Nouveaux Mondes, No. 8, Été 1998, pp. 67-103 [CRES - Centre de Recherches Entreprises et Sociétés, Geneva]

[Published in French, see PDF version]

The Nagorno Karabakh Conflict Provokes a Major Post-Soviet Leadership Change in Armenia

Hratch Tchilingirian

The peaceful resignation of President Levon Ter-Petrossian on February 3 brought to an end months of political crisis in Armenia. Under the 6-year leadership of Ter-Petrossian, Armenia was one of the relatively stable former Soviet republics. However, with Ter-Petrossian’s departure, Armenia faces its first and major post-Soviet leadership change since its independence in 1991. Prime Minister Robert Kocharian has become Acting President until new elections are held on March 16.

The roots of the political dispute which led to Levon Ter-Petrossian's resignation as president lie in his decision last autumn to back the proposals of the Minsk Group of the Organization for Security and Cooperation in Europe (OSCE) for a resolution of the conflict over Nagorno-Karabakh. The Minsk Group proposed a 'phased' solution, which calls for the Karabakh Armenians' immediate withdrawal from those Azerbaijani territories outside Nagorno-Karabakh which they currently occupy, prior to any discussion of Nagorno-Karabakh's political status.

The current leadership of Armenia and Karabakh reject these proposals arguing that: a) acceptance of the Minsk Group plan would increase the prospects for renewed hostilities, by disrupting the current military balance between the Armenian and Azerbaijani forces and failing to require security guarantees from Baku; b) Baku would have no incentive to make concessions to Nagorno-Karabakh once Azerbaijani control of the occupied territories is restored and might be tempted to re-start hostilities; and c) Azerbaijani promises to grant maximal autonomy to Nagorno-Karabakh are questionable, given that Azerbaijan is a unitary state.

The Karabakh Armenians and their allies in Armenia insist instead on a 'package' solution, whereby all issues pertaining to the resolution of the conflict are discussed at once without preconditions. The Karabakh Armenians also reject any subordination of Nagorno-Karabakh to Azerbaijan and would agree to only a "horizontal" relationship with Baku.

The anti-Ter-Petrossian political avalanche gained momentum after the January 7-8 meeting of Armenia’s Security Council, which was attended by leading Karabakh officials. Subsequent to the Security Council meeting, the exacerbated differences over Nagorno-Karabakh were exposed to the public. Tensions rose further when two senior security officials and a pro-Ter-Petrossian deputy were attacked in separate incidents. Yerevan Mayor Vano Siradeghian -- leader of the ruling pro-Ter-Petrossian Armenian Pan-National Movement (ANM) -- implied that the Kocharian government may have been behind the attacks. For his part, Defense Minister Vazgen Sarkisian alleged that the ANM had staged the incidents to create a pretext for Kocharian's sacking. On January 28, Sarkisian said that Ter-Petrossian should change his Karabakh policy or a new leader would be found.

A wave of rapid developments escalated the situation into a political crisis:

-- All major opposition parties called for Ter-Petrossian's resignation, including the Communist Party, National Democratic Union, the banned Armenian Revolutionary Federation (Dashnaks); Self-Determination Union, Constitutional Rights Union, and the Union of Armenian Intellectuals.

-- A new National Council, comprising over 500 prominent intellectuals and public figures, urged Ter-Petrossian's immediate resignation and the holding of early presidential elections.

 -- Several of Ter-Petrossian's key allies resigned, including Siradeghian, Foreign Minister Alexander Arzoumanian and Central Bank chief Bagrat Asatrian.

-- The leader of the paramilitary 'Yerkrapah' parliamentary faction, Armenia's most influential political faction, said that its forces had switched their support from Ter-Petrossian to Kocharian.

-- Forty of the pro-Ter-Petrossian 'Republican' bloc's 96 deputies defected to pro-Kocharian groupings, leaving Ter-Petrossian with 56 votes in the 190-seat parliament (elected in 1995).

-- The security forces arrested over 25 armed militiamen suspected of involvement in the assassination attempts, heightening the conspiratorial mood. 

Nevertheless, Ter-Petrossian's resignation came sooner than expected. He said that he had decided to resign in order not to destabilize the country. Sacking Kocharian would have threatened to make Armenia ungovernable. However, beyond the Nagorno-Karabakh dispute, Ter-Petrossian's political weakness stemmed from, and the movement against him built upon, several longer-term factors:

 -- Ter-Petrossian never recovered political legitimacy after the 1995 parliamentary elections and, especially, the 1996 presidential elections -- when he was accused of rigging the votes -- despite recent efforts to regain public confidence and widen his support base. In addition, corruption among government officials is believed still to be rampant, despite promises to curb it. 

-- Economic growth has been slowing, inflation rising and dependency on foreign aid and loans increasing. Social conditions remain poor for much of the population, heightening popular dissatisfaction with Ter-Petrossian and compounding the impression of national weakness created by his stance on Nagorno-Karabakh.

