For the first time region Javakheti (often refered as Javakhk by ethnic Armenians) is mentioned in the historical source about Georgian king Parnavaz, where it is said that Javakheti (Javakhk) is administrative entity of Kartli kingdom that has its own ruler Eristavi (Georgian: ერისთავი) meaning Head of a Nation.

In the I century BC Greek geographer Strabon in his work indicates that Armenia that was initially very small grew larger during Artaxias (Armenian Ruler). Strabon also tells that Armenia managed to occupy foreign territories namely Paradre (modern Parkhal), Khorzene (part of modern Samtskhe-Javakheti), Meskheti and Gogareni (Modern Lower Kartli). Strabon clearly states that these territories (including Javakheti) were integral part of Ibeian Kingdom (ancient Georgian state) that was temporarily occupied by Armenians during short period of time.

Temporary occupying the territory by Armenians obviously does not mean that these territories indeed became Armenian. If this is the case then in medieval ages 70% of Armenian land was under Georgian Kingdom, consequently with the same success we can claim that major part of Armenian land is in fact Georgian.

In the I century AD king of Kartli (Georgian Kingdom) Parsman I (Kveli) managed to get back Javakheti (Javakhk). Moreover since that time Armenian kingdom was for several decades ruled by Georgian royal family.

In the V century during the ruling of Vakhtang V (Gorgaslani) Javakheti (Javakhk) was an ordinary province of Georgia and after his death his second wife the Byzantinian princess settled in Tsunda (part of Javakheti) again proving that Javakheti was an integral part of Georgian Kingdom otherwise Georgian queen would not hold a residense there.

In VII century Armenian geographer Ashkhara Tsuitsi states that Javakheti is part of Kartli Kingdom (Georgian state). During Arab domination Javakheti is still under Georgian kingdom. Many Georgian epigraphic traces are found on this land dating VIII-IX centuries especially in Saint Giorgi’s and Saint Theodore’s churches proving that Javakheti was a part of Georgian cultural area and moreover belonged to Georgian Orthodox Church.

In 1829 Adrianople treaty was signed, where parties agreed to exchange the population. Russians heavily discriminated Georgian muslim population. 75,000 Georgian families were forced to to leave their land and resettle to Turkey, while Russians resettled 14,000 Armenians in Javakheti (Javakhk)in the early 30s of 19th century. Georgian population of the region became a minority on its own land.

During those times there was a special notice in Javakheti that displayed the words of General Paskevics (a Russian military official, who was an initiator of settlement of Armenians families in Javakheti): “Владей этой землей без опаски… Российская армия тебя защитит” (Owe this land without fear, Russian army is protecting you). Paskevics in his memories shares his motivation for this operation. According to him the aim was to create the population that would be liable to the Russian empire and therefore be loyal to it. Modern Armenian population from Javakheti(Javakhk) is very well aware that originally Armenains to that land came from Erzurum, however fail to admit this fact.

Russian-Georgian War

Recent conflict in Georgia left much space for evaluation and analysis. These events turned out to be absolutely unexpected for western leaders. Russia’s step – invading into sovereign country, occupying parts of its territory and declaring there independence was something that western leaders thought could have happened in 19-20th centuries, but deemed unacceptable for world of 21st century.

Most probably West considered such a scenario having the same chance as an gigantic asteroid falling on the planet earth and probably that was why it took west so long to respond to this challenge. Besides the nature of this response left an impression that it was made without any clear strategy or plan. Initially EU leaders talked about imposition of economic sanctions, exclusion of Russia from G8 and preventing it from WTO membership. However later on they found these proposals to be unfeasible and eventually EU just expressed “concerns” several dozen times and “deep concerns” a bit fewer times that seems quite weak measure in the given circumstances.

