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Viewing cable 07YEREVAN77, OPENING THE TURKISH-ARMENIAN BORDER: BUSINESSES AND
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
07YEREVAN77 | 2007-01-23 06:49 | 2011-08-24 01:00 | UNCLASSIFIED | Embassy Yerevan |
VZCZCXRO5297
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHYE #0077/01 0230649
ZNR UUUUU ZZH
R 230649Z JAN 07
FM AMEMBASSY YEREVAN
TO RUEHC/SECSTATE WASHDC 4762
INFO RUEHAK/AMEMBASSY ANKARA 1176
RUEHIT/AMCONSUL ISTANBUL 0518
RUCNCIS/CIS COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC 0013
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 03 YEREVAN 000077
SIPDIS
DEPT FOR EUR/CARC, EUR/ACE
SIPDIS
E.O. 12958: N/A
TAGS: ECON ETRD EINV ELNT PGOV PREL TU GG AM
SUBJECT: OPENING THE TURKISH-ARMENIAN BORDER: BUSINESSES AND
ACADEMICS SAY IT'S TIME
YEREVAN 00000077 001.2 OF 003
-------
SUMMARY
-------
¶1. On January 13 and 14 the Armenian International Policy Research
Group (AIPRG), with funding from USAID, the British Embassy, and the
Eurasia Foundation, held a conference on "The Economic and Social
Consequences of Opening the Armenia-Turkish Border." While the
caliber of the papers was mixed, the conference itself was generally
well received and very well-attended with over 250 enrolled
participants and 26 presenters (four of whom were Turkish). The
vast majority of presenters and all of the business representatives
in attendance said Armenia would benefit significantly (with a
potential 10-25 percent increase in GDP) if the border were opened.
The conference was widely covered in the media and generated
significant public dialogue on how best to move forward
normalization of Turkish-Armenian relations. END SUMMARY
----------------------------
TWO PERCENT OR 40 - EXPERTS DEBATE THE IMPACT ON GDP
----------------------------
¶2. One of the critical successful outcomes of this conference was to
expand the pool of available academic scholarship on the economic
impacts of border opening. Prior to this conference, we knew of
just two (controversial) economic studies on the potential economic
benefits of opening the Turkish-Armenian border (closed by the
Turkish Government in 1993). The first, sponsored by the World
Bank, was conducted in 2001 and suggested that opening the border
with Turkey would increase Armenian exports by 200 percent and
Armenian GDP by 40 percent. A second study, conducted by the
Armenian-European Policy and Legal Advice Center (AEPLAC) in 2005,
suggested that the Armenian market had largely adjusted to the
closed border and that the medium-term impact of border opening on
GDP would be between 2-7 percent.
¶3. Most presenters at this conference took issue with both studies.
One paper suggested that border opening alone will lead to a 3-7
percent increase in GDP, but there will also be benefits from lower
external conflict risk ratings in the international marketplace
leading to a 6-17 percent increase in GDP. According to conference
organizer and AIPRG Research Fellow Bryan Roberts, the reasonable
upper bound for the medium-term impact of opening the border is an
extremely impressive 10-25 percent of GDP. (NOTE: Roberts' findings
were muddied, however, especially on his external conflict risk
assumptions mentioned above, by his failure to disentangle the
effects of a Turkish-Armenian rapprochement and border opening, from
the effects of a Nagorno Karabakh settlement, which Roberts presumed
to go hand in hand with any chance of a Turkish border opening. This
point was not made very clear in either his paper or presentation,
but was one we elicited from him verbally on the margins. END
NOTE)
------------------------------
A WIDE-RANGE OF TOPICS COVERED
------------------------------
¶4. The papers presented at the conference were very wide-ranging and
of mixed quality. One paper argued persuasively for the merits of a
phased opening of the border, starting at two crossing points and
eventually expanding to six. Presenters also considered the
potential economic impact on Georgia of opening the Turkish-Armenian
border (judged to be minimal because Armenian and Georgian goods are
not close substitutes and therefore increased Armenian-Turkish trade
will not lead to a significant amount of trade diversion from
Georgia). While a number of studies looked at the economic benefits
of decreasing the distance Armenian and Turkish goods would have to
travel, none considered the additional benefits that reopening the
Kars-Gyumri railroad might have on freight forwarding costs, nor
entirely new and perhaps unforeseen business/trade opportunities
that would arise with an open border.
¶5. In addition to the benefits of increased trade, a number of
papers argued that Armenia would likely benefit from increased
foreign direct investment as well, as an open border would lower
Armenia's high external conflict risk thereby increasing investor
confidence. One study suggested that increased investor confidence
could lead to a 50 percent increase in FDI and as much as a 10
percent increase in Armenia's overall GDP. There was one paper
that, considering some of the potential benefits to Turkey,
suggested that the larger cities in Turkey may actually benefit more
than Turkey's impoverished eastern provinces, because the cities are
better equipped to engage in international trade. The general
consensus of conference participants, however, was that the impact
of a border opening would be much more significant for Armenia's
smaller economy then for Turkey's much larger and diversified
YEREVAN 00000077 002.2 OF 003
economy. All of the conference papers are available at
www.AIPRG.net.
