Future Prospects for Armenia

June 25, 2005

Dear Friends,

It is indeed a pleasure to be here with you tonight to participate in
the celebration of the Armenian Reporter's Fortieth Anniversary and to
honor the outstanding work of its Senior Editor, Ed Boghossian. The
Armenian Reporter, under Ed Boghossian's leadership, has long been an
important independent voice of the Armenian community in America. The
Armenian Reporter has shunned the strident partisanship that has,
unfortunately, characterized far too much of the Armenian Diaspora's
history. The Reporter has been a strong advocate of democracy in Armenia
and for Armenia's regional integration and strong relations with the
United States. It has informed the Armenian Diaspora on these critical
issues and, in so doing, has played that central role of open discussion
and debate that the free press should. So, I congratulate the Armenian
Reporter and Ed Boghossian on these accomplishments and wish you the
best success in the years ahead.

Allow me to take this opportunity to express some of my views on how I
see the future of Armenia at this important crossroads in its history.

First, let us not forget that we are very fortunate indeed to see in our
lifetime the emergence of Armenia as a free and independent state after
the collapse of the Soviet Union and the end of the Cold War. And for
me, as I am sure for all of us here tonight, Armenia's independence and
evolution as a democratic and prosperous state is a cherished goal.

When I was assigned to the United States Embassy in Moscow where I was
the Political Counselor during President Jimmy Carter's Administration,
it was a very difficult period following the Soviet invasion of
Afghanistan. Toward the end of our tour of duty, my wife and I and our
young son visited Soviet Armenia. The Armenian Communist Party
leadership was a bit nervous about my visit, given the adversarial state
of US-Soviet relations at that time. In stark contrast, our visit was
warmly welcomed by the Armenian Church and we had a direct introduction
to the role of the Armenian Church as the symbol of Armenian
nationalism. After my rather fruitless and protocolaire meetings with
government officials in Yerevan, I was met by a young, staunchly
nationalist Armenian priest who escorted us on our first visit to
Etchmiadzin. While the car was passing under the red Soviet propaganda
banners displayed across the road, the young priest asked me if I could
read Russian and I replied affirmatively- He then said, what does that
banner say? 1 replied, "the unity of the people and the party". The
priest then turned his head toward me and said, "You are not a good
Armenian." Rather surprised, I asked why not. He replied that "a real
Armenian would have read that banner to say "the unity of the people and
the Church". We were, indeed, on our way to Etchmiadzin and this young
Armenian priest's words would prove to be especially prophetic a decade

But the challenge today is for Armenians in Armenia and throughout the
Diaspora to work together to ensure that Armenia realizes the true
fruits of independence by evolving as a truly democratic state living
under the rule of law, providing its people with economic prosperity and
security, and pursuing an enlightened foreign policy that maximizes
Armenia's great potential to be a cultural, economic, commercial,
scientific and democratic center in the South Caucasus and as a regional
bridge between the North and South and the East and West.

Most importantly, while the realization of an independent Armenia is an
impressive achievement, the current challenge lies in determining what
type of country Armenia will become. And that, my friends, is the key
question facing the Armenians of Armenia and the Armenians of the
Diaspora. We can no longer afford to ignore the shortcomings, nor can we
blindly accept some of the more troubling trends in today's Armenia,

While Armenia has made important progress, particularly in terms of
economic reform and marketization, the absence of a long-term solution
to the Nagorno-Karabakh conflict serves to only constrain economic
growth, restricts efforts to improve regional security, harms normal
relations with its neighbors and impedes integration into Euro-Atlantic
institutions. Domestically, and faced with an ongoing constitutional
debate and upcoming parliamentary and presidential elections, Armenia
now has a window of opportunity to take important ~W and long overdue ~
steps forward on democratic reform.

On constitutional reform, it is especially important to correct the
imbalance of power that defines the country's political system. Armenian
governance is largely characterized by an overly dominant executive
branch that needs to govern with much more accountability. The lack of
an independent judiciary and an ineffective and overly compliant
legislature mandates greater "checks and balances" in Armenia. The
current discussion of constitutional amendments should also be brought
into the public sphere now, while there is time to have public input and
buy-in. The support of the Armenian people is essential if Armenia is
able to evolve in a truly democratic manner.

Armenians deserve to have full confidence in their elected leaders.
Armenia's authorities must ensure that parliamentary and presidential
elections in 2007 and 2008 are free and fair. The U.S. Government and
others are already working toward this goal. The Diaspora should
actively underscore this message with the Armenian Government. Armenia's
leaders must govern the country in the national interest, not from

Allow me to make a comment here on the Armenian Diaspora. Armenians
living in countries which enjoy the fruits of liberty, democracy and the
benefits of private market economies have a strong hope, I believe, that
Armenia will evolve as a strong and stable democracy endowed with
freedom and the rule of law as the hallmarks of the Armenian political
system, Armenia, since it became an independent republic in 1991, had
set out on this path. But this evolution must be consolidated and
attempts, as we have seen in the recent past, to thwart Armenia's
democratic evolution, especially by resorting to extralegal means and
violence, must be prevented at all costs. We must ensure that the past
incidents of political violence remain only one-time aberrations in the
course toward true democracy. We have waited far too long for Armenian
independence and any retreat from democracy must neither be tolerated
nor excused. These democratic ideals are veal values which Armenians
both in Armenia and in the Diaspora hold to be dear. Especially, as
Americans, we must be true to our values and must be strong advocates of
the consolidation of democracy in Armenia.

