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Deputy Secretary Talbott Testimony before the Subcommittee on Foreign Operations of the Senate Appropriations Committee, Washington, DC, March 31, 1998

(As prepared for delivery)

U.S. Policy Toward the Caucasus

Thank you, Mr. Chairman, for the opportunity to discuss with you and your subcommittee the Administration's strategy toward the Caucasus and the Caspian Basin. I am joined by my friend and colleague, Stuart Eizenstat, Under Secretary of State for Economic, Business, and Agricultural Affairs.

In my opening statement, I will focus on the American determination to help bring peace to the Caucasus; then Secretary Eizenstat will address American efforts to ensure that the vast energy resources of the Caspian Basin are developed and transported in ways that serve U.S. strategic and commercial interests.

Let me first introduce two other colleagues with us here today: Lynn Pascoe, Special Negotiator for Nagorno-Karabakh and Regional Conflicts in the New Independent States; and Bill Taylor, Deputy Coordinator for U.S. Assistance to the NIS. They are available to answer in detail any questions you may have about our diplomatic and assistance efforts.

Since the collapse of the U.S.S.R. 7 years ago and the birth of independent states where before there had been Soviet republics, the U.S. has worked aggressively to foster peace, prosperity, democracy, and respect for human rights.

In 1992, within months of the Soviet Union's collapse, the United States, under the Bush Administration, opened embassies in all 11 non-Russian New Independent States, including the eight of Central Asia and the Caucasus. Since then, under President Clinton, our engagement in the region has intensified.

Let me concentrate on three of those states in particular: Armenia, Georgia, and Azerbaijan. In our view, the South Caucasus has the potential to become one of the real success stories of the next century. The area is blessed with both human and natural resources. History, however, has not been so kind. In the 19th century, the region was a battleground for Great Powers encroaching from all points of the compass. And, of course, for most of the 20th century, Armenians, Georgians, and Azerbaijanis labored under a stultifying and repressive Soviet Communist system imposed by Moscow. Today, while they have gained -- or in some cases, regained -- their freedom, they are struggling against what might be called the opportunity cost of a lost century -- the inadequacy of the social, political, and economic institutions they inherited and the difficulty of building new ones that will allow them to develop as modern states.

The United States has made it a priority to help these three countries overcome those burdens. Our assistance programs support democratic institution-building, economic reforms, and numerous programs aimed at strengthening the rule of law and civil society.

It is against this backdrop that, with leadership from Stu Eizenstat and the Departments of Commerce and Energy, the U.S. is also promoting an east-west Eurasian transportation corridor for the export of Caspian energy resources. This commitment is a vital element in promoting the prosperity of the Caucasus, as it is for central Asia. Azerbaijan, a Caspian littoral state, will profit from development of its oil reserves. Georgia and Armenia, while not, in the journalistic cliche, "oil-rich," will benefit from being part of a robust economic hub fueled by the petroleum of their neighbors.

The political and economic dimensions of our policy are mutually reinforcing; they are integral to a single strategy. The nations of the South Caucasus can achieve their potential only if democracy and civil society thrive and only if their physical and economic infrastructures - that is, their pipelines and their markets, their oil fields and their legal and regulatory structures -- open them to the outside world.

But none of those objectives stands a chance if the people of the Caucasus are living and too often dying in a state of hostility. That's why our efforts on behalf of regional peace are so essential.

Let me concentrate on the enterprise to which we have devoted the most energy: Nagorno-Karabakh. This is not just a dangerous, potentially contagious conflict in its own right. It is also emblematic of one of the most vexing challenges of the post-Cold War world: From Slovenia on the border of Italy to Kyrgyzstan on the border of China, the 1990s have seen the eruption of ethnic and religious animosities that had been mostly dormant during the ice age of communist rule. Another manifestation of this threat to international peace requires the presence of approximately 8,000 American troops to help keep the peace in Bosnia today, and another still imperils Europe anew in Kosovo.

