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What Can We Expect from 2017 in the Settlement of the Nagorno-Karabakh Conflict? - UPDATED[Over]
February 22, 2017 04:22AM
Interview with Azenglishnews.com by George Vlad Niculescu, Head of Research, the European Geopolitical Forum
1. What can we expect from 2017 in the settlement of the Nagorno-Karabakh conflict?
I would hope to see the year 2017 becoming a watershed in Nagorno-Karabakh (NK) conflict resolution. To that end, one essential requirement is for the conflicting parties to identify a political compromise that would underpin the conclusion of a peace agreement on NK. It is deemed widely that the inability to produce a resolution on the Armenian-Azerbaijani Nagorno-Karabakh conflict so far was, to a large extent, linked to the dilemma regarding the prevailing legal and/or political principles that would be applicable: preserving the territorial integrity of Azerbaijan, or granting the right to self-determination of the Armenian population in NK. In this context, the Madrid Principles (including their subsequent updates) proposed by the co-Chairs of the OSCE Minsk Group would enable the application of both the notions of restoration of the territorial integrity of Azerbaijan with regard to the return of the seven districts, and the self-determination of Nagorno-Karabakh, possibly within the territorial integrity of Azerbaijan. In order to move political negotiations forward from the current stalemate, each party to the conflict should demonstrate greater political will and be more open to taking calculated risks in working with the other side towards a compromise solution. Such an approach should involve adopting a fresh narrative on conflict resolution, one which takes a more constructive, dialogue-oriented orientation.
2. “Armenia-Azerbaijan Platform for Peace” has recently been established. How can this kind of steps affect the process of the resolution?
The “Armenia-Azerbaijan Platform for Peace”-APA is an encouraging step forward in NK conflict resolution. What I feel APA is missing right now, it is a neutral international arbiter/manager that would guarantee the credibility of this initiative in the eyes of all conflicting parties, and would coordinate its development and implementation with the ongoing efforts of the OSCE Minsk Group. It is in the spirit of APA that the Brussels-based European Geopolitical Forum-EGF has argued for the creation of a platform for exchange of information between Armenian and Azerbaijani experts on energy, transport, trade issues, the rehabilitation of the territories affected by the conflict, and the return of IDPs to their homeland. It was deemed that such an economic dialogue could lead to the development of post-conflict scenarios for the whole Karabakh based on a roadmap leading towards an economically integrated South Caucasus. Consequently, the EGF research focused on developing economic incentives in the framework of post-conflict scenarios, while establishing links between the economic dialogue, on the one hand, and political and security negotiations, on the other. I believe that a dialogue on economic issues would have an important role to play in preparing the political and psychological conditions for readying wider circles of the Armenian and Azerbaijani societies to accept a negotiated compromise solution.
3. A Russian diplomat has recently been assassinated in Istanbul. How can Azerbaijan suffer from the exaggeration of Russian-Turkish relations?
Obviously, the assassination of the Russian ambassador to Turkey, Andrey Karlov, was a very tragic event. However, I wouldn’t exaggerate the importance of this event neither for the future Russo-Turkish relations, nor, more broadly, for the regional security in the South Caucasus, Azerbaijan’s security included. On the other hand, I’d see the new military initiative of Russia and Armenia to establish a joint ground force an issue which should be more worrying for Baku than the assassination of ambassador Karlov. This new initiative has been indeed a significant move towards further fragmenting the South Caucasus, aimed at compensating in Armenian eyes for the recent Russian tighter political, economic and security links with Baku, building upon an unrealistic threat against Armenia from the West/ Turkey. In reality, I would expect that, sometime in the near future, Russia and Turkey might have to reach a bilateral agreement on how to solve the NK conflict, irrespective of Armenian and Azerbaijani legitimate interests. When such an agreement would have shaped up, both Yerevan and Baku could do nothing else than accept it because of their acute lack of viable alternatives. Therefore, I see a strong imperative for both Baku and Yerevan to strengthen their own efforts to solve the NK conflict in their own terms, in order to avoid that regional powers, such as Russia and Turkey, compel them both in doing so in their terms. This threat is even higher for both Baku and Yerevan given the lack of appetite for increased foreign engagement of the upcoming Trump administration in Washington, and the increased preoccupation of the EU with the growing terrorist threats from the South at the expense of post-Soviet conflict resolution.
