Vol. 3, No. 7 (April 01, 2010)

Turkey-Armenia: Borders and trade

Javid Valiyev
Research Fellow
Center for Strategic Studies (Baku, Azerbaijan) 

On October 10, 2009, Turkey and Armenia signed two protocols in the capital of Switzerland, Zurich, to establish diplomatic ties and to open the borders.  Four months later, however, neither the Turkish nor the Armenian parliament has ratified them, something required for them to enter into force.  But in this period, it has become obvious that however politically important these accords were, for Armenia, it is a matter of vital economic importance that the border with Turkey be reopened.  

The borders between Armenia and Turkey were closed by Ankara in 1993 to protest Armenian occupation of Azerbaijani territories and in response to Yerevan’s political demands on Turkey.  These borders have not reopened, something that has forced Yerevan to explore expanding ties with Iran, but  because of Iran’s international isolation, the geopolitical and geo-economic competition between Iran and Russia, and Tehran’s own financial constraints, Iran has not been able to do much to help Yerevan.

Armenia’s difficulties increased after the August 2009 Russian-Georgian war, which effectively blocked the only route Armenia had had up to then for imports and exports.  As a result, Armenia stepped up its effort to reopen the border with Turkey, and if the protocols are ratified, Armenia will be able to escape from its current isolation.  Consequently, despite criticism from the Armenian diaspora and the Armenian opposition, the Yerevan government has felt compelled to pursue its new course with Turkey.  (The opposition and diaspora support opening the borders, but they oppose dropping Armenia’s political demands against Turkey, something Turkey requires for this accord to go forward).

Armenia’s economic situation is far from enviable.  A landlocked state without good relations with any of its neighbors and one that has no natural energy resources, it has to find a way to acquire energy from abroad and to export its products.  But if Armenia viewed its situation differently, it could have certain advantages: a regional market of 170 million consumers and access to oil and gas from the Caspian basin.  Unfortunately for Armenia, its government until recently has not been able to gain access to these advantages because of its demands that Turkey represent the events of 1915 as “a genocide” and because of its occupation of Azerbaijani territory.  Before August 2009, it could use Georgia as a lifeline to Russia, but the war there ended that. 

Russian forces not only damaged the Poti and Batumi ports but also closed the Russian-Georgian border thus closing Armenia’s only route out and severely limiting Moscow’s ability to help its economy.  CIS figures suggest that Armenia’s economy fell 19 percent in 2009, and its external trade more than twice that amount.  Similar declines, at least in the export sector, can be expected if the protocols are not ratified and the Turkish-Armenian border remains closed.  

Prior to signing the protocols, Yerevan had insisted that Turkey was in violation of international law for its closure of the borders given that various international accords require that landlocked states be provided access to the seas.  That argument does not stand up, however, because until August 2009, Armenia was able to carry out trade across Georgia and with Iran.  Moreover, there has been significant trade between Armenia and Turkey (through Georgia and Iran) even when the borders have been officially closed: trade turnover between the two rose from USD 4.5 million in 1993 to USD 30 mln. in 1997 to USD 200 million in 2008.  There are some 20 shareholder companies involved, and the Turkish-Armenian Business Council has been functioning since 1997.

Since 2003, there have been flights between Yerevan and Istanbul, Antalya, and Trabzon and bus tours from Yerevan to Antalya and Istanbul.  Some 40 to 75,000 Armenians now work illegally in Turkey.  Besides, there is a roaming accord between Turkish and Armenian GSM operators.  And there is also a five-plus-five year contract signed between Turkish Unit Group on the one hand and Armenia’s Ministry of Industry and Energy and Armenian Electric company on the other.  The latter will enable Turkey to start purchasing electricity from Armenia once the borders are open.  For all these reasons, one cannot say there is an economic blockade or even that the border is totally closed.  Instead, what has happened is that the “closure” has increased transport costs between the two countries by 10 percent and  delayed deliveries by two days.

Having said this, it is important to recognize that the issues of recognition and of opening borders are connected in an important way.  Lacking diplomatic ties, the investment risk point for each side has increased.  If Armenia restores its relations with Turkey and Azerbaijan, its investment risk point would fall by 25 percent and Armenia’s GDP would increase by as much as 30 percent.  

Opening the borders would have the greatest impact on labor migration.  According to a UNDP report, more than a million Armenians have left their country for economic reasons in the past 20 years.  If the economy improved as a result of the opening of the border, some of them might return. 

But whatever some Armenians claim, opening the borders will have only a marginal impact on Turkey as a whole, a country whose economy and trade are several orders of magnitude larger than Armenia’s.  Nonetheless, in several regions, the opening of the borders would help Turkey, something that explains local Turkish support for restoring trade across that frontier. 

Clearly, the Russia-Georgia war along with the global financial crisis has increased Armenia’s need for reopening the borders.  For this reason, the issue of opening borders has become a trump card for Turkey, a country that has more than economic issues at stake in whatever happens along that border.