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Books on Armenia
REPUBLICAN REFERENCE
Area (sq.km)
29,800
Population
2,991,360
Principal ethnic groups
Armenian 93.3%
Azeri 2.6%
Russian 2%
Capital
Yerevan
Currency
Dram
President
Robert Kocharian
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Update No: 308 - (29/08/06)
Armenia is an embattled state, even if not quite in the Israel
class, with which it has close parallels all the same.
The Armenians, like the Israelis, make fine warriors and good businessmen. But
the latter have been frustrated by a trade embargo imposed on them by Azerbaijan
and Turkey due to the only too successful feat of arms of the former.
This came in winning the war decisively over Nagorno-Karabakh in the
early-to-mid 1990s; and in the process kept 20% of Azeri territory, while making
one and a half million Azeris refugees.
OSCE bombshell reveals Karabakh position
The latest developments might seem advantageous to the Armenians, but are not
necessarily so at all, since it could spell a third war between the former
combatants.
The OSCE Minsk Group's most recent announcement on the disputed Nagorno-Karabakh
enclave is close to Armenia's position and spells bad news for Azerbaijan. In
the latest in a series of diplomatic bombshells to hit the South Caucasus,
Matthew Bryza, the new US co-chairman of the Organization for Security and
Cooperation in Europe's (OSCE) Minsk Group, announced in late July that he had
bad news for Azerbaijan. In an interview remarkable for its candour, Bryza told
Radio Free Europe - Radio Liberty (RFE/RL) on 26 July that as part of its
overall framework for ending the 12-year stalemate over Nagorno-Karabakh, the
Minsk Group was urging a referendum for Karabakh's population to determine the
enclave's future status.
Why this seemingly reasonable proposal is so contentious lies at the heart of
the aftermath of the bloody 1992-1994 conflict that dismembered Azerbaijan and
gave the Armenian population of Nagorno-Karabakh something very close to
sovereignty.
Bryza's comments to RFE/RL came amid the tumult following the Minsk Group's
previous announcements on 22 June and 3 July that were interpreted both there
and in Yerevan as an expression of exasperation by the co-chair states (Russia,
the US and France) and as a signal by some analysts that the Minsk Group would
no longer take an active role in the negotiations.
The two announcements represented the first time the Minsk Group - the primary
international body tasked with mediating the peace talks between Azerbaijan and
Armenia - had publicly outlined its approach to a permanent peace. It was a
major departure from the secretive talks that have been held since the end of
the war in 1994.
In its 3 July statement, the Minsk Group outlined the "core
principles" of what it considered to be a basis "for the two sides to
draft a far-reaching settlement agreement." The announcement laid heavy
emphasis on action from Azerbaijani President Ilham Aliyev and Armenian
President Robert Kocharian. It stressed that the Minsk Group believed "it
is now time for the two presidents to take the initiative for achieving a
breakthrough." It also chided them for "lacking" the
"political will" for a settlement.
The key premise includes the "redeployment" of Armenian troops from
territories bordering Nagorno-Karabakh, "with special modalities" for
the two territories that the Armenian side has shown no willingness to cede:
Lachin and Kelbajar.
By "redeployment" it is generally understood that the OSCE means
"withdrawal." The Armenians were willing to give back five of the
seven districts surrounding Nagorno Karabakh, as long as they received major
concessions, as ISN Security Watch reported in February.
Other components include demilitarisation of the territories, the establishment
of an international peacekeeping force, the return of Azeri refugees who were
forced out of Nagorno-Karabakh during the war, and "a referendum at a date
and in a manner to be decided through further negotiations" to determine
Nagorno-Karabakh's final legal status.
Defining a referendum
What was most remarkable about the 3 July statement was the word choice in
its reference to a future referendum. Any plebiscite should "take place in
a non-coercive environment," it said, in which citizens would have
"ample opportunity to consider their positions after a vigorous debate in
the public arena."
