THE POLITICAL AND ECONOMIC DEVELOPMENTS IN THE SOUTH CAUCASUS
AND ARMENIA'S REGIONAL POLICY
Let me first of all thank the members of the Committee on Foreign
Relations for providing me with an opportunity to address this forum. I am delighted
and honored to visit your state and to speak to you about the South Caucasus,
a topic on the minds of policy makers in important capitals of the world. Indeed,
the subject has lately achieved additional prominence due to the high-level support
the new Bush Administration is giving to the conflict settlement in Nagorno Karabakh.
As you know, Armenia is one of the three countries comprising what we call today the South Caucasus. Only ten years ago the South Caucasus was a part of the Soviet Union and was located on the fault line of the East-West confrontation. Today, that has changed tremendously as the South Caucasus has emerged as a distinct region, with its own characteristics, located in a larger - and highly volatile - neighborhood.
The South Caucasus matters because at this stage it is a weak link in a broader regional system. Many countries and regional powers have vested interests here, including Russia, Turkey and Iran, as well as the United States. The South Caucasus is a region around which a lot of politics is played, and one would think that the Great Game of the late nineteenth century is back with a vengeance. It is also a region rich in oil, gas and other minerals, and this attracts the attention of major powers in the world.
There are many
challenges that the three countries face, the biggest being the challenge of overcoming
the legacy of the past. If we look deep down into the history of the South Caucasus,
we will see sediments from many cultures and civilizations, starting from the
ancient Greek and Iranian influence, to Roman-Christian, then Arabic, Turkish
and
Russian. This is especially true of my country, the Republic of Armenia.
One can jump to a quick conclusion that the legacy of the Soviet regime has left
an indelible mark on the identity and the mentality of the people in Armenia.
However, if we carefully remove layer after layer of these legacies, including
the hard-to-erode legacy of the Soviet-style administration and politics, it becomes
obvious that the Armenian national identity is firmly grounded on the values and
the principles of the European civilization.
It is not a coincidence that our ethnic brethren in the democratic countries, including this country, prosper and thrive. A strong sense of justice, integrity and the entrepreneurial spirit are qualities imbedded in the mind of an average Armenian. These are also qualities that had to be suppressed during the Soviet regime. We, nevertheless, recognize that the Soviet legacy is still holding sway in the economic and political areas. In South Caucasus it is also visible in the area of ethnic conflicts. It is this legacy that is affecting our daily life and that is what we are trying to overcome.
The most important problem overwhelming Armenia is the state of its economy. The Soviet Union left us with a legacy of dependence, with misplaced heavy industries producing intermediate goods, generally of inferior quality, for assembly in other republics of the former Soviet Union, instead of final products ready to be traded on the international market. As a country, we now find ourselves having to survive alone economically in the international market when the former republics that had comprised are no longer in a position to trade with each other. We are certainly aware that most of the industries that we have inherited from the past are obsolete, and recognize it as a major problem facing our country today. The slow trickle of investment prevents a restructuring and reinvigoration of Armenia's economy, while the economic blockade imposed on Armenia presents a major impediment for development of its export potential.
We see the economic development as both an end in itself and a long-term answer to our national security challenges. Economic prosperity will consolidate civic and democratic liberties and strengthen the independence of Armenia and its democratic institutions. It will also tap into the productive resources of the nation, unleashing the entrepreneurial spirit of Armenian people. Armenia's economic development must be based on a modern, competitive market economy, with minimal government intervention. Armenia, in itself, is a small market. Clearly, its future lies in its economic integration within regional and international markets, together with the promotion of free trade, as Armenia's exports are a way to enlarge its domestic markets and strengthen its competitiveness. It is obvious that we need to work harder to attract investors, both foreign and domestic. Armenia will continue its efforts to integrate into the world economy and to join the World Trade Organization. We want to and we will work to promote a business-friendly environment, enforce economic legislation, and, of course, decrease the burden of taxation.
