How War in the Caucasus will Impact the Global Market
The Nagorno-Karabakh War has devastated the separatist enclave of Artsakh over the past month. However, behind Azerbaijan and Armenia are their respective allies Turkey and Russia competing for influence over the Caucasus. The larger global economic and geopolitical implications of this local conflict have yet to take root.
From 27 September to 10 November, the Republics of Armenia and Azerbaijan engaged in open hostilities over a disputed territory that brought regional stability into a new round of geopolitical vertigo. The familiar focal point of this latest war was the separatist enclave of Artsakh, which lies within the Nagorno-Karabakh region in Azerbaijan.
Since the dissolution of tsarist holdings after World War I, the Caucasian states of Armenia and Azerbaijan have clashed over this stretch of mountainous land. Both had millennia-old claims on the territory, but Azerbaijan was granted ownership of the region by the Soviet Union. This decision embittered the majority Armenian population in the region for decades. While the Cold War era paused the conflict, the USSR’s declining power saw open warfare break out between the two claimants in 1988. This conflict’s first phase ended with a ceasefire in 1994, which gave Armenia de facto control of Nagorno-Karabakh, though the international community recognizes Azerbaijan’s de jure authority.
Tensions have been simmering ever since. This past summer saw fresh escalations, which finally burst when Azerbaijani artillery launched shells into Artsakh’s proclaimed capital, and both sides quickly mobilized their militaries. After an agonizing month, during which Azerbaijan annexed several towns and villages, Armenia’s PM Nikol Pashinyan begrudgingly accepted a Russian-brokered peace treaty. This agreement ceded large swathes of Nagorno-Karabakh that Azerbaijan recaptured, reversing Baku’s losses in 1994.
What made this phase of the Nagorno-Karabakh conflict different from previous ones was its place in the larger machinations in Turkey’s and Russia’s economic-political agenda. In recent years, the government of Turkey has been pursuing an increasingly bold foreign policy and augmenting its military capacities. Its geopolitical goals center around expanding its influence in the eastern Mediterranean, in which the Turkish government claims that maritime agreements of states like Greece and Cyprus restrict Turkey’s ability to trade. After the failed military coup in 2016, President Recep Tayyip Erdoğan has sent troops and supplies to various theatres around the Mediterranean such as Libya and Syria.
With the USA’s steady withdrawal from Middle Eastern affairs, Erdoğan and his cabinet took the opportunity to secure Turkey’s southern and eastern borders. More importantly, they seek to counter Russia’s and Iran’s expanding spheres of influence. During the Nagorno-Karabakh war, Turkey entered on the side of their Turkic ally Azerbaijan by sending military advisors, military tech, and Syrian mercenaries in order to stymie Armenia and Artsakh. The Turkish government has denied all these claims despite several reports by accredited news sources.
Though there were religious, ethnic, and historical causes behind this conflict, there were also economic reasons that posed a huge stake for all belligerents. Azerbaijan is home to several gas and oil pipelines, and acts as a middleman that brings energy from the East to the rest of the world. For example, the Baku-Tblisi-Ceyhan (BTC) Pipeline begins at the Azeri oil fields in the Caspian Sea and transports one million barrels worth of crude oil per day over 1,768 km to ports in Turkey for global consumption. Other pipelines are planned for construction, as Azerbaijan and Central Asian states like Turkmenistan are forming new economic agreements. Even Italy, Greece and Albania recently signed a deal with Azerbaijan to build the Trans-Adriatic Pipeline, which will ease natural gas flow to European markets.
Artsakh posed a risk to Azerbaijan’s oil business, as the enclave, which Azerbaijan had no control over, was near important pipelines. On 6 October, Azerbaijan claimed that Armenia fired rockets at the BTC Pipeline, which validated the Baku’s and Ankara’s fears. Using the profits from these pipelines, Azerbaijan prepped its military to retake what they lost in 1994 and protect its primary economic export.
Armenia, on the other hand, has been relatively cut off from participating in the energy market, as Ankara and Baku have imposed a blockade since the 1994 ceasefire. This is made easy by the fact that Armenia is land-locked and shares most of its border with its two rivals. Most of the energy in Armenia comes from Russia and Iran, resulting in close political ties among these nations. Tehran and Moscow compete with Ankara in multiple fronts, and their support for Armenia was another step to halt Erdoğan’s expansion. With Armenia and Azerbaijan in the middle, an intense competition over energy production and transportation among Turkey, Iran, and Russia compounded the complexity of the war.
Now that the ceasefire has been signed in Azerbaijan’s favor, Turkey’s ambitions in the eastern Mediterranean can be consolidated. The West’s energy needs now rests more firmly in Erdoğan’s hands, which has two probable outcomes: either Turkey will have an unequal advantage at the negotiating table or Europe will seek other sources of energy, which will change energy value chains. With contention already existing over the Aegean islands, the migrant crisis, non-approved natural gas drilling in the Mediterranean, and Turkish involvement in the Syrian and Libyan Civil Wars, the list of disagreements between Ankara and its Western allies will now only grow.
Disputes with Greece are particularly concerning, as their status as NATO allies can potentially damage the organization’s integrity. Furthermore, Turkey’s chances of entering the EU and thereby expanding the region’s economic prospects diminish with each node of dissent.
The ceasefire also called for Russian peacekeepers to remain in Nagorno-Karabakh in order to protect the border. The Lachin Corridor, the only land route between Armenia and Artsakh, will be maintained by these forces for the next five years. With the presence of Russian troops in these lands, the competition between Moscow and Ankara can only escalate from here.
The most important cost has been the toll on human life for both sides. Casualties are in the thousands, several citizens have been displaced, and homes have been destroyed. Baku celebrated their victory, while Yerevan lamented. For several Armenians, memories of their nation’s terrible trials in the 20th century have resurfaced, bringing forth a reenergized national vigor. Meanwhile, Azerbaijanis who were displaced from their homes in Nagorno-Karabkah in the ‘90s can look forward to reclaiming land. Unfortunately, it will be difficult to remove the past century of bitter struggle between Azerbaijan and Armenia, and the treaty’s solidity is uncertain. The day Armenian PM Pashinyan signed the ceasefire, protestors broke into Yerevan’s main government building demanding to find the “traitor” PM. This conflict, like those of Yemen, Libya, and Syria, is far from resolved. When Armenia’s Russian allies leave in five years, there is little to say against a possible reignition of violence.
I am a MSc Management student with an interest in the growing sustainability industry. My interests lie in the social impact of business and history of organization.
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Fabio Di Fabbrizio
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Fabio Di Fabbrizio
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Fabio Di Fabbrizio
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Fabio Di Fabbrizio
