by John Hughes

If Stepanakert is the face of a nation, the Republic of Nagorno Karabakh is all smiles.

As recently as five years ago, the capital of Karabakh looked nothing like it looks today. Where the fragmented innards of bomb-damaged buildings stood like stalagmites of anti-creation, new buildings now rise to replace the death mask of war.

Streets once eroded by a rain of hell are now paved and curbed and lighted and prepared for the smooth transition from survival to commerce that leaders of the republic say is surely coming.

Utilities are mostly reliable, cellular phone service is available, the best road in the region connects Karabakh to Armenia and a new highway will soon replace rutted pathways for internal travel.

It can be argued, of course, that cosmetics are more concealing than revealing and no overview should put the blinders on to avoid other less-attractive snapshots of Karabakh.

Most of the population is unemployed. Outside the capital, rural life is often a century behind the rest of the world, not unlike many of the other former Soviet Republics. And while development is the key to its future, recovery is a ball and chain that holds Karabakh to post-war reality. Sixty-five percent of this year's budget will be spent on social needs.

Most significantly, the lack of a peace agreement with Azerbaijan cripples Karabakh's chances of normal international relations.

While throwing a shadow on all that would otherwise make Karabakh sparkle, it is also those very realities that make the republic's considerable rise toward self-reliance a lesson in overcoming odds.

It is a lesson written on the faces passing those new streets and visiting the new shops and enjoying the new cafes&mdsh;faces that not so long ago had a downward glance, guided more by memory than by vision.

Arman, a bartender at the Cascade café across the street from the Ministry of Foreign Affairs, says his job offers a barometer on the psyche of his city. He says that students from Artsakh University are frequent customers and he notices a more upbeat expression in their attitudes.

Irina, one of those students, says there's reason for herself and her friends to enjoy themselves.

"I often visit my relatives in Yerevan and what I like there is that the young girls are very emancipated," Irina says. "I am happy that Stepanakert is changing too, and now looks more like a capital."

Others notice too. Last year some 3,000 outsiders visited Karabakh, nearly twice as many as the previous year. And far more than might be expected in a territory where the term "cease-fire" is the main guarantor of safety.

Businessmen are banking on that guarantee holding, and are attracted to Karabakh by government-directed investment incentives that temper concerns about setting up shop in a "risk zone".

The Franck Mueller Company of Switzerland is among jewelers doing business in Karabakh. Another Swiss firm has plans to invest up to $2 million to reconstruct the Karabakh Hotel in the center of Stepanakert and says the hotel will include boutiques and restaurants and a banquet hall for 500.

Future tourists may have little evidence of conditions that cause regular visitors to stand in awe of today's Stepanakert.

One of Armenia's most popular singers, Shushan Petrosian, has been visiting Karabakh since a month after the cease-fire in 1994.

"Each time I visit Karabakh, I see evidence of their pride and endurance," Petrosian says. "Before my eyes I see the transformation of Karabakh from a war-torn country to one that's gaining stability and success.

"I see women who, despite hard social conditions, find time and means to go to beauty shops. And I see young people who stay in Karabakh, even if they have chances to leave. When I perform there the young Karabakhtsis sing with me. They know the songs by heart; not because all of them are my fans, but because the songs are about liberation and freedom."

It is, though, a limited liberation; development is constrained by Karabakh's status as a "de facto" entity in the eyes of the international community.

Karabakh's potential, says its prime minister, Anushavan Danielian, "can be compared with an iceberg in which only a little part is above the surface and the rest is not visible.

"Because Karabakh is an unrecognized state, it is difficult to attract investors, since it is a risk zone."

It is a difficulty government leaders have minimized by implementing tax breaks that between 2001 and 2003 helped attract $40 million in investment to Karabakh. Significantly, $13 million came from non-Armenian or non-Diaspora sources. According to the Prime Minister, until 1999 there had been zero investment from non-Armenian sources. Last year, foreign investment was about $8 million, up four times over the previous year.

"Any businessman who comes to our country has an open door to meet with ministers on that very day," Danielian says. "During implementation of any project, we go see how we can be helpful with it.

"Every businessman who makes investments here becomes our propagandist, our ambassador in a way."

It is a republic few outside will admit to, but all in the neighborhood acknowledge as a key to regional stability.

But, while the Prime Minister may be right about business "ambassadors", at diplomatic meetings that matter most to Karabakh's future, even the Republic's President is excluded. Peace talks are held between Baku and Yerevan, with (former president of Karabakh) Robert Kocharian the "de facto" representative of the de facto republic.

"Meetings between the presidents of Armenia and Azerbaijan can't be considered negotiations because, first of all, they are very rare and, secondly, the presidents of these countries are unable to discuss the subtle details of the settlement," Karabakh President Arkady Ghukasian says (see related interview in this issue). "As for the immediate dialogue between Baku and Stepanakert, it would certainly help build bridges of trust between the main conflicting sides, i.e. Azerbaijan and us."

Neither the Prime Minister nor the President is optimistic that a settlement is within reach. Karabakh's impressive progress aside, the effect of its current status is a lingering limbo that frustrates more substantial development and restricts involvement by governments that might otherwise find ways to participate in the republic's growth.

For example, the U.S. Agency for International Development (representing the State Department of the United States) is restricted in the type of assistance it can offer Karabakh. Under conditions of the Freedom Support Act, USAID has, since 1998, allotted about $35 million to Karabakh. But because Karabakh is diplomatically seen as a "break away, self-declared republic", the American government's assistance is limited only to humanitarian purposes, i.e., rebuilding hospitals and schools and other "emergency intervention" projects.

U.S. representatives say the issue is too sensitive for them to risk speculation of what could be, if Karabakh and Azerbaijan reached a peaceful settlement.

But outside the realm of official comment one might compare Gyumri in Armenia, devastated by the 1988 earthquake, with Shushi as an example of what Karabakh is missing out on because of the unsettled conflict.

Karabakh's "second city", Shushi, once had about 12,500 residents. Today it has about a fourth that&mdsh;and those live in mostly squalid conditions among battle ruins.

But because Shushi is classified as a "green zone", that is, an "occupied" territory, USAID is prohibited from carrying out any activity there.

By comparison, in Gyumri, the agency has funded a three-year, $31 million urban redevelopment program that by the end of this year will have helped more than 5,500 families purchase houses.

It is a testament to their endurance and outright stubbornness that the Karabakhtsis survived a war against a bigger enemy. It is an equal accomplishment that there is now starting to be evidence of what they were fighting for. Still: Who can help but wonder what could be?

Tigran "Dedo" Arakelian is not among those speculating. At age 90, his life is okay, he says. He lives in a home for the elderly, Karabakh's first, built in 1995, where he tends a garden, plays dominoes and chess, and is known to dance when the occasion calls for it.

"I feel like I'm 60 at most," Dedo says.

In his lifetime, Karabakh has gone from being part of Armenia to being part of Azerbaijan, to now claiming its autonomy.

Perhaps Dedo, who has never married, speaks for his country when he speaks of his own hopes of finding a wife.

"Maybe one day everything will change," he says. "I have the world before me."

(This report was supplemented with information collected by reporters Marianna Grigoryan and Julia Hakobyan.)

Originally published in the April 2004 ​issue of AGBU Magazine. Archived content may appear distorted on your screen. end character

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