AMERICAN UNIVERSITY OF ARMENIA POLITICAL AND ECONOMIC CONSEQUENCES OF OPENING THE ARMENIAN-TURKISH BORDER: IMPLICATIONS FOR ARMENIA AND TURKEY A MASTER’S ESSAY SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF POLITICAL SCIENCE AND INTERNATIONAL AFFAIRS FOR PARTIAL FULFILMENT OF THE DEGREE OF MASTER OF ARTS BY ANZHELA MAYILYAN YEREVAN, ARMENIA AUGUST 2012 1 SIGNATURE PAGE Faculty Advisor Date Date Dean Date American University of Armenia August 2012 2 Acknowledgments I would like to express my sincere gratitude to my faculty advisor Dr. Vahram Ter- Matevosyan for his support and understanding as well as his genuine interest in my topic. His guidance helped me in the whole process of research and writing of this essay and enabled me to develop deep understanding of the subject. I am very thankful to our interim dean of the Department of Political Science and International Affairs Dr. Douglas Shumavon for his kind and friendly attitude towards every student. Also I wish to acknowledge the whole faculty of our Department. The knowledge, academic advice and constructive criticism that they have given us helped me during the years of my study. Finally, I wish to thank my friends who have been next to me throughout these two years and the whole process of writing this essay. 3 Table of Contents ABSTRACT ............................................................................................................................ 5 Introduction ............................................................................................................................. 6 Literature Review.................................................................................................................... 9 Part 1. Political and Economic Consequences of Opening the Armenian-Turkish Border: Implications for Armenia ...................................................................................................... 15 Part 2. Political and Economic Consequences of Opening the Armenian-Turkish Border: Implications for Turkey ........................................................................................................ 29 Conclusion ............................................................................................................................ 38 Bibliography ......................................................................................................................... 41 4 ABSTRACT The given study aims to explore the political and economic consequences of opening the border between Armenia and Turkey. The essay proposes the argument that for Armenia the opening of the border implies economic benefits, whereas for Turkey it gives a framework to receive political dividends. For analysis of the study scholarly articles, statistical data, various databases, analytical documents, reports, and other studies are used. The essay demonstrates that the closed border strongly hampers Armenia’s economic development. Furthermore, Turkey’s eastern regions also can have economic benefits with open border. However, the analysis shows that Turkey will mainly gain in political terms by improving its international image and becoming a neutral actor in Nagorno-Karabakh conflict. 5 Introduction Borders between two states have both material and symbolic uses. They appear to be gateways to the outside world, areas of opportunity, contact and cooperation. Meanwhile, they can serve as barriers in dealing with the rest of the world, zones of insecurity, conflict and hostility. For the last nineteen years Armenian-Turkish closed border has been serving as a barrier rather than a gateway. Armenia has four borders, two of which are currently sealed. Moreover, Armenia is a landlocked country without a direct access to the sea which is a pledge for international trade. Thus, the closed border is not only a national security issue for Armenia but it also hampers the country to develop economically. That is why this is an issue the solution of which cannot be delayed. It is noteworthy to mention, though, that in recent years the situation has slightly changed. At least, we can mention Football Diplomacy in 2008 which being a milestone in Armenian- Turkish relations boosted a new wave of optimism towards normalization of relations between Armenia and Turkey and opening the border. Though 2008 initiative was frozen, both Armenia and Turkey showed explicitly that they are seeking for possible way-outs from the deep deadlock in which they have stuck for nineteen years. Though at the very beginning it was obvious that the rapprochement process was complicated by the Genocide issue and Nagorno-Karabakh conflict, this notwithstanding, both countries went on with the intention realizing the lost potential, both political and economic, that the deteriorated relations and the closed border bring about. Being a smaller country and having smaller economy as compared with Turkey, Armenia is considered to be the main beneficiary in case of the open border. Indeed, Armenia will have 6 substantial gains if the border opens. Moreover, this essay argues that the benefits will be more of economic nature. Armenia will have diversified routs which will help to reduce transportation time and costs, will have an access to the Mediterranean Sea and improve its export potential. Furthermore, with the open border the conflict risk will be lower than it is now. The latter will increase the foreign direct investments in Armenia contributing to higher inflow of the capital and production capacity. However, Turkey’s benefits are also significant. Due to its size and economic dynamism, there is a tendency to underestimate the economic, political and social costs to Turkey that the closed border brings about. The open border will help Turkey to fill the development gap that exists between its western and eastern regions. But, according to this essay Turkey will mostly benefit in political issues. With the open border Turkey will be able to realize its foreign policy aspirations; to reach “zero problems with neighbors,” at least with Armenia, perhaps become a regional power with more influence in resolving regional conflicts such as Nagorno-Karabakh, improve its international image, and go boldly with EU membership process. Taking into consideration the importance of the topic, the current essay is devoted to the Armenian-Turkish relations and the closed border. It will examine the political and economic consequences of opening the Armenia-Turkish border and demonstrate the costs and benefits both for Armenia and Turkey. Besides, the essay will address the issues that can challenge Armenia in case of the open border. In order to examine all the above-mentioned issues, the essay will try to answer the following research questions: RQ #1: What are the political and economic costs of the closed border between Armenia and Turkey? 