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Thank you for the opportunity to speak with you here today. I look forward to what is always an interesting dialog.

In preparing my thoughts for this evening, I looked over my talk here at Chatham House in 1999. I suppose I knew, but those notes, black on white, drove home the point that the world is a different place today. It is not only international geopolitical relations and calculations which have changed, but so has Armenia and our region.

I don’t know why I can’t remember who, but someone important said, show me a country’s location on a map and I’ll describe to you their foreign policy. Armenia is in the middle of the Caucasus, which itself is at the center of three continents, and just north of the Middle East. You can probably guess that our capacity to contribute to regional stability depends very much on our success in managing our relations with disparate and seemingly incompatible actors. Philip Marsden, the perceptive British author of one of the most engaging books on Armenia and Armenians, titles it The Crossing Place. No matter what type East-West, North-South, trade, exchange and migration one talks about, for 3000 years, Armenia has been at the intersection of millennial traffic.

It is therefore natural that the foreign policy choice, and sometimes burden, of this young Republic is to pursue a policy of multidirectional complementarity,

It is no secret, that given our geopolitical situation, the conflicts or hostilities we face and the limited resources we command, our room to maneuver is rather small.

It is important therefore for Armenia, that our actions, intents and relations are understood correctly and in their context.

Today, our future depends on how well we handle each of the following four challenges:
Security, Development, European integration and Nagorno Karabakh.

Let me start with security. Given our history and the current realities in the region, security is a number one priority for Armenia. Armenians are extremely security conscious, that is why we have entered into layers of security guarantees compatible with our policy of complementarity. Those layers are comprised of our bilateral security arrangements with Russia, our membership in the Collective Security Agreement, our extensive engagement in disarmament treaties, most particularly the CFE which provides balance and transparency in our region, our extensive relations with NATO, and finally other bilateral arrangements, such as with Greece, and most recently with the US.

Let me start with Russia with whom the scope and range of our connectedness is extensive -- economically, militarily, politically, and not unlike our relations with the US and the EU, influenced more and more by the presence there of a very large and increasingly more active Armenian Diaspora. Armenia does have a military pact with Russia. There are Russian military bases in Armenia. All of this leads to a myth about the degree of Armenia’s dependence on the Russian Federation. There exist differing assumptions about Armenia’s absolute margin of maneuver and, more significantly, our relative margin of flexibility in defining and pursuing our interests, more particularly with other countries.
Actually, the truth lies elsewhere. The larger, more crucial and geostrategically more contingent relationship between the US and Russia, and the EU and Russia, is what will shape the role, significance and performance of Armenia in that triangle. And that is no myth.
Before the war on terrorism, America itself was reticent to engage Armenia in military matters, given its desire not to offend or irritate regional proxies, friends or rivals. Today, we have entered into substantive military cooperation with the US.

Further, while neither invited nor self-invited to be a candidate for NATO membership, Armenia, through PfP, is active and interested in the process. We have just begun our accession process to IPAP. In this and other instances, we have never been offered more than we have been willing or able to accept. We are therefore somewhat realistically concerned that if Armenia’s and our neighbors’ engagement with NATO proceeds unevenly, there is the danger of new dividing lines being created in the Caucasus, and that’s not helpful for anyone’s security interests.

Turkey, too, has a role to play in Armenia’s security. Not as a partner, unfortunately, but as a neighbor whose words, actions, relations – or absence of relations – creates the environment in which security concerns must be addressed. Turkey missed the historic opportunity a dozen years ago, to use the event of Armenia’s independence to begin a new era of relations. Turkey is a major regional player with the potential of significantly impacting the regional environment. Its continuing insistence on preconditions to normal relations creates a breach in confidence. The absence of normal relations creates a fear of unexpected actions and complicates an already tense security environment.

Fortunately, Iran, our southern neighbor has been much more even-handed and farsighted in its relations with Armenia. By experience and necessity, our engagement with Iran is not and cannot be superficial and on-and-off again. What we have is the cooperation of two neighbors, each resisting different forms of isolation and marginalization.

Our second challenge is sustainable and rapid development. In the dozen short years since independence, we have secured Armenia’s borders in an inherently unstable region, we have defended our people by creating a strong army, we have begun to build state structures where none existed, we have stopped the economic collapse and begun the climb toward prosperity, we have resolved the energy crisis and converted energy into a commodity, and in these last three years have sustained double digit economic growth.

