Red Line: Nagorno-Karabakh, Greek debt crisis and Yulia Tymoshenko

Armenian President Serge Sargsyan and Azerbaijani President Ilham Aliyev met in the Russian city of Kazan at a meeting hosted by Dmitry Medvedev. Source: ITAR-TASS

Armenian President Serge Sargsyan and Azerbaijani President Ilham Aliyev met in the Russian city of Kazan at a meeting hosted by Dmitry Medvedev. Source: ITAR-TASS

Each week, Voice of Russia hosts Red Line, a discussion about the events of the week, as seen from Moscow. This week, the status of Nagorno-Karabakh, austerity measures in Greece, and Yulia Tymoshenko.


Participants: Ekatarina Kudashkina, Sergei Strokan, Mira Salganik, Sabina Frazer, John Nomikos

Ekaterina Kudashkina: This week we will start with a big story over a small territory – Nagorno-Karabakh. The dispute between Armenia and Azerbaijan is one of the oldest and fiercest armed conflicts in the post-Soviet space. We will then turn our eyes to Greece, where the Greek parliament finally approved a new austerity program. And finally we will examine the latest twist in the career of Yulia Tymoshenko, who is facing up to 10 years of prison on charges of abuse of power.

Mira Salganik: All three topics that we have chosen for this program have a very distinct European dimension.

Ekaterina Kudashkina: Yes, they all have some relation to security and stability in Europe. So, let us go straight to the subject. Beyond the headlines – our first section, in which we will look at Nagorno-Karabakh – a tiny Caucasus mountain area, squeezed between Armenia and Azerbaijan. This week Presidents Dmitry Medvedev and Barack Obama put additional pressure on Armenia and Azerbaijan to find a lasting solution. Armenian President Serge Sargsyan and Azerbaijani President Ilham Aliyev met in the Russian city of Kazan at a meeting hosted by Medvedev. But the meeting brought no breakthrough, to the utter disappointment of both sides as well as the world powers actively mediating the conflict under the umbrella of the OSCE Minsk Group – Russia, France and the United States.

Sergei Strokan:  Just two days after the Kazan meeting, Azerbaijani President Aliyev declared that the country’s military expenditures “have been increased 20 times over the past seven years and at present exceeded the Armenian budget by 50 percent.” He continued: “We venerate our martyrs, they will be revenged. The military buildup will continue.”


Ekaterina Kudashkina: Not surprisingly, he was rebuffed by Sargsyan, who said: “We are for bilateral concessions, but must we make concessions with a state that is prepared to train weapons on us?

Sergei Strokan: The Kommersant daily, quoting a highly-placed unnamed Kremlin source, revealed that after the Kazan summit, President Medvedev, while extremely disappointed, retained his determination to make it clear to both parties that he would agree to continue his mediating efforts only if the Armenian and Azerbaijani leadership ceased their present-day tactics of foot-dragging and declare their willingness to sign a legally-binding document on a long-lasting solution in Nagorno-Karabakh.


Mira Salganik: I think we have to make a brief historical introduction to the issue for those who might find it difficult to even point out Nagorno-Karabakh on the world map. The territorial dispute broke out in 1988, but even before that there was not much love between Shia Muslim Azerbaijan and Christian Armenia. Despite the Soviet propaganda of the fraternal family of all nations and things, the idea was already rather worn-out; it was crumbling.

Sergei Strokan: And by that time, the Nagorno-Karabakh autonomous republic –predominantly populated by Armenians – was under the jurisdiction of the Soviet Republic of Azerbaijan. But, it announced its desire to secede from the control of Baku.

Mira Salganik: The resulting war for Nagorno-Karabakh broke out in 1988 and went on until 1994. More than 30,000 lives were lost, and the whole thing left Armenia and Azerbaijan in a stalemate.

Ekaterina Kudashkina: Nagorno-Karabakh was added to the long list of the unrecognized states all over the world.

Sergei Strokan: And as we see, the talks on its future status, which started as early as 1994 – 16 years ago – within the framework of the Minsk Group of the Organization for Security and Cooperation in Europe (OSCE), haven’t yielded any tangible results.

