Memorandum submitted by the European Commission
The relative remoteness of Central Asia and
the Caspian Basin has not prevented their emergence as a region
of importance to the European Union. Exploitation of the huge
oil and gas reserves in the Caspian and Northern Kazakhstan became
a practical possibility only after the break-up of the Soviet
Union, and Central Asia is also a major supplier of cotton, uranium
and other minerals. Competition for economic influence there is
likely to intensify, provided that the present relative stability
in most of the Newly Independent States (NIS)including
the cease-fires in the regional conflictscan be maintained.
But the transition from relatively poor Soviet Socialist Republics
to potentially wealthy modern nation states is proving, for various
reasons, a difficult one.
The eight republics have a number of political
characteristics in common. Especially in Central Asia, it has
not been an easy task to establish the institutions of independent
statehood: they are ethnically diverse, with arbitrary borders
drawn up in the Soviet era for which little historical justification
exists. Amongst some ethnic groups strong regional or tribal affiliations
exist. All have highly centralised power structures, but the fabric
of state and government remains weak. In the South Caucasus, ethnic
problems lie at the heart of the three unresolved conflicts in
Nagorno-Karabakh, Abkhazia and South Ossetia.
The Presidents of the four energy-rich republics
(Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan) have all
opted for strong Presidential government as the antidote to the
fissile tendencies which characterise the region. The EU has serious
political concerns over the respect of human rights and democratic
principles in almost all the NIS.
It also remains to be seen whether the eight
republics will continue to view their interests as compatible
with Russia's conception of its long term role, Already, Russian
policies have led to a cooling of relations with some of them
and groupings within the CIS have emerged which could exacerbate
The EU is already a significant actor in both
regions. For the resource-rich states the Union remains their
single most important potential market outside the CIS; it is
also a very important supplier of the capital, know-how, goods
and services they require to realise their potential. For the
South Caucasus, Kyrgyzstan and Tajikistan, it is an important
aid donor. All the NIS are beneficiaries of the EC's technical
assistance programme, Tacis. All in all, since independence the
EC has provided assistance to Central Asia and the Caucasus of
some 1.4 billion Euros in grants alone. The EC and its Member
States have taken significant initiatives to create an international
framework for the eight republics' eventual integration into the
global political and economic structures. They have negotiated
Partnership and Cooperation Agreements (PCAs) with all the countries
of the region, except (for the moment) Tajikistan, and have encouraged
them to prepare for membership of the Council of Europe, the World
Trade Organisation and other international organisations.
Through the PCAs and Tacis, the EU has devoted
particular attention to assisting regional cooperation, which
it sees as an important tool for building confidence and realising
the NIS' economic potential.
The EU's long-term, strategic interests in the
South Caucasus and Central Asia
In its working paper of February 1994
the Commission put forward the view that even though Russia will
for the time being continue to play a major role in both regions,
there will be competition between the EU, other Western partners
and the regions' neighbours to exercise economic influence there.
It noted that the new republics will need time to realise their
potential and that infrastructure investment will be essential
for this; and it concluded that the EU has an interest, over time,
in encouraging investors to enter these markets and in providing
services and equipment. The EU, unlike Russia, US and Iran, also
has an interest as a major potential consumer of energy products
from the region, and especially of natural gas. At present near
to 50 per cent of its consumption of imported gas is of Russian
origin, and if forecasts are accurate a growing share of domestic
demand will, within the foreseeable future, be covered by imports.
The EU is also an important consumer of uraniumproduced
by all the Central Asian republics, except Turkmenistanand
proposes to negotiate sectoral trade agreements with them. It
is in the EU's interest to ensure that its voice is heard in matters
concerning extraction, pipeline routes and on related issues,
eg jurisdiction in the Caspian Sea.
Apart from these geopolitical and energy-related
interests, Central Asia and the Caucasus represent a not insignificant
market of more than 65 million consumers situated astride potentially
important land routes between Europe and the markets of the Far
East and the Indian subcontinent. Of these, some 16 million live
in Kazakhstan and 22 million in Uzbekistan, the traditional cultural
and economic heart of the region.
The Union's security interests are above all
linked to the (as yet hypothetical) dangers of increased instability
in the region. These go wider than the loss of markets and damage
to EU investments. In economic terms, access to resources may
in the long term prove to be a yet more significant factor. In
geopolitical terms, the emergence of rifts between ethnic or regional
groupings could lead to conflicts such as has occurred in the
Caucasus and Tajikistan becoming more widespread, bringing with
it the risk of outside involvement and ultimately the possibility
of confrontation involving third countries.
