WWS 401c: Energy Policy, the Environment, and the Gulf States

Professor H. Feiveson

The Azerbaijan-Armenia Conflict: The War in Nagorno-Karabakh,

Section 907, and their Impact on Oil Pipeline Routes

Kenneth Shaitelman

January 4, 1999

"A thousand years ago, camel caravans brought silk across Central Asia to the Mediterranean, supplying the most valuable commodity of the time to Europe. Now a new silk road has begun, this time to bring oil and gas from the Caspian Sea to the West," Sylvie Tertzakian, adjunct professor at Chapman University.

Executive summary

The conflict in Nagorno-Karabakh has impeded the development of pipelines carrying oil from the Caspian Sea. The fighting between Azerbaijan and Armenia has not only prevented a direct pipeline from Baku, the Azeri capital, through Armenia to the Turkish port of Ceyhan. It has also hindered the use of other routes through the region, such as one from Baku to the Georgian port of Supsa, or one from Baku to Ceyhan via Georgia. Terrorism and the escalation of a regional arms race are real concerns for international oil companies and Western governments.

Each of the countries involved has different interests at stake. The Azeris hope the oil will supply much-needed revenue and foreign investment. While the Armenians also view Caspian oil in economic terms, the Nagorno-Karabakh conflict, for them, is more a matter of national pride. Russia has always viewed the Caspian region as its sphere of influence. It has trouble accepting that a country such as Azerbaijan is now independent and can act free from Russian control. Further, Russia, like Azerbaijan, desperately needs the oil revenue to prop up its struggling economy. The United States wants to ensure the diversification of world oil supply for the 21st century, isolate Iran, and promote democratic, free-market reforms in the countries of the Caspian basin.

Finally, Section 907 of the Freedom Support Act of 1992, which restricts American government assistance to Azerbaijan, prevents the United States from playing an impartial role in the mediation of the Nagorno-Karabakh conflict. As the world’s only superpower, it has the responsibility to step in and work out a solution to this deadly dispute, which has dragged on for over a decade. Section 907 is a biased piece of legislation that was implemented only at the instigation of the Armenian lobby. It is contrary to American interests and should be repealed immediately.

A brief history of the Nagorno-Karabakh conflict

Nagorno-Karabakh is an ethnic Armenian enclave in the middle of Azerbaijan. Home to 160,000 people, 95 percent of whom are Christian Armenians, it is the size of Delaware. To the west of the enclave lies Armenia, less than five miles away at the nearest point. Iran is approximately 15 miles to the south. The two major towns of the enclave, Stepanakert, the capital, and Shusha, are only a few miles from each other.

The word "Nagorno" is Russian for mountainous. "Karabakh" is a compound of the Turkish word for black (kara) and a Persian word for garden (bakh). Although Nagorno-Karabakh is the most common name for the area, some prefer the title Mountainous Karabakh. Armenian nationalists call it Artsakh, a name said to date from a fourth-century Armenian empire.

Nagorno-Karabakh became an Armenian enclave in Azerbaijan after Joseph Stalin negotiated a treaty between the Soviet Union and Turkey in 1921. Carving out enclaves was deliberately practiced in Soviet times to exacerbate ethnic tensions. Because the Soviet republics were always occupied with ethnic problems inside their own borders, they were distracted from seeking independence from the Kremlin.

The Armenians of Nagorno-Karabakh (also known as Karabakhis) had desired autonomy for decades. However, they only declared independence from Azerbaijan in July 1988, as Moscow’s hold over the Soviet Union slipped. Full-scale war broke out between Azerbaijan and Nagorno-Karabakh in 1991, with the Karabakhis demanding complete independence or the absorption of the enclave into Armenia. Still going on today, the war is now the longest-running conflict in the former Soviet Union. The Karabakhis, with the help of Armenia, fight for self-determination and independence from Azerbaijan; the Azeris fight for the territorial integrity of their country.

The conflict over Nagorno-Karabakh has rapidly expanded and intensified since the declaration of independence in 1988, resulting in the deaths of an estimated 35,000 soldiers and civilians and the displacement of one million others. The territory stands as a devastated war zone subject to an economic blockade which has resulted in severe shortages of food and medicine.Ground assaults, shelling, air raids, and heavy artillery have been used by both sides. Although a Russian-mediated cease-fire has been in effect since 1994, over 400 people still die each year on the front lines.

Both the Azeris and the Armenians have committed egregious violations of the international rules of war. For example, there has been forced displacement, looting and burning of homes, mistreatment and execution of prisoners of war, and the use of air power against civilian targets. Attempts to rescue the wounded have been impeded. Further, there has been hostage-taking and torture of hostages.

Armenia, in particular, has been criticized by the international community for what some call ethnic cleansing. 850,000 have been expelled from Nagorno-Karabakh and several areas bordering the enclave, Azeri territory now occupied by Armenian forces. Further, nearly 200,000 Azeris have been forced out of Armenia. One out of every seven individuals in Azerbaijan has lost his home and his psychological, social, and economic sense of place. Most live in conditions of unimaginable squalor in abandoned rail cars and corrugated tin huts. There is no sewer system, electricity, running water, medical care, or a way to combat rats. Azerbaijan is making virtually no effort to re-integrate the refugees, in the hope that they will eventually be able to return to their homes.

The Karabakhis have proved themselves fierce fighters during the conflict. After three years of fighting, the Karabakhis had not only gained control of Nagorno-Karabakh’s 1700 square miles, but they had also seized territory beyond their borders to the west, south, and east, amounting to approximately ten percent of the rest of Azerbaijan. To illustrate Nagorno-Karabakh’s military prowess: In its history, the Soviet Union named only five marshals, four came from Nagorno-Karabakh. It is important, however, to remember that the Karabakhis did not fight alone. Against superior Azeri forces, the Karabakhis could never have prevailed without the food, troops, money, fuel, medical supplies, and advice from Armenia. (The Russians also provided some military aid, but they helped the Azeris as well.)

