Armenian-Azerbaijani Clashes
Armenian-Azerbaijani Clashes: Evaluating the Ukraine Factor
It may not be a coincidence that attacks took place when Russian appeared unable to help.
By Antonia Colibasanu - September 14, 2022
Major clashes erupted between Armenia and Azerbaijan along their shared border late Monday night. Both countries accused the other of instigating the fighting. Shortly after it began, Armenian Prime Minister Nikol Pashinyan spoke by phone with Russian President Vladimir Putin, reached out to the United Nations and called for a response from the international community. He said that since Baku had attacked territory that was internationally recognized as part of Armenia, Yerevan would invoke the Russian-led Collective Security Treaty Organization’s Article 4 collective security clause. Under the article, CSTO member states need to come to the aid of another member that’s under attack. In January, Kazakh President Kassym-Jomart Tokayev invoked the same clause, calling on Russia for military assistance after anti-government riots broke out in the country. In the Armenian-Azerbaijani clashes, Moscow hasn’t sent military support but did say on Tuesday that it had brokered a cease-fire (which hasn’t yet been confirmed by the two sides). The U.S. and EU, meanwhile, have called for de-escalation, while Turkey, Azerbaijan’s ally, said it supported Baku.
The clashes are the latest bout of fighting in a long-running conflict between Azerbaijan and Armenia. In 2020, they fought the Second Nagorno-Karabakh War, which ended in a Moscow-mediated cease-fire and the deployment of Russian peacekeepers. Since then, there have been sporadic border clashes, sparking fears of a larger confrontation. For the past six month – soon after the beginning of the war in Ukraine – hostilities have been escalating in and around the breakaway region of Nagorno-Karabakh, which is populated mainly by ethnic Armenians. The South Caucasus is an important buffer zone for Russia and a place where Russian, Turkish, U.S. and Iranian interests collide, so there’s always potential that a conflict here could draw in regional powers or destabilize Russia’s southern flank.
The roots of the conflict stretch back decades. In 1988, ethnic Armenians living in an Armenian-majority enclave in the Azerbaijan Soviet Socialist Republic called Nagorno-Karabakh Autonomous Oblast (NKAO) demanded that the territory be transferred to Armenia. But three years later, the Soviet Union collapsed before the issue could be resolved. In 1994, the First Nagorno-Karabakh War ended in a Russian-sponsored cease-fire, with Armenian forces in control of NKAO, which took possession of seven Azerbaijani territories to the west, south and east and declared independence. The status quo held until the Second Nagorno-Karabakh War began in September 2020, ending with another cease-fire negotiated by Moscow. Azerbaijan took control of part of Nagorno-Karabakh, including the towns of Shusha and Hadrut and the seven adjacent territories it had lost to Armenia in 1994. Armenian troops withdrew, but Russian peacekeepers deployed to the region to patrol the parts of the former NKAO that remained in the hands of ethnic Armenians.
In the early days of the war in Ukraine, officials in Yerevan and in Nagorno-Karabakh’s de facto capital of Stepanakert feared that Azerbaijan would take advantage of Russia’s and the West’s preoccupation to recapture more land in the breakaway region. Azerbaijan sees the whole territory as its own and has no interest in negotiating Nagorno-Karabakh’s status or that of the ethnic-Armenians living there.
The clashes that broke out in March resulted in Azerbaijan gaining control of Farukh, a village that lies in an Armenian-populated district of Nagorno-Karabakh. At the time, Russian forces successfully pressed both sides to end the fighting. The territory’s own troops left the area under Russian monitoring toward the end of the month, but Azerbaijani forces remained. Baku refused calls from the U.S., EU, France and Russia to pull its forces back to their previous positions. This led to the deployment of Russian peacekeepers to Farukh with the goal of preventing any further advances by Azerbaijani forces.
The timing of this week’s clashes is notable. As it became clear the war in Ukraine wasn’t ending any time soon, Azerbaijan found itself in a unique position. Not only could it provide Europe a much-needed alternative source of natural gas, but it, along with Turkey, its main ally in the region, also saw an opportunity to enhance its position as potential mediator between Russia and the West. While European and American delegations visited Azerbaijan for energy talks, Baku also maintained cordial relations with Moscow. It didn’t condemn the Russian invasion outright, but neither has it recognized the independence of the separatist regions of Donetsk and Luhansk. It instead continued to work with Turkey and pursued different opportunities in line with its national interests.