The EU also has security concerns relating both
to the production and marketing of, in particular drugs, and the
threat to its economic operators and its citizens resulting from
organised crime activities in general.
Finally, it should be noted that despite high
levels of emigration, there remain substantial number of citizens
in the five republics claiming ethnic links with Member States.
However, fears that instability could fuel pressures to emigrate
have not, as yet, been borne out by events.
Thus, the EU has an interest to:
reduce the two regions' remoteness
build up its presence there through
trade and investment and through bilateral and regional political
reinforce the stability of the regions
the evolution of broadly-based,
representative, democratic institutions;
the reduction of the scope for
further conflict and facilitating the search for peaceful settlements
to existing conflicts;
the continuing promotion of economic
and administrative reform;
support for the integration of
the republics into global political and economic structures and
generally for the adoption of international (including European)
norms and standards;
support for the development of
infrastructure (energy, transport, telecommunications) so maximising
the economic potential of the two regions, linking them with European
and other markets and boosting regional cooperation;
mitigate environmental threats,
eg the EU's proposals to assist Armenia to close down its nuclear
assist the eight republics to further
improve the business climate, in particular for EU companies;
improve the EU's own economic security
through access to energy, minerals and other raw materials from
the two regions;
stimulate regional cooperation in
combating illegal activities, eg drugs trafficking.
Moreover, cooperation in all these areas can
foster good neighbourly relations and contribute to political
rapprochement on a number of outstanding regional issues. This
must be a key EU objective.
Prospects for development of political and economic
In recent years, and despite frequent changes
in the NIS' administrations, the Commission has tried with some
success to build up close relations with all their governments.
A number of Joint Committees have been held with each of the republics
(except for Tajikistan, where the special circumstances relating
to the civil war and its aftermath have until this year impeded
the development of closer relations). The EC's aid and assistance
programmes have greatly facilitated the development of relations
We expect six Partnership and Co-operation Agreements
(with Georgia, Armenia, Azerbaijan, Kazkhstan, Kyrgyzstan and
Uzbekistan) to enter into force on 1 July 1999. The seventh, with
Turkmenistan, has been signed and transmitted to the European
Parliament and the Parliaments of the Member States for ratification.
The PCAs provide, for the first time, a common
platform from which to address political, trade and investment,
and co-operation issues (see separate brief, attached at Annex
A, on the nature of the PCAs.). They will be overseen by a Co-operation
Council at Ministerial level, meeting in principle once a year;
a Co-operation Committee which will, inter alia, continue
the work of the previous Joint Committees and prepare the Co-operation
Councils; and a Parliamentary Co-operation Committee composed
of MPs from the partner countries' parliaments and from the European
The Co-operation Council may formulate recommendations.
There is a dispute settlement mechanism providing for (non-binding)
arbitration in case of disputes over issues covered by the Agreements.
The PCAs are all based upon three "essential
elements": respect for democracy, human rights and the principles
of the market economy. If these are breached (ie presumably to
the extent that the PCA is effectively rendered inoperable) the
PCAs may be suspended.
Since the PCAs contain detailed provisions on
trade, the establishment and operation of companies, capital flows
and intellectual property protection, they reinforce bilateral
investment treaties and double tax treaties negotiated by the
Member States and provide an additional level of political coverage
for the activities of European traders and investors.
In addition, sectoral agreements (eg on trade
in steel, textiles and nuclear products) may be negotiated and
there is provision for such agreements in service sectors also,
The prospects for the further development of
political and economic relations depends in a number of factors,
prospects for peaceful resolution
of the ethnic conflicts in the South Caucasus and for the acceleration
of the peace process in Tajikistan;
the willingness of the NIS to reflect
representations made by the EU, through the PCA mechanism, in
their policies, notably as regards the "essential elements";
the NIS' success in implementing
political and economic reform, and in meeting the criteria for
accession to organisations such as the Council of Europe, World
Trade Organisation, World Intellectual Property Organisations,
progress in enhancing trade and investment
between the EU and the NIS.
For the future, cooperation with these countries
on justice and home affairs questions will become increasingly
important in bilateral and regional contacts. Such cooperation
will include not only the war on drug trafficking and money laundering,
but on organised crime and other illegal activities and on illegal
How does the EU pursue the different elements
of its policy towards the South Caucasus and Central Asia, in
the context of a "single strategy"?
