Oct. 10 (Bloomberg) -- Turkish Foreign Minister Ahmet Davutoglu and his Armenian counterpart signed an agreement to establish diplomatic relations and open their border within two months of ratification by both parliaments, in a Zurich ceremony attended by U.S. Secretary of State Hillary Clinton.

Clinton, French Foreign Minister Bernard Kouchner, European Union Foreign Policy chief Javier Solana, Russian Foreign Minister Sergei Lavrov and Swiss Foreign Minister Micheline Calmy-Rey stood behind the ministers as they signed the protocols and then shook hands.

They took a group photo and made no remarks after a dispute over what the foreign ministers were planning to say delayed the ceremony for more than three hours.

United Nations Secretary-General Ban Ki-moon issued a statement welcoming the signing and urging that the protocols “be swiftly ratified” by the Armenian and Turkish parliaments. Ratification is “going to be difficult but that’s the next step,” Clinton told reporters after leaving Zurich for London.

EU Commissioners Benita Ferrero-Waldner and Olli Rehn called the signing “a courageous and far-sighted step forward” in a joint statement e-mailed after the ceremony.

Détente between the neighbors may boost Turkey’s European Union membership bid and bolster ties with the U.S., where members of Congress have criticized the country for refusing to acknowledge the 1915 killings of Armenians as genocide. Armenia expects economic benefits from trade with Turkey’s $600 billion economy.

Ties have been frozen since Turkey closed the border in 1993 to protest against Armenia’s occupation of territory in Azerbaijan, a key Turkish ally and energy supplier.

Delayed Ceremony

The ceremony ran into a delay caused by a last-minute dispute over the text of statements to be read at the signing ceremony. Clinton tried to broker a deal to get the event back on track, calling both foreign ministers from her car.

“The process started in 2007, so having taken that long already, a three hour delay isn’t really that important,” said Cengiz Aktar, a professor of international relations at Istanbul’s Bahcesehir University in a telephone interview. “The important thing is that they’ve overcome the problem and now we are really entering a new era for the two countries and for the Caucasus as a whole.”

“Opening the border will help with everything, in particular by making the atmosphere more conducive for dialogue between civil groups on both sides,” the professor said. “There may well be similar hiccoughs on the rest of the road but this is an extremely important milestone for the region.”

World War I

As part of today’s agreement, the countries pledged to set up a joint commission of historians to investigate the World War I killings, recognized by France and several other countries as genocide. Armenia says Ottoman Turkey killed 1.5 million Armenians in the fading days of the Ottoman Empire. Turkey cites a lower figure and says the deaths were part of civil strife in which many Turks also died.

A first sign of a thaw in relations came in September last year, when Turkish President Abdullah Gul went to the Armenian capital, Yerevan, to visit President Serzh Sargsyan and watch a World Cup soccer qualifying match between the two countries.

U.S. President Barack Obama visited Ankara in April and said he hoped efforts to normalize relations between the two would “bear fruit.” Obama called Clinton while she was on her way to the Zurich airport after the signing.

Allegations Rejected

While Turkey recognized Armenia when it gained independence from the Soviet Union in 1991, Turkey never agreed to full diplomatic relations because it rejects allegations that a genocide was carried out against Ottoman Armenians.

The border has been closed since 1993 when Turkey sealed it in solidarity with Azerbaijan in its conflict with Armenia over the enclave of Nagorno-Karabakh. Armenia occupied the region in 1994 after years of ethnic fighting.

Europe and the U.S. want former Soviet states in central Asia such as Azerbaijan to sell oil and gas to the West independently of Russia. That means transporting it to Turkey through the Caucasus, which has been riven by disputes such as the one between Turkey and Armenia.

London-based BP Plc opened a $3 billion oil pipeline from Azerbaijan to Turkey’s Mediterranean coast in 2005. The proposed $11 billion Nabucco project to carry natural gas via Turkey to Europe depends partly on Azeri supplies of the fuel.

To contact the reporter on this story: Janine Zacharia in Zurich at jzacharia@bloomberg.net; Ben Holland in Istanbul at bholland1@bloomberg.net.

Last Updated: October 10, 2009 17:24 EDT