It looks like the world leaders are engaged in something like a Sisyphean task, rolling a large stone to the top of a hill from which it will inevitably roll back down again.


Most experts give grim predictions for the future of the Nagorno-Karabakh conflict; but I think there is more than one reason to believe that both sides, while trading accusations and building up their military might, still would not risk another war to resolve the issue.


First, the leadership in Baku and Yerevan obviously understand that if a war broke out, it would severely undercut, if not bury, their ambitions of integrating into another “big family”- the family of European nations.


Ekaterina Kudashkina: Shortly before his trip to Kazan, President Aliyev paid a high-profile visit to Brussels and he was reported to have used this opportunity to meet with key EU officials responsible for energy and the European Neighborhood Policy (ENP). Azerbaijan has been a part of the ENP since 2007 and it’s also been developing increasingly close ties with the EU as a cornerstone of its foreign policy. And don’t forget that this is a location where there are huge international interests, oil interests and gas interests.

Sergei Strokan: Baku is now negotiating an association agreement with the EU that includes an easing of visa restrictions. This will allow a greater number of people to travel to the EU and eventually lead to a visa-free travel regime. For his part, Armenian President Serge Sargsyan, during a recent visit to the Council of Europe Parliamentary Assembly in Strasbourg, reaffirmed what he called “a shared historical and cultural legacy with the European family of nations.”

Ekaterina Kudashkina:  I agree with Sergei that in the long run it would be extremely foolish to allow the conflict, and although the ethnic and religious contradictions are there, these are people who have lived side by side for many years. So it is way more complicated than it might seem from outside. Let us hope that reason prevails. To support the adherence to good reason, let me give you some economic considerations. Azerbaijan with its vast gas reserves –estimated to be at least 2.2 trillion cubic meters – is the key to the EU’s southern energy corridor. The country is already committed to supplying gas to the EU and, being the “gateway” to Central Asian gas, Azerbaijan also exhibits great potential as a transit state.

Sergei Strokan: This is more proof that they would hardly “train weapons” on Armenia, as President Sargsyan said. I think that Aliyev would hardly try to scare off foreign investors and force the West to look for alternative suppliers.

Ekaterina Kudashkina: Also, Azerbaijan is seeking much closer cooperation with NATO; Armenia is a member of the Collective Security Treaty Organization (CSTO), made up of seven former Soviet republics with Russia as its informal leader. Now, 16 years after its creation, the body has worked out a comprehensive mechanism for preventing conflicts, including a collective rapid deployment forces. So, a seemingly tiny Armenia is not alone, as the leadership in Baku surely knows.

Mira Salganik: And the Armenian Diaspora, which is so strong both in the United States and Europe, must be weighing on Aliyev’s mind. But Armenia doesn’t want another conflict with Azerbaijan, since it is so insistent on stressing its historic rapprochement with Turkey.


Ekaterina Kudashkina: So it is high time to turn to our expert, Sabina Frazer, Director of the European program with the International Crisis Group.

Sabina Frazer: Of course, the Kazan Summit was a big disappointment, especially because the co-chairs had expressed a great deal of hope and optimism that there would be an agreement on the basic principles. It’s really still fundamental issues that separate Azerbaijan and Armenia. And I think that here we have to go back to the origins of the conflict. For the Armenian side, they want to have an agreement where the right to self-determination and secession of Nagorno-Karabakh will be clear and, on the other hand, the Azerbaijani side wants to make sure that Nagorno-Karabakh will continue to remain inside the borders of Azerbaijan or, if it does get independence, this will be once the rest of Azerbaijan agrees to that. It was clear prior to Kazan that they had not been trying to inform their people and to convince their people that a solution was necessary. And I think it’s also very worrying that we still see very radical rhetoric coming particularly from Baku, but also in Armenia. If there is going to be an agreement on Nagorno-Karabakh, the presidency in both Azerbaijan and Armenia has to be much clearer in public, in Baku and in Yerevan, explain to people that this agreement is necessary to avoid a future war.

