction smuggling, international conflicts, or drugs trafficking. The raging increase in global demand for energy resources makes energy routes and transports the focal point in the strategic battle for their ownership. Consequently, energy security and geopolitics are tightly intertwined. Not surprisingly, the energy nature of contemporary foreign and domestic policies determines many political processes, including international conflicts – potential and real. Energy security cannot be viewed as only securitization of energy supply and availability, but also as an instrumentation of national power. Of course, energy pipelines, the “markers” of geopolitical influence and leverage, divide the energy community into exporters, importers, and transit states. More importantly, however, the world divides into those who receive and benefit from the pipeline routes, the energy community, and those, outside the energy community, who do not. The “do-nots” are isolated from natural resources and their direct and indirect advantages.

Approaches and perceptions on energy security

There is no global consensus on the determination of energy security, its dimensions, and indexes. It is a multifaceted conceptual understanding that differs from country to country, depending on national interests and priorities, and the role of energy in the countries domestic and foreign policy. Energy security can be viewed as a cluster: energy availability, affordability, efficiency, infrastructure development, environment and social effects, regulation and governance. Another key aspect of energy security is the variety of stakeholders; state, non-state, local, national, and international. Each having a different perception of energy security and, therefore, using a different articulation to address their concerns.

Energy security strategy of the European Union and of the Russian Federation

The European Union (EU) faced a new reality after the Russian Federation violation of Ukrainian territorial integrity when the annexation of Crimea was followed by Russia backing the separatist war in the Donbass Region. Russian aggression in its neighbor Ukraine, the primary energy transit hub to Europe, had shattered EU confidence in Russia as a reliable source of energy supply. The Donbass action removed the few remaining shards of doubt.

The EU’s energy security policies and approaches were challenged. In response to the changed geopolitical reality, and disabused of safe dependence on Russia’s energy imports, the EU crafted new energy security strategies to ensure its member states have a stable and abundant supply of energy resources, and limited vulnerability to supply disruptions. Therefore, in the wake of geopolitical turbulences and a transforming global energy environment, the Black Sea and Caspian regions, rich with hydrocarbons, emerged as a target of EU’s diversification strategy. In this light, the South Caucasus increases in importance as a major alternative energy source and an enhanced transit hub to satisfy EU’s need for assured energy.
Since Czarist times, Russia has controlled and dominated in the majority of oil fields and later pipeline projects in what was to become the Soviet Union, using them as a foreign policy tool to cement Russian economic and geopolitical interests. Traditionally, the key energy import destinations were the European countries. However, given the recent transformations in geopolitical reality, the EU’s members have decided to diversify their imports and establish as much energy independence from Russia as possible. The new European strategy will have a significant impact on Russia’s energy exports in the long term, diminish Russia’s presence in the global energy market, and weaken Russia’s energy leverage – a Russian means of influencing Western foreign policy and securing its national interests.

Economic and political sanctions imposed by the Western countries shortly after Russia’s annexation of Ukrainian peninsula Crimea in 2014, and the EU’s ongoing alternative energy projects, forced the energy behemoth, Russia, to turn from West to East. Asia. Asian markets should diversify and secure Russia’s exports capacities, economy, and reduce dependency on the European market and Western political conjuncture. The Kremlin considers energy security to be the most important element of Russia’s national and economic security, and defined as the security of demand markets and the security of transit points.
The recently update to Russia’s Energy Security Strategy is projected out two decades, to 2035. It emphasizes the number of challenges and threats to their energy sector, including the dwindling prospects of increasing energy exports in the European market due to the narrowing demand. Similarly, the potential growth in the Asian direction is limited due to the lack of export infrastructure and the need for major Russian public and private investments in Asian market development. Therefore, although the diversification to the East is an inevitable scenario to accommodate Russia’s resource-driven economy, preserving Russia’s dominant energy role in Europe is a vital presence to support export revenues and maintain political leverage in the foreign policy theatre. The South Caucasus potential energy projects, offering the EU an alternative to Russian hydrocarbons, weaken Russian energy position in the long run, especially if the Central Asian and the Middle Easter countries join the most anticipated gas project by the European Union, called the Southern Gas Corridor.