The Nagorno-Karabakh Conflict

With the collapse of the Soviet Union, the dispute over Nagorno-Karabakh was transformed from a domestic Soviet conflict into an international issue. Besides Russia, a number of countries--including regional players such as Turkey and Iran--and international organizations proposed various unsuccessful initiatives. The most important of these has been the OSCE, which, since the summer of 1992, has been actively facilitating negotiations in the form of its 11-state Minsk Group, whose co-chairmanship became a triumvirate of Russia, France and the US in early 1997. 

The Nagorno-Karabakh conflict, dating from the 1920s, is one of the oldest conflicts in the former Soviet Union. Flaring up again in 1988 as a movement for unification with Armenia, by 1991 it had become a full-scale war. As the USSR crumbled, Nagorno-Karabakh declared independence in September 1991, as the "Republic of Mountainous Karabakh." It has not been recognized by any state, including Armenia. The war claimed more than 20,000 lives on both sides, created more than 450,000 refugees in Armenia and 800,000 in Azerbaijan, and destroyed hundreds of villages. The war is not officially over, but a fragile ceasefire since May 1994 has remained in force. 

The main difficulty facing attempts to reach a solution to the Nagorno-Karabakh conflict has been the friction between the principle of Azerbaijan's territorial integrity on the one hand, and the Karabakh Armenians' right to self-determination on the other. The international community's position is that the territorial integrity of the countries of the former Soviet Union should be maintained. However, Karabakh Armenians have argued persistently that just as Azerbaijan had the "legal choice" to secede from the Soviet Union in 1991, Armenians too -- under the law governing the Soviet Union at the time -- had the right to secede from Azerbaijan.

The legal processes of declaration of independence--of both Azerbaijan and Nagorno-Karabakh--are among the most contested issues in the conflict. 

On August 30, 1991, the Supreme Council of the Azerbaijan SSR declared independence by restoring the independent Republic of Azerbaijan that existed between 1918-1920 and declared the establishment of Soviet power in Baku as illegal. Two articles formulated in the Constitutional Act were significant: Article 2 stated, “The Azerbaijani Republic is the successor of the Azerbaijani Republic which existed from May 28, 1918 to April 28, 1920“; and Article 3 declared, “The treaty on the establishment of the USSR on December 20, 1922, is considered not valid in the part related to Azerbaijan from the moment of signing it.“ Furthermore, earlier, the law proclaimed the Azerbaijani nation’s sovereignty over the republic. Azeri was confirmed as the state language, and the republic’s land and natural resources were defined as “national wealth“ belonging to “the Azerbaijani people.“ 

By refusing to become the legal successor of Azerbaijan SSR, Baku freed itself from recognizing Nagorno Karabakh as an Autonomous Region, a semi-“state“ within the legal framework of the Soviet Union. In 1923, the Armenians of Nagorno Karabakh were recognized as a legal entity within Azerbaijan SSR by becoming a “state” within a state, i.e., the Nagorno Karabakh Autonomous Oblast. As such, legally speaking, the “Mountainous Karabakh Republic“ was declared over territories that the Republic of Azerbaijan, in view of the fact that it had rejected the Soviet legal system, had no sovereignty over. Nagorno Karabakh was not part of the first republic of Azerbaijan between 1918 to 1920. 

The Armenians of Nagorno Karabakh declared independence based on the same operative laws of the Soviet Union of the time. The law granted rights to autonomous entities and national settlements to independently decide their legal and administrative status in case the host republic would exit the USSR. Based on this provision of the law, Nagorno Karabakh organized a referendum on December 10, 1991, in the presence of international observers, by which the people of Nagorno Karabakh expressed their will for independence. This provided legitimacy to Nagorno Karabakh’s independence in the legal context of the USSR’s disintegration. Thus, when in 1992 the international community recognized the post-Soviet states, including the Republic of Azerbaijan, it failed to recognize that Nagorno Karabakh had not been part of Azerbaijan, legally, starting in 1991. 

Currently, neither international law nor the treatment of the Bosnian Serbs' similar claims to a right of secession from an independent Bosnia give much support to the Karabakh Armenians' case. Yerevan has also argued that the recent historical record means that Azerbaijan is unable to guarantee the security of the population of Nagorno-Karabakh--especially in view of anti-Armenian pogroms in Sumgait, Baku, Gyanja, Shamkhor, Shamakh and Mingechaur--requiring that the enclave secure the right to self-determination. 

