Instability in the South Caucasus is a threat to European Union (EU) security. Geographic proximity, energy resources, pipelines and the challenges of international crime and trafficking make stability in the region a clear EU interest. Yet, the unresolved Nagorno-Karabakh, Abkhazian and South Ossetian conflicts have the potential to ignite into full-fledged wars in Europe’s neighbourhood. To guarantee its own security, the EU should become more engaged in efforts to resolve the three disputes. It can do so by strengthening the conflict resolution dimension of the instruments it applies. As the EU is unlikely to offer membership to Georgia, Armenia and Azerbaijan even in the medium term, it must identify innovative means to impose conditionality on its aid and demonstrate influence. This is a challenge that Brussels has only begun to address.

Since 2003 the EU has become more of a security actor in the South Caucasus, particularly in Georgia. It has appointed a Special Representative for the South Caucasus, launched a European Security and Defence Policy (ESDP) mission, and employed the Commission’s Rapid Reaction Mechanism to support post “Rose Revolution” democratisation processes. It has included Armenia, Azerbaijan and Georgia in the European Neighbourhood Policy (ENP) and started Action Plan negotiations due to end mid-2006. The Commission has allocated some €32 million for economic development confidence building programs in Georgia, and it has cooperated closely with the UN and the Organization for Security and Cooperation in Europe (OSCE).

Nevertheless, the EU can do more to help resolve conflict in the region, in particular through the Action Plans currently being negotiated with each country. For the EU, these are a chance to enhance and reposition itself in the South Caucasus if they can be tied to conflict resolution and include specific democratisation, governance and human rights benchmarks. For the region they may be an opportunity to map out the reform process concretely. But there is a long way to go. The EU’s relations are not strong with either Azerbaijan or, to a lesser extent, Armenia. It does not participate directly in negotiations on Nagorno-Karabakh, Abkhazia or South Ossetia. In and around Nagorno-Karabakh, it has done little for conflict resolution. It has rarely raised the South Caucasus conflicts in its high-level discussions with partners and has employed few sanctions or incentives to advance peace.

To become more effective, the EU must increase its political visibility. Compared with Russia, the U.S., the UN and the OSCE, its financial and political engagement in the region has been minimal. However, as it gives more aid through new and old instruments, its ability to provide incentives and apply conditionality should grow. Compared with other actors, the EU can offer added value, with its image as an “honest broker” free from traditional US/Russia rivalries; access to a range of soft and hard-power tools; and the lure of greater integration into Europe.

The arrival of a new Special Representative (EUSR) is an opportune moment for the EU to strengthen its political presence. The EUSR should try to become an observer in the three conflict negotiation forums. In South Ossetia and Abkhazia, where the Commission has already allocated significant funding, efficient and well-targeted assistance can give weight and credibility to the EU’s diplomatic and political efforts.

In Nagorno-Karabakh, rather then wait for an agreement on the principles of resolution mediated by the OSCE Minsk Group, the EU should begin contingency planning to assist peace implementation now. Sending military and civilian assessment missions to the region could give new impetus to a negotiation process which seems to be dangerously running out of steam. Whether or not a peace agreement is eventually signed, the EU should be prepared to implement confidence building programs or – in a worst case – to consider a range of options in case of an outbreak of fighting. Otherwise, having remained out of Nagorno-Karabakh and the adjacent occupied districts for over a decade, either war or peace will find it struggling to catch up in its own neighbourhood.

Tbilisi/Brussels, 20 March 2006