For the past year, the Azerbaijani government has been unambiguous in its view
that any referendum to decide Nagorno-Karabakh's final status would involve a
vote in which the entire country participated - something mandated by
Azerbaijan's constitution.
The outcome of such a nationwide vote is clear. It is inconceivable that
Azerbaijan's citizens would, in the wake of a painful and bloody war that ended
with their country's defeat, endorse the separation of Nagorno-Karabakh.
The Minsk Group's statement on 3 July seemed to indicate that a referendum
should take place not in Azerbaijan as a whole, but only in Nagorno-Karabakh - a
position clearly supported by the Armenian side.
In his interview with RFE/RL on 26 July, Bryza appeared to confirm that the OSCE
had largely accepted the Armenian approach to a referendum when he said the
ultimate status of the enclave should be determined by the "people of
Karabakh."
And despite the seemingly even-handed appeals to the two presidents in the
announcements, Bryza told RFE/RL after his 29 July trip to Yerevan that Armenian
President Kocharian had displayed a "constructive, candid attitude."
But then, since he seemed to be getting what he wanted, he could be on is best
behaviour.
Bryza added that Kocharian accepted the OSCE's outline of a possible settlement,
which may mean that the Minsk Group sees Azerbaijan as the main impediment to a
resolution.
In an interview with ISN Security Watch, Baku political analyst Leila Aliyeva
agreed that the Minsk Group had decided on a Karabakh-only referendum, while
speculating that the co-chair states were attempting to pressure President
Aliyev.
Aliyeva stressed that an up-or-down vote on independence that takes place only
in Karabakh was "a trap" for Azerbaijan, "as it would be for any
other state" in its circumstances.
Like a handful of other Azeri analysts, Aliyeva is not against a referendum on
principle. Such a vote might give citizens a range of choices short of full
sovereignty for Nagorno-Karabakh: "Even if legally it was possible, the
questions regarding different degrees of autonomy within the Azerbaijani state
would make more sense than questions about secession."
For its part, the Azerbaijani Foreign Ministry does not accept the
interpretation that the OSCE has adopted the Armenian view. Spokesman Tahir
Taghi-Zadeh found the 3 July Minsk Group statement perplexing: "The
co-chairs are trying to stimulate the process while being as vague as possible.
A statement like this is designed to make both sides see what they want to
see."
Even the recent comments by Bryza leave room for more than one interpretation,
said Taghi-Zadeh: "The population of Karabakh has the right to decide,
which can only be utilized through participating in a national referendum. Their
participation, in fact, is a must, if we want to make it a legitimate and
lasting solution."
The Karabakh-only view, if true, has major implications for Azerbaijan, which
must now make some very difficult choices.
Preparing for peace or war?
Since the failed Rambouillet summit between the two presidents in February,
the two sides have, at least in public, displayed little flexibility, with the
war option being discussed with increasing frequency in the Azerbaijani capital,
Baku.
President Aliyev said in February that the talks were at a "dead end,"
and more recently, that further negotiations in the current framework were
"hopeless" - a verdict that Minsk Group co-chairman Bryza described as
"not helpful."
The Minsk Group's appeal for the two presidents to "prepare their publics
for peace and not for war" is being given little emphasis in Baku, where
the options seem to be dwindling.
Azerbaijan's military is rated by many Western analysts as both weak and in a
state of structural torpor due to years of neglect by the late president Heydar
Aliyev. One of the few distinctive differences between father and son is the
money now being lavished on the military sector.
Military expenditures in Azerbaijan for 2006 were slated to rise to some US$600
million, but President Aliyev said publicly on 31 July that the actual figure
would rise to US$700 million, an announcement that came a day before the arrival
of the OSCE's Bryza.
Even the lesser figure represented a doubling of the 2005 defence budget. Aliyev
says he wants Azerbaijan's military spending to equal the total government
budget for Armenia. (According to the CIA World Factbook, Armenia's 2005
government expenditures were US$930.7 million.)