Energy security threats and challenges of the South Caucasus

The three independent countries of the South Caucasus are united by geography. Armenia, Azerbaijan, and Georgia each play a similar geopolitical and energy security role due to its cartographic location between Europe and Asia. A strategic chessboard for millennia, the current South Caucasus has additional players in its neighbors Russia, Turkey, Iran and non-regional actors, EU and NATO. The energy-hub South Caucasus, between the energy-thirsty EU and the energy-rich Caspian Sea and Central Asia, has great potential in the EU’s diversification strategy to get the West off the Russia’s energy needle.

The region is highly fragmented: the peoples divide and subdivide along cultural, political, religious, and ethnic lines which cross and crisscross frontiers. The resulting array of security challenges, in addition to unresolved territorial conflicts, such as those in Nagorno-Karabakh, South Ossetia, and Abkhazia, make this a precarious region for national and international investment and development. There is deeply rooted persistent cognitive dissonance – regional mental stress about conflicting relations among Armenia, Azerbaijan, and Georgia. This lack of political and technical integration within the South Caucasus countries has its routes in history, beyond the scope of this paper. A long memory is one of the predicaments of this region.

The South Caucasus states are also fragmented, internally and externally, by their energy dependency, international frameworks, regional preferences and partnerships, and by the different political and legal approaches and views in the South Caucasus. Armenia joined the Russia-led Eurasia Economic Union in January 2015. Azerbaijan is maintaining its neutrality as of 2016. Georgia had earlier signed a EU Association Agreement in June 2014. However, Armenia, Azerbaijan, and Georgia are all members of the European Union’s Eastern Partnership. Such classic South Caucasus fragmentation and cross-allegiances are obstacles to energy cooperation among Armenia, Azerbaijan, and Georgia, between the South Caucasus and EU, or even between the South Caucasus and Russia.

Energy-poor Armenia and less-poor Georgia are both heavily dependent on gas imports. Land-locked Armenia relies on gas imported mostly from Russia – 80% and from Iran – 10%. Georgia receives its gas from Azerbaijan – 88% and Russia – 10%. Moreover, in these two energy-dependent South Caucasus countries, the majority of their energy infrastructure, including energy supply and distribution, transmission, and power plants, has been privatized by foreign companies. The companies are headquartered in neighboring Azerbaijan as well as Russia, Kazakhstan, and the United Kingdom, to give just a few locations. These companies are no strangers or newcomers; BP was founded as the Anglo-Persian Oil Company in 1908.

In order to facilitate the energy security of the South Caucasus today, it is vital to assess the current views on the concept of energy security in Armenia, Azerbaijan, and Georgia, to select key aspects, and highlight stark differences and common similarities in approach.

Armenia

Around 75% of the total energy supply Armenia receives is from Russia. Russian monopolization and presence in Armenia’s energy sector is immense. Gazprom Armenia dominates and has fully owned, since January 2014, Armenia’s distribution networks, and delivers gas via Georgia to the Armenian domestic gas market and for power generation. In 2015, Gazprom Armenia took over the ownership of the pipeline section on the Armenian-Iranian border through which a lesser amount of gas comes from Iran, a barter agreement, in exchange for electricity deliveries from Armenia to Iran.

Armenia has a substantial electricity capacity for domestic production and for export, although it has certain limitations in the cold season, when the Hydro Power Plants (HPP) cannot operate fully and the demand for consumption is at its peak. Currently, their electricity trade with Georgia is hampered due to differences in their networks and thus exports are low. However, in December 2015, Armenia, Georgia, Iran, and Russia signed a memorandum to work on the development of a power transmission system to enhance electricity trade between the aforementioned nations, thereby strengthening regional cooperation through power trade. New power converter and transmission line with Georgia are planned for construction by 2018. Interconnectors with Azerbaijan and Turkey do not operate due to stalled political disputes. The electricity market is relatively closed to new players and is controlled by the Armenian government.

Armenia is dependent on the nuclear energy. The 36-year-old Metsamor nuclear plant, located 120 km from Azerbaijan, and only 16 km from Turkey, is another stumbling block in Armenian-Azerbaijani relations, besides the conflict in Nagorno-Karabakh. Due to the reactor’s aging technology and location in a potentially hazardous seismic zone, its exploitation puts at risk the neighboring states of Azerbaijan, Turkey, and Georgia. The Armenian Nuclear Power Plant (ANPP), or VVER 440 Model 230, at Metsamor, is designed to handle only small ruptures and does not have a safety compartment to protect its nuclear fuel. Therefore, in the event of a strong earthquake, a disaster similar to that of Fukushima, Japan, the system would vent directly to the atmosphere. In a worse case scenario, another Chernobyl.

