Memorandum submitted by Razmik Panossian,
Deparment of Government, London School of Economics and Political
In a recent article called "The New Great
Game" in the National Journal (12 March 1999), Paul
Starobin parallels the current geopolitical and economic dynamics
in Central Asia and the Transcaucasus to the "great game"
of the nineteenth century between the British and Russian empires.
In his analysis, the United States has now become the major "imperial"
player in the region, at the expense of Russia. Once again western
interests are pitted against Russian influence. And once again,
conflict could ensue.
One might agree or disagree with this approachand
there are many influential people on both sides of the argumentbut
the fact of the matter is that the Caspian region has become a
major source of international interest and competition. This short
brief is about one country in this vast area, Armenia, and the
focus is on a few of the key factors relating to it. The paper
is based on my research and writings on Armenia in the past few
years. However, my emphasis is on developments after Robert Kocharian's
assumption of the presidency in February 1998 (he was elected
as President in March 1998). Due to the limits of space, I will
have to confine my comments to the core issues and on the plane
of general analysis, although the dynamics of the region are complicated.
There are two areas which will be covered: the Nagorno-Karabakh
conflict and more general socio-political issues, including the
Nagorno-Karabakh is the Armenian populated region
within the borders of Azerbaijan. Between 1990 and 1994 it waged
a successful war against Azerbaijani forces to secede from that
republic. Although since 1994 there has been a cease-fire in this
conflict, there is no final peace agreement as of yet. The main
negotiatinbody is the OSCE Minsk Group, under the co-chairmanship
of France, Russia and the US. The OSCE's latest proposal was rejected
by Azerbaijan, but accepted by Armenia and Nagorno-Karabakh. It
called for a "common state" solution to the issue of
the status of the enclave.
There are four main issues regarding this
(1) The return of the refugees.
The war has created close to a million refugees and internally
displaced people. Approximately 700,000 Azerbaijanis had to flee
their homes due to Armenian advances, and approximately 300,000
Armenians had to flee Azerbaijani territories after pogroms. Any
peace agreement would have to deal with this issue, although it
cannot be expected that all the refugees will go back to their
homesparticulary the Armenians of Baku or the Azerbaijanis
(2) The town of Shushi/Shusha. This
is a particularly thorny issue related to the above question of
return. Shushi is located within Nagorno-Karabakh, but it was
predominantly inhabited by Azerbaijanis. Armenians do not wish
to see a return of the Azerbaijani population to this town, largely
due to its strategic location, overlooking the capital of the
(3) Return of occupied territories.
Armenian forces occupy large segments of Azerbaijani territory
around Karabakh as a military buffer zone. Armenians are willing
to give most, but not all, of these lands back. They are particularly
keen to keep the land corridor between Karabakh and Armenia which
runs through Lachin. (Nagorno-Karabakh and Armenia are not contiguous;
they are separated by few miles of Azerbaijani territory). The
need for a permanent land link between Armenia and Karabakh is
seen as a security issue.
(4) The final status of Nagorno-Karabakh.
The most difficult issue of all is what is to be the final status
of the enclave? Azerbaijan promises the "highest level"
of autonomy but as a region within a unified state. It has not
clearly defined what "highest level" means. Armenians
reject this approach. Their position has been either the independence
of Nagorno-Karabakh or its unification with the Armenian republic.
But any kind of innovative solution which does not subordinate
Karabakh to Baku is not ruled out. As a compromise solution, Armenian
representatives have accepted the notion of the "common state"
whereby the Armenians of the enclave and the Azerbaijanis would
"share" one state.
Of these four issues, the latter two are
the more significant ones and difficult to reach a compromise
Analysis and Future Prospects
The most fundamental tension within the Karabakh
conflict is over the two conflicting principles in international
law: territorial integrity vs. the right of self-determination.
Azerbaijanis insist on the inviolability of their borders, while
Armenians insists on their right to self-determination. In fact,
Nagorno-Karabakh has declared its independence from Azerbaijan,
although no country (including Armenia) has recognised it. In
terms of international law, Karabakh's current status is quite
unclear. It is, however, de facto independent.
Armenians have rejected any peace agreement
which would leave Nagorno-Karabakh under the jurisdiction of Azerbaijan.
The previous president, Ter-Petrossian, was forced to resign over
the issue because it appeared that he was willing to accept a
deal which would have kept Karabakh under the de jurerule
of Baku. The current president, Kocharian, is from Karabakh, and
much less willing to put his signature on any document which is
not acceptable to the Karabakh leadership. It is interesting to
note that Karabakh Armenians hold powerful positions in the government
of the republic of Armenia. Since Kocharian's election, the directon
of political pressure has reversed. It is now Karabakh that exerts
pressure on Armenia and not vice versa. It has therefore become
very difficult to pressurise Karabakh into accepting a soluton
to which it does not agree.
