YEREVAN, Nov. 28 (RFE/RL) - The latest worsening of the already strained relations between Armenia and Turkey is another bad news for their fledgling commercial ties which were expected to lay the groundwork for an eventual reconciliation between the two neighbors. The war of words between Yerevan and Ankara following discussions in the US and several European parliaments of resolutions recognizing the 1915 Armenian genocide may spell the end of hopes for closer bilateral economic contacts in the near future.

For Murad Bojolian, co-chairman of the Turkey-Armenia Business Council (TABC), the enthusiasm of recent years is gone. "Some attempts [at further cooperation] are still being made, but the previous seriousness of purpose no longer exists because there are no favorable political conditions for that," Bojolian says.

The TABC and an eponymous organization in Turkey were set up in 1996 with the tacit approval of both governments. The two groups have sought to facilitate a normalization of Turkish-Armenian relations through increased business contacts. This was supposed to somehow offset the absence of diplomatic relations which successive Turkish governments have made conditional on Armenia returning Nagorno-Karabagh under Azerbaijan's control. Armenia, on the other hand, has been pushing for a normalization without preconditions, not least because of tangible benefits that would accrue to its struggling economy. "Issues that could not be raised at the inter-governmental level were discussed by the business councils," Bojolian says. "There were regular mutual visits. In a sense, these organizations were acting like messengers." That period of unofficial business diplomacy may have come to an end with Ankara's decision to tighten the economic blockade of Armenia over its government's support for an international recognition as genocide of the mass killings and deportations of Armenians in the Ottoman Empire. The European Parliament and legislative bodies in France and Italy have recently passed resolutions condemning the slaughter of an estimated 1.5 million Armenians by the Ottoman regime 85 years ago. A similar resolution was shelved last month in the US Congress after last-minute intervention by President Bill Clinton.

The Turkish government, which consistently rejects the genocide accusations, has vented its anger on Armenia, saying that its leadership was behind the latest developments and tightening the visa regime for its citizens. The move brought additional hassle to a handful of Turkish businessmen operating in Armenia as travel between the two countries became even more complicated. Due to the closed Turkish-Armenian border, regular bus communication between Yerevan and Istanbul has to be carried out via neighboring Georgia. The tiring two-day journey became even lengthier after the Turks refused to issue visas to Armenian citizens on their entry into the country. The latter now have to spend one day in the Georgian city of Batumi to get the permits from the local Turkish consulate.

For Mustafa Avci, the owner of one of the four Turkish travel agencies active in Armenia, that means another headache. "Doing business here amounts to challenging my government," Avci tells RFE/RL, speaking in his Yerevan office decorated with Turkish and Armenian flags. "If trade links between Armenia and Turkey develop, they will create a basis for the establishment of diplomatic relations," he says.

But, in his words, obstacles to commerce are not only from the Turkish side. Avci, who has been based in Yerevan since 1992 and can speak Armenian fluently, complains about widespread extortion of bribes from his bus drivers by Armenian police and customs officers. The visa regime for Turks visiting Armenia is no less strict. They pay $25 for a single-entry visa which is valid for no more than three days. And since its extension is quite complicated, they have also to pay hefty fines when leaving the country. Avci estimates that a month-long stay in Armenia costs a Turkish citizen $130.

The vast majority of his agency's customers are Armenian "shuttle-traders" who travel to Istanbul for wholesale purchases of cheap consumer goods. They account for a considerable part of Turkish-Armenian trade estimated at over $100 million each year. Except for the extra day in Batumi, the bus trips have been unaffected the Turkish sanctions. The same is true of the weekly Yerevan-Istanbul flights with travel firms taking care of the visas.

The Turkish business presence in Armenia, unlike the other states of the Caucasus and Central Asia, is otherwise negligible. Kal Trade, the only major Turkish company to have been active in the Armenian market for several years, is now shutting down its operations there. Large Turkish trucks that can still be seen in Yerevan are hired by Armenian businessmen. Most of their owners, as it turns out, are Armenian as well, albeit with Turkish passports and names. Kemal, a mustachioed middle-aged man, is one of the so-called "hamshenahayer," a collective name of Armenians populating the Turkish Black Sea coast. The 1915 massacres left little from the once thriving community. Most of the remaining "hamshenahayer" have converted to Islam. Knowledge of the Armenian language, or rather one of its most peculiar dialects, is helpful for people like Kemal, although it does not translate into privileged treatment by the Armenian authorities. The drivers say they hide Armenian customs documents when crossing into Turkish territory because the authorities there do not look kindly on their business. "But of course they know well what we are up to," Kemal adds smilingly.

Both the truck drivers and travel agencies look forward to the day when the Turkish-Armenian border will be reopened. With the nearest border crossing only a one-hour drive from Yerevan, that would make quite a difference. But that seems impossible without a Turkish-Armenian rapprochement. Ankara has so far withstood pressure form domestic business groups and authorities in impoverished provinces bordering on Armenia to soften its position. Even the US government, an active backer of a dialogue between the two countries, has been unable to change Turkish policy.

A rapprochement seems even more unlikely now that relations between Turkey and Armenia, a major factor of regional stability, are again on a confrontation course.