We have been involved in the quest for a negotiated settlement to the Nagorno-Karabakh conflict since 1992, when the Organization for Security and Cooperation in Europe (then known as the CSCE) called for a peace conference to take place in Minsk. The conference never took place, but the Minsk Group has become a standing body, including the U.S., seeking a negotiated peace in the conflict.

In early 1997, we strengthened our direct involvement by becoming a co-chair of the OSCE process, along with Russia and France. I serve as the American co-chair of the Minsk Conference, and Ambassador Pascoe is co-chair of the Minsk Group, which works full-time on this immensely thorny and important problem. He and his Russian and French partners worked especially hard last summer and fall to develop a sound and promising approach that concentrated on the security aspects of ending the armed conflict in the first phase, with talks on status issues to follow.

The rationale was this: At present, there is no status for Nagorno-Karabakh that would be acceptable to all sides. Short of imposing a solution on one side or another -- something we have vowed not to do -- discussion of status could take many years. During that time, the life of the region would be disrupted and the threat of war ever-present. The stunted economic development, especially of Armenia, would continue to deprive the people of the Caucasus of the well-being and stability we seek and they deserve.

President Aliyev of Azerbaijan and then-President Ter-Petrossian of Armenia had hoped to sign a first-phase agreement that would have done the following:

• Ended the threat of renewed fighting and allowed hundreds of thousands of refugees to go home;
• Returned to each side much of the territory occupied by the other;
• Opened up borders and lines of communication and trade;
• Lifted all embargoes;
• Left the land connection between Nagorno-Karabakh and Armenia intact and secure; and
• Provided international peacekeeping forces and security guarantees.

This security would allow Azerbaijan and Nagorno-Karabakh to discuss status issues without preconditions, free of any military, political, or economic pressure to sign a deal until both sides found a settlement on which they could agree.

Unfortunately, the Nagorno-Karabakh authorities refused to participate in negotiations on this proposal. They insist on discussing status from the beginning. Our concern is that concentrating on status first would return the talks to the endless exchanges of maximalist positions that characterized the negotiations before we became co-chairs. Meanwhile, the vast number of displaced persons would remain in camps, miserable and increasingly radicalized. Neither Russia, France, nor the U.S. is willing to sponsor such negotiations. This is not out of impatience -- we are prepared to be patient. But we are only prepared to sponsor negotiations seriously aimed at achieving a settlement, not an exercise in futility.

As I said, Presidents Aliyev and Ter-Petrossian were prepared to proceed on what we regarded as a constructive and promising basis. The Nagorno-Karabakh authorities were not.

The resignation of President Ter-Petrossian on February 3 and the Armenian presidential elections -- the second round was held yesterday -- have forced a pause in the peace process.

But a pause does not mean a halt. We are not giving up. We owe it to ourselves and to the parties to persist. The co-chairs plan to return to the region in April. We have made clear that we hope and expect the new Armenian Government to take a serious approach to negotiations aimed at achieving real progress toward a lasting, fair settlement.

The quest for a solution to another dispute nearby, in Georgia, also has our active support and participation. This is the simmering, on-again/off-again conflict in Abkhazia. In the last year we have worked hard to open up the negotiating process so that UN-sponsored talks might be more successful than the stalled Russian-led effort. Frustrated by lack of progress, Russia has also recently welcomed an increased role for the UN in peace negotiations. Ambassador Pascoe is hard at work on this project as well.

The U.S., as one of the so-called Friends of the Secretary General on this issue, has become more directly involved in efforts toward an international settlement, led by the UN Secretary General's Special Representative, Liviu Bota. The most recent round of negotiations, in Geneva last November, produced a series of working groups that have begun to address the pressing problems of economic and humanitarian cooperation, refugee return and security issues. Ambassador Bota and the Friends are meeting today in Sukhumi with representatives of the parties to assess the progress of the working groups and to set concrete goals for another Geneva meeting later this spring.

The U.S. also contributes observers to the UN peacekeeping mission in Abkhazia -- UNOMIG. In the wake of recent violence, including the attempted assassination of President Shevardnadze on February 9, we have decided to pull back our presence from Abkhazia itself. We now have two U.S. military observers in Tbilisi. Two other American military observers will be redeployed to Abkhazia once we are confident that the security arrangements for UNOMIG are adequate. The UN is currently working on a proposal to provide adequate force protection for the UN observers that would allow the United States to resume full participation in UNOMIG.