The fact that the Karabakh conflict is not yet
solved is a major hindrance to the future development of the region,
both economically and politically. It is not possible to proceed
with regional integration when borders are closed between Azerbaijan
and Armenia, and between Turkey and Armenia. In addition, the
dispute can be exploited by external powers to destabilise the
region further. With so much western economic investment going
into the oil sector of Azerbaijan, such conflict can be detrimental
to western interests.
The potential for conflict is there. Both Armenia
and Azerbaijan are arming themselves. The first with Russian aid,
the second with Turkish assitance. Moreover, the development of
new geopolitical axes does not bode well for the entire region.
There seems to be a confluence of interests on the axis of Iran,
Armenia and Russia, as countered by another axis between Azerbaijan,
Georgia and Turkey. It is still in the early stages of the evolution
of such a dynamic (and it could not materialise at the end), but
Nagorno-Karabakh is at the pivot of both of these axes and therefore
a lasting solution to the conflict is crucial for regional peace.
This gloomy analysis is, however, one side of
the coin. There is also the potential of peaceful development
based on economic integration and regional co-operation. For this
to succeed, a fine balancing act must be maintained so that all
parties to the conflict feel that they have not been wronged.
This is where the OSCE can play a crucial role by suggesting innovative
solutions which might not have precedence in international law,
but can be acceptable to both sides.
The British Role
In this context, Britain can play an important
role by continuing to support the OSCE efforts. However, so far
Britain has taken more of a back seat approach to the Karabakh
problem. While it has an embassy in Armenia, it remains small
and not too visible compared to the American and French activities.
Hence, there is much room for a more active mission representing
Another problem related to this is the fact
that Britain suffers from an "image problem" in Armenia.
Part of this comes from the reality that British companies are
heavily involved in the Azerbaijani oil sector, part from Britain`s
historical support of Azerbaijan (in 1918Armenians have
long memories!), and part from the current British position which
supports the territorial integrity of Azerbaijan without taking
into account Karabakh`s right to self-determination. In the last
couple of years, British representatives in Armenia have not been
too successful in addressing this "image problem." It
seems that when it comes to the Karabakh issue, the FCO has not
been able to project the British government as an impartial mediator.
Britain could play a leading role in the settlement of the dispute
because of its extensive contacts in Baku. By encouraging an innovative
solution to the dispute within the parameters of the OSCEbe
it the notion of a "common state" or some other approachBritain
can contribute to the speedy solution to Karabakh conflict. To
do this, it needs more of a pro-active policy in the region.
As with the other Soviet republics, Armenia
too became independent in 1991, after the collapse of the USSR.
But its independence was marred with the conflict over Nagorno-Karabakh,
as well as the devastating earthquake of 1988. Despite ecomomic
problems and the hardships of war, and unlike most other southern
Soviet republics, Armenia managed to achieve internal polititcal
stability, a relatively democratic government, a ruling elite
which was not communist, and proceeded with the privatisation
of the economy. There was much hope for it as a model of stable
"transition" to democracy and market-oriented economics.
However, after eight years, it has become apparent that Armenia
is not too different from the other formerly-Soviet republics;
the whole idea of transition has become a questionable process.
These problems can be examined through the following factors.
Armenia faces the same challenges and pitfalls
as the other post-Soviet countries. But it also has some unique
features which merit mention. The latter include:
(1) The memory of Genocide. The
collective memory of the Ottoman-Turkish genocide against the
Armenians between 1915 and 1923 is much more than a historical
fact for the Armenians. It is ingrained in their collective psyche,
and casts a shadow on their world outlook, specially since Turkey
continues to deny the genocide. Hence, the Karabakh conflict is
sometimes interpreted as a war against genocidal policies. Relations
with Turkey are also influenced by the history of the Genocide.
Hence, it is important to factor this issue in while dealing with
Armenia and Armenians. Not taking the Genocide into account would
be like negating the Holocaust in relation to Israel and the Jews.
(2) Blockades. Another particular
issue relating to Armenia is the fact that two of its main borders
are closed due to a blockade by Azerbaijan and Turkey. This has
obvious economic ramifications in terms of trade and industry.
But it has also forced the country to seek alternative ways to
import and export goods. Hence, relations with Iran and Russia
(via Georgia) have become of absolute importanceboth politically
and economically. Partly because of the east-west blockade, Armenia
had to pursue and strengthen its north-south relations, leading
to the axes mentioned above. Moreover, the blockades also reinforce
the siege mentality of being a nation under threat and therefore
weary of regional co-operation.
(3) The diaspora. Finally, Armenia
is also unique insofar as it has a large and relatively powerful
diaspora (specially in the US and France). The diaspora has been
an important source of support (mainly through lobbying) for the
republic, as well as of financial assistancealthough the
latter is much exaggerated. But the diaspora is also a source
of additional problems, particulary when some elements of it wish
to interefere in the politics and policies of the republic.
