Understanding EU Political Conditionality in Conflict Management: The Case of European Neighbourhood Policy

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Supervisor: Prof. dr. A.W.M. Gerrits Date: 02-01-2015

Master Thesis European Union Studies

Understanding EU Political Conditionality in Conflict Management;

the Case of European Neighborhood Policy

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Chapter 1 – Introduction

1.1 - Topic and Motivation

After the Eastern enlargement in 2004, the European Union (EU) faced new borders. In order to create a stable neighboring region, the Union launched the European Neighborhood Policy (ENP). This policy aimed at creating a stable, democratic and economically prosperous region – as Prodi (2003) stated in his speech in Washington: “The Union aims to build a ring of friends (…) Our willingness is to share but institutions with our future neighbours”. ENP sought to include the proven successful mechanism from the enlargement process: political conditionality – it offered so-called “carrots” in case a country made the necessary political and economic reforms as wanted and pressured by the EU. ENP is largely designed in the same manner as the enlargement process (Schimmelfennig, 2005; Kelley, 2006). However, unlike the enlargement process, ENP does not offer the final carrot of EU membership.

Through political conditionality included in the pre-accession strategy, the EU was able to successfully shape candidate EU member states according to the EU norms and values even before they entered the EU (Lippert, 2006). However, with a certain enlargement fatigue in “old” EU member states such as the Netherlands, Austria and Germany emerging, the EU changed its enlargement strategy after 2004 into a more cautious one (Magen, 2006). In doing so, the Union lost an important instrument – the prospect of future membership of the Union - to influence the EU’s neighboring regions. As a result, the Union had to come up with a policy that would enable the EU to continue to influence its neighboring region as well as addressing the enlargement fatigue in the old member states: thus ENP (Lippert, 2006, p. 86-87).

As the EU is currently experiencing multiple armed conflicts in its neighboring region, this has drawn increased attention to the EU’s capabilities and efforts in conflict management in its neighborhood and more generally to the EU’s role in world politics and its foreign policy ambitions. In the backdrop of these developments, The Economist (2014) sneeringly alluded to the promising words of Prodi (2003); ENP as means to create a “ring of friends”. The current EU’s neighborhood looks far from this - with conflicts and tensions building up in the neighborhood in the summer of 2014 (Ukraine, Israel-Palestine conflict) - The Economist (2014) claims that these developments have turned the EU’s neighborhood into a “ring of fire”.

The current developments call for a critical analysis of the ENP as an effective instrument in relation to conflict management in the EU neighborhood. As it was the European Commission (2006, p. 10) itself which noted: “if the ENP cannot contribute to addressing conflicts in the region, it will have failed in one of its key purposes.”

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1.2 - Research Goal

The goal of this MA thesis is thus to gain a better understanding of the effectiveness of the mechanism of political conditionality - as applied in ENP - in conflict management in the EU neighborhood. Thereby critically addressing the potential of ENP as an effective instrument in conflict management, so to verify the statements uttered by the European Commission (2006, p. 10) as stated in the previous section.

1.3 - Research Question

This MA thesis will therefore try to find an answer to the following central research question:

“To what extent does political conditionality as applied by European Neighborhood Policy renders compliance in conflict management in the European neighborhood?”

1.4 - Literature Review: ENP and conflict management

Conflict management is being highlighted in the ENP as one of the main priority areas. However, Gordon and Sasse (2008) point out that EU involvement in conflicts remains to the Council to decide; it is organized on an intergovernmental basis and in consequence is largely dependent on EU member states' individual decisions. This is one of the key factors which fuels the critic on the EU that it is in the international arena a far less influential actor than would be expected on the basis of its relative economic potential. Popescu (2005, p. 10) adequately sums up this discrepancy between ENP ambitions and its legal origin and mandate: “ENP is a Commission-driven policy, and crisis management is the prerogative of the Council”.

Furthermore, Crombois (2008) points out two main reasons why ENP is not closely linked to conflict management: (1) due to the fact that – however it includes goals in conflict management – it was in the first place not designed as a policy instrument for conflict management, (2) in addition Crombois (2008) complements the argument made by Gordon and Sasse (2008) that ENP is linked to the Commission’s tasks and is not incorporated in the Common Foreign and Security Policy (CFSP).

However, the origin documents of ENP underpin the ambitions of the EU in conflict management through ENP. In 2003 the European Commissionb_{(2003, p. 12) stated in its}

communication on the Wider Europe document that it aimed to: “(…) facilitate the settlement of disputes over Palestine, the Western Sahara and Transnistria” and goes on in arguing for a role of the EU which illustrates “(…) tangible demonstration of the EU’s willingness to share the burden of conflict resolution in the neighboring countries”. In 2004, conflict management was included into the objectives of ENP in the Strategy Paper (European Commission, 2004, p. 13). In turn, Crombois (2008) argues that there is a misalignment between the ambition of the Commission regarding conflict management as an explicitly stressed goal of ENP, and the aims pursued by the individual member states which do not explicitly underpin the ambitions in the ENP regarding conflict management, in order to keep control over issues concerning conflict management themselves. This unclearness regarding the institutional divide on the issue of conflict management and the reluctance of member states to affirm and prioritize the aim of conflict management in ENP has thus posed challenges towards its legitimacy and its ability for constructive actions. Against this backdrop, Aliboni (2005) has argued that within such

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circumstances the EU will be paradoxically led towards greater involvement in conflicts in its neighbourhood, which in turn will demand a stronger stance of the EU in its CFSP.

Regarding the ENP actions and its results in conflict management there is no consensus in the existing literature. Balfour and Cameron (2006) state that the ENP includes aspects which contribute to the resolving of conflicts. In contrast, Gänzle (2007) argues that due to its institutional designing flaws (as touched upon previously) the ENP faces a “cross-pillar problem” in which the EU’s actions regarding conflict management are placed under the second pillar, whereas ENP is developed under the first pillar, which in turn hampers the effectiveness of the ENP in conflict management.

Crombois (2008, p. 44) concludes by arguing that case studies should be the main focus in further research on EU actions in conflict management and furthermore puts forward that on the basis of a conducted case study, one can conclude that the ENP “(…) has suffered from the lack of internal and external coherence of EU actions in conflict management in the neighbourhood.” The internal lack stems from the fact that individual member states were keen on keeping control of EU actions regarding conflict management. External coherence is hampering the EU’s actions due to the lack of a clear “grand strategy”.

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Chapter 2 - Theoretical Framework

Before laying down the methodology and the empirics of this study, it is necessary to link to the relevant literature regarding the research question on the working of political conditionality through ENP. And as a result putting this research into the broader academic context.

