Country Report Armenia November 1998 Main report

Outlook for 1999-2000: A breakthrough in relations with Azerbaijan--

In the first high-level Armenian visit to Azerbaijan since the collapse of the Soviet Union, the prime minister, Armen Darbinian, in September headed a delegation to the EU-sponsored Transport Corridor Europe-Caucasus-Asia (TRACECA) conference on the forging of a new Silk Route from Europe to Asia through the Caucasus and Central Asia. President Kocharian had been invited by his counterpart in Azerbaijan but asked his prime minister to go instead. Hopes that this short visit might yield progress on resolving the conflict between Armenia and Azerbaijan were not realised because the Karabakh issue was not touched on. However, Mr Darbinian and the president of Azerbaijan, Heydar Aliyev, both expressed the view that transnational transport corridor would have a beneficial effect on the stability and economic development of the countries participating in it. More significantly, for two countries which have had no diplomatic or trade ties since they gained independence in 1991 (the war broke out in 1988), Mr Darbinian's presence represented an important step towards reconciliation and an end to hostilities.

--and negotiations on Nagorny Karabakh are likely to resume

Faced with the reality that Armenia's prospects for long-term economic recovery depend on a resolution of the conflict over Nagorny Karabakh, the Armenian government is keen to restart negotiations. However, it firmly rejects the "phased" proposal of the Organisation for Security and Co- operation in Europe (OSCE) Minsk Group, under which compromises would have to be made (captured territories would have to be returned to Azerbaijan and refugees returned to their abandoned homes) before negotiations on the status of Nagorny Karabakh could start. Mr Kocharian's government claims that there would then be no incentive for Azerbaijan to continue with negotiations or make concessions. Instead, it is of the view that a "package" deal, whereby all problems are addressed right from the outset, would be more balanced. The issue of wide autonomy for Nagorny Karabakh-- but as a part of Azerbaijan--also remains contentious.

Nevertheless, the recent visit by Mr Darbinian to the TRACECA conference in Azerbaijan, and public utterances by President Kocharian on the need to resolve the conflict in order to foster swifter economic recovery, indicate a softening of stance. Additionally, Mr Kocharian's credibility with the hardliners in Nagorny Karabakh and in Armenia makes it easier for him than for his predecessor, Mr Ter-Petrosian, to sell concessions. This means that there is a better chance of progress on a settlement when a modified proposal is put forward by the OSCE Minsk Group in November.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information