Today, Nagorno-Karabakh remains dependent on Armenia for political, moral, and financial support. A 50-mile-long modern highway through Azerbaijan’s Lachin district, which is occupied by Karabakhi military forces, physically links the enclave with Armenia. The president of Nagorno-Karabakh, Arkady Ghukasian, emphasizes that the enclave constitutes a single economic area with Armenia as a result of this highway, which the Karabakhis call the "road of life."

A diplomatic team from Russia, France, and the United States has been trying to resolve the Nagorno-Karabakh dispute. They want the enclave returned to Azerbaijan but given "maximum possible autonomy." Armenia has rejected this, vowing never to allow Azerbaijan to rule there again. The question of how and where to settle the refugees remains unanswered.

Why is the Nagorno-Karabakh conflict important?

More and more, the Karabakhis fear losing their hard-won gains. They worry that the West, eager to tap Azerbaijan’s oil reserves, is pressuring them to make concessions to the Azeris. It is a realistic concern. There is a lot of oil in Azerbaijan, 50 billion barrels, by some estimates, enough to keep American industry and cars running for more than 30 years. For that reason, Western governments and companies are doing whatever they can to get at it. The country may also become the conduit for even more oil that will flow from Turkmenistan and Kazakhstan on the eastern side of the Caspian.

Right now, the issue of much debate is which of two pipelines will be chosen as the Main Export Pipeline (MEP) for the Azeri oil: a route from Baku to Supsa or a route from Baku to the Mediterranean port of Ceyhan in Turkey.

Routes through Russia, Iran, and Armenia have been dismissed because of political and economic concerns. In particular, the lack of a route through Armenia is unfortunate. Richard Morningstar, President Clinton’s Special Adviser for Caspian Affairs, said that such a route would be 10 percent cheaper than the proposed Baku-Ceyhan pipeline. Congressman John Porter (R-Ill.) has similar sentiments. He says, "A resolution to the [Nagorno-Karabakh] conflict that would allow for an oil pipeline through Armenia and Turkey is a ëwin, win, win, win’ situation: The United States would win cost-effective oil access, Armenia and Turkey would win revenue, Nagorno-Karabakh would win self-determination, and Azerbaijan, its own people suffering from current sanctions, would win business with oil-needy Westerners." However, the current strife in the region prevents such a route. It is striking example of the fact that what may be attractive to American geo-politics may not be economically feasible, and vice versa.

For a variety of reasons, the oil companies believe that taking the oil through Georgia is the best option. However, Georgia has its own problems, a fact highlighted by the several assassination attempts on its president, Eduard Shevardnadze, over the last few years. Moreover, the ethnic conflict in Abkhazia presents many of the same problems of Nagorno-Karabakh. Yet with oil companies clamoring to get Azeri oil, a route through Georgia is the most feasible one at this time, especially economically.

Even though the MEP will travel through Georgia, Nagorno-Karabakh is an important factor in each of the two potential pipeline routes. For example, if the Baku-Supsa route is chosen, and the pipeline is upgraded to allow for increased volumes of oil, Nagorno-Karabakh’s geographic location will play an important role. Although such a route will not go through Nagorno-Karabakh itself or through Armenian-occupied territory, the pipeline skirts these regions as it makes its way out of Azerbaijan and into Georgia. Armenians, especially extremists living in the Javakheti region of south-central Georgia, have talked about interrupting this flow of oil out of Azerbaijan. Oil personnel could even be targeted by certain ethnic groups seeking to assert their claims through acts of terrorism. As Jeffrey Goldberg writes in The New York Times Magazine, "There is real concern among oilmen that Azerbaijan will not be able to protect the pipelines from the Armenians, who so far have derived no benefit from the oil boom."

Inan Ozyildiz, the First Secretary of the Turkish Embassy in Washington, D.C., believes the ideas of Armenian terrorism are very far-fetched. However, given the expense involved in the pipeline and its importance to Western countries, any potential danger must be considered.

Further, the Baku-Supsa route does not deal with the problem of the Bosphorus, the strategic waterway that divides Europe from Asia. If it is chosen as the MEP route, much of the oil reaching Supsa would likely be shipped through the narrow, winding straits of the Bosphorus. However, if Turkey shut the area down as the result of war, for example, there would be no way to get the oil to the West. Turkish Foreign Minister Ismail Cem recently said, "As of next year, these straits will no longer be able to handle the 4500 tanker crossings, and traffic there will be slowed down." A pipeline that bypasses the Bosphorus may have to be built in addition to a Baku-Supsa MEP, especially if the Bosphorus becomes more of an issue. This alternative pipeline could conceivably run through Armenia and the areas around Nagorno-Karabakh, particularly if the conflict is resolved soon.

Finally, there is an Azeri saying: "Happiness means multiple pipelines." The relative inexpensiveness of the Baku-Supsa line may allow for a second pipeline sometime in the future. After all, the Baku-Supsa route is approximately $1 billion cheaper than the Baku-Ceyhan line, according to Ozyildiz at the Turkish embassy and many of the oil companies. (Monica Eppinger, an NIS energy officer at the Department of State, said that that figure is high. The real figure, she believes, is between $500 million and $700 million.) A second pipeline may involve a route through Armenia, either to resolve the Bosphorus issue or to tie Armenia closer to the West and end its isolation.

Many believe that a pipeline route through Armenia could enhance the Nagorno-Karabakh peace process (a so-called "peace pipeline", as Elin Suleymanov, the Second Secretary at the Azeri Embassy in Washington, termed it). Increased cooperation for purposes of developing, refining, and transporting oil resources may play a positive role in calming emotions and setting up preconditions for cooperation between Armenia and Azerbaijan. This would generate substantial revenue for both countries to be used for much-needed modernization and growth. Recent contacts between the leaders of the two countries seem to have been based on this kind of logic.