Actually why this crisis was allowed to happen was improper signaling. It is important to understand that Russia is not a typical European country sharing values of liberal politics. Russia is a country with difficult background, present and maybe even future. Geopolitical location and cold climate has always been natural defensive fortress for Russia, therefore an empire that emerged in 15-16 centuries had tremendous potential. It gradually expanded its territories for the last three centuries reaching the peak during Soviet times. However after the collapse of Soviet Union Russia lost direct control over surrounding states (countries of Former Soviet Union), but for last 17 years still retained indict control over them.

It is worth illustrating how this indirect control was imposed. Russia created so called ”managed chaos” in these states through provoking ethnic tensions, such as Transnistria in Moldova, Abkhazia and so called South Ossetia in Georgia and Nagorno-Karabakh between Azerbaijan and Armenia. It is worth noting here that in Karabakh case these problems were beneficial for Armenia as well. But this really does change anything: Russia gained control over both Armenia and Azerbaijan. The formula is quite simple: Armenia can only survive with Russia, since is surrounded by enemy states and in case it deviates from its influence, the results will be fatal. On the other hand, Azerbaijan is also under the control. If Azerbaijan makes step towards EU or NATO, Russia can support Armenia and even provoke a new war. This creates a vicious circle, where Russia ”divides and rules”. As a result even after the collapse of Soviet Union population of surrounding territories stayed integrated into Russian culture: they watched Russian TV channels, read Russian newspapers, watched Russian translated films. Russian language dominated at all levels of social, cultural, economic and political life. This type of control turned out to be much stronger than actual military presence in these countries. Taking into consideration this in some sense Kremlin rightfully considers this region to be under it’s dominance and this is where the Georgian tragedy begins.

Russia’s Interests

There are at least four good reasons why Georgia is so special for Russian state. First of all Georgia is pioneer among surrounding states making the real attempts to overthrow Russian influence and making choice towards EU and NATO. If Georgia succeeds, this may ”spoil” other surrounding states and they may start questioning Russia’s dominance over this region. Therefore problem is not in Georgia only, but also in other surrounding states. If Russia loses Georgia, it may also lose it’s influence over all surrounding states.

The second reason is control over energy routes. Georgia holds key location on the energy route that can connect middle Asian and Azeri oil and gas suppliers to European oil and gas receivers. This route leaves aside Russia and is considered to serve as an alternative source of fuel to the Russian one. If Russia controls Georgia, it also controls all the routes supplying oil and natural gas to the Europe and therefore can retain monopolistic position over fuel supply to Europe. Georgia is a real threat to the Russian energy empire.

The third reason lies in differences between Georgian and Russian political and economic models. Georgia moves towards building free society, democratic political system and free market economy, while Russia made a choice towards totalitarism, control and nationalization of economic assets. If Georgia succeeds on its way, this will clearly show that ”Georgian way” is more efficient and successful and this will be an additional reason why other surrounding states may ”’spoil”.

The fourth reason originates from intra-Russian ethnic tensions. Russia is ethnically quite unstable country composed of many small or large ethnic groups that are prone to separatist inspirations. From this point of view North Caucasus has historically proved to be ”cradle of separatism”. Chechnya is a good example of this. To justify its presence in Caucasus Russia has long been developing the stereotypes that Caucasus region does not have enough resources to leave without Russia, that Russia brought wealth and prosperity in this region, when it occupied this region in 19th century and the most important: “Russia is guarantor of peace in Caucasus.” These words became like a slogan for Russia’s actions. It is not in the best interests of Russian state to have on southern border a neighbor that is politically and economically developed, its citizens live much better than those people living over the boarder and they managed to achieve piece in their country without Russian “help”. This is extremely dangerous for the internal stability of Russia.

To summarize these basic reasons Russia needs Georgia to declare neutrality, not join any political or economic bloc, other than those dominated by Russia, refuse to build gas and oil pipelines on its soil, other than those initiated by Russia. It is in Russia’s best interests to have weak, unstable and failed Georgia as a southern neighbor. In essence this was the situation in Georgia from 1992 to 2003 (during Shevardnadze times).