One of Armenia's blessings is the strength of its Diaspora. More Armenians live outside the borders of Armenia than in Armenia itself. In the United States alone there are over one million people of Armenian descent. During the difficult years since independence, we have benefited from the Diasporan support and encouragement. They have also been among the first to invest in Armenia's private sector and engage in trade with the Armenian companies.
The other legacy that we have inherited is the whole mentality of the Soviet period, which is no less important in its repercussions than the economic problems we are facing. And truly this mentality and general outlook stand in the way of most of the reforms that we undertake in different areas of the economy, the judiciary, the whole democratization process and institution building. These are serious issues that most transition economies of the former Soviet Union have faced, as did the Eastern European countries. It seems, however, that the impact for the Eastern European countries was not as deep and broad as it was for the former Soviet Republics.
Armenia remains committed to building democratic institutions and a civic society and to defending freedom of the press and other civic liberties. However, by no means would I tell you that Armenia is a full and mature democracy. Certainly not. We understand that the building democracy is not a matter of the days, months or years. It is a tradition, it has to be imbedded in our people's collective thinking. It also has to be in their mentality and outlook. Just as there is no alternative to economic reforms in Armenia, there is really no credible alternative to a democratic form of government. Our country possesses an educated and motivated population capable of governing itself. Still, the tragic events of October 27, 1999, when Armenia's Prime Minister and Parliament Speaker, among others, fell victim to terrorist act, underscore for us all the reality that it is not an easy task to create a healthy society, a strong government and a real democracy. Armenia's constitutional mechanisms survived this horrendous shock, and the situation has stabilized now. We must continue forward, with a collective will and much hard work, if we are to reach our goals.
Certainly Armenia would have been in a much better position today, had there not been the problems that the region is encountering because the South Caucasus is inherently an unstable region. Armenia, as a part of that region, has been affected by the regional dynamics and developments. There are many destabilizing factors affecting the countries of the region, such as the political instability in individual countries and the economic hardships that each of them faces.
One of them is an unequal distribution of mineral wealth, oil for example. Some politicians would argue that, especially with the current level of crude oil prices, it should be a source of stability. We hoped it would be, but at this stage it is not. If we look at the oil element in the short-term vis-à-vis the long term, we think different rules might come to play. In the short term, oil seems to be a zero sum game, and there is a lot of competition over it: Russia, the United States, Western European countries, Iran, Turkey are all competing to have a share of the Caspian oil and gas resources. This is certainly a source of instability as is the ambiguity over the status of the Caspian Sea. This has led to a rift between Iran and Azerbaijan, between Azerbaijan and Turkmenistan, Russia and Azerbaijan. In effect, they are dividing the wealth that might not materialize at all.
Another major problem is the number and eventual course of main export pipelines. So at this stage it is a zero sum game, because whatever the country takes, it will be at the expense of another. If oil is used as a stabilizing factor by the oil producers like Azerbaijan and it is not used as a weapon of choice, it might become a way to contribute to the overall peace and stability in the region.
Of course the most destabilizing elements are the existing ethnic conflicts: in Georgia, in other regions of CIS and in our case, Nagorno-Karabakh. This is a very complicated and problematic issue. It affects Armenia in a very negative way and our foreign policy basically revolves around this issue. This conflict also determines our relationship with our neighbors, particularly with Turkey. Its peaceful resolution is our top foreign policy priority. Consequently we have adopted a regional policy that is as conducive as possible to the overall peace and stability of the region so that Armenia may survive and benefit economically and politically to the largest extent possible.
Armenia has approached the country's complex geographic and political situation with a regional policy of "complementarity". Its main features include avoidance of close affiliation with any regional or global power blocs and simultaneous pursuit of cooperative relations with all neighbors and all economic, political, or military organizations. Independent foreign policy combined with active, friendly, and balanced relations with neighboring states, are the building blocs of "complementarity". In practical terms, the policy has translated into Armenia's membership in both NATO's Partnership of Peace program as well as the CIS Collective Security arrangement. Armenia is forging the closest possible ties with the United States, while at the same time building an active trading relationship with Iran, one of Armenia's largest trading partner overall.
