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While internationally mediated efforts to find a lasting settlement to the protracted Nagorno-Karabakh dispute showed signs of progress in early 2001, the negotiations quickly lost momentum by midyear. Initially promising discussions in Key West, Florida, in April failed to lead to a comprehensive agreement at year's end. Despite criticism from the Council of Europe that municipal elections scheduled for September could further undermine peace efforts, the republic held the local vote as planned, in which the ruling Democratic Union Artsakh (ZhAM) party captured most of the local government body posts.
The region of Nagorno-Karabakh, whose population was overwhelmingly ethnic Armenian, was transferred from Armenian to Azerbaijani jurisdiction in 1923, and the Nagorno-Karabakh Autonomous Region was subsequently created. In 1930, Moscow permitted Azerbaijan to establish and resettle the border areas between Nagorno- Karabakh and Armenia.
In 1988, Nagorno-Karabakh's Supreme Soviet adopted a resolution calling for union with Armenia. The announcement, as well as February demonstrations in the Armenian capital of Yerevan in support of Nagorno-Karabakh, triggered violent attacks against Armenians in the Azerbaijan city of Sumgait shortly thereafter, and in Baku, the capital of Azerbaijan, in January 1990. During the late 1980s, skirmishes broke out along the Armenia-Azerbaijan border and around the Nagorno-Karabakh region.
Following multiparty elections for a new legislature, Nagorno-Karabakh's parliament adopted a declaration of independence at its inaugural session in January 1992. From 1991 to 1992, Azerbaijan besieged Stepanakert, the territory's capital, and occupied most of Nagorno-Karabakh. A series of counteroffensives in 1993 and 1994 by Karabakh Armenians, assisted by Armenia, resulted in the capture of essentially the entire territory, as well as six Azerbaijani districts surrounding the enclave. By the time a Russian-brokered ceasefire was finally signed in May 1994, the war had resulted in thousands of casualties and nearly one million refugees.
In December 1994, the head of the territory's state defense committee, Robert Kocharian, was selected by parliament for the newly established post of president. Elections to the 33-member parliament were held in April and May 1995, and Kocharian defeated two other candidates in a popular vote for president in November of the following year. In September 1997, Foreign Minister Arkady Ghukasian was elected president with 89 percent of the vote to replace Kocharian, who had been named prime minister of Armenia in March of that year.
In June 1999, Ghukasian dismissed Prime Minister Zhirayr Pogosian amid allegations that a surveillance device discovered in the president's office had been planted by Pogosian, possibly on the order of powerful Defense Minister Samvel Babayan. Some analysts speculated that Pogosian's dismissal indirectly targeted Babayan, with whom Ghukasian had become increasingly involved in a power struggle; Babayan was removed as defense minister the same month. Anushavan Danielian, a former deputy parliamentary speaker in Ukraine's Autonomous Republic of Crimea, was named the new prime minister.
In the territory's June 2000 parliamentary vote, 123 candidates representing five parties competed in single-mandate constituencies for the national assembly's 33 seats. The ruling ZhAM party, which supports Ghukasian, enjoyed a slim victory, winning 13 seats. The Armenian Revolutionary Federation-Dashnaktsutiun won 9 seats, the center- right Armenakan Party captured 1 seat, and formally independent candidates, most of whom support Ghukasian, won 10. Approximately 50 election monitors from several countries observed the poll, including representatives from the British Helsinki Human Rights Group. International observers described the electoral campaign and voting process as calm and largely transparent, although problems were noted with the accuracy of some voter lists.
On March 22, 2000, Ghukasian was seriously wounded by two gunmen during a failed assassination attempt. Police quickly arrested dozens of suspects, including Babayan and a number of his inner circle. While some welcomed the detention of Babayan, who had been accused of corruption and reportedly wielded considerable political and economic power in the territory, his supporters insisted that the arrest was politically motivated. Along with 15 other defendants, Babayan, who was charged with organizing the attack in order to seize power in the republic, was put on trial in mid- September in Stepanakert. In February 2001, Babayan was found guilty and sentenced to 14 years in prison, while the other defendants received various prison terms or short suspended sentences. The presiding judge announced that the verdict had been based on pretrial testimony in which Babayan confessed to the charges, even though he later retracted his admission of guilt, claiming that it had been obtained under duress. In a separate case, Babayan's brother, former Nagorno-Karabakh interior minister and Stepanakert Mayor Garen Babayan, was convicted in November of corruption, abuse of power, and illegal arms possession and was sentenced to five and a half years in prison.
