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Azeri-Armenia Conflict May Soon Escalate, ICG Official Warns

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Oct. 1 (Bloomberg) -- The territorial dispute between oil-exporting Azerbaijan and neighboring Armenia may soon escalate amid rising violence and weapons buildup, according to a non-profit group dedicated to resolving global conflicts.

Until the 2011 breakdown in peace talks, “there was a process,” Lawrence Scott Sheets, project director for the South Caucasus at the International Crisis Group, said today by phone from Tbilisi, the Georgian capital. “It was not a successful process but just the existence of a process acted as a restraining factor.”

Armenia seized Nagorno-Karabakh, a mountainous enclave about the size of Rhode Island with a population of more than 100,000, and seven adjacent districts from Azerbaijan in a war after the Soviet Union’s collapse in 1991. Although major fighting ended with a cease-fire in May 1994, the two countries haven’t reached a peace agreement and clashes are common along the heavily militarized cease-fire line.

Peace talks mediated by France, Russia and the U.S. since a 1994 cease-fire broke down at the end of 2010. Azerbaijan, the third largest oil producer in the former Soviet Union, also has used oil revenue to boost military spending almost 30-fold in the past decade to $3.7 billion this year.

Possible political unrest in both countries has added to the risk of an escalation, Sheets said. Azeri President Ilham Aliyev will seek a third term in office in elections next week, while Armenia faces possible political turbulence as a result of planned opposition protests this autumn, he said.

To contact the reporter on this story: Zulfugar Agayev in Baku at zagayev@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net