Having a large military - or at least a large defence expenditure programme -
may serve not so much as a platform for a future war, but rather as a bargaining
chip. This strategy would be consistent with Baku's approach thus far, promising
a number of rewards for Yerevan if Nagorno-Karabakh is returned to Azeri
control.
Analyst Leila Aliyeva believes that the burgeoning military establishment will
be used as an implied threat or a deterrent. "Most of the politicians here
think that not the actual war itself, but rather the mere existence of a strong
army, might be a deterring factor."
When combined with the government's economic carrot-and-stick approach to
negotiations, the modernized military might begin to look like a very real
threat, although an Armenian Foreign Ministry source told ISN Security Watch in
February, "We defeated Azerbaijan in war twice. Do they really want to try
again?"
Some analysts fear that the Minsk Group has withdrawn from the peace process.
International Crisis Group analyst Sabine Freizer reportedly told the website
Armenia Now that the region was "entering a dire stage" with the Minsk
Group acknowledging "the pointlessness of continuing their
activities." The situation is bleak, according to Freizer: "Now there
is no peace process, even negotiations."
Despite such interpretations, Minsk Group co-chairman Bryza has just completed
his tour of the region, with stops in Yerevan, Baku and Nagorno-Karabakh,
activities that sound inconsistent with no longer being involved as a mediator.
Minsk group to stay after all
Taghi-Zadeh, however, said the Minsk Group had "no intention of
disbanding.
"I mean, first they make this announcement, and then say almost immediately
that Matthew Bryza is coming to Yerevan and Baku? That doesn't look like they
are quitting the process," he said in a statement.
But the involvement of other actors is not being discouraged by the Azerbaijani
government, which now may welcome other mediators with perhaps more sympathetic
views - but Taghi-Zadeh denied that Azerbaijan would seek to replace the Minsk
Group.
He said that NATO and the EU had expressed interest in serving as mediators, but
said that was "due to the region's growing strategic importance. We are not
trying to replace the Minsk Group, but we'd like to see efforts by others as
well."
Armenian republicans 'unable to win free election'
To turn to equally pressing domestic matters, a close associate of former
parliament speaker Artur Baghdasarian claimed on August 4 that the governing
Republican Party of Armenia (HHK) is too unpopular to win a free election and
plans to rig next year's parliamentary polls.
Heghine Bisharian expressed serious concern at the HHK's recent merger with
powerful Defence Minister Serzh Sarkisian and his loyalists, accusing them of
creating an "atmosphere of fear" in the country.
"If this kind of individuals are joining forces, then there are some
scenarios that go against the people's interests," Bisharian told RFE/RL.
"That they are not with the people is out of question."
"They are trying to make people sell themselves, their families and the
future of their children," she charged, predicting a massive vote buying by
the Republicans.
The HHK, which is formally headed by Prime Minister Andranik Markarian, has
emerged as the favourite to win the 2007 election after being joined by
Sarkisian and other influential individuals last month, even if it is not seen
as the most popular political force in Armenia. The party is widely expected to
cash in on its grip on government structures and vast financial resources of
scores of wealthy businessmen affiliated with it. Sarkisian has made it clear
that its electoral victory is vital for his reputed plans to succeed President
Robert Kocharian in 2008.
The HHK's strengthening has already sparked concerns that the looming election
will again fall short of democratic standards. Sarkisian sought to allay these
fears late last month, saying that the vote will be the cleanest in Armenia's
troubled electoral history. But opposition leaders dismissed the pledge,
pointing to Sarkisian's important role in the conduct of previous elections
marred by serious fraud.
Bisharian, who is a senior member of Baghdasarian's Orinats Yerkir party,
insisted that the Republicans can not have the largest faction in the next
National Assembly if the 2007 vote is free and fair. "If the elections are
free and transparent, then I certainly rule that out," she said. "They
have had the greatest levers in the governance of our country and we can see
that nothing has changed in the people's life."
