1 April, 2014, ISET Economist's special correspondent in Geneva. The ISET Economist was invited to attend the signing ceremony concluding the last round of trilateral negotiations held in Geneva under the joint sponsorship of the Swiss Confederation, the US, Russia and Turkey. The three countries, represented by heads of states, agreed to join the newly created Transcaucasian Confederation and thus bring peace and a promise of prosperity to a deeply divided region that has provided the setting for yet another round in the Great Game – the battle between Russia and Western powers for political and ideological hegemony in Central Asia and South Caucasus; control over strategic trade routes (the traditional Silk Road); and access to the vast natural resources of the Caspian basin.

The agreement, carrying the signatures of Ilham Aliev, Serge Sarksyan and Irakli Gharibashvili, charts the political and economic contours of the future Transcaucasian Confederation (TC). It also envisions a series of shorter-term confidence-building measures seeking to dissolve existing political tensions, open borders, and normalize economic and cultural relations between the three neighboring nations.

The agreement consists of ten points outlining the main principles of the future economic, social and political arrangements:

1. Political arrangements.
2. Territorial conflicts. Currently disputed territories, such as Nagorno-Karabakh, will be assigned the status of autonomous tax free zones exempting their residents (legal and physical persons) from any taxes levied by the Armenian, Azeri and Georgian cantons. A similar status will be granted to South Ossetia and Abkhazia should they decide to join TC at a later time.
3. Borders. The parties agree to eliminate state borders and any other internal barriers to the movement of goods, physical persons and capital on the territory of the newly formed Transcaucasian Confederation (TC). Follow up negotiations with South Ossetia and Abkhazia will be conducted in Moscow and Istanbul to agree on a set of confidence-building measures such as direct dialog and the resumption of trade, transport and tourism linkages, eventually leading to the elimination of borders between TC and these territories.
• Modeled after the Swiss Confederation, TC will be governed by the Federal Council, serving as collective Head of State. It will be a collegial body of 7 members (three representing Azerbaijan and two the Georgian and Armenian cantons, each). As a compromise between Georgia and Azerbaijan, membership in the Federal Council will be limited to three consecutive terms, candidates must have attained the age of forty to be elected, and would not be allowed to serve past the age of 65.
• The President of the Confederation will be elected by the Federal Assembly from among the seven members, in rotation and for a one-year term; the President chairs the government and assumes representative functions. However, the President will be a primus inter pares with no additional powers.
• TC Parliament will consist of two houses: the Senate with equal representation for each canton and autonomous region; and Congress elected under a system of proportional representation. When both houses are in joint session, they will be known collectively as the Federal Assembly.
4. Neutrality. TC will adhere to the principles of military and political neutrality and will not join the North Atlantic Treaty Organization, the European Union, the Eurasian Union or any other military or political bloc.
5. International trade and transit. TC will simultaneously seek deep and comprehensive trade liberalization agreements with the EU, the Eurasian Union, Turkey, Iran, Kazakhstan and other Central Asian countries. Punitive transit fees will be applied on goods originating in countries imposing tariff and non-tariff restrictions on trade with TC.
6. Collective investment in and, ownership of, rail and road transport, pipelines and electricity transmission infrastructure. The parties recognize the vast opportunity for TC in restoring the role of the traditional Silk Road route linking Central Asia to the Black Sea and Europe, on the one hand, and forging North-South transport, trade and energy links between Russia and Turkey, on the other. To expedite the necessary investment in transport, pipeline and electricity transmission infrastructure, the parties agree to the principle of joint investment, collective ownership, building, and operation of all existing infrastructure.
7. Capping military spending and promoting inclusive growth. The creation of TC brings to an end a series of frozen conflicts undermining regional security, threatening investors’ property rights and slowing down economic development. In recognition of the above and to address pressing social challenges, the parties agree to cap military expenditures at 3% of TC’s combined gross domestic product (GDP). An aggressive “military conversion” plan will be implemented over the next five years (until 2019) to retrain former military personnel for suitable civic occupations (e.g. drivers of tanks and armored vehicles will be trained in the operation of tractors and other types of heavy agricultural and construction machinery). Every dollar saved in military expenditures will be used to promote inclusive growth and reduce inequality.
8. Economic specialization. TC will promote regional specialization corresponding to the natural comparative advantages of its constituent parts. The Azerbaijani canton will mainly specialize in agriculture and fuel production; TC’s manufacturing base will be established in the Armenian canton. The Georgian canton will be tasked with maintaining law &order and hospitality services. The parties realize the risk of picking the wrong specializations such as making Armenians responsible for fuel production; leaving law and order in the Azeri hands; and/or counting on Georgian males to man assembly lines.
9. The teaching of history. To stop arguing whose ancestors were the first to populate this or that hill, whose poetry had greater impact on the world literature, and which nation was the first to adopt a monotheistic religion, the parties agree to a joint rewriting of regional history textbooks. In particular, the most important technological and cultural achievements will be randomly assigned to prominent historical figures representing the various ethnic groups populating the region since times immemorial. As a gesture of good will, Georgia agrees to rename “Homo Erectus Georgicus” to “Homo Erectus Caucasicus”. Conversely, all great follies and attempts at ethnic cleansing will be non-randomly assigned to villains of unclear ethnic descent who shall be branded as “ultra-nationalist fascists” and demonized.
10. Official languages, anthem, and national symbols. The three cantons will pull their resources to construct the world’s largest Alphabet Tower featuring all three national alphabets at the intersection of the three national state borders. The three main languages of the region will be given the status of state languages and will be taught in all cantons. Nomination to any civil service position will be conditioned on Google Translate-assisted fluency in all three languages. TC’s anthem will include three verses, one in each language, to be performed in a randomly assigned order. The anthem will have as its general theme a famous aphorism by Aristotle: “the whole is greater than the sum of its parts”.

Speaking to journalists after the signing ceremony held at Geneva’s Grand Kempinski hotel, the three leaders explained that the breakthrough in negotiations (which have been slowly progressing behind the scenes since November 2012) was triggered by the recent crisis in Ukraine. The political and military confrontation in Ukraine provided a once-in-a-lifetime opportunity for countries along the Caucasus Transport Corridor (CTC) to attract investment and compete with alternative trade routes via Ukrainian and Russian ports on the Black Sea and via the Baltic ports and Russia to Central Asia. The only way to act on this opportunity was to make peace. “And since peace was blocked by disagreement about (arbitrary) border lines we had to think out of the box and eliminate the root cause of the conflict – the borders”, concluded Ilham Aliev.