Nagorno-Karabakh Armenians maintain that any solution leaving Karabakh within Azerbaijani jurisdiction is unacceptable. Baku is willing to grant a "high degree of autonomy" to Karabakh as part of the Azerbaijani state, but considers full independence as an infringement of its sovereignty and hence, of its territorial integrity. While official Baku has not specified what "high degree of autonomy" means or is (Azerbaijan's new Constitution does not have any provisions for autonomous regions within the republic), Azeri opposition parties have criticized the solutions proposed by the OSCE Minsk Group. Former President Abulfaz Elchibey, in addition to rejecting the OSCE proposal, stated that Nagorno-Karabakh should have no more than "cultural autonomy". He advocated military action to resolve the Karabakh conflict “if it proves impossible to do so by peaceful means.“ 

OSCE Negotiations 

Since 1992, in more than a dozen Minsk Group meetings, the two sides have focused without results on drawing up a “grand political agreement” between the Armenians and the Azerbaijanis. The agenda begins with the most complex and contested issue, which is determining Karabakh's political status in the negotiations. Azerbaijan objects to anything except "broad autonomy," while Karabakh Armenians refuse any formula that would give Azerbaijan legal, political or security jurisdiction over them. 

The other contentious issues are the security of Nagorno-Karabakh and its population, the guarantees to be provided by international community and composition of peacekeeping forces, and the establishment of a permanent land connection between Karabakh and Armenia--the Lachin corridor. 

A new twist occurred at the end of 1996 when Nagorno-Karabakh figured prominently at the OSCE's Lisbon Security Summit on December 2-3. Azerbaijan wanted its territorial integrity reaffirmed in the final summit declaration, and threatened to veto the entire communiqué. Armenia then vetoed these demands. To avoid embarrassment, all reference to the Nagorno-Karabakh dispute was removed from the final document. Instead Azerbaijan's demands were included in a separate statement, drawn up against Armenia's wishes. 

The statement of the OSCE Chairman-in-Office, attached as an annex to the Lisbon summit communiqué, states three key principles: 1) that the territorial integrity of the Republic of Armenia and the Republic of Azerbaijan is inviolable; 2) that the legal status of Nagorno-Karabakh will be defined in an agreement based on self-determination, conferring on Nagorno-Karabakh the highest degree of self-rule within Azerbaijan; and 3) that the security of the population of Nagorno-Karabakh will be guaranteed, including mutual obligations to ensure compliance by all parties with the provisions of the settlement. 

All 53 states of the OSCE, except for Armenia, supported these principles, which became the framework for future negotiations. Armenia’s political ‘defeat’ in Lisbon had significant negative impact on its domestic and foreign affairs throughout 1997. 

In December 1997, the OSCE Ministerial Council in Copenhagen marked the end of Armenia’s yearlong efforts of political recovery subsequent to the Lisbon Summit. Contrary to expectations and due to Armenia’s diplomatic efforts, the Ministerial Council did not make any substantive declarations concerning Nagorno-Karabakh. Armenia characterized the outcome in Copenhagen as “positive,“ since it did not create “additional obstacles“ for the peace process in general. 

A key problem in the negotiations process has been Baku’s refusal to recognize Nagorno-Karabakh Armenians as negotiating partners. The prospects for direct talks between Baku and Stepanakert (capital of Nagorno-Karabakh) has been discussed among the Minsk Group co-chairmen; Armenia has advocated for direct talk since the beginning of the conflict; and the Karabakh leadership sees it as the only way for progress in the talks. However, Azerbaijan consistently portrays the conflict in purely bilateral terms between Baku and Yerevan. 

Azerbaijan’s refusal for direct talks stems from several key elements of its Karabakh policy: a) direct talks with Karabakh Armenians would make the conflict a domestic issue rather than an inter-state issue. This would weaken Baku’s “territorial integrity“ argument and strengthen Stepanakert’s “right to self determination” argument; b) Baku has invested too much political and diplomatic energy in making “territorial integrity” the sole basis of resolution of the Karabakh conflict. Especially since the OSCE’s Lisbon Summit in December, this has been Baku’s most valued diplomatic success; c) direct talks with Karabakh Armenians could also serve as a pretext for other ethnic groups in Azerbaijan to demand for their rights. 

Rather than compromise, Azerbaijan seems to be willing to postpone the resolution of the conflict. Baku hopes that in the interim it would press Armenia and Karabakh economically. As affirmed by Azerbaijani presidential advisor Vafa Guluzade, Baku will use its oil politics “as skillfully as possible.“ In the meantime, it would have a chance to improve its military-political structures and train a more mobile and professional army. 

More recently, the Azerbaijani leadership has expressed interest in direct talks with Stepanakert, but only if Nagorno-Karabakh, first accepts Azerbaijan’s territorial integrity and returns the “occupied territories.“ Karabakh Armenians argue that direct talks should start without preconditions and without predetermining the relationship of the one side with the other. In the short term, direct talks between Baku and Stepanakert remain highly unlikely. And yet in the long term, no serious progress will be made without full participation of the Karabakh Armenians in determining their status. 