Democracy and economic development and reforms go hand in hand.
Armenia's business environment, economic development and foreign
investment must be promoted in a more even and transparent manner. Over
the past decade, Armenia has achieved remarkable economic growth in
spite of being cut off from markets (10.1% GDP growth in 2004, 8%
projected growth for 2005), but could do far better in attracting
foreign investment. Reforms are necessary in the financial sector and
tax administration. The business environment is not conducive to foreign
investment due to overregulation, systemic corruption, which is a very
serious problem, and the lack of administrative courts to protect
investors ~W these are all disincentives to sustained growth and development.

Concerning the Diaspora's role in investment in Armenia and despite the
structural problems, several Diaspora investors are now active in
Armenia and appear to be turning a profit (most notably in the IT,
tourism and export sectors). However, most of the outside investments in
Armenia axe coming from Armenians in Russia, who know how to "work the
system". The Armenian Diaspora in Russia has a very important role to
play in Armenia, including the prospects of Armenians there eventually
returning to Armenia. However, much more needs to be done to encourage
and facilitate investment from other Armenians in the Diaspora who live
in the countries of Europe, the United States, Latin America and the
Middle East. Business in Armenia requires on-the-ground attention and a
considerable investment of time. The U.S. Government encourages smart
U.S. investments that will bring American know-how and
business standards to Armenia. It is important to inculcate these values
and standards in Armenia. Let us not forget that Armenia was once
considered to be the Silicon Valley of the Soviet Union, providing
advanced avionics for Soviet aircraft and supercomputers. With literacy
rate of 98+6%f is there any question that Armenia's highly educated
population could not aspire to play a comparable role now in the region?

However, to accomplish this, the rule of law and anti-corruption
policies need to be more vigorously pursued. More specifically, Armenia
all too often demonstrates a rule of law that is more a "law of rulers."
An anti-corruption strategy exists, but it has no teeth; it must be
unambiguously supported by Armenia's current and future political
leadership and it needs strong enforcement provisions- The international
community -- including the Diaspora - can help by insisting on the
implementation of a meaningful and sustained anti-corruption strategy.

The economic and social situation in Armenia has, unfortunately, been
characterized by the emigration of human capital-people who are seeking
better opportunities elsewhere. Unfortunately, one of Armenia's most
important exports has been its people. This is particularly troubling
given the small size of Armenia. With a population of less than three
million, Armenia can ill afford to lose its ~Sbest and brightest,"
Foreign direct investment, trade, commerce and economic development will
all be enhanced with progress in one area: a negotiated settlement of
the Nagorno-Karabakh issue. Indeed, borders can be opened, blockades
lifted and the long journey toward the reconciliation of all peoples and
countries of the region can move forward.
Further, Armenia must look at current trends in the region. Russia will
continue to seek deeper ties with the West and beyond. Turkey is looking
westward, seeking to be part of the European Community, while
strengthening its ties in the Middle East and Central Asia and improving
its relationship with the United States. Georgia and Azerbaijan are
actively pursuing stronger relations with the West.

Armenia's relations with the United States are very important and
involve interaction on issues such as non-proliferation and border
security, international narcotics, money laundering and the trafficking
in persons, and the development of democratic institutions and
sustainable economic growth. Washington appreciates Armenia's support in
Iraq and that both countries are working together in a peacekeeping

Iran's future direction remains problematic, but it is a major regional
player. Increasingly, change in Iran is not a question of if, but of
when. Iran's policies will have important implications for Armenia.
While Armenia's relations with Russia will remain very important,
Armenia must avoid becoming over-dependent on Russia.

Thus, the promise for Armenia's security and prosperity rests with
following the major trends toward regional and international
integration. Armenia can no longer risk being "the odd man out". Indeed;
Armenia should rediscover and reaffirm its historic role as a bridge
between the North and South, and the East and West.

Armenians recognize that open borders with its neighbors will bring
peace and prosperity. The government of Armenia should continue efforts
that will benefit the country in the long-term: Namely, serious efforts
within the OSCE Minsk Group process on Nagorno-Karabakh and work toward
establishment of full diplomatic relations with Turkey should remain top
priorities. The Diaspora should strongly discourage the false idea that
time is on Armenia's side.

