Iran, Turkey Pick Up Trade In the War-Torn Caucasus

PEOPLE crowd around the counters at an "Iranski store," looking intently at the displays of plastic toys, kitchenware, shampoo, clothing, and other consumer goods stacked in the small space. Pictures of the late Iranian religious leader Ayatollah Ruhollah Khomeini and current President Hashemi Rafsanjani hang on the wall.

This is one of many such stores that have sprung up around the Armenian capital in the last year, filling once-bleak shelves with a wide variety of Iranian and Middle Eastern consumer goods. The supply is maintained by a steady stream of massive trucks that undertake 24-hour-long journeys along a difficult mountain road that crosses the Iran-Armenian border on a temporary bridge.

The Iranian trade, now second only to that with Russia, is a crucial factor behind the mini-economic recovery this Transcaucasian nation is experiencing.

After two years of misery, during which its gross domestic product fell by 67 percent, Armenia last year was the only country in the former Soviet Union to experience a positive growth rate. Inflation has dropped from 46 percent a month in the beginning of 1994 to less than 3 percent.

Underlying all of this is the year-long cease-fire that has brought an end to the fighting in the bitter war with Azerbaijan over the Armenian-populated enclave of Nagorno Karabakh. Azerbaijan and Turkey have closed off most supplies of energy, raw materials, and other trade with Armenia. But stability, not only here but also in neighboring Georgia, has opened up alternative trade routes.

Substantial aid from international financial institutions, such as the World Bank and International Monetary Fund (IMF), as well as food aid from Europe and the US have also helped.

While not yet as dramatic, there are similar signs of a turnabout in Georgia and Azerbaijan. In the Georgian capital of Tblisi, which managed to barely scrape through a bleak winter with severe heat, electricity, and food shortages, spring has brought new life. Cafes have sprung up on the city's once-famed Rustaveli avenue. Goods from Turkey and Iran are prevalent. And inflation has come down from heights of 8,400 percent annually at the end of 1993 to a current monthly rate in single digits.

In Azerbaijan, where hopes are pinned on future oil revenues, similar trends are visible, with inflation down to around 3 percent a month. Iran and Turkey are now larger sources of imports than Russia, helping to ease the effect of a long-term closure of the Russia-Azeri border due to the war in Chechnya. Although agriculture, the country's second-largest industry, is in bad shape because of the closure, the winter food crisis has been eased by aid shipments.

After a long delay, Azerbaijan is about to embark on a privatization program - a trend also visible in Armenia and Georgia, where the pace of economic reform is picking up. The Azeris were rewarded last month with a pledge of $430 million in aid from Western donors, including the IMF and World Bank.

But all this takes place against still bleak social conditions. According to a World Bank study, Georgian families spend 80 percent of their reported income on food. In Armenia, the bulk of the population lives from the money sent by relatives working abroad, mostly in Russia, on humanitarian aid, or on income from small-scale farming. In Azerbaijan, real unemployment is at least 12 percent, says economist Rasim Ramazanov, at the Center for Strategic and International Studies in Washington.

But the ability of these nations to adapt to even the most adverse conditions gives rise to hope in international circles that, with sustained conditions of stability and peace, this region could be the most prosperous in the former Soviet Union.