The Nagorno-Karabakh conflict is also likely to have an influence on the presidential elections due to take place in late 1998 in Azerbaijan (as it has been the case in the past during the administrations of two former presidents, Ayaz Mutalibov and Abulfaz Elchibey). The efforts of the Aliyev administration are likely to focus on establishing positive public opinion regarding the resolution of the conflict. If the negotiations drag on without concrete results, Aliyev may speak about the “military option” during his campaign: a) to show his opponents and the public his strength and determination to resolve the conflict by all means, b) to calm public frustration over the impasse and build favorable public opinion toward his administration, c) divert attention from existing socio-economic difficulties of Azeri society, popular frustration over corruption and lack of real political reforms. However, it is unlikely that the threats of military attack will materialize, at least in 1998, since they would not only result in heavy losses for Azerbaijan, but, most important, would hurt its booming oil-based economy. 

The temptation for Azerbaijan is to maintain the ceasefire and accelerate the oil-boom, justifying inaction by prosperity. The difficulty this poses is that each year that passes further solidifies Karabakh Armenians’ de facto independent status. 

OSCE Peacekeeping Mission? 

In December 1994, at the Budapest Summit, the OSCE established a High Level Planning Group (HLPG) under the direction of the Chairman-in-Office to plan a peacekeeping mission to Nagorno-Karabakh and the conflict region, based on "traditional peacekeeping" missions, such as the UN Protection Force (UNPROFOR) in Croatia and Bosnia. 

To date, the HLPG has produced documents that include basic concepts for the operation and an assessment of the work of previous groups and a report on the conflict zone based on two-week reconnaissance trip to the area. 

Major-General Heikii Vilen, head of the HLPG, commented that "there can be no deployment of peacekeepers unless a political agreement is signed assuming the cessation of hostilities and ceasfire in the area. The operation will be launched only with the consent and at the request of the parties, which means that they will actively cooperate with the peacekeeping forces and thus guarantee their security". This mission would "last for a certain period of time only." 

In October 1997 a military working group from the OSCE held talks in Stepanakert, Yerevan, and Baku on regional security issues and the deployment of a peacekeeping force in the region. While the OSCE representatives affirmed that the organization is prepared to mount a peacekeeping operation for Nagorno-Karabakh, they stressed, however, that the financial resources available for such an operation are limited. 

Despite the negotiations impasse, OSCE’s monitoring program continued. In November a delegation visited the region, led by Colonel Antal Herdic (Hungary) and Bern Lowritsen (Denmark), aides of OSCE acting chairman's personal representative. The delegation ran a monitoring program on the front line between the armed forces of Karabakh and Azerbaijan. 

In late January, a special envoy of the OSCE, Andrei Kasprczik, and his aides from Denmark, Ukraine and Sweden, toured the front line near Aghdam. To ensure their safety, military commanders of the two conflicting parties had established direct contacts. The Karabakh side organized and conducted the monitoring as required under the program agreed with the OSCE mission. Kasprchik also met with Nagorno-Karabakh government officials. Another visit to the region was paid on February 10 by OSCE Chairman's representative Anders Troedson to discuss the issues related to monitoring of the front line scheduled for late February. 

OSCE military observers believe that the basic conditions are present in the enclave to allow the forming of a peacekeeping mission in the region. 

40 Months of Ceasefire

The ceasefire since May 1994 has provided a cooling-off period and has afforded time to strengthen governmental infrastructure in Azerbaijan, Armenia and Karabakh. In addition to the war, these new republics have had to embark on the transition from state-controlled to free market economies, and, since independence, the state-building process. Unfortunately, both sides have also used the ceasefire regime to re-arm and replenish their military hardware. 

The ceasefire has particularly helped Azerbaijan's economy, which registered record growth in the last two years. Foreign investment rose five-fold. At the end of the first quarter of 1997, foreign direct investment in Azerbaijan had reached $590 million, compared to $436 million at the end of 1996. The European Bank for Reconstruction and Development estimated that after five years of decline, Azerbaijan's economy grew 1.2 per cent in 1996, rising toward 5 per cent in 1997. Inflation in the first quarter of 1997 was 0.8% compared to 6.8% in 1996 and 84.6% in 1995. This pace of expansion is expected to accelerate in 1998 and 1999. 

Armenia’s economic development, once considered the most “dynamic“ in the CIS, has shown a decline. The economies of Azerbaijan, Georgia, and Kyrgyzstan are all growing faster. Following three years in which Armenia registered one of the best performances within the CIS, Armenia’s trade deficit for the first 11 months of 1997 was $608 million, exceeded the 1996 level of $571 million. Both these figures and the current account deficits of about $500 million are large for an economy the size of Armenia's. Only inflows from international financial institutions, foreign countries (especially U.S.), and the Diaspora have prevented the imbalances from destabilizing the economy. Inflation soared to 21.9% in 1997, compared to only 3.6% in 1996. For the first ten months of 1997 the economy grew at a rate of only 2.6%, half the 5.2% rate it had grown in 1996. Foreign investment in Armenia’s industry in 1997 was estimated at $108 million, compared to $33.8 million in 1996. Even though Armenia has one of the most successful privatization programs in the former Soviet Union and has implemented significant economic reforms, its long term economic prospects are hampered by the existing Azeri and Turkish blockade, lack of rich natural resources and heavy industry. 