2.1 - Terminology

In order to avoid misunderstanding it is needed to firstly define the concepts as stated in the research question. Given the fact that the concepts of political conditionality, compliance and ENP will be thoroughly discussed in this chapter, this section will focus on the terms “conflict management” and “European neighborhood”. The latter term is in this thesis defined as the countries which are formally participating in ENP, thereby limiting the geographical scope of this study to these countries. The term “conflict management” is in the existing literature less clearly defined. Usually, there is made a distinction between three concepts: conflict prevention, conflict management and conflict resolution. Conflict prevention relates to preventing conflicts in the first place. Secondly, conflict management is understood as measures which are taken to put a halt to a conflict. Lastly, conflict resolution is understood as the efforts made to prevent violence in a conflict from re-escalation (Kronenberger and Wouters, 2004). Crombois (2008) argues that with regard to the actions of the EU, such a clear distinction is lacking. The EU has created instruments in order to deal with civilian crisis management which are brought down to four categories: police, rule of law, civilian administration and civil protection. These are placed under the accountability of the European Security and Defense Policy (ESDP). Popescu (2005) argues that since the ENP is developed and executed by the Commission, it mainly focuses on conflict prevention instead of direct involvement in conflicts. Thus, since the practice of the EU activities do not have a clear dividing line as the threefold distinction suggests, this research will take into account all ENP activities relating to one of the three elements. This is a rather broad definition but it avoids the risk of becoming too much involved in a theoretical debate whereas in practice clear dividing lines are absent, as Crombois (2008) states.

2.2 - Political Conditionality and EU influence

Kelley (2006) holds that ENP design was based on the Central Eastern European (CEE) countries accession process in 2004. The CEE countries had to reform their countries legal and economic systems according to the acquis communautaire in order to gain EU membership. In the same line of reasoning Johansson Nogues (2004) notes that the EU tries to exercise influence in its neighborhood by upgrading relations with neighboring countries only when these countries show progress towards the adoption of EU values such as democracy and human rights. The ENP makes use of this same principle: political conditionality. In essence, this can be captured by the phrase “more for more”, or as Schimmelfenning and Sedelmeier (2004) coined it: “reinforcement by reward”.

Political conditionality within International Relations has had an huge impact on the way in which countries engaged with each other on the world stage (Stokke, 1995). Its mechanism is fairly simple: if the government of the target (receiving) country complies with certain standards and conditions laid down by the donor (giving) country, it will receive a certain reward (e.g. financial support). At first, the concept of conditionality was applied to force economic reforms such as market liberalization (first generation). Later on, this also shifted to political reforms

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such as the promotion of human rights: hence the term political conditionality (second generation) (Stokke, 1995). Hughes et al. (2004) argue that the existence of power asymmetry is a key element of the concept of conditionality; as one actor sets the conditions under which rewards (“carrots”) or sanctions (“sticks”) are given. Applied to ENP, political conditionality is applied in order to create or strengthen democracy, human rights and good governance (Schimmelfennig, 2005).

After the accession of the CEE countries in 2004, attention towards the working of EU political conditionality increased. Moravcsik and Vachudova (2003) point out that the working of EU political conditionality was facilitated by the strong incentive; namely membership. They also note that the asymmetric power relation was important. In essence their argument holds that the applicant CEE countries accepted the costs of the application process (the implementation of the acquis communautaire) because it offered them high benefits and higher costs in case they would have stayed out. Kubicek (2003) furthermore argues that political conditionality is increasing in its effectiveness if the applicant state is relatively dependent on the EU – in economic as well as in political terms. Furthermore Kubicek (2003) notes that the effectiveness increases if the influence of third actors is limited. Also other studies have shown the effectiveness of political conditionality as applied by the enlargement process of the EU (Schimmelfennig and Sedelmeier, 2005; Sedelmeier, 2008). Regarding this success, Vachudová (2005) has argued that the EU decision making institutions held a meritocratic stance which led to a credible promise of entering the EU.

A number of studies have highlighted that the functioning of EU political conditionality is limited when the strong incentive of future membership is lacking. Thereby hampering the working of ENP in countries were membership is ruled out (Lippert, 2007; Kochenov, 2008). Furthermore, Schimmelfennig (2005) argues that the type of government regime in the ENP participating country is vital. He points out that authoritarian regimes will not easily comply with demands that aim on strengthening liberal values such as democracy, as it would undermine the power base of that government.

2.3 - Compliance

Closely linked to the concept of political conditionality is the concept of compliance. In fact, political conditionality is seen as a means to ensure compliance. Compliance in this sense relates to the effectiveness of conditionality: the degree and speed to which the desired policy changes and rule adoption are realized. As Checkel (2000, p. 2) formulates it: “(…) the extent to which agents act in accordance with and in fulfilment of the conditions prescribed by international institutions”.

Prior research on compliance within the context of the EU foremost deals with the underlying motives for compliance. In this sense, two schools of thought can be distinguished. Firstly, there is the rationalist school which argues that the underlying rationale for compliance is an outcome of strategically and rationally acting actors which use a cost-benefit analysis to determine the most desired outcome for themselves: in which situation they are able to maximize their power and welfare. Secondly, the constructivist school of thought follows a rationale which puts more emphasis on terms as “values” and “identities” (Schimmelfennig and Sedelmeier, 2005).

There is often made a distinction between two forms of compliance; formal compliance and behavioral compliance. Formal compliance relates to the matter of legal rule adoption (of EU rules) by the target countries. Schimmelfennig and Sedelmeier (2005) describe this type of

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compliance as the transportation of EU laws to the national laws, via direct adoption, secondary legislation and international treaties. Behavioral compliance relates to the eventual degree to which target countries reach an actual change in their behavior after legally adopting EU rules. This concept thus is more focused on the actual result which conditionality renders, not only its transfer “on paper”. This research pursues to focus on the latter form of compliance, as behavioral compliance focuses on the actual output.

2.4 - Understanding EU Political Conditionality: the External Incentives Model

Given the fact that ENP is largely designed in the same manner as the enlargement process - as both rest on the principle of political conditionality - an analytical model for explaining the enlargement process can be used for similar purposes regarding ENP. In order to analyze political conditionality as a concept within differing contextual situations and policies, Schimmelfennig and Sedelmeier (2004) outlined conditions which could explain the effectiveness of EU political conditionality. This is referred to as the External Incentives Model. In the academic literature dealing with the concept of political conditionality, this model is accepted as the most effective and most prominent in explaining the working of EU conditionality (Vachudova, 2005).

