• On an October Saturday, 675 Karabakhi couples enjoyed the benefits of a mass wedding organized by businessman Levon Harapetian.

  • 'Elite' residential buildings are now part of Stepanakert life.

  • Gandzasar Monastery is a bright spot for Karabakh tourism.

  • Hakob Abulakian wants Karabakh—and his Nairi hotel—to prosper.

  • Vank has undergone development by Armenian-American businessman Levon Hayrapetian.

  • Bako Sahakian received the Church's blessing to lead Karabakh since 2007.

  • Hope is way ahead of development in worn-wounded Shushi.

  • Stepanakert's popular green market is evidence of the potential of the "Black Garden.

November 1, 2008 | Magazine Archive

RECOVERY AND CONCERN: REGIONAL UNREST REMINDS OF NKR’S YEARS OF PROGRESS, WHILE RAISING ANXIETY

by Naira Hayrumyan

As Russian tanks rolled into Georgia this August, the impact of unrest in that country’s “enclaves” was felt across the plains of Armenia and into the mountains of Nagorno Karabakh, where 20 years ago Karabakhtsis first felt the horror of war.

Political analysts drew comparisons between the unrecognized but self-declared republic and the other Caucasian “frozen conflicts,” Ossetia and Abkhazia. But it was on a far more practical level that the reality of war made its presence felt here, where a 16-year cease-fire with Azerbaijan holds against disturbing threats and saber rattling. In Karabakh this August, war in Georgia resulted in a drop in real estate sales.

Official numbers have not been tallied, but on-the-ground real estate agents all agree that when fighting started in Georgia, property buying stopped in Karabakh.

The slowdown was noticeable partly because, for the past two years, NKR has experienced a relative real-estate boom as the tiny but determined republic rebuilds. In the fourth quarter of 2007, the state registered 457 property sales, an increase of nearly 13 percent over the third quarter and a remarkable 68.6 percent over the same period of 2006.

According to the State Committee of Real Estate Cadastre of Karabakh, the price of one square meter of property in the capital Stepanakert rose from $524 to $742.

Property managers there say that most of the purchasing has been done by locals. Most of the transactions concern Soviet-built apartment blocks; however in the past couple years, several “elite” housing units have been built.

The state has also built new housing for the socially vulnerable. In Stepanakert, 150 families of slain soldiers are registered for the free housing.

And while the recent fighting in Georgia is a reminder that “frozen” conflicts can easily erupt, life in Karabakh has found a level of normalcy under the constant hope of settlement and the constant threat of aggressions.

Though the past three years have been marked by a breakdown of peace talks and threats of renewed fighting from Baku, the 16 years of peace have taken Karabakh from disaster to recovery—if not yet to prosperity.

Due in large part to attention from Diaspora and humanitarian help from international agencies, and more recently investment by native Armenians, the NKR of the late 1990s is hardly recognizable in the buildup of the new century’s first decade.

A leader in the recovery has been AGBU, whose programs have not only constructed buildings and contributed to building new highways but, in 2004, included establishing a chamber orchestra and financed housing for 12 musicians who relocated from Yerevan.

As AGBU has contributed to the resettlement of rural areas, its most visible presence is the reconstruction of Alek Manoogian Avenue, School Number 8, an 11-story residential building on Mashtots Street and a chess house.

In 2005 AGBU London chapter began rebuilding the village of Bareshen in the Hadrut region, while the Canadian chapters of AGBU are planning to restore the village of Nor Jraberd in the Martakert region. Also in Hadrut, reconstruction projects are underway in the villages of Norashen and Jrakn.

So far, no one has placed a figure on the amount of money spent in rebuilding this strategic block of land that continues to be de-mined so that its rich soil may be fully farmed again without fear of buried bombs.

Economist Ruzan Mangasarian of Artsakh State University says the growth of Karabakh is deterred, though, due to its unsettled status. Foreign investors shy from opening enterprises where the political landscape could shift unexpectedly. “Therefore, investment policies acquire a special importance for Karabakh,” she says, adding that, as an agrarian country, its primary avenue for development is in light industry.

