Harnessing economic synergy: fuelling prosperity in Armenia-Azerbaijan reconciliation

In the aftermath of the recent conflict between Armenia and Azerbaijan, the urgent need for post-conflict reconciliation and future-building has become of paramount importance. While the border skirmishes and human losses have tragically become a disheartening ‘new normal’, the European Union must advance mutually beneficial economic policies that would appease both Armenia and Azerbaijan, alongside promoting political ideas such as peace, reconciliation, demarcation and delimitation. By leveraging the power of economic synergy, a prosperous future can be forged, rekindling hope and transforming the rhetoric of hatred into one of prosperity and cooperation.

The EU’s interest in promoting peace between Armenia and Azerbaijan is evident, extending beyond geopolitical dynamics. By prioritising peace in the South Caucasus, the EU can secure a conducive environment for trade, investment and socio-economic development, benefiting both the immediate parties involved and the Union itself.

The EU or any actor interested in Armenia-Azerbaijan peace should consider promoting economic initiatives concerning interdependence and resource efficiency; cross-border tourism development; and economic integration.

The Water-for-Energy Swap initiative holds promise in addressing critical economic and environmental challenges faced by both Armenia and Azerbaijan. The concept builds upon interdependence and resource efficiency principles, drawing on economic theories such as comparative advantage and optimal resource allocation. Trade that is free from obstacles and complications contributes to the more efficient allocation of resources in global markets, as the deadweight loss either decreases significantly or disappears. In addition, free trade makes states focus on their comparative advantages, thus maximising the possible gains from trade.

The bordering regions of Armenia adjacent to Azerbaijan have substantial water resources and Azerbaijan may avail itself of the opportunity to irrigate its bordering water-stressed regions. In reciprocation, Azerbaijan holds the potential to supply Armenia with the valuable hydrocarbon resources it lacks. This mutually beneficial arrangement not only fosters cooperation but also optimises the utilisation of scarce resources.

Armenia and Azerbaijan possess a wealth of cultural heritage, awe-inspiring landscapes and historical landmarks that have long captivated visitors from across the globe. Through the establishment of a collaborative cross-border tourism development initiative, these two nations can harness their shared tourism potential, paving the way for economic growth and enriching cultural exchanges. Cooperation could extend to the creation of shared tourist routes, infrastructure development and the establishment of cross-border cultural events and festivals.

The impact of this cross-border collaboration would be profound. A surge in tourism revenue would not only invigorate local economies but also contribute to the sustainable development of communities surrounding these captivating destinations. The creation of employment opportunities across various sectors, from hospitality to transportation, would empower individuals and uplift livelihoods. Moreover, by jointly curating memorable cultural events and festivals, Armenia and Azerbaijan would showcase their shared heritage, fostering a deeper appreciation and understanding between their respective populations.

Inspired by successful joint market initiatives in conflict zones, Armenia and Azerbaijan have the opportunity to foster economic cooperation and catalyse economic integration along their shared border. Examples like the Ergneti market in South Ossetia and the Sadakhlo market in Georgia demonstrate the potential for dialogue, compromise and shared interests. The Ergneti market, despite challenges of informal trade and smuggling, was an income source for Ossetians and Georgians, facilitating inter-ethnic trust-building. Similarly, the Sadakhlo market served as a hub for Armenians, Azerbaijanis and Georgians, promoting economic exchanges amid conflict and opening doors for dialogue.

Drawing from these experiences, an Armenian-Azeri bazaar along the border could be established. By locating it in regions with close civilian proximity and lower tensions, such as Tavush or Nakhichevan-Armenian border, opportunities for economic cooperation could flourish. Initial trials focusing on specific sectors, like agriculture, could be conducted to assess success before expansion.

The above-proposed initiatives, when examined collectively, offer substantial economic implications and synergies that can contribute to post-conflict reconciliation and economic revitalisation in Armenia and Azerbaijan. The two countries stand at a crucial juncture, where economic cooperation and shared prosperity can become catalysts for reconciliation and lasting peace. If the EU vigorously asserts its influence, it stands to gain an array of substantial political and economic dividends from the ongoing process. As the world watches, Armenia and Azerbaijan have a historical and second-to-none opportunity to create a new narrative—one that is rooted in economic collaboration, cultural exchange and a shared vision for a prosperous future. The attainment of peace transcends mere intentions and the rhetoric of peace espoused by Armenian leadership. The meetings of Armenian and Azerbaijani leaders brokered by Charles Michel, while noteworthy, fall short of being sufficient in themselves.

For peace to materialise, it must be rooted in tangible prerequisites, notably economic cooperation and, if attainable, a deep-seated interdependence. By forging ahead on this path facilitated by the EU, Armenia and Azerbaijan may set an inspiring example for nations grappling with conflicts, showing that reconciliation is not only possible but also a pathway to shared economic progress and sustainable peace.

This article is a contribution from a member or partner organisation of Friends of Europe. The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.