The model aims at a better understanding of the working of political conditionality. In their findings, Schimmelfenning and Sedelmeier (2004) argue that the adoption of rules by a candidate member country is taking place when the benefits of adopting these rules will outweigh domestic costs in the target country. Simply put: the adoption of reforms by a target country government is the result of a cost-benefit analysis. Schimmelfenning and Sedelmeier (2004) lay down four elements influencing this cost-benefit analysis:

 Determinacy of conditions

This element relates to the clearness of the rule setting which determine the conditions for the reward. Simply put; Schimmelfennig and Sedelmeier (2004) argue that the more legalized the rule is, the higher the determinacy of conditions this will render. This works in two ways: it creates a clear signal towards the target government and in addition creates obligations for the EU to fulfill its promises if the conditions are met by the target government.

 Size and speed of rewards

The size of the reward links to what the EU is offering the target state; the quality of the incentive. The speed of the reward relates to the time span in which the reward will be received. Generally, this holds that the longer the time span is before payment of the reward, the lesser the target government is pushed towards compliance.

 Credibility of threats and promises

This element relates to the extent in which the promises and the threats are seen as credible. This means that the conditions as negotiated by the EU and the target government need to be met to gain access to the promised rewards. When these conditions are not met, the withholding of the reward should be perceived as a real and credible threat.

 Size of adoption costs

In essence, this element holds that the target government makes a calculation on the basis of domestic costs. This has been the least developed element in the external incentives model as “costs” is a fairly large term and could be understood in a multitude of ways; reaching from opportunity costs to sunk costs. Schimmelfennig and Sedelmeier (2005, p. 16-17) note that the costs also relate to the preferences of the target government and the amount of other veto

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players and their preferences. Veto players are defined as “actors whose agreement is necessary for a change in the status quo”. In a situation in which there is a relatively large number of veto players (with each their own interests and preferences) it is essentially more difficult to reach successful compliance, as diverging interests will hamper this.

In this model target governments are perceived as “strategic utility maximizers” (Schimmelfennig and Sedelmeier, 2004, p. 664-666). When applied with regard to ENP; compliance will be rewarded whereas non-compliance will simply lead to the withholding of the reward. Schimmelfennig and Sedelmeier (2004) conclude by arguing that according to their model, political conditionality works when conditions are fixed, the rewards are high and quickly applicable, the threat to not engage in rewards is credible (risk of inaction), and costs of adoption are low.

2.5 - Alternative theories

This section brings attention to two alternative theories which Schimmelfennig and Sedelmeier (2004) highlight and will explain why the external incentive model is preferred as the main theoretical handhold in this study.

One of the alternative theories is labeled as the social learning model. Whereas the external incentives model is based on the notion of rationalism, the social learning model is based on social constructivism. Relating to this last term, the word “appropriateness” is important. In essence, it is argued that target countries will adopt EU rules only if that target country can identify itself with the EU promoted norms and values. As Schimmelfennig and Sedelmeier (2004, p. 675) argue: “Whether a non-member state adopts EU rules depends on the degree to which it regards EU rules and its demands for rule adoption as appropriate in light of these collective identity, values, and norms”. Accordingly, the authors argue that it is persuasion rather than coercion which drives the adoption of EU rules. The authors go on in arguing that there are three factors influencing the persuasiveness of the EU, namely: legitimacy (the quality of EU rules), identity (target state identification with EU community) and resonance (traditional target state rules show overlap, and do not conflict, with EU rules).

A second model described by Schimmelfennig and Sedelmeier (2004) is the

lesson-drawing model. In this model neither external incentives nor persuasion influence the

adoption of EU rules by the target country. According to the rationale of the model, it is domestic dissatisfaction among citizens with the situation in their country which triggers compliance with EU demands, as Schimmelfennig and Sedelmeier (2004, p. 676) state: “a state adopts EU rule, if it expects these rules to solve domestic policy problems effectively”. There are four elements which influence whether or not the target state looks towards the EU for solving their domestic problems: policy dissatisfaction, EU-centered epistemic communities, rule transferability and the existence of veto players.

In this research, the focus is on the testing of the external incentives model. This delimitation follows from the concluding remarks of Schimmelfennig and Sedelmeier (2005, p. 211). As they show that after conducted research, the external incentives model proves best in explaining the working of political conditionality and thus the rule adoption by target states. This research will thus follow this argument and delimit the scope by focusing exclusively on the external incentives model.

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2.6 - European Neighbourhood Policy

ENP originates from a proposal by the UK in 2003, in the prospect of the planned enlargement of the CEE countries, dealing with the new neighbors in the east of the EU. Before launching ENP, the EU held bilateral relations with its neighbors as a result of the Barcelona Process in 1995 (Mediterranean) and Partnership and Cooperation Agreements (Eastern Europe). Johansson Nogues (2004) points out that the goals of ENP are fairly simple: creating a neighborhood of peaceful countries which share - what is labeled as - “EU values”. Or in the words in of European Commission (2004, p. 3): “(...) prevent the emergence of new dividing lines between the enlarged EU and our neighbors and instead strengthening the prosperity, stability and security of all concerned.” In return, the EU wanted to offer close cooperation in terms of energy, trade and political relations, but excluded the explicit prospect of EU membership. This is adequately summed up by the following quote of former Commission President Romano Prodi (2002): “We have to be prepared to offer more than partnership and less than membership, without precluding the latter”.

In the ENP Strategy paper (European Commission, 2004, p. 6) the European Commission sets out the goals as following:

 Stability; by economic and political support for transition and assistance in the settling of regional conflicts.

 Security; by assisting in fighting crime and corruption.

 Prosperity; by assisting ENP participating countries to modernize their economies. The participating countries are given potential access to certain privileges which normally would only be accessible for member countries. At first, the European Commission sets up an Country Report for the prospective ENP partner state. This Country Report assesses the current status of the country’s political and economic situation. With each ENP participating country the EU negotiates an Action Plan (AP) which reflects both the EU values and norms as well as the interests of the participating country. In addition, the EU also takes into account the activities of other actors, such as neighboring states (Smith and Weber, 2007). The AP embodies the guiding line for the prospective reforms of the ENP participating country. The AP furthermore points out the priorities of reforms for the upcoming medium term; 3 or 5 years. Thereby a specific incentive (reward) is linked to the envisaged reform. The EU provides financial assistance through the European Neighbourhood Partnership Instrument (ENPI). This policy tool is concerned with the adoption of the reforms as stated in the AP. Via the ENPI, the ENP allocates its financial resources.

The progress of the reforms agreed upon in the AP are being monitored by the EU in the yearly Progress Report.

Practically ENP works as follows in a nutshell:

 An AP is created for each participating country. In this plan the reforms are negotiated between the EU and the ENP participating country.

 The progress of this agreed upon reforms is periodically monitored by the EU in the yearly Progress Reports.

 The EU provides assistance in the form of financial support to execute the agreed reforms as laid down in the AP’s.

