CSIS: Armenia FM: Armenia's Evolving Relations with the US & Europe

[Chalian Meline]

CENTER FOR STRATEGIC
AND INTERNATIONAL STUDIES

STATESMEN'S FORUM:
`ARMENIA'S EVOLVING RELATIONS WITH
UNITED STATES, EUROPE'


GUEST SPEAKER:

VARTAN OSKANIAN

FOREIGN MINISTER, REPUBLIC OF ARMENIA


MODERATOR:
PATRICK CRONIN
DIRECTOR OF STUDIES,
SENIOR VICE PRESIDENT, CSIS

JUNE 14, 2004


Transcript by:
Federal News Service
Washington, D.C.



PATRICK CRONIN: Good morning, ladies and gentlemen. Welcome to CSIS and this
Statesmen's Forum to discuss Armenian foreign policy with the foreign
minister of Armenia, Vartan Oskanian. I'm Patrick Cronin. I'm the Director
of Studies and Senior Vice President, and I just want to offer a couple of
thoughts before I introduce the Foreign Minister.
First is simply to note the strategic and geographic centrality of Armenia.
It really is at the crossroads, and it's so strategically important it must
be very vexing for the foreign minister to try to balance all of the
interests of Armenia with its neighbors; obviously Armenia has a very close
strategic partnership with Russia, out of necessity if nothing else, and yet
Armenia is pursuing this 360-degree multidimensional policy for its
security.

Essentially since 9/11 in particular we've seen Armenian foreign policy move
much closer to NATO and the United States in a number of ways. It has
actually deployed peacekeepers to Kosovo and now it's preparing to send
non-combat support to Iraq. And at the same time there is this debate that
goes on, the question of whether Armenia is being left behind in the South
Caucasus with respect to Georgia and Azerbaijan, which continue to
consolidate their relations with the West.
There is a great interest as well, obviously, in Armenian-Turkish relations.
This transcends the pipeline, and also with Azerbaijan. And on the Nagorno
Karabagh dispute we haven't seen observable progress but maybe we'll hear an
update this morning that could be more promising about where this could
lead.

Economically I'd like to also say that we have seen progress with respect to
Armenia. I was actually in the Bush administration helping to design - in
fact, in charge of the Millennium Challenge Corporation, and the fact that
Armenia was one of the two former Soviet countries to be declared eligible
and qualify for the Millennium Challenge Account based on 16 transparent
indicators of good governance - political, economic, and social - speaks
well of the Armenian economy, and we certainly hope that that successful
economic growth and those reforms, continued commitment to freedom, will
continue in Armenia.

With just those few thoughts thrown out, I'd like to now briefly introduce
the foreign minister. He was educated in the Yerevan Polytechnic Institute
and then took a Master's degree at Harvard University, and also went to the
Fletcher School here in the United States. He joined the Foreign Ministry in
1992 as the deputy head of the Middle Eastern department and had a meteoric
rise from there. He's gone on to be the deputy foreign minister, and then
for the past seven years or so he has been the foreign minister. Minister
Oskanian is also someone who has been deeply in charge and involved in the
Armenian negotiations on the Nagorno Karabagh issue for the past decade. He
has spoken here once before and is looking forward especially to your
questions. He's going to speak for about 20 minutes and then he'd like to
hear your questions and exchange in some give and take before his busy
schedule will take him away to one meeting after another here in Washington.

So please join me in welcoming Minister Vartan Oskanian.
(Applause.)

VARTAN OSKANIAN: Thank you very much. I truly appreciate this opportunity to
speak to this audience this morning, and certainly I don't want to
monopolize the time here. I will speak as shortly as I can, something I
promise I can deliver - I won't put a time on it but I will try to be as
short as possible so that you will speak out your mind and ask questions
that interest you most, and I will try to entertain them.

But again, it's an honor to be here at CSIS again. This is my second time,
and I recall my first appearance here. That was almost four years ago, and
since then certainly the world has changed. Armenia has changed, our region
has changed, and new challenges have emerged.
The question that I usually get confronted with, both in Armenia and abroad
but particularly in Armenia, our own people ask me, and our diaspora people
when I travel throughout the world, is the following: what Armenia wants,
where it's heading, what's the vision of Armenia's leadership today for
Armenia? To respond to such questions you could either be philosophical and
try to provide all sorts of long answers going in history and try to project
a vision or you can simply be very simple and very direct, and so that's
what usually we try to be, and I personally try to be, and the answer
usually is the following: we want to create, establish, build a country in
Armenia which is democratic, prosperous, which lives in peace and security.
It's very simple and this could be true for every other country, and every
leader of any country certainly will wish the same for its own people and
country.

And the countries differ in the way they pursue this goal, and Armenia, in
this past 10, 12 years of its independence has certainly made a lot of
progress in all those three directions: democracy, economic development,
which eventually will lead to full prosperity, and also to reach peace and
stability not only in Armenia but also in the region. All those three areas
have a few things in common. One is that we've made progress in all those
three directions. Second, that in all those three directions our departure
point was very low. We began building democracy from communism. When the
Soviet Union collapsed there were no traditions and we basically began from
scratch, and anything you do from a zero base would appear pretty promising.
We understand the road to democracy will be very long, will be very
treacherous, but it is a promising road and Armenia is determined to
continue on that path.

The same can be said for our prosperity and economic development. The last
four years in particular have been very promising for Armenia. We've been
having double-digit growth in these past three years: in 2001, then we moved
to 12.3, and last year it was 14.9. And this year, almost halfway through,
we're close to 10 percent GDP growth, and traditionally the early months of
the year are the slowest in our economy, so if the trend continues we will
certainly have another double-digit growth in our economy. But again, we
began from a very, very low point of departure. We are not alone, though.
All the other Soviet Republics had similar collapses. They too began from a
zero point. Our advantage in all this has been that we've made serious
progress compared to our neighbors, and our departure point, as I said, was
more or less the same.