If the Baku-Supsa pipeline is abandoned, however, and the Baku-Ceyhan route is chosen instead, Nagorno-Karabakh is still strategically important. Concerns about Armenian terrorism would remain, as the Baku-Ceyhan route would also travel through territory inhabited by ethnic Armenians.

More important, however, is Armenia’s exclusion under such a route (Armenia is excluded under the Baku-Supsa plan as well; however, the political ramifications for Armenia with that route are not as important, as Turkey would also be excluded). The tremendous increase in wealth of three countries on its borders, Azerbaijan, Georgia, and Turkey, two of which are Armenia’s enemies, would only anger Armenia and isolate the country even more. It could even lead to an escalation of the Nagorno-Karabakh conflict, which almost certainly would negatively impact the steady flow of oil from the region. Further, Russia, in order to weaken Turkey, its regional rival, and angered by the fact that the MEP does not go through its territory, would continue to arm Armenia and the Karabakhis. Thus, a Baku-Ceyhan route could ignite an arms race in the Caucasus, something the United States wants to avoid at all costs.

The Azeri Perspective

Azerbaijan has been a major petroleum-producing area since the nineteenth century. In the early 1900s, it was the world’s biggest oil-producing province. International business interests, such as the Nobel and Rothschild families, vied for control of Azerbaijan’s oil. Adolf Hitler wanted the country so badly that his generals promised it to him as a birthday present.

In the former Soviet Union, the country served as a major refining center. Oil production peaked at about 500,000 barrels per day (b/d) during World War Two, then fell significantly after the 1950s, as the Soviet Union did not have the technology to develop the bulk of Azerbaijan’s oil, which is located offshore. Once the onshore oil was developed, the Soviet Union focused its resources on other areas such as the Volga-Urals region and West Siberia. After Azerbaijan became independent in 1991, oil production fell to an estimated 199,000 b/d. Today, Azerbaijan aspires to rejoin the ranks of the world’s major oil producers, as it is poor and desperately needs the money.

James MacDougall writes, "Azerbaijan’s strategic location makes it the region’s critical geographical pivot in the context of an evolving transportation and communication link between Europe and Asia. Like the keystone in an arch, it is an essential component in any East-West link and may also play a role in newly developing North-South links."

However, because of chronic instability in the country, Azerbaijan has not been able to take on these new roles. It is one of the most unstable places in the world, where one never knows from day to day whether he will wake up to a revolution, an insurrection, or an invasion. Since 1992, Azeris have seen their government change three times. The most significant change came prior to the 1994 cease-fire, with the Azeri military defeat in Nagorno-Karabakh. This disaster led to the fall of the country’s democratically elected president, Abulfaz Elchibey, and the co-opting of the parliament and government in June 1993 by former Azerbaijani KGB chief and Brezhnev Politburo member Heidar Aliyev.

Aliyev, now 75, continues to rule. As one correspondent said, "He is more than a leader; he is a living icon. His profile and proverbs are on rugs and roads all over the country." He controls everything in Azerbaijan, including free speech. Rasul Gouliev, a former deputy prime minister and speaker of the Azeri parliament, said his country is now in the grip of a dictatorship that is even harsher than the oppression suffered in Soviet times. He said Aliyev’s security forces make arrests daily and are holding hundreds of people in prison. According to Gouliev, Aliyev tolerates no criticism and maintains strict control over the media.

However, not everyone dislikes the Azeri leader. An Iranian exile named Parviz Amir-Parviz, an entrepreneur in Azerbaijan, said recently in The New York Times Magazine, "Yeah, he’s a dictator, but so what? It’s like with Pinochet. He fixed the economy, made the streets safe, and made sure everyone had bread to eat." Zbigniew Brzezinski, the former U.S. national security adviser who is now a consultant for Amoco, agrees. "He [Aliyev] is a real cool cat," says Brzezinski.

It is Aliyev, more than anyone else, who holds the key to the oil. He has been referred to as "the gatekeeper of the oil riches" and "the maestro of the Caspian oil rush." Taking the first steps to develop his country’s rich oil reserves, he has tried to improve Azeri-American relations over the last few years. However, an important piece of American legislation has stood in his way. Section 907 of the Freedom Support Act, passed by the United States Congress in 1992, allows only humanitarian relief and assistance to non-governmental groups in Azerbaijan. The article bans direct aid to the Azerbaijan government and restricts American government assistance to Azerbaijan.

The Azeris consider Section 907 grossly unfair. After all, the legislative restrictions are predicated on the assumption that Azerbaijan is the aggressor in the Nagorno-Karabakh conflict. As Jeffrey Goldberg points out, "Armenia occupies Azeri territory, and yet it is Azerbaijan that, by Congressional fiat, cannot receive direct American aid." However, despite Section 907, Aliyev remains pro-American, mainly because he counts on the United States to protect him from pressures from Russia to the north and from Iran to the south. One oil executive said, "Only a strong relationship with the United States provides an opportunity for stability and for not being totally dominated."

Section 907 was initiated by the powerful Armenian lobby in the early 1990s in retaliation for Azerbaijan’s cutting off one of the rail routes that carried materials and fuel to Armenia from all over the region. At that time, the Armenians were at war with the Azeris, who did not want to provide supplies to a country that was carrying out military action against them.

The original version of Section 907 did not even allow for humanitarian aid. However, in 1995, Congress liberalized the bill to provide for limited humanitarian assistance through non-governmental organizations (NGOs). In November 1997, Congress changed the legislation again by allowing aid to Azerbaijan for programs designed to combat the spread of weapons of mass destruction, for democracy-building efforts, and for efforts related to activities of the Overseas Private Investment Corporation, the Trade and Development Agency, and the Foreign Commercial Service.

