ARMENIA CONCERNED AT CAUCASUS ARMS RACE - Could dissolution of CFE treaty herald outbreak of conflict in the Caucasus?

The sharp rise in defence budgets and accompanying militarisation of the countries of the South Caucasus is alarming the international community. Growth in military spending in Armenia, Azerbaijan and Georgia now exceeds GDP growth by 20 to 40 times.

For every million inhabitants of the South Caucasus, there are 75 tanks and 85 artillery pieces. This is a much larger proportion than in the three big neighbours of the region, Iran, Russia and Turkey. If you factor in the number of weapons in the three unrecognised separatist territories in the region, Abkhazia, South Ossetia and Nagorny Karabakh, the figures rise by around a third.

However, the militarisation of the region needs to be put in a wider perspective. The Stockholm peace institute, SIPRI, calculated that last year world military spending reached 1.2 trillion US dollars, a rise of 3.5 per cent on the year before.

That suggests that, despite the end of the Cold War and efforts to put in place a new international security framework, most countries still believe that the best means of preserving their security is maintaining an effective army.

Armenia's military budget for 2007 was just over 271 million dollars, or 3.5 per cent of GDP. The spending is based on a perceived actual military threat from Azerbaijan and a potential one from Turkey.

The Armenian government rejects accusations that it is exceeding the military quotas set by the 1990 Conventional Forces in Europe treaty, or CFE, and says that it is keeping to the limits and preventing a new arms race in the Caucasus. (Azerbaijan for its part accuses the Armenians of maintaining weaponry outside CFE in Nagorny Karabakh. See accompanying article).

Armenia has been accused of militarising the region by receiving Russian weaponry transferred from the former base of the 62nd army in Akhalkalaki in Georgia - now closed - to the Russian military base in Gyumri in northern Armenia.

Armenian officials responded to this by saying that most of the equipment transferred was vehicles and ammunition and that all equipment in the Gyumri base remains the property of the Russian armed forces, not of Armenia. They say that the whole process was transparent and agreed with the Georgian government and that it complies with CFE quotas.

Armenia is watching as Azerbaijan sharply increases its military budget year on year and says that their neighbour is breaking its CFE commitments. For example, in 2006 Azerbaijan declared that it possessed 217 tanks and bought 41 tanks from Ukraine and Belarus, thereby exceeding its CFE quota by 38 tanks.

Former Armenian defence minister Vagarshak Harutiunian said, "It's far from clear to what extent the OSCE and NATO can force Baku to keep to the quotas set out in the CFE. In this situation, it is obvious that Azerbaijan should either leave the CFE or observe it properly."

The Armenians say that Azerbaijan is trying to use its enhanced defence budget, based on increased oil revenues, to try to force them to make unilateral concessions in negotiations over the Nagorny Karabakh peace process. However, they say increased military spending by Azerbaijan is a necessary but not sufficient condition for achieving success should fighting resume.

It is worth noting that a large part of Azerbaijan's military expenditure is being directed towards naval forces in the Caspian Sea - and therefore not against Nagorny Karabakh or Armenia. Disputes over this large and energy-rich basin are a potential source of conflict in the future. Baku is also compelled to keep some of its forces in other parts of the country, such as the southern border, to repel other potential threats.

"The Armenian side in response to Azerbaijan's purchase of expensive offensive weaponry is giving its preference to cheaper defensive weapons systems," said Sergei Minasian, a military expert who is deputy director of the Caucasus Media Institute in Yerevan.

"[Armenia] is also using sensibly its membership of the CIS Collective Security Pact and its alliance with Russia. For example at the end of 2006, Baku bought expensive modern MiG-29 fighter aircraft from Ukraine. And just around the same time there was an announcement that the Russian-Armenian anti-aircraft system on the territory of Armenia had been replaced by a more up-to-date system and put on a state of battle alert."

Both NATO and Russia are contributing to the increased militarisation of the South Caucasus. The argument can be made that both NATO and the CIS Collective Security Pact have their place in the region and the two are in a state of competition for allegiance rather than outright hostility. NATO's activities in the region have been met with understanding in Armenia, which has hosted NATO training exercises.

However, up till now, relative stability has been guaranteed in large part due to a military balance, whose cornerstone has been the CFE treaty. If the CFE treaty begins to unravel that could lead to a destabilisation and rise in tension in the South Caucasus, with the threat of unresolved conflicts flaring up again.

David Petrosian is a political observer for the Noyan Tapan news agency in Yerevan.