An investigation on potantial economic effects of opening of Turkish-Armenian border

Turkish-Armenian border has been closed due to Nagorno-Karabakh question since 1993. The fact that the 20% of Azerbaijan territory is under Armenian invasion has prevented investigation of potential economic effects of Turkish-Armenian border on related parties so far from being a research agenda. Under the assumption that a resolution is reached between Turkey and Armenia by Azeri approval, this research suggests that although the opening of Turkish-Armenian border brings benefit to both countries, it is vital for Armenian economy. It is not difficult to see that a politically and economically stable South Caucasus region creates positive effects over the economies in the region. Macro advantages that an open border brings to Turkey are alternative highway, railway and pipeline routes to Caspian Sea basin and Central Asia while micro advantages are economic gains to Turkish border provinces and port cities connected with Armenia. In this context, connecting Trabzon port to Turkish railways system is of strategic importance. It is important to underline that the macro advantages of an open border are more important than micro advantages to an economy such Turkey which is ranked the 17th in the world economy so the micro advantages are not overvalued. The macro and micro benefits are vital for Armenia whose economy is agrarian, dependant heavily on foreign trade and foreign aids, experienced high transportation costs, unstable, poor and loosing population -although the population data does not reflect the real situation-. For Armenia, an open border means a direct territorial connection to European Union (EU), new employment opportunities, low transportation costs, pipeline benefits, a flourished foreign trade, and increasing well being.Key Words: Turkish Economy, Armenian Economy, Transportation Costs, Turkish-Armenian Border.