Bisharian went on to accuse the HHK of forcibly recruiting members among public
sector employees and planning to force tens of thousands of army conscripts to
vote for the party. "I have information that in some places people are
fired for protesting against that," she said without giving any specific
examples of that.
Orinats Yerkir was a junior partner in the HHK-dominated governing coalition
until being forced out of it by President Robert Kocharian. The party now claims
to be in opposition to Bisharian did not rule out the possibility of Orinats
Yerkir Kocharian forming an electoral alliance with other opposition groups. She
said Baghdasarian will begin "political consultations" with them
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AVIATION
EBRD finances new airport terminal
The European Bank for Reconstruction and Development (EBRD) will provide 20
million Euro to Armenian International Airports C.J.S.C (ArIA) to finance the
completion of the new passenger terminal at Zvartnots Airport in Yerevan,
including the acquisition of modern equipment to further upgrade the quality of
service as air traffic through the capital increases, New Europe reported
recently.
Michael Weinstein, head of the EBRD office in Yerevan is pleased to support a
private international operator in improving the airport's operations.
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CREDIT RATINGS
Moody's assigns BA2 ratings
Moody's Investors Service has assigned "BA2" foreign and domestic
currency ratings to the government of Armenia in light of the progress made by
the country since 1995, the year that marked the end of the seven-year
contraction that followed the collapse of the Soviet Union, New Europe reported.
Moody's said in a statement that Armenia has been experiencing real GDP growth
rates of around 10 per cent per annum or above since 2001, while inflationary
pressures have remained subdued due to the appreciation of the dram (the local
currency) and to a cautious monetary and fiscal policy stance. "We believe
that, over the medium term, there is sufficient scope for further GDP growth
such that it will help alleviate poverty and reduce unemployment, both of which
remain high in Armenia," said Moody's Vice President, Sara Bertin.
"Moreover, the rating is supported by the limited level and favourable
maturity structure of Armenia's foreign-currency denominated debt." She
said that with a 23 per cent debt-to GDP ratio at the end of 2005, the country
compares well to its peers. Ninety percent of the debt is owed to multilateral
lenders on concessional terms representing a long maturity and associated
minimal debt-servicing cost.
"We have also taken note of the high level of dollarisation and the
country's lack of financial depth," said Bertin. Moody's rating is capped
by geopolitical factors, said the analyst. Though the worst fighting over the
territory of Nagorno Karabakh ended in 1993, the conflict remains stalemated,
with the leaders of the Armenian-inhabited enclave claiming an independent
status that no other state has recognised. "Moody's assigns a very low
probability that the conflict between Azeris and Armenians might resume over the
short to medium term," said Bertin.
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ECONOMIC DEVELOPMENT
ADB identifies 3 priorities for beginning operations
Armenia, which joined Asian Development Bank (ADB) in September 2005, has
achieved tremendous progress in several key areas of economic development,
according to a press release. However, significant challenges remain if the
country's high level of poverty, 39 per cent of the population in 2004, is to be
lowered, an ADB report said.
The three priorities identified by the bank for beginning operations in Armenia
are accelerating rural development, promoting the private sector and enhancing
regional cooperation. For improving living standards in rural areas and creating
livelihood opportunities, ADB will concentrate on water supply systems and waste
management, rehabilitation of rural roads and developing alternative sources of
energy, according to the report. To strengthen enabling environment for private
sector development, ADB will explore potential assistance to improve regulatory
oversight and economic governance. To expand Armenia's regional cooperation and
integration initiatives, ADB will consider assistance to rehabilitate its
existing regional transport infrastructure to reduce costs of trade and
transport, and to upgrade regional energy transmission networks. "ADB's
Interim Operational Strategy is designed to be responsive to the development
challenges faced by Armenia. It will guide prospective assistance to areas that
have been identified as having the highest potential development impact,"
said Shikha Jha, an ADB's Country Programmes Specialist.
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