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ENP participant countries are geographically divided in two geographical zones: the east and the south. The geographical scope of ENP is somewhat vaguely described as: “EU existing neighbours and those that have drawn closer to the EU as a result of enlargement” (European Commission, 2004, p. 7). Currently, sixteen countries are part of the ENP (map 1): Armenia, Azerbaijan, Egypt, Georgia, Israel, Jordan, Lebanon, Moldova, Morocco, Palestine, Tunisia, Ukraine, Algeria, Belarus, Syria, Libya (European Parliament and the Council, 2014).

Map 1: ENP Participating (Dark Green) countries

Source: EU Neighbourhood Info Centre (2014)

2.7 - Hypothesis

Following the rationale from the external incentives model, the four elements influencing the outcome of the cost-benefit analysis lead to the following hypothesis:

“Political conditionality is most likely to render compliance in ENP countries where the size of benefits is higher than the domestic adoption costs, the credibility is high and the conditions are clear and straightforward.”

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Chapter 3 – Methodology

This chapter discusses the methodology as used in this study in order to adequately answer the research question. First, the research design will discuss the applied method. Second, the case selection and case background will be discussed. Third, the operationalization lays down how exactly the concepts are measured and elaborates on the way in which the data are being gathered and processed. Finally, some limitations regarding the methodology are discussed.

3.1 - Research Design: Comparative Case Study

In order to find an answer to the central research question, this section outlines the research design. As noted; this research tries to gain a better understanding of the working of political conditionality as applied through ENP. Using the external incentives model by Schimmelfennig and Sedelmeier (2004) as a theoretical handhold, hypotheses are formulated in line with this theoretical model. Given the fact that this research intends to deepen the understanding of EU political conditionality by testing the hypotheses following from a theoretical model; a comparative case study seems justified. As Crombois (2008, p. 44) concludes: “First, it demonstrates the need to focus on case studies when looking at the ENP. All discussions on the ENP and its relation with EU action in conflict management should be tested first before reaching conclusions”. The hypotheses resulting from the external incentives model are tested on a limited number of cases in the European neighbourhood on the basis of gathered literature and data. This study will therefore qualify as a “theory testing (comparative) case study”.

In the case of this research, states are the unit of analysis as conflicts emerge among states. George and Benett (2005) note that when extreme cases (cases at the end of an spectrum) are studied, this may unveil new theoretical insights. Moreover, the authors highlight the importance of qualitative methods in cross case comparison. Hence, a qualitative comparative (document) analysis of a limited number of chosen as the preferred research method.

3.2 - Case selection and background

As mentioned in the previous section, this thesis deploys a strategy in which hypotheses stemming from an existing theoretical model are tested on the basis of a comparative case study. Therefore, two cases are picked of long standing but yet unsettled territorial conflicts between two ENP participating countries in the European neighborhood, from which the countries involved (units of analysis) differ significantly on many aspects (non-similar characteristics). The cases (units of analysis) are:

 The state of Israel in the Israeli-Palestine conflict

 The state of Armenia in the the Nagorno Karabakh conflict between Armenia and Azerbaijan

The case of the Israel-Palestine conflict was chosen for the reason that Israel is the country which approximates EU standards most: the European Commissionb_{(2014) labeled - on the}

basis of statistics by Freedom House and other organizations - Israel as being “Free”, with a score of 1.5. It’s regime type was labeled as “Flawed” (rank: 37, highest rank among ENP participating countries). In addition, its economy is relatively strong (if compared to other ENP countries): in 2013 Israel had a GDP of 36.200 USD (CIA World Factbook, 2014). Therefore, following the

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external incentives model, costs (implementing EU demands) could expected to be relatively low when it comes to political conditionality on these aspects, in contrast the size of benefits would also be considerably lower; as the economic gains for Israel would be relatively low.

The case of the Nagorno Karabakh conflict between Armenia and Azerbaijan is like the Israeli-Palestine conflict a long standing territorial dispute, which recently gained attention when both countries became involved into increased bloodshed (summer 2014). However, unlike Israel, Armenia is known for its regime with less regard to democracy, good governance and human rights: Armenia was given the label “Partly Free” (with a score of 4.5) by the European Commissionb _{(2014). The regime type was described as “Hybrid” (rank: 114). In}

addition, Armenia is relatively poor (compared to other ENP countries); the Gross Domestic Product (GDP) per capita for Armenia was 6.300 USD in 2013 (CIA World Factbook, 2014). Thus, one could expect relatively high costs in terms of adoption to EU standards, but also high benefits with regard to potential economic gains.

 Case background Israel-Palestine

Having a long history, it is hard to grasp it in a nutshell and with stakes being high for both parties, historical information is often biased. However, this section will try to give a brief overview of the conflict’s history.

There are multiple important stages in the conflict that can be distinguished in the timeline of the conflict, three of these stages are identified: the first starting at the end of the 19th century in which Zionism gained ground after pogroms and rising anti-Semitism in Europe. The Jewish National Fund (JNF) started to buy land in Palestine to establish an independent Jewish state; which marked the start of the migration of Jews to Palestine. The second stage is linked to the aftermath of the Holocaust in 1947. In this year the United Nations (UN) adopted Resolution 181. This proposed partition of Palestine (which had be under the rule of Britain from 1917 onwards), and thus to establish a Jewish state in the territory. Consequently, this led to hostilities with the Arab Palestinians and led to a war with Egypt, Lebanon, Jordan and Lebanon. In 1949 an agreement was signed in which the borders of Israel where recognized, known as the “green line”. The third period began in 1967 when Israel had won the Six-Day War and started with the occupation of the West Bank, Gaza, Golan Heights and Sinai. Since then, there have been ongoing violent clashes between the Palestinians and the Israelis such as the First Intifada and the Second Intifada (Bickerton and Klausner, 2007).

Due to the historical and cultural relations between Europe and the Jewish community and the aftermath of the Second World War, the EU has had good relationships with the state of Israel (Terpan, 2010). This has also translated into close cooperation and trade; for example embodied in the participation of Israel in the Commission´s Horizon 2020 research program. Moreover, large trade flows between Israel and the EU illustrate the close ties. Recently, EU Israel relations have become dominated with the issue of Israeli settlements in Palestinian Territory. This has soured the mutual relationship (Techau, 2014). According to Youngs (2014), the EU takes no prominent role in the negotiations between Israel and the Palestinian Authorities, however it is a driving power on the ground in institution building in the Palestinian territories. Youngs (2014) points out that the Palestinian territories have per capita received the most EU aid in the last decade. Furthermore, Youngs (2014) argues that the aim of this institution building was also to prepare the Palestinians for statehood, as the EU strongly supports a two state solution of the conflict.

