Once more stable working relationships had been established within the Minsk Group its discussions focused on Nagorny Karabakh’s status and security, as well as refugees and internally displaced persons (IDPs) and the problem of the once Azerbaijani-dominated Karabakh town of Shusha. Between 1997 and 2001 four options, representing different methodologies of resolution, were discussed. The first, referred to as the ‘package solution’, favoured talking about all issues, including Karabakh’s final status, simultaneously to achieve the optimum balance. Given the number of issues on the table, this approach would offer more leeway for compromise. The package proposal presented by the co-chairs in May-July 1997 consisted of two agendas: ‘Agreement I’ on ending the conflict, including troop withdrawals, deployment of peacekeepers, return of displaced persons and security guarantees; and ‘Agreement II’ on Karabakh’s final status. The agendas were separate, as the 1997 OSCE Ministerial Council reported, ‘to allow the parties to negotiate and implement each at its own pace, but with a clear understanding that at the end of the day all outstanding issues will have to be resolved.’ Reactions in Baku and Yerevan were encouraging, but Stepanakert rejected it.
The so-called ‘step-by-step’ solution, proposed in September 1997, was premised on sealing Agreement I first before dealing with Agreement II, with the question of the Lachin corridor linking Nagorny Karabakh with Armenia moved to Agreement II. Nagorny Karabakh would continue to exist in its present form until agreement on final status was reached, but would gain internationally recognised ‘interim status’. In principle the step-by-step solution would build a constructive atmosphere in the early stages focused on military aspects, paving the road for negotiations on the more complex political issues.
However, the Karabakh Armenians were not ready to agree to make the first step by withdrawing from the occupied regions of Azerbaijan. Stepanakert argued that this buffer zone was its main source of leverage, which could not be given up without agreement on what concrete security guarantees it would receive in return. Once again, the Karabakh Armenians demonstrated that despite the restricted status accorded to them in the negotiations, Stepanakert wielded significant power of veto over possible settlement options.
The ‘common state’ proposal, presented in November 1998, proposed a vaguely defined common state between Azerbaijan and Nagorny Karabakh, featuring more or less ‘horizontal’ relations between Baku and Stepanakert. It was rejected by Azerbaijan on the grounds of the violation of its territorial integrity and of the principles agreed by the OSCE at its summit in Lisbon, December 1996, where Armenia had been alone in rejecting a statement reiterating principles for a settlement stressing the territorial integrity of Azerbaijan. Finally, President Robert Kocharian of Armenia and President Heydar Aliyev of Azerbaijan discussed a proposal based on an exchange of access to territory in 2001, though this never got as far as an OSCE draft agreement. In the course of the domestic debates launched only after the talks, Aliyev reported (and Kocharian denied) that it had involved Armenia surrendering access to a strip of its southern district of Meghri, offering Azerbaijan direct access to Nakhichevan, in return for accepting Armenian control over the Lachin corridor connecting Karabakh with Armenia.
None of the proposals could bring the sides close to agreement on status by reconciling the needs of self-determination with territorial integrity to the liking of all parties. Being founded on the Helsinki principles (named after the 1975 Helsinki Final Act of the CSCE), the OSCE stands for the inviolability of the frontiers of its participating states. Although the principle of territorial integrity is stipulated with a view to interstate conflicts, how this aspect should be dealt with regarding intrastate conflicts is determined only implicitly. The Final Act speaks of the right of peoples to self-determination “in conformity…with…territorial integrity of States”. This convinces some authors of the OSCE’s inability to be neutral. The Helsinki principles, however, stipulate one important aspect: any decision to alter frontiers must take place ‘by peaceful means and by agreement’. Hence there is no contradiction between accepting the inviolability of frontiers and being neutral at the same time, provided any agreement reached is acceptable to the parties to the conflict.