Nagorno-Karabakh Republic is a self-proclaimed state, its de iure is recognised as being the territory of Azerbaijan, but in de facto – it is an independent Armenian Republic that is very closely connected with Armenia.
In 2 September 1991, the Council of the Nagorno-Karabakh’s Oblast, declared the Nagorno-Karabakh Autonomous Oblast as the Nagorno-Karabakh Republic. In 10 December 1991, a referendum was organised in the Republic regarding its independence; in 6 January 1992, the Declaration of Independence of Nagorno-Karabakh Republic was approved. Due to these events, an open conflict began between Azerbaijan and Nagorno-Karabakh that was supported by Armenia; the conflict took place between 1992 and 1994 and in the result of it, Nagorno-Karabakh (or Artsakh, as it is known by Armenians) gained its independence.
None of the UN member states has recognised Nagorno-Karabakh, but at the same time, its missions are located in seven member states of the UN.
Nagorno-Karabakh is located in the south-east part of the Lesser Caucasus Mountain Range, in the east part of the Karabakh’s Plateau and in the Karabakh Valley, making a large part of the Kura and Aras’ lowland.
Majority of the Nagorno-Karabakh’s territory is mountainous, the average elevation being 1100 metres above the sea level.
The Karabakh’s Mountain Range is located in west part of the Nagorno-Karabakh; in the north part the highest peak is located – Gamish (or Gomshasar) with elevation 3724 metres.
According to the data from the 2005 Nagorno-Karabakh’s population census, 137 737 people lived in the self-proclaimed Republic, 137 380 (99.74%) of them were Armenians, 171 (0.1%) – Russians, 22 (0.02%) – Greeks, 21 (0.02%) – Ukrainians, 12 (0.01%) – Georgians, 6 (0.005%) – Azerbaijani and 125 (0.1%) were representatives of other nationalities.
According to the provisory data from the 2015 population census, during the period of 10 years, the number of Nagorno-Karabakh’s population has increased up to 146 260 people (which is by 10 000 people more).
Regarding religion, majority of Nagorno-Karabakh Republic’s population are the members of the Diocese of Artsakh of the Armenian Apostolic Church.
Nagorno-Karabakh Republic is divided in eight districts – (1) Shahumyan, (2) Mardakert, (3) Askeran, (4) Martuni, (5) Hadrut, (6) Shushi, (7) Kashatagh, and the capital of Nagorno-Karabakh, Stepanakert (which has a district status).
There are 10 cities, 210 villages and 239 populated places in Nagorno-Karabakh. Largest cities are Stepanakert (with population of approximately 55 200), Martuni (population of 10 200), Matrakert (population of 4600), Shushi (population of 4200), Hadrut (population of 4100) and Kashatagh (population of 3300).
During the Soviet years, Nagorno-Karabakh was isolated from Armenia's agricultural region and its economy was extremely underdeveloped. As a result of the anti-alcohol campaign in Nagorno-Karabakh from 1985 to 1986, the republic's economy suffered severely (vines were eliminated and alcohol factories closed), with the regional GDP recession reaching 43%. Although the anti-alcohol campaign was cancelled in 1987, the vines and the alcohol industry were not revived. This economic collapse was followed by a much more serious calamity: the Nagorno-Karabakh War (1991-1994), which completely destroyed Nagorno-Karabakh's ever fragile economy.
According to official Nagorno-Karabakh data, Nagorno-Karabakh's economy has grown rapidly over the past decade, thanks to diaspora assistance, but in recent years has even doubled. In 2017, GDP growth was 15.6%, which raised reasonable questions for the population, taking into account that their income lagged significantly behind the GDP growth rate. Compared with 2017, out of 15.6% of GDP growth, about 9% was provided by the growth of the mining industry, which resulted in profits for large entrepreneurs, foreign investors and partly also the budget, but the population gained very little from it.
In the first 9 months of 2018, GDP grew by 12.2%, including 5% from the mining industry. At the end of the year, growth was estimated at around 11%. Nagorno-Karabakh authorities predicted that in 2018, GDP per capita would be $ 4,260.
