Armenia vs. Azerbaijan

Armenia prides itself on being the first nation to formally adopt Christianity (early 4th century). Despite periods of autonomy, over the centuries Armenia came under the sway of various empires including the Roman, Byzantine, Arab, Persian, and Ottoman. During World War I in the western portion of Armenia, the Ottoman Empire instituted a policy of forced resettlement coupled with other harsh practices that resulted in at least 1 million Armenian deaths - actions widely recognized as constituting genocide. The eastern area of Armenia was ceded by the Ottomans to Russia in 1828; this portion declared its independence in 1918, but was conquered by the Soviet Red Army in 1920.

Armenia remains involved in the protracted Nagorno-Karabakh struggle with Azerbaijan. Nagorno-Karabakh was a primarily ethnic Armenian region that Moscow recognized in 1923 as an autonomous oblast within Soviet Azerbaijan. In the late Soviet period, a separatist movement developed that sought to end Azerbaijani control over the region. Fighting over Nagorno-Karabakh began in 1988 and escalated after Armenia and Azerbaijan attained independence from the Soviet Union in 1991. By the time a ceasefire took effect in May 1994, separatists, with Armenian support, controlled Nagorno-Karabakh and seven surrounding Azerbaijani territories. Following a Second Nagorno-Karabakh War that took place in September-November 2020, Azerbaijan recaptured much of the territory it had lost a quarter century earlier and under the terms of a cease fire agreement, Armenia returned the remaining territories it occupied to Azerbaijan.

Turkey closed the common border with Armenia in 1993 in support of Azerbaijan in its conflict with Armenia over control of Nagorno-Karabakh and surrounding areas, further hampering Armenian economic growth. In 2009, Armenia and Turkey signed Protocols normalizing relations between the two countries, but neither country ratified the Protocols, and Armenia officially withdrew from the Protocols in March 2018. In 2015, Armenia joined the Eurasian Economic Union alongside Russia, Belarus, Kazakhstan, and Kyrgyzstan. In November 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement (CEPA) with the EU. In spring 2018, Serzh SARGSIAN of the Republican Party of Armenia (RPA) stepped down and Civil Contract party leader Nikol PASHINYAN became prime minister.

Azerbaijan - a secular nation with a majority-Turkic and majority-Shia Muslim population - was briefly independent (from 1918 to 1920) following the collapse of the Russian Empire; it was subsequently incorporated into the Soviet Union for seven decades. Azerbaijan remains involved in the protracted Nagorno-Karabakh conflict with Armenia. Nagorno-Karabakh was a primarily ethnic Armenian region that Moscow recognized in 1923 as an autonomous oblast within Soviet Azerbaijan. In the late Soviet period, a separatist movement developed which sought to end Azerbaijani control over the region. Fighting over Nagorno-Karabakh began in 1988 and escalated after Armenia and Azerbaijan attained independence from the Soviet Union in 1991. By the time a ceasefire took effect in May 1994, separatists, with Armenian support, controlled Nagorno-Karabakh and seven surrounding Azerbaijani territories. Following a Second Nagorno-Karabakh War that took place in September-November 2020, Azerbaijan recaptured much of the territory it had lost a quarter century earlier and under the terms of a cease fire agreement, Armenia returned the remaining territories it occupied to Azerbaijan.

In the 25 years following its independence, Azerbaijan succeeded in significantly reducing the poverty rate and has directed revenues from its oil and gas production to develop the country's infrastructure. However, corruption remains a problem, and the government has been accused of authoritarianism. The country's leadership has remained in the Aliyev family since Heydar ALIYEV became president in 1993 and was succeeded by his son, President Ilham ALIYEV in 2003. Following two national referendums in the past several years that eliminated presidential term limits and extended presidential terms from 5 to 7 years, President ALIYEV secured a fourth term as president in April 2018 in an election that international observers noted had serious shortcomings. Reforms are underway to diversify the country's non-oil economy and additional reforms are needed to address weaknesses in government institutions, particularly in the education and health sectors, and the court system.

