U.S. Sanctions Could De-escalate Tensions Between Armenia and Azerbaijan

October 30, 2020 Topic: Politics Region: Europe Blog Brand: The Buzz Tags: ArmeniaAzerbaijanNagorno-karabakhRussiaTurkey

U.S. Sanctions Could De-escalate Tensions Between Armenia and Azerbaijan

The United States has the tools to de-escalate, but Azerbaijan and Turkey are testing the effectiveness of influence campaigns and strategic entanglement in coaxing the United States to overlook mass civilian displacement and potential massacres.

The streets of Stepanakert today stand desolate, the empty veins of a once vibrant and modern city whose citizens are now adapting to a new reality of life underground. The city has endured a targeted assault on civilian infrastructure, with Azerbaijan deploying cluster bombs and targeting power stations, residential areas, and even churches, maximizing the extent of collateral damage in a bid to drive out the city’s Armenian residents.

Stepanakert is one front in a rapidly escalating clash that finds its roots in a several generations-long conflict. This conflict, and its resulting animosity towards Armenia, is deeply ingrained in Azerbaijan’s social fabric and institutions. War for Azerbaijan is personal, reflected in its relentless assault and indiscriminate targeting of civilians and soldiers. Without significant involvement and enforcement of agreements from the United States and other major powers, the conflict stands to devolve further into a humanitarian crisis.

Lawmakers have been quick to condemn the violence in a bipartisan fashion, but the Trump administration's policy has been notably more reticent; likely the result of pressure from heavy lobbying and targeted disinformation by Azerbaijani interests. Washington's policy is also probably influenced by the added complication of Turkey’s own involvement and its implications for the North Atlantic Treaty Organization and America's complicated network of strategic partnerships in the region. If Washington does not take a greater role in the enforcement of the peace and negotiation process via its responsibilities in the Organization for Security and Co-operation in Europe Minsk Group, it will delegitimize U.S. foreign policy and demonstrate to the authoritarian governments of the world that multi-billion dollar influence and disinformation campaigns are an effective means of purchasing indifference to large scale civilian displacements and potential massacres.

Several weeks have passed since Azerbaijan re-initiated conflict in Nagorno-Karabakh, a region that has been continuously settled for more than 2,000 years and whose ownership has been in contention since the early years of the Soviet Union. The region has seen a steady escalation of conflict and breaking of cease-fire agreements, with involvement from major international bodies and various world powers, including Turkey, Russia, and Iran. Azerbaijan’s advance is supported primarily by its unconditional support from Turkey in the form of military and financial backing, including the deployment of Syrian mercenaries. Azerbaijan also relies on its strategic relationships with countries such as Israel for armament, and has engaged in a global money-laundering operation to buy politicians’ and lobbyists’ influence. Most prominently, Azeri money supported lobbying efforts in the United States and paid out millions to politicians such as Italian MP Luca Volontè. In turn, beneficiaries provided cover for the Azeri government’s various violations of human rights.

The return of conflict in the region was seemingly inevitable. For decades Azerbaijan has stoked fervent anti-Armenian sentiment within its population as oil revenues helped to fund a several decades-long ramp up in military spending. The country has tightly controlled media, implementing one of the most rigid forms of state censorship in the world, and conducting a laundry list of human rights violations. These abuses, cited in a recent State Department report, include  “unlawful or arbitrary killing”; “torture”; “physical attacks on journalists”; “systemic government corruption”; “police detention and torture of LGBTI individuals”; and “the worst forms of child labor.”

These developments should be of special concern to the United States and its allies. Azerbaijan’s totalitarian government and Turkey’s President Recep Tayyip Erdogan have taken significant steps to claim control of their respective national narratives and prime their nations for a generation of conflicts. This all comes as a part of a broader power struggle to establish Turkey, and its alliances, as a regional and global power. 

In addition, Turkey has taken an increasingly aggressive stance towards its neighbors, escalating tensions with Greece, defying the United States by waging war using American-made weapons against U.S. allies in Syria, and releasing maps on Turkish national television detailing appropriation of borders in Greece, northern Syria, and Iraq. Turkey has made a minimal effort to conceal its neo-Ottoman ambitions and confrontational rhetoric. Erdogan has drawn on this nationalistic sentiment to proudly display Turkey’s support for Azerbaijan. 

The United States is uniquely positioned to de-escalate tensions and enforce peace. Given that Turkish weapons and influence are driving violence, Washington has the ability to cut aid, weapons sales, and impose sanctions as a check to Ankara’s war drum. America’s most powerful tool is the global reach of the U.S. dollar. Despite losing recent ground, the dollar accounts for more than 60 percent of global foreign currency reserves and 88 percent of all FX trades. Commodity markets in particular depend heavily on dollar denominated transactions. The global financial system and funding markets are deeply tied to the U.S. banking system. As a result, through the U.S. Office of Foreign Assets Control, the United States has a significant level of control over global dollar denominated transactions, making financial sanctions a particularly devastating tool, something Trump highlighted in 2019 when he threatened to impose sanctions on Turkey. 

Turkey is only the 32nd largest trading partner for the United States, and bilateral trade relations between the United States and Azerbaijan account for less than $600 million annually—a relative blip for the US economy, limiting the effectiveness of any in-kind retaliation. Turkey itself is in the midst of a difficult economic crisis. With the Lira on a steady downturn and the country plagued by an ineffective central bank and poor economic policy, Erdogan’s popularity has been driven to new lows. Turkey’s struggling economy and crippled banking system, as well as Baku’s heavy dependence on oil exports,leave both particularly vulnerable, increasing the likelihood that the threat of sanctions could hold both nations at the negotiating table and provide a greater incentive to honor ceasefire agreements and continue peace talks. 

Promoting stability in the Middle East has been an important policy effort for the United States. In the case of this conflict, the United States has the tools necessary to keep all sides at the negotiating table and prevent further violence. 

Hugo Dante is a Young Voices contributor, D.C.-based banking policy analyst, and doctoral student in economics at George Mason University. Follow him on Twitter @hugodantejr.

Image: Reuters