Azerbaijan International

Summer 1996 (4.2)
Pages 56-59

Diplomatic Interview

A Conversation with the Three US Ambassadors to the Caucasus
Georgia, Armenia and Azerbaijan
by Betty Blair

Left: The Three US Ambassadors to the Caucasus: (L-R): Peter Tomsen (Armenia), Richard Kauzlarich (Azerbaijan); and Bill Courtney (Georgia), in Baku
at the US Embassy on April 4, 1996.

To fully understand the development and transitional process in Azerbaijan, it's important to see this Republic in the context of other former Soviet Republics especially those in the Caucasus, which are struggling with similar issues.

This April, Azerbaijan International's Editor, Betty Blair, had the opportunity to meet with the three U.S. Ambassadors to the Caucasus: Bill Courtney (Georgia), Peter Tomsen (Armenia), and Richard Kauzlarich (Azerbaijan). The following conversation took place April 3, 1996, at the U.S. Embassy in Baku where they had met together for three days.

Left: Map of the Caucausus. Produced by Petroleum Economist and Ernst & Young.

For centuries, the Caucasus has been known for the tremendous exchange that has taken place between the people of this region. There's been incredible interaction for centuries in the spheres of culture, business and interpersonal relations. Let me first ask about the rationale for your getting together as the Representatives of the United States to the Caucasus?

Kauzlarich: Let me provide some background since I've been in my position here a bit longer than the others. This is not an idea that originated with us. Our predecessors had met before. In October 1994, Kent Brown (Georgia), Harry Gilmore (Armenia) and I got together in Tbilisi to travel together for five days throughout western Georgia for the exact reason that you have pointed out.

Historically, there has been so much interaction in this region that as Ambassadors, we felt we needed to know what our neighbors are like and who our counterparts are dealing with. We felt this was especially important as these countries are dealing with each other bilaterally.

In my case, Azerbaijanis already have a sense about what Georgia is like as a country and what the Georgians are like as people. The same with Armenia. Our hope is that periodically we can get together as Ambassadors in different capitals. The result will be a better perspective for each of us and for the U.S. government as well.

So this is the first time you've ever met?

Kauzlarich: We've known each other from long ago. But it's the first time we've met in the context of our current responsibilities.

What similarities do you see between these three countries in regard to your task of representing the United States? And what are some of the differences?

Courtney: The most striking similarity between them, obviously, is that they were all part of the Soviet Union. Therefore, the obstacles that they have to overcome are similar especially in regard to democratic and economic reform.

All of them are facing obstacles in regard to transportation and communication. In the past, everything was organized like the spokes of a wheel, all originating from the center-Moscow. Now we are seeing the redevelopment of historical transportation routes in the region-especially between the east and west.
Nearly 40,000 trucks crossed from Turkey into Georgia last year. More than half of them continued on to other countries in the Caucasus and Central Asia. A new Eurasian Corridor is being created now. This is good for all the countries of Europe, Eurasia and Asia. It's good for Russia, too.

The route itself stimulates interaction and efficiencies. There is a ferry crossing the Caspian Sea which enables transportation routes to extend from the Black Sea all the way to the Chinese border. This is a vast expanse which parallels the ancient Silk Route. During the past seven decades of Soviet rule, this corridor was not operating.

Of course, the Western Oil pipeline route which will soon be constructed between Azerbaijan and Georgia as one of multiple pipeline routes is likely to bring greater efficiency, reliability and security to the oil transportation routes.

Kauzlarich: I think all of us see similar problems of building democracy and building the market economy. In some countries, certain things have progressed more smoothly than others. Perhaps, the political process and democracy building in Georgia has gone more smoothly certainly than in Azerbaijan.

I think economic reform may be moving ahead even more rapidly in Armenia given the commitment that seems to exist on many levels for privatization.

I believe Azerbaijan has had more success than the other two countries in attracting foreign investment because of its openness to foreign companies related to the oil and gas industry.

These three countries, more or less, started at the same point back in late 1991 when the Soviet Union collapsed, but they've already achieved different levels of success in meeting the challenges of building democracy and a market economy.

