Economy and Conflict

The conflicts in the South Caucasus are one of the greatest obstacles to the development and wider stability of the region. Powerful members of business, political and military elites have substantial vested interests in the status quo. Corruption and conflict are closely linked through a myriad of complex economic and political opportunities arising from the unstable context created by the conflict. These opportunities are then used as footholds for certain groups to climb to the gates of economic/political power and, once there, ward off all attempts to resolve the conflict that is keeping them in power.

Some of the countries’ poorest communities are obliged to participate in shadow economies in order to survive, perpetuating problems of revenue collection and the creation of formalised economic systems. Moreover, the closure of borders and blocked trading routes prevent the development of small and medium sized businesses. The interests of external powers further complicate prospects for peace and development, in particular due to the geopolitical influence of the oil in Azerbaijan and the Baku-Tbilisi-Ceyhan pipeline.

Although there is some subsistence trading between communities across the conflict divide, relations outside a strictly business framework are characterised by profound hostility and distrust. Long-standing negative perceptions can be manipulated by elites to distract attention from shortcomings in the provision of government services.

There is potential, however, for societal divisions and lack of trust in government to be transformed into collaboration through increasing the understanding of shared economic interests across conflict divides. Local businesses are both engines for reconstruction and development, and facilitators of community cohesion and reconciliation. Businessmen and women have a unique role to play therefore in forging economic linkages that can both cut through protracted divisions at the community level and communicate the socio-economic agendas of these communities to national policy makers that also have an interest in the business agenda. Furthermore, the subject of economic development provides fertile ground for dialogue between groups and parties which have different views on this issue, but who need to work together if the livelihoods of all peoples in the Caucasus are to improve.

International Alert’s work on Economy and Conflict

Since 2003, Alert has been working to engage the private sectors (local business and trans-national corporations) in Armenia, Azerbaijan, Georgia and Turkey, as well as Abkhazia, South Ossetia and Nagorny Karabakh, in regional economic initiatives that contribute to conflict reduction in the South Caucasus.

Among others, this project produced a publication that will be used as an advocacy tool to assist international decision-making institutions in devising strategies to address the negative impact of corruption on conflict resolution and to reduce the impact of conflict on anti-corruption strategies. Furthermore, we have conducted an assessment of the Baku-Tbilisi-Ceyhan (BTC) pipeline, viewing it in the context of the Nagorny Karabakh conflict. This at a time when BP, the main shareholder company of the BTC coalition, launched its regional development initiative.

Our engagement in analysing the region’s economies brought in the involvement of local businesses. This analysis started off with a year’s research into the link between economy and conflict in the South Caucasus. The findings from the research were spread to a wider constituency through the publication of the book: From War Economies to Peace Economies in the South Caucasus. The Economy & Conflict Research Group (ECRG) that authored the research was originally formed from a group of researchers based in the region and drawn from the communities representing the different sides of the conflicts. This group has become the catalyst for the development of ideas contained in this proposal.

During the course of 2005, the ECRG engaged in advocacy and lobbying with international institutions, in particular the EU. It also engaged diaspora business people from the South Caucasus living in Russia to begin developing a joint framework for legal economic cooperation across the South Caucasus, as well as initiating ties between Cypriot business communities and Caucasian ones in order to apply best practices of business cooperation from Cyprus in the South Caucasus. They went on to establish the Caucasus Business & Development Network (CBDN), which laid the foundations for a community of businesspeople engaging in cross-conflict dialogue and economic cooperation.

The CBDN has during 2006 created confidence-building mechanisms through local business centres that will connect business communities with each other across the region as well as connect small and medium enterprise owners with decision makers.

In 2007, the project aims to deepening and expand analysis of the conflict dimension of the regional economies, in particular economic incentives for the perpetuation of the conflicts, and researching possible ways of turning these into incentives for peace. Furthermore, we will continue strengthening the capacity of economic actors operating within or on the region to better understand their impacts on the conflict and to find practical ways of modifying their perceptions.
The Economy and Conflict project has now established itself as one of the most innovative and cutting-edge peacebuilding initiatives in the South Caucasus, using economic factors and incentives to analyse and address the underlying causes of the regional conflicts.

Links

• More on our policy and advocacy work with multinational companies.
  
• More on our work preventing conflict in Sao Tome and Principe, where oil is about to be exploited.
  
• Download our report on oil extraction in Angola.
  
  For more information contact Oskari Pentikainen
  

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Last updated: December 2006