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ARMENIAN GROWTH RAISES QUESTIONS ABOUT EX-PRESIDENT'S GLOOMY FORECAST
Emil Danielyan
EurasiaNet, NY
Aug. 16, 2006
Levon Ter-Petrosian, Armenia's reclusive former president, has
disclosed new details about his bitter dispute with key hard-line
members of his cabinet that forced him to step down in February 1998.
The newly released transcript of Ter-Petrosian's speech at a pivotal
meeting of the former Armenian leadership's top decision-making body
provides insight into the former president's belief that Armenia's
economic development is impossible without a settlement of the
Nagorno-Karabakh conflict.
Ter-Petrosian's opponents in 1998, including incumbent President
Robert Kocharian, took a diametrically opposite view. And they now
say that time has proved Ter-Petrosian wrong, pointing to robust
economic growth registered by Armenia in the past eight-plus years.
The Armenian economy is on track to expand at a double-digit rate
for a sixth consecutive year despite the unresolved conflict, a
performance that has repeatedly drawn praise from Western lending
institutions. [For background see the Eurasia Insight archive].
Ter-Petrosian allies insist, however, that only a small share of
Armenians have benefited from the economic improvements. And they
maintain that growth is not sustainable without a normalization of
relations with neighboring Azerbaijan and Turkey.
The power struggle that toppled Ter-Petrosian was sparked in the
summer 1997 by an international peace plan calling for a gradual
settlement of the Karabakh dispute. The plan, accepted by Azerbaijan,
would indefinitely delay agreement on Karabakh's status until after
the return of Armenian-occupied Azerbaijani territories surrounding
Karabakh, and the reopening of the Armenian-Azerbaijani border.
American, French and Russian mediators co-heading the OSCE Minsk
Group argued that these confidence-building measures would facilitate
a future deal on the territory's status.
Ter-Petrosian fully accepted this approach, laying out his vision
for Karabakh peace during a September 1997 news conference and a
subsequent newspaper article. Armenians, he wrote, should settle for
the proposed compromise because they "did not win a war, but a battle"
and because "the international community will not tolerate the status
quo for long." But other key policymakers, led by then-prime minister
Kocharian and then-Defense Minister Vazgen Sarkisian, insisted on
a single "package" accord that would settle all sticking points
at once. Their main argument was that it would be too risky for
the Armenian side to pull out of the occupied Azerbaijani lands,
which constituted Yerevan's main bargaining chip, without securing
international recognition of Karabakh's secession from Azerbaijan.
The crisis reached its peak on January 7-8, 1998 at a confidential
meeting of Armenia's National Security Council attended by two
dozen top officials, among them Karabakh's ethnic Armenian leaders
allied with the Kocharian-Sarkisian duo. The two sides reportedly
stuck to their guns during the two days of heated discussion, with
Ter-Petrosian and his top loyalists, including then parliament speaker
Babken Ararktsian and Foreign Minister Aleksandr Arzumanian, finding
themselves in minority. About a month later Ter-Petrosian went on
state television to announce his resignation and the defeat of his
"party of peace."
Details of that meeting remained sketchy until the 61-year-old
ex-president, who has rarely been seen in public since losing power,
published his concluding speech in the Yerevan newspaper Haykakan
Zhamanak in late July. Most of it elaborates on what Ter-Petrosian
described as the "physical limits" imposed by the Karabakh factor on
Armenia's post-Soviet economic prospects. "As long as these factors
remain in place, whoever governs Armenia, no matter how [smart] they
are, will fail to not only ensure a normal course of the country's
economic development but also to solve existing socioeconomic
problems," he told his rivals. He argued that disproportionately
high transportation costs resulting from the closed borders with
Azerbaijan and Turkey, and a lack of rail communication with the
outside world would continue to stifle Armenian exports and scare
away foreign investors.
Ter-Petrosian went on to describe arch-rival Azerbaijan and Turkey as
Armenia's "most natural and beneficial economic partners" and lament
the untapped "huge potential" of Turkish-Armenian commercial ties. He
also warned of Armenia's exclusion from regional economic projects
such as the Baku-Tbilisi-Ceyhan oil pipeline.
The Armenian economy had shrunk by half in 1992-1993 following the
outbreak of wars in the South Caucasus. It began to slowly recover
after a Russian-mediated truce stopped fighting in Karabakh in May
1994. Ter-Petrosian claimed in his 1998 speech that the recovery
would slow down and perhaps stall altogether if the Karabakh dispute
remained unresolved for several more years.
But economic growth only accelerated after his resignation, moving
into the double digits in 2001. As a result, Armenia has more than
doubled its GDP and state budget since 1998. Government statistics
also show that the proportion of Armenians living below the official
poverty line fell from 56 percent to 34.6 percent between 1999 and
2005. "Armenia's economic performance has been impressive in recent
years," Rodrigo de Rato, managing director of the International
Monetary Fund, said during a June visit to Yerevan.