In the first nine months of 2018, foreign trade increased by 24%, with exports increasing by 38% and imports increasing by 18%. Although the trade deficit remained, it decreased in 2018 mainly due to mining industry.
In 2018, the unemployment rate in Nagorno-Karabakh was lower than in Armenia and amounted to about 13%, and the poverty rate was 21.6%. At the same time, real wage growth lagged behind economic growth.
The currency of Nagorno-Karabakh is the drama, which is actually used in domestic settlements and in exchange for the Armenian drama. Due to its low face value and limited availability, the Nagorno-Karabakh drama is in the interest of money collectors.
One of the leading sectors of the Nagorno-Karabakh economy is electrical energy. The self-proclaimed republic supplies about 70% of its own electricity needs. The largest source of electricity in the self-proclaimed republic is the Sarsanga hydroelectric power plant (capacity 50 MW) on the Terter River. The Nagorno-Karabakh river networks allow the construction of mini hydropower plants in almost all areas. In total, the Sarsanga hydropower plant together with small plants produces an average of 130 million kWh of electricity per year. The Karabakh total capacity is up to 700 million kWh of electricity annually, which is twice the needs of the people of Nagorno-Karabakh. Nagorno-Karabakh's goal in the future is to export electricity.
Nagorno-Karabakh's foreign economic relations are closely linked to Armenia, which is the main sponsor of Nagorno-Karabakh's "statehood". In Armenia, Nagorno-Karabakh goods are becoming an Armenian commodity and are free to enter the world market. Nagorno-Karabakh mainly exports food (wine, juices, tobacco, fruit), works of art (carpets, jewelry) and copper ore.
One of the most successful companies in Nagorno-Karabakh is the Drombona plant, which is engaged in the extraction and processing of copper and gold. Nagorno-Karabakh also has factories that produce and process various types of building stones such as limestone, basalt, granite and limestone.
Nagorno-Karabakh does not have the opportunity to receive loans directly from international financial organizations, the only option for the republic is to receive them in cooperation with Armenia. Nagorno-Karabakh's economy is closely linked to Armenia's economic potential.
Nagorno-Karabakh also receives support from the Armenian diaspora abroad (mainly from the United States), which is about 10-12 million USD a year. The diaspora closely monitors the projects in which this money is invested.
Former President of the Republic Arayk Arutyunyan won the second round of the presidential election in the self-proclaimed Republic of Nagorno-Karabakh on April 14, 2020, receiving 88% of the electorate votes and leaving behind his rival, the Minister of Foreign Affairs of Nagorno-Karabakh, Masi Mailian.
A. Arutjunjan represents the ruling party bloc "Free Motherland - United Civic Bloc" and is ready to cooperate with all political forces that are ready to adopt the program for socio-economic development and security of Artsakh, as well as "Artsakh – it is Armenia and a full stop".
Former President of Nagorno-Karabakh Bako Saakyan, as well as the republic's largest financial, administrative and information resources, and Russian businessman and philanthropist Ruben Vardanyan all supported the election of A.Arutyunyan as president.
It is believed that A.Arutyunyan could pursue an economic policy much more independent of the Armenian budget, because he has his own sources of financing and extensive experience in economic management.
Although Nagorno-Karabakh has the necessary features of statehood: constitution, laws, administrative structures, police, armed forces, national symbols and representations abroad, it does not have an internationally and legally established place on the world political map.
According to the constitutional system, the self-proclaimed Nagorno-Karabakh is a presidential republic where the president is elected by direct popular vote for five years.
On January 17, 2017, a referendum was held in Nagorno-Karabakh on the project of new constitution, which envisaged for the transition of Nagorno-Karabakh from a semi-presidential to a presidential form of government, stipulating that the President of Nagorno-Karabakh will also be the head of government, but the post of prime minister will be eliminated. The referendum was attended by 76.44% of eligible voters, of whom 87.6% voted in favor of the new constitution.
