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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 2,797 2,367 2,100 139
GNI per capita
 US $ 950 790 570 143
Ranking is given out of 208 nations - (data from the World Bank)

Books on Armenia


Area (


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



Robert Kocharian


Update No: 291 - (29/03/05)

Armenia is in a predicament, a cleft stick, that few would want to be in. It is nearly surrounded by hostile neighbours, Azerbaijan and Turkey, who operate a trade embargo against it, a fact that obliges it to cleave to Russia, with whom it has 'a special relationship. Its only land outlets are the largely mountainous border with Georgia, with no good bi-lateral roads; and a narrow corridor in bleak desert and mountainous country with Iran, which is subject to closure in winter snow.
Armenia is bound to pursue a very subtle foreign policy, playing off everyone against everyone else.

Armenia banks on NATO 
For instance, as part of its expansion into the South Caucasus, the North Atlantic Treaty Organization (NATO) is taking a more active interest in the long time Russian ally in the region, Armenia. A visit by NATO Secretary General envoy Robert Simmons in February marked the high point for Armenia's ties with the Western defence alliance, and Yerevan seems eager to maintain the momentum.
Simmons' February 23rd-24th visit at times appeared a careful balancing act. In statements with Armenian Defence Minister Serge Sarkisian, the NATO representative took care to emphasize that stronger relations with NATO should not be cause for concern in Moscow about the country's participation in the Collective Security Treaty Organization, the post-Soviet defence alliance made up of Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Russia. 
"We do not compete in the region, but are building a constructive partnership, including also [with] Russia, which is an active player in CSTO [the Collective Security Treaty Organization]," Simmons told reporters. "Armenia's participation in CSTO does not affect in any way the degree of its relationship with NATO." 
To reinforce that line, emphasis was placed on collective initiatives that have included Russian participation or an international focus - in particular, the deployment of Armenian peacekeepers to Kosovo and Iraq as well as contributions made by Yerevan to the US-backed campaign against international terrorism. A group of NATO consultants is scheduled to travel to Armenia to advise the Armenian defence ministry on various defence programs, but details of this assistance have not been released. 
Nonetheless, NATO has not been reticent about carving out its own niche in the region. In March 1 testimony before the US Senate Armed Services Committee, NATO Supreme Allied Commander General James Jones stated that the Caucasus has become a strategically important region for the alliance. 
"The Caucasus is increasingly important to our interests. Its air corridor has become a crucial lifeline between coalition forces in Afghanistan and our bases in Europe", said Jones. "In addition to maintaining our traditional lines of communication and access, we seek access to new facilities and routine freedom of transit to the Black Sea, the Caucasus, the Levant, and Africa in order to advance US national interests." 
As part of that initiative, NATO signed a transit agreement with Georgia on March 2 that would allow the alliance to ferry supplies for its International Security Assistance Force in Afghanistan via Georgian air space, roads and railways.
Over the past year, Armenia has been actively developing its own cooperation with the collective, too. In November 2004, NATO Secretary General Jaap de Hoop Scheffer paid an official visit to Yerevan in which he described NATO's relationship with Armenia as "developing very well, indeed." The government has turned a deaf ear to public protests about the deployment of peacekeeping troops to Iraq, and is currently at work on an Individual Partnership Action Plan (IPAP), reportedly scheduled for release soon, that would form a crucial first step toward eventual NATO membership. In September 2004 President Robert Kocharian appointed veteran diplomat Samvel Mkrtchian to act as the country's representative to NATO headquarters in Brussels, a position previously filled by Armenia's Belgian ambassador.
But more than a desire to stay on the right side of the West - a rising influence in the Caucasus -- could drive Armenia's NATO interest. A December 2004 poll by the Armenian Centre for National and International Studies showed that most Armenians favour membership in both NATO and the expanding European Union. One opposition bloc - made up of the Liberal Progressive Party, the Republic Party and former Foreign Affairs Minister Raffi Hovannisian - has already been formed with the express intention of securing Armenia's exit from the CTSO in favour of NATO and strengthening Armenia's focus on the West.
Commenting on the results of Simmons' visit, Armenian Defence Minister Serge Sarkisian emphasized that further cooperation with the defence collective is in the works. "I'd like to once again state that we are going to keep up the adopted direction and develop our ties," he stressed.
That cooperation, however, has not been without its stumbling blocks. In June 2004, President Robert Kocharian declined to attend a NATO summit meeting in Istanbul, citing strained relations with Turkey, a NATO member state with which Armenia's dealings have long been acrimonious. Nor have ties with fellow Partnership for Peace member Azerbaijan proven particularly collegial. Much attention continues to focus on an Azerbaijani military officer's brutal axe murder of an Armenian counterpart at a February 2004 Partnership for Peace training session in Budapest. Fearing for their security, two Armenian parliamentarians did not attend a November 2004 NATO seminar in Baku.
Armenia's dispute with Azerbaijan over the breakaway region of Nagorno-Karabakh perhaps poses one of the largest obstacles to further NATO cooperation, government officials say. "If we didn't have an unsettled conflict, we would have more opportunities to participate in such programs," the defence ministry's press service quoted Sarkisian as saying. 
If meant as a diplomatic hint for NATO assistance with Nagorno-Karabakh, however, the statement failed to secure a desirable response. Simmons categorically rejected the notion that NATO might dispatch peacekeeping troops to Nagorno-Karabakh in a bid to end that conflict. "NATO does not directly participate in conflict resolution and doesn't discuss the issue of locating its peacekeeping forces in the region."

