Russia, the Caucasus, and Central Asia

Rajan Menon, Yuri E. Fedorov, Ghia Nodia, East West Insitute

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781315501710
• Topic: Politik & Internationale Beziehungen
• Subtopic: Politik

This comprehensive exploration of the international environment examines not only traditional political-military concerns but also economic, ethnic, and environmental issues and the role of crime, terrorism, the drug trade, and migration in the security environment of Russia and its neighbours to the south. This approach takes account of both the internal and external aspects of security problems and their interplay. The participation of international authors facilitates the consideration of each problem from all relevant points of view.

Economic Features of Security

3 Economics and Energy in the South

Liberal Expectations Versus Likely Realities

Hendrik Spruyt and Laurent Ruseckas

DOI: 10.4324/9781315501734-4

The Soviet system was highly centralized, economically as well as politically. Although the USSR was divided into nominally autonomous Union Republics, the command economy was run from the center as a single unit. Consequently, the fifteen successor states that emerged in 1991 exhibited a high degree of interdependence. Indeed, they were more interconnected than the states of the European Union or even Canada’s provinces. The Soviet brand of interdependence was of course highly artificial. Political decisions rather than efficiency criteria drove labor and resource allocation. Prices had little meaning in the command economy, and the principle of comparative advantage did not operate.

Relations among republics within the Soviet economy were asymmetric, with Russia in the strongest position. After the dissolution of the USSR, which severed the formal links of the command economy overnight, the non-Russian states—and the Southern Tier states in particular—found themselves highly vulnerable to Russian policies. In contrast, Russia was in a relatively good position to go it alone, being sensitive but not vulnerable to the policies of the others. Along with others such as the Baltic states, Russia was more able to expand its range of trading partners. In the Southern Tier the situation appeared to be far more grave. These states remain the poorest of the post-Soviet states in terms of gross domestic product (GDP) per capita, with high population growth and economic infrastructures characteristic of developing nations.

These economic circumstances have profound security implications. Poor economic performance leading to continued underdevelopment in the Southern Tier would be a breeding ground for political instability and potential civil strife, as is often the case in other less-developed countries (LDCs). Internal strife could spill over borders, particularly if economic conflicts are reinforced by ethnic tensions. Such trans-boundary effects may precipitate external intervention by Russia, still the dominant actor in the region, or by other states with hegemonic aspirations. Even the possibility of economic success in some states of the Southern Tier presents a danger. If some of these states, particularly the energy-endowed ones, are gradually pulled out of Russia’s orbit, certain interest groups in Russia might support some form of intervention to reassert Moscow’s influence.

The substantial oil and gas resources of the Southern Tier states, particularly those bordering the Caspian Sea, point to another set of security issues. The energy development boom currently underway has led to the hopeful belief that the prospects for prosperity and stability in the region are good. But experience shows that hydrocarbon rents are a mixed blessing, with negative economic effects often outweighing positive ones. Political dangers loom as well. Asymmetric distribution of oil and gas revenues could exacerbate zero-sum contests in states where a paucity of robust institutions has already created fertile ground for instability. Such revenues might also affect the relative balances of power among states in the region, heightening the potential for inter-state conflict. Finally, the strategic nature of oil and gas resources has already attracted considerable attention of outside powers, whose interest is geopolitical as well as narrowly economic. The hydrocarbons of the Caspian could give rise to sharp rivalries among external states that would be played out within the Southern Tier.

In the next section we begin by examining the influence of international trade on the foreign and security policies of states in this region. Different theoretical perspectives come to highly divergent predictions and recommendations for this region. Economic liberals expect that economic development and expanding trade will lead to a benign security environment. These are the sorts of liberal assumptions that inform current U.S. policy toward China: linking China into the global world economy is expected to reduce security tensions. We examine whether such liberal outcomes are likely to emerge in Central Asia and the South Caucasus, and entertain a contrary and more pessimistic scenario. Our conclusion is that liberal trade might not obtain, and that a more mercantilist, conflict-prone set of relations is likely to develop. Our focus throughout is on providing a theoretical rationale for predictions of how Russia will interact with the Southern Tier, as well as deducing policy recommendations from that analysis.

As suggested above, the prospects for economic development and the various scenarios for inter-state relations in the region are profoundly influenced by the presence of considerable hydrocarbon reserves. Consequently, we devote particular attention to clarifying how energy supplies might influence security calculations.

We then turn to a discussion of how energy will affect internal economic development and the ramifications this will have on economic take-off, the nature of regimes that might emerge in the region, and the likelihood of inter-state conflict. Some see energy as the means for unparalleled growth, similar to that of the resource-rich states of the Middle East. We, however, sound several cautionary notes: politically, economic windfalls may actually delay democratic reforms and raise the likelihood that militarized, authoritarian states emerge, while economically, hydrocarbon rents can retard more substantial economic transformation. Moreover, not all the states in the Southern Tier will have such hydrocarbon revenues. Some of these states will have to follow more conventional trajectories of economic growth, with all the problems that other LDCs have had to face since gaining independence.

