Azerbaijan

We remain reaffirmed in our belief that a direct military confrontation between both sides is unlikely. While we have previously noted that Azerbaijan is more uncomfortable with the status quo than Armenia, the oil-rich state will likely come under increasing international media attention over the coming 12 months. In particular we highlight that the upcoming Eurovision song contest to be held in Baku in 2012 will provide an opportunity for policymakers to improve their image abroad. While attention will likely focus on the business environment and Azerbaijan's poor democratic credentials, we believe that aggressive rhetoric towards Armenia will likely be toned down ahead of next year.

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