As for Karabakh, in April 1995 the government in Stepanakert estimated that the war has caused an estimated $2.5 billion damage to its economy and infrastructure. Karabakh's economy remains meager, and its relies heavily on Yerevan for financial assistance. Its state budget for 1997 was $20 million, $13 million of which came from Armenia in the form of long-term credit, to cover basic needs such as social welfare, education and health. 

Despite these economic and political setbacks, Armenia conducted a relatively consistent foreign relations.

Armenia’s Foreign Policy

Armenian foreign policy rests on three linked principles: 

-- Security. Armenia sees its immediate environment as hostile, and its foreign policy agenda is dominated by military and security concerns. For the purposes of deterrence, Armenia wishes to build its defense forces so that it at least matches Azerbaijan in military strength. 

-- Balance. For historical reasons, Armenia prefers to take the initiative in building a set of balanced relations with all relevant powers, rather than relying on a single alignment led by another state. Yerevan's enthusiasm for ties with both Russia and the United States contrasts with the more unequivocal pro-western orientation of Georgia and Azerbaijan. Armenia has been able to preserve a balance by neither antagonizing nor fully accommodating the players in a crowded region. 

-- Pragmatism. Armenia is aware of its relative military and economic weakness, especially compared with Azerbaijan, and takes account of this in pursuing its foreign relations, sometimes to the dismay of domestic public opinion. Armenia's main foreign policy lever is its geo-strategic position. 

Armenia thus aims to build as many international ties as possible, both within the region and beyond, in order to boost its security. The Armenian leadership is also aware that the international community will not allow the Nagorno-Karabakh conflict to go unresolved indefinitely. Yerevan thus aims to build a set of relationships that will facilitate an eventual settlement as favorable to the Armenian position as possible. 

Some of the key developments in Armenia’s foreign policy were in the areas of: 

1. Neighboring states. Progress in developing friendly relations with neighboring states included: 

-- Georgia. Relations between Tbilisi and Yerevan are friendly, although Georgia's more antagonistic orientation vis-a-vis Russia make for a closer affinity with Azerbaijan. Georgia has more to gain from Azerbaijan's oil wealth than from good relations with Armenia. Nevertheless, in July 1997 Armenia signed a 'strategic partnership' agreement with Georgia. 

-- Iran. Relations with Iran are increasingly cemented by numerous bilateral agreements. Iran's economic presence in Armenia (especially in energy, industry and consumer goods) is particularly strong. Although Iran maintains a neutral stance on Nagorno-Karabakh, its economic ties with Armenia aggravate Baku, as they undermine the effect of the Azerbaijani blockade. Armenia is developing a 'strategic cooperation' agreement with Iran, and has announced its intention to appoint a military attaché in Tehran. In April 1997 Armenia, Turkmenistan and Iran signed a memoranda on cooperation in trade, transport, banking, energy and gas supplies, and on tourism. This was followed by a significant tri-lateral Armenia-Iran-Greece agreement that was signed in Athens, in December 1997, paving the way for long-term cooperation in economic and commercial fields.

-- Turkey. During 1997 there were signs of a softening of Ankara's position on its blockade of Armenia, although a normalization of relations with Yerevan remains hostage to Turkey's hopes of benefiting from the transit of Azerbaijani oil. Azerbaijani pressure means that Turkey continues to make resolution of the Nagorno-Karabakh conflict a condition of normalized relations with Armenia. Despite the blockade, the volume of trade between Armenia and Turkey amounted to over $100 million in 1997. In recent years Armenian and Turkish businessmen have exchanged visits and discussed commercial projects. Most recently, in November 1997, a group of 30 Armenian businessmen visited Turkey where they discussed combining "their efforts towards the establishment of direct trade between Armenia and Turkey." This was followed by a three-day visit of Turkish businessmen to Yerevan, in February 1998. At the end of the visit a protocol on further development of Armenian-Turkish business ties was signed. 

-- Azerbaijan. No progress will be made in relations with Azerbaijan until a resolution is reached on Nagorno-Karabakh, of which there is little prospect at this time. The diversity of regional states' interests means that none is likely to be able to mediate effectively between Armenia and Azerbaijan. A settlement on Nagorno-Karabakh will probably rely on mediation by outside powers, even though unofficial direct contact exists between the two sides. 

2. Regional. There have been several significant developments in Armenia's ties outside its immediate neighbors, including an economic and military cooperation agreement with Ukraine and a 'strategic partnership' agreement with Kazakhstan, adding to those which Yerevan already has with Turkmenistan and Kyrgyzstan. Armenia is developing 'strategic cooperation' agreements with the United States -- where it hopes to post a military attaché -- and China, and in the summer of 1997 signed agreements with Syria, Lebanon and Egypt. Yerevan also gives weight to participation within multilateral forums such as the CIS and NATO's Partnership for Peace. In July 1997, Armenia signed military cooperation agreements with Greece and Bulgaria. Yerevan hopes to appoint a military attaché in Athens. Some Armenian officials have spoken of a Moscow-Yerevan-Athens axis, although this prospect alarms Turkey.