The current flareup began just a day after reports indicated that a counteroffensive launched by Ukrainian forces in eastern Ukraine was successful. Though it’s difficult to gauge the accuracy of these reports, given that most of the information about the operation is coming out of Kyiv, it seems clear that the morale of the Russian military has suffered greatly in recent months and may have reached its limit. If the Russian military has indeed suffered the kind of losses reported by most Western media, it needs to consider a new strategy. One option is to engage in another region where it has the upper hand. In Nagorno-Karabakh, Russia mainly plays the role of peacemaker rather than aggressor, seeing this as the best way to maintain its influence in the region. However, Moscow reportedly no longer has a full contingent of peacekeepers deployed to Nagorno-Karabakh, so it’s unclear whether it would be able to keep the peace there anyway.
This may be why Azerbaijan saw an opportunity to attack Armenia at a time when Russia appeared unable to help. We’ll know if this is the case in the next few days. If the cease-fire isn’t confirmed, and if fighting doesn’t stop and if Russia doesn’t come to Armenia’s aid, Moscow’s influence in the South Caucasus could diminish. Failing to intervene during a crisis would further weaken Russia’s position, while presenting opportunities – and headaches – for the West.
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The United States and Partners Announce Establishment of Fund for the People of Afghanistan
The United States, through the Department of the Treasury and the Department of State, and in coordination with international partners including the government of Switzerland and Afghan economic experts, today announced the establishment of a fund to benefit the people of Afghanistan, or the “Afghan Fund.”
The United States remains committed to supporting the people of Afghanistan amidst ongoing economic and humanitarian crises. Pursuant to Executive Order (E.O.) 14064, President Biden set a policy of enabling $3.5 billion of Afghan central bank reserves to be used for the benefit of the people of Afghanistan while keeping them out of the hands of the Taliban and other malign actors. The Afghan Fund will protect, preserve, and make targeted disbursements of that $3.5 billion to help provide greater stability to the Afghan economy.
The Taliban are not a part of the Afghan Fund, and robust safeguards have been put in place to prevent the funds from being used for illicit activity. The Afghan Fund will maintain its account with the Bank for International Settlements (BIS) based in Switzerland. The BIS is an international financial organization that provides a range of financial services, including banking services to central banks, monetary authorities and international financial institutions (see www.bis.org). An external auditor will monitor and audit the Afghan Fund as required by Swiss law.
“The people of Afghanistan face humanitarian and economic crises born of decades of conflict, severe drought, COVID-19, and endemic corruption,” said Wendy Sherman, United States Deputy Secretary of State. “Today, the United States and its partners take an important, concrete step forward in ensuring that additional resources can be brought to bear to reduce suffering and improve economic stability for the people of Afghanistan while continuing to hold the Taliban accountable.”
“The Afghan Fund will help mitigate the economic challenges facing Afghanistan while protecting and preserving $3.5 billion in reserves from Da Afghanistan Bank (DAB), Afghanistan’s central bank, for the benefit of the people of Afghanistan,” said Wally Adeyemo, United States Deputy Secretary of the Treasury. “The Taliban’s repression and economic mismanagement have exacerbated longstanding economic challenges for Afghanistan, including through actions that have diminished the capacity of key Afghan economic institutions and made the return of these funds to Afghanistan untenable. Through this Fund, the United States will work closely with our international partners to facilitate use of these assets to improve the lives of ordinary people in Afghanistan.”
“In response to the critical challenges facing the people of Afghanistan, the United States is already the largest donor of humanitarian assistance,” Sherman also noted. “We have worked with the World Bank and Asian Development Bank to make available more than $1 billion in assistance for basic services and other urgent needs, in addition to providing over $814 million in U.S. humanitarian aid directly to implementing partners to support the Afghan people while preventing funds from benefiting the Taliban. Now, the Afghan Fund will be part of our ongoing diplomatic and humanitarian efforts on behalf of the people of Afghanistan.”
According to the World Bank, income and economic output in Afghanistan have fallen 20-30 percent, imports have declined by approximately 40 percent, and about 70 percent of Afghan households report they are unable to fully meet basic food or non-food needs. Disbursements from the Afghan Fund could include keeping Afghanistan current on its debt payments to international financial institutions, which would preserve their eligibility for development assistance, and paying for critical imports, such as electricity.