Kocharian and his allies now feel that history has born out their view
that peace with Azerbaijan is not a necessary condition for economic
development. "Ter-Petrosian wrongly calculated Armenia's potential for
socioeconomic development," said Spartak Seyranian, a senior member of
the Armenian Revolutionary Federation, a nationalist party that was
controversially banned by Ter-Petrosian in 1994, and that has been
represented in Kocharian's government since 1998. "The past eight
years have shown that the rejection of the 1997 peace proposals has
not prevented Armenia's development," said Seyranian.
Ter-Petrosian supporters, however, play down the official macroeconomic
data, saying that Armenian growth would have been faster and more
broad-based had Yerevan agreed to the 1997 deal. In the coming years,
the economic and political risks to Yerevan posed by the Karabakh
status quo will grow, as Azerbaijan reaps the benefits of its vast
reserves of natural resources. "In essence, his [Ter-Petrosian's]
views remain valid," Levon Zurabian, the ex-president's former
spokesman who was also present at the Security Council meeting,
told EurasiaNet. "We remain depressed in the economic sense."
In his disclosed speech, Ter-Petrosian accused his opponents in 1997
of being irreconcilable enemies of compromise with Azerbaijan. His
opponents counter that international mediators have put forward three
different peace plans since Ter-Petrosian's resignation and all of
them were essentially accepted by the Kocharian administration. The
most recent of these proposals envisages a gradual solution to the
Armenian-Azerbaijani conflict that would begin with the liberation
of Armenian-controlled districts in Azerbaijan proper and end in a
referendum on Karabakh's status.
Ter-Petrosian loyalists claim that the current government in Yerevan
has embraced a peace formula that is similar to that which mediators
placed on the table back in 1997. The Kocharian camp strongly
disagrees, saying that the referendum envisioned in the existing plan
would almost certainly formalize Armenian control over Karabakh. In
the words of current Defense Minister Serge Sarkisian, this is what
makes the existing Minsk Group "much more favorable" for the Armenian
side. "The 1997 plan said nothing about the [predominantly Armenian]
Karabakh people's right to self-determination," Sarkisian said.
But as the Minsk Group co-chairs admitted recently, the existing
plan could still collapse amid lack of agreement on the method and
scope of a Karabakh referendum. Azerbaijani President Ilham Aliyev
has repeatedly said in recent months that his administration will
never recognize Karabakh's independence or unification with Armenia,
calling into question the implementation of the peace deal currently
on the table.
"In any dispute, the key thing is not what the mediator proposes but
what the parties accept," said Zurabian. "In 1997 we had a variant
officially accepted by Azerbaijan. I just don't know of any other
peace plans acceptable to Azerbaijan."
Editor's Note: Emil Danielyan is a Yerevan-based journalist and
political analyst.
Emil Danielyan
EurasiaNet, NY
Aug. 16, 2006
Levon Ter-Petrosian, Armenia's reclusive former president, has
disclosed new details about his bitter dispute with key hard-line
members of his cabinet that forced him to step down in February 1998.
The newly released transcript of Ter-Petrosian's speech at a pivotal
meeting of the former Armenian leadership's top decision-making body
provides insight into the former president's belief that Armenia's
economic development is impossible without a settlement of the
Nagorno-Karabakh conflict.
Ter-Petrosian's opponents in 1998, including incumbent President
Robert Kocharian, took a diametrically opposite view. And they now
say that time has proved Ter-Petrosian wrong, pointing to robust
economic growth registered by Armenia in the past eight-plus years.
The Armenian economy is on track to expand at a double-digit rate
for a sixth consecutive year despite the unresolved conflict, a
performance that has repeatedly drawn praise from Western lending
institutions. [For background see the Eurasia Insight archive].
Ter-Petrosian allies insist, however, that only a small share of
Armenians have benefited from the economic improvements. And they
maintain that growth is not sustainable without a normalization of
relations with neighboring Azerbaijan and Turkey.
The power struggle that toppled Ter-Petrosian was sparked in the
summer 1997 by an international peace plan calling for a gradual
settlement of the Karabakh dispute. The plan, accepted by Azerbaijan,
would indefinitely delay agreement on Karabakh's status until after
the return of Armenian-occupied Azerbaijani territories surrounding
Karabakh, and the reopening of the Armenian-Azerbaijani border.
American, French and Russian mediators co-heading the OSCE Minsk
Group argued that these confidence-building measures would facilitate
a future deal on the territory's status.
Ter-Petrosian fully accepted this approach, laying out his vision
for Karabakh peace during a September 1997 news conference and a
subsequent newspaper article. Armenians, he wrote, should settle for
the proposed compromise because they "did not win a war, but a battle"
and because "the international community will not tolerate the status
quo for long." But other key policymakers, led by then-prime minister
Kocharian and then-Defense Minister Vazgen Sarkisian, insisted on
a single "package" accord that would settle all sticking points
at once. Their main argument was that it would be too risky for
the Armenian side to pull out of the occupied Azerbaijani lands,
which constituted Yerevan's main bargaining chip, without securing
international recognition of Karabakh's secession from Azerbaijan.
