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Building Connections for Development in
Azerbaijan and the South Caucasus

Regional Digest July 23-29, 2022

Welcome to the #RestartConnects weekly digest on the main developments in the South Caucasus for the period July 23-29, 2022. You can also sign up to receive this digest via email here.

US Secretary of State Talks Karabakh Peace

On July 25, 2022, US Secretary of State Antony Blinken held separate telephone calls with Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan. In the readouts for both calls, Blinken reaffirmed continued US support for the progress registered following bilateral talks between the two leaders in Brussels as well as the recent meeting between Azerbaijani Foreign Minister Jeyhun Bayramov and Armenian Foreign Minister Ararat Mirzoyan in Tbilisi.

In his call to the Armenian Prime Minister, the US Secretary of State called the process a “historic opportunity to achieve peace in the region” and said the US “stands ready to engage bilaterally and with likeminded partners.” Blinken also offered both leaders US assistance in “helping facilitate the opening of regional transportation and communication linkages to help Armenia and Azerbaijan find a long-term comprehensive peace.” In the two separate calls, Blinken commended Pashinyan on related efforts to normalize relations with Turkiye in one and urged President Aliyev “to release all remaining Armenian detainees” in the other. The conversations came as expectations of another meeting between the Azerbaijani and Armenian leaders in Brussels appeared to be confirmed. Their last was on 22 May when European Council President Charles Michel said the next was expected to happen in “July or August.”

Russian Special Representative for Armenia-Azerbaijan Normalization Visits Baku, Yerevan

Following his 22 July visit to Baku, where he was received by Azerbaijani Foreign Minister Jeyhun Bayramov, the Russian Foreign Ministry Special Representative for the Normalization of Armenia-Azerbaijan Relations, Igor Khovayev, who is also technically the Russian Co-Chair of the OSCE Minsk Group, visited Yerevan six days later.

In their 28 July meeting, Foreign Minister Mirzoyan stressed the importance of holding negotiations between Azerbaijan and Armenia under the auspices of the OSCE Minsk Group though neither Khovaev or his American and French counterparts have conducted or coordinated their activities in that capacity since Russia invaded Ukraine earlier this year.

Nevertheless, the US and France says they are willing to resume negotiations in this format if Russia agrees, but Moscow says that the format is unworkable in the current situation while Baku does not consider it even necessary since the 2020 war. During his visit to Azerbaijan, Bayramov and Khovaev instead focused on the “the importance of full implementation of the provisions of the tripartite declarations signed by the leaders of Azerbaijan, Armenia and Russia to ensure peace and security in the region.”

Georgian Foreign Minister Visits Turkiye

On 28 July, 2022, Georgian Foreign Minister Ilia Darchiashvili paid an official visit to Turkiye where he met with his Turkish counterpart, Foreign Minister Mevlüt Çavuşoğlu. The two positively assessed relations between the two neighboring countries and announced their readiness to holding more such meetings in the future.

They also discussed the security environment in the region and welcomed the recent bilateral meeting of the Armenian and Azerbaijani Foreign Ministers in the Georgian capital facilitated by Darchiashvili. Foreign Minister Çavuşoğlu said that "Jeyhun Bayramov was satisfied with meeting held with Mirzoyan in Tbilisi.” US Investment Climate Statements says Azerbaijan Continues to Improve

The 2022 Investment Climate Statements issued by the US State Department says that the environment for business in Azerbaijan continues to improve though ‘significant challenges’ still remain. In particular, it says that the government seeks to attract foreign investment, diversify the economy, and encourage private sector-led growth.

"The economy of Azerbaijan grew 5.6% year-on-year in 2021, compared to a 4.3% contraction in the previous year. Both oil and gas (1.7%) and the non-oil and gas (7.2%) sectors of the economy expanded as the economy continued to recover from the pandemic," the report noted. However, it added,“a small group of government-connected holding companies dominates the economy, intellectual property rights enforcement is improving but remains insufficient, and judicial transparency is lacking.”

The report also paid special attention to the end of the 2020 Karabakh War and the development of the seven regions now returned from Armenian to Azerbaijani control.

“The government is also pursuing green energy projects in this region,” the report concluded. “Reconstruction is expected to continue over the coming years, along with continued special budget allocations provided for rebuilding and resettling these territories. Demining these territories as part of reconstruction efforts remains a priority of the Azerbaijani government.”

Armenia also fared well, though “obstacles include Armenia’s small market size, relative geographic isolation due to closed borders with Turkey and Azerbaijan, weaknesses in the rule of law and judiciary, and a legacy of corruption.” Like Azerbaijan and Georgia, the economy was “robustly recovering” from damage inflicted by the coronavirus pandemic though net foreign direct investment remained low.

“Despite improvements in some areas that raise Armenia’s attractiveness as an investment destination, investors claim that numerous issues remain and must be addressed to ensure a transparent, fair, and predictable business climate,” the country report ended. “A number of investors have raised concerns about the quality of dialogue between the private sector and government.”

Georgia was particularly lauded in comparison to its neighbors, but significant challenges were also identified there, especially in terms of the inability of the judiciary to rule on commercial cases independently or in a “timely, competent manner.”

“Other companies complain of inefficient decision-making processes at the municipal level, shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, accusations of political meddling, selective enforcement of laws and regulations, including commercial laws, and difficulties resolving disputes over property rights,” the country report ended.

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