One can observe a pronounced absence of an all- encompassing regional organization that includes all the countries in the region, providing a forum to discuss our issues and work on consensus building. This will certainly help promote the stability in the region. In this regard, the recent proposals to create a South Caucasus security pact, including President Kocharian's idea of a "3+3+2" security formula is of great interest. President Kocharian's proposal is aimed at creating a regional security framework for the three countries of South Caucasus, with participation of their immediate neighbors, Russia, Turkey, and Iran, and engaging the United States and the EU.
Armenia is basing its regional policy on several pillars:
The first aspect of our regional policy is to advocate equal economic development and economic cooperation. We believe that the South Caucasus countries should act together to develop strong regional economic and commercial ties, which is the key to our mutual development. In our view, no country in the region can strike it rich on its own. Such a disparity will simple be unsustainable, and instability in one country will trickle to the whole region.
One of the main impediments of Armenia's integration in regional and international trade arrangements is the twin economic blockade imposed by Azerbaijan and Turkey. Its effects were particularly suffocating to us in the early years of independence, causing a severe energy and transportation crisis and contributing to a drastic decline in the health and living standards of our people. Armenia not only survived but also advanced so that today the current effect of the blockade is to keep fragmented the South Caucasus common economic space and to impede needed regional integration and the flow of international capital into the region. Unfortunately, Azerbaijan does not meet us half way on this issue. Turkey is not cooperating either.
We think that the economic cooperation will help us transcend the political problems and will facilitate the resolution of the political issues. Azerbaijan's policy today in the region is to isolate Armenia, something clearly visible to an impartial observer. It was prominently displayed in the September 1998 TRACECA conference in Baku. Despite all the gloating and forecasts, the Armenian Prime Minister went to Baku to attend this conference which is the Silk Road project sponsored by the European Union, intended to create a corridor linking Europe to the South Caucasus, to Central Asia. It is of major importance to the economic development of our region. Armenia is eager to be part of regional economic and other programs. Yet, Azerbaijan introduced a special amendment to the text of the Conference document expressing its opposition to the projects involving Armenia.
The second aspect of our regional policy is to encourage and support stronger regional organizations. Looking at our region, we see that there is no single regional organization that includes as members all the regional powers such as Iran, Turkey and Russia. Iran is not a member of the Black Sea Economic Cooperation or the OSCE while all the others are. The CIS includes the former Soviet Republics but Turkey and Iran are left out. In the Economic Cooperation Organization, Turkey, Azerbaijan, Iran and a few other Central Asian republics are members, while Armenia and Georgia are not. We need such organization. The region has become hostage to the western policy of isolating Iran. This is why we have been unable to involve Iran in an interregional organization, where all the countries in the region, including the major players, having a common interest can come together to discuss common issues and build a consensus.
The third element of our regional policy is to eliminate the whole Cold War thinking and ideology, which still exists in the South Caucasus. Our approach differs from that of our neighbors. Azerbaijan's policies contribute to the polarization of the region while Armenia's policies promote reconciliation. We see our relations both Russia and the West, contrary to Azerbaijan's policies of deepening relations with NATO as an exclusionary measure to fend off Russia's influence in the region. This kind of policy leads to regional polarization, which the South Caucasus cannot afford.
Armenia regards the newly emerging GUUAM /Georgia, Ukraine, Uzbekistan, Azerbaijan, Moldova/ grouping as a potential contributor to a greater stability and prosperity in the region. GUUAM was created in 1998 as a forum to discuss and coordinate the participants' positions on arms control issues, economic cooperation, transportation, and other areas. We understand the motivation and positions of the countries comprising the group. Moreover, Armenia enjoys good relations with all the countries members of the GUUAM, with the exception of Azerbaijan. The founders have since expanded GUUAMS`s task list to include military cooperation on peacekeeping and the protection of export pipelines for oil and gas from the Caspian Sea region. In 1999, Georgia, Azerbaijan and Uzbekistan dropped out of the CIS Collective Security Treaty, adding to concerns that GUUAM and CIS could develop into two competing military blocs.
