Armenia Warns of `Full-Scale War' If Karabakh Clashes Worsen

  • Fighting between Azeris, Armenians worst in almost 20 years
  • No disruptions to BP's oil pipeline near conflict area

Armenia warned a “full-scale war” could break out with Azerbaijan after the worst fighting in two decades erupted over the disputed Nagorno-Karabakh territory, threatening to destabilize a region flanked by Russia, Turkey and Iran.

Armenian President Serzh Sargsyan said his country could officially recognize the independence of Nagorno-Karabakh, a region that broke away from Azerbaijan, if the conflict escalated. Fighting continued overnight, undermining the declaration of a unilateral cease-fire by Azerbaijan after attacks by tanks and aircraft killed more than 30 people over the weekend. BP Plc said the clashes haven’t affected operations at its 720,000 barrel-a-day pipeline bringing oil to the Mediterranean.

“Further escalation of military operations can lead to unpredictable and irreversible consequences, up to a full-scale war,” Sargsyan said on his website on Monday after meeting ambassadors from the Organization for Security and Cooperation in Europe in Yerevan. “If military actions continue, larger Armenia will recognize the independence of Nagorno-Karabakh.”

The violence in the Armenian-controlled enclave, which is not internationally recognized, threatens to reignite full-scale fighting in the Caucasus mountains, part of a new arc of instability along Russia’s border that stretches north and west from Nagorno-Karabakh through Georgia, Ukraine and Moldova. Fighting between Armenia, a Russian ally, and Azerbaijan, which has stronger ties to NATO member Turkey, would bring more turmoil to the region and potentially disrupt a new energy corridor between central Asia and Europe.

Map of southern Caucasus

Azeri and Armenian bonds fell, snapping a two-month rally. The yield on Azerbaijan’s Eurobonds due March 2024 climbed 17 basis points to 5.63 percent, rising from a four-month low. The rate on Armenia’s notes due September 2020 jumped eight basis points to 6.37 percent, after touching the lowest in five months on Friday.

In the biggest loss of life since Russia brokered a truce almost 22 years ago, the fighting has killed 15 Azeri and 18 Armenian soldiers. At least one ethnic Armenian and two Azeri civilians were also reported killed, according to accounts from both nations, while the APA news service in Baku said a third Azeri civilian died Monday. Russian President Vladimir Putin, U.S. Secretary of State John Kerry and United Nations Secretary General Ban Ki-moon called for an immediate end to the fighting.

“Once begun, any military operations in this conflict zone can easily escalate and get out of control,” Thomas de Waal, a senior associate with Carnegie Europe specializing in Eastern Europe and the Caucasus region, wrote on the group’s Moscow Center website. “Everyone knows that a new Karabakh war would not just be tragic for Armenia and Azerbaijan, but devastating for the entire South Caucasus region.”

Armenian forces regained control of more positions that had been seized by Azerbaijan
after the fighting began, Artsrun Hovhannisyan, spokesman for Armenia’s Defense Ministry, said on Facebook Monday. Azeri forces repelled an attempt to recapture a military position in northeast Nagorno-Karabakh, destroying three tanks, the Defense Ministry in Baku said. It also released a video where it purportedly destroyed a command center deep inside the province. Accounts from neither side could be independently verified.

Trench Warfare

Tensions have been rising for more than a year along the contact line, where what de Waal estimates is 20,000 soldiers on either side facing each other in World War I-style trenches separated by 300 meters (1,000 feet) of ground dotted with landmines.

The confrontation dates back to the dying days of the Soviet Union, when a dispute over the territory between Armenia and Azerbaijan flared into a war that killed 30,000 and created a million refugees. Armenians took over Nagorno-Karabakh and seven adjacent regions districts from Azerbaijan in the 1991-1994 conflict.

OSCE mediators from the U.S., Russia and France have failed to negotiate a lasting peace agreement since the 1994 truce. Armenia says the enclave’s Christian Armenians, who declared independence from largely-Muslim Azerbaijan in 1991, have the right to self-determination. Azerbaijan demands respect for its territorial integrity.

Oil Calculus

What has changed is the economic balance of power as Azerbaijan has attracted more than $50 billion from BP and its partners in recent years. Energy revenues poured into the government’s coffers, allowing President Ilham Aliyev to turn Baku into a gleaming capital of skyscrapers and high-end boutiques, while also building up his army. Military spending increased 30-fold in the past decade and reached $4.8 billion in 2015, more than Armenia’s entire state budget.

BP’s pipeline, which criss-crosses the Caucasus from Azerbaijan through Georgia and then to the Mediterranean via Turkey, at one point runs fewer than 30 miles from the conflict zone. In the past, Nagorno-Karabakh separatists have threatened to attack the line to deprive Azerbaijan from key petro-dollars, although all BP operations in the country are “continuing as normal,” Tamam Bayatli, spokeswoman for the company’s regional office in Baku, said by phone Monday.

The territory remains a potential flashpoint in a region where Russia, which has a military base backed by a mutual-defense pact in Armenia, has fought wars in the past 20 years with Georgia and against Chechen insurgents. Putin is seeking an immediate cease-fire, the Interfax news service cited his spokesman as saying. The U.S. urged talks to settle the dispute, according to the White House website. Turkey condemned Armenia’s use of artillery and demanded an end to hostilities, according to a statement on the Turkish Foreign Ministry’s website.

‘More Serious’

Each side has blamed the other for the attacks, which targeted civilian areas and military units across the contact line. Azerbaijan’s Defense Ministry said on its website that the clashes were triggered by Armenian shelling. Armenia first reported the attacks and called for international intervention. The unrecognized Nagorno-Karabakh government said it was ready to discuss a truce “in the context of returning to the initial positions.”

“This is more than the customary resumption of low-level violence that is often observed in the spring, when the snows melt in the highlands of Karabakh and soldiers begin shooting at one another,” according to de Waal at Carnegie. “This is something much more serious.”

Before it's here, it's on the Bloomberg Terminal.