Nearly 2,000 candidates contested legislative and executive posts in 223 municipalities during Nagorno-Karabakh's local elections on September 5. Voter turnout was estimated at 60 percent. Members of ZhAM were elected to head local government bodies in at least 140 towns and villages. ZhAM candidate Hamik Avanesian, who had been Stepanakert's municipal head during the Soviet period, defeated five challengers with 53 percent of the vote to become mayor of the territory's capital city. While no major irregularities were reported during the elections, Avanesian reportedly received significant support from the republic's authorities, including in the dominant state-run media. The Council of Europe warned that the elections were not legitimate and could undermine peace process efforts, and Azerbaijan called the poll illegal.
Despite some early promises of a breakthrough for a political settlement on Nagorno- Karabakh's status, a resolution of the long-standing dispute remained elusive at year's end. In February, Azerbaijan released details of peace plans drafted by the main international mediator for the conflict, the Organization for Security and Cooperation in Europe (OSCE) Minsk Group. Their publication provoked heated debate in Baku's parliament, which labeled the proposals unacceptable, and led some government members to voice support for a military solution to the conflict. However, during four days of meetings in April in Key West, Florida, Armenian President Kocharian and Azerbaijan President Heydar Aliev reportedly made substantial progress toward a settlement of the conflict. This momentum largely evaporated the following month, when subsequent peace talks scheduled for June in Geneva were postponed indefinitely, reportedly because public opinion on both sides was not yet prepared for the difficult compromises necessary for a lasting peace. While Yerevan insists that Nagorno-Karabakh should be left outside Azeri jurisdiction, Baku maintains that the territory may be granted broad autonomy while remaining a constituent part of Azerbaijan. Azerbaijan also has refused to negotiate with Ghukasian, who has demanded direct representation in the peace process.
A self-declared republic, Nagorno-Karabakh has enjoyed de facto independence from Azerbaijan since 1994 while retaining close political, economic, and military ties with Armenia. Residents of Nagorno-Karabakh technically have the means to change their government democratically. Parliamentary elections in 1995 and 2000 were regarded as generally free and fair, as were the 1996 and 1997 presidential votes. However, the elections were considered invalid by most of the international community, which does not recognize Nagorno-Karabakh's independence. Nagorno-Karabakh's electoral law calls for a single-mandate system to be used in parliamentary elections; lawmakers rejected the opposition's demands for the inclusion of party-based lists.
The government controls many of the broadcast media outlets, and most journalists practice self-censorship, particularly on subjects dealing with policies related to Azerbaijan and the peace process. Some observers maintain that the government used the attempted murder of President Arkady Ghukasian as a pretext to intensify attacks against its critics. According to one report, the telephone lines of several opposition journalists were cut two days after the shootings.
With Christian Armenians constituting more than 95 percent of the territory's population, the Armenian Apostolic Church is the predominant religion. Years of conflict have constrained the religious rights of the few Muslims remaining in the region. Freedom of assembly and association is limited, although political parties and unions are allowed to organize.
The judiciary, which is not independent in practice, is influenced by the executive branch and powerful political and clan forces. Former Defense Minister Samvel Babayan alleged that he had been physically assaulted during his interrogation and detention as a suspect in the failed assassination attempt against President Ghukasian. The majority of those who fled the war continue to live in squalid conditions in refugee camps in Azerbaijan, while international aid organizations are reducing direct assistance to the refugees. Onefifth of Azerbaijan's territory captured during the war remains occupied by Armenia. Sniper attacks and land mine explosions continue to result in casualties each year.
The territory's fragile seven-year peace has failed to bring significant improvement to the economy. Industrial capacity remains limited, with high unemployment forcing many residents to leave for neighboring countries in search of work. Widespread corruption, a lack of substantive economic reforms, and the control of most economic activity by powerful elites limit equality of opportunity for most residents. In May 2001, President Ghukasian signed into law legislation providing various financial incentives for new small- and medium-sized businesses.