In 1994, Armenian forces celebrated a triumphant victory, establishing a separatist state, called Arshak in Armenian, within Azerbaijani territory while etching a populist narrative of robust Armenian nationalism. But, in 2020, this triumph was transformed into a defeat that left behind a landscape marked by scorched aspirations and shattered illusions. Meanwhile, the First Karabakh War left Azerbaijan at the nadir of its national identity and pride. The war displaced more than 700,000 people, left between 20,000 and 30,000 dead, destroyed cities and their infrastructure, and stunned the Azerbaijani people. The trauma, often referred to as the “Karabakh Wound”, triggered not only a desire for revenge but also for national rehabilitation. Meanwhile, Armenians could not fathom the impact that the Karabakh Wound had left on Azerbaijanis. The trauma was felt not just by those who were displaced or were grieving for the dead but also by ordinary Azerbaijanis at all levels of society and in all walks of life. The Azerbaijani state coordinated its message about collective trauma and a nation’s profound sense of victimhood, reinforcing it and making this collective psyche resilient in the nation’s schools and popular media.

Conversely, the Armenian experience of military triumph not only bolstered newfound self-confidence but also bred a deep disregard for Azerbaijanis, whom the Armenians unjustly framed as “genocidal Turks” who were finally being punished for the events of 1915. Armenia saw its victory as confirming its nationalistic identity as superior to the weak and divided nation of Azerbaijani Turks. Unsurprisingly, Armenia’s bluster and intransigence served to intensify the Azerbaijani resolve for retribution. Armenia squandered the fruits of its military victory, never realizing how they could have capitalized on defining terms for a lasting peace in the region. It was Nikol Pashinyan, the Armenian Prime Minister, who ended any hope of diplomatic settlement by declaring that “Karabakh is Armenia” in 2019. Azerbaijan has no option but to search for a non-diplomatic solution to restore its territorial integrity. Thus, it was inevitable that there would be a Second Karabakh War.

In 2020, Azerbaijan captured most of the territories and controlled the key passages between Armenia and Karabakh. Azerbaijan emerged fortified and resolute during the Second Karabakh War. Meanwhile, several factors paved the path for Armenian’s military defeat that was just as tragic and humiliating as what Azerbaijan experienced. Karabakh Armenians, who have relied on Russian peacekeepers who were deployed following the Moscow-brokered ceasefire of 2020, found themselves vulnerable to surprise attacks. During the Ukrainian War, Russia prioritized winning in Ukraine above everything else. Even the Caucasus, which was strategically important, could be disregarded to ensure victory in Ukraine. The war forced Russia to establish ties with Azerbaijan and Turkey to mitigate sanctions and create new trade routes to the south. Armenia faced additional challenges as its previous military dominance gradually diminished. The country became complacent, neglecting the valuable lessons learned from the first war. Military spending stagnated, equipment became outdated, and training routines became less rigorous. This erosion of military preparedness compounded Armenia’s difficulties during this period. 

Meanwhile, Azerbaijan, buoyed by an oil boom and strategic alliances that filled the public coffers, built a formidable war apparatus, investing in advanced technologies such as drones, precision airpower, and cyber warfare capabilities. The balance of power tilted decisively, shredding the once-mighty Armenian Karabakh fortresses into powerless bastions unfit to confront or neutralize its now more technologically advanced adversary. The Armenian exodus, marked by the march of defeated, exhausted refugees, shattered the long-held belief of invincibility. It was now Armenia’s turn to experience profound national humiliation with grief, self-doubt, and questions about a nation’s will to exist.

In 2024, Armenia is at a critical juncture in its history. Presently, Armenia’s external borders are guaranteed by Russia, which also houses a major military base in the country. Additionally, a significant portion of Armenia’s major infrastructure is owned by Russia. As a result of the Second Karabakh War, Armenian-Russian relations have been radically changed. The alliance turned into a liability for Russia’s dealings with Azerbaijan and Turkey. The Ukrainian War increased the strategic costs associated with maintaining this alliance.  Russia cannot shift military resources due to the prolonged Ukrainian war and Moscow is mindful of its constructive relationships with Azerbaijan and Turkey. During the Second Karabakh War, Russia opted to remain passive, even as the negotiated ceasefire unraveled. The Kremlin chose not to intervene, a significant move given its past commitments to regional alliances. Moreover, Turkey, under Erdogan’s leadership, decided to support Azerbaijan, diplomatically and militarily. It was the Turkish high command who ran the war. Yet, President Aliyev had prepared the military for the war’s critical moment and also developed closer ties with Moscow.

