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On the eve of the Karabakh Talks in Geneva:
What does Armenia gain or lose from a peace agreement?

Armenian News Network / Groong
May 15, 2001

By Groong Research & Analysis Group

The long and torturous road towards the resolution of the Karabakh
conflict will reach Geneva next month. The meeting is a follow up to
what has been described as "momentous" talks between the Presidents of
Armenian and Azerbaijan, first in Paris in March, then in Key West in
April. According to Armenia's Foreign Minister Vartan Oskanian, the
parties came "closer than ever to a solution."  Interestingly, U.S.
negotiator Carey Cavanaugh has been, single-handedly, the most
enthusiastic promoter of the positive trends in the talks, hoping,
perhaps, that repeating the positives may help the sides to believe it.

There are a number of potential pitfalls for a peace agreement on
Karabakh at this juncture of the process. In the excitement generated
about the possibility of a deal between President Aliyev and President
Kocharian, certain issues and potential problems are glossed over.
Discussing some of these troubling questions does not negate the
overall importance of a peace agreement between Armenia, Azerbaijan,
and Karabakh. However, a critical evaluation is necessary to highlight
some of the assumptions being made.

Importantly, on the eve of the Geneva talks, serious discussions in
Yerevan and Baku are absent.  President Heidar Aliyev's jingoistic
statements last week, comparing Armenia to Hitler's fascist forces is
far from "preparing his people" for a peaceful settlement of the
conflict. On the other hand, recently, nationalistic discourse has
dominated the political landscape in Armenia - partly in reaction to
militaristic outbursts in Azerbaijan and partly due to the failure of
Armenian political parties to articulate a realistic position and
distinguish the essential issues from the non-essential.

A peace agreement is essential to Azerbaijan, Armenia and Karabakh.
The conflict must be settled peacefully and to the satisfaction of the
people who are directly affected by the conflict.

Nevertheless, on the eve of the talks in Geneva, the key question is:
what does Armenia gain or lose by signing an agreement in the immediate

Based on what is already known, there are several key issues which
should be taken into consideration:

	- Ostensibly, a peace agreement over Karabakh would lead to
the lifting of the Azeri and Turkish blockades of Armenia, and opening
of the borders of Armenia's two hostile neighbors on the east and
west.  This has been presented, especially by the West, as one of the
significant gains Armenia should look forward to in order to improve
its stagnant economy.  However, the question remains whether the
lifting of the blockade and opening of the borders would indeed have a
major affect on Armenia's economic development. At least in the short
term, it is likely that Baku and Ankara would continue to squeeze
Armenia economically - and politically. In the long run, it is likely
that Turkey would make the opening of the borders conditional on the
issue of the Armenian Genocide.

If and when the borders are opened, the argument goes, Armenia's
export routes would be enhanced. However, in the absence of serious
industrial production in Armenia, what will Armenia export through the
"new routes"? What are the products which Armenia is currently not
able to export due to the blockade?

Since Armenia's independence, the country's economy has structurally
developed around the blockade. The problem with Armenia's economy is
not the blockade, it is corruption and the oligarchic system which
controls the entire market. Outside a handful of foreign investments,
such as HSBC and Coca Cola, there has not been significant direct
foreign investments in Armenia. Privatization or selling of state
companies and assets are different, and, indeed, have been messy.

It could be plausibly argued that after the lifting of the blockade
Armenia's economy would not improve significantly unless the oligarchs
and their cronies in the government give up their tight grip on the
levers of the economy.

On the other hand, the opening of the Turkish-Armenian border could
also mean dumping (and flooding) of cheap Turkish goods (as from Iran)
into the Armenian market. To an appreciable extent this has already
happened. However, Armenian consumers have come to recognize the
difference between quality products and poorly produced goods, thanks
to the availability of choice on the market - despite the blockade.
More importantly, in the long term, Armenia could develop economic
dependency on Turkey, a prospect whose implications have not been
clarified or seriously studied.

Finally, it is argued, especially by the U.S., that the settlement of
the Karabakh conflict and opening of borders will enhance Armenia's
chances of integrating into regional networks of developments - from
transportation routes to pipelines, to regional trade and economic
cooperation. Obviously, this is very appealing and there are major
gains for Armenia. However, such developments are dependent on the
issues pointed above. In the short term, Armenia is likely to become
simply a conduit for others to conduct their business through.
Questions remain as to how such "regional cooperation" would benefit

Neighboring Georgia's case is instructive. Despite access to
international waters, integration into regional military and economic
alliances such as GUUAM and NATO's Partnership for Peace, vital
involvement in pipeline projects and regular infusions of military and
financial aid, the country is in a worst situation than Armenia.

	- It has become obvious that some form of territorial
rearrangements would take place in the final peace agreement. In
recent discussions of a "new plan" it seems almost certain that
Armenians would have to give up some Azerbaijani districts that they
control around the territory of Karabakh. This raises major security
concerns for Karabakh and Armenia. Can Azerbaijan be trusted to
respect the terms of the agreement? Once these territories are given
back, Armenia loses a very significant bargaining chip. On the other
hand, the rhetoric of the Azerbaijani leadership - last week President
Aliyev promised his people that "Aggressors will always be punished" -
and the deep-seated hostility of Azeri society towards Armenians (and
vice-versa) give little hope that the borders would remain quiet.

In October 1997, then Defense Minister of Armenia, Vazgen Sargsian,
underlining the strategic significance of, for example, Shushi and
Lachin, said "the existence of Armenia and Artsakh is impossible
without them," adding that "When Azeris start talking about Shushi and
Lachin one should break the negotiations." Sargsian, who had been on
the forefront of the Karabakh conflict, noted that "no concessions are
possible [for the security of Armenia and Karabakh], only compromise
is possible." The question is what are the compromises that Armenians
can make?

On the other hand, there is also talk about Armenia providing
Azerbaijan with a "corridor" to its exclave situated on Armenia's
south west, effectively lifting Nakhichevan's isolation. What are the
political, security and economic benefits of such an agreement for
Armenia? How would this affect Armenia's relations with its currently
most reliable neighbor Iran?

	- Finally, with the signing of a peace agreement, Armenia
might lose its importance in the region. Tdday Armenia does not
present an economic value for the region. But, ironically, the
Karabakh conflict has raised Armenia's strategic value and earned it
the attention of regional and global powers, as well as the
international community.  Many argue that once a peace agreement is
signed Armenia would become a less important player in regional
developments and would be squeezed out by other economically more
promising states, including Georgia, Azerbaijan and Turkey.

In the long term, of course, a peace agreement with Azerbaijan is to
the benefit of Armenia and Karabakh. However, under current
circumstances, Armenia may have more to lose than gain. An agreement
signed in the near future - without exhausting all the relevant issues
and implications and, most importantly, without extensive public
debate - would simply turn a "no war, no peace" situation into a "cold
peace" without much promise of long term benefits for Armenia.

Yerevan needs to sign an agreement from a stronger economic and
strategic position. But without eradicating the existing corruption
and the oligarchic system, a peace agreement will not make a
significant difference in the lives of Armenians.

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