Nagorno-Karabakh, the Caucasian region at the heart of a bitter conflict between Azerbaijan and Armenia, on September 2 will celebrate 25 years since its declaration of independence. But more than 22 years after a fragile ceasefire ended a bloody war that left almost 30,000 dead and a million displaced, the status of the republic is anything but settled. Not only that, but it continues to shape developments in domestic and regional politics in the Caucasus. 

A month ago, protests broke out in the Armenian capital city of Yerevan in which demonstrators expressed support for an armed group of veterans of the Nagorno-Karabakh war that attacked a police station, killing two and taking eight hostages. That Armenians would endorse such violent means of dissent demonstrates their disenchantment with the administration of President Serzh Sargsyan, with the government’s handling of the Nagorno-Karabakh issue just one of a long roster of grievances.

Daredevil actions

The police station attackers belonged to a group dubbed the Daredevils of Sassoun, which is believed to comprise thousands of members and is named after an Armenian epic tale from the Middle Ages. Upon occupying a police station in central Yerevan, the 20-odd attackers demanded the release of a radical opposition figure, Zhirayr Sefilian, who had been arrested at the end of June, as well as Sargsyan’s resignation and the formation of a caretaker government that would oversee the organisation of fresh elections.

Known for his criticism of the government, war veteran Sefilian has led opposition movements for two decades, decrying not just Yerevan’s willingness to compromise on the status of some of the regions surrounding Nagorno-Karabakh that are currently under occupation by ethnic Armenians, but also the high rate of unemployment in the country, poor housing, precarious healthcare facilities and corruption. He has chosen to maintain his “Founding Parliament” movement on the fringes of politics, however, claiming that the lack of transparency in the system would have prevented his movement from engaging in decision-making in the country.

Sefilian’s agenda is “a bit complicated and unclear”, political analyst Haykak Arshamyan said in an interview with Radio Free Europe/Radio Liberty (RFE/RL), but it reflects the multitude of complaints that the Armenian public has against the government: a third of the population lives in poverty, according to the World Bank; remittances from abroad have been falling, thus further eroding Armenians’ purchasing power; and government corruption is perceived to be widespread.

The July protests and attack added to the regime’s “pronounced degree of unpopularity, general mistrust and a deepening lack of legitimacy”, Richard Giragosian, director at the Yerevan-based Regional Studies Centre, tells bne IntelliNews. Nevertheless, the government remains “strong and able to sustain the closed political and economic system over the short term”, he opines, although the parliamentary elections in 2017 will pose “an unprecedented test, because the ruling elites seem both wilfully ignorant of the need for reform and dangerously reckless in demonstrating their arrogance of power”.

Meanwhile, the episode has rendered the likelihood of Armenia making concessions over Nagorno-Karabakh and the occupied territories even less likely than before. Yerevan and Baku have been negotiating the status of these regions for more than 22 years with the mediation of the Organization for Security and Cooperation in Europe (OSCE), with little success to date. The most likely first step in solving the conflict, moderate voices agree, is for Armenia to return the seven surrounding occupied territories to Azerbaijan, and to then discuss a separate arrangement for Nagorno-Karabakh.

But after the Daredevils’ protest, the return of the territories remains a distant prospect. The Armenian public is particularly sensitive to any territorial concessions to Azerbaijan at the moment, particularly after a four-day war in April that resulted in Azerbaijan’s recovery of a small portion of Nagorno-Karabakh. Yerevan is largely perceived to have lost the battle in April, and to be in danger of losing its most important ally in the region Russia, which supplied Azerbaijan with some of the weapons that it used during the conflict.

The April military defeat struck a chord with Armenians, who might have won the war with Azerbaijan in the early 1990s, but have been losing the peace ever since. With two of its borders – with Azerbaijan and Turkey – closed because of the Nagorno-Karabakh conflict, Armenia’s economy has lagged behind its regional peers, and is now the least developed in the Caucasus. Yerevan has come to rely almost exclusively on Russian money and support, yet Russia has been an unreliable ally, both on the economic and diplomatic fronts.

Russian companies, which control large portions of the Armenian economy, are perceived to have contributed to corruption and mismanagement in the country. In fact, last summer the Russian-owned main power utility was the target of large-scale street protests, prompting the government to seek other owners for the electricity provider and to reconsider a proposed hike in electricity tariffs.

Furthermore, the Kremlin has been unrepentant about its decision to sell arms to Azerbaijan, which, according to President Vladimir Putin, was wealthy enough to buy weapons from any supplier. The Russian government’s attitude has done little to quell the growing dissatisfaction in Armenia.

Azerbaijan’s machinations

But the arms deal is not the only grievance that Armenians have against Russia. Increasingly, the Kremlin is engaging with Baku on a variety of economic projects, including a rail and road transport corridor from Iran to Russia via Azerbaijan. Already enjoying the unconditional support of Turkey, Baku appears to be making strides in attracting the sympathy of its other two large neighbours – Iran and Russia – both former backers of Yerevan’s, by wooing them with advantageous economic deals.

