Fitch Ratings projects no Armenia-Azerbaijan escalation despite challenges

Fitch Ratings has projected no escalation between Armenia and Azerbaijan despite what it described as “challenging” peace talks owing to Baku’s demands.

“Armenia is negotiating a peace agreement with Azerbaijan following its complete loss of territorial control over Nagorno-Karabakh in 2023,” Fitch Ratings said in its latest Armenia report.“In Fitch's view, a comprehensive peace agreement will be challenging, owing to Azerbaijan's demands for Armenia to establish a transit corridor through its territory and changes to its constitution, which will be politically difficult to agree to. Our base case does not include an escalation of the conflict, even though Azerbaijani troops continue to have a presence inside Armenian territory, and there have been sporadic exchanges of fire.”

The report also covers Armenia-Russia ties. “Relations with Russia appear to have worsened, with Armenia suspending participation in and budgetary contributions to the Russia-led Collective Security Treaty Organisation, while engaging in military exercises with the US. However, trade links with Russia remain strong, and dependence on Russia for energy security is very high. Fitch does not expect secondary US, UK or EU sanctions on Armenia, and expects Armenia's financial sector to comply with sanctions targeting Russia,” Fitch Ratings said.