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Update No: 255

The Armenians are tilting heavily towards the US in the post-9:11 crisis, who are easily their largest aid donor. They are eager to be drawn into the anti-terrorist coalition even though they are far from any likely attack. They are in a not dissimilar situation from Israel, a non -Moslem nation surrounded by Moslem ones hostile to them, except for Georgia. But whereas Israel has been sustained by the distant US, Armenia has been propped up by Russia. Now the Armenians are hoping to obtain some US support as well, enabling them to lessen their dependence on Russia.
The US, indeed, views Armenia as a potentially useful ally. No less a figure than Donald Rumsfeld, US Defence Secretary, took time off to visit Yeveran in December to meet President Robert Kocharyan, and Defence Minister Serj Sargsyan, to discuss bilateral military cooperation. The US is very interested in a military presence in the Caucasus as well as Central Asia, having a base in effect in Georgia next door.
This cannot have gone down too well in Moscow. But the Russians are having to come to terms with the fact that the US is vastly their superior in military affairs, indeed is vastly superior to anybody else these days. Being in the Russian sphere of influence previously helped Armenia to victory in the war with Azerbaijan in the early 1990s with covert assistance aplenty. The war has left the fatal legacy of a blockade by Azerbaijan and Turkey until the Armenians retreat from the 20% of Azeri territory they hold.
This has crippled economic performance; for its trade with its neighbours to the South and West has long been important to Armenia. It is importing three times as much as it is exporting, the sign of a grave malfunctioning of the economy. That it can happen at all is due to the generosity of international agencies, the World Bank, the IMF, etc and the extensive Armenian diaspora, who are being supportive with aid and foreign investments 
What is urgently needed is a negotiated end to the conflict over Nagorno- Kharabakh, the Armenian enclave in Azerbaijan. Sooner or later there will be a compromise, and the sooner for Armenia the better. Even the diaspora, a very extensive one, consisting of many more abroad than in Armenia, are fed up with the intransigence of the hardliners. Until they relent, Armenia is unlikely to recover much in the way of attracting foreign investment or recover from its post-Soviet malaise. 
The economy is doing well on official figures GDP up by 9.6% last year. But this is from a devastatingly low base. People were denuding the landscape of trees for fuel during the war. That is no longer happening and a semblance of normality is being restored. Yet the country has a long way to go before it becomes prosperous. That will take decades, not years. First the dispute with Azerbaijan needs to be resolved.

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ENERGY

Armenian, Turkmen presidents discuss gas exports

The presidents of Armenia and Turkmenistan, Robert Kocharyan and Saparmyrat Nyyazow, have discussed issues concerning Turkmen gas supplies to Armenia, Mediamax News Agency has reported.
The leaders of the two countries met within the framework of the informal CIS summit in Kazakhstan. Following an agreement reached during a telephone conversation in January, Kocharyan and Nyyazow summarised concrete instructions to be issued to the working groups for the elaboration of the future agreement on the export of Turkmen gas to Armenia via Iranian territory.
Robert Kocharyan confirmed his invitation to the Turkmen president to pay an official visit to Yerevan, which was accepted with pleasure.
Construction of the Iran-Armenia gas pipeline is expected to start after the signing of an Armenian-Turkmen agreement on gas supplies.

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FOREIGN LOANS & AID

IMF, World Bank disappointed with progress of economic reforms in Armenia

A study by the international financial organisations has shown that economic reforms in Armenia have fallen short of expectations, therefore, it is necessary to reconsider the programmes of assistance to the Armenian government. This was stated on 28th February by the Armenian minister of finance, Vardan Khachatryan, Arminfo News Agency has reported.
According to him, Armenia's main creditors, the IMF and the WB [World Bank], have arrived at this conclusion after studying the situation in seven CIS countries, including Armenia. The said organizations tried to find out whether there were mistakes in the programmes of assistance to the governments of these countries and whether real difficulties connected with the economic reforms were not taken into account, the minister said. The biggest mistake was that the level of poverty in these countries has not reduced in comparison with the early 90s.

World Bank regional director, Armenian president discuss business environment

At the meeting on 5th March, Armenian President Robert Kocharyan and the regional director of the World Bank, Judy O'Connor, who was visiting Armenia, discussed the problem of improving the business environment in Armenia, Arminfo News Agency has reported. The head of the Yerevan branch of the World Bank, Owaise Saadat, attended the meeting as well.
Having set out the stance of the World Bank on the economic situation in Armenia and on the course of the projects implemented in the Republic of Armenia with the assistance of the World Bank, Judy O'Connor expressed her satisfaction with the mutual cooperation that had developed, the presidential press service told Arminfo. 
Robert Kocharyan noted that the task for the country's leadership was to minimise the number of checks done by various agencies in the republic's organisations, enterprises and institutions. In the opinion of the head of state, such measures will limit the sphere of unsubstantiated bureaucratic intrusion in the business sector.
The Armenian president highly valued the assistance of the World Bank in the restructuring in Armenia and the realization of economic projects. Speaking of the process of restructuring the state administration system in Armenia, he expressed his certainty that the structural reforms currently being prepared would help to increase the efficiency of the country's administration system.

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INDUSTRY

Armenian paper sceptical British management can restart rubber plant

On 9th February this year an agreement was signed on passing Nairit-1 to the British Ransat company for executive management. Pro-government propaganda sources were saying that the Nairit problem had been finally settled and the plant would soon function, Aykakan Zhamanak has reported.
But today it is impossible to say how great the grounds are for optimism. At that time observers of the process noticed several conditions. In particular, the programme presented by a representative of the Ransat company, Anil Kumar, on how they will export Nairit's production. He said that one possible direction for the export of Nairit's production is by lorry via Iran which will increase the prime cost of production. There is also one more problem - the problem of debt, which is about US$5m.
The problem of exporting Nairit's production has not been discussed yet, as Armenia is still under blockade. Instead, the problem of Nairit's debts is already being discussed. The interested parties gathered in the Energy Ministry: Energy Minister Armen Movsisyan, director of ArmRosGazprom [Ayrusgazard, Armenian Russian gas industry] Karen Karapetyan, Deputy Industry Minister Ashot Shakhnazaryan and others. The problem is that when the agreement was signed a representative of the Ransat company, Anil Kumar, said Nairit would resume operations when all the debt negotiations were finished and a list of terms for debt repayment had been drawn up. No specific terms were arranged. Since nobody from Ransat participated in the meeting, it may be supposed that it is the industry minister's business to persuade those whom Nairit is indebted to. But they are not likely to be persuaded. 
For example, Nairit owes ArmRosGazprom more than US$800,000. Nobody knows what the terms of this debt repayment will be. Even ArmRosGazprom's director does not know. Mr Karapetyan said that he would agree with shareholders on the terms. Fifty-five per cent of shares in ArmRosGazprom belong to the [Russian] Gazprom and ITERA companies. That means it is not so easy to set terms for the repayment of debts for gas.
The biggest debt is to the Energy Ministry. The latter is also seen as too "kind" to the new managers of Nairit. It should not be forgotten that the energy sector is not in a good state and they will not miss an opportunity to get their money - about US$3m. So the prospects for Nairit resuming operations are hazy.

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