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Another territorial conflict between two ENP partner countries is that of Nagorno-Karabakh in the former in the Caucasus between two former Soviet Union states: Armenia and Azerbaijan. The territorial conflict erupted in 1994 – not long after the collapse of the Soviet Union. Nagorno Karabakh is in majority populated by Armenians, but is legally part of the neighboring state of Azerbaijan. This however is only on paper the case. In practice, the region part of Armenia, which started with the mutual independence declaration of both Armenia and Nagorno Karabakh in 1989. This was followed up by and armed conflict between Armenia and Azerbaijan resulting in a ceasefire in 1994. Relative stability returned, still the ceasefire was shaky resulting in frequent clashes and exchange of fire. The summer of 2014 especially was marked by heavy exchange of gunfire in the aftermath of the crisis in Crimea leading up to speculations that Nagorno Karabakh might follow the example of Crimea (De Waal, 2014; Economist², 2014). There are no international forces in the region therefore the region keeps relying on the shaky ceasefire between both parties. The situation is monitored by the Organization for Security and Co-operation in Europe (OSCE) along the line of contact and negotiations are taking place under the umbrella of the OSCE; called the Minsk Group. Co-chairs within this group are the US, Russia and France; they are coming up with proposals for conflict settlement. However, both Azerbaijan and Armenia hold divergent views on conflict settlement which hampers the process (Babayan, 2011). Armenia is politically connected to Russia, with Armenia planning to join Russia’s Customs Union and Russia guaranteeing Armenia’s security. Azerbaijan in contrast tends to look more to the West. Being the richest country in the Caucasus, mainly based on income from oil wealth (De Waal, 2014).

3.3 - Operationalization and Data Collection

When illustrated visually, the methodological model looks as followed (figure 1); the four factors from Schimmelfennig and Sedelmeier (2004) as the independent variables and the degree of compliance as the depended variable:

Figure 1: Methodological framework

+ + + +

The plusses visualize the expected positive relationship on the basis of the external incentives model. The minus illustrates the expected negative relationship. This leads to the following hypothesis with regard to the variables:

Determinacy of conditions

Size and speed of rewards

Credibility of conditionality

Size of domestic adoption costs

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 The higher the determinacy of conditions, the higher the degree of compliance.  The higher the size and speed of rewards, the higher the degree of compliance.  The higher the credibility of conditionality, the higher the degree of compliance.  The higher the domestic adoption costs, the lower the degree of compliance.

Each of these variables is analyzed by translating them into measurable elements (table 1).  Dependent variable: degree of compliance. This variable ought to reflect the

behavioral compliance of the target country with the envisaged reforms regarding the particular conflict as formally laid down in the AP. The yearly Progress Reports from the countries involved are analyzed on the positive and negative mentioning’s regarding the target country’s compliance with agreements as stated in the AP. For this a coding scheme for document analysis is used (Appendix). As a result, the degree of compliance of the target country can be measured as the Progress Report will mention the state of development at a particular point in time. Since the EU started with Progress Reports from 2007 onwards, this offers the opportunity to track the degree of compliance over a certain period in time: from 2007 until 2013. On the basis of the coding scheme, passages from the AP are divided in five categories: major improvement (++), improvement (+), status quo (=), deterioration (-), major deterioration (--).

 Independent variable: determinacy of conditions. Schimmelfennig and Sedelmeier (2004, p. 672) state: “Determinacy refers both to the clarity and formality of a rule. The clearer the behavioral implications of a rule, and the more ‘legalized’ its status, the higher its determinacy.” Thus, the conditions as agreed upon by the EU and the target country in the AP’s and other EU documents relating to ENP are analyzed on their clearness; again, applying document analysis on the basis of a coding scheme. As the AP is the document which forms the legal basis on which a target country acts with regard to ENP, this documents are the basis of the analysis, accompanied by other EU documents issued relating to ENP. Thus, the AP and the EU documents regarding the particular conflict are analyzed on the degree in which they state clear behavioral implications. In essence, the more specific and “legalized” a statements, the higher the determinacy is. In contrast, vague and ambiguous terms which lack concrete calls for action will hamper the degree of determinacy of conditions. The statements in the AP regarding the conflict concerned are given a certain value ranging from: legalized (++), clear (+), vague (-), no determinacy (--).

 Independent variable: credibility of conditionality. With regard to the variable credibility of conditionality, Schimmelfennig and Sedelmeier (2004) point out three things. Firstly, capabilities and costs: the norm exporting actor (the EU) should be able to withhold the reward against no, or low, costs and in addition must be less eager in giving the reward than the receiving country must be “eager” in getting the reward: there has to be a certain a symmetrical relationship. Second, the consistency of the allocation of rewards is important. The reward has to be perceived to be meritocratic; based on the conditions which were agreed upon, and not on other economic and political factors. In a case in which consistency is lacking this might spur opportunistic behavior or noncompliance by the target country. Thirdly,

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according to Schimmelfennig and Sedelmeier (2014) cross-conditionality must be of low influence or non-existing. Cross-conditionality appears when there are third actors offering the same benefits, or higher benefits, against lower costs for the target country. In order to measure these three elements of credibility of conditionality, a broad range of data sources is applied. The “capability and costs” of the EU in either withholding or giving the reward is measured from EU data as well as reports from independent actors (think tanks and international organizations). The level of consistency is drawn from an comparison between given (financial) rewards compared with formal compliance regarding conflict management. “Cross conditionality” is analyzed by using external sources (think tanks and international organizations). On the basis of this literature and data research, each of these elements is given a certain value, ranging from: very high (++), high (+), medium (=), low (-), very low (--).

 Independent variable: size and speed of rewards. For this variable, the rewards of compliance are assessed. It focusses on the economic rewards: material gains that compliance would entail. There is made a distinction between direct economic rewards, and indirect economic rewards as a result of compliance. For assessing the indirect economic rewards, EU documents as well as documents from literature sources, independent think tanks and international organizations are used. For measuring the direct economic rewards, EU documents are used to determine the (relative) financial benefits for the particular country. Both indirect and direct rewards are given a certain value: very high (++), high (+), medium (=), low (-), very low (--).

 Independent variable: domestic adoption costs. Regarding this variable, there is made a distinction between political costs and economic costs. Political costs are the costs which the government would have to deal with in case of compliance with the AP. Economic costs relate to the material losses which compliance with the agreements in the AP would entail. Political costs are analyzed by drawing on academic literature, opinion polls and publications by international organizations and think tanks. Economic costs are measured by the indicated material losses in case of compliance with the AP regarding the specific conflict. The economic costs are measured on the basis of estimations of material losses stemming from independent sources such as academic literature, international organizations and think tanks as well as data from official EU documents. Both political costs and economic costs are given certain value after putting them in relative terms: very high (++), high (+), medium (=), low (-), very low (--).