The crisis reached its peak on January 7-8, 1998 at a confidential
meeting of Armenia's National Security Council attended by two
dozen top officials, among them Karabakh's ethnic Armenian leaders
allied with the Kocharian-Sarkisian duo. The two sides reportedly
stuck to their guns during the two days of heated discussion, with
Ter-Petrosian and his top loyalists, including then parliament speaker
Babken Ararktsian and Foreign Minister Aleksandr Arzumanian, finding
themselves in minority. About a month later Ter-Petrosian went on
state television to announce his resignation and the defeat of his
"party of peace."
Details of that meeting remained sketchy until the 61-year-old
ex-president, who has rarely been seen in public since losing power,
published his concluding speech in the Yerevan newspaper Haykakan
Zhamanak in late July. Most of it elaborates on what Ter-Petrosian
described as the "physical limits" imposed by the Karabakh factor on
Armenia's post-Soviet economic prospects. "As long as these factors
remain in place, whoever governs Armenia, no matter how [smart] they
are, will fail to not only ensure a normal course of the country's
economic development but also to solve existing socioeconomic
problems," he told his rivals. He argued that disproportionately
high transportation costs resulting from the closed borders with
Azerbaijan and Turkey, and a lack of rail communication with the
outside world would continue to stifle Armenian exports and scare
away foreign investors.
Ter-Petrosian went on to describe arch-rival Azerbaijan and Turkey as
Armenia's "most natural and beneficial economic partners" and lament
the untapped "huge potential" of Turkish-Armenian commercial ties. He
also warned of Armenia's exclusion from regional economic projects
such as the Baku-Tbilisi-Ceyhan oil pipeline.
The Armenian economy had shrunk by half in 1992-1993 following the
outbreak of wars in the South Caucasus. It began to slowly recover
after a Russian-mediated truce stopped fighting in Karabakh in May
1994. Ter-Petrosian claimed in his 1998 speech that the recovery
would slow down and perhaps stall altogether if the Karabakh dispute
remained unresolved for several more years.
But economic growth only accelerated after his resignation, moving
into the double digits in 2001. As a result, Armenia has more than
doubled its GDP and state budget since 1998. Government statistics
also show that the proportion of Armenians living below the official
poverty line fell from 56 percent to 34.6 percent between 1999 and
2005. "Armenia's economic performance has been impressive in recent
years," Rodrigo de Rato, managing director of the International
Monetary Fund, said during a June visit to Yerevan.
Kocharian and his allies now feel that history has born out their view
that peace with Azerbaijan is not a necessary condition for economic
development. "Ter-Petrosian wrongly calculated Armenia's potential for
socioeconomic development," said Spartak Seyranian, a senior member of
the Armenian Revolutionary Federation, a nationalist party that was
controversially banned by Ter-Petrosian in 1994, and that has been
represented in Kocharian's government since 1998. "The past eight
years have shown that the rejection of the 1997 peace proposals has
not prevented Armenia's development," said Seyranian.
Ter-Petrosian supporters, however, play down the official macroeconomic
data, saying that Armenian growth would have been faster and more
broad-based had Yerevan agreed to the 1997 deal. In the coming years,
the economic and political risks to Yerevan posed by the Karabakh
status quo will grow, as Azerbaijan reaps the benefits of its vast
reserves of natural resources. "In essence, his [Ter-Petrosian's]
views remain valid," Levon Zurabian, the ex-president's former
spokesman who was also present at the Security Council meeting,
told EurasiaNet. "We remain depressed in the economic sense."
In his disclosed speech, Ter-Petrosian accused his opponents in 1997
of being irreconcilable enemies of compromise with Azerbaijan. His
opponents counter that international mediators have put forward three
different peace plans since Ter-Petrosian's resignation and all of
them were essentially accepted by the Kocharian administration. The
most recent of these proposals envisages a gradual solution to the
Armenian-Azerbaijani conflict that would begin with the liberation
of Armenian-controlled districts in Azerbaijan proper and end in a
referendum on Karabakh's status.
Ter-Petrosian loyalists claim that the current government in Yerevan
has embraced a peace formula that is similar to that which mediators
placed on the table back in 1997. The Kocharian camp strongly
disagrees, saying that the referendum envisioned in the existing plan
would almost certainly formalize Armenian control over Karabakh. In
the words of current Defense Minister Serge Sarkisian, this is what
makes the existing Minsk Group "much more favorable" for the Armenian
side. "The 1997 plan said nothing about the [predominantly Armenian]
Karabakh people's right to self-determination," Sarkisian said.
But as the Minsk Group co-chairs admitted recently, the existing
plan could still collapse amid lack of agreement on the method and
scope of a Karabakh referendum. Azerbaijani President Ilham Aliyev
has repeatedly said in recent months that his administration will
never recognize Karabakh's independence or unification with Armenia,
calling into question the implementation of the peace deal currently
on the table.
"In any dispute, the key thing is not what the mediator proposes but
what the parties accept," said Zurabian. "In 1997 we had a variant
officially accepted by Azerbaijan. I just don't know of any other
peace plans acceptable to Azerbaijan."
Editor's Note: Emil Danielyan is a Yerevan-based journalist and
political analyst.