REGIONAL DEVELOPMENTS AND ARMENIAN NATIONAL SECURITY
Richard Giragosyan

"Noravank" Foundation
12 January 2009

The region of the South Caucasus has long served as an arena for
competing regional powers and, for much of the past two centuries,
has been hostage to the competing interests of much larger regional
powers, as neighboring Russia, Turkey and Iran which have jockeyed
for power and influence. And those very historic powers — Russia,
Turkey and Iran – continue to exert influence today as the dominant
actors in the region.

This competition has not only continued in the wake of the collapse
of the Soviet Union, but has only intensified with the onset of new
opportunities for engagement and energy-based interests. For the
three infant states of the region, Armenia, Azerbaijan and Georgia,
the combination of a lack of political legitimacy, fragile economies
and several unresolved or "frozen" conflicts, have prevented them
from resisting the powerful sway of their larger neighboring regional
powers.

But most significantly, this combination of historical legacies
and current realities has constituted a rapid shift in regional
security. This shift in security incorporates not only several
general elements, ranging from the challenges of energy security to
the constraints from unresolved or "frozen" conflicts, but also more
specific trends, including a recent resurgence in tension20between
Russia and the West.

Against the backdrop of a dynamic shift in security, the three
states of the South Caucasus region each face a difficult course
of economic and political reform, systemic transition and nation
building. The region also continues to struggle in overcoming the
legacy of constraints and challenges stemming from seven decades of
the Soviet rule.

In the light of this regional reality, each state has pursued a
different course, with Armenia backed by its sizable diaspora,
yet remaining firmly rooted in the Russian orbit, and Azerbaijan
leveraging both its Caspian energy resources and its historic ties to
Turkey. For Georgia, the legacy of instability from a destructive civil
war in the 1990s and the loss of the separatist regions of Abkhazia
and South Ossetia have prompted Georgia’s strategic reorientation,
based on exploiting its role as a key "transit state," offering its
territory and Black Sea ports as crucial links in the regional energy
chain, providing Azerbaijan with a strategic link to both the Black
Sea and to Turkey, and as a frontline Western ally.

But it is the more recent intersection of interests among greater
powers that tends to place this region, more than many others, in
danger of devolving into an arena for confrontation. This was further
evident in the August 2008 conflict between Georgia and Russia that
triggered a new period of confrontation well beyon d the confines of
the South Caucasus.

Conflict in Georgia Although initially centered on a conflict in
Georgia’s breakaway region of South Ossetia, the Georgian crisis
expanded rapidly, sparking fresh tension between Moscow and Washington
and seriously derailing Georgia’s long-held aspirations to join the
NATO alliance. The fallout from the Georgian conflict has been equally
serious, with new doubts over the U.S.

commitment to the fledgling pro-Western Georgian democratic
government. But even more troubling, the crisis further revealed the
inherent fragility of security and stability in the strategically
significant South Caucasus region.

Although Georgia’s strategic significance was substantially enhanced
after the so-called "Rose Revolution" that ushered in a new staunchly
pro-Western and democratically reformist government, Georgian
President Mikheil Saakashvili has suffered a severe setback after his
miscalculation in seeking to fulfill his pledge to re-impose central
Georgian control over the country’s breakaway region of South Ossetia.

The aftermath of the August conflict has not only weakened his personal
rule, but has also eroded his position as a key NATO aspirant.

For Armenia, the immediate effects of the August conflict in Georgia
was serious, imposing some $70 million in economic damage and losses
and sparking a five-day nationwide shortage of gasoline after Georgian
transport routes were closed. For Armen ian national security, the
conflict reaffirmed both the vulnerability of Armenia’s dependence
on Georgia as a key trade and transport route and the need for a new
policy of strategic energy security. In terms of energy security, the
most obvious and immediate impact of a nationwide gasoline shortage
only highlighted Armenia’s dangerous and short-sighted lack of an
adequate energy reserve.

Searching for a New Regional "Center of Gravity" In a broader context,
the Georgian conflict with Russia raised new doubts over Georgia’s
previous role as the regional "center of gravity" for the West. Prior
to the conflict, Georgia enjoyed a unique advantage as the focal
point for Western security policy. For the Saakashvili government,
Georgia’s future was clearly with the West, reflecting a strategic
vision that saw membership in NATO and the European Union as the
ultimate guarantee to external security as a front-line state bordering
a resurgent Russia.

Moreover, such an avowed Western orientation was seen as the most
effective way to overcome and reverse the legacy of a serious erosion
of state sovereignty and territorial integrity. This new orientation
forged important immediate benefits, ranging from a deepening of
U.S. and Western military ties to an influx of capital and investment
as the Georgian government liberalized the economy and initiated a
new anti-corruption campaign.

This ambitious shift to the West enabled Georgia to graduate from the
role of a key regional transit state to assume even greater prominence
as the West’s new "center of gravity" in the South Caucasus. This
role as a center of gravity was most evident in the U.S.-run $64
million "Georgia Train and Equip Program" (GTEP) and the subsequent
"Sustainment and Stability Operations Program" (SSOP), each of which
elevated Georgia as a "flagship" for U.S. military activities and
ambitions in the region, surpassing even U.S. training of Azerbaijani
forces in the Caspian Sea. But this prominence also served to
bolster Georgian over-confidence, despite the reality that neither
the U.S. military program was ever aimed at providing the Georgian
armed forces with any real combat readiness or offensive capability.