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3.4 - Limitations of Methodology

The use of comparative case studies has not been without criticism and question marks in the academic world. One of the main concerns addressed in social sciences research is that of representativeness. This issue relates to the fact that findings from a certain case are not necessarily applicable to other situations, and therefore to “the whole population”. This also relates to the concept of external validity: the extent to which the outcomes of the research can be transferred to another setting, or other types of cases. This type of validity is not easy to control for, as this study builds on data which are highly specific to the cases it studies. Thus, the findings from this research will be restricted to the two case studies it focuses on. However, it should be noted that each chosen research method in social sciences is bound to have its limitations. As this is inherently the case for all social science research (Boeije et al., 2009).

In addition, this research focuses on testing the external incentives model. This reveals a certain bias which holds the risk of not including alternative explanatory models. However, with regard to the limited resources in time and scope with which this thesis deals, and the fact that Schimmelfennig and Sedelmeier (2005) have highlighted that the external incentives model is most sufficient in dealing with the concept of EU political conditionality, this focus is argued to be a logical choice.

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Another limitation relation to this study is the fact that for some variables, it has to build on the AP’s. These documents are the result of a bargaining process between the EU and the target country. Since the bargaining process takes place behind closed doors it is hard to get a grasp on the outcome and the deals that have been made. In order to overcome this, this study also draws on data from other sources than EU official documents.

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This chapter elaborates on the findings of this research. The outlined variables – based on the external incentives model by Schimmelfennig and Sedelmeier (2004) – are discussed for both the cases. The first part discusses the case of Armenia in the Nagorno Karabakh conflict. The second part elaborates on the analysis of the same variables for the second case: the case of Israel.

4.1 - The case of Armenia 4.1.1 - The ENP and Armenia: an introduction

As previously mentioned in Chapter 2, the AP of a specific ENP country is the guiding line for its future working. AP’s are a product of bilateral negotiations and therefore reflect a consensus between the EU and the target country rather than the wishes of the EU. This also holds for the the conflict of Nagorno Karabakh in the AP of Armenia. Mostly in areas where consensus between both the parties appears hard to reach, the wording sticks to vague and ambiguous terms instead of concrete terminology. Furthermore, this is reflected in the fact that the AP only mentions the Nagorno Karabakh conflict limited number of times, and that the conflict settlement is listed as the 7th_{out of 8 priorities stated in the AP (Wolff, 2007). According to}

Poghosyan (2009, p. 6): “Armenia generally considers the ENP Action Plan to be an important tool for economic development and, therefore, it implements the Action Plan upon a selective basis”. The Armenian government has to decide on the implementation of certain agreements from AP on a yearly basis. This is done with a certain degree of involvement from civil society. However, national administrative bodies for the implementation and coordination of reforms have been lacking or are have been postponed (Poghosyan, 2009).

4.1.2 - Determinacy of Conditions

Building on the first hypothesis resulting from the external incentive model, it is argued that the more clear and straightforward the conditions and desired actions are formulated, the more likely it is that the degree of compliance will be high. Therefore the AP outlining the conditions and rules relating to the Nagorno Karabakh conflict are analyzed. In addition, also the statements and publications of the EU regarding Armenia and the Nagorno Karabakh conflict in the context of the ENP are analyzed.

The AP

Referring to the AP (European Commission, 2005) for Armenia, the outlined conditions are far from clear and straightforward. The AP of Armenia mentions 4 specific actions linked to Priority area 7; the Priority area which deals with the Nagorno Karabakh conflict (Contribute to a

peaceful solution of the Nagorno Karabakh conflict):

 Increase diplomatic efforts, including through the EUSR, and continue to support a

peaceful solution of the Nagorno-Karabakh conflict.

 Increase political support to the OSCE Minsk Group conflict settlement efforts on the

basis of international norms and principles, including the principle of self-determination of peoples.

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 Intensify the EU dialogue with the parties concerned with a view to acceleration of the

negotiations towards a political settlement

Furthermore, there are certain points which do (both explicitly and implicitly) also relate to the the Nagorno Karabakh conflict:

 Explore possibilities to provide EU support for humanitarian and de-mining initiatives.  Promote measures to assist refugees and IDPs.

 Promote the active involvement of civil society.

 Reinforce the cooperation on these and other matters in support of conflict resolution

with the EU Special Representative for the South Caucasus.

None of these statements explicitly identifies a condition under which EU would offer certain rewards. Moreover, statements such as “continue to support a peaceful solution” and “encourage people to people contacts” are quiet vague in their wording. In addition, the AP refers to support for the OSCE Minsk Group. This group being co-chaired by France, one can argue that the backing of the OSCE Minsk Group therefore only offers the EU the possibility to influence negotiations via France, thus limiting its own influence.

EU documents

The European Commissionb_{(2007, p. 18) states in the Strategy Paper for the period of}

2007-2013 with regard to the Nagorno Karabakh conflict:

“Depending on developments regarding a peace deal, the EC could provide further specific assistance related to aspects of peaceful conflict settlement and settlement consolidation. Under the appropriate financial instrument, the EC could also provide support for confidence-building initiatives in the South Caucasus region.”

This is a vague linkage to the working of conditionality, but can hardly be called straightforward as it rests on vague and ambiguous terms such as “the EC could”, furthermore it is not specified which “developments” would be a trigger for such assistance and what is understood by the EU as “assistance”. The document echoes the statements of the European Commissionc_{(2007) in its}

Armenia Country Strategy Paper for the period of 2007-2010. Another passage which is categorized as making a “vague” reference to determinacy of conditions is:

“Assistance provided under the national ENPI envelope for Armenia will focus on the initially mentioned three priority areas which have been selected on the basis of joint EU-Armenia policy objectives. In case that a still stronger prioritization will be requested the first sub-priorities under each headline will get most attention, and support will be based on lessons learnt from the previous assistance programmes and on complementarity with other donors.”

This passage however is still not clear and straightforward in many aspects of it; as it is not described under which circumstances “stronger prioritization will be requested”. Likewise, it makes a reference to the joint EU-Armenia policy objectives which are stated in the AP and, as already discussed, thus does not build on a strong foundation of determinacy. The Strategy Paper for 2007-2013 however, does make one reference which is categorized as being “clear”:

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“In case of peaceful conflict settlement, support, especially for the needed rehabilitation and reconstruction, could be provided under this [Stability] instrument”.

In the National Indicative Programme for 2011-2013 the European Commissionb_{(2010, p. 11)}

also makes relatively little mentioning of strong determinacy. One of the passages which can be qualified as “vague” holds:

“(…) depending on developments regarding the peaceful settlement of the Nagorno-Karabakh conflict, the EC will be ready to provide specific assistance related to all aspects of conflict settlement, settlement consolidation and strengthening of relevant civil society actors.”

However, the National Indicative Programme for 2011-2013 (European Commissionb_{2010, p.}

11) does make one mentioning relating to the Nagorno Karabakh conflict which is categorized as “clear”:

“Sufficient progress towards the principles and values of democracy, the rule of law, and respect for human rights is one of the main preconditions for upgrading contractual relations under the Eastern Partnership.”