The new dispensation from closer ties between Moscow and Ankara
Of course, powers closer to the top really call the shots, over Karabakh or anything else. Improving Russian-Turkish ties, for instance, could benefit Armenia, as many experts and officials believe that Moscow will place additional pressure on Ankara to lift the trade embargo and normalize relations with Yerevan. The Russian-Turkish rapprochement comes amid a growing US presence in the Caucasus, a region where both Russia and Turkey are considered regional superpowers and where both are eager to maintain their diplomatic and economic clout.
A visit by Russian President Vladimir Putin to Turkey in December 2004 - the first ever by a Russian chief-of-state - intensified the diplomatic dialogue between the two states, which for decades had been sparring partners. Turkish Prime Minister Recep Tayyip Erdogan reciprocated the visit with an official trip to Moscow on January 10th-12th, of intense interest to Yerevan.
A sizeable increase in trade and business ties provided the backdrop for these summits - Erdogan has forecast that bilateral annual trade is expected to more than double by 2007 to $25 billion -- but the Turkish press has argued that the true significance of these meetings is political. "Turkish-Russian ties gain a political dimension", The Turkish Daily News wrote recently. During Erdogan's trip to Moscow, Putin spoke out in favour of developing economic ties with Turkish Cypriots, a sensitive foreign policy point for Ankara, and promised to act as a mediator to resolve disputes between Turkey and Armenia. 
"We both agree that it is necessary to strive towards establishing friendly relations between neighbours," the Russian news agency Interfax quoted Putin as saying on January 11th. "[Russia] will do everything possible to settle conflicts in the post-Soviet space . . . acting exclusively as a mediator and guarantor of future accords."
Watching from the sidelines, analysts in Yerevan see the improved ties with Moscow as a sign that Turkey wants to cut its own path in foreign affairs, independent of the views of Washington, a fellow member of the NATO and long-time military partner. Turkey's relations with both the United States and Israel, a key American ally, have been strained of late. Turkish leaders are concerned about the presence of US forces in Iraq, and, last year, expressed dissatisfaction with Tel Aviv's treatment of Palestinians in the Gaza Strip. "We know that our responsibilities are not just internal anymore but in the Balkans, the Middle East, and the Caucasus and throughout the world," Erdogan said in his 2005 New Year's speech, the Turkish daily Zaman reported. "Being conscious of this responsibility, we will carry Turkey to a more active point."
Ruben Safrastian, head of the Turkey department at the Armenian National Academy of Science's Institute of Oriental Studies, argues that this "active point" means regaining influence over countries that were once part of the Ottoman Empire. That motivation parallels attempts by Russia to maintain its sway in countries, including Armenia, that were once part of the Soviet Union, he said. "Moscow is trying to use the privileges gained from high oil prices not only in the economic sphere, but also strategically. Thus, the two [regional] superpowers, dissatisfied with their role in the world, are trying to find a new place, a new niche," Safrastian said in a recent interview with the Russian news agency. Among the potential results of such an alliance: a Turkish partnership with the Shanghai Cooperation Organization, (which includes Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) and joint Turkish-Russian reconstruction projects in post-war Iraq. 
