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armenia

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  ARMENIA

REPUBLICAN REFERENCE

Area (sq.km)
29,800

Population
3,336,100

Principal ethnic groups
Armenian 93.3%
Azeri 2.6%
Russian 2%

Capital
Yerevan

Currency
Dram

President
Robert Kocharian

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Background:
An Orthodox Christian country, Armenia was incorporated into Russia in 1828 and the USSR in 1920. Armenian leaders remain preoccupied by the long conflict with Azerbaijan over Nagorno-Karabakh, a primarily Armenian-populated exclave, assigned to Soviet Azerbaijan in the 1920s by Moscow. Armenia and Azerbaijan began fighting over the exclave in 1988; the struggle escalated after both countries attained independence from the Soviet Union in 1991. By May 1994, when a cease-fire took hold, Armenian forces held not only Nagorno-Karabakh but also a significant portion of Azerbaijan proper. The economies of both sides have been hurt by their inability to make substantial progress toward a peaceful resolution.

Update No: 256 - (23/04/02)

The Armenians are in a hole and know it. The IMF and World Bank have just told them bluntly that they have not done enough in economic reform to merit any large-scale loans. The international institutions are also well aware of the scale of corruption. State auctions are announced a matter of days before being held, obviously rigged for some insiders. Any money lent to Yerevan is seen as money down the drain, but corruption here is ancient and endemic.

The enclave's the hurdle
The root problem is political, the festering sore of the dispute with Azerbaijan over the Armenian enclave there, Nargorno-Kharabakh. Consequently both Azerbaijan and Turkey have for ten years now maintained a trade blockade with Armenia, which has crippled its economy.
The Armenians need to retreat from the 20% of Azeri territory they control, allowing one million refugees to return home. 
Hardliners in the security forces and in the enclave itself are the problem. President Robert Kocharian as an ex-president of the enclave is in a good position to overcome them, one would have thought, as De Gualle the French military over Algeria. But then he was previously the principal warlord of the enclave.

Foreign investment rises?
He has a habit of being over-optimistic about Armenia's prospects without a new geopolitical turn. He has organised that energy flows should come from Turkmenistan, not Azerbaijan. He is also bullish, highly so, on prospects for foreign investment. In 2000, this was US$190m, most of it, however, from just two deals, one in telecoms with a Greek firm, and the other in energy with Gazprom. In 2001 it fell to US$100m.
This year there are reported to be over 300 enquiries to the Armenian Development Agency (ADA). But Western businessmen on the spot are not so optimistic. ADA has a miserly budget of US$100,000, while corruption and red tape abound. If the Baltic states are any guide, a far deeper and wider reform course is needed, as is peace and the lifting of the blockade. 

Growth returns
GDP grew by 9.6% last year, but from a very low level. It was the first real growth since the 1989-94 war, which devastated the economy. What Armenia needs is a real statesman in charge. It has not got one, apparently in Kocharian.

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ENERGY

Armenia welcomes Ukraine's interest in gas pipeline construction

Armenian Prime Minister Andranik Markaryan has welcomed Ukraine's interest in participating in the construction of the Iran-Armenia gas pipeline, Mediamax News Agency has reported.
Andranik Markaryan stressed that Armenia and Ukraine had to adopt a "careful and restrained position" while discussing problems linked to the interests of each other in in international organisations.
Yerevan expects Ukraine to show understanding in the discussion of issues of importance to Armenia, the prime minister said.

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FOREIGN ECONOMIC RELATIONS

Armenian, Kyrgyz presidents sign cooperation accord

Armenian and Kyrgyz Presidents Robert Kocharyan and Askar Akayev signed an "Agreement on friendship and cooperation between the Kyrgyz and Armenian Republics" at their meeting in Bishkek on 4th April, Mediamax News Agency has reported.
As Mediamax has learnt from the Kyrgyz presidential press service, Armenian-Kyrgyz intergovernmental agreements on military-technical cooperation, establishment of air links, cooperation and mutual assistance on tax legislation were signed after the bilateral negotiations in Bishkek.

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FOREIGN LOANS

World Bank gives over US$16m to Armenia for poverty reduction, environment

Armenia will receive US$16.02m to implement the programme on managing natural resources and reducing poverty. The protocol about this was signed on 8th April in Yerevan by the Armenian government and the World Bank (WB), Mediamax News Agency has reported.
The programme will continue till 2008. A credit amounting to US$8.31m will be extended from the WB's own resources. The Global Environment Fund and the International Development Agency will give the Armenian government US$5.12m and US$1.08m respectively. The Armenian government will add US$1.51m to these sums. The credit given for the programme will have to be paid back by 2042, with an interest rate of 0.75 per annum.
The programme will start on 1st June 2002, after the Armenian parliament's ratification and the approval of the WB Council of Directors.

Black Sea Bank to fund small, medium-sized business in Armenia

The Black Sea Trade and Development Bank [BSTDB] intends to launch a programme of crediting small and medium-sized business in Armenia next year, Arminfo News Agency has reported.
According to the head of the Central Bank, Tigran Sarkisyan, a representative office of the BSTDB with a US$5m capital is to open in Armenia to this effect.

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MINERALS & METALS

Armenia and Russia to boost diamond cooperation

In 2001 Armenia processed and exported diamonds worth US$100m, as opposed to US$10m in 2000, the head of the department for precious stones and jewellery of the Armenian Ministry of Industry and Trade, Gagik Mkrtchyan, has told an Arminfo News Agency correspondent.
The decrease in the volume of production and sales can be explained by last year's crisis in the world diamond market, Mkrtchyan said. Nevertheless, Armenia displays a trend towards a stable growth in the field. In 1999 diamonds worth US$85m were processed, which is less than in 2000, Mkrtchyan said.
Mkrtchyan said that the volume of production and sales would increase once the situation in the market changes for the better since only one third of the country's diamond-cutting plants were currently being using (some 300,000 to 350,000 carats). 
Quoting experts from the Russian company ALROSA, which has monopoly on large-scale wholesale diamond supplies, Mkrtchyan said that Armenia is currently capable of processing up to 1.2m carats. The main challenge lies in the demand for diamonds and fluctuations in the world diamond market and a lack of qualified diamond-cutters.
An agreement with Russia on supplying 2.1 carats of uncut diamonds to Armenia in the period between 2002-06 was signed on 5th April. Russia, according to the agreement, is to export to Armenia 400,000 carats of uncut diamonds per year in the period between 2002-04, and 450,000 carats per year in 2005-06. Since Armenia's demand for uncut diamonds is twice that figure, the remainder will be imported from Belgium and Israel, Mkrtchyan said. 
The Armenian Ministry of Industry and Trade is currently discussing the distribution in 2002 of 400,000 carats of Russian diamonds among the diamond-cutting plants. The potential for diamond-cutting, financial resources of the plants and their expertise in the field will be taken into consideration, Mkrtchyan said. 
Mkrtchyan said that under an intergovernmental agreement 300,000 carats which Armenia received from Russia in 2001, were distributed among 43 diamond-cutting plants. Some 10 to 15 of them did not use the diamonds, partly or completely, because of a lack of money and demand.

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