As a result of Section 907, Azerbaijan is the only nation to which the United States denies direct humanitarian aid (aid funneled through NGOs is not considered direct aid). Even Cuba, Libya, North Korea, Iran, and Iraq, all avowed adversaries of the United States, are allowed to obtain direct American humanitarian assistance. Since 1993, the United States has given over $1 billion to Armenia in aid, but only a fraction of that to Azerbaijan, and then, only through the NGOs.

In a country such as Azerbaijan, in which the medical and educational sectors are state-run, the legislation limits projects to supply hospitals, treat the tuberculosis endemic in the refugee camps, rehabilitate schools, or even use local doctors to do medical assessments. It also limits American aid to help implement free market reforms.

However, Richard Kauzlarich, the United States Ambassador to Azerbaijan, paints a more optimistic picture of Section 907. He says:

"It's easy to look at 907 and think there’s no assistance coming to Azerbaijan, but that’s not true. We clearly are able to do many of the same things that others are doing. Of course, 907 creates problems for us, but it doesn't mean that we aren't able to carry out considerable work in the areas where work clearly needs to be done. Even in agriculture, where privatization in Azerbaijan is lagging behind in comparison to the other countries, there’s an American volunteer organization called VOCA (Volunteers Overseas for Cooperation in Agriculture) working with private farmers here to bring Americans over here for short periods to help private Azerbaijani farmers."

In the eyes of some, the legislation plays into the hands of the Aliyev government, which uses the lack of American aid to justify its own failure to improve conditions in the refugee camps. Further, the more pathetic the refugees’ situation, the easier it is for Baku to divert attention from its role in the atrocities committed in the Nagorno-Karabakh war and paint Azerbaijan the victim.

In the United States, there have been many calls for the repeal of Section 907, particularly with America’s increasing interest in the oil-rich region. This past summer, there was a vote in the United States Senate Foreign Relations Committee approving the "Silk Road Strategy Act," a bill that would extend to the eight countries of the Caucasus and Central Asia equally the same American economic, political, and security benefits enjoyed by Russia, Ukraine and Central Europe. The legislation, in effect, would lift the six-year-old ban on direct aid to Azerbaijan. However, action on this bill has been delayed until the next Congress. There was also a move to repeal Section 907 in the House of Representatives. It passed the Committee on Appropriations but was defeated on the floor of the full House by a massive effort of the Armenian lobby.

Recently, Azerbaijan has been trying to parlay its oil and gas reserves into political clout abroad, in order to force the Armenians into accepting an agreement in the Nagorno-Karabakh conflict. It has taken great care to ensure that multiple foreign powers and companies gain a stake in the oil boom in the hopes of gaining political advantage. As Thomas Goltz, a respected authority on the region, puts it, "In internationalizing the oil patch, Aliyev bought himself an insurance policy."

If this strategy fails, Aliyev says that he will revamp his army and renew the war. "The oil contracts will revive our economy and that means reviving our military potential," Aliyev said. "We are for peace, but if Armenia does not leave the occupied territories, we will liberate them by military means." However, whether there will be any taste for war a few years from now in Azerbaijan, a country lacking a martial tradition, remains to be seen.

Aliyev, like the leaders of other Caspian countries, sees the energy reserves as an important determinant of his legitimacy. Azerbaijan has endured sharp declines in living standards since the collapse of the Soviet Union. Two-thirds of Azeris live in poverty. Their material future will depend largely on exploitation of their countries’ energy resources.

Further, there exists real urgency in gaining as much economic independence and international attention as possible now, while Russia is still militarily and economically enfeebled. In the eyes of many, this is the time to develop democratic and free market economies independent from Russian control. After all, a pipeline would provide increased government revenues, employment opportunities, infrastructure development, and independence of energy supply. Through production royalties, Azerbaijan could generate over $2 billion a year in revenue from its oil fields. With such wealth, the country would depend less on Russia, both economically and militarily. Independent and self-sufficient, bolstered by its oil revenues, Azerbaijan would deny Russia the chance to establish a sphere of influence in the region, something of paramount importance to the United States.

Even if Aliyev achieves these goals, the oil money, when it begins to arrive in force during the first decade of the next century, will carry the danger of a kind of instability which was seen in Iran in 1979. At that time, the disgruntled Iranian masses rose up against a greedy, out-of-touch elite for failing to distribute oil wealth equitably, and Shah Mohammed Reza Pahlavi was overthrown by a Islamic fundamentalist revolution.

In Azerbaijan, the situation is strikingly similar. The disparity of wealth is enormous. In contrast with the glitter of Baku, which is filled with fast cars and people in expensive clothes, much of Azerbaijan is filled with empty factories and concrete towns with no gas or heating. Azeri doctors and teachers make $20 per month. Goltz says, "It is not unusual to find that your taxi driver has a Ph.D." Moreover, corruption in Baku, where the cost of a baby outfit is equivalent to a deputy minister’s monthly salary, is so widespread that some believe that it could prove politically destabilizing. "What is hard to accept is the hijacking of assets and wealth by a few people while a large part of the country goes empty-handed," said Roger Thomas, Britain’s ambassador to Azerbaijan.

This disparity in wealth is also evident in the refugee camps. The situation of the refugees is desperate, and for that reason, they are a potential danger to Aliyev. As CBS news correspondent Bob Simon has said, "The refugees’ anger is rising a lot quicker than the oil." Dr. Kevin Kelly, an American pediatrician with Relief International who works with the Azeri refugees, echoes these sentiments. When asked how he feels about the press’ reports about Baku as a boomtown, he replied, "I agree, except that if they go 20 minutes outside of Baku, they will see hundreds and hundreds of public buildings that you and I would not put our dog in that these people [the refugees] live in. When you think Baku is Azerbaijan, you are wearing blinders, it is not."

The Armenian Perspective

Armenia is important to world energy markets because of its location as a potential transit center between the energy-rich Caspian republics and Western markets. It is still recovering from the devastation of a massive earthquake in 1988 and years of ethnic strife and armed conflict with Azerbaijan.

