Bringing together many nomadic tribesmen who had already settled in the Kur-Arax valley, Panah Ali launched a second attack on Jraberd. Melik Adam was forced to retreat to Giulistan crossing the thick forests of his domain. The battlefield was transferred to Giulistan. Melik Adam and Melik Hovsep, accompanied by the army and a part of their people took refuge in Gandzak. The Shahverdi Khan of Gandzak was Panah Ali’s rival. Even Nadir Shah’s attempts of weakening the Gandzak Khanate had always antogonized the rulers of Gandzak and now they refused to recognize Panah calling him an intruder and impostor. Gandzak’s Shahverdi Khan maintained friendly relations with the Armenian meliks of Karabakh. The Giulistan Melik Hovsep’s mother was the sister of Shahverdi Khan. This woman had been kidnapped by Hovsep’s father Abov II the Lame, who married her after baptizing and giving her the Christian name Mariam. The Gandzak Khan refused to become reconciled with the Armenian Melik and soon presented his brother-in-law with several estates. Besides this relationship, the Shahverdi Khan was grateful to the Jraberd melik for assistance in his struggle for throne against his brother Mamad Khan.16 No less important was the fact that the Gandzak khans were originally Persian, and as such tried to maintain close relations with the Armenians, shared mutual affection and fought a common enemy. And so the Shahverdi Khan decided to settle the two Armenian meliks in Shamkor environs, the boundries of the settlement being clearly defined to avoid further trouble. Melik Adam and Melik Hovsep “established themselves in those mountainous regions waiting for a favourable opportunity to resume their bloody quarrel with Panah Ali.”17

The Dizak Melik Yessayi remained the only serious rival of Panah Ali in Karabakh. Twice Panah Ali launched attacks on the Togh fortress and was humiliated by a defeat. But the third attack was successful for him. A peace treaty was concluded between the lords of Shushi and Dizak. Melik Yessayi’s death in 1781 was the chance Panah Ali had been waiting for. He extended his domain, capturing Meghri from the Karabakh Khanate, Tatev and Sissian from Nakhichevan and Kapan and Goris from the Tabriz beglerbeg. Then he conquered the Tartarr lowlands stretching to the Kura river and Jabrail. All the Tatar bandits of the surrounding districts arrived to serve under Panah, as he had not ceased to patronize robbers and plunderers. The Nakhichevan majors Demirch-Hassanlu and the Jinli chieftain from Georgia entered his service too. Panah’s forces comprised the Jivanshir, Otuziki (thirty-two), Kebirli tribes inhabiting the Kur-Arax valley (Arran).

Thus the Khanate of Shushi, established in the heart of the Armenian stronghold, step by step assuming control of the whole of what was formerly Khachen and also neighbouring provinces, threatened a serious danger to the Iranian rulers, who designed to seize Shushi from the Tatar chieftain Panah Ali.18

Mohammad-Hassan Khan Ghajar of Mazandaran undertook the first campaign. Crossing the Arax river he encamped in the Khatunarkh settlement not far from Shushi. The Armenians constantly attacked their camps and stole their herds. Soon the Mazandaran governor surrounded Shushi and was making preparations for a decisive attack when being reported about a threatening rebillion in Iran proper, was obliged to leave Karabakh and hurry back to Iran. The rebells were led by the Shiraz vekil Kerim Khan Zend. The news threw Mohammad-Hassan Khan into such a confusion that he left without taking the artillery of the army. Panah Ali rejoiced at the “present” and ordered to carry the cannons into the town.

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