BACKGROUND: Armenia’s geographic location as a potential transit center between the energy-rich Caspian states and western markets lends it strategic importance to world energy markets, and poses unique challenges to the goal of energy security in the region. As some countries in the Caspian region expand their oil and gas production and international export of these products, Armenia appears to be well situated to take advantage of these developments. Indeed, participating in the expanding network of oil and gas export is important, as the nation seeks to strengthen its own economy and political presence in the region. However, good intentions may be overwhelmed if unresolved conflict and ensuing reluctance of neighbors constrain efforts in regional cooperation. The inequality in the distribution of energy resources – their existence in Azerbaijan and Central Asia and absence in countries such as Armenia – is a major risk-contributing factor in the region. The disparity in geographic distribution of national expenditures and indiscreet utilization of oil wealth by energy-rich countries may lead to large imbalances. The fact that proposed pipelines would have to pass through a few selected countries in the region makes the situation even more complicated. The possible increase in wealth of three countries on Armenia’s borders - Azerbaijan, Georgia, and Turkey, with two of which Armenia has adversarial relations, may generate undesirable additional animosity in the country. Armenia hopes that in due time oil will become a stabilizing component in the region. If oil is used as a tool of tangible peace by the countries of oil origin, such as Azerbaijan, and not as a weapon of war, it can become an instrumental factor contributing to the economic integration and stability of the region. However, at present, oil seems to be a zero-sum game in the region, as if a country takes is at the expense of another. In addition, the intensifying competition for a share in the oil wealth, involving the U.S., Russia, European countries, Turkey, and Iran distorts regional stability, especially as the volume of oil is now estimated to be less than expected.

IMPLICATIONS: Conceptually, Armenia would prefer participating in the projects regarding the placement of pipelines in order to be on the map as far as an oil pipeline is concerned. At the same time, Armenia believes that an oil pipeline does not bring peace, but peace can help build the pipeline and keep it uninterrupted. With front lines, occupied territories, and minefields near the pipeline routes, oil not only fails to bring peace to the region, but may also threaten it. Therefore, the future stability of the region is critical to any oil pipeline, even if it runs relatively far from actual conflict areas. Since a route through Armenia has so far been excluded from the projects for transport of Caspian oil because of solely political reasons, Armenia currently does not oppose or endorse any Caspian pipeline route. Armenia also doubts that the planned pipeline route may be moved, as logistically so much has already been done to get the project to its current engineering phase that drastic changes would ultimately reshape the entire endeavor. Under such circumstances, Armenia formally is unable to take any position on the issue of pipeline routing, as long as Armenia is not aware of any route that would use the country as a transit territory, or would otherwise serve the interests of its national security and economic prosperity. Nagorno-Karabakh’s position has a significant impact on the development of oil pipelines. Until a peaceful solution is in place, pipelines will continue to be vulnerable to the conflict, because political action, and not terrorism, is generally the cause of pipeline cutoffs. The ability of military groups to either prevent the route from being operational, or to contribute to a larger conflict can increase risks of developing energy resources the region. By settling the conflict, Armenia and Azerbaijan would be able to reap the profits of Caspian oil and gas resources more advantageously. The future of pipelines depends on reconciliation of neighboring countries, rather than on the level of exploitation and oil revenues. In other words, peace has to come to the region first and then it will be possible to build and maintain the safety of the pipelines.

CONCLUSIONS: The Caucasus states, with their long history of interaction and dependency, can only grow stronger with the end of debilitating conflicts. The long-term prospect for each regional player is much richer than what it can achieve by maximizing its short-term gains. Oil development in Azerbaijan can be maximized only after a solution on Nagorno-Karabakh based on mutual compromise is achieved; Armenia can develop only with open borders and an invigorated regional trade. The piping of oil and gas through or to Armenia, a so far ‘segregated’ regional unit, could evidently consolidate the economic and security interests of the whole region. Caspian oil developments represent a vigorous opportunity for Armenia to participate in the projects by having an alternative pipeline or a spur coming off the pipeline to supply the country. With peace in Nagorno-Karabakh, the likelihood of participation will increase manifold. All existing and proposed pipeline routes supported by the West are within Armenia’s eyesight. In as much as this actuality may convey an alarming aspect, it puts Armenians in a strong negotiating position. It also effectively gives Armenians a position to guarantee the security of the pipelines, as reliability of oil supplies particularly depends on the political stability in the countries of transverse. Decisions concerning the routing of Caspian oil and gas pipelines through Armenia should recognize that an all-inclusive, grand cooperative strategy is preferred over alliance making and ‘win-lose’ games. It cannot be ignored that Armenia is the most cost effective transit route. While the most important preconditions for the safe operation of pipelines in the region are, among other factors, settled conflicts and overall political stability. Given the existing seven years of cease-fire in the conflict and ongoing results-oriented peace negotiations, a pipeline route through Armenia is feasible.

AUTHOR’S BIO: Tigran Martirosyan pursues a Master of International Public Policy degree at the Johns Hopkins University-SAIS. He is a former Director of the Americas Department at the Foreign Ministry of Armenia.