ADDITIONAL BACKGROUND
Central Bank of Afghanistan (DAB)
When the Taliban took over Kabul, Afghanistan’s central bank, DAB, lost access to its accounts at financial institutions around the world—not just in the United States—because of the uncertainty regarding who could authorize transactions on DAB’s accounts. Since then, the economic situation in Afghanistan has continued to deteriorate due to the Taliban’s poor economic management and failure to restore critical capabilities to DAB, such as adequate anti-money laundering and countering terrorist finance (AML/CFT) controls.
To rebuild confidence among the international financial community, DAB must demonstrate that it has the expertise, capacity, and independence to responsibly perform the duties of a central bank. To move toward that goal, DAB must demonstrate that it is free from political interference,
has appropriate AML/CFT controls in place, and has undertaken a third-party needs assessment and onboarded a third-party monitor.
The Afghan Fund
The Afghan Fund is incorporated as a Swiss foundation established to protect, preserve, and—on a targeted basis—disburse $3.5 billion for the benefit of the Afghan people. The Afghan Fund can also serve as a vehicle to protect and disburse other Afghan central bank foreign reserves currently held in additional countries. These disbursements are intended to help address the acute effects of Afghanistan’s economic and humanitarian crises by supporting Afghanistan’s macroeconomic and financial stability.
Location of Assets
The Afghan Fund will maintain its account with the Bank for International Settlements (BIS). The BIS is an established international financial organization that provides a range of financial services, including banking services to central banks, monetary authorities and international financial institutions. See www.bis.org.
The BIS will act as intermediary bank and will not be involved in the governance of the Afghan Fund or perform any related functions such as approving disbursements.
Use of the Funds
In the short-term, the Board of Trustees of the Afghan Fund will have the ability to authorize targeted disbursements to promote monetary and macroeconomic stability and benefit the Afghan people. This could include paying for critical imports like electricity, paying Afghanistan’s arrears at international financial institutions to preserve their eligibility for financial support, paying for essential central banking services like SWIFT payments, and others.
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In the long-term, the goal is for funds not used for these limited purposes to be preserved to return to DAB. The United States has made clear that we will not support the return of these funds until DAB: (1) Demonstrates its independence from political influence and interference; (2) Demonstrates it has instituted adequate anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) controls; and (3) Completes a third-party needs assessment and onboards a reputable third-party monitor.
Afghan Fund Governance
The Afghan Fund is based in Geneva, Switzerland, and a Board of Trustees oversees the fund. The Board currently consists of two highly qualified Afghan economic experts with relevant macroeconomic and monetary policy experience, a U.S. government representative, and a Swiss government representative. The Afghan Fund has the support of international partners committed to supporting sustainable monetary and macroeconomic stability in Afghanistan. An external auditor will monitor and audit the Afghan Fund as required by Swiss law.
Legal Basis for the Transfer of the Afghan Central Bank’s Assets
On February 11, 2022, the President signed E.O. 14064 to help enable certain assets belonging to DAB held in the United States to be used to benefit the Afghan people. Subsequently, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a license authorizing the transfer of up to $3.5 billion of DAB funds for the benefit of the Afghan people.
Consistent with past practice and following the Taliban takeover, the Department of State certified two individuals pursuant to Section 25B of the Federal Reserve Act as having joint authority to receive, control, or dispose of property from the DAB’s account. Those individuals founded the Afghan Fund as a legal entity in Switzerland.