Baku has been so keen on pushing for a north-south transport corridor from Iran to Russia, that it is ready to lend Tehran $500mn to build its portion of the railway connection, despite the fact that declining oil revenues have pushed its economy into recession. 

By spearheading the formation of several “cooperation triangles” in the region, such as Georgia-Azerbaijan-Turkey, Russia-Azerbaijan-Turkey, and Russia-Azerbaijan-Iran, Baku is seeking to push Armenia further into isolation, hoping to extract concessions in the peace negotiations from a desperate Yerevan.

But Giragosian is unconvinced about the effectiveness of Azerbaijan’s recent diplomatic outreach, which he believes “does not yet represent a serious shift in the region”. Furthermore, to counter Baku’s moves and Russia’s ambivalence, the Armenian government has pursued an unexpected line to escape its isolation, and that has been the diplomatic and particularly military rapprochement with the West. This direction is surprising, seeing how Armenia is part of the Russia-led economic and security blocs, the Eurasian Economic Union (EEU) and Collective Security Treaty Organisation (CSTO) respectively.

Armenia’s diplomatic brinkmanship has consisted of two distinct moves, Giragosian explains. “The first was a demonstration of Armenian independence, with the dispatch of senior Armenian military officials to a meeting with Nato, aimed at reminding Moscow that Yerevan has more options and greater opportunities beyond an institutionalised role as a vassal or supplicant state for Russia.

“The second was far more innovative, involving the threat to recognise the independence of Nagorno-Karabakh. This move represented a bid to garner greater leverage and wield diplomatic pressure on both the mediators and Azerbaijan, especially as any such recognition would immediately and irrevocably collapse the peace process. Yet this was also designed to pressure Moscow, which was seen as dangerously shifting further away from Yerevan and closer to Baku,” he elaborates.

No place at the negotiations table

Despite the controversy surrounding it, the unrecognised regime in Nagorno-Karabakh, which is de facto independent but highly reliant on Yerevan for aid and military support, has had no say in the peace negotiations that concern it. While the nominal capital Stepanakert might be preparing to celebrate the territory’s 25th independence anniversary, no UN member country – not even its supporter Armenia – has recognised the independence. And the likelihood of it maintaining an independent status is very low, seeing how Azerbaijan would never accept it as part of a possible peace settlement.

As bne IntelliNews correspondent Monica Ellena noted in her May report from the region, the small mountainous region remains locked in a state of limbo, its economy even more underdeveloped than Armenia’s, and its population at risk from the frequent flare-ups at the border with Azerbaijan.

While Karabakh’s president, Bako Sahakyan, has recently expressed his willingness to make concessions that “did not imperil our security or allow the adversary [Azerbaijan] to launch new attacks” in an interview with France’s Journal de Parlement, his views might clash with that of the opposition in Nagorno-Karabakh. As it is, Sahakyan’s regime has come increasingly under fire from the opposition over a proposed constitutional amendment that would enhance presidential powers and allow the incumbent to single-handedly decide on the composition of the government. Offering “concessions” to the “adversary”, no matter how vague, would further add to his growing unpopularity.

The complicated balance of power in the Caucasus and the episodes of domestic instability make the prospect of a peace settlement in one of the longest-standing territorial conflicts in the former Soviet Union as distant as ever. If an agreement is ever to be reached, an enfeebled Yerevan will have to prepare the population for the eventual return of at least some of the Armenian-held territories to Azerbaijan, Giragosian believes.

But the Azerbaijani and Armenian sides remain simply too far apart for such a settlement to take place in the foreseeable future, he adds. Baku has requested the unconditional return of Nagorno-Karabakh and the occupied territories all along, offering little in the way of a compromise and instead focusing on isolating Armenia in regional politics in order to increase the pressure on the regime. Even if Armenians were prepared to make concessions and return the occupied territories, which they are not at the moment, the offer would still fall short of Azerbaijan’s demands.

As for Russia, it will have to tread carefully in its relations with Armenia, Giragosian adds, as Armenians are becoming increasingly dissatisfied with the unequal terms of the partnership and the Kremlin’s “disrespect” of its alliance with Yerevan in favour of Baku.

The silver lining, if there is one, is that Yerevan has been pursuing a more diversified foreign policy, away from Russia and more focused on strengthening its ties with Nato and the EU. While rejecting outright any intention to seek Nato membership, Yerevan has nevertheless struck bilateral agreements with countries such as France, Germany, Greece and the US, and has been actively cooperating with Nato’s Partnership for Peace programme. “In a strategic sense, Armenia is becoming more successful in maximizing its strategic options, and is now beginning to challenge the dangers of its over-reliance on Russia as its primary security patron and partner,” Giragosian says.