Since war broke out in 1991, Armenia has had many economic problems. Azerbaijan to the east and Turkey to the west shut down railroad traffic to the country in response to Armenia’s support of the Karabakhis. Without these major trade routes, especially the one through Turkey, Armenia continues to endure isolation from major regional developments.

Most industrial enterprises in the country remain either shut down or operating at drastically reduced levels. The conflict over Nagorno-Karabakh has forced the Armenian government to militarize a number of its machinery manufacturers, thus putting additional burden on the weak economy. Unemployment in the country is high, and it is clear that the price of improvement is flexibility on Nagorno-Karabakh. Some observers say that Armenia could go broke supporting the continued military occupation of the large security zone around the enclave.

Over the past few years, there has been debate over a nuclear reactor at the Armenian city of Metzamor. This Chernobyl-type reactor sits on a great earthquake fault line. An earthquake as devastating as the one in 1988 could be disastrous for the whole region. Fallout could extend over the entire region, just as fallout from Chernobyl reached as far as northern Scandinavia. The Armenians, however, have no choice but to use this reactor, as they do not have alternative energy resources of their own.

The current conflict over Nagorno-Karabakh and a long history of second-class status, pogroms, and genocide under Turkish and Azeri rulers fuels the feeling among Armenians that their small, landlocked country cannot develop a strong economy and ensure its national security without a connection to Nagorno-Karabakh. It is a reasonable view. After all, the enclave’s human and natural resources are tremendous. As Nobel Peace Laureate Andrei Sakharov pointed out, Nagorno-Karabakh is a question of life and death in Armenia. The situation is quite different in Azerbaijan, where there does not seem to be any serious will among Azeris to regain lost territory.

In September and November 1997, Levon Ter-Petrossian, then the President of Armenia, argued that it was unrealistic to demand outright independence for Nagorno-Karabakh. He believed that Armenia should seek a compromise solution to the conflict rather than risk increasing isolation and economic stagnation. Ter-Petrossian even accepted a draft of a peace proposal put forward by a Russian, French, and American committee of the Organization for Security and Cooperation in Europe (OSCE) called the Minsk Group (see below). According to that plan, Armenian forces would withdraw from the Azeri territories they captured outside Nagorno-Karabakh in return for an eventual settlement that would promise the 160,000 Armenians in the enclave "the highest degree of self-rule within Azerbaijan."

However, the outrage at this proposal in Nagorno-Karabakh and Armenia made it impossible for Ter-Petrossian to deliver on his offer of compromise. Although he continued to promote the plan, he was forced to resign in February 1998, after criticism by hardline opponents for this conciliatory stand and for making too many concessions to Azerbaijan.

In the minds of many foreign policy experts, Ter-Petrossian was the best hope for a resolution to the conflict in Nagorno-Karabakh; to them, his resignation was a disaster. His fall from power was also a disappointment for the Western oil companies that wanted to see the Nagorno-Karabakh issue resolved quickly, because, as stated before, it is one of the main obstacles in exporting Azerbaijan’s oil.

The opposition that drove Ter-Petrossian from office included several key members of the Armenian government, including current President Robert Kocharian. Kocharian, a native of Nagorno-Karabakh, was president of the self-proclaimed republic from 1992 to 1996 and led its forces to decisive victories over Azerbaijan. He is the man who built up Nagorno-Karabakh’s weakened defenses in 1992 to their current strength, what Alexander Lebed, the former Soviet general, has called the most professional fighting force of the former Soviet Union.

Kocharian, technically an Azeri citizen, was elected President of Armenia in March 1998 in clear violation of international law. As one journalist wrote, a comparable analogy would be if the state of Colorado, which does not even share a border with Mexico, suddenly declared independence from the United States and went to war to attach themselves to Mexico, and in the process a Coloradan became the President of Mexico.

Kocharian won praise from the West for fighting corruption and backing radical economic reforms. He has promised to rebuild Armenia’s industrial sector and take steps to promote jobs, investment, and to help the impoverished. To implement these reforms, he has filled key governmental posts with Western-educated and -oriented ministers.

However, Kocharian is opposed to concessions to Azerbaijan and continues to stick to a hard line on Nagorno-Karabakh. In the past, he publicly backed a military solution to the conflict, refused to allow Azeri refugees to return to their homes, and threatened the security of Azeri pipelines carrying oil to Western markets. More recently, Kocharian called for Nagorno-Karabakh’s right to self-determination to be recognized and said that "historic justice" should prevail in settling the conflict.

If anything, one must admire Kocharian’s steadfastness and temerity. With his country of 3.5 million people bordered to the East by 63.5 million Turks and to the West by seven million Azeris, he simply refuses to compromise, instead maintaining loyalty to 160,000 Karabakhis.

However, he is not waging a one-man crusade against the Azeris. There are several hardline groups that follow in his footsteps. The Dashnaks, for example, are the most prominent and most hardline of the Armenian groups. They seek independence for Nagorno-Karabakh, as well as harbor claims against south-central Georgia and eastern Turkey. Like Kocharian, they view Russia and Iran as key allies in the region.

In Azerbaijan, the reaction to such hardline Armenian groups has been, needless to say, critical. The first deputy chairman of the Azerbaijan Popular Front Party, Ali Kerimov, says, "Unfortunately, in Armenia and Nagorno-Karabakh, very aggressive forces have become active lately, of course we are distressed that in Armenia those forces have come to power whom the Armenians themselves call the ‘party of war’." Kerimov emphasizes that those now in power in Armenia and Nagorno-Karabakh are very strongly linked with certain circles in Russia. He believes there is a real danger of a resumption of war.