Courtney: I'd like to add that, in general, I find the people of these countries still thrilled that they've gained their independence.

Is that still true - even though life is very difficult economically? I've heard people in Azerbaijan suggest that many individuals over 35 years of age have a tendency to reminisce and romanticize about the "good old days" under the Soviet system. I don't know if that's really true or not. Are you finding that people are still mostly excited about independence?

Tomsen: As you know, each of the Caucasus Republics had their own independent governments during the period between 1918-21. They've all had a taste of independence in their past.

Let me speak about the subject of economy in relation to gaining independence. Armenia's economy has just begun to level out and rise a bit after an economic "free fall" since the collapse of the USSR. The same thing is true in Azerbaijan and Georgia. Now the economies are stabilizing. The conflicts that broke out-in Karabakh [Armenia and Azerbaijan] and Abkhasia [Georgia]-as the Soviet government collapsed have added tremendous problems that have threatened sustained economic growth and political stability.

Nonetheless, there is a strong undercurrent for independence, and our policy has been to support this trend. True independence of the three Caucasus Republics will help stabilize this region, particularly if they cooperate with each other.

Yesterday, an Azeri told us, "The Caucasus is like a three-legged stool. If you take away a single leg, the stool collapses." I think there is no choice except for these three Republics of the Caucasus to cooperate with each other. And we're there to help them as they proceed along this path.

Let me ask you about U.S. aid to the region. Since both the governments of Armenia and Georgia are recipients of US aid while the Azerbaijani government has been the only one of the 15 former Soviet Republics to be denied assistance (because of U.S. Congressional Legislature, "The Freedom Support Act," Section 907), I was wondering, in terms of economic reform and democracy-building processes, whether you felt that the aid to the governmental agencies .had made a significant difference in these countries, especially in comparison to Azerbaijan's experience.

Courtney: During the first couple of years after the collapse of the USSR, most of the U.S. aid to Georgia was humanitarian assistance in the form of grain and fuel oil for heating. Now, the economy is beginning to turn around. Probably next year will be the last for them to receive large amounts of humanitarian assistance. Armenia is leading the way in land reform but Georgia is now catching up as they got off to a late start with economic reforms because of civil conflict. But since then, they've made major advances in the last year and a half or so.

Also, the U.S. has a large technical assistance program with the Parliament of Georgia. The Parliament supports reform possibly to an extent more than anywhere else in the former Soviet Union. We have been amazed, for example, how the Parliament has utilized US assistance to establish access to the Internet and connect to so many resources worldwide.

Georgia is on the Internet, then?

Courtney: Yes. Parliament has its own Home Page. USAID and USIS working together have provided access to the Internet. The way forward for economic reform is clear. Georgia had hyperinflation the first nine months of 1994. The average monthly inflation was 65%. Georgia has since controlled inflation through strict monetary and fiscal policy. The IMF (International Monetary Fund) says Georgia killed hyperinflation faster than any other country in the NIS (Newly Independent States). Georgia has a new currency called the "Lari" which has been stable since it was introduced in October 1995.

A major challenge for Georgia is to break up and privatize monopolies such as state-run bakeries (which is going forward), electrical energy, railways, sanitation and telecommunications. Massive amounts of private capital are needed to enable them to modernize. Nowhere in the former Soviet Union have state monopolies been able to attract large amounts of capital for modernization.

Before we move on to other topics, let me ask you how much US aid has been directed to Georgia since independence [1991]?

Courtney: Counting humanitarian assistance, the value of grain, fuel oil and technical assistance would be on the order of $100 million a year.

In terms of the last election in Georgia, in what ways was the U.S. government able to strengthen the democratic processes?

Courtney: Well, by discussions with political leaders in Georgia and by publicly supporting free and fair elections. The United States very strongly encouraged the elections to take place. President Shevardnadze himself was committed to free and fair elections. More importantly, a broad range of the Georgian population seemed to understand that "free and fair elections" was the right way to strengthen their statehood. The elections were relatively free and fair in most areas of Georgia. Consequently, the legitimacy of Georgia as a State has been enhanced, as has the legitimacy of the Parliament and Shevardnadze's Presidency.