Ekaterina Kudashkina: What do you think is the major problem? This is an area where people have lived side-by-side – Armenians and Azerbaijanis – and it wasn’t as explosive as it is now. So, why has that happened?

Sabina Frazer: Armenians and Azerbaijanis have lived side by side for four centuries. But we have a situation of 20 years of separation and there has been very negative rhetoric, where people were brought up basically hating each other. And it’s going to take years for people to change that and to again feel trust and confidence with each other.

Ekaterina Kudashkina: As I spoke to a number of analysts, they were telling me that there are some fears that the whole situation might explode again. I have my doubts. How do you see that?


Sabina Frazer: I am also concerned that there is a possibility that a war will start again. If this negotiation process fails, it will put us in a very precarious situation. I believe that Russian President Medvedev has played a very important role over the past couple of years. And it’s now questionable whether or not, in the election period, he will be able to continue playing such a hands-on role. The French and the Americans are also going to have elections soon, so if we don’t get an agreement in the coming couple of months, it’s clear that the negotiations are going to go onto the backburner.  Without an active negotiations process, it’s going to encourage both sides to think more about military conflict.

Sabina Frazer: Correct. I think neither Azerbaijan nor Armenia are too keen to join NATO right now. Of course, they are keen on increasing their ties with NATO, but NATO membership is very far down the line. The same thing is true with the EU. None of the countries of the South Caucasus has a clear EU membership commitment. So, it’s very difficult for either NATO or the EU to really put pressure on Azerbaijan or Armenia to resist a war, because they don’t have anything to offer, no clear “carrot.”

Ekaterina Kudashkina: How about economic considerations?

Sabina Frazer: It is true that if Azerbaijan went to war, this would undermine its capacity to export oil and gas, but also I think that Azerbaijan feels this could be a quick war, and that they could take back one or three of the occupied territories in a few days, and that this wouldn’t have a direct effect on their pipelines. This is the wrong calculation, because the Armenians are also prepared to retaliate. So, if a war starts, I don’t think it will be a short war. It will be something that will last numerous months and years, which would have an impact on Azerbaijan’s ability to export its reserves.


Ekaterina Kudashkina: Did you travel there?


Sabina Frazer: Yes, I’ve been to Karabakh, and one additional element that we don’t talk about is the people of Karabakh itself – both Karabakh Azeris and Karabakh Armenians. It’s clear that if there was an agreement on basic principles, it would be necessary to include them more in how to implement this agreement and how to reach a Comprehensive Peace Agreement.

Their sentiment, especially that of Karabakh Armenians, is more hardline than the sentiment in Yerevan, because they feel the security threats more clearly.


Ekaterina Kudashkina: And now I suggest we might move on to our next section – Between the Lines – in which we usually look at the most notable stories of the week. This time I suggest we discuss The Guardian editorial published June 29 focused on the recent developments in Greece. It is entitled “Greece and austerity: Brussels v. the people.”

“For anyone who has ever worried about the democratic deficit in Europe,” the editorial begins, “here it was, laid bare… Under orders from Brussels and Washington, MPs in Athens passed a slew of stringent measures even while hundreds of thousands of protesting Greeks faced massive amounts of teargas and riot police.”


The Guardian story says: “Those protesters were not a vocal minority; polls suggest that up to 80 percent of Greeks reject these austerity measures.”

Sergei Strokan:  All this reminds me of the Arab Spring revolutions. In each of the countries affected, it all started with power showing total disregard for the grievances of its own people. Their protests, however passionate and justified, were ignored. And then it burst.

Ekaterina Kudashkina: But this time the situation is different. [Greek Prime Minister George] Papandreou is not a dictator. I’d say that Greece has been caught between Scylla and Charibdis.  In one of his recent statements, EU economic affairs chief Olli Rehn made it clear that if the radical measures were not ratified by Athens’s parliament, Greece would not receive more money, and the country needs the money. We’re talking about 12 billion euros to pay wages and pensions in the coming month. So, if it doesn’t get the money, it automatically defaults on its 355 billion euro debt. Is it a shake-up for the whole euro-zone?