In addition to these special factors, the following
more common issues need to be addressed:
(4) Democracy and the rule of law.
Despite a promising start, Armenia has fallen short of expectations
in terms of establishing a democratic society based on the rule
of law. The country is not in as bad a situation as Azerbaijan
and some of the Central Asian republics. But there are abuses
of human rights, not to mention electoral fraud. The 1995 parliamentary
elections and the 1996 presidential elections were both marked
with widespread irregularities which put ultimate responsibility
at the doorstep of the ruling elite. The 1998 presidential elections
showed some signs of improvement. But the ultimate test will be
the upcoming parliamentary elections in May 1999.
The basic problem with the country is that the
rule of law is considered secondary to wealth, connections and
power. The well connected and the rich (the two go hand in hand)
can do as they please with impunity, as long as they respect the
unwritten "rules of the game" which governs the conduct
of the elite. This is a difficult phenomenon to overcome since
it comes from the Soviet past and is ingrained in popular culture.
(5) Russian influence. Russian influence
in Armenia is strongest in the area of security and foreign relations.
Armenia views Russia as a guarantor of its security and is a willing
member of CIS as well as bilateral security arrangements. Russia,
in turn, views Armenia as a valuable and dependable base in the
Transcaucasus. Recently, Russia has begun the process of deploying
S-300 missiles in Armenia. The missiles will, however, remain
under Russian command.
(6) Economic issues. The Armenian
economy is beginning to recover from the collapse it suffered
in 1992-93. The GDP is growing in the 4-6 per cent range. There
is some foreign investment (approximately 150-200 million dollars
in 1998), but the country survives, on the whole, on economic
assistance from the West (Worldbank, IMF, EBRD, etc. loans and
humanitarian grants): As of 1 January 1999, the total foreign
debt was 720 million dollars. Armenia`s major trading partners
are Russia, the USA, Belgium, Iran, and Great Britain (75 million
dollars). With all of these partners Armenia has a negative trade
balance. There is also a lot of money coming into the country
(200-300 million dollars per year) from expatriates who work abroad
(mostly in Russia) and send money home. As to industry, most of
the Soviet industrial complex is either idle or already dismantled
and sold as scrap metal. A few factories do operate, producing
electrical goods, machinery, etc. Foreign investment tends to
go to the service sector as opposed to production. There is a
fairly stable banking sector. Inflation and the currency rate
are kept stable as well due to the monetary policies of the government.
Official unemployment is around 10 per cent, but in reality it
is close to 50-60 per cent, if not more. At this point, the economy
is largely privatised. Seventy five per cent of the GDP is in
private hands, with trade and agriculture leading the way at the
rate of 97 per cent privatisation. Industry is 85 per cent privatised,
but transport and other element of infrastructure remain in the
hands of the state.
(7) Corruption. As with other CIS
countries, the biggest problem for the country is corruption.
This extends from the very top of society to the very bottom,
and it is tied to the issue of rule of law and economic problems.
Benefiting from the privatisation schemes, a few families have
managed to purchase most of the state enterprises, enriching themselves
enormously. The economy of Armenia is controlled by a few "clans",
all connected to various individuals in the government. The clans
have divided up the various sectors of the economy in between
Analysis and Future Prospects
Armenia is going through a phase of transisiton,
but it is no longer clear if the path of this transition is going
to lead to liberal democracy. There are tensions within society,
and within the region which could explode. The most important
of these tensions relate to the economic hardships that the bulk
of the population faces. What makes the situation volatile is
not so much that many people are pauperised, but that there is
an elite which has become visibly super-rich through dubious meansat
least, as far as the majority of the population is concerned.
Hence, there is much pent-up resentment underneath the surface,
some of which was visible in the post-election violence in1996.
The most worrisome developments is the fact
that there have been a few political assasinations (most recently,
the Deputy Minister of Interior, and earlier the Prosecutor-General)
under mysterious circumstances. These have not led to instability,
but are signs that violence is creeping into the political culture
as a means of settling disputesbe they political, economic
or personal. If such instances continue, the military might try
to take control of the country and establish a repressive regime.
The person most poised to do this is the current
defence minister, probably the most powerful man in Armenia. He
has the personal loyalty of many of the army officers. He has
recently established a political party which is to serve as his
civilian power base. Currently, his relations with the President
are cordial, but there is tension between the two men.
The above possibility is the "worse-case"
scenario. There is a democratic alternative, but it is contingent
upon the strengthening of civil society institutions and clear
signals from the west that a military regime will not be tolerated.
The parliamentary elections of May 1999 will be the clearest indication
of the future direction of the country as far as politics is concerned.