More specifically, the Train and Equip program was actually designed as
a flexible, phased training initiative, and merely provided training
and equipment for less then three thousand troops with the intended
goal of acquiring limited counter-terrorism capabilities. Similarly,
the goal of the U.S.-run Sustainment and Stability Operations Program
merely sought to prepare select Georgian units for deployment to Iraq
in support of the U.S.

Operation Iraqi Freedom (OIF).

But these new doubts over such a reliance on Georgia have also
sparked a search for a new regional "center of gravity" in the S
outh Caucasus. Western dissatisfaction with the Georgian leadership,
although something that started well before the August conflict,
reached a turning point after Georgian leaders ignored Western caution
and concern and proceeded to confront Russian power.

Although Georgia’s Westward shift was heralded as a Western success,
there were inherent limits to exactly how far and how fast Georgia
could go, however. These limits stemmed from the finite limits to
Georgia’s capacity to resist the steady reassertion of Russian power
and influence, especially evident when Moscow resorted to imposing
both energy and trade sanctions after reluctantly withdrawing from
its Soviet-era military bases in Georgia.

But a second inherent limit to Georgia’s longer-term goal of NATO
and EU membership was the scale and scope of the West’s commitment
to Georgia.

Although strong on rhetorical support for the Georgian government,
the West has long been reluctant to encourage any Georgian moves that
would confront Russia too directly, and has been even more wary of
the danger of a Georgian bid to retake its breakaway regions by force.

Overplaying a Weak Hand Against the backdrop of these limits, it
seems clear that the Georgian leadership seriously miscalculated
at the onset of the August crisis. After a series of provocations
through the summer, including sporadic artillery and mortar fire
and the downing of Georgian unmanned arial =0 D vehicles (UAVs),
the Georgian leadership ordered a military offensive against the
break-away region of South Ossetia. Although the exact chronology
of events during the opening of the conflict remain unclear, it is
fair to conclude that Georgia’s military strategy was significantly
flawed by both an initial underestimation of the Russian response
and a subsequent over-estimation of its own combat capabilities.

And most importantly, while the Georgian offensive may have been
effective within the small theater of South Ossetia, it was doomed
from the start when confronted by the full might of Russian military
resolve. Over the course of the conflict, as Russian forces launched
a massive land, air and sea response, the Georgian leadership also
greatly misread the West’s capacity and commitment to intercede or
intervene in support of Georgia.

While politically the Georgian decision to move against South Ossetia
reflected President Saakashvili’s consistent threats to restore his
country’s territorial integrity, militarily, the offensive was the
first-ever test of his U.S.-trained and -equipped Georgian troops,
both of which were long-standing worst-case scenarios for the West. On
a broader scale, however, what turned the Georgian miscalculation into
a strategic blunder was the Russian ability to exploit the conflict as
an opportunity to seriously challenge and check Georgia’s fundamental
Westward shift.

In the first military deployment beyond Russia’ borders since the
Soviet invasion of Afghanistan, the Russian response to the Georgian
conflict was both rapid and overwhelming. For Russia, Georgia’s
strategic blunder was an opportunity much larger than South Ossetia,
as Russian forces moved quickly to reinforce the country’s second
break-away republic, Abkhazia.

Surpassing the objectives of simply securing South Ossetia and
Abkhazia, Russian forces then completely repulsed and overwhelmed
Georgian forces, and established a perimeter security zone within
Georgia.

An essential secondary Russian goal was then to destroy fundamental
Georgian military capabilities by targeting as much military equipment
as possible and by bombing each and every Georgian military facility
and base, even those not involved in the conflict. This successful
destruction of the country’s military infrastructure was, with the sole
exception of the Georgian loss of Abkhazia and South Ossetia, the most
significant set back for Georgia’s strategic aspirations to join NATO.

Moreover, the scope of devastation of the Georgian armed forces
posed a new financial obstacle to the question of Georgia’s bid
for NATO membership, in addition to the already serious political
considerations. On an even broader scale, the aftermath of the conflict
also seriously questioned Georgia’s role as both a secure energy
transit state and as a regional "center of gra vity" for the West.

The danger for Armenia from this search for a new Western outpost or
"center of gravity" is the fact that there is a new degree of attention
focused on Azerbaijan. This new assessment of using Azerbaijan as
the regional center for Western security interests stems from three
factors.

First, Azerbaijan’s border with Iran continues to attract Western
interest, especially as the longer term challenge of dealing with
Iran may include a military option at some point, making Azerbaijan
a central theater for any such operations.

Second, in the wake of renewed tension between the West and Russia,
there is new interest in bolstering the Azerbaijani naval capability
to address Russian and Iranian naval power in the Caspian Sea, under
the guise of securing the offshore energy platforms in the Caspian.

And third, there is also Western interest in utilizing Azerbaijan
as a platform to Central Asia, as well as the continued reliance on
Azerbaijani air space as a key air corridor to reach Western bases
in Central Asia, an imperative for operations in Afghanistan that has
only been magnified in the wake of the loss of Pakistan as a key ally
in the West’s global war on terrorism.

Remaking the Map But even aside from the destruction from the
Russian-Georgian hostilities, by far the most significant result
from the August crisis was its impact on the region. The Georgia
crisis20offered Russia an important opportunity to reassert its power
and leverage throughout the region, an opportunity that was seized
to virtually remake the map of the South Caucasus and to redraw
the parameters of the region’s strategic landscape. Although it was
largely a Russian initiative that spurred the virtual redrawing of the
region’s landscape, the reactions and responses to the new regional
reality by other states were equally as profound.