Theories of International Trade: What Do They Predict for the Southern Tier?

Students of political economy have taken a variety of theoretical approaches toward the issue of international trade. For simplicity’s sake, it is useful to understand this diverse literature as cleaving into two broad paradigms of international economic relations: liberalism and mercantilism. In international relations more broadly, liberalism applied to both economics and politics has been one of the dominant schools of thought since Kant. For its part, mercantilism is the economic face of the other major perspective on world politics, realism. What, if anything, do these two contending approaches predict for the future (and recent past) of economic relations among Russia and the states of the Southern Tier?

A liberal perspective would look forward to a benign atmosphere and the construction of mutually beneficial economic relationships among the Soviet successor states. The artificially high levels of economic interdependence that characterized the USSR will diminish with a broad regional shift toward the market. The new states of Central Asia and the South Caucasus will to some extent reorient their economies toward alternative partners, as indeed will Russia. However, strong economic ties with Russia will continue, not for artificial political reasons but as a function of the new market environment. Trade will continue on a contractual basis, that is, on the basis of economic rationality and the principle of comparative advantage. Indeed, a variety of factors such as geography and the previous legacy of economic interaction would lead one to expect interaction between Russia and its post-Soviet southern neighbors to remain relatively high.

This perspective would go on to argue that these liberal patterns of trade and economic interaction will spill over to affect the political behavior of states such that the likelihood of inter-state conflict will be reduced. A return to patterns of trade that are “normal”—that is, unconstrained by political factors—will give rise to economic interdependence. This interdependence in turn will diminish the incentives of any states in the region to pursue military options. Just as growing functional integration and economic interdependence has made armed conflict unthinkable in postwar Western Europe, so will similar causes work to diminish the probability of inter-state violence among Russia and the Southern Tier states, as well as among the states of Central Asia and the Caucasus.

A mercantilist approach would suggest a less benign scenario for the development of economic relations in the area. In this view, the power of the market to stimulate cooperation and friendly international relations will be overwhelmed by the tendency of states to seek to increase their political power vis-à-vis one another. Here the focus turns to Russia, which remains the singular power in the post-Soviet space. Russia might retain a high level of economic interaction with the states of the Southern Tier, but do so on the basis of asymmetric bargaining rather than evenhanded contracting. Moscow might resort to a variety of economic levers—tariffs, leverage over energy supply or transportation, control of trade outlets—to retain its sphere of influence. In a worst-case version of this more pessimistic scenario, a neo-imperial outcome could emerge. Perhaps after failing to restore Russian hegemony in the Southern Tier through the use of economic levers, some actors in Russia could propel Moscow to use military means to secure vital concessions or gain access to strategic resources. Like France with its former colonial holdings, Russia would retain considerable political, economic, and military hold over the region.

Which of these two scenarios is the more plausible? And which fits better with the developments in inter-state economic relations among Russia and the Southern Tier states in the seven years since the USSR’s collapse?

The Liberal Argument: Benign Economic Relations Bring a Benevolent Security Environment

Economic liberalism argues that minimal levels of government intervention are appropriate not only at the domestic level but also at the international level. Just as states should only play a minor role in allocating domestic resources and preventing market imperfections, so too should they only play a minor role in international market exchange. The political and thus artificial pursuit of economic gains is seen as counterproductive. Mercantilist strategies emphasizing tariffs, the conquest of foreign markets, and selective subsidization will not yield the most efficient use of resources for a state and its citizens. Thus Western economic liberals in the 1930s argued that tariffs and imperial trade preferences diminished rather than increased a country’s net economic resources. Such mercantilist strategies violated Ricardo’s laws of comparative advantage and forestalled necessary domestic adjustments. In contrast, liberals would point out that international trade in the postwar era has led to sustained economic take-off in such states as Taiwan, Singapore, and South Korea, an achievement whose magnitude cannot be diminished by the current financial crisis in Asia and other “emerging markets.”

More analytically, unrestricted trade is expected by liberal theory to follow the logic of the gravity model of trade. ¹ The gra...

Table of contents

• Cover Page
• Half Title Page
• Other Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• About the Editors and Contributors
• Preface
• Acknowledgments
• Introduction The Security Environment in the South Caucasus and Central Asia: Concept, Setting, and Challenges
• Traditional Security
• Economic Features of Security
• Territorial and Ethnic Disputes
• Non-Traditional Challenges
• Conclusion Regional Security for Russia, the Caucasus, and Central Asia: Going from Zero-Sum to Positive-Sum Policies
• Index