Under the new constitution, the president has the right to form a government and become its head. In the new draft constitution, the Republic of Nagorno-Karabakh is named the Republic of Artsakh (as an ancient Armenian name). Article 1 (2) of the Constitution stipulates that the names of the Republic of Nagorno-Karabakh and the Republic of Artsakh are identical.
The indefinite status of the Republic and the existing threat of war seriously affect the lives of Nagorno-Karabakh and its people. The priority of Nagorno-Karabakh's policy is to build a strong, democratic, social and legal state and to ensure the security of the people of Nagorno-Karabakh. Special attention is paid to security issues in Nagorno-Karabakh, as evidenced by the large size of the Nagorno-Karabakh army, which is at least 30,000. There is a high level of patriotism among the people of Nagorno-Karabakh, a willingness to defend their land, which in a way compensates Azerbaijan, as an oil-exporting country, for its much greater opportunity to invest in the development of its armed forces.
The main goal of Nagorno-Karabakh's foreign policy is to achieve the recognition of the republic's independence.
Nagorno-Karabakh pursues a multi-level policy in its foreign policy in order to achieve international recognition, starting with the municipal and regional level and moving to the national level. Nagorno-Karabakh is taking steps to inform the international community about its citizens' right to self-determination. The independence of Nagorno-Karabakh, thanks to Armenian strong diasporas abroad, has been recognized by several US states – Massachusetts, Rhode Island, Maine, Louisiana, California, Georgia and Hawaii, as well as Australia’s state New South Wales, Basque Country (Spain) and several cities, including Los Angeles. From the point of view of Nagorno-Karabakh, the recognition of the republic is only a matter of time.
Nagorno-Karabakh is cooperating with the co-chairs of the OSCE Minsk Group – Russia, France and the United States of America. Special significance in Nagorno-Karabakh's foreign policy is given to the mutual relations with Russia, as they have historical, economic and cultural ties, and in Russia lives the largest segment of the Armenian diaspora.
Until 1997, Nagorno-Karabakh participated in the OSCE Minsk Group negotiations [on the settlement of the Nagorno-Karabakh conflict issue]. The leaders of Armenia and Nagorno-Karabakh insist that a settlement of the conflict is not possible without the full involvement of Nagorno-Karabakh in the process of talks as a negotiator with equal rights, but Azerbaijan opposes this.
Nagorno-Karabakh has representative offices in Armenia, Russia, USA, France, Lebanon, Australia, Germany. Representations perform the functions of embassies. In addition to political functions, the missions co-operate with these countries to attract investment to the republic's economy.
An important diplomatic resource for Nagorno-Karabakh is the Armenian diaspora and such influential organizations as the Armenian National Committee in the United States, the Armenian Assembly in the United States, the Armenian Organization in France, and others. These organizations lobby the interests of Nagorno-Karabakh. Various humanitarian projects are also being implemented in cooperation with the Armenian diaspora.
In March 2013, a group of members of the French Parliament set up a "Friendship Group" with Nagorno-Karabakh. In March 2013, the "Interparliamentary Group for Relations with Nagorno-Karabakh" was established in the Lithuanian Parliament.
At the same time, despite Nagorno-Karabakh's efforts to achieve recognition of the independence of the self-proclaimed republic, this is likely to be an unattainable goal. This is due to the strong position of Azerbaijan, an oil-exporting country, against the establishment of two Armenian republics (Armenia and Nagorno-Karabakh) in the South Caucasus. Nor can it be ruled out that Moscow, which has important relations with Turkey, could reach a mutually beneficial agreement with Ankara, Azerbaijan's closest ally, and force Armenia to gradually return Nagorno-Karabakh territory to Azerbaijan. Nor can it be ruled out that, given the decades of mutual hatred between Armenians and Azerbaijanis, the resumption of war is a constant thread.
The status quo of Nagorno-Karabakh cannot be eternal. Sooner or later, politically or militarily, a solution will have to be found.