The Commission considers it of the greatest
importance that the EU's various instruments be coordinated in
the context of a general approach towards each of the two regions.
Their circumstances are not identical, although there are a number
of common themes. It has therefore, since 1994, submitted a number
of "Communications" to the Council with this objective
"The EU's future contractual
relations with the Newly Independent States" (COM(94)258)
"Towards an EU Strategy for
relations with the Transcaucasian republics" (COM(95)205)
"The EU's relations with the
Newly Independent States of Central Asia" (COM(95)206)
"Regional Cooperation in the
Black Sea Area" (COM(97)597)
"EU contractual relations with
"EU contractual relations with
On the basis of the second and third of these,
the General Affairs Councils (GAC) of 12 June and 17 July 1995
formulated conclusions on future policy orientations towards these
regions (attached at Annex B).
The last two communications referred to above
addressed only the issue of opening PCA negotiations with Turkmenistan
and Uzbekistan. They followed the GAC's request to the Commission
to hold explanatory talks with each of these countries and to
report back to the Council.
The German Presidency of the Council has invited
the Presidents of the three South Caucasian States to a regional
"Summit" with the EU in Luxembourg on 22 June 1999.
With this event in mind, and in view of the impending entry into
force of the PCAs with these countries, the Commission has updated
its strategy towards the South Caucasus and a new Communication
will be available shortly.
The instruments which the EC has at its disposal
The mechanisms for dialogue foreseen
in its bilateral agreement with the NIS; the EC's technical assistance
(know-how) programme, TACIS. TACIS includes:
ie biannual "Action programmes" containing a number
of projects agreed with each of the NIS governments.
"regional" or "interstate"
programmes which apply to a number of partners. Infrastructure
projects (transport, energy or telecommunications networks) are
particularly suited to this kind of programme, but projects on
questions such as drug-trafficking are also funded in this way.
"Small projects" of
a thematic nature which may be made available to interested partners
(eg TEMPUS, an academic exchange programme.)
nuclear safety programmes.
Humanitarian aid, through NGOs funded
by the EC's Humanitarian Office, ECHO. This aid is intended essentially
for targeted, emergency relief actions.
Food security assistance, intended
to help some of the NIS to feed themselves. This was by way of
follow-up to two major EC operations to provide the South Caucasus,
Kyrgyzstan and Tajikistan with structural food aid in 1994-96.
The assistance is in the form of budgetary support channelled
towards agricultural reform and relevant technical assistance.
It is conditional upon implementation of an agreed programme of
reform, upon compliance with IMF requirements and upon correct
administration by the NIS' authorities.
Rehabilitation support: this instrument
provides limited assistance, notably for post-conflict reconstruction.
Financial assistance. This is exceptional
in nature. So far only Georgia and Armenia, which have had difficulty
in meeting their financial obligations to the EU, have benefited
from balance of payments support in the form of a mixture of loans
and grants; again, this is conditional upon continued respect
of commitments in IMF programmes.
Whereas these instruments have been used throughout
the South Caucasus and in Kyrgyzstan and Tajikistan, in Uzbekistan,
Kazakhstan and Turkmenistan the dialogue mechanisms and Tacis
are virtually the only instruments the EC currently deploys. Tacis's
activities in Tajikistan have had to be suspended for the time
being due to the unstable situation in that country, but essential
humanitarian aid continues.
Since independence, the Community has spent
825 million in the Caucasus and
556 million in Central Asia in grant aid alone (see
table attached at Annex C) not including regional Tacis programmes
and the Democracy Programme (see below).
Under the PCAs, the Commission would like to
accelerate the process of moving the EU's relationships with the
NIS away from aid and towards trade and investment. The EC is
already using Tacis to assist our partners to press ahead with
large-scale privatisation, adoption of international standards,
and modernisation of the administrationincluding mechanisms
for the transparent collection and expenditure of revenue, a key
objective throughout the region. At the same time interstate projects
are preparing the ground for investment in key communications
infrastructures, while also enhancing regional co-operation which
is essential if these countries, whose communications with each
other are difficult and few of which have easy access to European
markets, are to derive full benefit from economic reform. The
EC's key initiatives in this domain are TRACECA (Transport Corridor
Europe-Caucasus-Central Asia) and INOGATE (Interstate Oil and
Gas to Europe); regional projects in the field of justice and
home affairs are currently being launched. These initiatives are
funded under the Tacis Interstate programme.
