Armenia (June 1999)

The Republic of Armenia is a small landlocked country located in the mountainous Southern Caucasus region, marking the border between Europe and Asia. In the late 1980s and early 1990s Armenia entered a period of severe economic, social and political turmoil caused by several concurrent events. These included a devastating earthquake in 1988 (which claimed an estimated 25,000 lives and left another 250,000 homeless) the collapse of the former Soviet Union, and open warfare with Azerbaijan over the disputed territory of Nagorno-Karabakh.

As a country with few natural resources and as a net importer of food and energy, Armenia was particularly hard hit by the breakdown in inter-republic trade and economic relations resulting from the disintegration of the Soviet wdition, financial constraints over the last 10 years have led to the deterioration of most of the country’s infrastructure. Most institutions have had little or no basic maintenance since 1988 and have outdated equipment and chronic shortages of basic supplies. Limited budgets have prompted institutions to impose fees for services that were free in the past, thus limiting access for the poor. The deterioration of infrastructure such as roads, water, irrigation systems, and central heating continues to impose a range of hardships on both rural and urban populations.

While most current observers agree that the humanitarian crisis in Armenia is now over, pockets of extreme vulnerability remain. For this group, which includes a segment of the refugee population and elderly pensioners living alone, basic security needs to remain acute. To address these needs hte international community continues to provide humanitarian assistance on a limited scale, while more longer term interventions are being explored.

While Armenia can be characterised as a country in transition, economic activity is still limited mainly to trade and services rather than production. As a result unemployment and/or underemployment is high and poverty is widespread. In addition, financial constraints over the last 10 years have led to the deterioration of most of the country’s infrastructure. Most institutions have had little or no basic maintenance since 1988 and have outdated equipment and chronic shortages of basic supplies. Limited budgets have prompted institutions to impose fees for services that were free in the past, thus limiting access for the poor. The deterioration of infrastructure such as roads, water, irrigation systems, and central heating continues to impose a range of hardships on both rural and urban populations.

The government of Armenia and the international community has responded to the challenges facing the country in a number of ways. Macro-level legal and regulatory reforms are being promoted to create a policy environment conducive to the development of a market economy and pluralistic governance. Concurrently, the international aid community is increasingly focusing its efforts on promoting civil society by supporting the nascent indigenous non-governmental sector, community development initiatives, and small and medium private enterprise development. This strategy is viewed as a more sustainable approach to providing assistance in that it helps to rebuild a social safety net and decreases dependency on external aid.

Lack of resolution over the status of Nagorno-Karabakh will, nevertheless, continue to play a role in the political and economic stability of Armenia and the region. For example, in 1992 the US Congress passed Section 907 of the Freedom Support Act which prohibits the delivery of US government economic and military assistance to the government of Azerbaijan. Within the parameters of Section 907, only the delivery of humanitarian and democracy-building aid is allowed. Section 907 was passed largely because of the lack of resolution over Nagorno-Karabakh and the continuing blockade between the two countries. While 907 has been reinterpreted to expand the scope of humanitarian assistance, it still bars most categories of assistance to the government of Azerbaijan and, by extension, Nagorno-Karabakh – an area which is still recognised by the international diplomatic community as part of Azerbaijan although all Azeris fled the enclave during the conflict years.

Pending a permanent peace settlement, US assistance is therefore confined to humanitarian assistance to the victims of the conflict within the enclave. In FRY 1998, the US Congress allocated US$8 million for humanitarian assistance activities within Nagorno-Karabakh (previously, no US government assistance had been targeted to the enclave). Assistance within the enclave was primarily provided by the Armenia diaspora and a limited number of international organisations such as the ICRC and MSF. The US position continues to be that until a permanent peace settlement is reached, US assistance will be limited to relatively short-term humanitarian support.

Finally, it should be noted that, under the auspices of the OSCE, negotiations for a peaceful settlement continue through the Minsk Group which is comprised of a number of countries including Russia, France, the US, UK and Belarus. In the absence of significant progress on this front, foreign assistance coming into Armenia and Nagorno-Karabakh tends to be dictated by the continuing political uncertainty in the area.