7 RQ #2: What are the potential political and economic benefits of the open border between Armenian and Turkey? RQ #3: What are the potential political and economic challenges of the open border between Armenian and Turkey? The essay proposes the following hypothesis: opening the Armenian-Turkish border implies economic benefits for Armenia and political dividends for Turkey. In order to conduct the current study about the costs of the closed border between Armenia and Turkey and the potential benefits and challenges in case of the open border, analysis of secondary sources is done. In particular, scholarly articles are examined so as to have the picture of the events that describe the relations between Armenia and Turkey. Statistical data both concerning Armenian and Turkey are brought in the paper in order to show the full picture of the situation. Various databases, analytical documents, reports, studies and other documents prepared by credible international institutions and experts are further examined. The essay consists of introduction including research questions, hypothesis, methodology and literature review, two parts, conclusion and a bibliography. In part 1 the essay will illustrate the impact of the closed border on Armenia viewed both from political and economic perspective. It will also give a detailed description of challenges that can be anticipated with the open border. Part 2 of the essay is describing Turkey’s potential costs and benefits in case of the open border. Again, both political and economic aspects will be explored. At the end, conclusion and bibliography will be given. 8 Literature Review Despite the studies carried out with regard to the border issue between Armenia and Turkey, there are still controversial arguments around the consequences of the open border. Iskandaryan and Minasyan argue that from the perspective of Armenia, the relations with Turkey are a national security issue. Closed borders with two neighbors from a total of four put Armenia into a complicated situation where the dependency upon the other two neighbors rises.1 The open border would provide access to new markets, lower the transport costs and increase flexibility, and bring potential savings from removal of the embargoes and opening of the railway line.2 Furthermore, Armenia is bypassed in many regional projects; export and foreign investment are in poor conditions. The opening would also favorably impact Armenia’s political development and open the way to the county’s full integration into the region contributing to the accession process of Armenia into the EU.3 As for Turkey distorted relations with its neighbor first of all are an ‘issue of historical liability’ that has a negative impact on its international image and serves as a hindrance in its foreign policy aspirations. Being a country that is able to solve its problems with its neighbors and is ready to negotiate and make compromises on the most controversial issues, Turkey would be able to have better image in the US, the Muslim world, and especially in the EU.4 Moreover, Tocci et al add that the open border would help Turkey in its efforts to become an energy hub connecting Europe and the Mediterranean to the Caucasus and Central Asia, a crossroads of 1 Alexander Iskandaryan and Sergey Minasyan. 2010. Pragmatic Policies vs. Historical Constraints: Analyzing Armenia-Turkey Relations. Caucasus Institute Research Papers, #1: 41. 2 Center for Socio-Economic Research and Analysis. 2009. Doing Business in Armenia and Turkey. White Paper: 5. 3 Nathalie Tocci et al. 2007. The Closed Armenia-Turkey Border: Economic and Social Effects, Including Those on the People; and Implications for the Overall Situation in the Region. Study for the Foreign Affairs Committee of the European Parliament made under the framework contract with the Trans European Policy Studies Association (TEPSA): 10-13. 4Aybars Görgülü et al. 2010. Turkey-Armenia Dialogue Series: Assessing the Rapprochement Process. Caucasus Institute, TESEV Publications: 23. 9 north-south and east-west trade. Turkey’s integration in to the EU’s TRACECA program would be welcomed as Turkey-Caucasus-Caspian route is considered to be a cheaper and strategically beneficial railway.5 However, Suvaryan et al do not agree with Tocci’s argument explaining that Armenia could be of Turkey’s interest in terms of transit routes, however the role of Azerbaijan is crucial in such developments; the latter will be possible if the border with Azerbaijan is open.6 From the economic perspective, Turkey’s economy is much bigger than of Armenia. Indeed, according to IMF estimates for 2011, Turkey’s GDP in PPP terms constitutes 1.073 trillion which is nearly 60 times bigger than of Armenia’s GDP (17.941 billion)7 being the 16th on the list of world countries.8 Thus, due to Turkey’s size and economic dynamism there is a tendency to underestimate the economic potential that Turkey loses because of the closed border. The open border is not likely to have much impact on Turkey’s total foreign policy. Yet, a number of authors argue that Armenia could become a critical partner and market for Eastern Turkey, the least developed and poor region in Turkey.9 The closed border has had negative repercussions on the possible political, economic and social development of eastern Turkey, particularly Kars, Iğdır, and Ardahan that are bordering Armenia. It is worth mentioning that 5 Tocci et el. The Closed Armenia-Turkey Border: Economic and Social Effects, Including Those on the People; and Implications for the Overall Situation in the Region: 18. 6 Yuri Suvaryan et al. 2010. Trade and Economic Relations between Armenia and Turkey: Possible Developments and Tendencies. “Tntesaget” publishing house: 62. 7 International Monetary Fund. 2012. Report for Selected Countries and Subjects. 20/07/2012 (http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?sy=2009&ey=2012&scsm=1&ssd=1&sort =country&ds=.&br=1&c=911&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=67 &pr.y=6). 8 International Monetary Fund. 2012. Report for Selected Countries and Subjects. 20/07/2012 (http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?sy=2011&ey=2017&scsm=1&ssd=1&sort =country&ds=.&br=1&c=186&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC&grp=0&a=&pr.x=68&pr.y=1 3). 9James Bosbotinis and Irina Ghaplanyan. 2007. The Economic and Social Consequences of Reopening the Armenian Turkish Border: The Implications for the South Caucasus, Turkey, and Europe. Armenian Journal of Public Policy. Special Issue. Yerevan, Cost Press 72-73; Aybars Görgülü. 2008. Turkey-Armenia Relation: A Vicious Circle. TESEV Publications: 28; Tocci et al. The Closed Armenia-Turkey Border: Economic and Social Effects, Including Those on the People; and Implications for the Overall Situation in the Region: 15; Suvaryan et al. Trade and Economic Relations Between Armenia and Turkey: Possible Developments and Tendencies: 63. 10