Economic Solutions For The Nagorno-Karabakh Crisis: Interview With Dr. Fariz Huseynov
Co-authored with Maria Birger
When armed conflicts break out, it is difficult for many people to not get emotional and pick sides. We often gravitate towards quick solutions that bring peace because our perspective is limited. We rarely have awareness about the bigger picture, about what happens over the longer term — how to make peace sustainable. To talk about the bigger picture, specifically utilizing economics and finance solutions for war-torn regions, we sat down with Fariz Huseynov, a tenured professor at North Dakota State University in Fargo. Professor Huseynov is currently working on a number of papers on economic development in post-conflict states.
Please tell us a bit about yourself and what you do?
Originally from Azerbaijan, I went to college in Turkey, continued my education in Indiana and Tennessee and ultimately ended up in North Dakota. I teach courses in corporate finance, international finance, and investments. Most of my research is focused on empirical corporate finance and some on international finance.
How did your path lead you to the US, and specifically North Dakota?
I first came to the US to pursue a Master’s degree and the most challenging part was figuring out what to do next. I served as a Teaching Assistant for one of my professors and I really enjoyed it. He noticed that I had a knack for teaching, and suggested that I go for a Ph.D. Excited about research and potential work-life balance, I took his advice and applied for a program at the University of Memphis, Tennessee. After graduation, I ended up becoming a professor at North Dakota State University.
What is it like living in North Dakota?
Located on the border of North Dakota and Minnesota, Fargo is a great town to raise a family. It is a very diverse community. It is safe, friendly, not too small and not too big, just right. There are around 250,000 people in the area. It is not just a college town. Plenty of things happen here and Minneapolis is close, if you want a big city with a lot going on.
What is challenging about being a finance professor in general, in the US, and specifically at NDSU?
Well, getting tenure is incredibly tough. Also, my work is paid for by a land grant. Universities in the area were given their lands to cultivate agriculture and to do engineering many years ago. As a result, they have a mission: they require quality teaching and impactful research from professors and also demonstrations of how they impact their community and their students’ lives. I have been able to balance all of these pretty well, but it is challenging. In today’s world, when state and federal funding is being cut, higher education is not as valued as before, and scientists are not respected as much as in the past — as a professor and public employee I have to constantly explain the value of what I do, of learning. The changing structure of higher education and the move to online education means that we have to be very adaptable. In addition, in finance things change incredibly fast. My students want to know what’s happening right now. That means I have to offer quality, relevant teaching, impactful research and I also have to constantly engage with outside industry, so that I don’t become obsolete. And all I have is 24 hours a day to do all that.
Please talk about your research.
My research is mainly in empirical corporate finance. I have done research focusing on factors impacting corporate decisions, and their implications on financial markets. I have studied corporate tax avoidance and accounting manipulations. I am currently looking at information channels between markets and corporations, focusing on bidirectional learning. We are examining how algorithmic trading and other high frequency trading is making an impact on this.
Have you done any work in financial and economic development?
I have always been interested in financial and economic development of war-torn, post-conflict areas. I have been working with some institutions in Azerbaijan for a while, trying to find new finance solutions for small and medium sized businesses, and overall, policies to develop Azerbaijan’s economy. The Nagorno-Karabakh conflict erupted this summer, and I started thinking about making peace sustainable. I realized that we need to focus on economic development. We need people to live prosperous lives, and value economic ties with each other. How do we put together a sustainable, inclusive economic development plan that makes peace stay and the economy prosper? I am applying for a fellowship at NDSU that will fund research on economic development, immigration and international finance. I am also working on a couple of op-eds that draw attention to the conflict, not only about the political side, but also focusing on economic plans. When the war ends, peace will not just happen by itself. We have to put an economic ingredient there.
How would you talk about the Nagorno-Karabakh conflict in financial/economic terms?
The United Nations roughly estimates that about $50 billion of damage was inflicted in economic terms in the 1990s, though I am not familiar with the exact methodology that they used. Thousands of economic entities have been destroyed in the region. You had a lot of agriculture and an industrial complex in Nagorno-Karabakh. You had lands for livestock, a lot of meat production and food processing, forestry, and obviously educational institutions and so on. All that was destroyed in the conflict in the 90s. Immediately after both countries had high inflation. Azerbaijan’s infrastructure in the area was destroyed. Hundreds of thousands of internally displaced persons had to leave and move elsewhere in Azerbaijan, putting a lot of pressure on other areas. Social and other spending increased and there was not enough of a safety net at the time. Azerbaijan’s economic condition worsened, as economic relationships were broken. The Soviet system was famous for tying regions together with infrastructure and industry. All of the factories and plants that the Soviets put in place there were destroyed. There was no real middle class to create consumption to drive the economy after this crisis. So for many years, until the oil money started coming in early 2000s, it was really tough. While Armenia probably suffered from war as well, Azerbaijan suffered significantly more, because Nagorno-Karabakh and other occupied lands are about 20% of its territory.
