Nagorno-Karabakh: New threats, old solutions

Nagorno-Karabakh: New threats, old solutions

Azerbaijani authorities may try to exploit the Nagorno-Karabakh conflict to improve the country’s domestic and international situation.

On April 1, major fighting erupted between Azerbaijani and Nagorno Karabkh Republic (NKR) forces along the contact line of the breakaway republic, becoming the most violent incident since the ceasefire agreements of 1994. However, five days later, a new fragile ceasefire was achieved. This bloodshed leads to two key questions: what motivated Baku to start a massive offensive on NKR positions and what are the chances that it was just a test for the Azerbaijani forces and leadership, before engaging in a full-scale military campaign for the ultimate return of the region?

To answer these questions, the situation in Baku should be analyzed through a broad perspective of the different risks President Ilham Aliyev is facing. Unfortunately, the combination of economic, political, and military threats for Azerbaijan, emerging after 2014, makes a decision to start a wider conflict against NKR an attractive option for Aliyev’s regime survival.

Radicalization and securitization

Generally the socio-political threats for Aliyev’s regime emerge from the “resource curse” – Azerbaijani elites gain major revenue from the oil rent, which breeds corruption and deep distrust on behalf of the population, giving ground for radical political opposition.

Since 2014 this process has drastically increased. According to Awas Hasanov of the regional Analyticon Centre, the government, concerned by the precedents for large-scale unrest set by the Arab Spring and Euromaidan, enhanced the pressure on Islamic groups that encourage political change.

Militarizaton of the political environment, seen as a response to radicalization, is also concerning. As noted by the regional analyst Natiq Gulahmedoglu, in 2014-2015 a sharp increase occurred in the number of military and security officers who hold senior positions, particularly in the provinces of the country. The increased militarization and securitization of the political environment creates “panic thinking”. Moreover, local military escalations in Karabakh proved to cause only limited social backlash. Thus, if facing the radical protest, President Aliyev could see a full-scale war as a measure to achieve unprecedented national unification.

Dropping oil prices

According to Thomas De Waal, one of the most prominent scholars of the Karabakh conflict, the Azerbaijani elite has been creating a corrupt structure for decades through receiving direct income from the sale of oil, thus increasingly stratifying the social makeup of the country.

This process ended in 2014 with the decline of oil revenue. According to the report from The Center for Economic and Social Development (CESD) – the leading Azeri economic think tank – 95.3 percent of Azerbaijan’s total export revenues are from oil and oil products. Consequently, the current revenue flow to the state declined by 53.4%. Such a drastic reduction in the budget may lead to a reduction in social spending, primarily in health care and education, which Baku has traditionally used to stabilize the political situation. Furthermore, the value of the Azerbaijani Manat has fallen by 33% against the USD, leading to an 8% rise in inflation. The rise in inflation led to a sharp decline in private consumption and decreasing living standards in 2015 and 2016.

The crucial challenge is that the political and economic risks are empowering each other. One of the possible strong risk mitigations could be found in the IMF loan to Azerbaijan. Such a loan could not only mitigate the financial and social stress of the decreasing oil prices, but could make Azerbaijan more integrated into the global economy and international institutions, therefore, increasing the cost of violence. However, such decision would require President Aliev to implement broad institutional reform including decentralization of financial mechanisms, which is unlikely in the current securitized and centralized environment.

The major achievement of the years of high oil prices abundance, which didn’t devaluate since 2015 was the huge military industrial complex. However, to transform this complex into actual political power, Baku would need to use its potential in a real battlefield which only increases the chance of large-scale war.

A security dilemma

Even if the internal factors are ignored, Azerbaijan could still be motivated to go to war, as it is currently facing a window of opportunity to improve upon its security environment.

Both Armenia and Azerbaijan are devoting huge efforts toward increasing their military capabilities. According to The Economist and the International Crisis Group, in the ten years between 2003 and 2013, Azerbaijan’s annual defence budget has increased 20-fold from $177 million to $3.4 billion. Such a policy by Azerbaijan can lead to a response from Armenia, even perhaps to a preventive strike by Yerevan.

According to The Independent Military Observation, Armenia is determined to build up its military potential, regardless of any difficulties. For instance, despite the heavy 15% fall in GDP during the global financial crisis in 2008, Armenia did not cut its military spending, which remained at a very high level – 4.07% of GDP or about $700 million per year.

This creates a deadlock in the security dilemma. However, in 2016, Russia shifted the balance of powers by granting a military loan to Yerevan, which increased the Armenian military budget for 2016 by 50%. Azerbaijan could choose to attack before Yerevan transforms Russian financial support into actual military power.

External context

Finally, regional and supra-regional conjuncture could also motivate Azerbaijan to act now. The Ukrainian crisis has created a precedent whereby the international community has given a moral carte blanche for Kiev to fight state-sponsored separatism. This precedent could motivate Azerbaijan to consider fighting NKR’s separatism via military means. In this case, the position of Armenia, which demands the recognition of Karabakh through a Crimea-like referendum, will be weakened. According to Edgar Elbakyan, a Research Fellow at Yerevan State University, Armenia’s position is fragile because of the strong anti-Russian consensus in the West and Turkish geopolitical expansionism. Meanwhile, Azerbaijan is poised to start a conflict and gain serious leverage.

While the April 6 ceasefire declaration is a hopeful move, the situation in Nagorno-Karabakh remains extremely tense. Unless the international community increases its peace-building effort in Karabakh, Baku would most likely see the current escalation as a way to address the challenges and risks it faces, and eventually engage into a full-scale military offense.

Categories: Europe, Security

About Author

Elisey Boguslavskiy

Elisey specializes in political instability in the former Soviet Union. He works as a political risk consultant for the conflict prevention NGO's and holds a Master's Degree in Security Policy Studies from the George Washington University. He also obtained a Bachelor Degree in Near Eastern studies from the Moscow State University and has recently published a book on Middle Eastern intelligence services.