Prewar Situation

The situation in the world was quite interesting before the conflict. Key players of EU (Germany, France and Italy) except UK had quite warm relations with Russia. First of all Russia is a large supplier of oil and gas to EU and second a large market with 150 million consumers. Western leaders were interested in integrating Russia into world economic system like it happened with Germany after WWII. However how Russia perceived the situation was diametrically different. The ultimate aim of Putin regime was to restore ”past glory of Russian empire” and warm relations with the west were merely part of preparatory measures for it. Russian authorities were sure that they ”bought out” key western leaders offering their countries and them personally wide range of benefits. Former German chancellor Gerhard Schroder got ”warm place” at Gazprom (Russian State-owned gas monopoly). Italian officials also benefited from “Russian friendship”. These single cases gave Russian authorities belief that they have western politicians ”in their pocket like nickels and dimes”. In addition, rising oil and gas prices gave them impression that old strength and power came back and and Russia is a country that can dictate it’s will to the world.

In the prewar period Russia received full set of wrong signals from the west that eventually resulted in the invasion in the sovereign state and occupation of its lands. First of all west made little or no reactions on several Russian provocations in Georgia, such as shooting administrative buildings from helicopters in Upper Abkhazia, dropping anti-radar missle in village Tsitelubani and also ignoring frequent shooting of Georgian villages in South Ossetia. By these Russia obviously tested western reaction that turned out to be minimal for that moment.

Second important signal was refusal to grant Georgia and Ukraine NATO Membership Action Plan (MAP) in April 2008 at Bucharest summit. Germany and France under the influence of Russia blocked the decision at the summit. At that point Russian authorities derived 2 main conclusions: first of all that they have power to influence decisions of NATO and the second that western leaders were ready to “sacrifice” Georgia and Ukraine and therefore all surrounding states to Russia in exchange for stable gas steam to European households.

The third signal was visit of German minister for external affairs Walter Steinmeier to Georgia. An official reason for his arrival was facilitating negotiations between Georgian, Abkhazian and South Ossetian sides. He met Georgian authorities, Abkhazian and Ossetian separatist leaders and finally Russian minister for external affairs Mr. Lavrov. After these meetings Georgian side made a statement that they were supporting the plan with few amendments. Abkhaz and Ossetian separatist leaders unconditionally rejected this plan and so did Russian authorities.

The conclusion that Mr. Steinmeier made was that the positions of conflicting parties are so distant that a great deal of efforts are needed to made them closer. In fact what EU through Germany and Mr. Steinmeier did was that they just showed that they “fulfilled their duties”. European leaders demonstrated that “although they are eager to resolve these conflicts and they make actual step towards this, they are unable to help since conflicting sides have very different undertanding of the issue”. In fact this was one more reason for Russia to think that west abandons these states and Russia is allowed to “act”.

The wrong signalling game ended dramatically for Georgia. The war resulted in ethnic cleasing and massive killings of ethnic Georgian population, tens of thousands of citizens lost their homes and villages in so-called South Ossetia that were populated by ethnic Georgian population was removed from the face of earth.

Russian Skinheads

“There is a rise in racist aspirations in Russia” states member of European Commission against Racism and Intolerance (ECRI) Michael Had. ECRI is a commission founded by Council of Europe in 1993 for monitoring racist and xenophobic issues in the member states. Had also stated that the public opinion towards ethnic minorities has significantly worsened recently and racist statements are often made by politicians as well.

It very hard not to agree with Michael Had’s position. Historically Russian society at some point created a concept of so-called “member of smaller nation”. This is a person, who is a Russian citizen, is integrated in Russian society, shares Russian culture, but at the same time hates the society he/she is part of and by all means tries to harm it. In this way Russian society created a group of individuals towards which the entire “xenophobic energy” of the nation was diverted. Anyone could be regarded under this concept: Jew, Georgian, Azeri, Armenian, Chechen, Latvian, Lithuanian, Kazakh, Kirghiz and so on.