---------------------------
BUSINESSES READY TO ENGAGE, PARTICULARLY IN CONSTRUCTION
---------------------------
¶6. One of the most interesting components of the conference was a
businessmen's roundtable. Representatives from a number of
prominent Armenian businesses said that they were anxious to see the
border open. They said they were ready for the increased
competition and saw strong potential for Armenian exports to the
Turkish market. Cement and construction materials were identified
as sectors where Turkish local production may not be sufficient to
meet local demand, resulting in ripe opportunities for Armenian
exporters. Critical to this type of export would be the reopening
of the Kars-Gyumri railroad, an issue which Armenian businesses have
long championed. According to TABDC Europe Coordinator Burcu
Gultekin, a number of the participants discussed holding a similar
conference in Turkey next year and brainstormed about other ways to
promote better Armenian-Turkish business relations in the future.
-------------------------------
INEVITABLE POLITICAL COMMENTARY
-------------------------------
¶7. While the conference organizers were surprisingly successful at
keeping the focus on economic analysis, there were some moments of
inevitable political discussion. At the opening of the conference,
CDA called on participants and panelists to set politics aside. The
goal, he added was not just economic growth, but the increased
stability and security which comes from economic integration.
Deputy Armenian Foreign Minister Arman Kirakossian in his opening
remarks clearly laid out the longstanding official GOAM position
that Armenia is prepared to establish diplomatic relations "without
precondition." He continued by saying Azerbaijan is "trampling
international law" by supporting the Azerbaijani position on NK,
violating a "bilateral agreement" with the border closure (he did
not specify which one, but we infer he meant the 1921 Kars Treaty
between Turkey and the USSR) and carrying out a program to "oust"
Armenia from the regional economy. He also suggested that Turkey
was failing to live up to its commitments as an EU candidate country
and should work hard to normalize relations, particularly given that
Armenia recently joined the European Neighborhood Program. He
underscored the need to reopen the Kars-Gyumri railroad and said
that while economic and civil society contacts are useful, they
cannot replace intergovernmental dialogue.
---------------------------------------------
GOOD WILL AND A CALL FOR FACE-SAVING MEASURES
---------------------------------------------
¶8. Turkish participants and scholars played an important role in the
success of the conference and their presence in Yerevan and active
engagement on the border issues was welcomed by Armenian scholars
and businessmen alike. Indeed, at one point an Armenian presenter
and the Turkish discussant of her work embraced each other, a sign
of the good will which the conference generated. Managing Editor of
the Turkish Policy Quarterly Erkut Emcioglu repeatedly underscored
the need for Armenia to provide face-saving measures to allow Turkey
to open the border. He explained that Turkey's ties with Azerbaijan
were strengthening and that it would be politically difficult for
Turkey to change its position without some sort of concession from
the Armenian side. Turkish Co-Chairman of the Turkish-Armenian
Business Development Council (TABDC) Kaan Soyak underscored this
message, saying that the BTC pipeline made it increasingly risky for
Turkey to take political decisions which might harm
Turkish-Azerbaijani relations. He said that the Azerbaijani lobby
was growing stronger both in Ankara and the U.S. and suggested that
Armenia needed to be more sensitive to political pressures in
Turkey.
------------------------
EXTENSIVE MEDIA COVERAGE
------------------------
¶9. Armenian television stations and print media outlets, as well as
foreign media outlets such as the Washington Post, extensively
covered the conference, the U.S. Embassy Charge's opening remarks,
and the preceding press conference announcing the event. Media
outlets reported that all participants, including representatives of
the U.S. and Armenian governments and Turkish scholars, agreed that
the opening of the border would be economically beneficial for both
countries. International coverage was generally positive. The
headline of a Reuters article carried in the Washington Post was
"Turkish, Armenian Businesses Demand Border Opening."
YEREVAN 00000077 003.2 OF 003
¶10. Local editorial comments were mostly pessimistic, remarking that
the conference would not be able to change the situation, especially
since the border was closed by Turkey. Azg, a center-right daily,
published an article commenting that it was irrational to discuss
issues that were obvious to everyone since no one could deny that
opening the border would increase prosperity in both countries. The
author of the article also remarked that it did not make sense to
hold the conference in Armenia since it was Turkey that closed the
border. Haykakan Zhamanak, a sensationalist daily, said that the
conference's predictions of how much Armenia was losing due to the
closed border were unimportant since it was clear that Armenia was
suffering regardless of the dollar figure.
--------
COMMENT:
--------
¶11. Both Turkish and Armenian conference participants heralded this
event as a significant step forward in advancing the opening of the
Turkish-Armenian border. Business representatives engaged in a
productive dialogue and said they were anxious to find new ways to
promote Turkish-Armenian trade. Thanks to the conference, there is
also a larger body of empirical data which can be used to persuade
both the Armenian and Turkish governments of the merits of opening
the border. Normalization of relations between Armenia and Turkey
is an important USG priority and a Mission MPP objective. This
conference advanced that objective in important ways and we will
continue to look for opportunities to capitalize on the momentum of
this event.
GODFREY