It is in the Caucasus that both countries will put their partnership to the test, observers believe. An Armenian diplomat commented that US-Turkish relations started to worsen after Washington began training Georgian troops in 2002. Turkey, formerly Washington's partner for advancing Western interests in the region, is becoming a competitor with Washington for influence, the diplomat said. Although Turkey continues to train Georgian military officers, and handed over $2 million worth of military equipment in 2004, its programmes pale in comparison with US training initiatives. Washington has set aside $15 million in 2005 alone for its ongoing Georgian military training program, and Georgia has responded in kind with a contribution of over 800 troops to the US Iraqi reconstruction effort.
Turkey is now looking to engage Russia diplomatically in order to check the growing US influence in the region, the diplomat said. Safrastian echoed this view, telling that "the Caucasus is no longer a source of discord for Russia and Turkey." According to this scenario, Russia's increased involvement in the economies of the south Caucasus countries would be reinforced by expanded trade with Turkey.
While Armenian media and political parties have paid relatively little attention to these events, the government has been watching closely. Although no Russia-facilitated breakthrough is in the works for Armenian-Turkish relations, the topic's presence on the Putin-Erdogan summit agendas was nevertheless considered by Armenian officials as unprecedented.
Accordingly, optimism in Yerevan for a breakthrough is on the increase. The Armenian diplomat said that the government sees the frequent meetings in 2004 between Armenian Foreign Minister Vartan Oskanian and his Turkish counterpart Abdullah Gul as the basis for an Armenian-Turkish thaw. "They had very thorough discussions and discovered that the two countries can cooperate well in many areas," he said. "We believe that Turkey may initiate some steps to overcome the current deadlock."
Nonetheless, Yerevan is treading carefully. In a January 25th interview with the Turkish national daily, Zaman, Oskanian said that he does not believe Russia's mediation will be decisive in resolving long-standing disputes between Turkey and Armenia. In this interview, apparently meant as a message to Turkey's political leadership following the Putin-Erdogan summits, Oskanian again dismissed the reasons usually cited for Ankara's unwillingness to normalize ties with Yerevan. The Armenian government, he said, does not insist that Turkey recognize the slaying of over a million Armenians in 1915 as genocide, nor is it considering claiming any territories or financial compensation from Turkey for lands lost after the border between the Soviet Union and Turkey was finalized in 1921. Oskanian's stance on the Nagorno-Karabakh conflict, the primary reason for Turkey's decision to close its border with Armenia in 1993, was more prickly, however.
The conflict, Oskanian said, is not a relevant problem for Turkey. "Turkey cannot mediate because it is partial. Russia, for instance, has no preconditions and is neutral. Turkey frequently offers its help as a mediator, and we hold bilateral meetings. We are not against meetings, but don't accept [Turkey's] mediation."
Rather, the key to reconciliation between Turkey and Armenia, the foreign minister said, would be a decision by Ankara to reopen Turkey's border with Armenia. "No one can insist that there can be normal relations between two countries if the border between them is closed. . . [W]e can't wait 10-15 years or longer, for Turkey to be accepted into the EU, for there to be some positive movement. We hope that very soon Turkey will open the border."