Armenia's most notable recent foreign policy success came with the August 29, 1997 treaty with Russia on friendship, cooperation and mutual assistance, in which Moscow committed itself to the defense of Armenia should it be attacked by a third party. The treaty was ratified by both the Russian Duma and Armenia’s National Assembly. Russia is the key regional security player, and has proved a valuable historical ally for Armenia. However, it is clear from the wider context of Armenian foreign policy that -- while Yerevan welcomes the Russian security guarantee -- the country does not want to rely exclusively on Moscow, nor to become part of a confrontation between Russian and US-led alliances in the Transcaucasus. 

Armenian-Russian relations, beyond the implementation of military agreements, will focus on energy supply arrangements and economic development. As for the Karabakh conflict and its resolution, Russia is likely to continue to exercise its unpredictable political influence on both sides to the conflict, determined by its own changing geo-political and strategic interests in the South Caucasus. 

The United States has allocated $87 million foreign aid for Armenia for the fiscal year 1998. The Clinton administration’s failure to repeal Section 907 of the Freedom Support Act , a promise Clinton made to President Aliyev of Azerbaijan, was a major victory for Armenia and the Diaspora’s Armenian lobby. Congress not only preserved the ban on direct U.S. government aid to Azerbaijan, it also approved $12.5 million for direct U.S. government aid to Nagorno-Karabakh. However, the Clinton Administration has indicated that it will continue its efforts in 1998 to repeal Section 907 and reduce the amount of foreign aid to Armenia. 

There are other long-term developments in U.S.-Armenian relations. In August 1997 representatives of the U.S. State Department, the Departments of Defense, Trade and Energy, the United Headquarters of the U.S. Armed Forces and the U.S. Agency for Armaments and Disarmament Control were involved in a U.S.-Armenia dialogue to discuss assistance in security sphere, control over the export, licensing and non-proliferation of mass destruction weapons, nuclear and chemical substances and prevention of drug smuggling. France has also provided significant technical and financial aid for the proper maintenance of Armenia's nuclear energy system. 

The goal of the U.S.- Armenia security dialogue is to hold bilateral conferences, boost partnership and cooperation towards European security (within the framework of the Euro-Atlantic Partnership Council and Partnership for Peace Programs), European integration (within the framework of the OSCE), armaments and disarmament control (including the Conventional Arms in Europe Treaty and the course of arrangements on security and trust in Europe). A key purpose of the dialogue is to develop a system of efficient control of mass destruction weapons, including production technologies and export. In this regard, the National Nuclear Control Agency of Armenia received a $7.5 million aid from the United States. Those funds were assigned to tighten the safety and reliability of the Armenian Nuclear Power Plant, update the nuclear energy control system, as well as develop a more efficient management system. 

Security concerns, prevention of possible diplomatic pressures, energy supply, economic stability and development will be the key determinants of Armenian foreign policy in 1998. In addition to participation in multinational regional and international structures, such as CIS, NATO, European Council, Armenia is likely to continue establishing diplomatic relations within and outside the region, with special attention given to the development of bilateral and multilateral agreements. The Armenia-Greece-Iran relation is likely to be strengthened with further mutually beneficial economic, strategic and security arrangements.

Domestic Affairs 

The reverberations of the upheaval after the September 1996 presidential elections continued throughout 1997 and until President Ter-Petrossian’s resignation. A wave of dissentions and splits in the rank and file of the political parties took place in the context of two key factors: 

a) All the opposition parties in Armenia have failed to develop a broader political base and agenda. To a large extent, they had made President Ter-Petrossian and his administration the sole focus of their political activities. Their criticism of the government was not effective, with diminishing public support, since they did not offer viable alternative political or economic policies for Armenia. The scattered public support of the opposition parties was not a recognition of their policies or ideology, but was primarily an expression of dissatisfaction with the government. 

b) The fact that there are 57 political parties and organizations for an officially estimated population of 3.7 million is an indication that no party would be able to create large political and popular support in Armenia with proper resources for effective functioning. With a few exceptions, most political parties in Armenia are made of small groups of individuals or intellectuals who oppose the government or the leadership of their former party or organization.

It remains to be seen as to how Armenia’s internal political forces would be consolidated after a new president is elected in March. It is likely that a number of opposition parties will persist in trying to justify their existence by only criticizing the government. However, a larger number of parties will try to play a more constructive role in Armenian politics by reevaluating their agenda and realigning their relations with the government.

Ter-Petrossian's speedy resignation and the subsequent constitutional conduct of all actors have prevented any clashes or internal destabilization.

The Presidential Elections

Poor socio-economic conditions and Nagorno-Karabakh were among the most important election issues during the first phase of the presidential elections on March 16.