Georgia has a multi-ethnic population. Along the Ajarian coastal areas of the Black Sea, the population is mostly Muslim Georgian. You'll find enclaves of Azeris and Armenians inside Georgia as well. In a multi-ethnic state especially, democratic processes are essential so that everyone feels they have access to the political process on an equal basis. Georgia is going in the right direction.

How is US aid being used in Armenia? They're receiving quite a lot of assistance, aren't they, especially given their relatively small population (2+ million)?

Tomsen: Yes. For example, this year, if you include all sources-the Department of Agriculture, the Treasury, USAID, and the State Department. Together it would add up to about $143 million. Well over 50% goes to humanitarian assistance.

Specifically, who is receiving it?

Tomsen: The Republic of Armenia has blockades on both sides-Turkey to the West and Azerbaijan to the East. But to the north, there are trade routes into Georgia and to the south, into Iran. But there is really not much activity yet in terms of exports and imports. Armenia has always been a fairly industrialized country with less emphasis on agriculture (70 percent industry, 30 percent agriculture). So the U.S. has supplied a large amount of grain to Armenia.

We are moving forward in our aid program to assist Armenia to privatize. A new energy law is expected this summer which will create a new legal regulatory framework for privatization of the energy section, particularly in the production and distribution of energy. The energy monopoly will be divided into three separately administered sectors: production, distribution and transmission, much of which will be privatized within the next few years. As was mentioned earlier, these enterprises such as those in the energy sector cannot develop and modernize unless there is foreign capital, management and technology.

Armenia like Georgia has managed to stabilize its foreign exchange rate. Now it is in the process of institution building. The energy sector is one example-as well as the real estate and banking sectors. A private property law was passed this past March - the first one in the former Soviet Union.

That means Parliament has ratified it?

Tomsen: Yes, it's a law now. Land and property will be measured and titles designated for the owners, enabling property to be bought and sold. A free market economy requires privatization if it is to move forward.

In the banking sector, we've placed a lot of emphasis on financial reform. We've recently instituted an electronic banking system in the Central Bank and other government banks. Armenian bankers were sent to the United States for training. The Central Bank and other government banks will be able to transfer money instantaneously abroad as well as within Armenia. Next we'll move on to the commercial banks.

Midland Bank, one of the major banks in the world, has just opened offices in Yerevan with $10 million. Our assistance is going forward in housing. We helped develop the Condominium Law which will be passed in May to facilitate privatization of the condominium-type constructions.

We are involved in agriculture, attempting to support private sector activities. We are trying to attract private investment from abroad to invest in vegetables and fruits exports which used to be sent to Russia. Trade routes now are opening into Turkey, Greece and Western Europe.

There's also a lot of potential in the high tech area in Armenia. Slowly, but surely this area is also being privatized. Armenia used to produce a lot of advanced military technology during the Soviet period. They have a computer chip factory and other related factories.

Are the factories operating?

Tomsen: No, basically not. Armenia's computer technology is outmoded. But Armenians are very skilled in this area. If we manage to get investment from abroad, then Armenia could compete quite well in the international market especially since wages are so low (less than $100 a month).

Let me ask you, in general, about the U.S. aid that is going to Armenia for fuel and grain. Is such aid being monitored by the United States? How do you guarantee that fuel and grain are not being used by Armenians in the war effort against Azerbaijan? How do you guarantee that U.S. taxpayer's money isn't fueling the war?

Tomsen: U.S. assistance is directed to the Armenia government. The wheat, for example, comes in via train through Georgia and is taken to the government's three flour mills. Then it gets distributed to the bakeries and transported to about 300 outlets around the country where it is sold at very nominal prices.

So it is may be used anywhere?

Tomsen: We see no evidence that wheat or any other aid is being divested.

Kauzlarich: This is one area where I think it's very important to recognize that regional cooperation already exists. All the Republics share a common desire to get needed relief food to their people. That's why they cooperate under the UN World Food Program to make sure that the infrastructure for importing the grain and food supplies operates.

