Principal ethnic groups
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: 272
The Armenians are in a cleft stick. They do not like the Russians. But they dislike and fear the alternatives more, Azerbaijan and Turkey.
The Armenian solution
The Armenians know that they have few options. They are an outpost of Christian culture in the troubled Caucasus. It is not that the Armenians are that keen on the Russians; but, like Margaret Thatcher with Gorbachev, they feel that they can do business with them.
That is exactly what they cannot do with the Azeris and the Turks. Both have placed an embargo on trade with the Armenians. This is all about the Nagorno-Karabakh affair.
The Russians, however are pretty meager business partners. Moscow pays only a symbolic rent and delivers inexpensive, obsolete military equipment to Armenia for its bases there, while being as tight in negotiation as can be.
Transfer of thermal plant to Russia
This is shown by the latest deal between the two countries, announced in early August, the sale of a thermal plant. It has one massive advantage. The transfer of the Razdan plant to Russia will allow for greater export of electricity to Azerbaijan and Turkey. Business has its own logic, stronger than that of geopolitics.
Kocharian sacks Yerevan mayor
In early July President Robert Kocharian dismissed the mayor of the capital Yerevan, namely Robert Nazarian, after a poor showing of his party in May's parliamentary elections. Kocharian has appointed Yervand Zacharian, who was previously the main tax-collector. The move consolidates Kocharian's grip on power, which was already formidable.
The pro-government Republican Party, headed by Premier Andranik Markarian, holds the leading position in parliament, with 40 out of 130 seats. It also controls over 400 local governments in towns and villages around the country. Kocharian is firmly in the saddle.
The Armenian ambassador
Georgy Khosroyev, the Armenian ambassador in Moscow, has expressed his government's interest in military cooperation with Russia and NATO. The Armenians are keen to become a member of GUUAM (a regional body set up in 1997 with five members, Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova). It looks likely to happen.
One more A-320 in Armavia's fleet
Armenia's commercial air carrier, Armavia, has announced it will purchase another A320. Russia's number two carrier, Sibir, effectively took control of Armenia's state-owned national Armenian Airlines (AA), 36 flight destinations through Armavia after AA folded under the weight of its debts. Now Sibir holds a 70 per cent state of Armavia, becoming Armenia's main carrier. Armavia absorbed 29 routes formerly served by Armenian Airlines, among them Amsterdam, Frankfurt, Odessa, Novosibirsk, Yekaterinburg and Krasnodar. The remaining licences have gone to International Armenian Airlines, set up last year by a French businessman of Armenian descent.
Armavia currently operates a single, leased Airbus 320. Armavia got its first Airbus 320 last year. Apart from flying the A320, Sibir is gaining knowledge of how to service the aircraft, having set up two technical centres, in Yerevan and at its headquarters in Novosibirsk, to handle not only Airbuses but Boeings as well. Sibir reported a surge in passenger traffic in 2002 of 41 per cent, carrying 2.7 million passengers, and it plans to boost that figure to 3.2 million passengers this year. Financially, it reported its first profit of 15m roubles (US$480,000) last year. Armavia has now eight crews who fly the Airbus 320. Two more crews are expected to be retrained in August in Toulouse in France.
Germany's Siemens wins tender to modernize Armenian power stations
The German electronics group Siemens was pronounced the winner of an international tender to modernize four high-voltage substations in Armenia on 31st July, Arminfo News Agency has reported.
These are Ararat-2, Lichk, Ashnak and Shinuayr. This work will be carried out within the framework of a World Bank credit of 15m SDR granted for 35 years with an annual interest rate of 0.75 per cent and with a privileged period during the first 10 years.
Armenia to transfer Razdan thermal plant to Russia
Armenia is expected to transfer the property complex of Razdan Thermal Power Plant to Russia in September to help pay off state debt, Interfax News Agency quoted Director General, Albert Bagdasaryan, as saying in an interview.
The first stage will see the transfer of the station to the Russian Property Ministry and then to a management company. The Razdan plant will later be transferred to Unified Energy Systems of Russia, Russian Minister of Industry, Science and Technology, Ilya Klebanov, said.
With gas prices running at high levels, the thermal plant, which is the biggest consumer of natural gas in the state, generates the most expensive electricity. "Armenian Nuclear Power Plants sells Armenergo electricity at 11 drams per 1 kWh, while Razdan Thermal Power Plant sells electricity at 15.5 drams per kWh," Bagdasaryan explained.
The Razdan senior official said the transfer of the thermal power plant to Russian ownership may create the possibility for a reduction in price for natural gas supplied from Russia and, as a result, a reduction in the cost of electricity produced. Interfax reported that the transfer of the Razdan plant to Russia will allow for greater export of electricity from Armenia to Azerbaijan and Turkey. The thermal power plant is currently worth US$62m, based on Russian exports. In the first half of 2003 "Razdan Thermal Power Plant increased electricity production 120 per cent to 1.5bn cubic metres, of which the country's energy system received 975m kWh," Bagdasaryan said. "Growth in electricity production took place due to the fact that the Armenian Nuclear Power Plant was not operating at the start of 2003."
Razdan plant generated 1.35bn kWh of electricity last year. It used about 7 per cent of the electricity produced for its own purposes.
FOREIGN LOANS & AID
US subcommittee approves financial assistance to Yerevan
The US Congress Appropriations subcommittee has allocated US$70m in US assistance to Armenia for the fiscal year 2004 and another US$5m for an humanitarian aid package for Nagorno-Karabakh. The Bush administration had asked the congress to allocate only US$49.5m, which is US$40m less than the Congress allocated last year, the Armenian Liberty reported recently. Armenian advocacy groups in the US expressed disappointment over the assistance level that was proposed by the House Appropriations subcommittee. Due to the efforts of the influential Armenian-American community, Armenia has been a leading per-capita recipient of American aid, which has totalled more than US$1.4bn over the past decade.
"We remain troubled by the reduction in aid to Armenia proposed by the Bush Administration and while we very much appreciate the hard work of our friends on the foreign aid panel, are disappointed by the US$20m shortfall in the assistance, approved by the House, relative to last year's appropriation," Executive Director of Armenian National Committee of America, Aram Hamparian, was quoted as saying by the Armenian Liberty.
The US House Appropriation subcommittee also voted to allocate US$2.5m additional funds in foreign military assistance for Armenia, and US$900,000 for training the Armenian military. To preserve the parity in military assistance for Azerbaijan, US House Subcommittee appropriated equal funds for Azerbaijan.
The foreign aid bill will go to the full House Appropriations Committee, followed by a full House vote. The US Senate will also consider the bill in its committees.
MINERALS & METALS
Russian aluminium giant planning more investment in Armenia-based plant
New investments will be channelled into the ArmenAl enterprise to develop the company's economy, the deputy managing director of Russia's RusAl [aluminium consortium], Aleksandr Livshits, told a meeting with Armenian President Robert Kocharyan on 30th July, Public Television of Armenia has reported.
Armenal was set up on the basis of the Kanaker aluminium plant and is currently producing aluminium products. RusAl is planning to upgrade the quality of products at ArmenAl.
The company has already invested US$61m in the plant, Livshits said, adding that another US$32m will be put into the company for upgrades and new products.
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