>From the Russian perspective, the new regional reality was marked by
three distinct achievements: first, an abrupt end to NATO expansion
in the South Caucasus, at least for the near-term, second, the demise
of Georgian capabilities to fulfill its ambitions as a fully fledged
Western anchor in the region, and thirdly, a serious spike in broader
tension and looming confrontation with the West as a whole.

Notably, despite Russian recognition of the independence of separatist
Abkhazia and South Ossetia can not be seen as an important achievement,
especially given Russia’s firm stance that the move will in no way
infer similar recognition for the region’s other "frozen" conflict,
the Armenian-populated enclave of Nagorno-Karabakh. Nevertheless,
Russian President Dmitry Medvedev has recently signed "friendship
accords" with the leaders of Abkhazia and South Ossetia, formalizing
military, diplomatic and economic cooperation and securing a new
Russian bridgehe ad in Georgia proper.

Russia was also able to reaffirm the inherent energy insecurity of
the South Caucasus, demonstrating the vulnerability of the region’s
pipelines and ports and raising new doubts over the reliability of
Georgia as a key transit state. Interestingly, this lesson was also
one of the most important concerns for both Turkey and Azerbaijan. In
terms of the Azerbaijan-Georgia-Turkey energy chain, both the Turks and
the Azerbaijanis were angered at what they interpreted as a Georgian
blunder that only portrayed them as weak and vulnerable.

This energy insecurity factor also reignited questions over the
viability of the long-standing U.S. regional energy strategy of
seeking to bypass the existing Russian pipeline network while also
isolating and excluding Iran.

In fact, in order to manage the closure of the existing pipelines
through Georgia during the crisis, Azerbaijan resorted to exporting
its oil to Iran, utilizing so-called "swap" agreements whereby Iran
re-exported the same quantity through its Persian Gulf facilities.

Reinforcing Underlying Trends The impact from the Georgian crisis will
also accelerate several trends already underway in the region. One such
trend, concerning an improvement in Azerbaijani-Russian relations,
was already evident during the July 2008 visit to Baku by Russian
President Dmitry Medvedev and which was marked by new progress in
negotiations over the planed Russian purchase of20a substantial amount
of natural gas from Azerbaijan.

While Azerbaijani energy has been driven by its primary role as
an essential component in the U.S.-backed Baku-Tbilisi-Ceyhan and
Baku-Tbilisi-Erzurum oil and gas pipelines, Russia is now seeking to
promote its own Baku-Novorossiysk pipeline, playing on Azerbaijani
apprehension of relying on the Georgian routes and promising to
purchase Azerbaijan’s growing gas output, which have almost doubled
over the last two years, to an annual level of 10.3 billion cubic
meters (bcm).

An added bonus for Azerbaijan is that improved relations with Russia,
which has traditionally followed policies in support of Azerbaijan’s
archrival Armenia, may weaken Armenia’s position over the unresolved
Nagorno-Karabakh conflict. With presidential elections set for October,
Azerbaijan may also benefit from less international scrutiny over its
poor record on democracy, with the aftermath of the Georgian crisis
tending to downplay the past standards of electoral performance.

Despite the obvious geopolitical context to the aftermath of the
Georgian conflict, the most conclusive consideration has little to
do with broad regional factors of security or even energy. Rather,
the more pressing conclusion was that domestic politics and economics
matter much more than weeping geopolitics. In many ways, the Georgian
conflict was rooted as much in domestic politics as in regional
geopolitics, as likewise the deci sion by the Georgian leadership to
attempt a military solution to the South Ossetia issue, the Georgian
miscalculation in over-estimating their own military capabilities,
and the Georgian misreading of the West’s capabilities and commitments
were also domestic Georgian decisions.

The Turkish-Armenian Engagement The second trend to be influenced
by the Georgian crisis was the new process of Armenian-Turkish
engagement, capped by the first-ever visit to Armenia by a Turkish
head of state. After months of secret talks among Armenian and Turkish
officials in Switzerland, both sides seemed ready to tentatively
open a preliminary dialogue after years of Turkey’s refusal to extend
diplomatic relations or open its border with Armenia. But it was the
Georgian conflict that spurred a new breakthrough in talks, with an
added impetus for at least opening the closed Armenian-Turkish border
and offering both countries a potentially important new economic and
trade route alternative to Georgia. Aside from the Georgian factor,
another key to this new diplomatic opening, however, was Russia’s
support for such a breakthrough between Armenia and Turkey.

More specifically, Russian policy has long been opposed to any
significant improvement in relations between Armenia and Turkey and
the closed border was seen as a helpful way of maintaining Russian
dominance over Armenia, as demonstrated by the continued presence of
a Russian military base an d Russian border guards in Armenia. But
Russian policy shifted dramatically in the wake of the August crisis,
with a possible Armenian-Turkish rapprochement only serving to bolster
the Russian strategy to more completely isolate, marginalize and
surround Georgia. Nevertheless, Russia will only remain supportive
as long as the future direction of Armenian-Turkish relations remains
under its control.

There are also added benefits for Russia from the issue, however,
such as the possible sale of electricity to eastern Turkey from
Russian-owned energy network in Armenia. There was also a diplomatic
coup by Moscow seizing the issue from the Americans, as the Armenian
president publicly invited his Turkish counterpart to Armenia while
on an official visit to Moscow and coordinate the opening closely
with Russian officials.