A fortiori the EU's instruments should, whenever
possible, be used to support efforts in international fora (UN,
OSCE) to negotiate peace settlements in the conflicts over Abkhazia,
South Ossetia, and Nagorno-Karabagh and to press ahead with the
inter-Tajik peace process. Without conflict resolution, it is
difficult to envisage political "normalisation" in the
Caucasus and Central Asia. Indeed, the present stalemate in these
conflicts institutionalises an abnormal situation. Borders and
communications remain closed. 1Ö million refugees continue
to live in conditions of extreme poverty and squalor. Business
operate under particularly difficult constraints, and are not
able to access regional markets. Organised crime flourishes due
to shortages and interruptions of supply.
Apart from these economic questions, the existence
of the conflicts preserves an effective state of emergency which
in turn hampers an open debate on the democratic institutions
of state. There are also concerns about emigration; some of the
best brains in the region have left.
Moreover, whereas the UN has sponsored an ongoing,
if difficult, peace process in Tajikistan, the inability of the
three Caucasian countries to make progress means that they will
continue to rely upon international assistance, while at the same
time that assistance is less effective than it would be under
more favourable circumstances.
In short, in the South Caucasus in particular,
any policy which addresses only bilateral assistance issues and
does not touch upon the source of the problems will not bring
the "dividend" which PCAs implementation should imply.
It follows that the EU will need to fashion its policy under the
PCAs in such a way as to ensure that its actions and its assistance
become an incentive for positive change.
Key priorities for cooperation
Some of these are referred to above, but broadly
speaking the Commission would single out measures which can assist
conflict resolution and post-conflict
reconstruction (Caucasus, Tajikistan);
weaning the NIS off international
aid (Caucasus, Kyrgyzstan: for Tajikistan this is a more distant
goal) and building up a viable productive base (all);
rolling back government intervention
in the lives of citizens and promote freedom of choice and opportunity
political reform and the development
of pluralist, parliamentary democracy and the civil society (all);
improving the efficiency of government
administration and reducing corruption (all);
improving the business climate for
both privatised entities and EU investors (all);
promoting further diversification
in the economy (all, but especially resource states);
preparing the NIS to accept the obligations
and commitments of participation in the international community,
including adoption of international and European norms and standards
drawing partners closer to the "European
space" ie the EU and its neighbours in Central and Eastern
Europe and around the Black Sea (all).
How do EU policies encourage best practice in
public policy and standards of good governance eg in the environment,
democratic development and human rights?
The PCAs specify that:
"Respect for democracy, principles of international
law and human rights as defined in particular in the United Nations
Charter, the Helsinki Final Act and the Charter of Paris for a
New Europe, as well as the principles of market economy, including
those enunciated in the documents of the CSCE Bonn Conference,
underpin the internal and external policies of the Parties and
constitute essential elements of partnership".
The political dialogue foreseen under the Agreements
is intended to support political and economic change in the partner
countries. The Parties undertake to endeavour to cooperate on
(inter alia) the observance of the principles of democracy and
the respect and promotion of human rights, particularly those
of minorities. They agree to hold consultations as necessary on
In advance of the entry into force of the PCAs,
the Commission has been using Tacis programming, and also the
Democracy Programme (which is now separate from Tacis) to provide
technical assistance in these areas. The impending entry into
force of the PCAs in itself provides leverage in this respect.
Projects have been, or are in the process of being, launched to
help all partners whose PCAs are about to enter into force to
prepare for implementation. In addition, well-funded projects
(at least £1 million each) are under way on directly democracy-related
issues in Georgia (assistance to the Parliament and to the judiciary)
in Armenia (judiciary) and Uzbekistan (democracy generally).
Civil society projects are funded under the
Tacis "Lien" programme.
The Democracy Programme has mounted a number
of smaller projects, some of which in cooperation with the Council
of Europe and OSCE/ODIHR, in all NIS. Total expenditure under
the DP since independence has been of the order of 6.5 mn Euros
in the South Caucasus (61 projects) and 5.3 mn Euros in Central
Asia (56 projects).
The EU monitors developments in the fields of
democracy and human rights carefully, and has addressed a number
of diplomatic de«marches to the NIS' governments. Some of
these have been presented jointly with the US. EU-US-OCSE cooperation
in this field may be expected to intensify in the run-up to parliamentary
and/or presidential elections due this year or next in Armenia,
Georgia, Kazakhstan, Turkmenistan, Uzbekistan and Tajikistan.
