Publication: Eurasia Daily Monitor Volume: 5 Issue: 89

Among the “frozen conflicts” left over from the implosion of the USSR in December 1991, the economic implications of Armenia’s 1988 to 1994 conflict with Azerbaijan over Nagorno-Karabakh are perhaps the most striking, as Armenia’s economy has until recently stumbled along while Azerbaijan’s has soared, floating on a tidal wave of oil exports.

One of the unpleasant diplomatic byproducts of Yerevan’s dispute with Baku over Nagorno-Karabakh was Turkey’s decision in 1993 to close its 204-mile-long border with Armenia in a show of solidarity with Azerbaijan. Turkey had no formal diplomatic ties with Armenia, but ironically, the previous year Turkish Prime Minister Suleyman Demirel had opened the border with Armenia for humanitarian aid, thereby clouding diplomatic relations with Azerbaijan, even as it was supporting the Azerbaijan side in the dispute over Nagorno-Karabakh at the United Nations (Hurriyet, November 13, 24, 25, 27, 1992).

With economic considerations undoubtedly in mind, Armenian Foreign Minister Eduard Nalbandian recently extended an olive branch to Turkey. On May 6, during a meeting with French Foreign Minister Bernard Kouchner in Paris, Nalbandian said, “For its part, Yerevan is ready to establish relations with Ankara without any preconditions. Our nations and the whole region [would] benefit from it” (Interfax, May 6). This echoes earlier, similar government pronouncements. On June 5, 2005, when addressing the Black Sea Forum for Dialogue and Partnership, then Armenian President Robert Kocharian announced, “We are ready to continue dialogue with Azerbaijan about the settlement of the Nagorno Karabakh conflict and with Turkey on establishing relations without any preconditions” (www.panarmenian.net, June 5, 2005). Last June then Turkish Foreign Minister Abdullah Gul and Armenian Foreign Minister Vardan Oskanian met on the sidelines of a Black Sea Economic Cooperation Organization summit in Istanbul, where Oskanian told Gul that Armenia wanted to improve ties with Turkey, which would be facilitated by reopening the border. Gul responded that Armenia should first work to resolve the Nagorno-Karabakh dispute with Azerbaijan (Daily Star, June 26, 2007).

While Armenia’s disputes with Azerbaijan date back to the twilight years of the Soviet Union, its issues with Turkey are nearly a century old, focusing on the tragedies in eastern Anatolia during World War One. Armenia labels the death of hundreds of thousands of Armenians there genocide, a charge that Turkey strongly rejects. Armenian advocates for years have been urging the U.S. government to label the events as such, adding stress to relations between Washington and Ankara.

For Yerevan, the net result of its foreign policies toward Baku and Ankara has been diplomatic isolation, which in turn has slowed potential growth rates and had a deleterious effect on the economy.

In 2007 the Central Intelligence Agency estimated Armenia’s GDP growth rate at 13.7 percent, Azerbaijan’s at 31 percent and Turkey’s at 5.1 percent. The CIA concluded, “Armenia will need to pursue additional economic reforms in order to improve its economic competitiveness and to build on recent improvements in [eliminating] poverty and unemployment, especially given its economic isolation from two of its nearest neighbors, Turkey and Azerbaijan” (“Armenia,” “Azerbaijan,” “Turkey,” 2008 CIA World Factbook).

A bitter truth for Armenia is that while it is adjacent to a rising oil producer, the vast majority of Armenia’s energy is produced with fuel imported from Russia, including gas and nuclear fuel for the Metsamor nuclear power plant,. Its main domestic energy source is hydroelectricity.

Yerevan’s diplomatic isolation meant that Armenia was excluded from the $3.6 billion, 1,092-mile-long Baku-Tbilisi-Ceyhan (BTC) pipeline, but Azerbaijan in turn was forced to pay a price for its unwillingness to negotiate, as the BTC was forced to take a lengthy detour around Armenia, adding substantially to the project’s cost and causing delays in construction. Armenia continues to lose out on regional developments, such as the Kars-Tbilisi-Baku railway line, due to be completed in 2010.

While Turkey has consistently maintained that resolving the Nagorno-Karabakh issue is a precondition for normalizing its relations with Armenia, Ankara has attempted to assist in facilitating peace negotiations, convening the Foreign Affairs Ministers of Turkey, Azerbaijan and Armenia in trilateral discussions in 2002 in Reykjavik and 2004 in Istanbul, all to no avail. Interest in resolving the impasse led the new administration of U.S. President George W. Bush to convene a diplomatic summit in Key West in April 2001 between the former presidents Robert Kocharian of Armenian and Heydar Aliyev of Azerbaijan, again without results (“Remarks with President Kocharian of Armenia, and President Aliyev of Azerbaijan at Key West Peace Talks,” Secretary Colin L. Powell, Key West, Florida, April 3, 2001, www.state.gov).

An honest broker may now again be at the table. The French co-chair of the OSCE Minsk Group, Bernard Fassier, has given some faint cause for optimism on the issue, stating, “France treats both Armenia and Azerbaijan as friends and its position is completely impartial. It would assist development if the borders were open not only between Turkey and Armenia but also between Azerbaijan and Armenia. Nobody is interested in the poverty and the misfortune of its neighbor. Closed borders do not hinder Armenians from traveling to Turkey by air or from working in Turkey. It shows that relations between the two countries are not completely disturbed. We hope for a peaceful solution to all problems between the countries. The normalization of relations between Turkey and Armenia will help resolve the Nagorno-Karabakh conflict. Simultaneous resolution of these two problems is possible” (AzerTag news agency, May 5).

For Yerevan, the choices are as stark as they are unpalatable. Concessions must be made on its territorial and ideological disputes with its neighbors if it wishes to gain the diplomatic traction to participate in the economic growth of eastern Anatolia and the southern Caspian. If events of the last decade and a half have proven anything, it is that Turkey and Azerbaijan, in particular, can get along without Armenia more easily than Armenia can prosper without them, preconditions or no preconditions.