Among the 12 candidates running for the presidency, the two candidates that received the highest percentage of the votes were Acting President and Prime Minister Robert Kocharian, 39 percent, and former Communist leader Karen Demirchian, 30 percent. The chairman of the opposition National Democratic Union, Vazgen Manukian, received 12 percent and leader of the Communist Party, Sergei Badalian, 11 percent.

More than 300 international observers were in Armenia to monitor the elections. Special representative of the election observation mission of the Inter-parliamentary Assembly of the Council of Europe Lord Russell Johnson stated that, “on the whole, the presidential election in Armenia proceeded well.” However, while there were some violations similar to the 1996 election, he noted that “considerable improvements” were in place during this election. The majority of violations observed were of technical character, such as open voting, stuffing of ballots into ballot boxes, presence of police at polling stations. It was noted that the majority of the violations were caused by "over-zealousness" of officials of middle administrative structures.

Council of Europe representative Bernard Owen told journalists that according to criteria of the newly independent states the "election proceeded well.” Commenting on the statement of seven presidential candidates, urging to declare the election “not free and not fair,” Owen noted, "If there are strong grounds for such a statement and it is not only a political one, there are structures which are authorized to pass a verdict, recognizing the election null and void. The democracy must not be confused with anarchy."

A controversial OSCE observers’ statement said that "significant" electoral law violations had been found at 15 percent of the 800 polling stations monitored. The statement also indicated that significant improvements were needed for the March 30 run-off to be fair but stopped short of declaring the ballot invalid.

At a news conference, Kocharian disagreed with some of the points of the statement and rejected OSCE claims that the use of state resources, police and other unauthorized personnel in polling stations and media bias contributed to his victory in the first round of the election. Kocharian acknowledged "some flaws" in the voting process and promised that they will be eradicated in the run-off. He pointed out that, other than isolated incidents, the March 16 polls showed major improvements in the election process, with a record number of electoral participation, over 60 percent.

Since none of the candidates received the required 50-percent-plus-one votes, a run-off elections ill be held between Kocharian and Demirchian.

Robert Kocharian is a native of Nagorno-Karabakh, where he was president from 1996 until his appointment as Armenian Prime Minister of Armenia in March 1996. Despite doubts over Kocharian's citizenship and residency requirements, the Central Electoral Commission approved his candidacy, on the basis of precedent, current legal practice and contested constitutional provisions. Over two dozen, mostly centre-left, parties and organizations have endorsed Kocharian, including the formerly banned ARF-Dashnak Party, which Kocharian reinstated immediately after Ter-Petrossian's resignation. Kocharian can point to his demonstrated leadership abilities -- as former leader of Nagorno-Karabakh and Prime Minster of Armenia -- and some economic achievements during his year in office. He is also seen as the key figure behind the creation of 'national solidarity' on Nagorno-Karabakh and the exit of the unpopular Ter-Petrossian. It remains to be seen whether socio-cultural differences between citizens of Armenia and citizens of Nagorno-Karabakh would eventually have an effect on Armenia’s Karabakh policy.

Karen Demirchian, 66, was the First Secretary of the Communist Party of Armenia from 1974 to 1988; he has since lived in relative obscurity as director of one of Armenia's largest state enterprises. He was nominated by the Socialist Party but declines to be placed clearly on the political spectrum. Demirchian's popularity has risen rapidly since he launched his surprise candidacy. He has received the support of those nostalgic for the higher living standards of the late Soviet era.

Regardless of who wins the elections, two significant issues will affect Armenia in the short and the long term:

1. The Economy. Despite some success in economic stabilization and institutional reform, bilateral and multilateral aid and diaspora financial inflows remain vital. Popular frustration with high levels of poverty and inequality is considerable. According to government figures nearly 25% of the population has left Armenia since 1991 to seek work and better living conditions outside Armenia, mostly in Russia and CIS countries. 

Kocharian has pledged to strengthen industry, create jobs and more favorable investment conditions and crack down on the black market and tax evasion. He has also promised to increase wages, reform the social security and pension systems and introduce free healthcare for the most vulnerable groups. 

Kocharian argues that "better economic policy" and reforms aimed at wiping out corruption will suffice to ensure satisfactory economic performance even without progress on Nagorno-Karabakh. Given the economic damage inflicted by the Turkish and Azerbaijani blockades, it remains to be seen whether such policies are realistic. Unlike Demirchian, Kocharian probably offers the greatest prospect of continuity in market reforms, and he is largely backed by the business community. For his part, Demirchian promises to promote the transition to a market economy, albeit a “state-regulated” one; his experience in the enterprise sector gives some credibility to his reformist pledges. 