For Turkey, whose decline in power and influence in both the South
Caucasus and Central Asia has never been fully reconciled with its
vision and aspirations, the Georgian conflict prompted a new diplomatic
initiative. The so-called "Caucasus Stability and Cooperation
Platform," is an initiative that seeks to forge a new cooperative
attempt at conflict-prevention, multilateral security and regional
stability, but also reflecting a goal for securing the now vulnerable
energy export routes running from the Caspian basin to Europe.

Aside from the reiteration of general principles of stability
and security, which are neit her particularly new nor novel,
the energy imperative is the key to the initiative, as the recent
outbreak of hostilities in Georgia have raised new concerns over
the viability of not only the BTC and Baku-Supsa pipelines, but also
the Baku-Tbilisi-Erzurum natural-gas pipeline and the U.S.-EU backed
Nabucco gas pipeline project, which proposes to carry an additional 31
billion cubic meters of natural gas to Europe once operational by 2020.

Scenarios & Recommendations for Armenian National Security I. Scenario
One: An Armenian-Turkish Diplomatic Breakthrough?

In terms of scenarios to be considered for Armenian national security,
the first challenge is posed by the recent Turkish engagement of
Armenia. The historic visit of the Turkish president to Armenia marked
a significant turning point in Armenian-Turkish relations. Clearly,
as the first-ever visit of a Turkish head of state to Armenia, Turkish
President Gul’s visit to Armenia was an important step success for
Armenian diplomacy and foreign policy. Yet in the wake of the visit,
the obvious question remains: why now?

The timing of the visit and the apparent sudden breakthrough in
Armenian-Turkish relations stems from two important factors. First,
it reflects the fact that Turkey is now struggling with its deepest
and potentially most disruptive degree of change, with a profound
reexamination of the very tenets of its national identity, driven by
a combination of internal reforms20and external challenges. And most
recently, there has been an equally significant strategic reorientation
involving Turkey’s role within the region and its future position
in a broader international context. The depth and degree of change
and redefinition in Turkey is also matched by a battle with itself,
redefining itself and the very core of its identity.

The second key factor in the timing of the breakthrough in
Armenian-Turkish relations is rooted in the new shifts in the regional
landscape. More specifically, in the wake of several months of careful
diplomacy and secret meetings between Armenian and Turkish officials
in Switzerland, Gul’s visit to Yerevan was revealed as an integral
part of a broader Turkish diplomatic initiative that seeks a greater
degree of stability in the region. Within this context, this Turkish
initiative was only accelerated by the recent conflict in Georgia,
which not only demonstrated the need for real security and stability
in the South Caucasus, but also affirmed the limits of Turkish policy
in the region.

But it was the Georgian conflict that spurred a new breakthrough
in talks, with an added impetus for at least opening the closed
Armenian-Turkish border and offering both countries a potentially
important new economic and trade route alternative to Georgia. Aside
from the Georgian factor, another key to this new diplomatic opening,
however, was Russia’s support for such a bre akthrough between Armenia
and Turkey.

More specifically, Russian policy has long been opposed to any
significant improvement in relations between Armenia and Turkey
and the closed border was seen as a helpful way of maintaining
Russian dominance over Armenia, as demonstrated by the continued
presence of a Russian military base and Russian border guards policing
Armenia’s borders, as well as its economic dominance over the Armenian
economy. But Russian policy shifted dramatically in the wake of the
August crisis, with a possible Armenian-Turkish rapprochement only
serving to bolster the Russian strategy to more completely isolate,
marginalize and surround Georgia. Nevertheless, Russia will only
remain supportive as long as the future direction of Armenian-Turkish
relations remains under its control.

There are also added benefits for Russia from the issue, however,
such as the possible sale of electricity to eastern Turkey from
Russian-owned energy network in Armenia. There was also a diplomatic
coup by Moscow seizing the issue from the Americans, as the Armenian
president publicly invited his Turkish counterpart to Armenia while on
an official visit to Moscow and coordinate the opening closely with
Russian officials. For Turkey, whose decline in power and influence
in both the South Caucasus and Central Asia has never been fully
reconciled with its vision and aspirations, the Georgian conflict
prompted a new diplomatic initiative. The so-called Caucasus Stability
and Cooperation Platform, is an initiative that seeks to forge a new
cooperative attempt at conflict-prevention, multilateral security
and regional stability, but also reflecting a goal of securing energy
export routes.

But while this Turkish regional initiative includes a new breakthrough
with Armenia, including the opening of the border and an attempt
to open a new chapter in relations, it also includes larger goals
of engagement, with Turkey as a leader in the region. And from this
larger perspective, Turkey now views the unresolved Nagorno-Karabakh
conflict as a central factor to regional stability. But there
is a very important difference in Turkey’s strategic view of
Karabakh. Specifically, Turkey no longer seeks to merely support
Azerbaijan by pressuring Armenia.

In fact, the new Turkish engagement of Armenia, ranging from the secret
talks to the high-profile visit to Yerevan by the Turkish president,
actually represents a significant shift in Turkish policy away from
its traditional close support for Azerbaijan. This was most clearly
demonstrated by the strong negative reaction by Azerbaijani officials
to the Turkish opening toward Armenia, as Azerbaijani leaders are
now gravely concerned and worried. The Azerbaijani leadership is
worried that the potential for normal Turkish relations with Armenia
and the opening of the long-closed Turkish border with Armenia will
only weaken their position regard ing the Nagorno-Karabakh issue.

