Business New Europe
July 26 2009

Slow progress in latest Nagorno-Karabakh negotiations

Clare Nuttall in Almaty
July 27, 2009

The latest summit between the presidents of Armenia and Azerbaijan was
followed by promises to meet again, but yielded no concrete progress
on resolving the territorial dispute over the Nagorno-Karabakh
enclave.

Armenia’s Serzh Sargsyan and Azerbaijan’s Ilham Aliyev held talks in
Moscow on July 17, and met again the following day together with
Russian President Dimitry Medvedev. Russia, which has considerable
influence in the Caucasus and has been seeking to broker a compromise
on the Nagorno-Karabakh enclave, described the discussions as
"constructive."

"During today’s, fourth, meeting, between presidents of Russia,
Azerbaijan and Armenia, Dmitry Medvedev confirmed the readiness of
Russia as co-chairman of the Minsk Group to continue exerting efforts
to find mutually acceptable solutions to the Nagorno-Karabakh
settlement," presidential aide Sergei Prikhodko told journalists the
following day. "In our view, the meeting was very constructive," he
said, adding, however, that, "It focused on certain problems, which
remained open."

Some 35,000 people were killed in the early 1990s when war broke out
after the ethnically Armenian enclave of Nagorno-Karabakh, backed by
Armenia, declared its independence from Azerbaijan. A ceasefire
agreement was signed in 1994 bringing an end to the war, but
small-scale clashes on the border between Azerbaijan and
Nagorno-Karabakh are still frequent. Fifteen years on, no peace treaty
has yet been signed and no country has recognised the Nagorno-Karabakh
Republic’s independence, though it is effectively integrated with
Armenia.

In the last year, Russia has stepped up its efforts as it seeks to
cement its influence in the South Caucasus, as well as presenting
itself in a more positive light – as a peacemaker – after the PR
disaster of the 2008 war against Georgia. The ever-present concern
that a border skirmish could escalate into full-scale conflict also
poses a threat to the region’s role as a key energy transit point.

However, while Sargsyan and Aliyev are both participating in
discussions, their rhetoric back on their home territory is less
conciliatory.

Home truths

Speaking at Chatham House in London the week before his meeting with
Sargsyan, Aliyev said that independence for Nagorno-Karabakh was out
of the question and refused to rule out a military solution to restore
Azerbaijan’s territorial integrity. "Nagorno-Karabakh will never be
recognised as an independent country. It is absolutely ridiculous to
expect that," Aliyev said. "A million refugees from Azerbaijan who
were the subject of ethnic cleansing policies of Armenia have a right
to return to their land."

On the Armenian side, representatives of the country’s large diaspora
have spoken out against the Madrid principles, while the head of the
hardline nationalist opposition party Dashnaktsutyun party warned
Sargsyan against signing any agreement with Aliyev.

The Nagorno-Karabakh government is also dissatisfied with the
procedure. In a statement published two days before the talks, the
NKR’s Foreign Ministry described the talks, from which it is excluded
on Azerbaijan’s demand – as "distorted."

"Real progress in the negotiations is possible only with the Karabakh
party’s equal participation in all the stages of the negotiation
process," it said.

Despite this, the economic situation in Nagorno-Karabakh has improved
somewhat in recent years, with GDP increasing by 116% between 2001 and
2007, according to the republic’s statistical office. The economy has
also moved away from its previous reliance on agriculture, with that
sector’s share of GDP falling from 33% in 2002 to 16% in 2007, while
manufacturing and services have increased.

In another significant development, the recent IPO of Artsakh Hydro
Power Plant, the proceeds of which will be used to build small hydro
plants in Nagorno-Karabakh, attracted investment from international
investors in countries including France, Russia, Switzerland and the
UAE. If progress towards resolving the conflict continues, it could
unlock the region’s potential in several sectors, in particular
mining.

Russia is continuing to keep Armenia and Azerbaijan at the negotiating
table, with the next meeting between the two presidents scheduled for
October. However, unless the political will for a solution from Baku,
Yerevan and Stepanakert increases, progress could to remain elusive.

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