Caucasus Stability Under Threat as Armenia’s Kocharian Faces Opposition,
Azerbaijan’s Aliyev Issues Fighting Talk

WMRC Daily Analysis (World Markets Research Centre Limited)
April 15, 2004

By Dario Thuburn, WMRC Perspective

Significance

President Robert Kocharian’s government in Armenia is looking in trouble
and the Nagorno-Karabakh dispute between Armenia and Azerbaijan
increasingly fragile.

Implications

Domestic political pressure at home may push Kocharian’s government
into a more confrontational attitude towards Azerbaijan, with a
pre-emptive attack against an increasingly threatening enemy a
possible worst-case scenario. Azerbaijan’s Aliyev will also seek to
escalate tensions in the fragile stand-off as a way of putting
pressure on Turkey not to lift its blockade on Armenia.

Outlook

If Turkey lifts its blockade on Armenia, Russia’s leverage over the
country will be seriously diminished and regional economic development
will be boosted but this is only likely to happen over the
medium-term.

The question of what effects Georgia’s ‘rose revolution’ in November
2003 and the sweeping changes that have taken place in that country
will have on Georgia’s neighbours Armenia and Azerbaijan is fast
rising in prominence. In Armenia, the opposition has consolidated and
has made clear its specific intent of toppling President Robert
Kocharian’s strong-arm rule through a series of relatively large-scale
demonstrations that are ongoing. In Azerbaijan, newly installed and
relatively inexperienced President Ilham Aliyev has softened some
aspects of the authoritarian system in place but also signalled a more
nationalistic and tough attitude towards Armenia over the
Nagorno-Karabakh dispute. The region as a whole has come under the
international spotlight because of its rising importance as a source
and transit route for oil and gas from the Caspian sea.

Political Pressure

After international criticism of a crackdown on opposition
demonstrations by the Armenian authorities, most notably from the US
and the Council of Europe, Armenian President Robert Kocharian
yesterday said he was prepared to talk to opposition leaders who have
vowed to oust him from power. The opposition is questioning the result
of Kocharian’s re-election in March, which was deemed flawed by
international observers. So far they have limited their protest action
to recourse to the country’s Constitutional Court and boycotts of the
country’s parliament but, most probably inspired by the ‘rose
revolution’ in neighbouring Georgia, they have now embarked on a more
confrontational strategy, bringing thousands of disaffected people out
into the streets of the Armenian capital Yerevan. Police used water
cannons to break up an anti-government demonstration earlier this week
and dozens of police and protesters were reported injured, with
several opposition activists detained.

International Influence

The stand-off between government and opposition in Armenia is clearly
not only an issue limited to the country’s borders. The revolution in
Georgia could not have taken place without the implicit backing of the
international community, particularly the US, for opposition leaders
against President Eduard Shevardnadze. Then Russian Foreign Minister
Igor Ivanov tried and failed to broker a last-minute compromise
between Shevardnadze and his pro-Western opponents. Despite the
rhetoric of strong personal relations between new Georgian President
Mikhail Saakashvili and Russian President Vladimir Putin it is clear
that Georgia’s orientation is now more firmly pro-Western and the
country is slipping from Russia’s sphere of influence. Russian foreign
policy hawks are intent that the same should not happen in Armenia,
which has been traditionally strongly pro-Russian and where Russian
business plays a major role. Putin today urged Kocharian to uphold
stability and the rule of law amid the protests – a statement that
implied backing. The US State Department, on the other hand, expressed
‘concern’ and appeared to criticise the Armenian authorities’ handling
of the protests (see Armenia: 14 April 2004: US Criticises Armenian
Authorities for Demo Crackdown).

Fragile Peace

The confrontation could also have a negative impact on the delicate
‘frozen conflict’ with Azerbaijan over the disputed Nagorno-Karabakh
territory, which is currently occupied by pro-Armenian forces. Open
armed conflict was brought to an end through international mediation
in the early 1990s but low-intensity confrontation on the front line
has been ongoing and there is no formal peace agreement in place
between Armenia and Azerbaijan, with stability largely ensured by a
balance of forces on the ground. This balance is now under
threat. Azerbaijan is due to reap massive financial rewards from the
oil and gas windfall over the next few years, which it could use to
increase its military capability. The US, for one, has promised
defence assistance and Azerbaijan has been receiving training and
assistance from Turkey for several years now (see Azerbaijan: 6 April
2004: Azerbaijan is Better Prepared for War, National Television
Reports and Azerbaijan: 15 March 2004: US Steps Up Military Presence
in Azerbaijan, Pressures for Reforms).

Fighting Talk

Political rhetoric in Azerbaijan, which still faces the socio-economic
fall out of tens of thousands of internally displaced people from the
conflict has also been more combative recently, particularly as the
failure of high-level peace negotiations between Presidents Aliyev and
Kocharian has become increasingly clear. In an address to the Turkish
parliament yesterday. Aliyev said ‘Azerbaijan will liberate its own
territory whatever the price’. This is the kind of rhetoric that will
appeal to domestic populism and hawks in the establishment but it is
also a warning to Turkey not to lift its blockade on Armenia, which
has been in place since 1993. For his part, Kocharian in Armenia may
see the Nagorno-Karabakh issue as a helpful distraction to his
domestic political troubles, particularly as parts of the defence
establishment reckon a pre-emptive strike on Azerbaijan, before the
country has a chance to build up military might, would be beneficial.

Implications and Outlook

The dogs of war in the South Caucasus are not yet loose but it is
clear that the effects of momentous political change in Georgia, a
groundshift in Turkey’s foreign policy and the region’s rising
prominence on the energy map have the potential to undermine
stability. While it is still difficult to see the Armenian opposition
coming to power in the short-term, Georgia-style, the potential for an
escalation of tensions between Armenia and Azerbaijan is high. Turkey
too may change the complex geopolitical map of the region by lifting
an economic blockade on Armenia as a way of improving its standing
with the European Union, though this is only likely to happen over the
medium-term. The regional economic effects will be massive. The World
Bank estimates that the lifting of both the Azerbaijani and Turkish
blockades could increase Armenia’s GDP by as much as 30-38%. The
Turkish-Armenian Business Council has estimated that bilateral trade
could reach US$300m per year with the lifting of the blockade, a
drastic rise from the current US$70m. It would also lessen Armenia’s
dependence on Russia and therefore the influence of Russian politics
and business over the country, as well as undermining the mafia
structures that have profited from limited import routes and smuggling
over the past decade.

In the short-term, the ousting of President Robert Kocharian in
Armenia is possible. This would bring a more youthful, less corrupt,
but also more populist, leadership to power in a similar way to
Georgia’s new government. The likelihood is lessened however because
of Russia’s far stronger influence in Armenia, the power of mafia
structures within government, the opposition being less consolidated
and organised and the country being far less strategic than Georgia
for the international community. An announcement of the lifting of a
blockade between Turkey and Armenia is possible, though restrictions
are likely to be removed only gradually over the medium-term. In any
case, the risk of renewed conflict between Armenia and Azerbaijan over
Nagorno-Karabakh is increased.