Sergei Strokan:  Greece adopted the first package of austerity measures roughly a year ago – and it hasn’t worked.

Mira Salganik: The question is why? Are you saying the measures are bad, or, still it’s more up to corruption, and lack of transparency, or lack of efficiency, perhaps; and mismanagement? And bureaucracy? There ought to be a reason why it didn’t work.


Sergei Strokan: Some analysts say Russia might face a similar scenario. Sergei Ulatov, the resident World Bank economist in Moscow, said: “By 2030, the debt level would be unsustainable like in Greece. Right now, we are mostly helped by oil prices and not by a very prudent macroeconomic policy.”

Ekaterina Kudashkina: Could that be the reason Russian Finance Minister Alexei Kudrin urged the government to cap annual spending increases at 4 percent? And now there is more discussion about introducing new taxes?

Mira Salganik: Ulatov expressed just his opinion, not the official position of the World Bank. And the World Bank, as far as I know, says that Russia, which is one of the world’s largest energy exporters, is going to have monetary and current account surpluses this year and in 2012. "Russia faces no traditional fiscal sustainability issues," according to the World Bank.


Ekaterina Kudashkina: Just let me remind you – we’re talking not of economics, but of democracy now. The Guardian story is all about Greece and democracy – or, a lack of it. The editorial looks into just how democratic the process of decision-making on those painful issues is. And their point is that to save the whole of the euro-zone from another financial crisis, the Greek government was made to act against the will of its own people. Which is not exactly a democratic procedure. Let me quote the paper: “What the socialist government has just accepted is just as brutal and radical as any structural-adjustment policy imposed by the International Monetary Fund - only it has been forced on Greece by its supposed friends and neighbors in the euro-zone.”

Sergei Strokan: These measures really are radical – to say the least. Here’s a brief list. A big increase in income taxes and national insurance contributions, 150,000 public-sector jobs to be cut, and those keeping their jobs are facing a salary cut of 15 percent.


Mira Salganik: Well, it’s the price people pay for the excesses of their elites.

The point is, Greece is in debt, right? It has to pay it up or this is a blow on the euro-zone.


Sergei Strokan: Some say that spending cuts, privatizations and tax increases could wipe out the country’s middle class. And we all know just how important it is for a nation’s successful economic development.

Ekaterina Kudashkina: Now it reminds me of the Arab Spring. Countries like Libya, or Yemen, where the change goes especially painfully, have almost no middle class – their societies have been strongly polarized, which only made them weaker in the face of more economic blows.

Before we turn to our guest speaker for his expert opinion, I’d like to quote the Guardian editorial for the last time: “Greece is being pumped with cash so it can repay its debts to German and French banks. The financiers are being bailed out, while the economy craters, society is pushed to breaking point and Greek politics becomes ever more combustible.”

And now let’s listen to Dr. John Nomikos, Director of the Athens-based research center, the Institute for European and American Studies.

John Nomikos: The point is, we had a very critical vote in the Greek parliament. The government passed the bill by 155 votes, but the point is that we have a critical problem in Greece. The social skeleton of Greek society is falling apart, we have increased unemployment, many people right now are losing their jobs; we have a big security problem here – not only along the Greek-Turkish border, but the illegal immigration problem is getting worse.

Now on the one side we have the success of the Greek government, and on the other side we have the break up of the Greek society. So in the short term, the government is winning, but in the long term, the society is going to have a lot of problems that are going to increase instead of decrease.

Ekaterina Kudashkina: Austerity measures have been in place for a year and a half, and they haven’t worked?

Dr. John Nomikos: Well, not exactly what they promised. Instead of seeing some light in the tunnel, we see more frustration, we see more people losing jobs, we see more medium-size companies shut off, we see the increase of unemployment, we see increase of crime. In other words, there is no balance between austerity measures and some light in the tunnel regarding economic development.


Ekaterina Kudashkina: But what could be done about the situation?


