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Caucasus Report: April 18, 2008

Analysis: Armenia's Outgoing Foreign Minister Defends Karabakh Policy

By Anna Saghabalian and Liz Fuller
Vartan Oskanian, who stepped down as Armenia's foreign minister on April 9 after serving for a decade in that capacity, has shrugged off criticism that Armenian diplomacy remained passive during his time in office ostensibly leading to a number of failures, including last month's nonbinding UN General Assembly resolution on Karabakh.

In an interview with RFE/RL, Oskanian called that resolution, which defines the unrecognized Nagorno-Karabakh Republic as an internationally recognized part of Azerbaijan, a "tactical error" on the part of Azerbaijan. Earlier, Oskanian downplayed the impact of the resolution by saying that only 39 UN member states, most of them affiliated with the Organization of Islamic Conference, voted for it, while over 150 other countries abstained or did not vote. The three states that co-chair the Organization for Security and Cooperation in Europe (OSCE) Minsk Group-- the United States, Russia, and France -- were among the seven countries that voted against the resolution.

Oskanian believes the resolution was rather a sign that Azerbaijan is on the defensive, and displaying "nervousness" in its foreign policy. "They [Azerbaijan] are trying to take the issue to the UN, dissolve the whole Minsk process, do away with the Prague process and the document that has been produced as a result of our joint work with Azeris and the co-chairs during the past two years," Oskanian told RFE/RL, referring to the Basic Principles for resolving the conflict that the two sides have come close to agreement on.

The basic principles, as outlined in a statement by the co-chairs on June 22 to the OSCE's Permanent Council in Vienna and posted on June 28 on the website of the U.S. Embassy in Yerevan, point to a "phased-package" approach to resolving the conflict, meaning that the various elements of a settlement are agreed on simultaneously, even though they are implemented successively, with one key aspect -- the final status of the NKR -- to be decided by "a referendum or vote" at some unspecified future date.

"These principles include the phased redeployment of Armenian troops from Azerbaijani territories around Nagorno-Karabakh, with special modalities for Kelbacar and Lachin districts [separating Karabakh from Armenia proper]," the co-chairs said. "Demilitarization of those territories would follow. A referendum or popular vote would be agreed, at an unspecified future date, to determine the final legal status of Nagorno-Karabakh."

"An international peacekeeping force would be deployed," added the statement. "A joint commission would be agreed to implement the agreement. International financial assistance would be made available for de-mining, reconstruction, resettlement of internally displaced persons in the formerly occupied territories and the war-affected regions of Nagorno-Karabakh. The sides would renounce the use or threat of use of force, and international and bilateral security guarantees and assurances would be put in place."

Those provisions correspond very largely to the ones contained in the draft peace settlement proposed by the Minsk Group in May-July 1997, the key difference being that the 1997 document contained no specific mention of Kelbacar.

The mediators said the conflicting parties would also have to work out practical modalities of the Karabakh referendum. "Suitable preconditions for such a vote would have to be achieved so that the vote would take place in a noncoercive environment in which well-informed citizens have had ample opportunity to consider their positions after a vigorous debate in the public arena."

"Clearly the Azeris are not happy with the content of that document, which has been formalized by depositing at the OSCE Secretariat, and in which Karabakh's right to self-determination has been clearly codified, and this is what makes the Azeris very nervous," Oskanian explained.

"What they did at the UN is not a preemption. It's a reaction to the Minsk process. The document is a reaction to the co-chairs' move to deposit for the first time ever in the history of this conflict a document that they thought has reached the maturity which can be put at the OSCE Secretariat as a clear guideline and clear principles that have been codified as a result of the joint work of the past two years."

Oskanian, who was succeeded in office earlier this week by former Armenian Ambassador to France Eduard Nalbandian, said Armenia's options in the Karabakh process remain limited but refrained from prejudging what might happen under the new administration. "At this moment it is difficult to predict what the next president will do. It's his choice what kind of foreign policy he will implement, whether he will maintain the notion of 'complementarity' or not. But given my experience I don't think Armenia's room to maneuver is very wide. Our options are limited. What can be done is simply to make some changes in the accents not necessarily in direction," Oskanian said. "My expectation will be that there will not be major changes, but again I don't want to speak prematurely without waiting to see what decisions will be taken by the new president and the foreign minister."