And thirdly, peace and security. Again, here, if we look back to 10 years we
began building peace and security in our region basically from a war.
Armenia's first days of independence, first years were marked by war with
Azerbaijan over the conflict of Nagorno Karabagh, and in 1994 we reached a
ceasefire agreement, and that's been holding in these past 10 years. This
year we celebrated the 10th anniversary of that ceasefire. Again, we do have
relative peace and stability, but again our departure point was too low.
When you're beginning building peace from war and you reach relative peace
and stability, that is something positive but certainly is not the end
result. We understand we have to demonstrate a lot of political will in the
coming months and years, hopefully only months so that we reach long-term
and permanent peace and stability in our region.

So in all those three directions, although we've made progress and we're
happy with it, but we understand that the challenge is not to sustain them
but to further deepen and strengthen. Democracy, for example, I think - and
I will always admit this - that we've only scratched the surface of
democracy in our country. We have a long way to go. Our membership in the
Council of Europe was very instrumental. The Council provided us with a
clear blueprint as where the country should be heading, what kind of
reforms, political reforms must implement, and since our application to that
organization we've made a lot of progress, and with full membership three
years ago we've assumed new responsibilities and obligations which we will
fulfill. And the end of 2004 is a clear deadline to complete the first phase
of those obligations, and I must say we're at 90 percent rate in terms of
fulfilling those, and we are pretty confident that we will be able to
complete them by the end of 2004.

This will not be the end. We will enter a new phase, a more difficult phase
where we will try to go deeper and deeper in democracy building. As I said,
we've only scratched the surface so far, and a more difficult task, and the
challenging task, is to go deeper in democracy building, and here we require
assistance from abroad. The United States has been extremely helpful and
instrumental in the democratic processes in Armenia. NDI is present,
National Democratic Institute, in Armenia, and they're bringing their
contribution to Armenia's democracy building, and the United States, through
its Millennium Challenge Account, is making Armenia more focused in areas
which would provide good governance, democracy building, rule of law, and
respect for human rights.

So all this and the Council of Europe's obligation certainly will make
Armenia to move faster in that direction. But there is one caveat here that
we need to be aware of, that after a certain point, once you do and complete
the easy phase of democracy building - and we've learned this through our
own experience - to move to the second phase will be much more challenging
and will require further political will. To be able to complete that
successfully, the country requires a constructive opposition. Without
partnership with your opposition domestically you will have a difficult time
to make that next move and to go deeper into democracy. I'm sure people who
are in this room have interest in our region and have been following events
in Armenia, our domestic developments, and you're aware of the recent
political problems we've been having with our opposition, and our
opposition, through its very aggressive attitude towards the authorities,
did not contribute to the democracy building because there's a lack of
partnership between government and opposition.

So we think, through the international organizations, through the NDI,
through the American government, through the Council of Europe we'll be able
to patch up the relationship between the opposition and the government, be
able to bring the opposition back to its normal course, back to parliament,
and to become a true partner with the government in those areas which are
critical for Armenia's democracy building.
So again, in this area - so I may move on to the economic and then peace and
security, to conclude, we're happy with the progress we've had but certainly
we have a long way to go, and this new phase, as I've said, will be much
more challenging and much more difficult and will require further political
will by the government and our opposition and our people so that we'll be
able to further deepen and strengthen democracy in Armenia.

Moving to the economy, which has been, as I said, very positive in terms of
its development in these past three years, puts us in a very challenging
situation. As we understand, to have double-digit growth over - two years of
double-digit growth - and just continue this will be extremely difficult.
You simply cannot sustain - there is no additional foreign direct
investment, there's no continued export growth, import substitution, and
continued economic reform in the country, and also peace and stability in
the region, in the country.

So these elements need to be there so that we'll be able to sustain economic
growth in Armenia, which will be extremely important so that we'll be able
to tackle the more problematic issues that we face, such as high poverty
rates in the country, high unemployment. These, we believe, are the two
macroeconomic evils that the country is facing because the other
macroeconomic fundamentals are pretty strong. Our currency has been stable
in this past six, seven years. Growth is high. Inflation is low. Our
reserves have been growing every year. We now have four months of import
reserves, which puts us in a very stable situation in terms of exchange
rates, and the growth is continuing, as I've said. So the challenge is to be
able to sustain this.

What were the reasons, as we now look back, for this kind of success that
Armenia had in this past three-four years were the reforms basically that
we've conducted in the country since '92. Those reforms began to yield their
positive results. One is the climate that we've created. The Wall Street
Journal and Heritage Foundation assessment of economic freedom of the
countries in the world puts Armenia at 44, rank at par with France. Indeed,
our economy is very liberal. Our laws are extremely liberal. And as I said,
we rank along with France and Singapore at 44 in economic liberalization.

Secondly, the continued flow of foreign and direct investment. This is
growing year over year, although the numbers are not very big - our economy
is small in general - but the trend is very positive, and we're seeing more
and more interest in Armenia's economy by foreign companies, other
countries, and our own diaspora of people. And with the Millennium Challenge
Account's further injection of cash to our budget on average - almost $100
to $150 million, even could be $200 (million) - if we could provide the
right programs and projects there will be additional injection of cash in
Armenia's economy, and that coupled with the investments we've been having
from our diaspora people - last year we had average $150 million - if that
continues, so the two coupled together will inject another $300 million in
Armenia's economy over the next four or five years, this will certainly
sustain the double-digit growth in Armenia's economy.