Clearly, more crucial challenges are waiting for us still. This growth, which admittedly began from a very low point of departure, will be difficult to maintain. We must continue to create rewarding jobs, elevate people’s standard of living and eradicate poverty and indignity, we must fight and win the war against nepotism and corruption, we must dispel the shadow economy, we must protect the socially vulnerable, advocate for the rights of women and children, allow entrepreneurs to dream and create, bolster the vital mission of educators and shape a society where people believe in their abilities to live up to their dreams.

We must also fashion a government of believers and believers in government. We often say that the steps we’ve taken toward democratic processes and democratic institutions have been the easy steps. Now, we need to do the hard work that results in the absorption and realization of these values in personal and public life. The recent demonstrations in Yerevan, by an opposition determined to come to power at all cost, even as they’ve publicly said by force, demonstrates that we have a ways to go. For Armenia or for any country in transition, what is needed is not just a government willing to set the rules and play by them, but also a constructive opposition that is willing to do the same, without brazenly, aggressively abusing the new opportunities that a democratic system offers. Only this will provide the kind of stability that is as important to empower a citizenry, as it is for a businessman to take risks.

Taken together, all of these efforts – economic and political – will in turn create the kind of confidence necessary for direct foreign investments to increase and exports to find markets. It is the combination of these two pillars around which our economic growth will be sustained. Towards this end, we envision the creation of a Caucasus free trade zone, as Presidents Kocharian and Saakashvili have advocated. The BSEC and CIS can provide serious opportunities for unhindered economic cooperation among member states if political obstacles do not interfere. For such an enterprise to succeed, for foreign investors to engage in Caucasus projects, we need open communication lines. The closed border with Turkey has resulted in a gap in operating rail links from Turkey thru Armenia to Georgia. Within the TRACECA route, this constitutes the only missing link from Europe to Asia. Doubtless, re-commissioning this existing line is of value to those beyond our immediate region as well, thanks to waves of regionalization and globalization. Thus what is good for Armenia’s development is also good for our neighbors near and far.

From a common security policy to a free trade area, all are achievable and workable. Civil society, interstate cooperation, human rights reforms, legislative compatibility, economic cooperation – these are the agenda items that will drive the development of our region. In the Caucasus, where we live with unresolved conflicts, a signal that the Caucasus belongs in Europe, will influence and determine how conflicts are resolved. This is our third challenge: Euro integration. This would not be a simple affirmation of cultural and religious affinities. This would be the framework within which we would view our futures, our borders, our neighbors. The Caucasus in Europe means a Caucasus where all neighbors quit trying to settle scores, where borders are no longer viewed as barriers. The countries of Europe and the European structures talk to the Caucasus, visit us, consider our problems and progress, our needs and accomplishments, all together, in one breath. This means that in time, we too, will see our future together.
We appreciated the request by the Council of Ministers of the European Union to the European Commission to make recommendations about the Caucasus inclusion into the EU Wider Europe initiative during the Irish Presidency. We hope for and expect such a positive recommendation.

But let me make a clear distinction, so we do not have any false illusions. The European Union offers us the prospect, not the promise. This is clearly understood by Armenia, and I have no doubt that it is understood by our neighbors. It is we in the Caucasus who will turn that prospect into a promise.

Europe's standards force us to reexamine our own conduct and behavior. We are working to build functional, responsive, responsible societies in this neighborhood not through an imposition of force, but because we want to be a part of a greater Europe. Europe's experiences in regional cooperation, regional conflicts, regional compromises, influenced by the successes of the last 50 years can provide examples and guidance.

The prospect of EU membership has already had positive effects for our neighbor Turkey, which is being forced to revisit its relations with at least one of its neighbors. In light of possible Turkish membership in the EU, the normalization of Turkey’s relations with Armenia, should also be both condition and consequence. After all, this will be Europe’s eastern border, and the prospect that it might be a closed border sounds improbable given Europe’s standards and ideals.

As you can see, Turkey is a factor in all the major challenges facing Armenia today. Whether we consider security interests, development directions, or European integration, the role that Turkey plays in the region is of consequence.