4. Do you see the military solution of the conflict? Why? What will be the total cost of it for both countries?
There is obviously no military solution to the NK conflict since the costs of war would be huge for all parties. I guess this is quite well understood in both Baku and Yerevan. On the one hand, Baku knows quite well that a war with Armenia will disrupt its continued energy-based economic development and prosperity, while, on the other hand, Armenia, which is inferior in terms of defence capabilities, has no strategic interests for engaging in military offensive actions against Azerbaijan. However, mutual threats of use of force will continue for some time to prevent a peaceful conflict resolution in the case of Karabakh, to poison bilateral relations between Armenia and Azerbaijan, and to impede the development and implementation of most positive initiatives, such as the “Armenia-Azerbaijan Platform for Peace”. To date the constituency for peace between Armenia and Azerbaijan remains small. If there was political will on both sides to expand the constituency for peace, restore international legal order, ensure freedom for all people, and nurture prosperity through regional integration – something that has been contested by many – there would then be a clearer path towards making the Nagorno-Karabakh conflict come to a peaceful, mutually agreed upon solution.
5. How would you describe the economic situation in Azerbaijan and Armenia over the last 10 years?
It is often assumed that the unresolved conflict between Armenia and Azerbaijan over Nagorno-Karabakh has had dire consequences on the economic development of both countries. It has also affected the South Caucasus region more broadly, due to the opportunity costs of unrealized trade and investment, as well as non-engagement of the most efficient trans-regional lines of transport and communications. This may, indeed, be the case. What is more debatable, however, is the relative economic impact that the non-resolution of the conflict is having on each of the parties independent of the other, as well as on the South Caucasus region as a whole.
Research conducted by the World Bank has estimated that opening the closed borders between the Armenia, Turkey and Azerbaijan would increase Armenian exports to $US269-342 million, increase GDP by 30-38%, and result in trade volumes exceeding $US300 million. Other forms of economic impact on Armenia relate to demography: emigration from Armenia to Russia and the West has arguably halved the country’s population. Substantial investment and economic activity in Nagorno-Karabakh has been very low, while in the occupied districts it is practically frozen. Both Armenia and Azerbaijan have shifted large volumes of their state budgets to defence requirements, away from investment into economic development and welfare programs. Azerbaijan, in spite of its rapid economic development and the rise of its hydrocarbons economy, has likewise had to spend a great portion of its national wealth on the needs of Azerbaijanis displaced by the Karabakh war.
However, European Geopolitical Forum's-EGF's research has revealed that the economic impact of the non-resolution of the Karabakh conflict may not be as dire as it has been often perceived. For example, one international expert interviewed by the EGF deemed that the respective economic narrative cultivated by both sides is one reason why we are unlikely to see a resolution to the conflict at any time soon: "Both sides hope that the economic status quo is not sustainable for the other, producing an “information war” and little progress towards peace. Since both sides build their policies to the conflict on these premises, the odds for reaching a political solution are very low. Azerbaijan hopes that Armenia and the Nagorno-Karabakh enclave will collapse economically sooner rather than later. Armenia is waiting for Azerbaijan’s energy driven economic growth to plummet, so that it is able to re-balance its economic status and defence budget to greater parity with that of their adversaries, and decrease economic pressure mounted against the country externally."
Most experts deemed the current economic status quo sustainable into the medium term, even though the situation was sub-optimal. The main arguments supporting this assessment were related to the way Armenia has adapted its economy to survive the Azerbaijani-Turkish blockade, and to the shared interest of both Russia and the West (especially the EU) to support Armenia’s economic stability. That being said, experts also expressed concerns as to the long term sustainability of the economic status quo, offering the following reasons:
•The lack of regional integration and its impact on the integration of the South Caucasus in the global economy;
•The lack of resources available for ensuring vibrant and sustainable economic growth (particularly in the case of Armenia);
•Weak governance standards set against the backdrop of persistent and high levels of corruption;
•Uncertainty about future economic growth and prosperity of the “big neighbors” of the South Caucasus region: Europe and Russia;
•The fact that the “military option” for the resolution of the Karabakh conflict remains on the cards, which might reverse economic gains made during the past 20 years.
Armenia has shifted its external trade through Georgia (between 70-80%) and via Iran (20-30%), thereby circumventing the Azerbaijani and Turkish blockades. To further release from the pressure of the blockades on its economic development, Armenia has had little choice but to increase its reliance on both Russia (in terms of external loans and foreign investments, but also for security and defence purposes), and the Armenian Diaspora, which is also one of the main pillars of the economy and public budget of Nagorno-Karabakh. Since the mid-1990s, Armenia has found effective ways to adapt itself to, and tackle the consequences of the blockades imposed by Azerbaijan and Turkey, and therefore it is very unlikely that its economy will collapse at any time soon. The irony of this rather positive message for the Armenian side is that Yerevan is unlikely to budge on its position on Karabakh, further reducing scope for a settlement and elevating the risk that Azerbaijan may be forced to take desperate measures in order to retake its territories. Similarly, there is no sign that global demand for oil and gas is set to decline at any time soon, further propping up Azerbaijan’s position and deflating any form of Armenian wishful thinking that Baku’s energy incomes are set for a drastic decline. Indeed, the main challenge for the economy of Armenia is not so much the threat of economic collapse, but rather “building-up a sound framework for economic governance”.