In 2007 Karabakh’s per capita GDP was $1,489 (about $1,300 less than Armenia’s). In the first half of 2008, per capita GDP was up $240 over the first six months of last year. (There is no data to compare previous years’ GDP.)

“According to international norms, countries where the GDP per capita does not exceed $4,000 are rated as economically undeveloped,” Mangasarian says.

A price for repopulation

In July of 2007, the former Head of NKR National Security Service Bako Sahakian was elected president of Karabakh. He appointed Ara Harutyunyan to the post of Prime Minister and announced that social support and demographic development would be political priorities.

As of January 1, 2008, the population of Karabakh was 139,500. The population of the Autonomous Region of Nagorno Karabakh, based on the 1989 census, was 189,000. Considering that 25 percent were Azeris who fled during the war, the current census shows that the Armenian population has survived the threat of demographic disaster.

The war—which took the lives of 6,000 sons and daughters of Karabakh and crippled thousands more—deportation and social emigration all led to a sharp de-population from which NKR is recovering.

The government has taken active measures to encourage growth of families. Beginning this year, newlyweds are given 300,000 drams ($1,000) during their marriage registration. Established families are encouraged to expand through a program that grants a one-time benefit of 500,000 drams ($1,700) to establish an account for the third child and an equal amount to the mother. A fourth child brings 1,400,000 drams ($4,800) to its family.

The result of the program exceeded expectations. The state budget had allocated 450 million drams ($1.5 million), expecting about 1,500 marriages during the year. Instead, more than 3,000 couples married in just the first half of the year. The state kept its promise, finding funds from other sources to reward the newlyweds.

The pay-for-births program has also had an impact. In the first quarter of this year there were 1,113 births, an increase of 11.5 percent compared to the same period last year.

Levon Hayrapetian, an Armenian-American and a native of Vank, with a Russian-based business, took a personal stake in stimulating Karabakh’s population. In October, Hayrapetian hosted a collective wedding of 675 couples. A fund set up by Hayrapetian (and supported mostly by Russian-Armenian businessmen) paid each couple $2,000, and each bride got $500 for a wedding dress. Further, the newlyweds were assigned sponsors to support the family when children are born.

Stimulating births may be easier than stimulating economic growth in Karabakh. During the first half of 2008, the country’s industrial output was only about $46,000—represented mainly by mining.

The state budget of Karabakh is $140 million, with two-thirds of its expenditures covered by an interest-free loan from Armenia. In the first half of this year, the state collected $18.5 million in taxes—up nearly 11 percent over 2007.

Twenty percent of collected taxes was paid out by Base Metals, an ore-dressing and processing enterprise near the village of Drmbon in Martakert that processed about 320,000 tons of ore last year. Executive Director Artur Mkrtumian says the plant plans to process 400,000 tons by the end of this year. The enterprise—Russian owned—has 1,200 employees who make an average wage of 200,000 drams a month (about $660)—a staggering sum by Karabakh standards.

There are no other major enterprises in Karabakh, except for a couple of wine and liquor plants and furniture factories. Agriculture has seen some development. For instance, wheat production nearly doubled to about 74 tons between 2007-8.

Karabakh is yet to see an expansion of medium-sized businesses. About 2,000 entities (mostly shops) are registered at the Tax Service. Entrepreneurs complain of high taxes and a complicated accountability system by which the slightest error can result in severe sanctions.

Ara Martirosian had to leave for Russia right after the war to earn his living. In Krasnodar, near the Russian Black Sea coast, he managed to create his own business, a furniture upholstery workshop. Several people from Stepanakert were employed at his enterprise. In 2005 they all made a decision to return to their homeland.

“It is complicated to run a business here. Too much running about: by the time all documents are ready, pay here, pay there, find employees, you lose all the desire to do anything. Then it turns out there is no raw material, no market. Transportation expenses are so high that the net cost increases, and then you are at a loss, not knowing what to do with that product. We tried to make our own beehive and export honey in glass jars. But no luck so far,” says Martirosian.