What about missed opportunities?
To talk about missed opportunities, think about transportation routes between North, South, East and West. You can’t use them because of the conflict. You can draw capital to oil and gas industries, but you can’t draw capital to non-oil industries because of the risk of escalation. You have a frozen conflict that can erupt anytime. You have a ceasefire, but it can be broken anytime. This entirely elevates risk for any investor. See, if I am thinking about a large investment in the area — the South Caucasus region — I would like to know if this crisis has been sustainably solved. And the answer is no.
So what can be done to bring about a sustainable solution for this conflict?
We have to think about how to bring economic prosperity while we negotiate peace. We need to find a peaceful, sustainable solution that works. According to the UN Security Council resolutions Nagorno-Karabakh and the other 7 occupied areas are Azerbaijan’s lands, so first we need to restore Azerbaijan’s territorial integrity, and not just that. It is about bringing economic prosperity to the region. Azerbaijan has a responsibility and a right to cultivate its lands and provide prosperity to its people. And we need support. We need it to be internationally managed. Well, like the Baku-Tbilisi-Ceyhan (BTC) oil consortium, for example. We bring in multiple stakeholders. We build a plant. We have a pipeline and take oil to the Mediterranean Sea. And the money from this project is going to bring prosperity to this area. We need this kind of mindset. And Azerbaijan has it. It has several plans on how to bring different projects to the area, and it has adopted UN Sustainable Development Goals (SDGs).
So both Azerbaijanis and Armenians would benefit from the economic development of the disputed lands?
The way I see this all citizens of Azerbaijan, whatever ethnicity they are, have a right to economic opportunity. In other parts of Azerbaijan there are many people of different religions and ethnicities, and we don’t talk about them in ethnic or religious terms. We have to approach investment in Nagorno-Karabakh from a different angle: those who are from underdeveloped rural areas, low income, women, small and medium sized business. While we are talking about military and diplomacy, we have to also talk about the economy and we should have a plan on the table about how to develop these areas. And this plan looks like this: multistakeholder, bringing different interests together and ensuring that we are tied together economically. I think that makes it more sustainable. It is obviously not going to come in one day. It’s a long-term solution. But I think it would be a good experience for Azerbaijan and an opportunity to showcase development and prosperity.
Tell us more about the economic development plan for the area. What kind of projects are you proposing?
This should be an economically viable project. It should be profitable for all participants. But there should be mechanisms in place to protect foreign interests, and ensure their investment return and earnings. Azerbaijan definitely wants to open up for foreign capital. We want to develop this area, our lands. Give us a chance, and not only that, support us. I can definitely see organizations like UNDP or the World Bank coming in first. They usually participate in these kinds of projects, they receive funding from different institutions and different companies participate. This area has a lot of potential for water, mining, transportation projects. We definitely need basic infrastructure there. All of this needs capital, experience, and all of that brings different stakeholders together. I think there is room for Western, Russian, Turkish, even Iranian companies. Companies from any part of the world should be able to participate. After all, it’s a business proposal.
Will it be like the BTC?
With the Baku-Tbilisi-Ceyhan international consortium, we brought in several companies and each received different percentages. It was easier because there was clear participation and distribution of income. It won’t be as simple in Nagorno-Karabakh. There will be different types of projects than oil and gas, different income distribution models, and socially minded, impact based investments. That makes it a bit complex. And I don’t think there is one simple formula there that can be used.
What should the US and the West do to help find a solution for this crisis?
The US, Russia and France took on responsibilities as co-chairs of the Minsk Group. They should return to the basic principles they forced both sides to agree upon. They can’t just say ceasefire — checkmark, our job is done. They can’t continue blaming both sides for not wanting to give concessions. They have an agreement. How about implementing it? You brought the sides together, you have to take an objective stance, you have to get it solved. If you are not enforcing or implementing such agreements, what you are doing is just kicking the can down the road and actually increasing the risk of future escalation. What happens if people lose trust in peaceful mechanisms? War. Do you think people will just forget? No, we know a family who 30 years later still keep keys from their apartment in Nagorno-Karabakh. How can you say we are going to reach a peaceful agreement but not implement it, and expect that both sides will just move on? We need to understand that economic prosperity must come to these lands, and you can’t reach that by freezing the conflict. With time, economic opportunities are lost, and all you get is decay.
