EXECUTIVE SUMMARY AND RECOMMENDATIONS

Europe Report N°167

11 October 2005

Settlement of the long running Nagorno-Karabakh conflict -- the most significant
obstacle to stability in the South Caucasus -- remains elusive, despite more
optimistic noises recently from Azerbaijan and Armenia. Eleven years after the
1994 ceasefire, burgeoning defence budgets, increasing ceasefire violations, and
continuing demonisation by each side of the other side are ominous signs that
time for a peace agreement is running out. But a compromise can now be
constructed around an approach that, while addressing all the matters in
dispute, leaves the core issue of Nagorno-Karabakh's ultimate status open for
later resolution, after other measures have been put in place.

Key elements of that proposed settlement package include the withdrawal of the
Armenia-backed Nagorno-Karabakh forces from the occupied districts of Azerbaijan
surrounding the entity; the renunciation by Azerbaijan of the use of force to
reintegrate the entity; the deployment of international peacekeepers; the return
of displaced persons; and the re-opening of trade and communication links.
Nagorno-Karabakh's status should ultimately be determined by an internationally
sanctioned referendum with the exclusive participation of Karabakh Armenians and
Azeris, but only after the above measures have been implemented. Until then
Nagorno-Karabakh would remain part of Azerbaijan, though in practical terms it
would be self-governing and enjoy an internationally acknowledged interim
status.

Today Armenia and Azerbaijan remain divided on vital points. Azerbaijan does not
accept any compromise of its territorial integrity, nor does it agree that
Nagorno-Karabakh's population alone can vote on determining its final status.
Armenia is not willing to support withdrawal from the seven occupied districts
around Nagorno-Karabakh, or allow the return of Azerbaijan internally displaced
persons (IDPs) to Nagorno-Karabakh, until the independence of Nagorno-Karabakh
is a reality. There has been tentative discussion of a possible plebiscite to
determine the entity's final status, but with none of the necessary detail
agreed as to who would vote on what, when and how, nor any agreement as to what
other settlement conditions would create the context for such a vote.

The Minsk Group of the Organisation for Security and Cooperation in Europe
(OSCE), currently co-chaired by France, Russia and the U.S., has been
facilitating negotiations since 1994. After a decade of fruitless talks, a new
format of meetings, the Prague Process, involving direct bilateral contact
between the foreign ministers of Armenia and Azerbaijan was initiated in 2004.
During the past twelve months the participants and OSCE co-chairs alike have
publicly expressed optimism that a deal can be reached soon. But there is an
urgent need to translate that generalised optimism into very specific agreement
and action.

An earlier Crisis Group report explored how the Armenian and Azeri communities
of Nagorno-Karabakh and the surrounding districts live today and view resolution
of the conflict.[1] Against that background, this report examines the causes of
the Nagorno-Karabakh conflict, analyses the OSCE-led negotiations process as it
has evolved since 1992, and identifies the necessary elements of a workable and
achievable peace plan.

RECOMMENDATIONS

To Avoid a Resumption of Fighting:

1. All parties to the conflict should respect the 1994 ceasefire, refrain from
using force, not promote the use of force, and end the arms race in the region
by halting the rise of defence budgets.

To Create an Appropriate Environment for Conflict Settlement:

2. Azerbaijan should resume direct contact with the de facto Nagorno-Karabakh
authorities and facilitate the development of closer contact between Karabakh
Azeris and Karabakh Armenians.

3. The de facto Nagorno-Karabakh authorities should end support for settlement
of formerly Azeri majority areas with Armenians, including by:

1. stopping privatisation of land, homes and businesses in those areas;
2. ceasing to establish local administrations and infrastructure in the
   occupied areas adjacent to Nagorno-Karabakh; and
3. protecting the remaining Azeri homes.

4. Armenia should encourage the de facto Nagorno-Karabakh authorities to take a
more conciliatory stance on resolution of the conflict.