In the international community, the Armenians have some things solidly in their favor. First, they have Western Christian solidarity behind them, and they have learned how to exploit this. More important, though, are the three million members of the Armenian diaspora. Communities in the United States, France, Argentina, and Lebanon are haunted by memories of the 1915-1916 Ottoman Turkish genocide that left one million Armenians dead. Many Armenians, especially the Diaspora, are obsessed with the nationalist dream of establishing "the Great Armenian State" by reclaiming a wide stretch of territory that they insist belonged to them nearly 2000 years ago. The prospect of a Nagorno-Karabakh independent from Azeri rule (the Azeris are a Turkic people) led some diaspora Armenians to drop everything to fight on behalf of Nagorno-Karabakh.

The most famous is a man named Monte Melkonian, a third-generation Armenian-American from California’s San Joaquin Valley. He said, "If we lose [Nagorno]-Karabakh, we turn the final page of our people’s history." From late 1990 until his death in battle on June 12, 1993, Melkonian was a legendary military commander who led Armenian forces in Nagorno-Karabakh to one victory after another. He was buried with full military honors. According to one estimate, some 15,000 people filed past his open casket as it lay in state at the Officer’s Hall in Yerevan, the Armenian capital. As many as 250,000 people attended the funeral, including then-President Ter-Petrossian. Friends and acquaintances also came from Iran, Syria, Lebanon, Turkey, France, and the United States to pay their respects. Today, busts of Melkonian are displayed in many government offices in Stepanakert.

Such efforts, though significant, are less important than the diaspora’s well-funded international lobbying on Nagorno-Karabakh’s behalf or its large financial contributions to the self-proclaimed republic. For example, a telethon in Los Angeles last year raised $11 million for construction work on the "road of life" (the road through the Lachin corridor connecting Nagorno-Karabakh and Armenia); diaspora Armenians were assured that $250 would sponsor a meter of roadway.

The lobbying by the diaspora has won for Armenia levels of foreign aid and of political backing greater than those enjoyed by any other country of so little importance. In the United States, for example, the nearly one-million strong Armenian-American community is powerful and well-organized and supports a sophisticated political lobbying apparatus to insure that American-Armenian relations are excellent. As mentioned before, Armenian-Americans were instrumental in implementing and supporting Section 907 (the ban against direct American aid to Azerbaijan).

Further, the United States provides approximately $135 million a year to Armenia. Robert Kocharian stresses the importance of American aid, but he also feels pressure from Washington. He said, "Our political and economic relations with the United States are developing in a positive way. Yet, with U.S. policy in the region, we wish that oil factors did not suppress other issues." Members of his cabinet insist that there is no contradiction between wanting ties with both the United States and Russia, which has over 4000 border troops in Armenia and which collaborates a great deal with the Armenian army.

The Russian Perspective

Western governments, on the whole, do not want Caspian oil to go through Russia. Many in the American foreign policy elite, for example, believe that Moscow wants to dominate the region, and this creates fears. Further, a deep-rooted Russian suspicion of foreign ownership, conflict with powerful domestic monopolies, and a chaotic legal climate have caused many Western energy companies to look beyond Russia.

Yet the war in Nagorno-Karabakh has rendered some non-Russian pipeline routes unusable. Therefore, the conflict gives Russia an advantage in securing its aim for Caspian oil to be exported through Russian domestic pipelines. Russia has lobbied hard for the MEP, eager to prop up its struggling economy with the revenue that such a pipeline would produce.

But the Russians have been doing more than lobbying. They have slowly been establishing a massive military presence in the region in order to gain exclusive control over all future oil pipelines. Georgia now has four Russian bases and Armenia has three, while Azerbaijan is still holding out despite severe pressure from Moscow.

Further, Russia has been actively stirring up trouble to make its territory the best option for the pipelines. The assassination attempts on the Azeri and Georgian presidents over the last few years have been linked to the issue of the pipelines. Further, it is common knowledge that the Russians have exploited local ethnic strife for their own gains. For example, in Azerbaijan, they have supported ethnic separatist movements, such as that of the Lezgin minority in the north of the country.

However, this exploitation of ethnic conflict is best seen in the Nagorno-Karabakh conflict. Russia, from 1993 to 1995, shipped over $1 billion of modern weaponry, including medium-range missiles, to Armenia to aid in the war against Azerbaijan. This was done despite the fact that Russia is one of the judges in the Nagorno-Karabakh dispute. As Azeri foreign policy adviser Vafa Gulizade said, "It is worrisome that Russia, which is co-chairman of the OSCE Minsk group on Nagorno-Karabakh, has simultaneously become a military ally of Armenia." (See next section for information about the Minsk group).

Russia continues to aid Armenia, despite protests from a number of nations. This past summer, there was a report that Russian Defense Minister Igor Sergeev promised to supply S-300 missiles to the Armenians. Asked about this during a visit to Yerevan in July, he refused to give a definite answer. Further, on October 1, Russia and Armenia began joint military exercises in Armenia. Aliyev himself commented on this Russian hypocrisy. He said, "Russia has a huge territory and should keep its own forces on its own territory, and not in our neighborhood."

Viktor Chernomyrdin, the former Russian Prime Minister, welcomed Western participation in development of Caspian oil, as a means of insuring access to capital and advanced technology. At the same time, however, he was not averse to coercive diplomacy, and during his tenure, there were many Russian-inspired coups, blockades, and threats in Azerbaijan.

In 1996, before Chernomyrdin was ousted from office, Azerbaijan induced Russia, weakened by the war in Chechnya, to abandon these coercive policies and reach an accommodation with Baku. Moscow changed its foreign policy personnel and began negotiations for shares in oil projects around Azerbaijan. In mid-1997, it even signed a friendship treaty with Baku, under which the two countries renounced intervention in each other’s internal affairs, a major victory for Azerbaijan.

However, with the recent appointment of Yevgeny Primakov as Prime Minister, Russia seems to have reverted to its old ways. Primakov has always viewed the oil as a method of maintaining Russian influence. In his eyes, the substantial involvement of Turkey, the United States, and other Western countries in the region is a potential erosion of Russia’s influence. The continuation of Russian aid to Armenia seems to indicate that he still supports this view.

