Trade, Borders, and Enclaves: Armenian-Azerbaijani Relations Post Nagorno-Karabakh

On September 19, 2023, Azerbaijan launched an offensive against the Armenian majority and de-facto independent region of Nagorno-Karabakh, or Artsakh as it is known in Armenian. The offensive saw Azerbaijan establish control over the entirety of the region and forced the dissolution of the local government and defense forces. The offensive also saw Nagorno-Karabakh’s 100,000 residents flee to Armenia, which some analysts have described as ethnic cleansing. With virtually no Armenians remaining in Nagorno-Karabakh, no foreseeable path for the return of Armenians to Nagorno-Karabakh, and the territory under full Azerbaijani control, it seems that for now, the conflict over Nagorno-Karabakh is essentially over. 

The Nagorno-Karabakh conflict had been the main foreign policy priority for both Armenia and Azerbaijan since their independence, which was gained after the collapse of the Soviet Union. The First War over Nagorno-Karabakh, from 1990-1994, did not resolve the conflict. Instead, it established the conditions which have served as the main roadblock in establishing diplomatic relations between the two countries: not demarcating their shared border, and not allowing trade through each other's territory. The conflict also prompted Türkiye (formerly recognized as Turkey), a close ally of Azerbaijan, to close its land border with Armenia in 1993 as a show of support to Azerbaijan. The closure of both the Armenian-Turkish and Armenian-Azerbaijani border caused economic hardship for Armenia, having made it more difficult to engage in trade with outside partners. Due to these economic difficulties, Armenia prioritized the re-opening of these borders but the persisting Nagorno-Karabakh conflict had prevented these hopes from being realized. Türkiye and Azerbaijan wanted a change in regards to the issue of Nagorno-Karabakh before any borders were reopened. However, now that the issue of Nagorno-Karabakh is solved, however violently that solution came, it would seem that the main point of contention in normalizing relations has been solved. Unfortunately, new issues in the re-opening of trade routes, the borders of the two countries, and former enclaves have been brought up in the negotiation process by Azerbaijan, which holds maximalist positions on many of these issues. This has prevented a final peace agreement and a genuine normalization of relations between Armenia and Azerbaijan.

While issues like borders and trade routes are notable points of disagreement, a more immediate question seems to be where exactly Armenia and Azerbaijan should negotiate and who the mediators should be. Historically, Armenia and Azerbaijan negotiated under the auspices of the OSCE Minsk Group co-chaired by the U.S., France, and Russia in an attempt to resolve the Nagorno-Karabakh conflict. However, after the 2020 Nagorno-Karabakh conflict, Azerbaijani President Ilham Aliyev said that his country had “already said goodbye to the OSCE Minsk Group” and refused to carry out any further negotiations under that format. Aliyev claimed the group had not achieved the results Azerbaijan had wanted in previous rounds of negotiations. As a result of Azerbaijan’s refusal to continue under this format, multiple competing formats have emerged that are attempting to mediate between Armenia and Azerbaijan. The first format is the tripartite negotiations that have taken place between the leaders of Russia, Armenia, and Azerbaijan. This format has arguably been in existence since 1994 when Russia was able to mediate the end of the First Nagorno-Karabakh war. Most notably however, Russia was again able to mediate a ceasefire to the Second Nagorno-Karabakh war in 2020 and place its peacekeepers in the parts of Nagorno-Karabakh that remained under local Armenian control until the 2023 offensive. Russia has also hosted discussions on various levels since 2020 regarding the demarcation and delimitation of the Armenian-Azerbaijani border and the opening of trade links in the region. Russia has used its historical presence in the region, as both the territory that is now Armenia and Azerbaijan were part of the Russian Empire and later the Soviet Union, as a pretext to take a main role in mediating the conflict. It sees the South Caucasus as its “near abroad” or sphere of influence. It therefore wishes to maintain its power in the region and ensure any deals are settled in a way that is beneficial to Russia. 

The West has also begun to ramp up its efforts in hosting negotiations between Armenia and Azerbaijan. The United States, for example, has hosted discussions between various Armenian and Azerbaijani officials in the years after the 2020 war. The EU, at times with the participation of the leaders of France and Germany, have also hosted negotiations multiple times since 2020. These efforts have been seen by some analysts as an attempt to reduce Russian influence in the region and promote new ties between the South Caucasus and the West especially since the Russian invasion of Ukraine in February, 2022. However, since the beginning of October, Azerbaijan has refused to continue participating in talks hosted by the EU, France, and Germany, citing French agreement to supply defensive military equipment such as radar and short range surface to air missiles to Armenia. Azerbaijan however, is not the only country opposed to Western mediated negotiations. Russia, Türkiye, and Iran have, for differing reasons, also expressed their discontent over the Western format. This has caused them to create the so-called “3+3 format” which includes Russia, Türkiye, and Iran, as well as Armenia, Georgia (who has refused to participate), and Azerbaijan. The format has been utilized only twice, once in December 2021, and again in October 2023. Additionally, on October 27, 2023 negotiations were held between Armenia and Azerbaijan in the Georgian capital of Tbilisi in yet another new format. The differing formats have arguably complicated negotiations as it is increasingly unclear as to how compromises on different issues can be implemented as the different mediators have competing views on how they would like to see regional issues settled. 