John Nomikos: Well, the point is that the people should realize that the problem in Greece is not only in reforming the public administration or the Greek government in general, the problem is systemic. The biggest problem is corruption, so we need independent justice, justice to combat corruption. People are frustrated, because they see what sacrifices they are being asked to do, in the long term they see no light.

Ekaterina Kudashkina: So with the current austerity measures being voted on and adopted there is still no more light in sight?

John Nomikos: Well, the government needs to do the reforms faster, but we are a Mediterranean country; when we have summer time, things go slow. In September-October, people will come back to work, the situation is going to be like a social volcano, and I am afraid that we are going to have more social problems in if something has not happened yet, and we may find ourselves in a surprise, like in elections.



Ekaterina Kudashkina: And now we will move on to Red Line’s concluding section – Face in the News. The face in the news we are going to discuss this week must be familiar to many of our listeners:  Yulia Tymoshenko.  Ms. Tymoshenko, known in Ukraine as the “gas princess,” twice prime minister of Ukraine - now in opposition - faces a term of up to 10 years on charges of abuse of power. The charges are connected to a contract she signed with Russian Prime Minister Vladimir Putin after a gas dispute with Russia in early 2009. Ukrainian officials claim Tymoshenko caused the country to lose nearly $200 million when she signed the contract.

Sergei Strokan: The opposition insists that Yulia Tymoshenko has become a subject of sort of political vendetta on the part of her long-time arch-enemy, Ukrainian President Victor Yanukovich, and there is a belief that he wants simply to put her to jail to sideline her from big politics well before parliamentary and presidential elections in the country.

Ekaterina Kudashkina: In a situation like this, the Ukrainian opposition usually turns its eyes to the West seeking support. However, this time things are not that simple. Although Western governments have not come down publicly on Tymoshenko’s side, visiting EU politicians have told Ukraine’s current leadership that they are concerned about the possible use of "selective justice" in Ukraine.


Sergei Strokan: I think this is the maximum support Yulia Tymoshenko can enjoy at that time.


Ekaterina Kudashkina: It is a universal scenario: a dethroned leader is accused of a something that no one opposed while said leader was in office. And the list of charges is standard:  the abuse of power, embezzlement of state funds, corruption. The leader denies everything, declaring the accusations are false and politically motivated. Western human rights campaigners express their concern, but this can hardly change anything. So it is all the same over and over again. We have seen that dozens of times, all over the world.


Yulia Tymoshenko, with her trademark braid, first hit the world headlines and became an international figure in 2004, as a leader of the “Orange Revolution,” which brought hundreds of thousands to the streets prompting Victor Yanukovich to accept his defeat in the 2004 presidential election.


Ms. Tymoshenko has been known in Ukraine as the Gas Princess since the late 1990s, as the owner of a company that traded in Russian gas. Already at that time there were nasty rumors of stolen gas and avoided taxes, but she soon became the Gas Princess and the richest woman in the whole of the 50-miliion people Ukrainian nation. After the Orange revolution she became the first woman to be elected prime minister of Ukraine. That is a rather simple story.

Sergei Strokan: But by February 2010, many people were disillusioned with the Orange Revolution leaders. What strikes me now is a certain similarity of all victorious street actions - Orange revolution, or Jasmine revolution, or any other.

Ekaterina Kudashkina: They seem to be always following a standard pattern – any flower revolution eventually results in a massive popular disillusionment, and that plays an important role in further political developments. Take Yulia Tymoshenko for example: She is still popular across the country, but she could not raise another mass protest action nor unify the opposition. She is no longer a valid political figure.


Mira Salganik: Yet, President Yanukovich remembers that Tymoshenko narrowly lost to him in last year’s presidential elections. He knows her to be a ferocious enemy with a well deserved reputation as a political firebrand, the type that never takes “no” for an answer. Yanukovich will do his best, whatever he can, to put her behind bars or to find any other way to keep her away from big politics.  