The 'special relationship' with Russia looking less 'special'
Despite Moscow's strong interest in Armenia's energy sector, officials in Yerevan worry that the Kremlin is considering a policy realignment that would enhance Azerbaijan's stature at the expense of the Russian-Armenian special strategic relationship.
The main source of Yerevan's concern is a planned railway project that would connect Iran to Russia via Azerbaijan. Armenian officials fear that the railway, if built according to current plans, would deepen Armenia's regional economic isolation. The proposed Kazvin (Iran) - Astara (Azerbaijan) line would skirt Armenian territory, denying Armenia an opportunity to expand trade with Russia. Given the existing economic blockade maintained by Turkey and Azerbaijan, Armenia can ill afford to be left on the sidelines of such a project, officials in Yerevan say. Since the 1991 Soviet collapse, Armenia has maintained a close strategic relationship with Russia, in part to offset the geopolitical disadvantage of having hostile neighbours on its eastern and western flanks. In recent years, the special relationship has shown signs of fraying. Russia-Azerbaijani relations have thawed, while Yerevan has expanded contacts with both Iran and the United States.
Armenian officials took note of Russian Foreign Minister Sergei Lavrov's February 2 trip to Azerbaijan. Lavrov's comment in Baku that "there are no unresolved problems" between the Russian and Azerbaijani governments heightened concerned in Yerevan about Moscow's potentially shifting loyalties in the South Caucasus.
Lavrov's February 16-17 visit to Armenia did little to assuage Yerevan's concerns. During talks with Lavrov, Armenian Prime Minister Andranik Markarian voiced concern about the railway project, according to official sources. In response, Lavrov merely indicated he would relay the Armenian government's views to Russian Transport Minister Igor Levitin and Russian Railways President Gennady Fadeyev.
Markarian and Lavrov also reportedly discussed the possibility of reopening the Abkhaz section of Georgia's railway system, a link that would re-establish Armenia's railway ties with Russia. Officials provided no details on the substance of those discussions. 
Problems between Yerevan and Moscow are not limited to rail-related topics. For the past two years, five Armenian companies, handed over to Russia as compensation for $100 million in unpaid Armenian debt to Moscow, have stood idle. In his meeting with Markarian, Lavrov assured the prime minister that Russia is doing everything possible to reopen the companies, but neither Moscow nor Yerevan has announced a concrete plan for getting the firms up and running again. Golos Armenii (Voice of Armenia), a Yerevan-based Russian-language newspaper, has described the fate of these companies as the most sensitive issue in relations between Russia and Armenia. 
Armenian media outlets also looked askance at Lavrov's actions on his recent visit to Azerbaijan, when the foreign minister visited Baku's Martyr's Avenue, a memorial to the 130 people killed during the Soviet Army's 1990 crackdown on anti-Armenian pogroms in the Azerbaijani capital. Meanwhile, as Armenia commemorates 2005 as a Year of Russia, Russia has declared 2005 a Year of Azerbaijan.
Moscow's recent behaviour has left some Armenian political leaders feeling confused. "Honestly speaking, Armenia sometimes does not understand some of Russia's steps, especially those concerning relations with Azerbaijan and Turkey," Giro Manoyan, international secretary of the Armenian Revolutionary Federation, a member of Armenia's ruling coalition, said in a recent interview with the Caucasus Journalists Network.
Amid the uncertainty surrounding the Armenian-Russian special relationship, Armenia's energy sector is one strategic area in which Russia, sensitive to growing Western influence in the South Caucasus, maintains a strong interest. Accordingly, Lavrov probed economic cooperation possibilities with Markarian.
The Russian energy company United Energy Systems (UES) is reportedly considering the purchase of Armenia's electricity distribution network, according to the Armenian news agency ARKA. UES already holds three power stations in Armenia - Sevan-Hrazdan hydropower plant, the Hrazdan thermal power station and the Armenian Nuclear Electric Plant - facilities that generate some 75-80 percent of the country's electricity. With the purchase of UK holding company Midland Resources' 80 percent stake in the distribution network, UES would hold control over almost the entire Armenian electrical power grid. 
Russian energy giant Gazprom, has been similarly active. The Iranian-Armenian gas pipeline, scheduled to be operational before 2007, could provide stiff competition for gas in European markets from Gazprom's own Blue Stream gas pipeline project with Turkey, according to Gazprom Deputy Chief Executive Officer Alexander Ryazanov. "If we do not take part in the construction of [the] Iran - Armenia gas pipeline, no one knows where that gas will go," the news site PanArmenian Network reported Ryazanov as saying at a recent session of the Federation Council, the Russian parliament's upper chamber. 
During his trip to Armenia, Lavrov confirmed Russia's interest in joining a pipeline construction consortium. "We received an offer, inviting our corresponding structures to take part in this project," Lavrov said, repeating past assurances that the pipeline meets with Russia's approval. "This offer is presently under consideration and I am convinced we will be able to give an answer in the nearest future."