The reopening of trade routes has been the thorniest issue between both Armenia and Azerbaijan, as well as for foreign mediators. Azerbaijan, Türkiye, and Russia, prefer to see a deal where Armenia has little to no control over a future railroad and highway—that would go through the province of Syunik in southern Armenia—and instead be guarded by servicemen of the Russian FSB. They have called this route the “Zangezur Corridor,” further implying it should not be under Armenian control. For Türkiye and Azerbaijan, who are strategic allies, this would give them the ability to conduct nearly unhindered trade more quickly without having to include Armenia as an equal partner. For Russia this would mean unobstructed and sanction-free access to Türkiye, full control over Armenia’s southern border, and a way to influence growing cooperation between Türkiye, Azerbaijan, and Central Asia. Armenia, however, is unequivocally against any such agreement. As recently as October 26, 2023, it has announced its readiness to reopen transport and trade routes on the condition that any routes through Armenia be subject to customs clearance, as goods moving from Armenia through Azerbaijan would be. Additionally, the EU, France, and Iran, for differing reasons, have also objected to any arrangement that would establish a “corridor” through Southern Armenia. The EU has emphasized that the restarting of trade should include the respect for the sovereignty of the country through which the trade route would go through. The EU’s opposition to such a “corridor” is also likely due to the desire to prevent an increase in Russian influence in the region as well as ensure the effective implementation of sanctions against Russia. Iran’s opposition to such a corridor is due to fears that Türkiye, through cooperation with Azerbaijan, will fully dominate Iran’s Northern borders and may even cut off any trade North towards Russia and Europe. While Azerbaijani officials have recently claimed that they “no longer find the project appealing,” many in Armenia are still distrustful of Azerbaijani intentions given the fact that Azerbaijan has carried out military operations on sovereign Armenian territory before and has made claims to large parts of the country. Additionally, Azerbaijan has not yet responded to Armenia’s most recent call to reopen transport links with the sovereignty of all countries respected. Armenia has also found it essential to open transport ties with Azerbaijan, as Turkiye at times has connected the opening of its own border with Armenia, to Armenia and Azerbaijan reaching an agreement. 

The reopening of trade connections is far from the only dispute. Due to the Nagorno-Karabakh conflict, Armenia and Azerbaijan have yet to demarcate their shared border. This is made more complicated by the fact that during the Soviet times, both Armenia and Azerbaijan had enclaves, or little islands of territory, in each other's countries. Armenia had one enclave in the middle of Azerbaijan’s northeast Gadabay district while Azerbaijan had two enclaves in Armenia’s Tavush province and one in Ararat province. While the Armenian and Azerbaijani enclaves combined are about the same size and an exchange deal is feasible, Azerbaijan has continuously demanded the return of their Soviet-era enclaves. This is quite problematic for Armenia as these enclaves sit on major highways leading to Southern Armenia and Iran both in the case of the enclave in the Ararat Province, and a highway leading to Georgia in the case of the enclaves in the Tavush Province. A return, especially without the construction of alternative roads, could pose a serious security and economic risk to Armenia as these highways are essential for trade and connectivity to the outside world. Azerbaijan has based these claims off of Soviet-era maps from 1975 which the sides have agreed to use as a basis for demarcation of their shared border. However, according to these same maps, Azerbaijan itself is in control of 215 square kilometers of Armenian territory in the provinces of Gegharkunik, Vayots Dzor, and Syunik, seized in military clashes with Armenia in 2021 and 2022. These same maps also show that Azerbaijan is in control of the Armenian enclave in the Gadabay district as well as some other areas in Armenia’s Tavush Province. Azerbaijan has yet to make any public guarantees of returning the mentioned territory to Armenia in any potential deal. Additionally, Azerbaijan has often referred to its border with Armenia as “conditional” and has referred to regions inside internationally recognized Armenia with Azerbaijani names, raising questions whether Azerbaijan is indeed serious about demarcating and recognizing its border with Armenia and ultimately reaching a peace deal.

While the Nagorno-Karabakh conflict has ended for the foreseeable future, the threats of a new conflict between Armenia and Azerbaijan have not. Azerbaijan is classified by freedom house to be “not free” with a freedom score out of 9/100. Armenia meanwhile is classified as “partly free” with a score of 54/100 and is rapidly improving its score, having gone up nearly 10 points since 2017. The Azerbaijani Government may continue to use conflict with Armenia as a means to distract the public from internal problems and use nationalism as a means to rally the public around the ruling Aliyev regime. Azerbaijan is also still holding numerous Armenian prisoners of war. These prisoners include those captured during the 2020 Nagorno-Karabakh War, intermittent clashes since the 2020 war, as well as many former Armenian leaders from Nagorno-Karabakh. Fears of a new conflict are not unfounded. According to Politico, on October 3, 2023, U.S. Secretary of State Anthony Blinken told a group of U.S. lawmakers that there was “a possibility that Azerbaijan would invade southern Armenia in the coming weeks.” While the State Department later denied that Secretary Blinken made such comments to lawmakers, many, especially in Armenia, fear that Azerbaijan is not interested in meaningful cooperation or negotiation and may continue pursuing its maximalist ambitions through military force.