United Press International
Sept 11 2008

Analysis: Azeri-Armenian relations

JOHN C.K. DALY
WASHINGTON, Sept. 11

Last month’s military conflict between Russia and Georgia over South
Ossetia has cast a harsh spotlight on Western assumptions about
exporting Azeri oil through neighboring Georgia and Turkey.

While the military confrontation focused Western media attention on
tensions between Russia and Georgia, Azerbaijan itself remains gripped
by a "frozen conflict" dating back to even before the 1991 collapse of
the Soviet Union. Azerbaijan’s clashes with Armenia over the enclaves
of Nagorno-Karabakh and Nakhchivan broke out in February 1988; by the
time a cease-fire was signed in May 1994 ending active hostilities,
thousands had been killed and wounded, while hundreds of thousands of
refugees were created on both sides and the Armenian armed forces were
left occupying swaths of Azeri territory, including Nagorno-Karabakh
and seven neighboring districts. The volatility of the situation was
instrumental in the eventual decisions of the Western consortium
members to build their proposed export pipeline for Azeri oil through
Georgia rather than utilize a shorter route transiting Armenia.

Now, however, there are some indications that there might yet again be
movement toward a resolution of the issue. On Wednesday, after meeting
with Turkish President Abdullah Gul, Azeri President Ilham Aliyev
expressed hope that the Nagorno-Karabakh issue eventually could be
settled. Gul’s comments had a strong economic undertone, as he told
reporters, "If we settle this conflict, which I hope we will manage to
do, all countries of the region will develop much faster."

A resolution of the disputes between Azerbaijan and Armenia could give
Western investors yet another export route for Caspian energy, an
issue of growing concern among Western investors because of Russia’s
increasing assertiveness in the region, combined with the fragility of
export routes through Georgia, as demonstrated by the recent
conflict. The prize is certainly tempting: The Caspian’s 143,244
square miles and attendant coastline are estimated to contain as much
as 250 billion barrels of recoverable oil, boosted by more than 200
billion barrels of potential reserves, quite aside from up to 328
trillion cubic feet of recoverable natural gas. From the outset
Washington’s policy has been to construct, if possible, multiple
export pipeline routes, bypassing both Russia and charter "axis of
evil" member Iran.

Because of the Nagorno-Karabakh dispute, however, export routes to
Armenia were never considered as a viable option in 1994 after
then-Azeri President Geidar Aliyev signed the "Contract of the
Century" with Western energy concerns to develop Azerbaijan’s Caspian
Azeri-Chirag-Guneshli fields. Consequently, the first Western export
oil pipeline not under Russian control went westward through
Georgia. In 1999 Baku’s export options broadened with the opening of
the $600 million, 515 mile, 100,000-barrel-per-day Baku-Supsa
pipeline. Azerbaijan was finally able to free itself completely from
reliance on Russian export pipelines when, in May 2006, the $3.6
billion, 1,092-mile, million-barrel-per-day Baku-Tbilisi-Ceyhan
pipeline opened.

The Armenians and Azeris sought to influence Washington’s decisions on
the region; political agitation by the Armenian-American lobby
resulted in the inclusion in 1992 of Section 907 in the U.S. Freedom
Support Act, which banned any direct U.S. aid to the Azerbaijani
government as punishment for its blockade of Armenia. It was only in
January 2002 that President George W. Bush waived the legislation as a
reward for Azeri support of the United States following the Sept. 11,
2001, terrorist attacks.

The Bush administration, in one of its first foreign policy
initiatives, attempted to break the diplomatic impasse between the two
Caucasian nations. In April 2001, even before the waiver of Section
907, Secretary of State Colin Powell’s first major foreign initiative
was to try to resolve the Nagorno-Karabakh dispute during a summit in
Key West, Fla., where he met with Azeri President Geidar Aliyev and
Armenian President Robert Kocharyan. But the meetings, which were held
by the Office for Security and Cooperation in Europe Minsk Group
co-chairs France, Russia and United States, proved fruitless.

There now seems to be a genuine chance for breaking the diplomatic
logjam, especially as Turkey and Armenia are slowly edging toward
restoring relations, as well, in the wake of last week’s "soccer
diplomacy," which saw Gul fly to Yerevan to attend a Turkish-Armenian
football match, where he held talks with Armenian President Serzh
Sargsyan.

Gul is convinced that new opportunities have opened for settling the
Nagorno-Karabakh dispute. He pragmatically informed journalists that a
resolution of the issue could allow all countries of the region to get
involved in major energy transportation projects, noting, "If the mood
of cooperation prevails in the region over hostility, it will serve
the interests of all countries in the Caucasus." Ankara is certainly
thinking big; Turkish Minister for Energy and Natural Resources Hilmi
Guler, currently in Baku to attend a conference on "oil and gas
potential in Azerbaijan and Turkmenistan" organized in Azerbaijan,
held out optimism that one of the West’s most cherished projects, the
Nabucco pipeline to bring Azeri natural gas westward, would go
forward, telling reporters, "Turkey will definitely finalize the
Nabucco project."

Turkey is also pressing to resolve the Russian-Georgian dispute; on
Sept. 2 Gul telephoned Bush, whom he informed about Prime Minister
Recep Tayyip Erdogan’s proposal for a Caucasus Stability Platform to
restore peace and stability to the region. Rather than unilaterally
pushing military aid to Georgia, Washington ought to listen closely to
Turkey’s diplomatic initiatives, especially if it wants to prevent any
further checkmates to its policies of developing Caspian energy
projects: The Kremlin is less likely to feel threatened by a friendly
soccer match than U.S. naval warships sailing in the Black Sea.