Every year without full relations with neighbors comes with huge
opportunity costs for Armenia. For example, the Baku-Ceyhan pipeline's
most economically commercial routing would have been through Armenia,
Georgia, Azerbaijan and Turkey will benefit from this energy-related
commercial linkage. Despite Azerbaijan's current internal political
difficulties, its economic and military potential will only grow in the
years ahead. Rhetorically, this was underscored by Azerbaijani President
Ilham Aliev in June, 2005, who boasted of his country's military muscle
at a rally of the ruling party in the capital of Baku: "Azerbaijan has
recently got the upper hand in negotiations with Armenia over the
resolution, of the Nagorno-Karabakh conflict. Military and economic
potential are on our side. We will get our lands back/' Aliev said.
While this militant posturing does little to help the situation, it does
reveal the fact that Armenia's current military advantage is only
temporary, and should not be taken for granted.

Despite the rhetoric and looking ahead to the period beyond Azerbaijan's
upcoming parliamentary elections, Armenia and Azerbaijan, with the help
of the international community, must make every effort to resolve the
Nagorno-Karabagh issue in a timely and comprehensive manner. Let me make
clear that the period ahead is the time for diplomacy. And while there
is now a window of opportunity, that window will not remain open for too

In 1999 and in my current capacity as the Director of the Baker
Institute at Rice University we conducted a conflict resolution mission
and flew to Baku and to Yerevan to help facilitate the negotiations
between the parties on the issue of Nagorno-Karabagh. We were received
at the highest levels in both countries and did what we could to move
the process forward. I was heartened later in 2001 by the high level
involvement of President George W. Bush, and then Secretary of State
Colin Powell and the State Department team in urging the parties to move
forward. A unique opportunity with the highest level of United States
involvement to achieve a peaceful settlement was missed by the Azeri and
Armenian leadership; I am convinced that a negotiated settlement is
still possible. But it will take strong political will on the part of
the leadership of the parties directly involved and creative and active
diplomacy on the part of the OSCE members, especially the United States,
France and Russia, There are different approaches which have been
discussed and put on the table for discussion and there is reason to
believe that, when negotiations resume, a focused effort to narrow the
differences on some of the key issues can help the parties reach a
resolution both sides can support and agree upon.

At the same time, there must be resort by both sides to Public Diplomacy
so that public opinion in both Armenia and Azerbaijan, can begin to
better understand the merits of a negotiated settlement and the benefits
that both the Armenian and Azeri people will enjoy from the peaceful
resolution of this dispute. This means that both governments in Yerevan
and Baku must make public gestures and statements that ameliorate the
atmosphere so that the negotiating process
Obtains the support of the people of both countries. Such an approach
would be an important confidence building measure.

What concerns me the most now is that it has been over a decade since
the Nagorno-Karabagh ceasefire; and failed efforts to find a negotiated
settlement are resulting in the hardening of political attitudes amongst
certain domestic constituencies in both Armenia and Azerbaijan. It would
indeed be a tragedy if the willingness expressed by the leaders of both
Armenia and Azerbaijan to make a lasting peace coupled with the progress
made in recent years during negotiations at different levels should all
falter. Both sides must take steps now to confront those groups, both in
Armenia and Azerbaijan that have vested interests in the status quo.
Without a determined effort of public diplomacy, the entrenched
hard-line posturing on all sides could become one of the most serious
obstacles to peace.

Even if there is no outbreak of fighting in the near term, the absence
of an agreement will have a major negative effect posing an obstacle to
the political economic and social development and progress of both
Armenia and Azerbaijan and can lead to regional instability in the South
Caucasus. But again, it is not just the peace process itself that is the
sole challenge. The need to "sell" and secure any peace deal is an
equally difficult challenge for both sides.

Looming large in the background of this overall situation is the
strategic importance of Armenian-Turkish relations. I am an advocate of
reconciliation between Turkey and Armenia and between the Turkish and
Armenian people. Armenia cannot obtain its full potential without full
and normal diplomatic relations with Turkey, and the Armenian government
has called for that. And Turkey, likewise, can enhance significantly its
international standing and foreign policy goals, e.g., with the EU, by
the establishment of full and normal relations with Armenia.

Two major issues impede the establishment of such relations and
reconciliation; the lack of a negotiated agreement and comprehensive
settlement of the Nagorno-Karabagh issue, and the issue of the Armenian
genocide+ What needs to be done, in my view, is for all parties to
engage on these issues concomitantly.

First, as I mentioned earlier, is the need to engage in discussions and
negotiations between Armenia and Azerbaijan seeking a peaceful
settlement of the Nagorno-Karabagh issue. And second is to pick up on
the two public proposals~Wone Turkish and one Armenian~Wby Prime Minister
Erdogan in his letter to President Kocharian for the creation of a joint
commission to address the history of the Turks and Armenians, and
President Kocharian's proposal for an intergovernmental commission to
meet and discuss all outstanding issues between the two countries with
the aim of resolving them. Let that discussion begin now.

My friends, it is, as I said, the time for diplomacy and dialogue. Let
us work to encourage the leaders in Armenia, Azerbaijan and Turkey to
take the path of statesmanship with the strong support of the
international community and the Armenian Diaspora. The stakes are too
high to do anything less. Our vision for a truly democratic and
prosperous Armenia living in peace and security with all of its
neighbors demands nothing less.

Thank you.