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**Haykakan** · 07-01-2010, 08:21 PM

Re: Economic Research Paper

expensive route via Georgian Ports. The economic principle of The Firm’s Sales Revenue Depends on Demand for its Product comes into play here as the Armenian firms find the demand for their products drop along with their revenues because of the higher transportation costs incurred due to the blockade. Minimizing Cost for Each Level of Output is another economic principle which comes into play because of the blockade. Armenian firms have to cut costs more than other competing firms to make their goods affordable. This situation has lead to improvements in the technology of production and the demand for lower input prices by those firms. Decisions are Always among Alternatives is yet another economic principle that comes into play here. Since the Turkish border is closed and the Georgian border can be undependable (Georgian-Russian war, instability…), Armenian firms have begun using Iran as an alternative market and source. A road has been constructed between the two countries and trade has increased significantly every year. The new economic relationship with Iran leads us to yet another economic principle. Decision Alternatives Always Have Costs and Benefits applies very well to the situation Armenia finds herself in. The new improved economic relations with Iran have had significant economic benefits for Armenia which include a gas pipeline built between the two countries, import and export of goods has increased and many Iranian citizens have chosen Armenia as a vacation destination. The opportunity cost to this choice has been the loss of much of the economic aid Armenia was getting from the USA whose aim is to isolate Iran.
Armenia does suffer from the blockade but so does Turkey. Turkey’s eastern provinces are under developed and have much to gain by opening the border. Ports in eastern Turkey are more convenient for Armenian transit then Georgian points thus they would be getting much of the transit business should borders open. (Punsmann, et al, 2007). The closed border and the Armenian genocide issue are among the weapons used against Turkey when it comes to European Union membership talks (Thornhill, 2005). Recent events have also prompted the traditional allies of the Turks like Israel and the USA to use the blockade and genocide issues against it. There are more costs incurred to Turkey as a result of this blockade then just economic ones but they are beyond the scope of this paper.
The Armenian-European Policy and Legal Advice Center (AEPLAC) found that the short term gains for Armenia would not be great in case of the border opening but the benefits would grow significantly within five years due to increased bilateral trade and further cuts in transportation costs to other markets (Barseghyan, et al, 2005). The study ordered by the European Parliament's Committee on Foreign Affairs and the Committee on Development found that the benefits of opening the border between Armenia and Turkey are not limited to the two countries and will have a significant regional effect with Russia, Iran, and Azerbaijan being some of the other benefactors (Punsmann, et al, 2007). The geography of the region dictates that the most efficient east-west routes should run through Armenia like the silk-road did for centuries. The region is mountainous and these mountains make transport in the north and south direction difficult but the east-west routes are relatively unobstructed by the mountains. Due to the blockade which closed down the east-west route Armenia has been forced to build roads through the mountains connecting itself to Georgia and Iran. Most of Armenia’s exports and imports go through Georgia but Iran is becoming a bigger factor every year.
Due to historic and current events there is deep mistrust and even hatred between Turks and Armenians. This atmosphere of mistrust has contributed to the breakdown of the treaty which was aimed at opening the border (Champion, 2010). Despite this setback there are behind the scenes negotiations taking place between the two sides which are facilitated by the EU, Russia and the USA who all have interests in opening this border. To gradually build trust between the two nations some have suggested a gradual opening of the border which will be done in phases to address the security concerns for both sides (Beilock, et al, 2010). By opening one or two checkpoints at first, the authorities can gage the amount of traffic that needs to be accommodated and they can address any security or other negative issues which may or may not arise. If Armenia and Turkey are satisfied with the results of the initial checkpoints then they can go further and open new ones if they are needed.
The opening of the borders will bring economic benefits to not just the two countries who share the border but to the entire region. Economics, however, is not the only issue to consider here. Research shows that social and cultural affinities are more important than democratic governments and economic relations when it comes to lasting peace between former enemies (Ikenberry, 2010). In this regard the outlook for successful relations is not as optimistic as the economic prospects. There is much bad blood between Turks and Armenians along with unsettled territorial claims and accusations of mass murder and genocide. The religious differences between the Christian Armenians and the Muslim Turks have always served as grounds for discrimination and fates much worst. After the invasions of the nomadic Turkic tribes, Armenians lived under Turkish rule for centuries but they maintained their own religion and culture despite the fact that doing so proved fatal on many occasions. The Turkish and Armenian people do share some cultural aspects due to their long period of cohabitation but they still remain very distinct from one another in regards to language, religion and national goals. The great powers of the world have not been helpful in assisting the two nations to bridge the big gap. Often the Russians or the Americans and recently the xxxs have used one side against the other for their own gains which invariably has widened the rift between the Turks and the Armenians. Some attempts are now being made by the Russian and American sides to bridge this gap today while Israel continues working in the opposite direction. The latest flotilla incident has changed the relations between Turkey and Israel and Israel readily used the Turkish-Armenian problems to retaliate by threatening to assist the Armenian lobby in gaining official recognition of the Armenian genocide carried out by the Turks in 1915.

**Haykakan** · 07-01-2010, 08:22 PM

Re: Economic Research Paper

Conclusion
The economic implications of opening the Turkish-Armenian border mostly seem to be positive for both sides. Armenia has more to gain via the open border than any other country but Turkey also stands to reap substantial benefits. While there are security concerns on both sides, there are also methods to deal with these concerns. The opening of this border has regional implications with other countries in the region gaining better, more efficient trade routes then they have now. These new trade routes are the reasons why the great powers of the world (EU, USA, Iran and Russia) have been urging both sides to settle their differences and open the border.
The argument for opening the border seems pretty one sided when examined in economic terms but there is more to relations between people and countries then money. Cultural, religious and historic differences can trump economic common sense when it comes to international relations and lasting peace between neighbors. The current situation between Armenia and its neighbor Azerbaijan further complicates an already complex matter. Finely it is in the best interest of the Great Powers of the day to bring the Turks and Armenians together instead of pitting them against each other but it may be too little and too late.
This paper deals mostly with the economic aspects of the possible opening of the Turkish-Armenian Border. While the economic aspects seem pretty straight forward, the issues surrounding it are not. This paper provides great reasons for opening the border and these reasons do need to be taken into account by both sides but the issue is bigger than economics and further research in politics, history and culture seems imperative to gain a better understanding and perspective about this issue. As if that was not complicated enough, the political climate between other nations (USA-Iran, Turkey-Russia, USA-Russia) directly and indirectly can affect this situation. Economic principles work in the economic world but the world consists of more than economics.

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