Finally, the third aspect, which is peace and stability and security in our
region, is extremely critical. Without it, the other two could not have been
achieved. Peace is essential. Security is essential. And Armenians in
general are extremely security conscious. Our history, our past has made us
extremely sensitive to security matters. We're extremely security conscious,
and being bordered by Turkey and Azerbaijan, with which we don't have any
diplomatic ties - with Azerbaijan we have the Nagorno Karabagh conflict -
puts us even in a more difficult situation in security terms. That's why in
this area we've been implementing multi-layer security measures based on our
policy of complementarity to provide as maximum security as possible for
Armenia.

Our security measures are indeed multi-layered. It begins with our bilateral
security cooperation with Russia. It goes through the collective security
agreement that we're a member of, along with other CIS, former Soviet
republics, six of them. It takes us through the CFE treaty and other
disarmament treaties, Europe and global. It takes us to our cooperation with
NATO, which is increasing and deepening every day, every month. Almost a
year ago we were way lagging behind of our two neighbors. We caught up with
them. Today Armenia is a member of SOFA, is a member of PARP, and we're
beginning our individual partnership program now with NATO, and that puts us
at par with our two neighbors, which we believe is extremely important when
it comes to NATO cooperation so that no dividing lines will be created in
our region. Just imagine if our neighbors will move way ahead in terms of
their cooperation with NATO and Armenia will stay behind. That will create
this balance in the region, even will lead to some sort of a dividing line,
something that we don't want to happen.

So our moves forward on this NATO matter have to be in tandem, and we
believe all three of us now are moving in unison, and we hope it will
continue in the future. We also appointed a full ambassador to NATO,
something we didn't have before. Our ambassador at the European Union and
the bilateral covers Belgium, the Netherlands, and Luxembourg was also
covering NATO. Now we have a full separate ambassador that covers NATO for
Armenia, and we're looking very much forward to take part at the foreign
minister's level, to the NATO summit in Istanbul.

The other layer is our bilateral cooperation, along with the one that we
have with Russia. Because of our policy of complementarity, it allows us
also to have bilateral military cooperation with other countries, and the
two with which we have good cooperation are Greece and the United States.
With the United States, the cooperation began only recently. Because of the
908 restriction, the administration were not in a position to provide any
military assistance, neither to Azerbaijan or Armenia. With the waiver of
907, now we have the opportunity to have military cooperation with the
United States, and that is extremely helpful. It comes to add to the layers
that we already had, and all taken together through complementarity indeed
provides a strong security shield for Armenia in a very delicate and
problematic region.

Our region is problematic for Armenia because of two basic reasons. One is
the consequence of the other. The source of it is the Nagorno Karabagh
conflict, which has also brought Turkey on board because of its unequivocal
support and solidarity to Azerbaijan, with total disregard of the
geostrategic vision that they could have had beginning '91, '92 when Armenia
became independent. With total rejection of that vision they focused on
their ethnic solidarity with Azerbaijan and adopted a very uneven and
one-sided policy to Nagorno Karabagh and towards Armenia. And since then, no
movement has been registered in Turkish-Armenian relations despite the fact
that Armenia has never and will never set any condition for normalizing ties
with Turkey, despite the fact that Armenia has more reasons to set
conditions for normalizing relations with Turkey. But because of our
strategic vision, because of our willingness to have a peaceful region and
good neighborly ties with all our neighbors, we've never put any conditions
before Turkey to normalizing ties, but we regret that Turkey on this issue
has not met us halfway and they continue to make the Nagorno Karabagh
conflict, which is a conflict that Armenia has with a third country, as a
precondition for normalizing relations with Armenia.
We've been working on these relations. Last year I had three separate
meetings with my counterpart from Turkey. The first meeting was very
promising but since then we've basically backpedaled because Turkey came to
realize that their intentions are one thing but their capabilities are
another. And they are indeed hostage to Azerbaijani pressure when it comes
to normalizing relations with Armenia. When I began to talk with Abdullah
Gul, he said, we certainly want to separate the two together and we move
forward with our bilateral ties. In the second meeting he said, you know
what, that linkage is there but not much weight should be put on it. Let's
continue to work on our bilaterals. In our third meeting he simply
apologized and said, no, we can't do much because that issue is there.
Unless Armenia does something about it we cannot do much in our bilaterals.

So that's where - back to point zero, and at this moment, no progress has
been registered, but we're still hopeful that we can do something about
this. With Turkey's membership possibilities to the European Union, with the
United States' insistence that Turkey does actually something and open the
border - begin with the railroad opening probably and move on to other
issues.
So we're still hopeful and will continue to work on this without losing hope
that eventually we'll be able to make progress in our bilateral ties.
Indeed, we believe Turkey has a responsibility and obligation to change its
policy towards Armenia. Eventually Turkey is the bridge for the Caucasus to
NATO and the European Union.

The three countries - the Caucasus - have a border with Turkey: Azerbaijan,
a very small one. Through Nakhichevan it's only eight, nine kilometers. We
have a long border with them. Georgia has a long border. And Turkey indeed
is the only country - NATO and future European Union with which the three
Caucasus countries have borders. We are a member of the Partnership for
Peace in NATO. We're a member of the Euro-Atlantic Partnership Council.
Turkey is a member. When we became a member in these two organizations,
which are NATO organizations, we thought, Turkey will take leadership in
here and just bring Armenia tracked into these programs with its help,
serving as a bridge between Turkey and NATO. The same obligation now Turkey
should feel - not that they felt in the first case, they did not, but the EU
processes should be additional burden on Turkey to feel that obligation that
now they have dual obligation, not only NATO but also the European Union.
Everyone expects that Turkey will get session negotiations right early next
year.