Residents of Karabakh, and especially Stepanakert, who have had discouraging experience in commerce and business, generally turn their attention to the public sector. Many try to find an “approach”—that is to say, a bribe—to the right people in order to get a position at state institutions. Some 9,000 residents of Karabakh are paid their wages from the state budget. More than 3,000 of them work at administrative bodies. More than half of Karabakh’s population is made up of children and pensioners.

Beginning this year, the average retirement pension was raised by 68 percent and allowances to vulnerable categories of the population were doubled. Meanwhile, the average wage in Karabakh, according to the State Statistical Service, is 68,400 drams ($240), which is higher than the 2006 index by 21 percent.

Transition and tourism

Post-war Karabakh stands out by the fact that almost one third of its population receives state pensions because the state feels obliged to compensate the children of those who died in the war ($100 per child per month), as well as war veterans and invalids. The average pension of civilians is 23,000 drams ($80).

According to official data, the minimal consumer basket per person in Karabakh is 34,372 drams (about $115), the minimal food basket alone is 22,170 drams (about $74). These means, as the government holds, are enough for the most essential sustenance. However, polls conducted by Open Society NGO (Karabakh) show that residents say 60,000 drams per capita ($200) a month are needed to satisfy food demands alone.

A loaf of bread (half a kilo) in Karabakh costs 50 cents, a half-liter of milk is about 30 cents; eggs are $2.40 per dozen. The prices reflect a 4.5 percent increase in the overall cost of living since last year.

There were 12 primary schools and eight universities in Stepanakert.

“Eight universities are way too many for such a small town as ours,” says town old-timer Vagharshak Harutiunian, hiding his smile in his mustache. “Let them study, no harm there, but who is going to work at construction? My son was renovating his apartment recently and couldn’t find a proper tile master. Those who are, are mostly from Armenia.”

In August of 2008 a state commission prohibited three private universities from enrolling students. So, currently there are “only” five universities in Karabakh—Artshakh State University and four private ones with a total of 7,300 students. The country’s 236 comprehensive schools have a total of 22,000 pupils.

Three years ago, a vocational school was founded in Stepanakert teaching welding, construction, dress-making, hairdressing and wood processing to 1,000 students. It also has a course in hotel management.

There are at least 10 hotels of different classes operating in Stepanakert, some belonging to local businessmen, others to Armenians living abroad.

Nairi Hotel belongs to a group of Australian citizens of Armenian descent. Hakob Abulakian, upon whose initiative his Australian colleagues decided to invest money in Karabakh, is planning to try his hand at something else as well.

“Of course it’s not merely about business. I mean that I work here not only because it’s profitable. I just want this land to prosper and people living here to make use of all the resources. I am now ready to take up organization of tours around the country. Karabakh has astoundingly beautiful and historically significant sites. People have to see them,” says Abulakian.

Tourism in Karabakh is mostly of ethnic character, although one can see hundreds of people who are apparently not of Armenian descent in the streets of Stepanakert. From May to November hotels are mostly fully booked. Stepanakert hotels can receive more than 450 guests at rooms ranging from $60 to $120 per night depending on the season.

In 2007, tourists spent about $3 million in Karabakh and industry specialists say the number of visitors grows by about 10-12 percent per year.

In August of this year a tourism department was created as a government-adjunct body to systemize the creation of a tourist industry.

The first tourist destination is Gandzasar, a 13th-century monastery complex called “the pearl of Armenian architecture.” It stands in splendor above the village of Vank in the Martakert region.

Levon Hayrapetian, originally a native of Vank (he of the mass wedding), has funded asphalting of the road leading to the church, construction of a contemporary woodworking plant in Vank, two hotels, a school, infrastructures and services. Vank has become a pilgrimage shrine not only for tourists but also those residents of Karabakh who returned to the bosom of the Armenian Apostolic Church.