There could be an opportunity, even a potential of rebirth, in the defeat. With Russia uncoupling from the Karabakh issue, the Armenian state could seize the opportunity and free itself of the chains of being a protectorate and reaffirm its sovereignty. Turkey and Azerbaijan should address Armenia’s real or imagined threat perceptions to provide larger maneuvering room for the Pashinyan government to distance itself from Russia. It is more or less up to Turkey and Azerbaijan to shape the future of a stable and peaceful Armenia by addressing Armenia’s historic fears, a win-win proposition for all three nations. The repercussions of this “majestic defeat” continue to resonate in Armenia, with the loss of Karabakh, a historical and cultural hub. The financial impact is evident, with disrupted trade routes and a severe lack of infrastructure resources exacerbating an already overwhelmed economy. Politically, Armenian society grapples with divisions, recriminations and a quest for new paradigms. Yet, there are glimmers of hope. The recent prisoner exchange between Armenia and Azerbaijan, achieved without external intervention, presents a fragile but viable opportunity for reconciliation. Both nations now face a critical choice: cling to the ghosts of past aggressions or forge a path for mutual understanding and prosperity.

One of the negative factors for the durable peace is the Armenian diaspora which invests more in writing the past than building the future of Armenia. The Armenians of Karabakh fled within a few days of the war’s outbreak. Although the European Parliament said the exodus amounted to ethnic cleansing, a United Nations fact-finding report did not find any evidence of forced deportation. Yet, the Armenian diaspora attempts to frame the history of this exodus as ethnic cleansing and even genocide. The defeat represents a collective trauma that would likely expand the historical genocide narrative. That is, the Armenians will situate Karabakh within the framework of the genocide narrative of 1915. This will reinforce the image of the “terrible and genocidal Turks,” especially among the Armenian diaspora, and anchor a narrative of victimhood that could fuel a resurgence of revanchist Armenian nationalism.

To prevent the revanchist nationalism there is a constructive alternative. Azerbaijan and Turkey should work with Armenia to foster closer ties, and economic cooperation, and repair relations so that the psychic cycles that led to both wars are broken for good. Ankara should make overtures to Armenia by opening the border and by formally recognizing and apologizing for the sufferings of the Armenian people during World War One. Ankara’s actions could move past the lingering incriminations and accusations of genocide that have persisted for more than a century. Moreover, the Pashinyan government’s handling of the conflict, military strategy, and diplomatic efforts are more likely to contribute to growing dissatisfaction and domestic discontent. The psychological impact of perceived failures may intensify a profound loss of confidence in political leadership, prompting a collective demand for accountability. Unfortunately, the weakness of political opposition in Armenia has ensured Pashinyan’s re-election and efforts to consolidate his power, without the political will to make substantial changes on the domestic front.

The humanitarian crisis resulting from the displacement of hundreds of thousands of Armenians has intensified emotional strain while also fostering a sense of solidarity. Witnessing the suffering of fellow citizens and grappling with the need to address the needs of internally displaced persons create an emotional burden that goes beyond geopolitical considerations. The U.S., the European Union, and regional neighbors should provide economic assistance to the resettlement of refugees. Likewise, changes in regional power dynamics contribute to a collective sense of urgency and the need for a strong, unified response to safeguard national interests.

Peace between Armenia and Azerbaijan is imperative for securing their respective futures. Despite Armenia being excluded from key regional economic projects, such as oil and gas pipelines, the Middle Corridor Project initiated by China holds the potential to engage the region with new trade routes and interdependent relations. In 2024, the Caucasus could thrive economically and politically, with Armenia, Azerbaijan, Georgia, Turkey, Iran, and Russia acting upon a mutual vision for a peaceful, integrated region.