Armenia, Georgia, and Azerbaijan only last month were declared as three
countries who will be included in the European Union's New Neighborhood
initiative, which is a step forward in that direction and future membership,
Turkey being ahead of us with the accession negotiation rights should feel
the obligation to serve as a bridge for the three Caucasus countries as
members of the New Neighborhood policy. Pay attention to the word
`neighborhood.' The only neighborhood possibility we have is our border with
Turkey. No other Caucasus country has any other border with any other EU or
potential EU member state. Turkey is the only one, and they need to feel
that responsibility that they've got to change their policy towards Armenia,
engage Armenia, and bring them in Turkey is now being asked by the European
Union also to recognize the Armenian genocide. Recently, at the very highest
level, the Socialist Party chairman in France made that declaration, and now
there are repeated calls on Turkey that they demonstrate that political
will, come to terms with their past and history, and get over with this
issue.

Speaking of genocide recognition I should - so that I do not contradict my
previous words - that recognition is not a precondition from the Armenian
side. Recognition issue is an agenda item. We will pursue that with other
countries in international organizations, even with Turkey, but we haven't,
and we will not in the future, make that a precondition for normalizing ties
with Turkey. In other words, if Turkey decides tomorrow to normalize
relations with Armenia and the genocide has not been recognized, that will
not be an obstacle for Armenia to go ahead with normalization. This is one
point that I'm very careful to make very clear because there are all sorts
of interpretation, even from Armenia, that we on one hand say we have no
conditions; on the other hand we raise the genocide issue. We don't see a
contradiction here. The genocide issue is our moral obligation to raise, to
have it on our foreign policy agenda, but having it on the agenda and making
it a precondition, these are two separate things. So it is no condition and
we are willing to move forward in our bilaterals with Turkey.
Now this brings me to the Nagorno Karabagh conflict, which is an important
component in that last dimension, which is the peace and stability. We can't
have long-term permanent peace and stability in the Caucasus in our region
between Armenia, Azerbaijan, without resolving the Nagorno Karabagh
conflict. This is very clear, everyone understands it, and we really work
hard to reach an agreement on this issue. We came very close with Ilham
Aliyev's father, Heydar Aliyev a year and a half ago, two years ago. At Key
West a document was produced which basically provided a package agreement
for the Nagorno Karabagh conflict. It took a lot of courage by both
presidents, by President Aliyev and President Kocharian, to agree to the
terms of that agreement, because both sides were making serious compromises,
but that provided a serious framework for resolution of the conflict.

Unfortunately, now, Ilham Aliyev's situation has changed. Ilham Aliyev now
is saying he cannot continue on the same path that his father had embarked
on, and the conditions and the terms that are included in the Key West
document cannot be acceptable. The word `acceptable,' I would use it with
some reservation because that will mean - its not that it's not acceptable
but it's not do-able given the political conditions that the new president
is in after his elections. He's a new president, he's young, he doesn't have
the moral authority within the country that his father had, and indeed it
will be extremely difficult for him to fulfill the terms and obligations of
that agreement. We understand that. That's why we think we've got to give
time to the new leadership in Azerbaijan, work with them, and try to even
reach a compromise agreement, even some other reflection or interpretation
of the Key West document. Does it have to be the exact wording? It doesn't
have to be the same letter and the spirit, but it could be a variation of
what we had as long as we stick to the basic principles.

Unfortunately, now, Azerbaijan policy differs greatly from Heydar Aliyev's
policy. Today, Azerbaijan basically is trying to focus on the consequences
of the conflict rather than on the cause of the conflict. Because the
conflict has two parts: the cause of it, which is the status of Nagorno
Karabagh. The whole thing started because the people of Nagorno Karabagh,
during the collapse of the Soviet Union, opted for self-determination. They
wanted to have their status changed from autonomy to one of something else,
that they will have more say in their lives and future. Azerbaijan needed to
reject that call and they suppressed the peaceful demonstrations.

So the cause of the problem is the status of Nagorno Karabagh but that issue
has its consequences because the suppression by Azerbaijan in 1992 of those
peaceful calls led to military conflict, which eventually brought about some
consequences, such as territories that are now under Armenian control. It
generated a lot of refugees from both sides, and other negative consequences
that eventually need to be addressed. Azerbaijan's approach is to focus on
the consequences, ignore the cause, and try to unravel them. We Armenians
also would love to unravel those consequences, but in a different way. We
would have loved to go back in time and undo the pain and suffering. We
would have liked that Azerbaijan would have not relinquished, yet even
victimized its own population. We would have liked to see that Azerbaijan
would not try to provide a military solution to a political problem. And
still today we would like to prefer that the Azerbaijani rhetoric will be
less militant, will be more realistic, forward looking and more hopeful.
But it is not. Their insistence that those territories that are Armenian
controlled be returned in exchange for beginning of talks for a possible
high autonomy within Azerbaijan doesn't really make much sense because that
will simply take us to 1988 status quo ante, as if nothing has happened in
the intervening years, as if no war was fought and won, as if no generation
of new Armenians were born oblivious to Azerbaijani claims, as if the
Nagorno Karabagh right - political, historic - and realities on the ground
can be ignored. These things simply cannot be ignored. The focus today
should be on the status of Nagorno Karabagh. We've got to address that.

