ABSTRACT
This chapter explores the internal factors contributing to maintaining the status quo in the Caucasus conflicts. It discusses the democratisation and dependency constitutes a fluid environment faced by the unrecognised states of the South Caucasus. At the domestic level, in the absence of the formal institutions responsible for regulating economic life during conflicts, the unrecognised states had to develop coping mechanisms that would secure their survival. The shadow economies in the former Soviet Caucasus are thus often organised around ethnic and religious networks, and the ethnification of power structures has been adopted by most of the parties involved in the conflicts of the region. In the 1990s, the EU showed little interest in the breakaway entities of the South Caucasus and hesitated to engage directly in conflict management in the region, being more concerned with the wars in the Balkans.