Playing the Iranian card - when there isn't much else!
Seeking to ease its economic isolation, Armenia is expanding trade contacts with Iran. Work on a variety of infrastructure projects, including an Armenian-Iranian pipeline, is proceeding amid uncertainty. Armenian officials' main worry is that mounting US-Iranian tension over Tehran's nuclear program will disrupt the projects. 
Armenian President Robert Kocharian issued guidelines in late February for the construction of a new highway designed to foster a rapid expansion of trade between Armenia and Iran. The launch of the highway project came amid continuing construction of the pipeline, as well as of yet another power transmission line. 
Work on the highway, which will run through Armenia's mountainous southeastern Syunik province bordering Iran, is scheduled to start in April and finish in late 2006. The estimated $20 million cost makes the highway the largest single infrastructure project undertaken by the government since the country regained its independence in 1991. 
The sole existing road link between Armenia and Iran meanders through a high-altitude mountain pass in Syunik that is often closed in winter. Transport and Communications Minister Andranik Manukian says the new highway will always be passable and will be able to accommodate heavier trucks. 
The road should go into service by the time the Armenian side completes work on its section of the 120-kilometer gas pipeline. Work on the pipeline began last November following a high-profile official ceremony led by Armenian Prime Minister Andranik Markarian and Iranian Energy Minister Habibollah Bitaraf. The two men also inaugurated a second high-voltage transmission line connecting their countries' power grids. Two days later, Bitaraf and his Armenian counterpart, Armen Movsisian, signed an agreement in Yerevan on building a third such line, which they said would have twice the carrying capacity as the existing lines. 
Armenia is financing both the pipeline and electricity projects with Iranian loans totalling about $64 million. Yerevan will repay them with electricity supplies. In addition, the two sides have agreed to look into the possibility of building an Armenian-Iranian railway. 
Economic ties with Iran are deemed vital for land-locked Armenia, as they mitigate the effects of economic blockades maintained by Azerbaijan and Turkey, as a result of the unresolved Nagorno-Karabakh conflict. 
Many Azerbaijanis view Iran's refusal to join those blockades as a sign that Tehran favours Yerevan. Visiting Iran in January, Azerbaijani President Ilham Aliyev publicly urged the Iranians to show solidarity with fellow Shi'a Muslims and exert "economic pressure" on Armenia. 
The Iranian government does not seem inclined to heed Aliyev's appeal, however. Analysts in Yerevan have long suggested that Tehran's main motive for maintaining close links with its sole Christian neighbour is to limit the spread of Turkish influence in the region. 
"The relationship between the Armenian and Iranian peoples can serve as the best example for all those who want to live side by side and respect each other's sovereignty," Iranian President Mohammad Khatami declared during an official visit to Yerevan last September. A substantial element of the Armenian diaspora, both since ancient times and more recently since the economic decline of the 1990s, is based in Iran, with a whole quarter of Tehran city being theirs.
Keeping Armenian-Iranian relations on track may prove difficult for Kocharian's government in the light of the recent upsurge in US-Iranian tension. "We very much hope that problems in American-Iranian relations will be settled by peaceful means," Armenia's influential Defence Minister Serge Sarkisian said after a recent visit to Tehran where he met with virtually every Iranian leader. Sarkisian was at pains to stress that the talks focused on economic issues and that "we have no military cooperation with Iran." 
Tevan Poghosian, director of the International Centre for Human Development, a Yerevan-based think-tank, believes that the Armenian leadership does have cause for concern. "We will have serious problems if the Americans fail to find diplomatic solutions [to the nuclear dispute]," he says. "If they don't, the Armenian-Iranian projects will simply be frozen indefinitely." 
Other observers believe the importance of trade ties with Iran should not be overestimated in Armenia. "They are certainly not a miracle cure to resolve the Azerbaijani and Turkish blockades," a senior member of the Western donor community in Yerevan told EurasiaNet. "The Iranian economy itself isn't exactly healthy." 
Indeed, Iran was a leading trading partner of Armenia in the 1990s, but Tehran's share of Yerevan's overall foreign trade activity has declined dramatically in recent years, standing at a modest 5 percent in 2004. The volume of bilateral trade totalled almost $100 million. That figure is roughly the same as the trade volume between Armenia and Turkey, according to unofficial estimates. Virtually all Armenian-Turkish trade is conducted via third countries, especially Georgia, as Yerevan and Ankara have not normalized diplomatic relations, and Turkey keeps its frontier with Armenia closed. 
Growth in Armenian-Iranian trade is hampered by the poor quality of Iranian consumer goods, as well as prohibitive import tariffs that hinder Armenian manufacturers from entering Iran's huge market. Still, according to Poghosian, Yerevan is keenly interested in the success of the pipeline project with Iran, hoping that it will reduce Armenia's energy and power dependence on Russia. Moscow currently controls about 80 percent of Armenia's power-generating facilities and is its sole supplier of natural gas. "Armenia is looking for an alternative way of meeting its energy needs," Poghosian said. "I don't think the Russians are happy with this policy."

