Armenia remains formally at war with neighboring Azerbaijan over the Nagorno-Karabakh territorial dispute. It also suffers from a seven-year-old economic embargo imposed by Turkey. Except for the European Union-sponsored TRACECA project, aimed at coordinating the development of transit routes between East and West, Armenia has remained on the sidelines of most of the region's major economic projects.
The Soviet Union created the Nagorno-Karabakh Autonomous Region within Azerbaijan in 1924, when over 94 percent of the region's population was Armenian. The term Nagorno-Karabakh originates from the Russian for "mountainous Karabakh." As the Azerbaijani population grew, the Karabakh Armenians chafed under discriminatory rule, and by 1960 hostilities had begun between the two populations of the region.
On February 20, 1988, Armenian deputies to the National Council of Nagorno-Karabakh voted to unify that region with Armenia. Although Armenia did not formally respond, this act triggered an Azerbaijani massacre of more than 100 Armenians in the city of Sumgait, just north of Baku. A similar attack on Azerbaijanis occurred in the Armenian town of Spitak. Large numbers of refugees left Armenia and Azerbaijan as pogroms began against the minority populations of the respective countries. In the fall of 1989, intensified interethnic conflict in and around Nagorno-Karabakh led Moscow to grant Azerbaijani authorities greater leeway in controlling that region.
The protests of the Armenians of Nagorno-Karabakh against Azerbaijani rule began in the spirit of perestroika, but the movement evolved quickly into a political organization, the Karabakh Committee, a broad anticommunist coalition for democracy and national sovereignty. In the confusion following the earthquake that devastated northern Armenia in December 1988, Soviet authorities tried to stem the growing opposition to their rule by arresting the leaders of the committee. The attempt by the CPA to rule in Armenia without support from Armenian nationalists only worsened the political crisis. In March 1989, many voters boycotted the general elections for the Soviet Union's Congress of People's Deputies. Massive demonstrations were held to demand the release of the members of the committee, and, in the elections to the Armenian Supreme Soviet, the legislative body of the republic, in May, Armenians chose delegates identified with the Karabakh cause. At that time, the flag of independent Armenia was flown for the first time since 1920. The release of the Karabakh Committee followed the 1989 election; for the next six months, the nationalist movement and the Armenian communist leadership worked as uncomfortable allies on the Karabakh issue.
Gorbachev's 1989 proposal for enhanced autonomy for Nagorno-Karabakh within Azerbaijan satisfied neither Armenians nor Azerbaijanis, and a long and inconclusive conflict erupted between the two peoples. In September 1989, Azerbaijan began an economic blockade of Armenia's vital fuel and supply lines through its territory, which until that time had carried about 90 percent of Armenia's imports from the other Soviet republics. In June 1989, numerous unofficial nationalist organizations joined together to form the Armenian Pannational Movement (APM), to which the Armenian government granted official recognition.
The Soviet policy backfired, when a joint session of the Armenian Supreme Soviet and the National Council, the legislative body of Nagorno-Karabakh, proclaimed the unification of Nagorno-Karabakh with Armenia. In mid-January 1990, Azerbaijani protesters in Baku went on a rampage against remaining Armenians and the ACP. Moscow intervened, sending police troops of the MVD, who violently suppressed the APF and installed Mutalibov as president. The troops reportedly killed 122 Azerbaijanis in quelling the uprising, and Gorbachev denounced the APF for striving to establish an Islamic republic. These events further alienated the Azerbaijani population from Moscow and ACP rule.
In a December 1991 referendum boycotted by local Azerbaijanis, Armenians in Nagorno-Karabakh approved the creation of an independent state. A Supreme Soviet was elected, and Nagorno-Karabakh appealed for world recognition. Soon after Azerbaijan's independence, Armenian separatists declared control of Nagorno-Karabakh and parts of Azerbaijan - about 20% of Azerbaijan's territory - displacing almost 1 million Azeris, and a bloody war followed.
The Karabakh Army mobilised and attacked Azerbaijan. The conflict swayed backwards and forwards but in the end the Army, supported by Armenian units, cleared the Azerbaijan Army from all the territory to the west and south of the enclave and cleared the ground to the east, establishing a front line which prevented Azerbaijan guns from firing into their capital, Stepanakert. Karabakh commanders are quite clear that their offensive to the east, with the exception of the battle for Agdam which lasted for a long time, was over in a matter of hours and that they stopped as soon as this important security line was reached, having no territorial aspirations and only wanting to secure the capital.
