European Geopolitical Forum's Research on: "A Pragmatic Review of Nagorno-Karabakh Conflict Resolution: Could Economic Incentives Help Break the Current Stalemate ?" Briefing by Mr. George Niculescu, Head of Research, the European Geopolitical Forum-EGF, Brussels, Director of Programs, Centre for East European and Asian Studies, Bucharest

BACKGROUND  A ‘political settlement’ will be hardly sufficient:  Economic incentives might be the most appealing;  Little “light at the end of the tunnel” to peaceful settlement;  Azerbaijani-Armenian negotiation process and the wider relationship governed by a severe lack of trust.  Confidence building measures and steps towards conflict resolution are extremely difficult to develop.

Key Questions Underlying the Research: 1. Could be brought to the forefront the South- Caucasus “pragmatism”? 2. Would it be added value in starting talk about “jumping over the fire”?

The Aim and the Method  To test the idea of whether economic incentives could help break the current deadlock over Nagorno-Karabakh.  A questionnaire submitted to local and international experts inquiring on whether “a return of land for access to infrastructure projects” could contribute towards breaking the current stalemate.

The Overall Finding of the Research: Economic incentives, cannot, on their own, substitute a political settlement to the conflict, including its territorial dimensions. However, they could play a key role in confidence building.

Evidence supporting the utility of economic incentives:  break the current economic isolation of Nagorno- Karabakh and Armenia;  provide economic benefits for Azerbaijan;  offer Nagorno-Karabakh with a broader range of economic options and opportunities;  forge economic interdependencies which could serve as ‘mutual security guarantees’;  a stronger basis for the economic and humanitarian rehabilitation of the seven districts around Nagorno- Karabakh;  could turn the "zero-sum game" thinking into a "win- win" solution.

But also cautious views:  would not lessen Armenia’s position in calling for recognition of the independence of Nagorno- Karabakh;  Armenian ‘hard liners’ would never accept a territorial compromise;  "Lowland-Karabakh“ is the only place to safely resettle 400,000 Armenian IDPs;  cross-border oil and gas pipeline projects hardly viable from a financial perspective;  Russia might tacitly oppose, given its regional economic and political interests.

How to use economic incentives in N-K conflict management?  use economic incentives as a confidence building measure. Need to synchronize them with the work of the Minsk Group.  establishment of a Regional Development Agency (RDA) in charge of preparing and implementing regional projects;  examples of regional infrastructure projects which could be open to Armenian participation;  obstacles hindering possible Armenian participation in regional infrastructure pilot projects;

Conclusions  Starting a comprehensive dialogue on post- conflict scenarios involving joint regional energy and infrastructure projects;  possible topics for the agenda:  joint rehabilitation of infrastructure both in Nagorno-Karabakh and in the occupied districts.  priorities, joint management, sources of funding, inter-operability of technical standards and other challenges to planning and implementing regional infrastructure projects.  how to help the process of resettlement of IDPs and refugee communities?

The Potential Role of the EU and of Other International Stakeholders:  Providing frameworks for dialogue;  Guaranteeing security and political aspects of economic pilot projects and associated confidence building measures;  Compelling both sides to take a more flexible and constructive approach towards the conflict;  Focus creative energies on fostering regional economic cooperation;  Bringing in experience from the Balkans on conflict dissuasion and fostering economic cooperation;

 “Economic incentives are a key element of a new vision for peace in the South Caucasus reinforced by comprehensive, integrated and sustainable cooperation, which would ultimately enable free movement of people, goods, services and capital at the regional level, lead to economic integration and the opening of all closed borders.“  Is this vision feasible? How could it be implemented?