For the past 20 years, the economic blockade by Azerbaijan and Turkey against Armenia has hampered regional economic cooperation, including in the energy sector. It has basically forced Armenia to seek alternative energy cooperation partners, such as Russia and Iran. Consequently, instead of achieving its original political goal of forcing Armenia to give in on the settlement of the NK conflict, this economic blockade has actually increased the dependence of the Armenian energy sector on Russian interests. This could make Armenia’s participation in any future common economic energy project with Azerbaijan subject to Russian approval.
7. What is the tourism potential of Armenia and Azerbaijan?
This seems like a too narrow perspective over the prospects of post-conflict economic cooperation between Armenia and Azerbaijan. The aim of the EGF research on economic incentives was to develop an alternative narrative on Nagorno-Karabakh through Track 2 diplomacy. This new narrative could highlight the advantages of choosing peace and regional economic development over the current state of hostility, hence it might ease some of the existing tension. This view appeared to be widely supported within international peace building circles relevant to NK. Starting a public debate amongst NK stakeholders on post-conflict scenarios may offer the flexibility needed by the political leaders to make the tough decisions, and lead the parties towards a political compromise solution to the NK conflict. Could a ‘blueprint for regional economic development’ work as a key trigger for such a public debate? This topic was widely discussed with Azerbaijani and Armenian experts at a roundtable organized by the EGF in Berlin, in the summer of 2014. The short answer emerging from that discussion was “Yes, but…”, while Armenians would favor an immediate resumption of regional economic cooperation, Azerbaijanis believed that, as an initial step to peace, regional cooperation should be pursued in parallel with the return of the seven districts around NK to Azerbaijan. Armenians seemed more concerned with improving regional and national economic governance, and with countering the threat of its own economic insignificance (within the international context). On the other hand, Azerbaijanis would be willing to invest their wealth in post-conflict reconstruction and regional cooperation, but understandably upon the immediate return of the seven surrounding districts and the settling of the final status of NK.
Post-conflict scenario building workshops were developed by the EGF as a highly interactive negotiation simulation exercise built-into stakeholders’ consultations rounds. The given post-conflict scenarios were set in the years 2019 and 2020, respectively. It was assumed that a Peace Agreement (PA) based on the current Madrid Principles was reached in 2019 between the imaginary Republics of Salandia and Oronia, which were engaged in years of fighting over the political status of the ‘break-away territory’ of Mordovia (the country profiles of Salandia and Oronia in 2019 were identical to those of Azerbaijan and Armenia, respectively, while the status of Mordovia was mirroring that of Karabakh). During the post-conflict scenario building workshops, Armenian and Azerbaijani participants simulated the work of a bi-national Task Force assigned to negotiate a roadmap for the implementation of the economic components of the PA. The main target of the simulation consisted of identifying joint economic measures in areas such as energy, transport, trade, rehabilitation of the territories affected by the conflict, and the return of IDPs to their homeland. In practical terms, the workshops eventually resulted in drafting a realistic, mostly agreed action plan. This action plan was set into a timetable outlining a possible post-conflict roadmap for peace building in Karabakh. It included economic measures such as: calling an international donors’ conference, setting up a Trust Fund, and concluding a bilateral Tax Treaty; starting negotiations over a bilateral Free Trade agreement; starting discussions on a gas pipeline from Baku to Nakhichevan via NK and Armenia; reconstruction of existing water reservoirs (for example Sarsang); repairing melioration and irrigation systems, including usage of water resources from Kalbajar, etc. Creating touristic clusters (e.g. in NK and in Azerbaijan) was also discussed in this context as an opportunity for NK to benefit from special funding provided by Baku to relevant regions of Azerbaijan. While declaring itself in favour, the Armenian team requested a broader approach for this economic incentive, without specifically pointing at NK. That was the case for it otherwise might be interpreted as anticipating the political decision on the final status. Moreover, they suggested that the whole touristic infrastructure of Karabakh, Armenia and Azerbaijan should be integrated rather than approached as piece-meal.
All that would make for a huge potential for post-conflict economic cooperation between Armenia and Azerbaijan, which should be factored into the current OSCE Minsk Group negotiations process among the two countries the sooner the better.