But what is most interesting is the fact that the Turkish engagement
with Armenia has also weakened the Turkish position on Karabakh. For
example, although it can be argued that a Turkish move to build
relations with Armenia may grant them more power over the Karabakh
issue, in reality Turkey’s engagement with Armenia has already
seriously weakened and undermined its relations with Azerbaijan.

Implications for Armenia: What is to come Next?

Despite the poor record of past initiatives, the potential benefits
from even the most basic and rudimentary form of engagement are clear
for each country, but we can ask: what is to come next? For Turkey,
opening its closed border with Armenia would constitute a new strategic
opportunity for galvanizing economic activity in the impoverished
eastern regions of the country, which could play a key role in the
economic stabilization of the already restive Kurdish-populated eastern
regions and thus meet a significant national security imperative of
countering the root causes of Kurdish terrorism and separatism with
economic opportunity.

Likewise, an open border with Turkey would offer Armenia not only
a way to overcome its regional isolation and marginalization,
but also a bridge to larger markets crucial for economic growth
and development. In addition, the commercial and economic activity
resulting from opening the Armenian-Turkish border would foster
subsequent tr ade ties between the two countries that, in turn,
would lead to more formal cooperation in the key areas of customs
and border security. And with such a deepening of bilateral trade
ties and cross-border cooperation, the establishment of diplomatic
relations would undoubtedly follow.

Thus, the opening of the closed Armenian-Turkish border could not
only bring about a crucial breakthrough in fostering trade links
and economic relations, but may also serve as an impetus to bolster
broader stability and security throughout the conflict-prone South
Caucasus. Since August, despite the obvious tension between Russia and
the US, which came out in the open so strongly over the recent crisis
in Georgia, both Washington and Moscow remain not only committed to
working together within the OSCE’s Minsk Group, but will step up
efforts, together, to prevent the "frozen" Karabakh conflict from
"heating up" into a new "hot" conflict, as both are equally concerned
over the danger of Azerbaijan resuming hostilities and threatening
war over Karabakh.

There is no viable apparent alternative to the Minsk Group process. But
the one most important factor missing from the peace process is the
fact that Karabakh has no place at the table. The real key to success
for the peace process does not involve Russia or the US, and certainly
does not involve Turkey. The real key to progress in the peace process
is to include the democratically-elected government of Karabakh as an
equal party to the conflict and to grant Stepanakert an equal seat at
the peace table. Karabakh has been prevented from holding equal status
with Yerevan and Baku for too long. Now is the time, especially after
lessons from Georgia, to include Karabakh in the peace process.

A New Political Context: Future Prospects?

Within a broader context, the opportunities from a breakthrough in
Turkish-Armenia relations offer a new beginning to an old problem,
defined by the promise from a foreign policy success and the pressure
from a lack of legitimacy, as well as a new challenge to the existing
order, which inherently poses challenges to Armenia’s internal
"vested interests." For Armenian politics, which is now marked by
the emergence of clan-based elites and defined by an "arrogance of
power," there is a fresh chance to use this transition point to more
fully reform the closed political and economic systems. The closed
economic system, in particular, will be under threat from a possible
opening of the long-closed border. The threat will also be felt among
the country’s new clan-based oligarchic elite, which has attained
significant political power in recent years.

Although not as outwardly visible as the ruling elite, a new,
wealthy political elite, so-called "oligarchs," have managed to
secure significant political power. T heir election as deputies
demonstrates a convergence of corporate, state, and in some case,
even criminal interests. In addition to gaining serious influence over
the formulation of public policy and garnering substantial leverage
over the course of governmental policies, this new oligarchic elite
has come to embody the difference between the power to rule and the
responsibility to govern.

In the case of the other former Soviet economies, this new class of
oligarchs has tended to exploit the privatization process to gain
economic power first, but has exhibited a subsequent appetite for
political power. It is that political role that inherently threatens
the course of democratization and political reform. In Armenia, these
oligarchs have been able to extend their informal networks of political
power through informal cartels and commodity-based semi-monopolies,
and now wield significant economic and political power.

The key to defeating the power of the oligarchs is to attack the
economic monopolies and cartels that comprise the oligarchic system by
introducing greater competition and law-based enforcement, regulation
and supervision.

Generally, such cartels and monopolies flourish within "closed"
economies, averting the transparency and competition that dominate
the more open marketplace. But in addition to the need for greater
anti-trust legislation and stronger state regulatory bodies empowered
to limit or breakup monopolies, it is the rule of law and political
will that is needed to overcome this "cronyism."

Thus, the closed nature of the Armenian political system, utilized by
a new dual clan-based and oligarchic elite, has significantly eroded
the state’s most important asset – legitimacy. This has also been
matched by a steady decline in "good governance," with a tendency for
both public policy and national security formulated by self-interest
over national interest. Thus, one can only hope that the combination
of new opportunities and challenges will serve as "agents of change"
to force open and reform the overly restrictive and rigid political
and economic systems that have become so entrenched as to deny the
legitimacy, political will and efficacy so necessary to move the
country forward.

II. Scenario Two: Armenian-Iranian Relations

A second scenario for bolstering Armenian national security in the
face of new threats and challenges stems from the issue of Armenia’s
relations with Iran. Among the countries of the former Soviet Union,
Armenia has been largely recognized as a small state faced with an
especially difficult set of challenges. Faced with a blockade imposed
by its neighbors Azerbaijan and Turkey that has imposed a degree of
relative isolation stemming from disrupted trade and energy links,
landlocked Armenia has relied on a strategy of adaptation.

