STRATFOR: EXPECTATIONS OF RENEWED FIGHT BETWEEN ARMENIA AND AZERBAIJAN RISING

Expectations of a renewed fight between Armenia and Azerbaijan over the Nagorno Karabakh region are rising, since Azerbaijan has started using the huge windfall of cash from its new pipeline to quintuple its defense budget. This time, the conflict could serve as a spark for the larger struggle between the United States and Russia, said the experts of Stratfor intelligence center. The conflict between Armenia and its neighbor Azerbaijan over the disputed Nagorno Karabakh region has crescendoed in recent months, since Azerbaijan has started seeing the enormous cash windfall from its new pipeline and Armenia has scrambled to secure a protective Russian presence within its borders. But the conflict between Azerbaijan and Armenia is about more than the two states and their disputed territory; the United States and Russia are using that conflict as a foothold to strengthen their positions in the region as they try to expel each other, the experts say. Armenia and Azerbaijan have long been deadlocked over the small sliver of land between the two states, though the conflict has been relatively dormant since the 1994 cease-fire. Technically, Nagorno-Karabakh is within Azeri territory, though it is controlled by Armenia. International pressure, lack of support from every nation but Russia and Iran, and fear of Azeri retaliation have kept Armenia from annexing the territory. Azerbaijan has been held back from retaking the land due to international pressure and the Azeri military’s relative weakness. Russia has maintained a shaky and controversial balance by supporting both sides. However, Azerbaijan began to see the possibility of change in 2006 with the completion of its Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which Western companies developed to feed oil to Europe. Azerbaijan not only became increasingly pro-Western, but it also saw tremendous new income. Azerbaijan’s president has already decided how he wants to spend his country’s newfound wealth: on defense. In 2004, Azerbaijan’s defense spending was approximately $175 million, but by the beginning of 2008, the country will begin spending at least $1 billion on defense. Armenia recently increased its defense spending by 20 percent -- from $125 million to $150 million, which obviously pales in comparison to Azerbaijan’s increase. Azerbaijan’s spending will go mostly toward air offensive capabilities, with Armenia’s going to air defense, though both now are looking to expand their ground capabilities. Armenia simply lacks the influx of energy income that Azerbaijan has. The enormous Armenian diaspora inside the United States has ensured that Armenia is one of the largest recipients of U.S. foreign aid, but Armenia’s neighbors -- Azerbaijan, Georgia and Turkey -- have shunned it economically and politically, leaving it with little opportunity for trade or expansion. The one neighbor Armenia has an open relationship with is Iran. In March, Iran and Armenia opened the Iran-Armenia natural gas pipeline; Iran ships natural gas north and Armenia converts the natural gas to electricity to export back south to Iran. The pipeline itself is owned by Russia, as is much of Armenia’s energy infrastructure, the experts note, www.stratfor.com reports.

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Headlines for July 04, 2007

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