"Given Azerbaijan's positions and change of heart, I do expect that there will be some modifications in our foreign policy that will be done by default, because Azerbaijan itself seems to be deviating from the established path. If Azerbaijan changes direction, then Armenia has no choice but to make corresponding adjustment in its policy. What exactly those changes will be, we have to wait and see," Oskanian concluded.

President Serzh Sarkisian paid tribute on April 16 to Oskanian's stint as foreign minister, noting in particular his role in the search for a solution to the Karabakh conflict and in strengthening Armenian statehood, reported on April 17. Sarkisian said that in the next few years Armenia's foreign policy will become "more proactive and oriented toward initiative," while remaining true to the policy of complementarity (which was largely Oskanian's brainchild). Specifically, Sarkisian affirmed that Azerbaijan must accept once and for all time that the existence of an independent Nagorno-Karabakh Republic is irreversible. It is impossible to envisage that the NKR could in some way be subordinate to Azerbaijan."

Analysis: Azerbaijan Grapples With Rising Inflation

By RFE/RL analyst Liz Fuller
Economic Development Minister Heydar Babayev warned on April 15 that the Azerbaijani government may be forced to revise upward its projection for annual inflation in 2008, reported. The annual budget predicts a figure of 13-14 percent, considerably lower than the most recent IMF estimate of 20 percent, while the CIS Statistical Committee has predicted that inflation in Azerbaijan this year will reach 16 percent, higher than in any other CIS member state.

The 2007 budget initially envisaged inflation not exceeding 9-10 percent. But on November 29, experts from the independent Center for Economic Research announced that according to their data, prices had already risen by 22.5 percent and the final figure could reach 25 percent. On January 23, quoted Azerbaijan State Statistical Committee Chairman Arif Veliyev as announcing that the annual inflation rate last year was 16.7 percent. But government officials argue that last year's double-digit inflation should be seen in the context of the 25 percent annual increase in GDP and a 42 percent rise in the average wage, to 214 manats ($258.45).

President Ilham Aliyev told a cabinet session on April 14 that real incomes are still outpacing inflation, reported on April 15, with incomes rising by 33 percent. Economic Development Minister Babayev for his part insisted that inflation is "completely under control."

Such optimistic statements fail, however, to take into account the artificially high prices of some imported food, which contributed to "inflation for the poor" reaching 50 percent last year, according to on November 30.

Speaking in Baku in mid-March, Valeria Fichera, who heads the IMF's Middle East and Central Asia Department, warned that inflation could reach 20 percent in 2008 and that it could take up to five years to bring it down to single digits, ANS Press reported on March 14. She said the fund has made specific recommendations to the Azerbaijani government, including cutting to between 27-30 percent the increase in budget spending this year, given that "the Azerbaijani economy is not yet ready" to increase expenditure further. Other recommendations focused on state-funded investment and regulating wage increases.

The Azerbaijani government had foreseen the possible impact of increased budget spending on the inflation rate: Babayev announced early last fall that the government had drafted a program of measures, which the IMF had approved, intended to keep inflation in 2008 within manageable limits, at around 12 percent, according to on September 28. But independent experts were more skeptical. Eyub Huseynov of the Union of Free Consumers predicted that annual inflation in 2008 would be no lower than 15 percent in light of what he termed the absence of any comprehensive government policy to curb it.

Analysis: North Ossetia Struggles With Crime Wave, Police Corruption

By RFE/RL analyst Liz Fuller
Statistical data shows a marked increase in crime in North Ossetia since 2006. But even though overall figures are lower than for the Russian Federation as a whole, two thirds of respondents in a recent survey conducted in Vladikavkaz said they do not feel protected by police, while only one in five said they do, reported on April 15. In addition, over 50 percent of the 250 respondents linked their sense of vulnerability to crime to police corruption.

In February 2007, North Ossetian Prosecutor-General German Shtadler said a total of 7,909 crimes were committed in the republic the previous year, a 12 percent increase over 2005, according to on February 14, 2007.

Eight months later, North Ossetian Interior Minister Lieutenant-General Sergei Arenin said the incidence of crime for the period January-September was 9.1 percent higher than in 2006, although the number of murders dropped by 36 percent.

The republican parliament held a debate on the crime situation in May 2007 that ended with the passage of a resolution criticizing the work of the Interior Ministry and singling out police corruption as the gravest problem, ITAR-TASS reported on May 31. An Interior Ministry meeting on April 10 registered a 57 percent increase in violations of police discipline among mid-level personnel during the first three months of 2008 compared with the same period last year, reported on April 11.