Armenia repeats at every possible opportunity that we are prepared to continue dialogue, to work, without preconditions, for diplomatic relations, for open formal sovereign communications, without which regional imbalances, instability and even hostilities cannot be righted, mitigated, or anchored in reciprocal understanding. The simple fact is that neither our past nor our geography is going to change.

To ignore this truth means that – perhaps – we do not want them to go away. If we do, then their legacy must be transcended together. We are not the only neighbors in the world who have had, and who continue to have, a troubled relationship. We know that evil ghosts on the Franco-German border were exorcised. We know that ours can be as well.

I believe that Turkey’s current government is also interested in working towards normalizing relations. But I also know that Turkey has fallen hostage to Azeri pressure. Azerbaijan’s new President Aliyev recently acknowledged, publicly, that closed borders between Turkey and Armenia is a huge bargaining chip in Azerbaijan’s hand, and the opening of the border will impact negatively on the Nagorno Karabakh peace process. He’s wrong on both counts.

Open borders are in the interests of everyone else, as well, but it would not be unfair to say that Turkey’s role in Iraq, with Israel, with NATO and EU defense policy, not to say anything of the Baku-Ceyhan pipeline, are all too critical to risk jeopardizing by pushing a positive Turkish-Armenian agenda in the face of Turkish resistance.

We believe that the facts show that the utility of sealed borders has diminished. On the contrary, their continued existence tends to lessen Turkey's credibility as a positive, active, regional player.

This bring us to our fourth challenge: finding a lasting, peaceful resolution to the Nagorno Karabagh conflict.

I’ve just returned from a meeting in Prague with the new Azerbaijani Foreign Minister, called by the Minsk Group co-chairs. I must admit that there are many uncertainties today in the negotiation process and I think that wittingly or unwittingly, rather than focusing on finding answers to the causes of this conflict, Azerbaijan is focusing on the consequences, and looking for ways of unraveling them.

If the stages of this conflict are viewed one frame at a time, and the analysis is based on a single frame – the way the conflict appears today – then we will have a distorted view and will apply inaccurate labels and propose inappropriate solutions. It is 2004 and the current phase of this century-old conflict, which resurfaced in 1988, has not yet ended. It has gone through a period of peaceful demonstrations by Armenians, followed by pogroms in Sumgait and Baku, sanctioned by the Azerbaijani authorities. This armed response was followed by a full military escalation, then a ceasefire, then many stages of negotiations, and that brings us to today.
The refugee issue is consequence of the military conflict, and affects us all. One million refugees Azerbaijan says. That’s true. But more than one-third of those refugees are Armenians. There were 400,000 Armenians living in Azerbaijan before this conflict began. If Armenia, with far less resources than Azerbaijan, has found ways to settle those refugees into some semblance of normal life, rather than keep them in tents and barracks as a showcase to the world, that does not mean that they do not exist. There are refugees from both sides just as there is suffering on both sides. Both sides have certain rights that need to be addressed.

Second, it is simplistic to assume that Armenians will relinquish control over territories under their control as some sort of confidence building mechanism. Whose confidence are we building? Certainly not the confidence of the population of Nagorno Karabakh which fought for its basic civil and human rights, but will be left with no prospect of a long-term status and security to ensure that it will not have to fight again. The conflict is not over, and we’ve never claimed anything beyond what we think we deserve -- that the international community look at this from the point of view of the rights of the people who live on those territories. We are both victims. We have to work towards a solution which allows us both to become victors.

This year, on the 10th anniversary of this, the only self-imposed and self-maintained cease-fire in the world, what we want for Armenia, for Nagorno Karabagh and for our neighborhood are visionary, creative, tolerant responses based on good will. The formula we seek for our conflict and for our region is one that assumes that tomorrow we will live next door to a neighbor and not an enemy. Our dream is to create a country that will live in peace within itself and with its neighbors, a country that will provide security and comfort to those who wish to return. We dream that there will be no dead-end roads leading out of Armenia, that they will all be avenues of opportunity linking neighbor to neighbor, country to country, civilization to civilization.

Our borders defining our territories will identify our cultures and identities, not serve as obstacles to free exchange and cooperation. In other words, putting this conflict within the context of European integration, finding solutions that are appropriate to the new geopolitical context is what will move all of the Caucasus to a new level of peace and prosperity.