In June 2012, a severe flood occurred near the ANPP, which could have lead to disaster: if the damages to the reactor had been severe, its cooling water would have drained into Lake Sevan and thereby spread into rivers, contaminating the Azerbaijani river system. Living in close proximity to the potentially dangerous nuclear plant raises certain fear among Azerbaijani and Turkish authorities and residents alike.

Despite these concerns, Armenia is unlikely to shut down its reactor and has repeatedly denied EU proposals to phase out the aging nuclear plant. The ANPP supplies 40% of Armenia’s energy and the government cannot close it without alternative sources of power. Metsamor’s power plant operation has been extended from 2016 to 2026 with the approval from the International Atomic Energy Agency (IAEA), and it will close only when the new advanced reactor VVER 1000 model is constructed with Russian assistance.

In order to strengthen Armenian energy security, achieving energy independency through supply diversification must become the focal point in the development of their national energy strategies. Provision for the domestic energy supply, on the other hand, should be ensured by the government, bearing in mind the level of political tension with Azerbaijan and regional instability due to the ongoing conflict.

Through the creation and the update of the alterative sources of energy, including installation of additional hydro and thermo power plants, building interconnectors with Iran and Georgia, and the replacement of its Metsamor nuclear plant, Armenia would significantly improve its energy security, increase its exports capacities, and strengthen regional integration. Therefore, attracting foreign investments is a critical factor to implement the government’s aspirations in achieving Armenian energy security.

To attract and flourish in the investment climate, the government must address ongoing concerns regarding the continuing corruption, feeble legislative framework, monopolization, and vague state and local regulations and policies. Opening their market to outside players, with fair participation and competition, would bring investments to the energy market.
Additionally, establishing the dialog between the government and its citizens, and the inclusion of the local NGO’s, environmental groups, and the energy companies would contribute to the development of a clearer mutual understanding and transparency in the approach to the country’s energy security.

Energy security threats summary – Armenia

  • High dependence on energy imports from single supplier
  • Seasonality of hydroelectric energy supply
  • Lack of technical efficiency and vulnerability of the aged equipment to the technical accidents or natural disasters
  • Energy unaffordability due to the tariffs increases
  • Ongoing conflict with Azerbaijan
  • Weak governance and poor regulation, corruption, lack of transparency

Azerbaijan

Rich in ample oil deposits and natural gas reserves, Azerbaijan is a primary energy producer and transporter in the South Caucasus region. The state on the Caspian Sea shore has been the world’s fastest growing economy in recent years, as a result of successful strategies in oil and gas developments, and attraction of foreign investment. Further reducing poverty has been the liberalization of its trade system. Strategically located as a gateway between Europe, Asia, and the Middle East, Azerbaijan is viewed as a viable component in the EU’s energy diversification plans, and a pivotal player in the grand project of linking the Caspian Sea hydrocarbons to the European market via the Southern Gas Corridor.

The Southern Gas Corridor is pivotal to the EU vision for transportation of 10 billion cubic meters of Azerbaijani gas from Shakh Deniz II field, the world’s biggest gas project. From there it will pass through Georgia and Turkey via the Trans-Anatolian Pipeline (TANAP), and then the Trans-Adriatic Pipeline (TAP) will deliver the gas on, through Greece and Albania, to Italy. The first gas supplies through the corridor are scheduled for late 2018, beginning 2019. The Shakh Deniz consortium, formed by BP 25.5%, Statoil 25.5%, State Oil Co. of Azerbaijan Republic (SOCAR) 10%, Lukoil 10%, Total 10%, Naftiran Intertrade Co. 10%, and Turkish Petroleum AO 9%, has an ambitious plan – to reach the pipeline’s capacity up to 16 bcm by 2020.

Azerbaijan’s notable success in attracting foreign investment in the country’s oil and gas fields development stems not only from considerable improvement of the legislative and regulatory framework and streamlined procedures for international companies to enter the market but more from the government’s independence in foreign policy and the Azerbaijani pragmatic view of the world. Trying to not being caught in the crossfire of interests of neighbors Russia and Iran to the North East, and of the EU and the rest of the West, Azerbaijan refuses to join any alliances and focuses instead on the maintaining stable relations with all players in the region, keeping in mind the prevailing importance of its own national interests. Such a strategy proved viable in realization of the Baku-Supsa, Baku-Tbilisi-Ceyhan (BTC) and Baku-Tbilisi-Erzurum (BTE) pipelines, and a prosperous cooperation with Turkey as a major partner and consumer of Azeri fossil fuels.