At different points in the history of Russian state different ethnic groups were regarded under this concept. During Tsarist Russia and Soviet Union period this stereotype was applied to Jewish minority. People that lived in Soviet Union remember that Jews were considered to be “mean and ungenerous, selling smuggled goods illegally and hiding proceeds in the form of gold and jewelry in the ground or in the wall of their house”. At that given period Jews were the ones, who were blamed for the problems of the system and the state and the overall hatred was directed to them. There were numerous jokes about Jews emphasizing how mean they were even towards their family members.

With the abolishment of the Soviet system “Jewish smaller nation” lost its importance and was “successfully” substituted by a “new threat”: an uncivilized person with black hear and mustache, having Caucasian or Middle-Asian origin, speaking “fractured Russian” and having excess sexual energy. He came to Russian soil to “make money” and does so by selling flowers or fruits and vegetables on the bazaar. Russian society often refers to such individuals as “Лицо Кавказской Националности” meaning a person of ethnic Caucasian origin. Since for ordinary Russians it is difficult to distinguish among different Caucasian and Middle-Asian ethnicities they use one single concept to refer to the people described above. It is widely believed that “people of ethnic Caucasian origin” often sexually harass women in the bazaar, while they are making purchases for their families. Besides these group of people are also regarded to be extremely unloyal to the law and they are solely blamed for high crime rates in the Russian state. This is how an image of the new enemy was created.

It is worth noting that TV channels also facilitate such thinking. They often sacrifice valuable TV time for making reportage how Caucasian or Middle-Asian guy seduced Russian woman, lived with her for some time lying on the sofa with a can of beer, watching TV and wasting her savings that she gathered through tough work. Then, when the savings were over he left her stealing her jewelry and selling it out on the bazaar for half-price. This is a typical story that is shown every day with minor variations.

What concerns to Russian politicians as Michael Had stated they often make extremely xenophobic statements. Politicians often blame ethnic minorities for hard social problems in the country. It is worth illustrating here a political ad that political party “Rodina” (Motherland-National Patriotic Union) used for the elections elections in the Moscow City Duma in 2005. In the ad a group of immigrants (dark haired, unshaved and wearing caps) are gathered up in the typical Moscow yard of large living blocks eating a watermelon and throwing garbage on the ground. The ad is accompanied with the Caucasian folk music as a soundtrack. Further in the clip a “typical Russian” woman with blue eyes and blond hair passes near them with a baby carriage. One of the immigrants expresses his dissatisfaction about this by shouting at her. Then we see head of the party Mr. Dimitry Rogozin and his partner Mr. Iuri Popov that advise uncivilized immigrants to keep clean. Iuri Popov asks them whether they understand Russian language to emphasize that these are those “bad guys” that Russian TV keeps talking about and the ones that “don’t let Russian people live in peace and prosperity”. The ad ends with the following slogan: “Let’s clean our city from garbage”.

After displaying this clip political party Rodina was banned from the elections of Moscow City Duma. It is not hard to imagine what would happen to the politician displaying similar ads to the public in any European country. Most probably that person would have to leave the political arena and never come to the surface again. However it turns out that xenophobic aspirations are not deemed that unacceptable for Russian authorities. In January 2008 Dmitry Rogozin was appointed as Russian representative to North Atlantic Treaty Organization (NATO). In other words, a person sharing extremely xenophobic views will represent Russian state in front of 26 countries. It is really very hard to comment here.

In one of the previous posts we discussed the issue of sustainability of Georgian growth, where it was identified that the growth was fully sustainable assuming that there was no change in exogeneous factors that would affect investors’ decision to make investments in Georgia.