Yet Geoffrey Kemp, the Director of Regional Strategic Programs at the Nixon Center for Peace and Freedom, has a different opinion. He points to the seemingly insurmountable burden of a depression-like Russian economy. "Primakov as Prime Minister will be far less hardline on these issues than he was as Foreign Minister, because now he has to worry about feeding the Russian people," says Kemp.

Regardless of what policy Primakov ultimately follows, he faces many challenges. In Russia, as in the United States, politicians, corporate leaders, and others concerned with foreign policy are deeply divided on the issue of Caspian oil. While the Kremlin continues to articulate strategic interests in the area, these interests do not seem to cohere in an organized or disciplined "grand plan."

Yet on the whole, the fears of the West regarding Russia seem to be particularly well-founded with Yevgeny Primakov in power. If Russia continues to exploit the Nagorno-Karabakh conflict, not only will Azerbaijan be affected, but also the independence of Armenia will be limited. With these countries weakened, the Russian sphere of influence in the region will increase immeasurably.

The American Perspective

On the political front, the Armenian-Azeri dispute has the potential for conflict between Turkey, a NATO member, and Russia, America’s partner in a dialogue on arms control and other critical issues. Therefore, there is a high American interest in a peaceful resolution to the dispute.

Moreover, although the states of the Caspian Basin may represent no real threat to the United States, other countries might seek hegemony in the region. An American presence may help contain Russian influence, for example. Other American political goals in the region include regional stability and a settlement of territorial disputes; humanitarian relief; the integration of Armenia, Azerbaijan, and Georgia into the regional and global political economy; and the promotion of democracy.

The economics of the situation are just as important. After all, Azerbaijan’s proven and estimated oil resources are considerable and will play an increasingly important role in the world oil market of the 21st century. The region will almost certainly create significant commercial opportunities for American firms. With that understood, American oil companies have been competing vigorously with each other and with companies from other nations for contracts to develop Azerbaijan’s vast reserves. Further, Caspian oil will diversify world oil supply and lessen the dependence on exports from the volatile Persian Gulf.

Thus, in economic and political terms, the region’s potential is certainly a worthy goal of American foreign policy. Yet in focusing on such stakes, the White House has frequently ignored the civil strife and human rights violations that fill the region, such as Aliyev’s crackdown against opposition politicians and newspapers, or his government’s horrific treatment of the refugees. "The Americans put oil above everything else in the Middle East, and it got them Iran, a country where everybody hates Americans," said one Azeri official. "I wonder if they are insensitive enough to do that again here?"

On the whole, American leadership in the region has been lacking. Although the Clinton Administration has supported many of the policies of the Aliyev government, its efforts have been very weak. American leaders fail to understand that oil revenue will flow into Azerbaijan, with or without American involvement. A vigorous economic and political presence would help to ensure that oil revenues will be used in ways that would benefit the United States. There are two steps the United States must take:

1. Help resolve the conflict in Nagorno-Karabakh

The Nagorno-Karabakh issue needs active mediation. Little progress has been made since the 1994 cease-fire. Large, well-equipped armies still face each other in the lowlands around Nagorno-Karabakh. As mentioned earlier, over 400 people die each year on the front lines. If the dispute is not resolved soon, and full-blown war breaks out again, that number could increase dramatically.

The principal organization working to resolve the Nagorno-Karabakh conflict is the Minsk Group, a committee formed under the auspices of the OSCE. It was named after the Belorussian capital where its first meeting was held in the early 1990s. Initially, the Minsk Group included representatives of nine countries. Now, only France, the United States, and Russia remain.

There have been many criticisms of the Minsk Group. Azeris complain that the committee’s work has been fruitless and that no leverage is being exerted on Armenia to resolve the crisis. Revelations of Russia’s shipments of arms to Armenia have only complicated the negotiations in recent years.

Rasul Gouliev complains that the governments of Armenia and Azerbaijan do not play a leading role in the negotiations. He said, "They are behaving as observers in the peace process and taking their lead from the OSCE." He also criticized the OSCE peace plans for being too general and directed at a general strategies for peace, instead of concrete, step-by-step proposals to resolve the dispute.

Another major problem in resolving the Nagorno-Karabakh conflict is that much of what has been revealed to the public is one-sided and selective, filled with exaggerated propaganda, popular myth, and deliberate lies and disinformation. Because the dispute has involved unspeakable atrocities and war crimes, there is good reason for the people responsible to distort the facts and lie about what really happened.

Despite such issues, there seems to be more progress made every day towards peace. Armenian Prime Minister Armen Darbinyan said on October 6 that his country is prepared to forego its demands for the immediate independence or annexation of Nagorno-Karabakh in an effort to break the diplomatic impasse. Darbinyan noted, however, that any relationship worked out "has to be horizontal, not vertical", meaning that Armenia is not yet willing to see the region become a fully-integrated part of Azerbaijan.

Robert Kocharian has said that "nonstandard approaches" could produce a unique solution in the dispute. He mentioned several possible models: Northern Ireland, which has broad powers to run its affairs but remains under British sovereignty; Bosnia and Herzegovina, where a joint presidency represents the three principal ethnic groups; New Caledonia, a self-governing "overseas territory" of France; and Andorra, a principality that holds a seat in the United Nations but whose rulers are the President of France and the bishop of Seo de Urgel, Spain.

Mike Van Dusen, Democratic Chief of Staff for the House Committee on International Relations, said that the Nagorno-Karabakh conflict is in a category with Cyprus. Each administration inches the process along, but there is not much will among politicians to resolve this issue." However, such a position endangers American interests. If war breaks out again in Nagorno-Karabakh, it may disturb powers such as the United States and Russia, whose interests in the area have grown substantially since the early 1990s, or regional powers like Turkey and Iran, which would bear the brunt of refugee flows that would be a major consequence of renewed fighting. As suggested before, continued hostility will also encourage further arms supplies to the region.