Therefore, the energy sector is central in Azerbaijan’s economy and its national security formulation, and contributes to the robust economic growth of the past decade. Foreign investment resulted in the development, modernization, and rehabilitation of the energy infrastructure across the country to ensure stable supply and reduce electricity shortages. Domestic electricity generation is run by gas, accounting for 90%. Only about 8% comes from hydropower.

Although Azerbaijan has experienced an impressive boom in the energy sector, the government has been widely criticized internationally for their lack of democratic norms, presence of corruption and monopolization, poor human rights laws, no freedom of the press, pressure upon civil society, and absence of free and fair elections. All are important factors that may undermine Azerbaijani and world energy security stability, if not addressed promptly.

Among Azerbaijani government major concerns regarding energy security are uninterrupted export to international markets and domestic supply, viewed as twin key pillars of national economy and security. Protection of energy infrastructure from physical threats to the pipelines is the fundamental factor in ensuring uninterrupted imports and exports. In 2008, the Kurdistan Workers’ Party (Kurdish: Partiya Karkerên Kurdistanê‎, PKK) carried out its first terrorist attack on the BTC pipeline and targeted the energy infrastructure on Turkish territory several times after. Geopolitical implications of the South Caucasus region, and particularly, the ongoing conflict in Nagorno-Karabakh with a serious instability over the “contact line”, add to the threats to the Azerbaijani energy infrastructure and security.

Energy security threats summary – Azerbaijan

  • Physical threats to the pipelines in Azerbaijan and in transiting countries
  • Regional instability and ongoing conflict in Nagorno-Karabakh
  • Economy’s dependence on energy exports – total oil and gas exports constitute 90%
  • Corruption, lack of transparency, in both public and private sectors
  • Unaddressed human rights, media, pressure of civil society
  • Governance and unequal distribution of the energy revenues

Georgia

Georgia reaps its benefits from its strategic geographical location, bridging the East-West and North-South energy routes in the South Caucasus. It is the only country interconnected to all four countries in the neighborhood: Russia, Armenia, Azerbaijan, and Turkey. Georgia is a major energy hub for the Caspian hydrocarbons transportation to the European market, and, therefore, a magnet for attracting foreign direct investment and development projects on its territory. ¬Georgia maintains strategic energy partnerships with Azerbaijan and Turkey through participation as a transit territory for the oil and gas pipelines, notably, Baku-Tbilisi-Supsa, Baku-Tbilisi-Ceyhan with the parallel South Caucasus Gas pipeline.

Georgia’s energy relies on its well-developed system of hydropower. The country is rich in rivers. However, only 12% of the water resources are utilized for hydro energy. In warm weather, hydropower meets 100% of the electricity demand with an ability to export the surplus of generated electricity to neighboring countries. Cold weather increases the country’s dependence on natural gas imports from neighboring Azerbaijan – 88%, and Russia – 10% to satisfy its seasonal energy demands. Because Georgia is a transit hub for Azeri and Russian gas, the state enjoys Azeri price discounts, and, in the Russian case, Georgia takes an annual gas cut, skimmed off the top of Russian gas shipments to neighboring Armenia.

The government demonstrated considerable efforts to make its country a favorable destination for foreign investment, thus increasing its energy sector’s attractiveness. The state implemented several correction actions, notably minimal government interference, liberalization of the economic environment, deregulation and privatization, and ease of licensing and taxation, all contributing to the Georgian stable and reliable energy sector. Central to Georgian energy security strategy is energy source diversification, particularly boosting hydropower generation, to increase export capacity to the neighboring markets.

Armenia Azerbaijan, and Georgia are contracting parties to the Energy Charter Treaty (ECT), which provides a multilateral framework for energy cooperation under international law. The ECT is an important mechanism for addressing national development of the energy sector and provides a stable platform for multilateral cooperation. In this spirit, Georgia’s flagship initiative, proposed in 2015 when chair of the ECT, to foster regional cooperation through cross-border electricity trade – is a viable attempt to start the communication process.