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INSS, Tel Aviv
Difficulties in the Negotiations with Iran: Implications for Israel
While the nuclear talks in Vienna have reached a stalemate and the chances of reaching an agreement appear to dwindle, Iran continues to accelerate its nuclear program. According to one report, within one month it would be able to enrich enough uranium to weapons-grade level that would be sufficient for three bombs. In this complex situation, Israel must – and in full cooperation with the United States – immediately formulate a new strategy vis-à-vis Iran
INSS Insight No. 1642, September 14, 2022
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EU's Borrell ‘less confident’ Iran deal can be quickly saved
The negotiations between the United States and Iran on renewing the nuclear agreement have run into serious difficulties following the opposition by the United States and the European partners to Iran's demand that the IAEA close the open files on the Iranian nuclear program before the implementation of the agreement (120 days after signing). At the same time, Iran continues to accelerate the program, including the enrichment of uranium using cascades of advanced centrifuges. Three scenarios are possible: a resolution of the crisis and achievement of an agreement; continued stagnation, i.e., low-intensity talks; or the collapse of the negotiations. The worst scenario for Israel is a continuation of the current situation, in which Iran could in a short time accumulate enough fissile material for weapons-grade enrichment for several nuclear facilities, while the temptation of a nuclear breakout increases. Thus, Israel should immediately formulate a new strategy regarding Iran. The government should conduct a discreet dialogue with the US administration and focus on proposals that seek to advance Israel’s military and strategic needs, including consolidating covert and effective cooperation with the countries of the region under the auspices of the United States.
The United States and Iran continue to clash over the mutual commitments that would enable a return to the nuclear agreement based on the document that was submitted to the sides by the European Union a few weeks ago. The US administration stated that Iran's response is not encouraging, and a statement published by France, the UK, and Germany on September 10, 2022 asserted that "this latest demand raises serious doubts as to Iran’s intentions and commitment to a successful outcome on the JCPoA." The heart of the disagreement is the Iranian demand to close the International Atomic Energy Agency's investigations before the date the agreement is re-implemented (120 days after the signing). The administration and the European partners in the negotiations have emphasized that the return to the nuclear agreement cannot be made conditional upon stopping IAEA investigations that are not related to the nuclear agreement; in contrast, Iranian President Ebrahim Raisi stated that "without resolving the IAEA's open investigations, a return to the nuclear agreement is meaningless." For his part, IAEA Director General Rafael Grossi stated that he would not close the investigations until Iran provides satisfactory explanations for the evidence found at three undeclared sites.
At the same time, Iran continues to advance its nuclear program. In recent days it began to enrich uranium to a level of 5 percent in the second of three cascades of advanced centrifuges (IR-6) that were installed at an underground facility at Natanz. These are in addition to the enrichment to 60 percent that began last year using advanced centrifuges at the upper facility at Natanz, and last month a second cascade of IR-6 centrifuges was put into operation at the underground facility at Fordow. The IAEA's latest report (of September 7), released before the meeting of the Board of Governors currently underway, states that Iran possesses 55.6 kilograms of uranium enriched to 60 percent – an amount sufficient for one bomb. According to a report by the Institute for Science and National Security (ISIS) in Washington, which tracks the progress of Iran's nuclear program, with its current stockpile Iran could enrich a sufficient amount of uranium to weapons grade for three bombs within a month, and five bombs within four months. According to this report, Iran is accumulating important experience that is relevant to a nuclear breakout decision regarding direct enrichment to a high level while skipping intermediate stages. Moreover, IAEA supervision on the ground has been greatly reduced, and Tehran's unwillingness to respond to the open questions posed by the agency makes it difficult to track possible diversion of enriched material. The spokesperson of the Atomic Energy Organization of Iran attacked the latest IAEA report, saying that it is a repetition of previous events driven by political interests due to international pressure, chiefly from Israel.
The issue of the IAEA investigations is a fundamental bone of contention. This, along with the publicity surrounding it, makes it very difficult for the United States and Iran to agree on the vague wording as it appeared in the first European draft, which was meant to enable conclusion of the agreement and the start of its implementation, while postponing the resolution for later. It is hard to see how the polarized positions of Washington and Tehran regarding the issue can be bridged, but it seems that at the current stage, all the parties involved – the United States, Iran, and the European countries – do not want to declare the collapse of the negotiations. From the perspective of the US administration, the interest remains what it was – achieving a diplomatic solution that will curb the Iranian advancement of its nuclear program. It is also clear to the United States that the alternatives are very problematic. In the coming months the Biden administration will be heavily engaged in the midterm congressional elections (November 8, 2022). Thus, it is certainly possible that the administration is interested in postponing dealing with the issue until after the elections, particularly when it is also currently facing increasing opposition to it from lawmakers within the Democratic Party.