In conclusion, both the EU documents as the joint EU-Armenia documents are vaguely stated, and hardly include strong references to conditionality. The only hint towards the existence of conditionality is stated in the EU documents. However, even in this documents the conditionality is vaguely outlined. In most passages it does not tell whether the developments should be either positive or negative, and thus are far from clear and straightforward.

When connected to the coding scheme for document analysis (Appendix), none of the statements can be categorized as being “legalized” as none of them makes an reference to a legal condition which has to be implemented before receiving the reward (table 2). In addition, the AP does not have any mentioning’s which can be categorized as “clear” or “legalized”. In the later EU documents (from 2007 and 2010) there are two passages which are categorized as being “clear” with regard to determinacy of conditions. However, there are multiple mentioning’s which are either “vague” or as having “no determinacy”. Therefore, it is argued that in the time after the AP, EU documents have increased the determinacy of conditions. Although this is slightly at best, considering that there are only two passages categorized as “clear”.

Table 2: Categorization of AP and EU document passages on basis of document analysis

Legalized (++) Clear (+) Vague (-) No determinacy (--)

AP (joint

EU-Armenia, 2006)

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EU documents

(2007, 2010) 2 3 4

4.1.3 - Credibility of conditionality

Regarding the credibility of conditionality, three elements are outlined by Schimmelfennig and Sedelmeier (2004): (1) capability and costs, (2) consistency, (3) the absence or low level of cross conditionality. As stated in Chapter 3, the credibility of conditionality is measured by drawing on a variety of sources. The three elements of credibility of conditionality are discussed in their previously stated order:

Capability and costs

This relates to the associated capabilities (can the EU live up to its promises in case of compliance?) and costs (what does the EU lose in case of withholding the promised benefits in case of non-compliance by the target country?). This section will focus on the costs, as the capabilities of the EU to live up to its promises under ENP were not debated.

Schimmelfennig and Sedelmeier (2004) argue that in the case of the accession of the CEE countries, the EU was only marginally dependent on the EU, whereas the CEE countries were heavily dependent on the EU market. Thus, there was an asymmetrical relationship in which the CEE countries would benefit much more strongly from accession than the EU member states. In order to assess the interdependence between Armenia and the EU, table 3 shows the relative importance of Armenia to the EU and vice versa in terms of trade. Armenia is far more dependent on the EU as a trade partner than the EU is dependent on Armenia. EU exports to Armenia do not hold any proportion to the total EU exports. In contrast, Armenia is far more dependent on the EU as a trade partner. Whilst the EU was still a relatively important trade partner in 2013 (accounting for 22,9 percent of Armenian exports), it should be noted that this relative importance almost halved during the period 2007-2013: decreasing from 43,6 percent to 22,9 percent. In contrast, EU exports to Armenia increased from 605 million euro in 2007 to 718 euro in 2013. Still, this is only of a marginal portion of the total EU exports (table 3). As a consequence, Armenia is far more reliant on the EU than vice versa, thereby concluding that the costs for the EU of withholding rewards (in case of non-compliance) are categorized as "low", given the relative low importance of exports to Armenia for the EU.

Table 3: Relative importance of EU export to Armenia and Armenia export to EU

2007 2008 2009 2010 2011 2012 2013 EU export to Armenia (Mln. EUR) 605 670 535 556 645 683 718

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% of export on total EU export 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Armenia export to EU (Mln. EUR) 355 318 161 260 322 275 260 Total export Armenia (Mln. EUR) 841 719 500 785 959 1.112 1.135 % of export on total Armenia export 43,6 44,2 32,2 33,1 33,6 24,7 22,9 Sources: Eurostat (2014)

Consistency

Regarding the second aspect – consistency - the credibility is expected to be higher when the decision of the EU to grant Armenia a reward is not blurred by other factors than the compliance of Armenia with its AP. In essence, the reward has to be perceived as being meritocratic. The perceived lack of consistency within the ENP is one of the main points of criticism on ENP in general. Lehne (2014) notes:

“To put conditionality at the heart of the policy [ENP] in theory and then to ignore it in practice undermines the EU’s credibility.”

This also holds to the specific case of Armenia, as Babayan (2011, p. 2) notes:

“(…) the EU’s inconsistency regarding political conditions reduces its credibility and future bargaining power. The May 2010 report on Armenia’s progress in implementing the ENP Action Plan states that Armenia has made progress in several areas (…) In fact, democracy indices show that democracy has not progressed since the launch of ENP in Armenia, and has even deteriorated in several areas.”

Analyzing the EU documents, the same picture emerges. From the Progress Report of 2010 until the most recent Progress Report, the EU makes a statement on the number of CFSP declarations that Armenia aligned with in comparison to the number of CSFP declarations that it was invited to join. These declaration relate to “Cooperation on foreign and security policy, conflict prevention and crisis management”. Table 4 thus represents the (formal) alignment of Armenia with EU demands in conflict management:

Table 4: CFSP declarations Armenia

2009 2010 2011 2012 2013

Invited to subscribe 138 44 82 62 32

Aligned with 108 (78,2%) 28 (63,6%) 44 (53,7%) 35 (56,5%) 19 (59,8%) Sources: EU Progress Report Armenia from 2010 until 2014

When this formal alignment with EU demands is compared to the direct rewards given (in terms of ENPI funding), in an situation of consistency, the financial rewards should mirror the approximation of alignment with CFSP declarations. A comparison results in the following (table 5):

Table 5: EU financial support (under ENPI) for Armenia and % of aligned CFSP declarations

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% of aligned CFSP declarations 78,2 63,6 53,7 56,5 59,9

EU financial support (mln EUR)24,7 27,7 43,1 35,0 66,0

Sources: EU Progress Report from 2010 until 2014 and Statistical Annex of Implementation of ENP document (2014)

On first sight this shows that there does not appear to be a clear link between the EU financial support and the alignment of Armenia with CFSP declarations: as EU financial support after 2010 increased while the alignment with CFSP declarations decreased. It could however be argued that the financial support lags behind on the alignment of CFSP declarations: as the EU financial support declines in the period of 2011-2012, following a decline in percentage of aligned CFSP declarations in the period of 2010-2011. Even if that would be the case, the sharp rise in financial support from 2012 to 2013 (+31 million EUR) does not hold any proportion to the only marginal rise in aligned CFSP declarations in the period 2011-2013 (+2,8%). Thus, based on the data from the EU documents, there is little consistency.