There is a solution
The world would say that it's really all very simple. That Armenia should take the initiative in resolving the long dispute over Nagorno Karabakh, which is more to do with Armenia's military occupation of the land corridor connecting them to the enclave. That territory, unquestionably Azeri, represents 20% of their total land area and it seems likely that deals could be done about the Armenian enclave itself, if returning this Azeri land were initially to be the subject of negotiation.



Yerevan, Tehran aim for energy cooperation expansion

Iranian and Armenian ministers of energy met in Tehran recently to negotiate ways to expand of bilateral ties in the energy sector, Interfax News Agency reported.
During the meeting, the Iranian minister asked that they jointly carry out an expert-level study in order to clarify the details of the contract before arriving at a final decision.
Iran had earlier agreed to import power from Armenia and export gas to that country after a 160km gas pipeline is constructed between the two countries. Armenia has stored 600m kilowatt hours power this year and is keen to export it to Iran.
Both ministers agreed to establish a wind power plant with a capacity of 90m watts; a third power transmission line; two circuit lines with a capacity of 220/230 KV to boost transmission capacity from Harazdan to Agarak power plants; the Aras dam and its power plant; and development of the fifth 130m watt unit of Garazdan power plant which needs 90-100m Euro in investment.
The Iranian minister asked the Armenian side to calculate how much power is supposed to be exported to Iran via the first, second, and third transmission lines and to determine the price of the power too. The Iranian minister said that Iran needs a couple of months to sign the agreement.



World Bank okays US$20m loan for Yerevan

The World Bank's board recently approved an International Development Association (IDA) credit of US$20m for the Yerevan Water and Wastewater Project (YWWP), Interfax News Agency has reported.
This is the third IDA-financed water and wastewater project in Armenia. The credit would assist the Armenian government in its efforts to improve Yerevan's water and wastewater system by continuing and expanding accomplishments achieved under a previous IDA-financed Municipal Development Project (MDP). The credit would be made to Armenia on standard IDA terms, including 40 years maturity and a 10 year grace period. Under the YWWP, Yerevan would have access to safe, continuous water supply while reducing environmental pollution. The World Bank also financed the initial Municipal Development project to support Yerevan's Water and Sanitation Company (YWSC) and a more recent (FY04) Municipal Water and Wastewater Project for Armenia's small- and medium-sized cities. The project benefits directly from Yerevan's successful experience with a management contractor recruited under the MDP. For YWWP, the government will increase private sector involvement and recruit an operator for YWSC under a lease contract. The project will finance investments in YWSC during the first five years of the lease.



Diamond industry shrinks in Armenia

Armenia's diamond cutting industry fell 20 per cent in 2004 but the government claims a turnaround is on the cards for this year, Interfax News Agency reported.
The diamond production value for 2004 reached 280m Euro but dropped 20 per cent against local currency which pulled down the industry further. Russia also failed to deliver the anticipated rough diamonds; this complicated future plans. At the end of 2003 Armenia embarked on a programme to double its annual cut-diamond production to 500m Euro and create 10,000 new jobs within a period of three years. Diamond-driven exports are quite beneficial for the country's exports earnings (39 per cent overall) and Armenia currently has 50 cutting firms.

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