Azerbaijan is strategically advocating for a “framework agreement” as a stepping stone towards a more comprehensive treaty, intending to address persisting issues with Armenia. Crucial challenges, including the intricate delimitation of mountainous borders, are on the horizon, requiring several years for resolution. Notably, the demarcation of the Azerbaijani-Georgian border has remained unresolved since 1991. Azerbaijan is proposing to delineate borders based on the current de facto situation, recognizing the imperative to consider present conditions. The inevitable exchange of enclaves between both nations and the lengthy process of border demarcation along rugged mountains further underline the complexity of the situation. Furthermore, Azerbaijan has urged Armenia to amend its constitution’s preamble, shifting the narrative away from the goal of unification with Karabakh as the national objective. While some Armenian and European scholars interpret these actions as attempts by Azerbaijan to perpetuate regional tensions and secure Russia’s presence while deflecting attention from domestic issues, Azerbaijan maintains its sincere commitment to fostering a stable, peaceful region.

Five obstacles hinder the realization of reconciliation between Azerbaijan and Armenia and the potential for a prosperous Caucasus:

1. External Guarantors and Intervention: Azerbaijan’s aspirations for a peace treaty face resistance from Armenia, notably in seeking the involvement of European Union members as guarantors. However, Azerbaijan, along with Russia, opposes external intervention. Trust deficits persist, but both sides already have exchanged seven drafts of a peace treaty without third-party involvement, which indicates a promising potential.
2. Enclaves and Territory Swap: Azerbaijani and Armenian enclaves within each other’s territories pose a significant hurdle. There are eight Azerbaijani enclaves inside Armenia and one major enclave of Armenians inside Azerbaijan. The need for a swap raises questions about feasibility and terms, and disagreements persist on handling Azerbaijani enclaves, which are located along major highways connecting Iran, Armenia, and Georgia.
3. Location for Signing the Agreement: Disagreements have arisen over the preferred location for signing the peace treaty. Armenia insists on a European or U.S. venue, while Azerbaijan favors a location on its border with Armenia or in Georgia, which reflects underlying geopolitical considerations.
4. The Karabakh Issue:  Armenian nationalists around the world insist that Pashinyan include the Karabakh issue in treaty terms. The Azerbaijani government refused to include anything about the Karabakh Armenians in the treaty, as it considers Karabakh as properly within Azerbaijan’s jurisdiction of domestic affairs.  So far, the Pashinyan government has agreed to leave Karabakh outside the treaty and instead develop better relations with neighboring states.  
5. Reparations and Compensation: This matter concerns Armenians who once lived in Azerbaijan and those Azerbaijanis who once lived in Armenia. Armenian institutions throughout the diaspora have explored legal avenues to claim Karabakh Armenian property from Azerbaijan. However, Armenia’s reluctance to bring reparation issues to the forefront reflects concerns about potential demands for higher compensation due to the displacement and destruction during the First Karabakh War. But, for prospects of stable relations between the two countries, the property issues on both sides must be addressed. 

In conclusion, neither defeat nor military victory is permanent. The Armenian experience in Karabakh is a cautionary tale. It highlights that military victories, however glorious they might be, come with a hard expiration date. Lasting security is found not in the spoils of war but instead through the pursuit of enduring peace that is grounded in mutual respect, compromise, and a willingness to confront historical challenges. The Karabakh conflict, a tragic narrative of territorial disputes and ethnic tensions that have been recycled respectively by both nations, showcases the multifaceted epiphanies arising from military victory and defeat. As both nations aim to develop their regional identity, addressing multidimensional, intersecting issues is essential for achieving sustainable peace. Navigating territorial disputes, the impact of external players’ involvement and embedded nationalist sentiments requires humble and magnanimous diplomacy paired with sincere commitments to regional stability. The potential for a prosperous Caucasus hinges on overcoming these obstacles and forging a path toward reconciliation and cooperation between Armenia and Azerbaijan.