Certainly those who've heard the representation of the position from both
sides will come to the conclusion, oh, boy, the views are so different, so
divergent that there's absolutely no hope that any progress can be made. Not
at all. We think we can make progress despite the divergences of our views
and positions because there's always a middle way. There is a compromise
solution. The word `compromise' we'll hear from Armenia, but we never hear,
especially recently, from the Azerbaijani side. But there is a compromise
solution. We think we can agree on a timetable through which all those
consequences, those side issues can be addressed, meanwhile providing the
people of Nagorno Karabagh the opportunity to decide their own future by
using internationally accepted norms and instruments. I don't want to open
up exactly what this entails, but I think I tried to explain it as what kind
of an approach can be adopted. And during our talks, which are now two-track
talks - one at presidents' level, one at foreign ministers' level - we are
addressing these kinds of issues: how to try to reconcile these two views
when you insist on return of territories, the other side insists on status,
we think the concoction of two could provide a new opportunity, can produce
some new elements which would serve as the hinge around which this whole
conflict can be resolved.
There's one other element that both sides need to be cognizant of and that
is our future goal, future aim to be part of Europe, to become more
integrated in European structures. I think this idea - and with clear
intention by Armenia, Azerbaijan and Georgia as we do not hide it that, yes,
indeed, we would like to be a member of the European Union sometime down the
road as long as it takes, but that's our strategic vision. We're moving in
that direction. If this is true for all three countries, we've got to try to
put these conflicts in that broader context: try to look at borders not as
something that will provide political division but simply will define our
cultures and identities, not as borders that will serve as an obstacle for
cooperation in the future. If that context and understanding is embedded in
our thinking, we may begin to look at issues differently, and that certainly
will provide the broader context within which we can address differences and
reach a solution.

I think I went over the time that I thought I would speak. Here I will
conclude and I'll be happy to entertain your questions. Thank you.
(Applause.)

DR. CRONIN: Minister, thank you very much for that outstanding rundown - 30
minutes, no notes - talking about the vision for Armenia, about democracy
building, trying to integrate an effective opposition, economic growth,
sustaining it not just for the growth but for the reforms that have produced
that growth, and with the Millennium Challenge Account prospects out there,
maybe that would be something that would lead to further reforms within
Armenia to be a model, and then the peace and security very much hinging on
this multi-layered set of relations, especially the most tenuous relations
over Nagorno Karabagh but also important relations with Turkey.

The minister has agreed to take some questions. We have Cory Welt, and other
CSIS staff, standing by to pick up cards on which questions should be
written. Our Russia-Eurasia program has just done an outstanding job working
with our External Affairs Office today to produce this program.

Cory, are you going to bring up some questions or -

Minister, the first question I have here is a comment on the specific
consequences of Georgia's `rose revolution' for Armenia and the region -
this of course seen as an anti-corruption revolution. What impact might that
have on the region, and any impact or consequences for Armenia?

MR. OSKANIAN: Well, the consequences I can think of are all positive, but
still, we have to give some time to see how things will evolve in Georgia,
but it seems like as we follow very closely the developments in Georgia it
looks like it's moving in the right direction, especially as far as Armenia
is concerned. The peaceful conclusion of the conflict with Ajaria was
extremely good news for Armenia, and those two days where the communications
were disrupted between Ajaria and Georgia and between Ajaria and Armenia we
had close to 120 trucks, trailers and cargo trailers just sitting at the
port in Ajaria and we couldn't bring them into Armenia. This is a clear
testimony and indication at how linked Armenia is with Georgia, with the two
Black Sea ports, and how important is Georgia's stability for Armenia's
economy and for Armenia's stability. So if the trend continues in this
positive direction and the central government continues to enlarge and
broaden its control over its territory, I think that will work for the
benefit of the region, for the benefit of Armenia and Azerbaijan and the
rest of the countries.

Its implications on Armenia, yes it had some, because the change of power -
very abrupt change of power in Georgia roused some interest and got our
opposition itself excited about changing presidents, and they began to
think, if the Georgians can do it, why can't we? And they suddenly recalled
and remembered the flaws and irregularities that we had during our own
elections, although there was no comparison between our election situation
and Georgia's, although there was no comparison in the assessment and
evaluation of international organizations as observers of Armenia's
situation and Georgia's, and despite there is no comparison between the
strength of government structure, the economic situation, the social
conditions. Nevertheless, our opposition got very excited and they thought
they could replicate the rose revolution in Armenia, and they began to act
on it but it lost its excitement very soon and the wind was taken out of the
sail when they realized that they don't have large public support to achieve
that goal.

So that was some of the impact that it had on Armenia, which created a
semblance of instability, but thanks to our economic growth and strong
government structures, and also the public understanding of the real
situation in Armenia, that threat has diminished very quickly.
DR. CRONIN: Minister, this question very much follows on your answer, and it
deals with your vision for constructive political opposition and what is the
likelihood of that happening here say before the next election?

MR. OSKANIAN: Well, eventually it will happen. The opposition will have no
choice but to return to parliament. The partnership that I emphasized is
extremely important because if you do it without the opposition I don't
think you'll go in the right direction. When you have an opposition which is
extremely aggressive and not willing to participate, again, it will be very
harmful to the processes. With a constructive opposition I think we can move
much faster in democracy.
Now, the question that you may ask, how would you expect an opposition which
is a minority in the parliament to have its say in democracy-building
matters, in the army, and parliament when the laws need to be adopted, you
know, debated and what have you. Well, our coalition parties, which have a
majority in the parliament, recently, as a way out of this crisis, offered
the opposition veto rights over extremely important and critical issues in
the parliament.

Three areas: one, reform of election law. They've given - despite the fact
that they only have 22 members in the parliament, they've given veto rights
on this issue. Without opposition agreement on the issues of reform of our
election code, no change can be made. This will force the majority to work
very closely in partnership with the opposition to make the necessary
changes that will benefit Armenia, that will provide the legal framework for
better and fairer elections in 2007 and 2008.

The second area where we've given veto rights was the overall constitutional
reform. Armenia now having implementing its constitution since '95, has
detected a lot of flaws and shortcomings in our constitution, which we want
to change. With the new changes, the balance of power between the different
branches will be much more balanced. The president will be losing, with
these changes, some authority. The parliament will gain and the government
will gain some, so it will be much more balanced. And the opposition needs
to be engaged in this, and they were given again veto rights on all
constitutional reform matters.

The third area was all the laws pertaining to the fight against corruption.
The opposition will also have veto rights.