At the same time, we are aware of Azerbaijan's efforts to privatize the agenda of GUUAM and put it to the blind service of its short-sighted foreign policy goals. Azerbaijan wants to use this organization to isolate Armenia from the rest of the region. I believe that other countries of GUUAM are also aware of this development and oppose it as well. The organization may also not serve its purpose if it promotes confrontation and polarization in the region. But we work with individual members of the group to prevent both extremes.
At the same time, Armenia enjoys friendly and firm relations with Georgia, enforced by the presence of a large and well-established Armenian community in Georgia. The amicable Georgian-Armenian relations will be one of the pillars of the emerging South Caucasus security framework.
The forth element in our foreign policy is to engage Turkey in a more positive and constructive way in the South Caucasus. While Azerbaijan is viewed as bellicose but less militarily capable, Turkey is regarded by Armenia as a potentially far more destructive threat. Armenia's view of Turkey remains permanently affected by the Genocide of 1915. Although Turkey was among first countries to recognize Armenia's independence, the two countries never established diplomatic relations. In 1993, Turkey closed the border with Armenia. Most recently, in response to the House International Relations Committee deliberations on the resolution affirming the U.S. record on the Armenian Genocide, Turkey announced a unilateral toughening of visa regulations against citizens of Armenia, as well as threatened to close down its airspace for any flights to/from Armenia.
Turkey maintains that the closure will continue until Armenia and Azerbaijan make progress toward a settlement of the Nagorno-Karabakh conflict. If we look at the three major regional powers, Russia, Turkey and Iran, we see that, because of Turkey's Caucasian policy, particularly with regard to Armenia and the Nagorno-Karabakh, there is a misbalance in the region. Russia has equal relations with both Armenia and Azerbaijan although Azeris love to dispute this. But you can see that Russia and Azerbaijan have diplomatic ties. They trade. One does not blockade the other. They have ambassadors in both capitals, they carry diplomatic relations as well as a dialogue between them. Despite all sorts of problems with Azerbaijan, Iran maintains an equal balance in the region and normal relations with both Armenia and Azerbaijan.
The exception is Turkey. Turkey has good, even exceptional relations with Azerbaijan. Turkey has no diplomatic relations with Armenia however. Turkey blockades Armenia. Turkish policy vis-à-vis Armenia creates a misbalance in the region. Despite all our historical problems and differences with Turkey, we are trying to engage them as positively as we can in this region because we believe it is important to keep balance in this region. But unfortunately that has not happened yet because of the very intransigent Turkish policy and because of their choice to put their ethnic affinities with the Azeris ahead of the geo-strategic interests of the region. A more balanced engagement by Turkey in this region will certainly help the overall regional peace and stability and enable Turkey to play a much more conductive and positive role in reaching a peaceful resolution to the Nagorno-Karabakh conflict.
The last and more important element of our foreign policy is our
position with regard to the Nagorno-Karabakh issue. This is one of destabilizing
elements in this region. Generally, the conflicts that we are facing today, and
particularly in our region boil down to the reconciliation of two major principles
of international law, that of territorial integrity and the right of people for
self-determination. But in a way the latter has been inclusive of the former,
that is the approach to conflict resolution has given preference to territorial
integrity. We think that international community has to be ready to adopt a policy
where it can manage change in this quickly changing and dynamic international
environment. This is what we need to focus on instead of simply applying a blanket
policy supporting the territorial integrity of states. That is why Armenia has
really welcomed the recent developments in the conflict settlement process. The
positive stage of today's negotiations is the dialogue between the president of
Armenia Robert Kocharian and the president of Azerbaijan Heydar Aliyev. They have
had a series of meetings in the last two years, most recently in Paris and in
Key West, FL. In Paris, the two presidents have agreed on a set of principles
to guide them in the settlement of this conflict. In Key-West, the Co-Chairs of
Minsk Group, representatives of US, Russia and France have held intensive discussions
with the country delegations there. The mediators are working on a new proposal,
to be based on the President's mutual understanding in Paris and the detailed
discussions in Key West. We hope that the new proposals will be eventually accepted
by the all parties to the conflict as the basis for negotiation so that we can
move forward in the process and reach long lasting peace and stability in the
South Caucasus.