For the sake of clarity we should go through balance of payments figure for 2006. There was large (around 18%) deficit in current account composed of significant deficit in goods and small surplus in services and transfers. Surplus in capital account was composed of large surplus in foreign direct investment and a small surplus in portfolio investment. To summarize the basics: country’s imports were comfortably accommodated by large FDI inflows ensuring stability in foreign balances and good conditions for economic growth.

It is worth noting that current account deficit has been rising during recent years making Georgia more dependent on FDI inflows.

The recent Russian provocation caused a massive outcry in world media and can be undoubtedly considered as a ”bad news of the month”. The events had a negative effect on Russian economy. During first days of the conflict 7 billion US dollar of investments were withdrawn from Russia and the tendency continued afterwards as well. Falling of RTS index (Russian Stock Exchange Index) accelerated and reached unprecedented levels.

What concerns Georgia, during first few weeks foreign reserves of National Bank of Georgia (NBG) (1.5 billion Us dollars) declined by 200 million US dollars. This process reversed soon afterwards, but situation is still shaky.

Along with declared war that Russia openly conducts against Georgian state Russia also launched full-scale cyberwar that resulted in the hacking of Georgian news sites and web sites of several governmental agencies.

Web sites Rustavi2 and Civil.ge (leading news agencies) were down for two days. Although the third large news agency Newsgeorgia.ge was operating during the entire period, administration of the agency spread special note warning visitors that they could have a problem accessing news due to frequent hacker attacks.

As an answer Georgian authorities officially banned all Russian TV channels saying that they were one-sided and did not objectively reflected the reality.

The largest internet forum Tbilisis Forumi has been closed down for several days and is still inaccessible for visitors. Another internet forum politforumi.com that was considered to be prorussian was also hacked and as the message left by hackers implies it was done by people that did not like statements that forum users made in their posts.

Besides news sites and internet forums hackers also attacked web site of president of Georgia and the web site of the Ministry of Foreign Affairs (MFA) and MFA temporarily moved to http://georgiamfa.blogspot.com since Google servers were completely secured from Russian hackers.

Although Armenians have large and rich diaspora in the world, foreign direct investment (FDI) has been historically low in Armenia. Although FDI growth rates remain high, Armenia still lies behind the countries in the region. To illustrate, FDI inflows in Armenia in 2006 were 450 US dollars, while foreigners invested around 1 billion dollars in Georgia, 3.7 billion dollars in Azerbaijan and 20 billion dollars in Turkey. Relative to neighboring countries FDI in Armenia stay at extremely low levels.

For 2007 Armstat reports 670 million dollars, while the same figure for Georgia is above 1.5 billion dollars. It is difficult to figure out its causes, however possible explanation can blockage that Armenia has been experiencing already for a decade.

Sustaining Karabakh problem in the present state is extremely risky for Armenia. Azerbaijan’s military strength is steadily increasing and the proof to that is last military parade, where Azerbaijan had opportunity to demonstrate this. It seems that Azerbaijan considers war scenario as one of the most probable way of resolving the conflict.

It is noteworthy that Azerbaijan is oil exporting country with 10 million inhabitants (vs. Armenia – a bit less than 3 million) and over 10 billion USD foreign reserves that are ready to use during the possible war scenario . Taking this into consideration and the fact that Armenia has full access to the rest of the world only through neighboring Georgia that strongly depends on Azeri gas and has closed borders with Russia, the situation for Armenia does not look very promising.

In case the war breaks out, Armenia will face it with very limited human, material and financial resources. Although many Armenians I have talked to truly and unconditionally believe that Kirk Kirkorian and other members of Armenian diaspora will be able to provide enough resources to cover this difference, I strongly doubt that the diaspora will be able to provide enough funds in a short periods of time.

It should be mentioned Armenia, like Georgia and unlike Azerbaijan strongly depends on foreign direct investment inflows that is major source of import financing. Since FDI is extremely vulnerable to instability, it very well may happen so that investors will not find Armenia the best place for their investments that may prove to be extremely harmful for the balance of payments. Therefore prolonged war can be devastating for Armenian economy.