To Address the Substantive Matters in Dispute:

5. The parties should sign an agreement that includes the following elements:

1. renunciation of the threat or use of force to settle disputes, including any
   that may arise in connection with the implementation of the peace agreement;
2. creation of a joint commission including Azerbaijan and Nagorno-Karabakh
   representatives and chaired by the OSCE to supervise implementation;
3. incremental withdrawal of Nagorno-Karabakh forces backed by Armenia from all
   occupied territories around Nagorno-Karabakh, but beginning with five districts
   and occurring simultaneously with the deployment of international peacekeepers;
4. withdrawal of Nagorno-Karabakh forces backed by Armenia from the Kelbajar
   district once appropriate security measures are in place at the Murov mountain
   pass, and from the Lachin district following agreements guaranteeing secure
   communications through the Lachin corridor;
5. safe and voluntary return of displaced persons to their pre-war homes in the
   formerly occupied districts, once withdrawal and international deployment have
   been completed;
6. assurances for free movement of people and goods, including the lifting of
   all blockades and the reopening of all transport and trade routes (road and
   rail) closed as a result of the conflict;
7. implementation of confidence-building measures in cooperation with
   international organisations including the UN, International Committee of the Red
   Cross, OSCE and non-governmental organisations; and
8. identification of a referendum mechanism for resolving the final status of
   Nagorno-Karabakh, as set out below, with provision until then for the entity to
   have internationally recognised interim status, and its governing bodies to be
   elected under international supervision.

6. The final status of Nagorno-Karabakh should be decided by a
self-determination referendum, which would:

1. be held after the return of displaced Azeris to former Azeri-majority areas
   in Nagorno-Karabakh and after an international conference determines that
   Nagorno-Karabakh has met international preconditions for statehood, including
   the protection of minority rights, such review to be conducted for the first
   time five years after the signing of the peace agreement;
2. give Nagorno-Karabakh an appropriate range of options, including unity with,
   and secession from, Azerbaijan;
3. be held with the exclusive participation of Karabakh Armenians and Azeris;
   and
4. have its exact modalities agreed upon in talks chaired by the OSCE, based on
   the principle that all parties will recognise the validity of its result.

To Facilitate Public Acceptance of the Settlement:

7. Azerbaijan should allow Karabakh Azeris to play a bigger role in the
negotiations and the internal political process, including by passing
legislation allowing Karabakh Azeris to elect the head of their community,
ensuring voting rights for displaced persons in the 2005 parliamentary
elections, and permitting all candidates to campaign in collective centres.

8. Government officials and media in Azerbaijan and Armenia should refrain from
using belligerent and xenophobic language against "the other".

9. Officials involved in the negotiations process should agree to a broad common
strategy for disseminating information about that process, coordinate efforts to
present to the public elements of a possible agreement, and not be reluctant to
start a debate on highly sensitive questions.

To Build Confidence and Guarantee Sustainable Peace:

10. Donors should assist Armenia and Azerbaijan in developing and carrying out
small, cross-border, sub-regional trade, humanitarian and public health
projects, including in response to disasters, and should fund and help carry out
programs aimed at improving mutual understanding, tolerance and reconciliation
that target civil society, teachers and journalists.

11. Donors should carry out a common assessment mission of needs in
Nagorno-Karabakh and the adjacent occupied districts, and once a peace agreement
is signed should hold an international donor coordination conference and begin
implementing projects in the former conflict zone.

12. Armenia and Azerbaijan should each investigate war crimes, prosecute those
responsible and adopt legislation to give amnesty to those who participated in
the conflict but did not commit serious offences.

13. Armenia and Azerbaijan should establish joint commissions to:

1. make a political assessment of the conflict's causes and consequences; and
2. deal with inter-state property return and compensation questions.

To Increase the Prospects for a Peace Agreement and to Give It Stability:

14. The UN Security Council, the OSCE and the EU Council of Ministers should
pledge to serve as guarantors of the peace agreement.

15. The OSCE should expand the mandate of the Personal Representative of the
Chairman-in-Office to include working with civil society, media and opposition
political forces in order to facilitate contacts between the sides at the local
level and build confidence and opening an office in the occupied territories,
staffed with political, human rights and elections officers.

16. The EU should become more actively engaged in the conflict resolution effort
by basing the office of its Special Representative for the South Caucasus in the
region.

17. The EU should include long-term programs and strategies to promote
confidence building in its Action Plans with Armenia and Azerbaijan.

Tbilisi/Brussels, 11 October 2005

[1] Crisis Group Europe Report N°166, Nagorno-Karabakh: Viewing the Conflict
from the Ground, 14 September 2005.

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