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Shift Towards Russia To Stoke Nagorno-Karabakh Tensions

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  • Shift Towards Russia To Stoke Nagorno-Karabakh Tensions

    Caucasus Business Forecast Report
    July 30, 2014 Wednesday

    Shift Towards Russia To Stoke Nagorno-Karabakh Tensions


    BMI View: T he intensification of violence between Armenia and
    Azerbaijan over the disputed Nagorno-Karabakh region is not likely to
    escalate into a ground war in 2014 or 2015 , and our core scenario
    remains that of a prolonged ' frozen conflict ' . However, Armenia's
    accession to the Eurasian Economic Union in 2015 could lead to more
    support for Yerevan's claim from Moscow, stoking tensions further.

    We expect Armenia to continue its progress towards becoming a member
    of the Russian-led Eurasian Economic Union (EEU) in 2014, before
    joining in January 2015. However, the ongoing 'frozen conflict' with
    Azerbaijan over the disputed Nagorno-Karabakh region will remain a
    source of extreme tension between Yerevan and Baku, as well as a
    potential stumbling block for Russia in its attempt to expand the EEU.

    Armenia has been at odds with Azerbaijan over which country has the
    legitimate claim to Nagorno-Karabakh (which lies inside Azerbaijan but
    is majority ethnic Armenian) since a ground war between the two states
    ended in a ceasefire in 1994. Nagorno-Karabakh, as well as surrounding
    Azerbaijani territories, remain under the control of Armenian armed
    forces, with the borders between these regions and the rest of
    Azerbaijan heavily militarised. While skirmishes and even deaths are
    not uncommon on the borders of Nagorno-Karabakh, the frequency of
    clashes and number of casualties has risen in recent months, in a
    situation which threatens to shatter the fragile truce.


    Little Chance Of A Mediated Resolution
    South Caucasus - Map of Nagorno-Karabakh and Surrounding Regions

    Media reports from both Armenia and Azerbaijan consistently blame the
    other side for violating the ceasefire, with each country accusing the
    other of attempting to provoke military action. In June, alone the
    Armenian defence ministry stated that five of its troops had been
    killed by Azerbaijani gunfire, while in the same month its Azerbaijani
    counterpart alleges Armenian soldiers fired on civilians, injuring
    three. Both sides continue to deny the other's claims.

    Our core scenario remains one of a prolonged frozen conflict in the
    next five years at least that does not develop into an all-out ground
    war. Neither of the primary military powers in the region (Russia,
    which by-and-large backs the Armenians, and Turkey, which due to
    ethnic links and long-standing animosity towards Armenia provides
    support for Azerbaijan) have a strategic interest in seeing a
    widespread conflict erupt in the South Caucasus. In addition,
    Azerbaijan will be deterred from launching a military attack to
    reclaim Nagorno-Karabakh by the Russian military presence in Armenia.
    However, the recent escalation in violence undoubtedly increases the
    risk of a breakdown in the fragile truce between the two states, and
    given that international diplomatic efforts remain focused on other
    conflicts in Eastern Europe and the Middle East, we cannot rule out an
    outbreak of violence in the South Caucasus in the months or years
    ahead.


    Nagorno-Karabakh Tensions Ensure Low Security Score
    Armenia - Short-Term Political Risk Rating and Sub-Components, Out of 100

    Moscow's Attitude Towards Conflict Key To Any Resolution

    Russia remains one of the key actors in the Minsk Group of the
    Organisation for Security and Co-operation in Europe (OSCE) alongside
    the US and France, tasked with facilitating a peaceful resolution to
    the conflict. The fact that Armenia is on course to join the EEU in
    2015 could lead to an increase in overt support from Moscow (in the
    form of financial assistance or discounted arms shipments).
    Alternatively, the Kremlin could reduce co-operation with Azerbaijan
    (which is not on course to join the EEU, and continues to tread a fine
    line between closer integration with Moscow or Brussels), which has
    picked up over the past two years on the back of increased Russian
    arms exports to Azerbaijan. Both of these scenarios would be a net
    positive for the Armenian side, as either its armed forces become
    better equipped (currently the Azerbaijani forces are much more
    technically advanced than their Armenian counterparts) or its
    adversary loses a key arms supplier and a potential mediator in the
    dispute. Moreover, following Armenia's accession to the EEU it will
    likely have a formal say or veto of future expansion of the group. As
    such, we cannot rule out a scenario in the future where Armenia
    attempts to block Azerbaijani accession, a move that would undoubtedly
    raise tensions further between the two states.

    Risks To Outlook

    In a prolonged and bitter dispute where both sides are heavily armed,
    such as Nagorno-Karabakh, there is always the risk that sporadic
    violence could escalate into a widespread conflict due to
    miscalculation. The elevated tensions on the border make this scenario
    more likely as troops on both sides remain in a heightened state of
    readiness. If a ground war were to erupt ( see 'Armenia-Azerbaijan
    Tension: Conflict Scenarios Assessed', April 8 2011) we would expect
    to see Armenian forces pushed back to the border given the greater
    numbers of Azerbaijani troops and the newer, more advanced equipment
    the Azerbaijani forces posses.

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