TOPIC OF THE WEEK: Q&A on the 3rd Karabakh War

CAUCASUS / CENTRAL ASIA - Report 20 Sep 2023 by Ivan Tchakarov

The fast-developing story from Nagorno-Karabakh (NK) has made us bring forward a bit our CCA Weekly by offering our initial thoughts on this all-important development in the Caucasus. Our Sep 19th In Brief on the results of the Yerevan City Council elections, which we interpreted as a strong signal to assign higher country risk premium to Armenia, has unfortunately served as an eerie forecast of the start of what should be rightfully called the 3rd Karabakh War. We thought it only pertinent to place the results of the elections within the existing geopolitical context in the region, which we called explosive. In the CCA Weekly today, we extend our analysis, which still holds in full, by asking and answering what we deem are the key questions pertaining to the conflict and its ultimate resolution.

We provide some scenario analysis and conclude that there is a significant, 90-percent probability that the war will end victoriously for the attacking side, with Baku claiming full control of Nagorno-Karabakh. This has practically already happened given the announcement that NK has agreed to lay down weapons. In our view, subsequent steps would involve the gradual exit of the vast majority of ethnic Armenians to Armenia proper, accompanied by a corresponding process of moving Azeris to settle in NK. There is still a negligible, 10-percent probability that the international community might get involved militarily to help NK or that local fighters might somehow succeed in standing up to the Azerbaijan military should, for any reason, fighting re-emerge. While the baseline scenario might very well speed up the conclusion of a formal peace treaty between Armenia and Azerbaijan by removing from the discussion the key bone of contention, NK, we are skeptical that this would bring peace and stability to the Caucasus in the medium term.

On the contrary, the shifting geopolitical alliances and fast-changing security infrastructure will most likely make the region less predictable and more prone to further destabilization. Azerbaijan and Turkey will ultimately be the key beneficiaries from the war while Armenia, Russia and Iran will have the most to lose.

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