ROYAL UNITED SERVICES INSTITUTE
BREACHING THE IMPASSE: DISCUSSING WAYS
FORWARD IN NAGORNO-KARABAKH
17 APRIL 2013, LONDON
"A Pragmatic Review of Nagorno-Karabakh Conflict
Resolution: Could Economic Incentives Help Break the
Current Stalemate?"
Dr Marat Terterov,
Principal Director and co-Founder
&
George Niculescu
Head of Research
The European Geopolitical Forum-EGF, Brussels,
THE FULL RESEARCH PAPER AVAILABLE ON
HTTP://GPF-EUROPE.COM/
Why talk about economic incentives in
a territorial conflict?

Little “light at the end of the tunnel” to peaceful
settlement for Karabakh in the current climate;

Azerbaijani-Armenian negotiation process and the wider
relationship governed by a severe lack of trust;

Confidence building measures and steps towards
conflict resolution are extremely difficult to develop;

Little compromise from either side, with heightened risk
of a ‘spark’ coming from incidents or provocations

A ‘political settlement’ alone is unlikely to be sufficient

Economic incentives might be amongst the most
appealing aspects of a wider-’Grand Bargain’;
A basis for deepening the discussion ?:
1.
2.
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Major gains for all sides from regional economic
cooperation
Both Armenia and Azerbaijan are in transition towards
modernisation and nation building
War has not stopped Georgia and Russia from
economic cooperation, nor Israel and the Arabs
South Caucasus yet to ‘take off’ economically
How much money would a joint Baku-Yerevan
Olympiad in 2024 bring into the region ?
Madrid Principles not incompatible with economic
cooperation
For Armenia, can the geopolitical status quo last ?
Could the type of pragmatism which lies “just under
the surface”, in the Caucasus, be brought forward ?
Would there be added value in starting talk about
“jumping over the fire”?
The Aim and the Method

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To test the idea of whether economic incentives could help break
the current deadlock over Nagorno-Karabakh.
A questionnaire submitted to local and international experts
inquiring on whether “a return of land for access to
infrastructure projects” could contribute towards breaking the
current stalemate.
The Overall Finding of the
Research:

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Economic incentives, CANNOT, on their
own, provide a substitute for a political
settlement to the conflict, including its
territorial dimensions.
Economic incentives CAN contribute
towards conflict resolution as an
element of a broader deal between the
parties.
Economic incentives CAN play a key role
in confidence building by ‘toning down
the heat’ and forging a ‘shift of gear’ in
the current narrative
We found the following
arguments from our survey
respondents supporting the
utility of economic incentives:
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They can help break the current ‘economic isolation’ of
Nagorno-Karabakh and Armenia;
They can provide economic benefits for Azerbaijan by
creating new markets via regional integration;
They can offer Nagorno-Karabakh with a broader range of
economic options and opportunities;
They can forge economic interdependencies which could
serve as ‘mutual security guarantees’;
They could provide a stronger basis for the economic and
humanitarian rehabilitation of the seven districts around
Nagorno-Karabakh;
They could turn current "zero-sum game" thinking into a
"win-win" solution.
More scope to be cautious than
bullish ?
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They would not lessen Armenia’s position in
calling for recognition of status/the independence
of Nagorno-Karabakh Republic;
Armenian ‘hard liners’ would never accept a
territorial compromise;
"Lowland-Karabakh“ is the only place to safely
resettle 400,000 Armenian IDPs;
We have largely “missed the bus” on new crossborder oil and gas pipeline projects with joint
Armenian and Azerbaijani participation;
Russia (a key external power broker) would, for
the most part, oppose, given its regional
economic and political interests.

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How to use economic incentives in N-K conflict
management?
Applied as a confidence building measure and
synchronized with the work of the Minsk Group,
which (despite its imperfections) remains ‘the
only game in town’.
Establish a Regional Development Agency
(RDA) in charge of preparing and implementing
economic cooperation projects at the regional
level;
Identify the scope for regional energy and
infrastructure projects which could be open to
Armenian participation;
However many practical obstacles hindering
possible Armenian participation in regional
infrastructure pilot projects remain, not just at
the political level;
An agenda for expert level discussion
groups:

Starting a comprehensive dialogue on post-conflict
scenarios involving joint regional energy and
infrastructure projects;

possible topics for the agenda:
 joint rehabilitation of infrastructure both in
Nagorno-Karabakh and in the occupied districts.
 priorities, joint management, sources of funding,
inter-operability of technical standards and other
challenges to planning and implementing regional
infrastructure projects.
 how to help the process of resettlement of IDPs
and refugee communities?
 role of RDA remains critical as a driver, regulator
and monitor
The Potential Role of the EU and of
Other International Stakeholders:
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Providing frameworks for dialogue;
Guaranteeing security and political aspects of economic
pilot projects and associated confidence building
measures;
Compelling both sides to take a more flexible and
constructive approach towards the conflict;
Focus creative energies on fostering regional economic
cooperation;
Bringing in experience from the Balkans on conflict
dissuasion and fostering economic cooperation;
Does the EU have the will to develop a mandate ?
THE NEXT EGF RESEARCH PROJECT?
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“Economic incentives are a key element of a new vision
for peace in the new South Caucasus, comprised of
states and entities, less hung up on sovereignty and
hard power, whilst reinforced by comprehensive,
integrated and sustainable cooperation, which would
ultimately enable free movement of people, goods,
services and capital at the regional level, lead to
economic integration and the opening of all closed
borders.“
Is this vision feasible? How could it be implemented?
The road ahead for Karabakh: pragmatism or ‘warrior
nationalism’ ?
DISCUSSION