The initiative proposes the establishment of two ministerial-level Task Forces, one comprising the East-West energy corridor countries and the other the North-South. This is a pragmatic idea, given the tensions between Armenia and Azerbaijan. It is aimed to strengthen regional electricity trade, enhance transport corridors, and attract foreign investments into energy infrastructure development. Such a proposal is especially important to Georgia due to the current geopolitical situation in the Middle East, and in particular, the rapidly fraying Russian-Turkish relations. Georgia has no alternative but to balance the external influence and diversify its market in order to secure its own position in the likelihood of increasing regional instability. With the return of Iran to the game after the lifting of international sanctions, Georgia envisages a potential energy import diversification and new trade relations.

Among the existing energy security risks in Georgia, the unresolved territorial conflicts in Abkhazia and South Ossetia threaten not only Georgian resources supply and availability, but also that of neighboring Azerbaijan. In 2015, South Ossetia expanded its territory by moving administrative borders and seized control of 1.6 km of the Baku-Supsa oil pipeline, operated by British Petroleum. Consequently, BP decided to abandon that section of the pipeline and replace it with a part running on Georgian territory. Moreover, the important Enguri-Vardinili hydropower cascade, producing about 40% of Georgia’s electricity, is located partially on the Abkhazian territory and thus possesses a serious threat to Georgian energy security because it can be used as political leverage. Overall, there is still a room for Georgia to improve in governance and regulation of its energy sector, specifically in promotion of transparency and energy affordability.

Energy security threats summary – Georgia

  • Unresolved conflicts in South Ossetia and Abkhazia
  • Dependence on seasonal hydro energy and surplus trade
  • Gas imports diversification
  • Governance and regulation

Challenges and threats to energy security in the South Caucasus – Summary

  1. Unresolved conflicts in Nagorno-Karabakh, Abkhazia, and South Ossetia endanger the stability and security of the energy supply to the local and European markets
  2. Global terrorism threatens the physical security of the pipelines and undermines the confidence in an uninterrupted energy supply
  3. Cyber attacks have become a new challenge to the security of the pipelines’ infrastructure
  4. Absence of a unified understanding, concept, and approach to the energy security in the region makes the energy security questionable
  5. Russian double-game and aggressive policies in the neighborhood region
  6. Internationally undetermined status of the Caspian Sea limits the access to the Central Asian energy stockpiles

Conclusion: Energy security in the South Caucasus has both great expectations and lost illusions

Energy security is an essential part of national security and interests. Armenia, Azerbaijan, and Georgia all recognize the importance of energy security as a key national priority. Nevertheless, none of these countries concur in their perception and articulation of energy security. The hierarchy of energy needs vary from one South Caucasus country to another. Energy security, from resource availability and affordability, energy efficiency and infrastructure development, environment and social effects, to regulation and governance, appear, disappear, and jostle for primacy. Energy security is a complex notion; it is a polyhedron. Each player, both regional and non-regional, sees a special side facing its national security and interests.

Political tension over territorial conflicts in Nagorno-Karabakh, South Ossetia, and Abkhazia destabilize the region, preventing energy cooperation and integration among Armenia, Azerbaijan, and Georgia. The decades-long regional-geopolitical-ethnic conflicts in South Caucasus cannot be resolved in the near future, thus must omitted from energy security discussion. Can economic benefits and self-preservation become compelling enough impetus for these three powers to repress racial memories and ethnic politics? Is the region ready for great expectations?

A change of mindset is crucial to overcome the stalemate. Armenia, Azerbaijan, and Georgia could be successful in energy cooperation and integration if the three states would perceive it not as a regional but as a part of a global process – transformation of the entire South Caucasus into a profitable efficient energy “aorta” pumping the major energy hub, linking East to West, and North to South. Open minds would be the key to unlocking South Caucasus economies to new markets, better trade relations, and more foreign investment for regional development. Regional energy integration would diversify each state’s markets and benefit their economies. Consequently, a vibrant energy sector would enrich and stabilize the South Caucasus as a region.