Such a strategy of adaptation has been most evident20in its pursuit
of a rather innovative foreign policy, known as "complementarity,"
which effectively balances its inherently pro-Western position with
its preference for a strong alliance with Russia. While the dual
nature of this policy has brought a limited nature of benefits,
Armenia holds a more significant advantage from a similar policy of
balancing competing strategic interests.

More specifically, this longer term strategic advantage is rooted
in Armenia’s unique balancing of its commitment to the West and its
integration into the architecture of Euro-Atlantic security with its
dynamically developing relationship with the Islamic Republic of Iran.

The Imperative of Isolation Despite the long history of close ties
between Armenia and its Persian neighbor to the south, the bilateral
relationship between Armenia and the Islamic Republic of Iran has not
been a natural alignment. Rather, the Armenian-Iranian relationship
is rooted in a shared condition – an imperative to cooperate in the
face of isolation. Moreover, even through the difficult course of the
Nagorno-Karabakh conflict in the 1990s, Iran followed a consistently
pragmatic course that prevented the conflict from taking on any
religious connotations and sought to promote a negotiated resolution
to the conflict.

In a larger context, Iran was drawn to Armenia as a natural ally,
bolstered by the shared challenges of isolation, blockade and external
pressure. But th ere is also an element of opportunity in Iran’s view
of Armenia. This view is only compounded by the role of Armenia as a
routine destination for Iranians on weekend visits and by the over
1200 Iranian students currently studying in Armenian universities
and educational institutions.

The Armenian strategic approach toward Iran is also less about
history but more of practical necessity or opportunity. Specifically,
Armenia’s relations with Iran are driven by the need for an outlet
from the East-West blockade of Armenia and the desire for reducing its
already serious over-reliance on Russia as the primary, or even sole,
external partner for trade and energy. Thus, Armenia’s Iran policy
is shaped largely by blockade and isolation, most apparent in the
exclusion of Armenia from all regional energy plans, most notably
apparent in the Baku-Tbilisi-Ceyhan pipeline project.

But it is the geopolitical context that is most significant for Iran,
especially as the South Caucasus has reemerged as a regional arena
for competing interests among larger powers. From this perspective,
Iran values its engagement with Armenia as a tactical counterweight
to the projection of both Western and Russian power and influence in
the region.

Such a geopolitical agenda is rooted in the historical record, as
Iran has been vulnerable to Russian, British and, for a more limited
time, American pressure and interference. Although this historical=2 0
vulnerability to pressure from both East and West reached its zenith
during the rule of the Shah, even current Iranian leaders recognize
their vulnerability. For this reason, Iran has more recently steadily
sought to counter first Turkey, as a U.S.-backed regional proxy,
and then the United States more directly, driven by the American
military presence in both neighboring Iraq and Afghanistan. It is
this expanding U.S. military network and presence in the region and in
Central Asia that fuels an Iranian desire to solidify ties to Armenia,
stabilize relations with Azerbaijan, and deepen ties with Georgia.

Armenia as a Bridge to Iran But from the broader perspective of Iranian
interests in the region as a whole, Iranian policies are also driven
by a strategic drive to consolidate a North-South transport network,
with the South Caucasus as an integral link in that plan. And it is
Armenia, more than any other state that offers a unique role as a
potential platform or bridge to Iran.

In practical terms, such as trade and commerce, Armenia’s relationship
with Iran has been marginal, however. Despite the limited nature of
bilateral trade, the true significance of Armenian-Iranian relations
rests with the unique Armenian potential as an outlet for Iran and as
a bridge to Iran. The clearest demonstration of this significance is
in the energy sector, as seen by launch of a project in 2004 to build
a 141-kilometer na tural gas pipeline between Iran and Armenia. After
years of delay and prolonged negotiations, the pipeline was completed
in 2007.

The gas pipeline project is to supply Armenia with roughly 1.1 billion
cubic meters (bcm) of gas, expected to rise to 2.3 bcm over the next
twenty years.

The pipeline will also allow Armenia to import Turkmen gas as an
alternative to its sole reliance on Russia as a gas supplier. In turn,
Armenia is to pay for Iranian gas with electricity supplies. But
even this pipeline was a limited success for both countries, as
Russian pressure succeeded in reducing the size of pipeline, thereby
preventing the pipeline for use to transport gas beyond the Armneian
market. The Russian interest in reducing the diameter of the pipeline
was mainly due to its desire to prevent Armenia from emerging as a
gas transit rival.

Thus, Armenia sees and presents itself as bridge to Iran to the
current regime and as bridge to new Iran. But as demonstrated by the
now reduced parameters and potential of the Iran-Armenia gas pipeline,
for the immediate future, Russia is the key impediment or incentive
for a deepening of Armenian-Iranian relations. In fact, the final
details of the Iran-Armenia gas pipeline reveal an accommodation of
the Russian reassertion of influence and power in the region.

Yet in one of the rare instances of an Armenian advantage of geography,
Iran is likely to emerge as a key partner=2 0over the course of
transition in both countries. And perhaps most significant is the
potential for linking the two regions of the South Caucasus and the
Middle East, each of which face even more profound geopolitical change
in the near- to medium-term.