The future for regional cooperation will build upon the developments that are emerging now. There will be opportunities for regional cooperation that didn't exist in the past because previous relationships were north and south (through Moscow). Now, there are east-west relationships developing. There are tremendous opportunities for the future if we can only guarantee the peace.

Courtney: Telecommunications is another critical area that must be developed in the Caucasus, Central Asia and Kazakhstan. It will require massive investment to modernize. A system must work well among all the countries along the Eurasian Corridor in addition to Moscow. The system doesn't operate well now because countries can't communicate well laterally. Everything is still directed through Moscow.

Kauzlarich: The oil development will create many incentives for telecommunications and transportation. Once equipment items for developing Azeri oil start to enter the region, much of the material will be shipped through the Black Sea to Georgian ports.

If all this activity is generated between Azerbaijan and Georgia, will Armenia be left out?

Kauzlarich: No, I don't think so. Not at all. To me, the benefit, even in Azerbaijan, will come from the secondary and tertiary economic development that is going to take place because of the oil. When new communication links are established and new improved infrastructure exists for ports, you're going to see Armenia having an easier time receiving goods and linking into transportation and communication systems.

But all of this is going to require peace. If we were in a period of peace now, the answer would be straightforward. But because we aren't, barriers exist for all the Caucasus.

Courtney: It also requires internal democratic and economic reform to be able to take advantage of these possibilities. In Armenia, we're placing a lot of emphasis on democracy building.

In what ways?

Tomsen: Various ways. We're providing training on how to run a business for many of the TV stations that are springing up. We're also providing them with equipment and training. We're helping the Yerevan Press Club to get established as a professional independent entity. We're involved in helping establish a legal infrastructure. We've started a Master of Law Program at the American University which is connected with the University of California. We're helping Yerevan State University with its law program and providing a lot of technical assistance in drafting laws that are reflective of due process, democracy and market economy. The head of the Armenian Constitutional Court will be visiting the U.S. Supreme Court in May and traveling around the country.

Kauzlarich: One thing that a lot of people don't realize about Azerbaijan is that despite the restrictions imposed on us by "907," the US government does allow us to get involved with many projects that are not directly related to the Azerbaijani government. We can provide assistance via NGOs (non-governmental organizations, both Azerbaijani and American) to political parties and independent media. Some of the same agencies that are operating in both Armenia and Georgia are operating here in Azerbaijan.

For example?

Kauzlarich: ISAR is one (an environmental NGO) and Inter-News. The NDI (National Democratic Institute) now has offices in all three countries, I believe. Essentially, we're pursuing the same kinds of programs as the other countries of the Caucasus are. It's easy to look at "907" and think there's no assistance coming to Azerbaijan, but that's not true. We clearly are able to do many of the same things that others are doing. Of course, "907" creates problems for us, but it doesn't mean that we aren't able to carry out considerable work in the areas where work clearly needs to be done. Even in agriculture where privatization in Azerbaijan is lagging behind in comparison to the other countries, there's an American volunteer organization called VOCA (Volunteers Overseas for Cooperation in Agriculture) working with private farmers here to bring Americans over here for short periods to help private Azerbaijani farmers.

It seems to me that each of you is involved in making history. Do you feel this sense of history as Ambassadors?

Kauzlarich: I'd say that we're witnesses to history, not that we're making it. But I think certainly that in Azerbaijan, and I suspect in the other countries as well, people are looking to the United States as a source of inspiration, as a model, and as a partner in their efforts to maintain their independence and sovereignty.

Courtney: They also look to the European Community. They're signing Partnership and Cooperation Agreements with the European Union, which is a very important step. The Trans-Caucasian Republics have many friends and well-wishers throughout the international community with whom they are beginning to build stronger and stronger relations.

Kauzlarich: We'll need to close now. Got to go, got to run. They've got to catch the plane out of here.

My best wishes to all three of you. Thanks for sharing your thoughts and insights. I hope your own personal efforts and endeavors as Ambassadors will help strengthen the historical links and strengthen the peace process and prosperity in this region.

Betty Blair is Editor of Azerbaijan International.

From Azerbaijan International (4.2) Summer 1996
© Azerbaijan International 1996. All Rights Reserved.

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