Therefore, only politically and emotionally muted discussion and a perception of individual benefit from mutual regional energy cooperation could persuade and incentivize these disintegrated countries to converge. As of today, there are no joint regional groups of policymakers from South Caucasus countries to coordinate their energy security strategies and approaches. The establishment of a joint group is a delicate but essential step for Armenia, Azerbaijan, and Georgia. The group should focus purely on energy cooperation and achieving broad mutual pragmatic goals:

  • Increase energy exports
  • Diversify energy imports
  • Enhance, harmonize, and interconnect energy infrastructure
  • Exchange approaches, strategies, and practices in energy infrastructure development
  • Create a unified legal framework and ease market regulations to attract foreign investment
  • Expand energy market to the European and Middle Eastern countries
  • Become a major energy hub between the East and West, North and South

Different stakeholders, including governmental, public, and private, should be represented in the regional joint group to increase the effectiveness of addressing energy concerns. Shared understanding of the joint initiative and common articulation are fundamental in achieving desired results. Establishing a joint energy group is an ambitious project given the complexities and peculiarities in the relationships of the South Caucasus states. A small-steps approach to regional cooperation, for example, a discussion over potential of renewable energy trade and harmonization of aging energy infrastructure, could be one starting mode.

Other players could hamper a regional energy cooperation initiative, even if Armenia, Azerbaijan, and Georgia were able to overcome their political tensions and disputes and work together. Russia, Turkey, Iran, and even the EU could undermine this, sensing a threat to their vast economical and political presence in the region. Therefore, on top of mutual pragmatic goals for the South Caucasus countries should be a coordinated balanced policy towards their main foreign stakeholders and those interests. Domain interests and leverages coming from Russia, Turkey, Iran, and EU must be factored in the policy.

Current South Caucasus energy projects could be developed and move from potential to real threat to Russia’s energy security, specifically security of supply demand. Once completed, the South Caucasus Pipeline will bring energy from East to West, undermining Russia’s export volume and become a real competitor on the European energy market. The Russian government cannot afford to lose its dominant energy position in the EU, as this would directly affect Russia’s energy-dependent economy. The Kremlin’s recent attempts to entice the EU with a new grand South Stream gas pipeline project bypassing Ukraine were unsuccessful, meeting with strong traction among European countries. Neither did an alternative to it – the Turkish Stream project, further hobbled by Russian-Turkish crippling relations. In order to preserve its leading place in the world’s energy community and to secure its national and geopolitical interests, Russia would scuttle any attempt to lower its rank in or squeeze it out of the global energy market.

While the South Caucasus energy projects could pose a threat to the Kremlin, the Russian eagle eyes and closely monitors energy developments in Armenia, Azerbaijan, and Georgia. Always retaining a roost for quick maneuvering and control over the situation, Russia maintains a multi-dimensional presence in the South Caucasus. Its level of political and economic influence ranges from country to country. If the joint South Caucasus energy group is established, a strategy must be readied to include Russian cooperation. If not coopted, the Kremlin might perceive the initiative as an attempt to exclude Russia from the region. Given Russia’s strong military presence at 102nd Military Base in Gyumri, Armenia, and sturdy economic ties with Armenia, the Russian government could and would use all possible mechanisms (non-coercive and assertive) to prevent such a scenario, thus further destabilizing the South Caucasus.

A subdivision of the South Caucasus joint energy group could be comprised of Russian, Turkish, Iranian, and EU representatives. This could be used as a ground for wider joint energy cooperation to address concerns, define recommendations, and discuss potential projects. Healthy and fruitful negotiations can be far-reaching only if all parties’ interests are mutual and treated equally. Energy and geopolitics are deeply intertwined when it comes to decision-making where to place a pipeline or with which bordering country to install an interconnector to trade electricity. The success of the joint group lies in the formulation of the common goal – to make the South Caucasus an energy hub bridging East to West, and North to South, rather than the creation of a South Caucasus energy hub to annihilate Russia’s energy hegemony in the European Union, or elsewhere.

Are all illusions to be lost? The proverb, “He who rides a tiger is afraid to dismount”, perfectly conveys the dilemma of Armenia. Is it possible Armenia could have the courage to remove itself from Russian protection and face Kremlin’s wrath? The potential of a South Caucasus joint energy group is further diminished by the events of April 2nd, 2016. The heaviest fighting in a decade has flared up in Nagorno-Karabakh’s contact line, thus significantly escalated tensions between Armenia and Azerbaijan. Grave concerns regarding the South Caucasus fragility, stability, and energy security looms over regional and non-regional stakeholders, thus making a joint energy group, comprised of Armenia, Azerbaijan, and Georgia, a pipe dream.

Paper presented at the Partnership for Peace Consortium 13th Workshop of the Study Group Regional Stability in the South Caucasus – “Energy Security in the South Caucasus”, April 2016, Chisinau, Moldova.