THE ART OF LEVITATION; THE CAUCASUS

The Economist
U.S. Edition
November 18, 2006

How Armenia copes with its isolation in the combustible Caucasus

NOWHERE is living next to big countries trickier than in the
Caucasus. Georgia, Armenia and Azerbaijan were for centuries swallowed
by rival empires; when the last of them, the Soviet Union, collapsed,
three territorial wars broke out, all of which may yet re-erupt. Now
Georgia is in a cold war with Russia.

Next-door Armenia’s geographical plight might seem the worst in the
Caucasus-or anywhere. It is landlocked and poor; of its four borders,
those with Turkey and Azerbaijan are closed following its bloody
but successful struggle for Nagorno-Karabakh, a province of Soviet
Azerbaijan mostly populated by Armenians. Its other neighbours are
Georgia (under an economic blockade by Russia) and Iran. Yet despite
the war, the economic collapse that went with it and a terrible
earthquake that preceded it, Armenia seems to have levitated out
of trouble.

It benefits from an indulgence not afforded to pro-Western Georgia.

Per person, Armenia is one of the biggest recipients of American aid
(thanks to the powerful diaspora there, which remembers vividly the
massacres of 1915). Yet that American help does not trouble Russia,
which has a military base in Armenia. GDP is growing-though still
pitifully low: monthly wages are around $150. Towns and villages in
the beautiful, barren countryside are still poor and dilapidated,
but Yerevan is full of construction cranes and posh cafes.

But levitation has its limits. After some progress in the late 1990s,
reforms have stalled. The famed cognac aside, exports are puny.

Armenia relies on foreign aid and remittances from the huge diaspora;
emigration (see box) has put the population well below the official
2.9m figure. The international balance is also precarious. Some in
Russia want the Armenians to take sides against the Georgians, perhaps
by stirring up the Armenian minority there. "We refuse to choose,"
says Vartan Oskanian, the foreign minister. Indeed: alienating Georgia
would be suicidal.

But the Kremlin’s leverage is growing. Russian firms already control
the energy sector and want a greater stake elsewhere. Mr Oskanian says
"our needs today are too dire" to worry about future risks.

Azerbaijan’s hydrocarbons windfall makes it sound confident, even
bellicose, stoking Armenian reliance on Russia.

American interest in the pipelines that link the Caspian to the
Mediterranean, doglegging round Armenia, mean that renewed fighting
would echo far beyond the Caucasus. Internationally sponsored talks
about Karabakh limp on-Mr Oskanian met his Azerbaijani counterpart
this week-and Western diplomats try to sound upbeat. But a deal,
or even a fudge that would at least allow normal trade relations,
looks all but impossible. Sporadic shooting continues.

One reason is that bad governments in both countries bang the
nationalist drum for want of wider legitimacy. Armenia’s Robert
Kocharian has emulated his sponsors in the Kremlin, squeezing the
media and rigging elections. Corruption flourishes. It is hard to
find an Armenian politician who does not want to succeed Mr Kocharian
when his presidential term expires in 2008; it is harder still to find
one who thinks the vote will be fair. Like Ilham Aliev, who inherited
power in Azerbaijan from his father, Mr Kocharian promises just enough
change to pacify America. Unsurprisingly, considering their history,
most Armenians are too cynical to expect much better from their rulers.

Like acrobats in a human pyramid, the Caucasus countries are inevitably
affected by their neighbours’ behaviour. Russia’s closure of its border
with Georgia, for example, hurts Armenian traders. Such outsiders’
jostling would be much easier to bear if the three (relative) tiddlers
had a common line. But they are all, as Raffi Hovannisian, a former
Armenian foreign minister, says of his country, "long on civilisation,
short on statecraft."