66 districts (rayonlar; rayon - singular), 11 cities (saharlar; sahar - singular);

rayons: Abseron, Agcabadi, Agdam, Agdas, Agstafa, Agsu, Astara, Babak, Balakan, Barda, Beylaqan, Bilasuvar, Cabrayil, Calilabad, Culfa, Daskasan, Fuzuli, Gadabay, Goranboy, Goycay, Goygol, Haciqabul, Imisli, Ismayilli, Kalbacar, Kangarli, Kurdamir, Lacin, Lankaran, Lerik, Masalli, Neftcala, Oguz, Ordubad, Qabala, Qax, Qazax, Qobustan, Quba, Qubadli, Qusar, Saatli, Sabirabad, Sabran, Sadarak, Sahbuz, Saki, Salyan, Samaxi, Samkir, Samux, Sarur, Siyazan, Susa, Tartar, Tovuz, Ucar, Xacmaz, Xizi, Xocali, Xocavand, Yardimli, Yevlax, Zangilan, Zaqatala, Zardab

cities: Baku, Ganca, Lankaran, Mingacevir, Naftalan, Naxcivan (Nakhichevan), Saki, Sirvan, Sumqayit, Xankandi, Yevlax

1 American Ave., Yerevan 0082

Under the old Soviet central planning system, Armenia developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics, in exchange for raw materials and energy. Armenia has since switched to small-scale agriculture and away from the large agro industrial complexes of the Soviet era. Armenia has only two open trade borders - Iran and Georgia - because its borders with Azerbaijan and Turkey have been closed since 1991 and 1993, respectively, as a result of Armenia's ongoing conflict with Azerbaijan over the separatist Nagorno-Karabakh region.

Armenia joined the World Trade Organization in January 2003. The government has made some improvements in tax and customs administration in recent years, but anti-corruption measures have been largely ineffective. Armenia will need to pursue additional economic reforms and strengthen the rule of law in order to raise its economic growth and improve economic competitiveness and employment opportunities, especially given its economic isolation from Turkey and Azerbaijan.

Armenia's geographic isolation, a narrow export base, and pervasive monopolies in important business sectors have made it particularly vulnerable to volatility in the global commodity markets and the economic challenges in Russia. Armenia is particularly dependent on Russian commercial and governmental support, as most key Armenian infrastructure is Russian-owned and/or managed, especially in the energy sector. Remittances from expatriates working in Russia are equivalent to about 12-14% of GDP. Armenia joined the Russia-led Eurasian Economic Union in January 2015, but has remained interested in pursuing closer ties with the EU as well, signing a Comprehensive and Enhanced Partnership Agreement with the EU in November 2017. Armenia's rising government debt is leading Yerevan to tighten its fiscal policies - the amount is approaching the debt to GDP ratio threshold set by national legislation.

Prior to the decline in global oil prices since 2014, Azerbaijan's high economic growth was attributable to rising energy exports and to some non-export sectors. Oil exports through the Baku-Tbilisi-Ceyhan Pipeline, the Baku-Novorossiysk, and the Baku-Supsa Pipelines remain the main economic driver, but efforts to boost Azerbaijan's gas production are underway. The expected completion of the geopolitically important Southern Gas Corridor (SGC) between Azerbaijan and Europe will open up another source of revenue from gas exports. First gas to Turkey through the SGC is expected in 2018 with project completion expected by 2020-21.

Declining oil prices caused a 3.1% contraction in GDP in 2016, and a 0.8% decline in 2017, highlighted by a sharp reduction in the construction sector. The economic decline was accompanied by higher inflation, a weakened banking sector, and two sharp currency devaluations in 2015. Azerbaijan's financial sector continued to struggle. In May 2017, Baku allowed the majority state-owed International Bank of Azerbaijan (IBA), the nation's largest bank, to default on some of its outstanding debt and file for restructuring in Azerbaijani courts; IBA also filed in US and UK bankruptcy courts to have its restructuring recognized in their respective jurisdictions.