Tehran also sees the current situation as the best of all possibilities, as it enables Iran to continue to progress in its nuclear program without new pressure placed on it. Therefore, the Iranian Foreign Minister declared that the negotiations are continuing, held talks with his counterparts in Oman and Qatar on the issue, and even placed indirect pressure on the European partners for talks while hinting that Iran would have the ability to answer their need for natural gas if the sanctions against Iran are removed. The European partners, for their part, are mainly preoccupied with the crisis surrounding Ukraine and with domestic economic issues and likewise are not eager to declare the negotiations over, which would obligate them to confront a possible deterioration. The two additional partners in the nuclear agreement, Russia and China, which are in a kind of "honeymoon" in their relations with Iran, are not concerned by Iran's progress in the program, and are not interested in an achievement for the Biden administration. Likewise, Russia is also not interested in additional natural gas flowing into the market.
IAEA: Iran's near weapons-grade uranium stock grows
Against this backdrop, three scenarios are possible:
Reaching an agreement currently seems problematic and formidable, but the sides continue to declare that they wish to achieve it. If the agreement is nonetheless renewed and implemented, the main achievements will be less enriched uranium in Iran's possession, a reduced level of enrichment, a freeze on the process of installing advanced centrifuges – in effect keeping Iran about half a year away from nuclear breakout capability, and renewed full IAEA supervision of the nuclear program. On the other hand, the large amount of knowledge accumulated in Iran cannot be erased, the advanced centrifuges will remain in Iran, and in the future Iran will be able to return to enrichment within a short time while enjoying the release of hundreds of millions of dollars of frozen funds outside its territory and the profits from oil and gas exports.
Continued stagnation, although under the guise of negotiations that could lead to an agreement, is the worst scenario for Israel. In this situation, while the sanctions imposed on Iran remain, Iran can continue and maybe even accelerate the advancement of its nuclear program while continuing to declare that if an agreement is reached, it would be able to turn back the progress on the program. In this scenario, Iran could reach the accumulation of sufficient fissile material for weapons-grade enrichment for several nuclear facilities within a short amount of time, and from there the temptation of a nuclear breakout is expected to increase.
While the collapse of negotiations and public acknowledgment by Washington and the European countries that the talks have failed would be seen by the agreement's opponents as a major achievement, it is doubtful that any of them has an effective response to Iran's continued progress in accumulating high-grade enriched uranium, or to the continued development and advancement of the other capabilities in the nuclear program. The US administration declared that it is also preparing for the possibility that it will be necessary to implement alternatives for not returning to the agreement, but it seems that aside from general statements it does not have an organized plan for dealing with Iran if the talks collapse. Furthermore, even after the midterm elections, the Biden administration will continue to cope with a need to address a long series of domestic problems (the economy, increasing social polarization, and more) and with external challenges that threaten American interests, chiefly the competition with China and the war in Ukraine.
This grave reality requires that Israel immediately formulate a new strategy regarding Iran. While Israel opposes a return to the agreement, thus far it has not presented a sustainable strategic alternative for coping with this situation. It is doubtful that the response of the international system and in particular the United States to the collapse of the talks will match Israel's aspirations, which are mainly a significant intensification of the sanctions and development of a "credible military option," in order to impose a "longer and stronger" agreement on Iran. In the United States there appears to be overwhelming bipartisan agreement on refraining from intervening in "unnecessary" wars, especially in the Middle East, and in addition, resources are currently channeled to the consequences of the war in Ukraine and preparedness regarding China. In these circumstances, the likelihood of building an effective coalition against Iran is low, as long as Tehran focuses mainly on developing enrichment and there is no unequivocal proof that it is working toward a nuclear weapon.
Assuming that the scenario of an agreement soon is less likely than the other two scenarios, it would be best for Israel to maintain a discreet dialogue with the US administration and focus its efforts on advancing proposals whose purpose is not harming the limited prospects of progress toward an agreement but rather advancing its military and strategic needs, including consolidating a framework of covert and effective cooperation with the region's countries, under the auspices of the United States. Indeed, the non-achievement of an agreement will likely encourage Iran to initiate aggressive actions against its neighbors with an emphasis on the US presence in the region, which Iran fiercely opposes. Israel must remember that even if the Biden administration does not win a majority in both houses of Congress in the midterm elections, there are still two more years of his presidency, and Israel's ability to maintain a good relationship with the President regarding the range of political-military issues on the agenda is of the utmost importance.
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Senior Research Associate bei GEPAGroup
2yEs scheint um einen Korridor in die Türkei zu gehen.