Recently, however, there have been signs that American policy will change. For example, on June 17, Senator Mitchell McConnell (R-Kentucky), said he is "deeply skeptical that the Minsk Group as a process for resolving this dispute can work." He does not believe Russia is truly interested in a settlement of ethnic conflicts in the Caucasus and that the impetus must come from the United States. He wants the United States to proceed on Nagorno-Karabakh with or without the Minsk Group. Otherwise, he believes America will compromise its own interests in what he called "a coherent Caspian energy security policy." McConnell said, "A consistent, U.S.-led initiative could produce a breakthrough."

However, the burden of resolving this conflict cannot fall on the United States alone. As John J. Maresca, the former American Ambassador to the OSCE, said, "The government of Azerbaijan should initiate direct contacts with the leadership of the Armenian community in Nagorno-Karabakh. After all, these people are also citizens of Azerbaijan, and there would be nothing more natural than for the government to try to hear them out and reach a settlement. Ultimately, they too must be satisfied with the agreement."

Oil companies must also encourage a peaceful settlement in Nagorno-Karabakh. Up until now, they have acted as if the conflict was none of their business. However, they have every reason to push for a resolution to the Nagorno-Karabakh dispute. They wield enormous influence over the situation. That the Azeri government would resent their encouragement and turn to rival companies is completely short-sighted on their part.

2. Repeal Section 907

The United States cannot show discrimination in the Nagorno-Karabakh conflict. It requires mediation by disinterested parties. Countries such as Russia, which is engaged in self-serving efforts to reestablish regional hegemony, and the United States, which legally and economically supports one country over the other, do not meet this requirement.

As long as Section 907 stands, it will be very difficult for the United States to present itself as an independent broker in the peacemaking process. Such partiality prevents effective mediation. As Zbigniew Brzezinski has said, "Equal treatment is a prerequisite to facilitating the peace process."

With the emerging interest in Azerbaijan, however, American support for Section 907 seems to be diminishing. Madeleine Albright recently asked the Senate to repeal this legislation and lift the ban on direct American assistance to the government of Azerbaijan. She said repealing the law "would restore balance in our policy toward Azerbaijan and Armenia and reinforce our role as an honest broker in the peace process."

There have been other, more definitive, steps taken to repeal Section 907. The Silk Road Strategy Act, mentioned earlier, has been sponsored by Senator Sam Brownback (R-Kansas) in the Senate and Congressman Benjamin A. Gilman (R-New York) in the House. It aims to create an economic corridor in the Caucasus and also calls for ending the ban on aid to Azerbaijan.

The Armenians, of course, are against this legislation, which was recently passed by the Senate Foreign Relations Committee. On June 26 of this year, Armenia’s Ambassador to the United States, Rouben Shugarian, said his country was extremely upset about this. Armenia, after all, believes the United States should not remove the economic sanctions on Azerbaijan until Baku ends its blockade of Armenia. Shugarian said also that lifting the aid ban without getting anything in return from Azerbaijan will harden that country’s position in the peace negotiations on Nagorno-Karabakh. He said, "If Azerbaijan gets a free gift, it will toughen its position and the peace process will go nowhere."

The Armenian lobby has campaigned actively against the Silk Road legislation. Those supporting the Armenian cause have claimed that lifting the aid ban would be seen as legitimizing Aliyev’s repressive rule in Azerbaijan. Thomas Goltz, however, called such excuses ridiculous. Others have argued that without the legislative restrictions, Azerbaijan would have been less likely to agree to a cease-fire in 1994 and would now be less likely to negotiate over the future of Nagorno-Karabakh. There is little evidence, however, to suggest that the unilateral sanctions applied by the United States have had any effect on Azerbaijan’s willingness to negotiate a settlement.

Groups such as the Anti-Defamation League and the American-Israeli Public Action Committee (AIPAC) have been working diligently to ensure continued support for the Silk Road legislation. Among many American foreign policy experts, the passing of the Silk Road bill in committee is a realization that the oil resources of Azerbaijan and the Caspian basin will likely be more important than the narrowly focussed efforts of the Armenian lobby.

Further, the Silk Road bill is essential at a time when American corporations are facing vigorous competition from Russia, Western Europe, Japan, and the Middle East. The legislative restrictions of Section 907 have been raised by foreign companies as a reason why the Azeri government should award contracts to them rather than to American companies. Further, loss of these contracts is not only a significant blow to American oil companies, but also to American companies in the region providing ancillary services such as transportation and telecommunications. The very existence of the Silk Road legislation provides a tangible demonstration of America’s desire to play a more constructive role in Azerbaijan. Such issues will be important when the bill comes up for a vote in the full Senate during the next Congress.

A repeal of Section 907, whether it is through the Silk Road bill or other legislation, is inevitable. When it comes, it will do much more than help American firms and increase the American position in the Nagorno-Karabakh peace process. The repeal of Section 907 will also give the United States more influence and leverage in other policy areas in the region. For example, both Richard Morningstar and Donald Pressley, the Assistant Administrator for the United States Agency for International Development (USAID), said the United States would like to include Azerbaijan in the Trans-Caspian Environmental Partnership, a cooperation project among states in the region to deal with oil and gas spills and other environmental hazards. However, the current legislation prevents it.

Conclusion

The conflict in Nagorno-Karabakh is no longer a trivial issue. The enclave and its surroundings will be vital to American interests in the 21st century. The sooner the Clinton Administration realizes this, the sooner it will push all the parties involved to work out the dispute, which should have been resolved years ago. While the Administration must be given some credit for increasing American involvement in the region, it has not done enough. The United States has stood by idly while both the Azeris and the Armenians have committed crimes of unspeakable horror and Russia has sponsored coups, assassinations, and shipments of arms that have exacerbated the tension in the region. Unless the Administration gets moving on these issues, especially the repeal of Section 907, the United States stands to be excluded, something that would have enormous implications on the balance of power in the years to come.

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