Azerbaijan has made limited progress with market-based economic reforms. Pervasive public and private sector corruption and structural economic inefficiencies remain a drag on long-term growth, particularly in non-energy sectors. The government has, however, made efforts to combat corruption, particularly in customs and government services. Several other obstacles impede Azerbaijan's economic progress, including the need for more foreign investment in the non-energy sector and the continuing conflict with Armenia over the Nagorno-Karabakh region. While trade with Russia and the other former Soviet republics remains important, Azerbaijan has expanded trade with Turkey and Europe and is seeking new markets for non-oil/gas exports - mainly in the agricultural sector - with Gulf Cooperation Council member countries, the US, and others. It is also improving Baku airport and the Caspian Sea port of Alat for use as a regional transportation and logistics hub.

Long-term prospects depend on world oil prices, Azerbaijan's ability to develop export routes for its growing gas production, and its ability to improve the business environment and diversify the economy. In late 2016, the president approved a strategic roadmap for economic reforms that identified key non-energy segments of the economy for development, such as agriculture, logistics, information technology, and tourism. In October 2017, the long-awaited Baku-Tbilisi-Kars railway, stretching from the Azerbaijani capital to Kars in north-eastern Turkey, began limited service.

telecom market struggles to provide an effective national telecom service; country remains dependent on the economic health of  Russian and EU economies; fixed-line penetration falling, driven by growth in mobile and fixed-line broadband; growth of 4G networks and falling prices due to growing competition; fixed broadband is growing but remains low by international comparisons; flat mobile market; strong growth predicted for mobile broadband market; government participating in a project to ensure eventual nationwide 5G network; government approved plans for a new data center built via public-private partnership; communication technologies sectors have attracted foreign investment; top importer of broadcast equipment from China (2021)

Armenia's government-run Public Television network operates alongside 100 privately owned TV stations that provide local to near nationwide coverage; three Russian TV companies are broadcast in Armenia under interstate agreements; subscription cable TV services are available in most regions; several major international broadcasters are available, including CNN; Armenian TV completed conversion from analog to digital broadcasting in late 2016; Public Radio of Armenia is a national, state-run broadcast network that operates alongside 18 privately owned radio stations

the dispute over the break-away Nagorno-Karabakh region and the Armenian military occupation of surrounding lands in Azerbaijan remains the primary focus of regional instability; residents have evacuated the former Soviet-era small ethnic enclaves in Armenia and Azerbaijan; Turkish authorities have complained that blasting from quarries in Armenia might be damaging the medieval ruins of Ani, on the other side of the Arpacay valley; in 2009, Swiss mediators facilitated an accord reestablishing diplomatic ties between Armenia and Turkey, but neither side has ratified the agreement and the rapprochement effort has faltered; local border forces struggle to control the illegal transit of goods and people across the porous, undemarcated Armenian, Azerbaijani, and Georgian borders; ethnic Armenian groups in the Javakheti region of Georgia seek greater autonomy from the Georgian Government

Azerbaijan, Kazakhstan, and Russia ratified the Caspian seabed delimitation treaties based on equidistance, while Iran continues to insist on a one-fifth slice of the sea; the dispute over the break-away Nagorno-Karabakh region and the Armenian military occupation of surrounding lands in Azerbaijan remains the primary focus of regional instability; residents have evacuated the former Soviet-era small ethnic enclaves in Armenia and Azerbaijan; local border forces struggle to control the illegal transit of goods and people across the porous, undemarcated Armenian, Azerbaijani, and Georgian borders; bilateral talks continue with Turkmenistan on dividing the seabed and contested oilfields in the middle of the Caspian

Tier 2 Watch List - Armenia does not fully meet the minimum standards for the elimination of trafficking but is making significant efforts to do so; law enforcement authorities did not conduct proactive investigations and relied on victims to self-identify; prevention efforts decreased and protection efforts were weak, with the government continuing to lack a formal victim-witness protection program; the government had no convictions, including convictions of complicit government employees, for the second consecutive year and has not had a forced labor conviction since 2014; legislation was passed to strengthen the health and labor body and training was provided to law enforcement officials; government and local NGOs provided legal, medical, and psychological assistance, housing, and monetary compensation to victims; however, civil society continued to provide reintegration and long-term support services without government funding (2020)