Costs of reconstruction of Nagorno-Karabakh damaged-areas

The conflict between Armenia and Azerbaijan for the control over Nagorno-Karabakh is the first ethno-territorial conflict emerged in the territory of the former Soviet Union and its the longest running. After more then twenty years the conflict remains unresolved.

The ceasefire signed in 1994 did not prevent the recurrence of sporadic border incidents; the most recently occurred the night of April 2, 2016. As time passed the conflict has changed its nature. Born during the Soviet period as an intra-state conflict, after the dissolution of the Soviet Union and the declaration of independence of both Armenia and Azerbaijan it became an inter-state conflict.

The negotiation process over Nagorno-Karabakh is seen by many to be deadlock. Peace talks to resolve the conflict have been under way for more than two decades with virtually no tangible progress.

As a result of the armed conflict the socio-economic sphere of the country was seriously damaged: the cessation of most economic activities in the occupied territories (20% of the Azebaijan’s territory has been occupied), the cut-off of the Nakhichevan portion of the country and the influx of refugees and IDPs.

In the occupied territories houses, schools, hospitals have been destroyed. Every sectors from manufacturing to agricultural have been pillaged.

Since the beginning in 1988, the conflict has led to over 20.000 deaths and almost 1 million refugees and internally displaced persons. A refugee flow which has resulted in a considerable crisis especially in Azerbaijan, where the number of displaced persons is close to 1 million, roughly 12–15 per cent of the population of the country consists of displaced persons [1].

It has also affected the South Caucasus region more broadly, due to the opportunity costs of unrealized trade and investment, as well as non-engagement of the most efficient trans-regional lines of transport and communications.

To calculate the costs of reconstruction of Nagorno-Karabakh damaged-areas devastated by the conflict between Armenia and Azerbaijan is an extremely difficult research task in itself. It requires the concentration of vast material, energy, financial and labor resources.

In drafting a state reliable program of reconstruction of the post-conflict areas the government of Azerbaijan needs to consider many issues: from basic planning assumptions to the management of risks typical of large-scale government programs.

First, its necessary to consider the State’s economic capacity and the availability of other investors, from the world community and other potential donors, to take part in the rehabilitation works.

To collect the required funds its important to consider possible ways to save money like cost minimization and resource saving, by choosing which enterprises to be reconstructed or constructed considering their potential competitiveness at international or regional level, by comparing the economic advantages of new construction and restoration of previously existing facilities.

The Government needs to clearify the number of people returning to the post-conflict areas as a necessary condition for reconstruction planning, because the subsequent restoration of all life support systems and infrastructure, production and sociocultural facilities should be shaped precisely to this figure.

The government of Azerbaijan has to consider the costs of rebuilding of the Nagorno-Karabakh damaged areas in order to restore normal living conditions even in surrounding territories, including the cost of the resettlement of IDPs, the restoration of education, health and law enforcement services, the cost of de-mining operations, and the restoration of the infrastructure of the agriculture sector, livestock, fisheries, electricity, water, bridges, roads, railways, banking and finance facilities.

One of the possible risk threatening the process of  reconstruction is the possibility of a renewed military action. Until an agreement will be reached between the two parties the Government can formulate short-term reconstruction plans.

As the program is developed before the parties reach a political agreement on resolving the conflict, it should be constanty adapted to new contingencies.

Only when the liberation of areas around the administrative boundaries of the former Nagorno-Karabakh Autonomous Region and the withdrawl of the illegal armed formations from the occupied areas zone will be realized,  permanent measures can be taken and a new border security system can be created.

Another important risk is represented by possible corruption in the use of funds and the crucial impact of potential inflation on developing the financial aspects of a reconstruction plan.

The conflict starved both sides of opportunities for transparent and regulated trade, leading inevitably to a questioning among broader societies of the benefits of transition to a market economy.

However, despite any effort the achievement of a political agreement on resolving the Nagorno-Karabakh problem remains crucial.

Once realized it will make possible to reintegrate the occupied areas into the legitimate political and economic space, while their economic revival will play a very positive role in improving the well-being of all citizens in the region, and also in the overall social and economic development of the South Caucasus.

The government of Azerbaijan will continue to put its efforts on the realization of a reconstruction plan, which represents a feasible task for Azerbaijan which has the sufficient intellectual and economic potential to quickly reconstruct its post-conflict areas, with active support from the international community.


[1] CORNELL S., “‪Small Nations and Great Powers: A Study of Ethnopolitical Conflict in the Caucasus”, ‪Routledge, 2005.


Giorgia Pilar Giorgi. Laureata in Relazioni Internazionali all’Università degli Studi Roma Tre, specializzata in analisi geopolitica e sicurezza, collabora con diversi istituti di ricerca in Italia ed Azerbaigian e recentemente ha ricoperto il ruolo di analista geopolitica per il CESD – Center for Social and Economic Development di Baku. In passato ha svolto un periodo di formazione e ricerca presso l’Università di Baku per un progetto promosso dall’Azerbaijan International Development Agency.