Mr. Chairman, I would like to stress that our assistance programs are an important component of our diplomacy in the Caucasus. We are moving forthwith to utilize the $12.5 million earmarked by Congress for the victims of the Nagorno-Karabakh conflict and the $5 million Congress has appropriated for the relief of victims of the Abkhazia conflict.

This contribution on the part of the U.S. has been a key tool in inducing the Abkhaz to participate in a broader, multilateral effort on peace negotiations. USAID and our embassy in Tbilisi have sent an assessment team to Abkhazia to determine how best to use this assistance. Spurred on by our efforts, the UN and international financial institutions have sent teams of their own in to work on post-conflict reconstruction.

In addition to these high-profile humanitarian assistance programs, American funds have helped make it possible for reformers in Armenia and Georgia to institute judicial reform and to draft economic legislation and electoral laws. U.S. assistance contributed to the monitoring of yesterday's election in Armenia. Overall, U.S. assistance to Armenia and Georgia is among the highest in the world on a per capita basis.

There is, however, one congressionally imposed obstacle to our diplomacy. That is Section 907 of the FREEDOM Support Act, which prohibits certain assistance to the Government of Azerbaijan. I would only reiterate Secretary Albright's urging before the Foreign Relations Committee on February 10 to lift legal restrictions on non-military assistance to Azerbaijan while maintaining support for aid to Armenia. But I would also say that, thanks to the further loosening of Section 907 restrictions contained in the FY 1998 foreign operations appropriations legislation, we will have the means to work with the Azerbaijanis to make sure that this fall's presidential elections there are free and fair.

Let me now turn to the question of other states that have an active interest in the region. We believe that the zero-sum rivalries among large powers trying to impose their will on smaller states are -- or at least should be -- a relic of history. There is more than enough wealth and economic opportunity in the Caspian Basin to go around if all the states of the region, large and small, cooperate in an open, mutually beneficial and mutually respectful manner and if they play by today's rules of international life.

That principle particularly applies to Russia. We believe it is in everyone's interest for Russia to build strong relations with its neighbors -- so long as those relations are founded on respect for the rights of sovereignty and independence of all concerned.

Since the breakup of the U.S.S.R. 7 years ago, Russia has demonstrated what I would call strategic ambivalence about the region we are discussing. Some forces in that country are nostalgic for the Soviet and Russian empires. But there are also other forces at play in the great drama of Russian politics today that want to see their country adapt itself to the challenges and opportunities of the 21st century rather than replay the "Great Game" of the 19th.

In our own policy toward the Caucasus and Central Asia, as well as in every other respect of our policy toward the former Soviet Union, we are doing what we can to create conditions in which those committed to Russia's transformation into a normal, modern state prevail over those that are bucking the tide of history.

With respect to the conflicts roiling in the South Caucasus, Russia has, over the past several years, been both part of the problem and part of the solution. Earlier Russian attempts to exploit the indigenous trouble in the region not only failed to enhance Russia's security along its southern flank, they may even have contributed to the outbreak of Russia's single greatest trauma within its own borders -- the devastating war in Chechnya.

Today, as I indicated earlier, Russia is working cooperatively with the OSCE on Nagorno-Karabakh and with the UN in Georgia.

A final word, if I might, about another regional power: Iran. We continue to caution nations throughout the region about the development of close relations with Iran. As a state-sponsor of terrorism and a nation bent on the development of weapons of mass destruction, Iran still poses a threat to all its neighbors.

Moreover, we are against any state in the region being allowed to dominate the region, politically or economically. We will continue to work with all the states of the Caucasus to thwart the growth of Iran's influence in the region while those states strengthen their ties to Europe and the Trans-Atlantic Community.

Secretary Eizenstat has been the Administration's point man in maximizing cooperation between the United States and its friends and Allies with regard to Iran. So this, I think, is a good point to turn the microphone over to him. [End of Document]

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