So those offers are still on the table, still outstanding. The opposition I
think is now trying to position itself - is playing hardball and they
haven't accepted - they have other conditions, but eventually they will
realize that they need to be engaged for the sake of the country, and that
will happen.

So the short answer is that, yes, it will happen within the next six, seven
months. That's my belief. They will return and will begin work on these
matters as equals with the majority in the parliament so that we'll be able
to make advances in these areas.

DR. CRONIN: Minister, there are a couple of questions here I would like to
combine regarding relations with Turkey. One of them deals with the Armenian
official position on territorial claims on Turkey or the recognizing of
mutual borders between Turkey and Armenia, and a related question really is
what is the biggest obstacle to reconciliation with Turkey inside Armenia?

MR. OSKANIAN: The greatest obstacle within -

DR. CRONIN: Within Armenia is there a domestic calculus here that -

MR. OSKANIAN: You know, the border recognition issue is an interesting
question. The best way to approach this issue is not talk about it -- don't
ask, don't tell type of policy. Armenia is a member of the United Nations.
Turkey is a member of the United Nations. We're both members of the OSCE and
the charters of these organizations are very clear on border matters. When
you're a member of those organizations with certain borders that are
recognized by the United Nations and one or the other side has not stated
otherwise, then the de facto situation holds. Why Turkey would like to ask
Armenia if they have not asked their other neighbors when they establish
diplomatic ties that Armenia makes an explicit statement that we don't have
territorial claims from Turkey - I don't think this is a fair approach to
this issue. That needs not to be discussed. Secondly, if a diplomatic
relations protocol is signed, all those issues are addressed within that
protocol. There are standard texts for establishing diplomatic ties, where
all those border matters, sovereignty, non-use of force, respect of rights,
what have you, are all addressed in that diplomatic protocol.

So Turkey raising this issue I think is one of their ways to create
additional obstacles, not to move forward in their bilateral ties with
Armenia. We understand now the Karabagh part - we do not accept it but we
understand it could be a legitimate issue. But again, it's a third country
issue and we would prefer that Turkey focuses on bilateral matters rather
than raising this issue concerning a third country, in this case Azerbaijan.

The major obstacle in Armenia? Well, we have different political parties in
Armenia with different political agendas, different platforms, different
approaches with regard to different issues. Each has the right to express
their views, but the foreign policy prerogative is the president's.
Constitutionally, the president is mandated to devise and implement through
the foreign ministry Armenia's foreign policy. We do not have any obstacle
for normalization - as a government - for normalization of our relations
with Turkey: opening the border, signing diplomatic relations protocol, and
just move on, look to the future - not forgetting the past but look for the
future. There is the European integration process, there is NATO, all sorts
of things that are happening, developing in our region and Turkey needs to
provide the leadership, given its size, its bigger population, its economic
strength. Turkey has to take the lead in these matters and we hope
eventually we will be able to achieve that.

So the short answer is as far as the government and the public at large,
there are no serious obstacles for normalizing relations with Turkey.

DR. CRONIN: Mr. Oskanian, we have a couple of questions about Nagorno
Karabagh. One of them is trying to press you a bit further to elaborate on
your sense of optimism that you expressed, including meeting with your Azeri
counterpart. Another one is citing history of the `90s when there was
movement toward an agreement and it led to the resignation - the departure
of the president. Is that something that could be in the offing if it didn't
have the popular support, if an agreement strayed from principles?

MR. OSKANIAN: Well, that was a very good question, a very knowledgeable one.
The one that led to President Ter-Petrossian's resignation was not a
movement toward solution. That was a movement toward a cosmetic patch-up of
the situation in hand. And when I spoke about Azerbaijan's insistence on
return of territories with the promise of beginning negotiations on future
status within Azerbaijan, that was being debated in '97, '98 in Armenia,
which led eventually to President Ter-Petrossian's resignation.

But one point I want to make clear -- there is total misunderstanding on
this issue; I hope eventually President Ter-Petrossian will write his
memoirs and he'll speak up on this issue because he alone can say what
exactly was the reason behind his resignation. But my understanding is
Nagorno Karabagh was only one issue there, just a small part or big part, I
don't know, but that was not the only reason that Ter-Petrossian resigned.
But again, if we just assume for the sake of argument that he resigned over
the Karabagh issue, again, to formulate the question correctly, that
movement was not leading to any solution. That was leading to a patch-up
that would have created disbalance in the region, would have taken us to the
1988 status quo ante and that would have created additional problems for the
future.

Had we moved on that in 1998, I'm confident that today we'd have been in a
much more difficult situation on the Nagorno Karabagh issue. Things would
have changed and the possibility for the resumption of war would have been
much higher at this moment.

DR. CRONIN: And your sense of optimism?

MR. OSKANIAN: And my sense of optimism is basically the content of the
discussions that we're having with our Azerbaijani counterparts, with the
presence of the three co-chair countries -- the United States, Russia, and
France -- and we're trying to reconcile those differences. Again, so that
you understand this clearly, the positions are the following: give
territories - we'll talk about status. We're saying no. Let's introduce,
produce clarity in the status issue; then we're willing to address the
territory issues.

Now, the way to bring these two together is the one that I tried to
formulate very diplomatically without mentioning the specific instruments.
The way I described it was the following: that we think we can agree on a
timetable that will address the consequences of the Nagorno Karabagh
conflict, the military side of it -- territories, refugees, what have you -
and at the same time, with a timeframe difference possibly, allow the people
of Nagorno Karabagh to decide its own fate through instruments that are
acceptable internationally. What that instrument will be, that is subject
for negotiations and that's what we're trying to do during our discussions,
during our talks at two different levels.