Level of cross conditionality

The third outlined element of credibility – the absence or low levels of cross conditionality – is at the heart of the conflict of Nagorno Karabakh. Given the threat of an escalation of the Nagorno Karabakh conflict, Armenia looked for security guarantees to other states. Since tensions have been rising in the conflict, this has become increasingly important as De Waal (2014) points out:

“Armenia has lurched in a more pro-Russian direction, with the country’s course set on joining Russia’s Eurasia Union. That may have reinforced the belief in Yerevan that in the event of conflict, Moscow will step in to defend its treaty obligations under the CIS Collective Security Organization and come to the aid of Armenia.”

The fact that this can be placed within a longer timeline, stems from the following statement by Babayan (2011, p. 3):

“The EU’s focus on non-conflictive issues will keep the spotlight on Russia as the regional player. To safeguard its security, Armenia signed a new defense agreement with Russia in August 2010 extending Russia’s military base lease until 2044, further increasing Russian influence in the region.”

Within this light Armenia has turned towards Russia. In addition, Russian influence in the Armenian economy is large; as Babayan (2011, p. 2) points out:

“The plethora of European loans and grants are unlikely to secure the EU’s position in the Russian-dominated Armenian economy. Russian capital dominates Armenian telecommunications, electricity networks, banking and gas distribution. In the latter sector Russia provides a de facto subsidy and prevents the price of gas from doubling: an offer the EU cannot match.”

This shows that cross conditionality is high within the context of the position of Armenia in the Nagorno Karabakh conflict. Given the fact that apart from economic influence, Armenia also heavily relies on Russia for security reasons.

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Table 6: Categorization of elements of credibility

Element Categorized Level

Capability and costs Low (-)

Consistency Low (-)

Cross conditionality High (++)

Hence, drawing on academic literature and EU documents, Armenia is relatively unimportant to the EU in terms of trade, therefore the costs for the EU to withhold the reward are labeled as “low”. In addition financial assistance and compliance are not consistent, which also undermines credibility. Moreover, as Russia plays a large economic and strategic role in the region, cross conditionality is high - with Russia offering security and economic benefits which the EU “cannot match”. In sum, the three elements with regard to credibility of conditionality do not mirror an ideal situation for the working of it (table 6).

4.1.4 - Size and speed of rewards

This section discusses the rewards which Armenia would reap in case of compliance with the AP agreements related to the Nagorno Karabakh conflict. Complying with the AP would possibly yield both direct rewards (financial support from the EU) and indirect economic benefits (increased trade). This section will make use of both EU documents as well as documents from other sources such as academic literature, international institutions and think tanks.

Direct Economic Rewards

To gain insight into the relative importance of EU funding under ENPI for Armenia, first basic macro(-economic) data of Armenia are examined (table 7). This shows that in the period of 2009 until 2013 the total GDP of Armenia has steadily increased. GDP per capital also steadily increased within this period. However, in 2013 the GDP per capita was almost unchanged in comparison to the year of 2008. This indicates a relative large economic deterioration in the period of 2008-2009. Indeed, GDP per capita decreased from 2.451 EUR to 1.909 EUR (-22,1%). Table 7: Basic Macro Data Armenia

2008 2009 2010 2011 2012 2013 Total GDP n/k 6.2 7.0 7.3 7.8 7.9 (Bln. EUR) GDP per capita2.451 1.909 2.142 2.415 2.560 2.444 (EUR) Population n/k n/k n/k n/k n/k 3.027 (x1000)

Sources: Eurostat (2014) and Statistical Annex of Implementation of ENP document (2014) Concerning the direct economic reward: for Armenia, the financial sums received have gradually increased from 21 million euro in 2007 to 66 million euro in 2013 (Table 9). During this period, Armenia received a total sum of 241,5 million euro from the ENPI: on average 34.5 million euro per year. For the period of 2011 to 2013 ENPI provided 104.1 million euro in funds. From this amount, 30 percent was allocated to “support for strengthening of democratic structures and good governance”, 34 percent was allocated to “support for regulatory reform and administrative

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capacity building” and 36 percent was allocated to “support for poverty reduction efforts” (European Commissionb_{, 2014) (table 8).}

Table 8: Allocation of ENP funding under ENPI in 2007-2010

Priority Planned Actual Support for strengthening of democratic

structures and good governance (%) 30 30

Support for regulatory reform and a

dministrative capacity building (%) 30 34

Support for poverty reduction efforts (%) 40 36 Source: Statistical Annex of Implementation of ENP document (2014)

Table 9: Financial support under ENPI

2007 2008 2009 2010 2011 2012 2013 Average

ENPI Funds (Mln. EUR) 21 24 24.7 27.7 43.1 35 66 34.5

As % of GDP n/k n/k 0,40 0,40 0,59 0,44 0,84 0,48

Sources: Eurostat (2014) and Statistical Annex of Implementation of ENP document (2014) When putting this in perspective of the ENPI funding per capita and as an percentage of GDP per capita, the following becomes clear: on average for the period of 2009-2013 ENP funding accounted for 0,48 percent of the total GDP. Although it should be noted that funding more than doubled in this period; amounting to 0,84 percent of the total GDP in 2013 (table 9). One can thus conclude that although ENP financial support through ENPI funding is still relatively marginal in comparison to the size of the economy (not even 0,5 percent on average), it has more than doubled and thus has grown in importance relative to the growth of the economy. Moreover, the relatively large increase over the period 2012-2013 shows that the direct financial reward can be given on a short time span: the “speed” of the direct reward under ENPI funding is relatively high.

Indirect Economic Rewards

Regarding the indirect economic rewards of conflict settlement, Hopmann and Zartman (2013, p. 116) state: “ [Armenia] has seen 80 percent of its borders blockaded as a result of the conflict (…) This leaves Armenia with only two routes to the outside world, Georgia to the North and Iran to the south, severely limiting the nation’s economic growth potential”. Moreover, The World Bank has pointed out that a settling of the conflicts and disputes with both Azerbaijan as well as with Turkey would lead to an increase 30-38 percent in GDP, with a potential of trade volume of over 300 million USD (Champain et al., 2004). However, both governmental and non-governmental studies have challenged this reasoning (Poghosyan, 2009). Terteroy and Niculescu (2012, p. 20) argue: “What is more debatable, however, is the relative economic impact that non-resolution of the conflict is having on each of the parties independent of the other”. Champain (2005) refers to the unofficial trade practices which have been developed between Armenia and Azerbaijan as a result of the closure of the borders. Therefore, opening of the borders would mean an increase in tax revenues as this unofficial trade becomes “formalized”.

Other indirect economic rewards would be: 1) less military spending costs, 2) more stability which could spur external investment in the Nagorno Karabakh region and 3) a curbing of migration streams from Armenia to other countries (Terterov and Niculescu, 2012). Regarding

Understanding EU Political Conditionality in Conflict Management: The Case of European Neighbourhood Policy

Master Thesis European Union Studies