These activities will also form part of the
political dialogue, at various levels, foreseen under the PCAs.
The EU is also hoping to negotiate a joint statement
or declaration with the South Caucasian countries which should
make specific reference to the importance of the rule of law and
good governance, and to EU support for the efforts of the governments
to strengthen democratic institutions and protect individual human
In the field of environment, the EC has for
some years been funding, in coordination with other donors, regional
programmes related to pollution in the Black and Caspian Seas
and on water management in Central Asia (linked to the dessication
of the Aral Sea).
Moreover, EC has provided assistance to raise
public environmental awareness and develop environmental media,
assisted in the development of National Environmental Action Plans,
prepared environment investment projects and is helping to set
up a New Regional Environmental Centre in Tbilisi.
It has also, as part of the Tacis action, programmes,
designed projects for some of our partners in the energy field
with a strong environmental impactfor example, the rehabilitation
of land contaminated by hydrocarbon production. Our projects aim
to assist these countries to progressively introduce modern standards,
including environmental ones. Each PCA also contains an important
chapter on cooperation in this field.
How are EU relations with the Central Asian and
South Caucasian countries coordinated with relations with neighbouring
In the case of Russia and other East European
countries, co-ordination is facilitated by EU policy being normally
decided by the same Council Working Groups. The instruments at
our disposal (PCAs, Tacis) are for the most part similar. Within
the Commission and most Member States policies are also administered
within the same directorate. The Tacis interstate programmes cover
variously all or most of the NIS.
In the case of INOGATE and, for the future,
TRACECA, there is also considerable interest among Black Sea and
Central European countries. Romania and Bulgaria are the first
Central European countries to become beneficiaries of a programme
originated within Tacis (INOGATE). Projects in these countries
are, however, funded through PHARE. Turkey is an observer at TRACECA
and INOGATE working groups.
In its Communication on "Regional Co-operation
in the Black Sea Area" presented to the Council in November
1997, the Commission drew attention to the EU's policies and assistance
projects towards the former USSR and Central and Southern Europe,
including Turkey. The Black Sea has been identified as a "Pan-European
Transport Area", so emphasizing the important of links between
TRACECA and Trans-European "transport corridors" terminating
on the Western shores of the Black Sea. For the future, more contracts
between the European institutions and those of the Black Sea Economic
Co-operation Organisation are envisaged.
In the case of Iran, Afghanistan and China EU
policies are of a different nature, in each case sui generis.
EU political co-ordination is assured at the level of the Council's
"Political Committee" attended by the political Directors
of each Member State and of the Commission, which prepares the
General Affairs Council meetings on CFSP questions.
In terms of regional co-operation there have
been contacts with the Economic Co-operation Organisation, of
which the members are Turkey, Iran, Pakistan, Afghanistan, Azerbaijan
and the five Central Asian republics. The effectiveness of this
body is however as yet limited, especially given the political
differences between some of its members.
Do EU policies differ in their approach and emphasis
from the bilateral policies of Member States, in particular the
UK, and how is coherence assured?
EU policies are proposed by the Commission and
decided by the Member States in the Council. For certain proposals,
eg those which have implications for the Community's budget, the
European Parliament must also be consulted.
Draft policy initiatives are transmitted by
the Commission to the Council, where they are usually discussed
in the Working Group on Eastern Europe and Central Asia. In most
cases a consensus is worked out there before going on to COREPER
(Committee of Permanent Representatives, which prepares Council
meetings). If the issue concerns the Common Foreign and Security
Policy, it will first go to the Political Committee.
The legal bases for EC instruments are also
determined in this way.
Member States also follow implementation of
the instruments in question by the Commission through their participation
in management committees. Such committees have been set up under
the Tacis, rehabilitation, food security and other relevant Council
It is for the Member States attending these
meetings to ensure that what is being proposed is coherent with
their own policies. In addition there are informal contacts within
the NIS between EC delegations and Member States' embassies.
Unfortunately, there is as yet no other mechanism
for the regular distribution of information regarding Member States'
policies within their individual competences. Now that the PCAs
are entering into force, and given that they are mixed agreements
(ie each Member State is a Party in its own right, as well as
through the EC) the Commission feels that the establishment of
such a mechanism would be timely.
6 "The EU's future contractual relations with
the NIS of the former Soviet Union: and assessment of strategy"
(SEC(94) 258 of 10.02.1994). Back