DR. CRONIN: Minister, we have a couple of questions regarding Armenia's
relations with Russia and also with the United States. First, regarding the
United States-Armenia security cooperation, what actually has been agreed to
and where is that security relationship heading in your opinion, and then
how does that relate to Armenia's ties to Russia? So what is the plan that
you have to combine the cooperation with Russia and the U.S.? What are the
roles respectively?

MR. OSKANIAN: Let me begin from the end. We do not see a contradiction
between our cooperation with the United States and Russia. With Russia of
course it's much deeper. There is no comparison. We hope one day we'll be
able to bring the American cooperation at par with Russia. I don't rule that
out, but at this moment there's no comparison. With Russia it's much deeper
on security matters; we have bilateral agreements. With the United States
it's just beginning. We've sent, as you mentioned in your opening remarks,
sent a peacekeeping force to Kosovo. We're preparing to send a noncombatant
contingent to Iraq. And also we're negotiating with the United States that
some training can be provided to Armenian companies or battalions in
preparation for future peacekeeping throughout the world.

Our cooperation began with the United States on military matters during this
fight against terrorism. Armenia is a partner with the United States in this
fight and we are ready to make our very modest means available to fight this
problem, along with the international community. We're extremely satisfied
and happy to see a U.N. resolution, Security Council resolution on Iraq,
which will broaden the scope of engagement by different countries, and
Armenia is certainly willing to take part in that.

Again, going back to the first part of my response, there is no
contradiction between our cooperation with the U.S. and Russia because the
policy that we've been adopting - employing in this past six years, a policy
of complementarity, allows us to do that. The complementarity policy is not
a policy of balance. A policy of balance requires that what you do with one
try to do equally the same with the other so that you create a balance.
Complementarity gives us the opportunity to have an asymmetrical relation
with two different powers. We can do eighty percent with one and complement
your security needs with the twenty that you do with the other side, and the
two together will add up to one hundred and provide a better shield for
Armenia. That's the essence of complementarity, and it's worked for Armenia
and we will continue to employ it in the future as long as the contradiction
and the differences between the United States and Russia have not gone deep
enough to put us in a position where we have to choose between one or the
other. We're not in a similar situation. I don't think that will happen
again. That is a Cold War situation, and there's no way that we'll revert
back to a similar situation that countries like Armenia, Georgia, Azerbaijan
and others will look at the international situation and say, oh, no, if you
do this you can't do the other side. We're not there and I don't think we'll
ever get to that position.

DR. CRONIN: Minister, could you outline Armenia's cooperation with Iran?

MR. OSKANIAN: Well, our cooperation with Iran economically is very normal.
We trade with them. Iran is our third or fourth trade partner. The borders
are open, unlike Turkey's. So we make more extensive use of Iran's territory
to transit through the Persian Gulf and communicate with the rest of the
world. Iran is a big market - 60 million population. We have extensive trade
with them although there are some limitations - tariffs; quotas; they're not
members of the World Trade Organization, Armenia is; our market is more open
to their products than theirs to ours -- but nevertheless, as we go on we're
making progress.

Now we've begun cooperation also on energy matters. A pipeline hopefully,
gas pipeline, will be built soon. We concluded the agreement. We understand
this may put us at odds with the United States because of ILSA, the
Iran-Libya Sanction Act, but we will work with the United States to see how
we can fit it so that we do not contradict the term of that resolution. That
issue will be one of the topics that I will discuss during my talks today
and tomorrow with government officials.

So we will have also energy cooperation with Iran, which gives us additional
energy security, which will diversify the energy sources that enter into
Armenia. The only gas pipeline that we sit on is the one that comes from
Russia, carrying Turkmenistani gas, passing through Georgia and entering
Armenia. That is extremely unreliable, very unsecure, and given the past
history, in the early `90s was being blown up every other day, causing havoc
in our energy sector at that time made us learn our lesson. So we would like
to see it diversified because also eventually the closure of nuclear power
plants is also on our agenda.

So in between we've got to find enough substitute energy sources so that we
can, with peace of mind, can close the power plant and have enough energy
that will compensate the loss that we will incur from the closing of the
power plant.

DR. CRONIN: Minster, the next question is regarding the European Union. How
will the decision to start preparing for the inclusion of Armenia,
Azerbaijan, and Georgia in the EU's European Neighborhood policy affect the
EU's involvement in the region's frozen conflicts, and how does the Armenian
government view that involvement?

MR. OSKANIAN: Well, we view this very positively. We like to see the
European Union more engaged in the Caucasian matters so that they bring
their contribution to the resolution of the conflict. And there are two ways
to do it. When we say that we would like to see the EU more involved, it
doesn't mean that they will be hands-on mediators and substitute the Minsk
Group. Not at all. They can complement the Minsk Group work because the
Minsk Group has done a wonderful job. They have not exhausted their
potential. They will continue to work. And I think this conflict eventually
will be resolved with the help of the Minsk Group. That has not been
exhausted by any means.

But the European Union can do complementary work in two ways. One is to
engage the three Caucasus countries in regional cooperation from the
European Union perspective. As we have now become members of the New
Neighborhood Initiative, that will require additional obligations from all
three countries if we are serious about our integration. So we've got to
begin making our moves from now. You can't wait 24 years and do nothing and
the 25th become a member of the EU. If you have the goal of becoming an EU
member in 25 years, that means you have to make serious progress from now on
to the end of that period every year, every month, every day. So we've got
to work on it.

So when the EU puts pressure on the three Caucasus countries to engage in
regional cooperation -- because the EU looks at the Caucasus as one unit --
that's our advantage. They look at the Caucasus as one unit, they approach
us as one unit, and they would like to see the three countries cooperate as
extensively as possible. So that will help us to create a more favorable
environment within which we can address the more problematic issues such as
the Nagorno Karabagh conflict. The Georgians can view the Abkhaz issue, the
Ossetian issue, what have you.

