Armenia-Russia: province-center relations

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Baku, 6 September 2013 –

Serious tensions have been evident in Armenia-Russia relations in the recent years. They became more pronounced in the wake of 13 August, 2013 visit of Russia’s President Vladimir Putin to Azerbaijan and signing of several economic, political and military agreements between the two governments. Since the declaration of its independence, Armenia has done nothing but "putting all eggs in one basket” in economic, political, security and military fields and tried to bolster ties with Russia. In a certain way, such policy was promising for Armenia that had just declared its independence and pursued a revisionist policy towards its neighbors (excluding Iran).

Until late 1990’s, Armenia, having occupied Azerbaijani territories, needed Russia’s political and military support like air and water. Despite Azerbaijan’s good intentions, Armenia failed to take positive steps towards achieving resolution of the Nagorno Karabakh problem, based on a comprehensive peace agreement, upon the signing of the ceasefire agreement between the parties in May 1994.

Having realized the legal inconceivability of annexation of Nagorno Karabakh to Armenia, its leadership pursued a policy of achieving recognition of Nagorno Karabakh’s "independence” by the international community, through protracting the settlement of the problem. To date, their efforts have proven to be futile. Had Armenia taken pragmatic steps towards the settlement of the Nagorno Karabakh problem after 1994, it might have lessened its dependence on Russia and significantly alleviated Armenia’s economic and social grievances by participating in important international projects executed in the region.

Most recently, news has emerged with respect to Armenian authorities’ intention to nationalize industrial enterprises of strategic value. Impossibility of such a move is known to even those with little knowledge of Armenia-Russia relations. Government of Armenia is incapable of making such a decision and presumably, the issue was deliberately brought into agenda in light of the Russia’s pressure aimed at ensuring Armenia’s membership to the Eurasian Union and the Customs Union.

Armenia faces a tough dilemma. It is the political maneuvers towards the North and the West that are called for streamlining of Armenia’s relations with both sides and aimed at benefiting from their technical and financial potential. Surely, both the North and the West can see that Armenia is trying to "belly dance” to rock music.

In the meantime, on 24 July, 2013 Armenia and the EU agreed upon the text of the "Deep and Comprehensive Free Trade Area” treaty. Signing of this document may offer some prospects to Armenia. Russia, on the other hand, objects signing of the document, and wishes to see Armenia in the Eurasian Union and Customs Union, and exerts pressure to that end. Does Armenia have sufficient economic and political prowess to implement the nationalization of Russian-controlled strategic industrial assets? One may need to briefly examine Armenia’s economic development dynamics to find the answer to the question.

- Former Prime Minister of Armenia Hrant Bagratyan claims that Armenia economy has been experiencing a catastrophic economic decline in last 5 years, quoting World Bank’s report on Armenia;

- Armenia’s GDP has shrunk to 11.6 billion USD while Azerbaijan’s economy has reached 67.2 billion USD (37.5% growth);

- Armenia ranks lowest in the region in terms of GDP per capita and its standing has not changed since 1993;

Migration remains a pressing issue. Georgia has 4 times less the number of migrants per every 1000 citizens than Armenia. 123 thousand citizens fled Armenia in the first 2 quarters of 2013[i]. In the meantime, Azerbaijan and Turkey enjoy positive migration trends.

- Armenia’s external debt is reaching 5 billion USD;

- Production of most industrial enterprises that require significant modernization, lack international competitiveness;

- By May, 2013 Armenia’s external trade stood at 444 million USD, 9% less than in 2012 [ii] ;

- Russia continues to hold the top position as Armenia’s trade partner;

- Industrial enterprises overseen by Russia are either performing below capacity or deliberately made to stand idle.

Political reasons are the following:

- Russia stations its 102nd military base in Armenia;

- In military and security sense, Armenia’s reliance on Russia continues;

- Russia hosts some 1 million Armenian labor migrants, and therefore, in the event of nationalization of industrial assets in Armenia, Russia may simply expel several hundred thousand of those, whose return to Armenia would have a catastrophic consequences for the country;  

- Pro-Russia elements are strong within the Armenian government, thus, nationalization would be prevented;

- In terms of energy (oil and enriched uranium for the Metsamor nuclear power plant), Armenia solely relies on Russia.

Under the circumstances, what pressure mechanisms Armenia intends to employ against Russia to achieve nationalization of the strategic industrial enterprises that are otherwise under Russian control? Government to endeavor such a move stands zero chances of staying in power. Forcible resignation of Levon Ter-Petrosyan, assassination of Karen Demirchiyan during an act of terrorism in the Parliament and yet another assassination of a Prime Minister Andranik Markaryan serve as a vivid testimony to that.

Dr. Hatem Jabbarli

[i] Армения уже 5 лет подряд находится в катастрофическом экономическом упадке., 12.08.2013.

[ii] Армянский экспорт за год сократился на 13,1%. 20 июня 2013.

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