The OSCE Minsk Group’s so-called “Step-by-step deal” peace proposal (official name: Agreement on the Cessation of the Nagorno-Karabakh Armed Conflict) was introduced to the parties to the conflict by the Minsk Group Co-Chairs to the region on September 19, 1997. The peace proposal outlined a two-stage solution to the Nagorno-Karabakh conflict between Armenia and Azerbaijan. Under the terms of the proposal, in the first stage, the military forces of Armenia and Nagorno-Karabakh would withdraw to behind the 1988 boundaries of the NKAO, with the exception of the Lachin district of Azerbaijan, which linked Nagorno-Karabakh with Armenia, and internally displaced Azerbaijanis would return safely and voluntarily to their former places of residence. Meanwhile, the parties to the conflict would carry out immediate measures for opening road, railroad, power, communications, trade and other links, in accordance with the schedule and detailed provisions. In the second stage, the parties would continue negotiations aimed at reaching agreement on the status of Nagorno-Karabakh and the Lachin district, Shusha and the Shaumyan district, with the help of the Minsk Group, after the military aspect of the conflict ended. The proposal stated: “This Agreement shall enter into force upon signature and ratification and shall remain in force except as provided in the comprehensive settlement”.
When the “Step-by-step deal” was proposed, there was a hope that it would avoid ethnic hatred between to neighboring nations, bring them into regional framework and territorial borders that help the achieve peace easily rather than fighting over a peace of land, soften myths and prejudice, and lead co-existence and cooperation between Armenia and Azerbaijan as well as between the Armenian and the Azerbaijan communities of Nagorno-Karabakh. Therefore, both Azerbaijan and Armenia accepted the proposal in principle. For the first time, the OSCE Minsk Group peace proposal was supported by both sides in the conflict. Furthermore, Armenian President Ter-Petrossian made a realistic assessment and stated that this or that way Armenia would face the wealthy and powerful Azerbaijan soon. He was concerned that the economic blockade of his country due to the Nagorno-Karabakh conflict would damage the long-term economic viability of Armenia. He said that the deal was a chance to guarantee the security of Karabakh and the political and economic well-being of Armenia. In addition, it seemed that acceptance of the first stage of the “Step-by-step deal” proposal by the conflicting parties was also advantageous to the Minsk Group. It was considered to be the best peace proposal for solving the problem. If the two sides came to the same conclusion and signed the first round of the proposal, the occupied lands outside Nagorno-Karabakh would be given back to Azerbaijan, the status of Nagorno-Karabakh would remain the same until its final status was determined, Lachin and Shusha would exist as they were and until the final status of Nagorno-Karabakh was achieved no IDPs would return to these regions. Moreover, Nagorno-Karabakh would have additional security, due to the demilitarization of the formerly occupied territories of Azerbaijan. And furthermore, all economic embargos and blockades, including those by Turkey that were implemented after the occupation of Azerbaijani territories by Armenian forces in 1993, would come to an end.
However, the “Nagorno-Karabakh leadership” and Robert Kocharian, the Armenian Prime Minister and former President of the so-called Nagorno-Karabakh Republic, opposed the proposal. They demanded that the previous peace proposal, the package deal, should be implemented, and that the Minsk Group’s plan should be carried out at the same time, or the final status of Nagorno-Karabakh should be achieved before occupying forces were withdrawn from the region. There were several assumptions as to why Nagorno-Karabakh rejected the proposal, such as that Karabakh Armenians were concerned that if they accepted the proposal, Nagorno-Karabakh would remain within the boundaries Azerbaijan. It was also assumed that the withdrawal of forces from the occupied territories of Azerbaijan would result in direct access being lost to Iran, a profitable trading partner for Nagorno-Karabakh, and that this would increase Nagorno-Karabakh dependence on the Armenian authorities, particularly Armenian President Ter-Petrosian, who had become suspect in the eyes of Nagorno-Karabakh Armenians. Additionally, opponents of the peace proposal thought that withdrawal from the occupied territories would result in Nagorno-Karabakh losing its leverage over status questions.
Thus, the consequence of political crisis between Armenia and Nagorno-Karabakh that culminated at the result of the support of President Ter-Petrosian to the “Step-by step deal” proposal was resulted ‘constitutional coup d’état’ in Armenia against the president and on February 3, 1998 Ter-Petrosian resigned from his presidential post. Prime Minster Robert Kocharian, a Nagorno-Karabakh hard-liner and opponent of the “Step-by-step deal” proposal of the Minks Group, became president of Armenia.
 OSCE Minsk Group Co-chairmanship, “Agreement on the Cessation of the Nagorno-Karabakh Armed Conflict”, (Step-by step), September 19, 1997.
 Shafiyev, Farid, “Ethnic Myths and Perceptions as Hurdle to Conflict Resolution: Armenian-Azerbaijani Case”, The Caucasus & Globalization: Journal of Social, Political and Economic Studies, Vol. 1, No. 2, 2007, p. 70.
 Carley, Patricia, “Nagorno-Karabakh: Searching for a Solution”, United States Institute for Peace, December 1, 1998; https://www.usip.org/publications/1998/12/nagorno-karabakh-searching-solution-0. Accessed on October 3, 2020.
 Laitin, David D., and Grigor Suny, Ronald, “Armenia and Azerbaijan: Thinking a way out of Karabakh”, Middle East Policy, Vol. 7, No. 1, 1999, p. 165.
 Malysheva, Dina, “The Conflict in Nagorno-Karabakh: Its Impact on Security in the Caspian Region”, in Chufrin, Gennady (ed.), The Security of the Caspian Sea Region (Oxford University Press, 2001), p. 274.
 Laitin and Grigor Suny, “Armenia and Azerbaijan”, p. 165.
 Miller, Nicholas W., “Nagorno Karabakh: A War without Peace”, in Eichensehr, Kristen and Reisman, W. Michael (ed.), Stopping Wars and Making Peace: Studies in International Intervention (Martinus Nijhoff Publishers, 2009), p. 69.