The wannabe nation of Nagorno-Karabakh

Anoushavan Danielyan's office is resplendent with the signs of his high post. A red, blue, and orange flag adorns a corner. A large seal depicts a regal bird, above whose head floats a crown. Plastic flowers sit in a vase.

Outside, in a grim corridor that has seen better days, a sign indicates this is the office of the prime minister of the Nagorno-Karabakh republic.

Never heard of it? Don't worry. That's because it doesn't officially exist.

It's after 9 p.m., but the prime minister is still receiving visitors. Most of the staff have gone home, and his are the only windows in the blocky, Soviet-era structure that still twinkle with light.

It's a long journey from the outside world to this putative nation. There's only one way to Nagorno-Karabakh: a long, winding road from Armenia, six hours from that country's capital, Yerevan. High-ranking government officials sometimes travel by military helicopter, but for ordinary people there's just the road, built with money from the Armenian diaspora after the 1988 to 1994 war between ethnic Armenians and Azerbaijan.

The war won the ethnic Armenian Karabakh de facto independence and purged the region – which lies wholly within the borders of Azerbaijan – of its Azeri overlords. But it also laid waste to the land and infrastructure. More than a million refugees – 800,000 Azerbaijanis and 300,000 Armenians – still live in exile.

As the head of government, Mr. Danielyan is rebuilding the region, which is about the size of Utah's Great Salt Lake with a population of 100,000. Though the guns have largely fallen silent, the war isn't really over. Azerbaijan still claims Nagorno-Karabakh, and, for now, the international community agrees. So the legions of aid workers and international investment that normally flood postwar zones have largely stayed away. That has left the prime minister – a serious, professorial man with a glossy bald head and bushy moustache – with all the responsibility of running a country and few of the perks.

He's comfortable with the arcane world of budgetary mandates and foreign direct investment: His shelves are piled with manuals from international organizations and statistical compilations. He pulls out a series of heavy books, covered in Armenian script and containing government statistics on Karabakh (example: The region grows wheat, grapes, potatoes, and garbanzo beans, yet must import 55 to 60 percent of its food). "We observe all international standards," he says patting the books with pride.

But Karabakhi officials are the only people who ever see them. The UN, World Bank, and other international organizations that usually collect such statistics and distribute them to the world won't use them, no matter how good, because – Nagorno-Karabakh doesn't officially exist.

A Soviet-trained economist, Danielyan is well versed in Communist centralized planning. But it's to Reaganesque, trickle-down economics that he's turned for salvation. Low taxes and private investment are now his mantra: "Within one year we decreased the income tax from 30 percent to 5 percent. The tax on business revenue has fallen from 28 to 5 percent. Property tax is now only 6 percent," he says, with growing enthusiasm, as the list grows longer. "For imports, there were six different types of taxes. Now there is one standard tax of not more than 2.5 percent!" A veritable business paradise, except for glitches such as sporadic lack of running water and the hostile Azeri military massed on the border.

The next morning, it's time for a tour of the capital, Stepanakert, to see the fruits of the government's low taxation plan. The first stop, though, is of a historic nature: a red sandstone monument depicting the faces of an old woman and old man, called Tatik Paptik (grandmother and grandfather, in Armenian). This symbol of Karabakh, explains a young adviser to the president, looks toward the motherland, Armenia.

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