In 1930, the doors of the last church in Karabakh closed. Up to 1989, when the bell rang again after almost six decades of silence at Ganadzasar monastery, there were no functioning churches in Karabakh. Though even now in almost all the villages one can find abandoned churches without a pastor, they are being recovered one by one. Fifteen churches have already resumed their service. Among them is St. Hakob church in Stepanakert, completed last year, built by the Vatche Yepremian family of California in memory of his brother.

There isn’t a single tour that does not include Shushi. However, Stepanakert and Shushi (with a population of 3,000) are two different worlds. In Stepanakert life is peaceful and comfortable, a life of progress; in Shushi the war seems to have just finished and the town is still in ruins.

Only a small part of housing has been recovered. It has Internet but doesn’t have proper water supply; it has two music schools, three theatres, art centers, an art gallery, but lacks roads and general heating. The situation is changing with great difficulty.

Many of the apartments in Shushi were privatized by investors who bought them for nearly nothing and are now trying to sell them at unrealistic prices. A two-bedroom apartment that, in 2006, sold for $3,000 is now being offered for $20,000.

Several funds were created to revive Shushi, the biggest among them is Shushi Revival lead by the Mayor of Yerevan Yervand Zakharian. However, even the projects by those funds have made little difference in Shushi.

Prosperity amidst unease

People who have survived war are fearful of new conflicts. The recent events in South Ossetia have awakened painful memories and concerns about the future. “For three nights in a row I had nightmares about jets bombing the city,” said Svetlana Danielyan, 30. “For many years I have tried not to think about it, but after the events in Tskhinvale (Georgia) my memories have come to life again. What’s going to happen to us? Will they one day decide to settle our issue in the same way too? Based on what? What gives them the right? We have lived in peace for almost 20 years; children born in independent Karabakh now serve in our army. What else do they want from us?”

In 1991-93 Stepanakert was bombed from five fire points, names of which were known even to children. Back then all the buildings had apartments with their interior visible from the street. Flower-ornamented wall paper peacefully smiled from the cross-section of apartments. Ten years ago wood-stove pipes looked out of the windows, balcony ceilings black with smoke, and windows had pieces of plastic instead of glass. Every year the number of stove pipes and glassless windows decreased, and now there almost aren’t any. They have been replaced by fashionable euro-style windows.

Despite the twists and turns in both internal and external politics, life in Karabakh indeed goes on and the standard of it, especially in Stepanakert, keeps improving. Shops which can hardly keep up with consumer demands, including washing machines, DVD players and other goods, are a vivid example of the change.

Prices for real estate have grown too: a two-bedroom apartment in Stepanakert costs an average of $70,000. Only two years ago, the price for such an apartment was no more than $22,000. And immediately after the war—in 1994-98, three-room apartments could be purchased for $3-4,000.

But nothing came easy. Immediately after the cease of hostilities a group of military officers lead by the then Minister of Defense Samvel Babayan came to power in the country. Even though Robert Kocharian was elected as president, power was in the hands of the military. Many of them soon became very rich. Nonetheless, some too were instrumental in securing the massive rehabilitation projects carried out to recover what the war had destroyed.

It was made possible mostly due to efforts and assistance of the Armenian Diaspora, without which Karabakhtsis might have never survived and recovered. In 1996, repair of the only road connecting Karabakh to Armenia and the rest of the world, the Stepanakert-Goris highway, was completed through contributions to Hayastan All-Armenian Fund. Ever since, residents of Karabakh, deprived of air and railway communication, can reach Yerevan from Stepanakert in five to six hours by car. In recent years, the Fund has concentrated on rebuilding internal roads, primarily the North-South highway.

A middle-aged woman in Karabakh, reflecting on the events of the past 20 years, philosophically said: “I have come to the conclusion that there is nothing left in the world that I haven’t faced. When I was 16, my family and I, barefooted, hardly escaped pogroms in Baku. I got married early and had a daughter. My husband died in 1994. We lived in an apartment, often half-starving. I had to ask my neighbors not to throw away bones of cooked meat, so that I could give what meat was left on them to my child. Thank God, my daughter has grown, I am employed, we have been given an apartment. But I have lost the ability to be surprised.”

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