By June 1992, ethnic Armenians had expelled all ethnic Azerbaijanis from the Nagorno-Karabakh region and had opened a corridor to Armenia through the Azerbaijani region of Lachin, which had a substantial Kurdish population. In 1993 they captured the province of Kelbacar, which lies between Nagorno-Karabakh and Armenia, as well as large areas surrounding Nagorno-Karabakh. They drove out the inhabitants and looted and burned the provincial capitals and most of the villages of these regions. The U.N. Security Council condemned these offensive actions, including the looting and burning. Until the May 1994 cease-fire, all parties to the conflict engaged in indiscriminate shelling and rocket fire against civilian targets, including in both directions along the Armenia-Azerbaijan border. Before the cease-fire, the Azerbaijanis also mounted fixed-wing air attacks against civilian targets in both Nagorno-Karabakh and Armenia.
As of November 1994, there were 900,000 refugees and internally displaced persons in Azerbaijan. These figures did not include the 50,000 internally displaced persons caused by the hostilities in the spring of 1994. Close to 500,000 fled the Nagorno-Karabakh Armenian offensives into Azeri- inhabited areas outside the bounds of Nagorno-Karabakh between March and September 1993, joining the 150,000 who fled in 1992 and the over 200,000 who were expelled from Armenia in 1988-89.
A Russian-mediated ceasefire has been in place since May 1994, and Russia, the United States, and France have tried to bring the sides closer together. The Karabakh government is unable to man the confrontation line properly, and approximately five strong infantry companies face just under five brigades of the Azerbaijan Army. The Azerbaijan Army unlikely to try to attack to recover its lost territory because every time the two sides have been in battle, the Karabakh Army supported by Armenia has eventually heavily defeated them.
Azeri President Aliyev has offered to route an oil pipeline through Armenia en route to Turkey, which would give Armenia transit revenues from the pipeline, in exchange for Armenian withdrawal from the occupied territories. Armenia has refused, and serious consideration of pipelines running from Azerbaijan through Armenia to the west remains unlikely as long as the conflict remains unresolved; skirmishes still flare along the Armenian border with Azerbaijan.
Relationships between Russia and Azerbaijan were strained when it became known that Russia had shipped over $1 billion of arms to Armenia from 1993 to 1995. In the meantime, Armenia and Russia signed an updated friendship treaty at the end of the summer, as well as a deal to create a joint venture with Gazprom of Russia to supply Armenia with natural gas. Armenia's fuel supplies had been constrained by the Azeri blockade that followed the Nagorno-Karabakh conflict. Following the imposition of that blockade, the United States passed section 907 of the Freedom Support Act in October 1992, which restricts U.S. government assistance to Azerbaijan until Azerbaijan has taken "demonstrable steps to cease all blockades and other offensive uses of force against Armenia and Nagorno-Karabakh". In October 1998, U.S. legislation was approved that permitted some exemptions (including the U.S. Export-Import Bank, the Overseas Private Investment Corporation -- OPIC, and the Trade and Development Agency) from the bans contained in section 907.
Armenian forces and forces of the self-styled "Republic of Nargono-Karabakh" (which is not recognized by any government) continue to occupy 20 percent of Azerbaijan's territory. Exchanges of fire occurr frequently along the Azerbaijan-Armenian border and along the line of contact with Nargono-Karabakh causing casualties, including some civilians. Military operations continued to affect the civilian population. As of 1999 there are 800,000 Azerbaijani refugees and internally displaced persons (IDP's) who cannot return to their homes. In the part of Azerbaijan that Armenians control, a heavily militarized ruling structure prevents ethnic Azerbaijanis from returning to their homes. In the part of Azerbaijan that the Government controls, government efforts to hinder the opposition continue to impede the transition to democracy.
A presidential election in the breakaway Nagorno-Karabakh Republic (NKR) was held on 11 August 2002, and as expected, acting President of the NKR Arkady Gukasyan won the election. Peace talks between Armenia and Azerbaijan on the status of NKR remain stalemated, despite a meeting of Presidents of Armenia and Azerbaijan held on 14 August 2002. tthe previous talks of the Presidents took place on November 30, 2001, during the jubilee CIS summit in Moscow. Some hawks in Azerbaijan intend to resolve the ethnic and territorial dispute regarding NKR by military methods, and it is evident that the Armenian army will take part on the side of NKR in the case of a conflict. The efficiency of the ground forces of Azerbaijan is very low, and under current circumstances Baku is unable to conduct effective offensive combat operations against the forces of NKR and Armenia.