Ekaterina Kudashkina: Still, I want to review the charges against her, the charges that carry a maximum sentence of 10 years in prison. The prosecution alleges that Tymoshenko, without consulting her government, forced the then-head of the state energy firm Naftogaz to sign the gas deal with Russia's Gazprom. Ms. Tymoshenko says the case against her is part of a wider political plot. She says: "The aim of this trial is the liquidation of a working opposition in Ukraine."

Sergei Strokan: The gas supply agreement ended a stand-off between Moscow and Kiev over the pricing of Russian gas, which had led to supplies being cut off to Western Europe.  Although it has since been denounced by the Yanukovych leadership as a sell-out, Kiev is continuing to observe it.


Mira Salganik: Meanwhile Western Europe is continuing to look for more reliable ways of getting gas supply.


Ekaterina Kudashkina: Would you agree that this dramatic clash between Tymoshenko and Yanukovich looks more like a fight for the room at the top rather than a real struggle of two political parties with different political agendas?


Sergei Strokan: Although there is a lot of difference in the programs of Yanukovich’s Party of Regions and Tymoshenko’s Batkivschina (it is Ukrainian for “Fatherland”) this is not what the two are fighting over. Much depends on chance and momentary political expediency. Strangest political alliances are formed and broken up in what looks as a chaotic game without any rules.

I’d say the trump card in Ukrainian political game is Russia – a politician in Ukraine has primarily to take a stand vis-à-vis Russia, this will be the declaration of intent on which a politician is to be judged by the electorate.


Ekaterina Kudashkina: And Ukrainian leaders use to make dramatic turnarounds in their stance on the relations with Russia depending on what electoral group’s support is a priority at the moment.


Sergei Strokan: Symbolically, this was the case with all major political players in the last years. For instance, Yulia Tymoshenko who at one time viewed Moscow as a threat, and was largely seen as anti-Russian ended with signing a gas deal with Putin. And Yanukovich, who initially was considered pro-Russian is now accusing Tymoshenko of trading national interests to Russia!


Ekaterina Kudashkina: Yanukovich who only last year needed the voices of Russia-friendly electorate while being an incumbent, as the president now is begging for friendly prices for gas and is secretly negotiating expanding cooperation with NATO which he lambasted during his presidential campaign! And he has given green light to the notorious Sea-Breeze manoeuvre in the Black Sea which irritated Moscow so much. So what kind of signals is he giving?


Sergei Strokan: I think by trying to sue Tymoshenko for “gas treason,” Yanukovich is showing he is not a puppet of Moscow.

Ekaterina Kudashkina: I guess we ought to ask our experts to further elaborate on this important factor in Ukraine’s political makeup. I suggest we talk to Arkady Moshes, the Director of the Russian Program at the International Studies Institute in Helsinki, Finland.

Arkady, could you please explain to us, in your opinion, why the process against Ms. Tymoshenko has started, because no one seemed to mind her signing the contract when she was doing that in 2009?

Arkady Moshes: I think the main reason behind these processes is internal Ukrainian politics, the Party of Regions is very quickly losing popularity and support, and it is facing ever more unpopular reforms, and parliamentary elections are coming about a year from now. It would be very difficult for the Party of Regions to guarantee a parliamentary majority if the opposition is powerful and strong. The only chance for the Party of Regions to stay in power is to weaken the opposition. The Party of Regions wants the opposition not to have such a powerful, energetic, charismatic leader as Yulia Tymoshenko.


Ekaterina Kudashkina: Is it going to affect the relations between Ukraine and Russia?

Arkady Moshes: I would say not very much, because the opposition cannot run on a pro-Russian platform in any way, and Ukrainian-Russian relations are now in a very bad shape, they are stagnating, none of the questions that are currently on the agenda is being solved or actually can be solved. Because after Yanukovich so badly played the Sebastopol card last year, he doesn’t have another trump card to use. Russia is in the driver’s seat, because if Russia doesn’t get control of the Ukrainian pipeline system, it can continue the construction of the by-pass pipelines; it can further affect gas prices for Ukraine. The Ukrainian political elite is now fully aware of the troubles in which it finds itself, and the case against Tymoshenko would not be able to affect Russian-Ukrainian relations in any way.

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