From Disengagement to Active Economic Competition: Russia's Return to the South Caucasus and Central Asia

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Abstract: This article looks at the role of economic factors, particularly energy, as a key component of Russia's complex and evolving relationship with the states of the South Caucasus and Central Asia. This article explains the major trends and changes that have taken place during the Yeltsin and Putin governments to identify the driving forces behind Russian policy towards the states of the region. It then describes current processes, potential, and constraints of Russian economic expansion, and considers some implications for CIS integration and the dynamics of conflict and cooperation in the region.

Key words: Central Asia, economic relations, energy, foreign policy, geopolitics, Russia, security, South Caucasus

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The significance of Russia in developments in the South Caucasus (Armenia, Azerbaijan, and Georgia) and Central Asia (Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, and Turkmenistan) has declined over the past decade; Russia's military and economic power continues to exceed that of these eight states combined, several times over, however. Russia continues to maintain a highly asymmetric structure of energy and trade relations with its southern neighbors, making most of them critically dependent in their economic development and security, and providing Moscow with leverage over internal political developments. Thus, no matter which way Russia turns, it is safe to assume that Russia will continue to have considerable influence on the domestic and foreign policies of these states for some time.

Although the single most important geopolitical development during the 1990s was Russia's disengagement from the region and the expansion of other outside powers, the years since Vladimir Putin's ascendancy to the presidency have seen a reemergence of Russian influence. The main features of Russia's presence in the region today are not, however, the military bases or facilities that Moscow continues to maintain but the Russian ruble and actors from Russia's business community, mainly from the energy sector. Whereas Russia's increased foreign economic engagement is related to the country's uninterrupted economic growth since 1998 and the subsequent expansion of some of Russia's giant energy companies into external markets in their quest for profits, economic expansion also reflects a foreign policy that today is more preoccupied with economic competition than military and political preeminence.

This article looks at the role of economic factors, particularly energy, as a key component of Russia's complex and evolving relationship with the states of the South Caucasus and Central Asia. The article explains the major trends and changes that have taken place during the Yeltsin and Putin governments to identify the driving forces behind Russian policy toward the states of the region. It then describes current processes, potential, and constraints of Russian economic expansion, and considers some implications for Commonwealth of Independent States (CIS) integration and the dynamics of conflict and cooperation in the region.

Geopolitics and Change in Russian Foreign Policy

Admittedly, Russia's policies toward the eight states south of its border differ and are thus difficult to analyze jointly in any coherent way. From a broader security perspective, however, the situations confronting Russia in the region are characterized by a number of common features. Along its southern border, Russia is facing a generally volatile security environment, caused by weak civic and state institutions in the individual states of the region; socioeconomic crises; and ethnic, religious, and political tensions. From the Russian perspective, the most important element uniting the South Caucasus and Central Asia region is that in all eight cases, Russia has been confronted with the same complex geopolitical process--the expansion of other external powers into the region. This geopolitical process has defined Russia's new immediate international environment more than anything else and has had far-reaching implications for its policy choices. …