WASHINGTON, June 11 (UPI) -- As oil prices rise relentlessly to record-high levels, relations between the United States and Iran, OPEC's third-largest producer, continue to worsen. Further heightening investors' anxieties, speculation about a possible Israeli or U.S. attack to thwart Iran's nuclear ambitions continues to mount.
Despite Washington branding Iran a charter member of the "axis of evil," in a diplomatic gesture full of portent for the future of Caspian energy exports, Tehran has offered to mediate one of the Caucasus region's longstanding disputes, the Nagorno-Karabakh clash between Armenia and Azerbaijan. If Iran succeeds, it will have accomplished something the Bush administration failed to do in one of its first foreign policy initiatives.
As reported by Azerbaijan's APA news agency, during a news conference in Baku, the Azeri capital, on June 5, Iranian Deputy Foreign Minister Alireza Sheikh-Attar said that Iran is ready to mediate the Nagorno-Karabakh conflict if requested by both sides, noting that while Iran had earlier attempted to negotiate a resolution of the issue, "Unfortunately, under the influence of outside forces, our country was sidelined from the mediatory mission."
A shooting war between the two southern Caucasian nations broke out in February 1988, as both nations claimed the Nagorno-Karabakh enclave, then administered by Baku. The rising violence saw the Commission on Security and Cooperation in Europe (now the Organization for Security and Cooperation in Europe) in the summer of 1992 create the 11-country Minsk Group with the aim of mediating a solution to the conflict.
By May 1994, when Azerbaijan and Armenia signed a cease-fire agreement ending active hostilities, the conflict had caused thousands of casualties and created hundreds of thousands of refugees on both sides and left Armenian armed forces occupying swaths of Azeri territory, including Nagorno-Karabakh and seven neighboring districts. While 14 years later Russia, France and the United States, currently the Minsk Group co-chairs, are currently holding talks, nothing concrete has been achieved.
In a largely forgotten U.S. diplomatic initiative, Washington's interest in resolving the impasse led the new administration of U.S. President George W. Bush to convene a diplomatic summit in April 2001 in Key West, Fla., under OSCE auspices between Armenian President Robert Kocharian and Azeri President Geidar Aliyev. As with the earlier Minsk Group efforts, however, the talks went nowhere.
The diplomatic impasse has affected all three countries' economies, with only Azerbaijan's soaring because of its oil revenue. Last year the Central Intelligence Agency estimated Armenia's GDP growth rate at 13.7 percent, Azerbaijan's at 31 percent and Turkey's at 5.1 percent.
The last couple of years have seen some softening of Yerevan's position; on June 5, 2005, the Armenian media noted that Kocharian announced, "We are ready to continue dialogue with Azerbaijan for the settlement of the Nagorno-Karabakh conflict and with Turkey on establishing relations without any preconditions."
Both sides have lost out in the impasse. Armenia was excluded from the Baku-Tbilisi-Ceyhan pipeline, but Azerbaijan in turn was forced to pay a price for its unwillingness to negotiate, as BTC was forced to take a lengthy detour around Armenia, adding substantially to the project's cost and construction delays.
The prize is certainly tempting; the Caspian Sea's 143,244 square miles and attendant coastline are estimated to contain as much as 250 billion barrels of recoverable oil, boosted by more than 200 billion barrels of potential reserves, quite aside from up to 328 trillion cubic feet of recoverable natural gas.
Needless to say, foreign companies are battling to build more export pipelines, and Iran has been angling for years to increase its transit trade of other Caspian nations' exports, while energy-starved Armenia, which has no oil reserves and imports virtually all of its needs, could benefit from improved relations with its oil-rich neighbors to the east.
Should diplomatic relations normalize, Armenia also could benefit from transit fees on any pipelines constructed across its territory, while Iran possibly could sidestep the crippling U.S. ILSA sanctions, which have largely precluded development of its natural gas reserves, estimated at more than 26 trillion cubic meters, the world's second largest after Russia. Despite such potential riches, a lack of foreign investment means that Iran currently produces a paltry 460 million cubic meters of gas per day.
Iran brings a number of negotiating strengths to the table; it maintains diplomatic relations with both nations, 24 percent of its population is Azeri, while an estimated 400,000 Armenians reside in the Islamic Republic. The above considerations give Iran an added cachet as a possible "honest broker" in negotiations that the Minsk Group members lack. In a sign of the diplomatic relations between Armenia and Iran, the new Armenian Defense Minister Seyran Ohanyan recently visited Tehran.
Given the diplomatic barrenness of 16 years of discussions, Iran's offer ought to be seriously considered by all interested parties. The results of a negotiated peace are obvious -- the only question is whether "outside forces" will allow Iran's efforts to proceed.