In addition, it is instructive to examine Armenia from an Iranian
perspective. Iran also exhibits a broader geopolitical consideration,
as Iran’s engagement with Armenia is seen as a tactical counterweight
to the projection of Western, or U.S. power and influence. Through much
of the period of independent states in the Caucasus, Iran had sought
to counter Turkey, as the U.S. regional proxy or agent state. More
recently, however, given the deterioration of U.S.-Turkish relations
and the replacement of proxy states by direct U.S. engagement, Iranian
strategy has shifted to counter the U.S. more directly. The expansion
of the U.S. military presence has surrounded Iran in each direction:
from Iraq to the west, Azerbaijan to the north, Central Asia, Pakistan
and Afghanistan to the east and northeast, and in the Gulf to the
south. Thus, Iran feels compelled to pursue external ties to Russia
with Armenia and by improving relations with Azerbaijan.

Thus, from the Iranian perspective, the significance of Armenia
stems from three considerations: (1) strategic, by a shared sense of
blockade and isolation; (2) geographic, with Armenia as a neighbor
seeking cooperation over confronta tion, and, (3) geopolitical, as
Armenia offers an avenue to check the surrounding of Iran by a web
of expanding the US military bases. And, finally, from the broadest
perspective, Iran’s national interests in the region are driven by
the pursuit of the only remaining outlet: through the North-South
transport network, with the South Caucasus as an integral link in
that plan. This too is rooted in the isolation of the Iranian regime.

III. Scenario Three: The Rise of Azerbaijan as a Military Power

A third and crucial scenario for Armenian national security is the
threat of renewed war as Azerbaijan seems determined to build a modern
and strong military, hoping to become the most powerful armed forces
in the region. And with the long record of aggressive and threatening
statements from Azerbaijani leaders, there is a growing danger, at
least over the medium- to long-term, that war over Nagorno-Karabakh
may return to the region.

Although much of the recent Russia tension over NATO expansion has
centered on the Georgian and Ukrainian bids for NATO membership, the
more fundamental challenge for NATO enlargement stems from neither
political or even geopolitical considerations, but is rooted in the
test of military reform.

And most significantly, one of the most militarily ambitious of the
former Soviet states is Azerbaijan, a country which has repeatedly
asserted a commitment to building modern and self-sufficient armed
fo rces on its own terms, rejecting the patronage of both NATO
and Russia. Yet the course of military reform in Azerbaijan has
been particularly difficult in recent years and, despite a sharp
increase in its annual defense budget financed by its energy wealth,
the outlook for Azerbaijan’s rise as a regional power by the year
2020 is far from certain.

Obstacles to Azerbaijani Military Reform Despite the benefits of
three consecutive years of defense budgets of more than $1 billion,
Azerbaijan accomplished little in terms of procuring advanced weapons
systems or investing in modern equipment. Of its three branches of
service, both the army and air forces have continued to suffer from
neglect, with continued shortages of spare parts and poor maintenance
of existing stocks. The one exception has been the Azerbaijani navy,
which has significantly increased its capabilities. Yet even the
development of its naval forces has resulted from the training and
equipping from the U.S.

"Caspian Guard" program, which has bolstered the naval capabilities of
both Azerbaijan and Kazakhstan in an effort to match a naval buildup
by both Iran and Russia in the Caspian.

The development of the Azerbaijani navy, including the standing
up of an impressive new maritime Special Forces unit, has provided
Azerbaijan with important new counter-proliferation capabilities to
combat the trafficking of both weapons and most crucially, of drugs
throu gh the Caspian Sea. But it has not endowed Azerbaijani with
any offensive capabilities beyond an enhanced command and control and
radar-based surface monitoring system, thereby depriving Azerbaijan
of its most valued prize – the ability for real power projection.

But there are real limits to such a future of Azerbaijani military
dominance, as its Air Force continues to suffer from shortfalls in
munitions, ordnance and even aviation fuel, making the service the
least combat-ready force in the Azerbaijani armed forces. In addition,
the Azerbaijani army, traditionally the core service of the armed
forces, also lacks power projection capabilities and is far from
attaining even a minimum level of combat-readiness.

Nevertheless, over the longer term, the rise of Azerbaijan as a
military power seems assured. Its rise is based on an influx of oil
(and gas) wealth used to finance a new, modern armed forces, enhanced
with both training and equipment, and a political will in Baku that
seems set to exercise a new-found self-sufficiency based not on Turkish
or even American patronage, but relying on its own national power. For
both Karabakh and Armenia, such a strategy is obviously a threat not
only to its own security but will also result in a dramatic shift in
the already delicate regional "balance of power" in the South Caucasus.

As the recent developments have confirmed, the Azerbaijani government
has resolved to im plement an assertive and ambitious effort aimed
at forging a new and robust military.

First, Azerbaijan sought to develop its own defense
industry. Established as early as 2005, Azerbaijan’s Defense Industries
Ministry, headed by Yavar Jamalov, took over the State Departments for
Military Industry and for Armaments and the Military Science Center,
each of which was formerly a separate agency within the Azerbaijani
Defense Ministry. This new ministry has an annual budget of between
$60-70 million and has already started to create an indigenous defense
production capability, bolstered by assistance from both Ukraine and
Pakistan, with some Russian technical expertise as well.

A second development has been the return of a role for the Turkish
military.

This Turkish role in developing Azerbaijan’s military capabilities
is no longer simply about providing Turkish arms or training, but
comprises a much more strategically significant role by senior,
high-level Turkish military advisers. News of this enhanced Turkish
role first surfaced in January 2007, and included reports that
a senior Turkish military officer would be appointed to a post
within the Azerbaijani Defense Ministry. Those early press reports
claimed that senior Turkish military leaders selected an unnamed
Turkish Army general to assume the position of a deputy minister
within the Azerbaijani Defense Ministry, endowed with sweeping power
and authority, including direct and sole=2 0control over a team of
lower-ranking Turkish military officers serving as military instructors
and advisers.