2. Nagorno-Karabakh conflict. With the marginalisation of Ter-Petrossian and his party, a broad consensus has emerged in Armenia on Nagorno-Karabakh, based on the Karabakh Armenians' right to self-determination. In order to remain in contention, most political forces thus oppose the phased proposals of the Minsk Group mediators -- which Ter-Petrossian came to support -- and instead back a 'package' solution, whereby all issues are discussed simultaneously Kocharian, whose views on Nagorno-Karabakh are the clearest compared to his opponent, takes this position. He has promised to seek international recognition of the rights claimed by the Karabakh Armenians, although he has also said that there is room for compromise within the Minsk Group framework. Demirchian's position is the least clear, although he has ruled out a return to Nagorno-Karabakh's pre-independence declaration status. He also believes that his long acquaintance with Aliyev could help to expedite a resolution. The challenge for the new president will be to balance domestic popular support for the Karabakh Armenians against international pressures for a resolution of the conflict.

In addition to these issues, Kocharian has promised to amend the constitution to make Armenia a parliamentary republic and grant citizenship to Diaspora Armenians.

It has been widely speculated that Demirchian's candidacy was aimed mainly at taking votes from the other challengers to Kocharian, namely Manukian and Badalian thus helping the prime minister to victory. However, Demirchian has denied reports of a secret pact with Kocharian. Moreover, Demirchian's current strong position marks the emergence of a new political heavyweight in the election campaign.

Regional actors and the international community are concerned about a possible Kocharian victory. In a clear indication of their choice, Azerbaijan, Georgia and Turkey hailed Karen Demirchian as "the opportunity of the region.” In the event of a Demirchian victory, Armenia would join the other two South Caucasus states in having returned a Brezhnev-era Communist to power. Both Presidents Eduard Shevardnadze and Heidar Aliyev are the linchpins of their countries' stability. Both know Demirchian well, having ruled the region at a time when it was one of the most well-to-do parts of the former USSR. Aliyev and Shevardnadze rapidly adjusted to the new post-Soviet realities, and their pragmatism and flexibility helped them regain power. The shared political “heritage” of Aliyev, Shevardnadze, and Demirchian would seemingly create a more favorable political atmosphere in the region.

The consequences of a Kocharian victory are fairly obvious. In the region and outside, he is viewed as the "hard-line," “nationalist” leader who comes from "secessionist" Karabakh with an “uncompromising” stance on the resolution of the Nagorno-Karabakh conflict. The international community, especially the West, which had developed a relatively "comfortable" working relationship with Ter-Petrossian since 1991, will have to face a relatively new-comer Kocharian. The West will either continue to pressure Armenia -- which is unlikely to work as indicated by Ter-Petrossian’s downfall -- or will have to find a new political modus operandi, other than the current oil-centered diplomacy. As the new political realities in Armenia unfold, Western diplomacy has to move beyond its "orientalist" attitude toward the region, that is, other than the oil, the region is perpetually infested with ethnic, religious or nationalistic conflicts. As obviated by Ter-Petrossian’s downfall, the policies of the last seven years were not particularly "helpful". Whether Armenia is headed by a president Kocharian or a president Demirchian, a more dynamic and creative approach is needed, especially to break the Karabakh impasse. In the long term, the more the West pressures Armenia, the more Armenia will get closer to Russia and Iran. A Kocharian administration, unlike Ter Petrossian, instead of giving in to the pressures, will probably move closer to other "hostile" alliances in the region. In his turn, Kocharian will also have to realize that he has to adjust to the expectations of the international community and cannot keep Armenia “hostage” to the Nagorno-Karabakh conflict. Some observers suggest that there are precedents of intransigent leaders breaking new grounds in settlement of conflicts. U.S. President Richard Nixon, a staunch Cold War warrior, is cited as an example. "It took a Nixon to go to China," they say. It remains to be seen whether a similar scenario would be played in Armenia.

The economic and political competition between Russia and the United States for greater influence in the region is the larger context that would shape the policies of the new president in Armenia. Russia’s unpredictable and at times contradictory position in the South Caucasus will, in the short term, buy time for the new president and his foreign policy. The long term question is what will happen to Russian-Armenian relations in particular, and Russian policy generally in the region once Yeltsin is no longer in power?

With the election of a new presidential, a relatively peaceful transition of political power in Armenia appears likely. However, domestic politics in both Yerevan and Baku will probably ensure that the Nagorno-Karabakh peace process is effectively stalled until at least the end of the year.

Both Acting President Kocharian and Azerbaijani President Heydar Aliyev have expressed their continued support for the ceasefire in Nagorno-Karabakh and efforts to find a peaceful settlement to the conflict. Interested international parties have also expressed hopes that the political turmoil in Armenia will not disrupt the peace process. 

In the short term, Armenia’s domestic and international credibility depends on a fair, free and transparent presidential election. In the long term, the improvement of socio-economic conditions, strong economic development, and the resolution of the Nagorno-Karabakh conflict will be the most difficult challenges facing the new leadership in Armenia.

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*Hratch Tchilingirian is a Ph.D. Candidate in the Sociology Department of London School of Economics and Political Science.

[For notes see French version in PDF]