AZERBAIJAN’S GROWING ECONOMIC CAPACITY HAS YET TO AFFECT KARABAKH RESOLUTION
By Fariz Ismailzade

Eurasia Daily Monitor, DC
Oct 11 2007

On September 4 Azerbaijani President Ilham Aliyev stated that the
national budget of the country in 2008 would reach $12 billion (Day.az,
September 4). Just three years ago, the budget totaled only $4 billion.

Aliyev’s announcement was no surprise to the domestic audience,
since the population of Azerbaijan has been witnessing a period
of booming economic growth unprecedented in the history of the
region. Last year Azerbaijan’s economy grew by 26% and so far in
2007 by 34%. This dramatic increase was mainly due to the start of
the Baku-Tbilisi-Ceyhan pipeline’s operations and the corresponding
dramatic increase in oil exports.

Recently the Azerbaijani government has been making a direct link
between the country’s growing economic capacity and its ability to
solve the long-standing Karabakh conflict. Specifically, both carrot
and stick policies have been offered to the Armenian side. While
Azerbaijan has tripled its military budget from $300 million in
2005 to $1 billion in 2007, the government simultaneously has been
deepening its economic partnership with Georgia and other countries
of the region, such as Kazakhstan, Tajikistan, and Belarus, in order
to show official Yerevan the potential benefits of regional economic
cooperation. For example, Azerbaijan has initiated and funded the
Baku-Tbilisi-Kars railway project, which will immensely benefit the
Georgian and Turkish economies and bring greater prosperity to the
whole region.

However, the initial optimism that these policies would produce
tangible results in the Karabakh peace process seems to be fading.

Armenia, as indicated by Armenian Foreign Minister Vartan Oskaniyan’s
recent statement at the UN General Assembly session in New York,
does not want to make concessions and withdraw military forces from
the occupied territories. On the contrary, the military empowerment
of Azerbaijan has created a sense of insecurity in Armenia, which
is pushing it further into the hands of the Kremlin. A new arms
scandal erupted in August, when Turkish border guards seized a
military hardware shipment en route to Armenia from Albania. Many
Azerbaijani analysts believe the origin of the cargo was Russia,
which is trying to further arm Armenia to offset the potential
military imbalance in the region. On October 8, Khazar Ibrahim,
spokesperson for the Foreign Ministry of Azerbaijan, stated, "Russia
should be very careful in such a sensitive issue as arming Armenia"
(Foreign Ministry official briefing, October 8).

In addition to the spiraling arms race in the Caucasus, local pundits
in Azerbaijan claim that the increase in the country’s military budget
has not affected the level of professionalism among the troops nor
has it increased the amount of military hardware available to the
soldiers. Azerbaijan focuses on purchasing military equipment mainly
from former Soviet republics, such as Russia, Belarus, Ukraine,
and Kazakhstan. As recently as October 8 the Kazakh defense minister
paid a visit to Baku to further enhance the military partnership with
the Azerbaijani government. These countries provide either outdated
equipment or charge large amounts to repair existing equipment,
a frequent need since the quality of the hardware is generally very
low. As a result, Azerbaijan’s military capability and its ability
to re-take Karabakh by force remains in serious doubt.

Baku’s economic policies have not impressed Yerevan. On October 8,
the Day.az website quoted an Armenian Dashnaktsutsun party official
saying, "Nagorno-Karabakh will never become part of Azerbaijan." This
statement, coupled with the deadlock in the negotiation process,
illustrates Azerbaijan’s inability to use the growing economic capacity
to change hearts and minds in Yerevan.

The only solution for the current deadlock is to encourage extensive
public diplomacy efforts between both countries. As long as mistrust
is high and dialogue opportunities are low, it will be extremely hard
to convince the public in both countries that compromises are needed to
peacefully resolve the conflict. If Azerbaijan agrees to restore public
ties with Armenia, it would reduce the feelings of insecurity in this
country and subsequently Yerevan’s level of dependence on Russia for
military and economic assistance. Only under these conditions can
Azerbaijan’s newfound economic prosperity facilitate the peaceful
resolution of the conflict.