But this plan for a direct Turkish military role in Azerbaijan,
marking a reversal of the deterioration in Azerbaijani-Turkish
military ties over the past few years and a return of Turkish
military advisers following their departure from Baku in 1995, was
never carried out. In addition, to the surprise of many analysts,
Turkey was unable to restore its traditional military alliance with
Azerbaijan. And throughout 2007 Baku actually moved farther away,
not closer to Western security structures and NATO.

But in the light of its commitment to building a modern and powerful
Azerbaijani armed forces and after several years of substantial defense
budget, why has Azerbaijan failed to embark on serious military reform?

Interestingly, the main obstacle preventing Azerbaijan from building
a powerful new military is the very man who heads the Azerbaijani
Ministry of Defense. The Azerbaijani Defense Minister, Colonel General
Safar Abiyev, is today the longest-serving defense minister in the
world. Yet his position stems not from military competence but rests on
his personal loyalty to the Aliyev family. And his tenure as defense
chief has been defined by a long period of neglect, underinvestment,
and marginalization of the Azerbaijani armed forces, not to mention
a record of miserable conditions for front-line soldiers and even an
una cceptable high rate of death for conscripts.

Specifically, the late President Geidar Aliyev was firmly convinced
that the one true threat to his power came from a strong military
and, in response, kept the Azerbaijani armed forces weak, corrupt
and incompetent. Aliyev senior also ensured that the military was
denied essential training and equipment, a policy maintained by his
son and successor, current President Ilham Aliyev. Both leaders also
utilized the Azerbaijani Ministry of Defense as an important vehicle
for corruption. This ensured that the military would always be weak
and divided, undermined by the cancer of corruption from within.

Thus, the real potential for building a modern and powerful armed
forces in Azerbaijan remains little more than a distant promise. And
even with the enormous annual state budgets for defense, a relatively
small proportion of defense spending has actually been spent on
arms, training and essential equipment. Moreover, although the
future trajectory of Azerbaijan as a regional military power seems
assured, most experts believe that it will take between 5-10 years
of sustained and serious military reform before Azerbaijan can meet
this potential. In the shorter term, there are several important
lessons revealed from recent clashes between Karabakh and Azerbaijani
forces. First, it is clear that the Karabakh (and Armenia) forces
still hold a significant military dominance over Azerbaijan, an
advantage likely to20continue for at least the coming 5-10 years.

Second, Azerbaijan faces a new deterrent against renewing war. This
new deterrent against any Azerbaijani attempt to restart hostilities
is posed from the very sources of their wealth – the international
energy companies and the powerful Western energy consuming nations
themselves. This is very important and offers a new "energy deterrence"
that will do everything to keep the oil flowing.

Lastly, and perhaps the most important is the fact that despite
the wealth and power of Azerbaijan, both Karabakh and Armenia are
substantially more stable and secure than Azerbaijan. This asset
of stability is also an important positive consideration for world
and regional powers that are now seeking ties with stable partners
over riskier authoritarian regimes like Azerbaijan. Thus, while the
outlook for security for Karabakh and Armenia is not without its own
challenges, there is a comparative advantage of stability in a region
already very much at risk.

Conclusion: The Need to Strengthen the National Security Process
Despite the focus on the pronounced shift in regional geopolitics,
on a deeper level, the other consideration is that local politics,
such as good governance and democratization, and local economics,
in terms of market reforms and anti-corruption efforts, are the real
keys to lasting security and stability in the South Caucasus. And with
the South Caucasus more than eve r a "region at risk," the imperative
should be more on focusing on bolstering local politics and economics
and less on grand geopolitical designs in order to forge a degree
of stability more durable than simply relying on individual leaders,
no matter how pro-Western or accommodating.

In this way, institutions matter more than individuals and evolutionary
reform, not revolutionary change, offers more assurance for stability.

And finally, there is an obvious need to strengthen the process of
national security in Armenia. Although there are obvious limitations
of resources, both human and financial, to the development of a more
sophisticated and comprehensive Armenian strategy of national security,
there are some key points for consideration. The core mission, however,
is to establish a coherent process of national security. This entails
both organizational and ideological reforms, including recognizing
the fact that the most glaring deficiency in the current institutions
of Armenian national security is their absence. Even in the wake
of the recent appointment of a new head of the Armenian National
Security Council, the body has met infrequently and has been largely
marginalized from the formulation and considerations of the national
security decision-making process as many of the most crucial decisions
have been concentrated in the president’s office.

Although there has been a marked increase in the role of parliamentary
comm ittees with jurisdiction over defense and security policy, the
sheer dominance of the executive branch in general, and the president
in particular, the dysfunctional nature of the national security
process remains uncorrected. One basic recommendation to improve
the process of Armenian national security would be to reform the
organization of the National Security Council. Currently, the Armenian
National Security Council is rarely convened as a full consultative
body and, even when it meets, is usually focused on the implementation
of a decision already adopted. This distorted process stems from the
fact that the body is subordinate to the presidential administration,
an act that limits the capability for longer term strategic planning
and preparation, a potentially fatal flaw for Armenia in the wake of
such recent threats and challenges to Armenian national security.

From: Emil Lazarian | Ararat NewsPress