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Nagorno-Karabakh: Tiny Enclave, Huge Global Consequences


Nagorno-Karabakh is small, landlocked region in the South Caucasus that you’ve probably never heard of.

Image Courtesy of Flickr, © 2013.

It makes sense – the territory is tiny, mostly mountainous, and lacks lucrative natural resources. In the midst of global anonymity, its 150,000 residents are caught in perpetual political limbo as citizens of a country that doesn’t technically exist.

Nagorno-Karabakh is a disputed region between two Eastern European countries both seen as holding limited strategic importance to the United States. But the small enclave could have vast economic consequences for the global system, and quickly foray to the forefront of international debate.

Nagorno-Karabakh is internationally recognized as part of Azerbaijan, but most of the territory is governed by a de facto independent state with an overwhelming (95 percent) Armenian ethnic majority. Armenia remains Nagorno-Karabakh’s unofficial economic and security patron; in fact, Azerbaijan has not exercised political autonomy over the region since 1988, when war broke out after Nagorno-Karabakh voted to join Armenia.

The Nagorno-Karabakh war ended in 1994, after thirty thousand lives were lost, one million people were displaced and Russia and the Organization for Security and Cooperation in Europe (OSCE) brokered a cease-fire. The OSCE is the world’s largest security-oriented intergovernmental organization, and its subdivision called the Minsk Group spearheads the OSCE’s efforts to find a peaceful solution to the Nagorno-Karabakh conflict. Peace talks between Armenia and Azerbaijan have been mediated by the Minsk Group ever since.

If the war ended twenty years ago, why should we care about Nagorno-Karabakh?

While often called a “frozen conflict,” the situation in Nagorno-Karabakh has been intensifying for decades – and will quickly jump to the vanguard of global political discussions.

Mediation efforts have failed. Militarization has escalated. The cease-fire brokered by the Minsk Group has been routinely broken. Azerbaijan and Armenia teeter precariously on the brink of a new war, with relentless threats from the former resulting in frequent skirmishes along the border, and notable clashes and fatalities in 2016.

Currently, Nagorno-Karabakh faces an increasingly high risk of resumption of hostilities – and a reignited military conflict between Armenia and Azerbaijan could destabilize the entire South Caucasus.

The Council on Foreign Relations’ Global Conflict Tracker says Nagorno-Karabakh could have widespread and severe humanitarian consequences, but that impact on U.S. interests would be limited since the countries involved do not hold “strategic importance” to the U.S.

The issue is compounded by the bipolar politics that rule much of Armenia and Azerbaijan’s relations today. Armenia is closely allied to Russia, and has Russian troops in its territory, patrolling its borders, and flying in its airspace. Armenia exclusively outsources foreign policy to Moscow, and maintains growing ties with Iran. Conversely, Azerbaijan has aligned itself with the West, developing a vibrant military and economic relationship with Israel, and utilizing its rich network of oil and gas pipelines to enhance its economic ties to Europe, known as the Southern Gas Corridor.

The crux of why you should care about Nagorno-Karabakh lies there.

The Baku-Tblisi-Ceyhan pipeline runs through Azerbaijan – the only pipeline located in the former USSR that does not penetrate Russia. Resumption of hostilities means potential disruption of oil and gas exports from the region and resource insecurity. Azerbaijan is a significant oil and gas exporter to Europe and Central Asia; and the BTC has the capacity to produce more than 1 million barrels of oil per day – over 1 percent of the global demand for oil, earning Azerbaijan about 1 billion USD monthly.

The likelihood of another war has led Azerbaijan to use that oil revenue to arm, increasing the size of its military tenfold in a decade. However, as the main export pipeline runs through Georgia, adjacent to the Armenian border, it becomes increasingly vulnerable to Armenian attack. As resumption of hostilities impends, the BTC pipeline looks to be the first hostage the Armenians will take – and as the current global oil supply lacks elasticity, that could carry immediate consequences. At modest estimates, a 1% diminishment in the global oil supply could lead to a 5% increase in prices – not including speculation. That kind of spike in the global oil market could directly harm U.S. economic interests – and means we should start to care about Nagorno-Karabakh.

One thing is certain: humanitarian, strategic, and economic concerns could reign high in a milieu of destitution, and unless serious action is taken – and soon – it’s possible the rest of the world will face the repercussions of inaction.

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