In the economic sphere, trade relations of Armenia
have diversified considerably since independence. Whereas in 1993
foreign trade with countries outside of the former USSR was 28
per cent, in 1998 it had increased to 73 per cent. Exports to
CIS countries (except Turkmenistan), Turkey and Iran all fell
in 1998, whereas it increased to the USA (180 per cent), Britain
(540 per cent), and other western countries. Imports from Britain
increased by 660 per cent. These figures clearly show that Armenia`s
economy is being oriented towards the west, and although there
is a long way to go, there seems to be a trend which is tying
the country to European markets.
The British Role
The FCO has been active in promoting British
economic interests in Armenia, particularly in the banking sector,
pharmaceuticals, aviation, etc. It has been assisted in this by
diaspora (London based) Armenians who invest in the country. It
is important for the FCO to maintain and enhance such a presence
in Armenia in order to ensure that economic links deepen between
the two countries. As Armenia becomes more and more integrated
in western markets, it is inevitable that its economic importance
will increase in the Transcaucasus. Oil related interests in Azerbaijan
are, of course, of paramount importance. But they must be viewed
in a regional context. In the absence of economic and political
links between Azerbaijan and Armenia, it becomes important to
tie the latter in a wider economic network for the sake of regional
stability. And the FCO's role in this is crucial.
But the British role must not be limited to
the sphere of economics. It is also crucial to support civil society
institutions (NGOs, etc) which can consolidate democracy, free
speech, etc. The Tacis programme is one such European effort which
has been beneficial. The important factor here is to insist on
direct accountability rather than giving money to state agencies
with the hope that it reaches the intended recipients. Corruption
is the scrooge of many post-Soviet countries, and Armenia is no
exception. It is also essential to devise programmes directed
at combatting corruption. Although it is not the role of the FCO
to do this, it can nevertheless co-ordinate efforts which would
link British aid/investment with anti-corruption programmes.
On the political side, British representatives
in Armenia have established contact with all major political parties
and key figures. They have acted as a two-way medium of communication
between Britian, and various elements in Armenia. They have been
active in other spheres as well, such as British cultural week,
the Byron School, promoting higher education possibilities in
the UK, etc.
Despite its various endevours, the FCO has room
to expand if Britian wishes to assume a more active role in the
region. One possible avenue, which would be beneficial to both
regional players and Britain, is to augment its role as a mediator.
Not by duplicating the work of the OSCE on the Karabakh issue,
but on a more general level, presenting the middle position between
the USA/Turkey/Azerbaijan and Russia/Iran/Armenia (something that
the French seem to be doing). By having relations with all of
these countries, Britian can try to smooth relations between them.
As such, it can perhaps diffuse some of the geopolitical tensions
inherent in the region due to the axes mentioned above.
Finally, in the specific Armenian case, there
is the outstanding issue of the Genocide, the recognition of which
has now become an integral part of Armenian foreign policy. This
issue will not go away and it is essential to deal with it. Standing
on the moral high-ground and denouncing Turkey will not do. Nor
will statements urging the Armenians to forget history are satisfactory.
A balancing act between the varius positions of Armenia, Turkey
(and Azerbaijan) will not be easy, but it is the only way that
could lead to some sort of satisfactory understanding between
these countries. The FCO, based on its contacts and expertise,
can play a special role in this matter.
The basic dynamic in Armenia, as in other CIS
countries, is one of clashing values and practices between the
Soviet past and the principles of liberal democracy (the hegemonic
ideology in the post-cold war world). If the post-Soviet experience
has taught western policy makers one thing in the past few years,
it is that mass privatisation and a democratic constitution will
not automatically lead to a liberal society and economic prosperity.
The problems that these societies face are much more profound
because they are ingrained in deep historical and cultural practices
and habits. The democratisation process takes generations becuse
it entails changes of attitude as well as institutions. Hence,
it is important to examine the issues and problems facing these
countries from a long term perspective, and to emphasise the need
to establish strong foundations on to which democracy can be built.
To do this, a much deeper understanding of these societies is
needed, and the FCO, as the representative and main agent of information
to the government, must keep tract of developments, as well as
advise avenues for change beneficial to Britain and Europe.
It is quite understandable that British emphasis
in the region is on Azerbaijan, due to its oil reserves, and on
Georgia, due to its position on the Black Sea. But neglecting
Armenia would be quite problematic as it will lead to regional
instability. The post-war European experience has shown that regional
integration is the key to prosperity and stability. A similar
dilemma faces the Transcaucasus region at this point. It has the
potential to develop either way: rule by democratic institutions
and economic devlepment, or represssive and unstable governments
connected to export-driven resources. Obviously, these countries
must themselves make the decision about their own future. But
the international community can have a direct input to help them
achieve a prosperous and free future. After all, it is in the
the economic and political interests of Europe and the west to
have a stable Transcaucasus. Herein lies the role of Britain and