The other thing that the EU would do is more long term, and that is the
visionary thing. By giving the signals that, yes, the three Caucasus
countries could become members of the European Union down the road if they
meet the necessary requirements.

One of them is having full peace in their region, having resolved the
conflicts. And I made a reference to this point at the end of my remarks
when I said, this EU membership possibility provides a new context, a
broader context within which we can address the Nagorno Karabagh conflict,
that borders can be viewed differently had there not been the potential for
the European member.

The Cyprus question, you know, it's a double-edged sword. In one way you
say, had there not been the Cyprus membership possibility, the Northern
Cyprus people would have not voted yes to that plan. So that gave them a
vision, but the Greek Cypriots voted no. So that can work both ways. But in
my view it was the EU membership prospects that really allowed the progress,
the kind that they made on this issue. So the same can work also for Armenia
and Azerbaijan if that prospect is made clear: the EU made the first step
declaring that, yes, we are part of the initiative of New Neighborhood. If
we move on to more serious steps, then we will look more seriously to this
and that context will be provided within which the Karabagh issue can be
addressed.

DR. CRONIN: So the next question notes that it's not only NATO and the
European Union that are interested in security cooperation in Europe; there
is also the OSCE, for instance. And the question is regarding whether the
OSCE has a role in the future, especially in resolving or helping to solve
Nagorno Karabagh or in relations with Turkey.

MR. OSKANIAN: Well, OSCE does two things for security. One is negotiates the
Nagorno Karabagh conflict, which is extremely important. The other one is
the CFE treaty. It's a visionary thing. It's been extremely helpful -- sets
corridors for the member states for armaments and personnel. There's an
inspection mechanism. Even Turkey can send inspection into Armenia; Armenia
can send to Turkey or vice versa. So this provides balance and transparency
in the region. So the OSCE indeed plays a very positive role on security
matters in our region and we hope it will continue.

Turkey is a member of the OSCE. They aspire now to become chairman in office
in 2007. Decisions at the OSCE are made by consensus. This puts us in an
extremely difficult situation, and that decision has to be made this year
during the ministerial meeting towards the end of this year, because there
is the troika mechanism. The next year chairmanship we know who it is, the
next year is already clear, so this year we need to decide who will be
chairman in office of OSCE in 2007. And Turkey is the only candidate, and
Armenia has the veto power, which we will use, because Turkey has not risen
to the occasion. We cannot allow a country to be chairman in office with
which we don't have diplomatic ties. We cannot allow a country to be
chairman in office of OSCE which negotiates the Nagorno Karabagh conflict,
and the chairman has certain rights and privileges that can be used against
Armenia. And given their policy in these past 12 years towards the region,
which has been extremely unbalanced, and given their unequivocal support and
solidarity toward Azerbaijan and one-sided policy toward Nagorno Karabagh,
Armenia simply - even if we want - cannot afford to have, for a whole year,
Turkey as a chairman in office.

So these kind of problems rise because Turkey has not risen to the occasion
and has not given us the chance to look at Turkey differently. And this, as
I said, puts us under a lot of pressure by different countries so that we
accept Turkey as chairman in office, but it will be an extremely difficult
political decision for Armenia.

DR. CRONIN: So do you have time to answer a question on the Millennium
Challenge Account? Of course this is an account that was set up by the U.S.
government to help promote economic growth in developing countries that are
committed to good governance. I know Millennium Challenge Corporation
officials are right now in the throes of looking at all these countries, and
I think a very distinguished group just came back from Armenia. Obviously
it's a long-term process, a building and inclusive process, but nonetheless,
this is a question regarding your government and what - since the
development agenda is hardly new, are there specific projects or programs or
ideas in Armenia that you're thinking about or that others in the government
are thinking about that would be particularly helpful to help Armenia
sustain economic growth and increase productivity?

MR. OSKANIAN: Yes, that will be the whole purpose of it. I know all the
money will go towards alleviating and reducing poverty in Armenia. That will
be the key element there and to all the programs and projects the government
of Armenia will present to be financed by the MCA will be within that realm.

Speaking of the Millennium Challenge Account, I'll use this opportunity
since - you being one of the people who devise that - we think that was a
visionary thing to do for countries like Armenia, and I really would like to
use this opportunity to thank the U.S. government, the people who make the
decision. Well, this is a program for needy countries. You have to be a poor
country to be eligible. That's fine. We'll take that label. Yes indeed,
we're poor. But we think our future is bright so we've got to work on it.
But there were 100 countries who were poor and listed as potential MCA
recipients. Only 16 were chosen, and the criteria that was set by the United
States was extremely strict. One was good governance, the other one was
economic liberalization, the third one was investment in human capital.

So Americans looked at these countries, 100 of them. They've come with the
16 that had fulfilled this requirement. That means we are a poor country but
we are a developing country and we are developing in the right direction.
That is the most important thing. And the good thing about the MCA is that
the very money that has been made available to us because of those criteria
must be spent on those very issues so that we further deepen, strengthen,
and sustain them.

So we think, again, this will be something that will greatly contribute to
Armenia's economic development, and we're extremely happy and delighted to
work with the members of the board. They were in Armenia. We've been
devising our plans. I'm not personally involved - going back to our question
to tell exactly what kind of programs we're presenting. Those have not been
concluded and finalized yet. But again, those will be programs that will be
directed towards poverty reduction in Armenia.

DR. CRONIN: Unfortunately we're out of time with this particular Statesmen's
Forum, but, Minister, I hope we will be back with you yet a third time if
you have time when you're here in Washington again.

Please join me in thanking the minister for an outstanding presentation this
morning, and on behalf of CSIS, the Office of External Affairs, the Eurasia
Program, we really appreciate your remarks this morning.

MR. OSKANIAN: And thanks for the opportunity.

(Applause.)

(END)