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Books on Armenia
REPUBLICAN REFERENCE
Area (sq.km)
29,800
Population
2,991,360
Principal ethnic groups
Armenian 93.3%
Azeri 2.6%
Russian 2%
Capital
Yerevan
Currency
Dram
President
Robert Kocharian
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Update No: 295 - (26/07/05)
Armenia is facing a sticky situation. It has a deeply
resentful enemy in the Azeris, 20% of whose territory it has occupied in defence
of its ethnic-Armenian separatist enclave, Nagorno-Karabakh. In May it accepted
a Russian offer of military supplies from two bases in Georgia which Russia is
evacuating.
This may prove a very costly mistake. The Azeris have reacted immediately.
Petro-dollars funding big military build up in Azerbaijan: Aliyev
Aliyev is resorting to the standard ploy of a beleaguered dictatorship, military
adventure. It does not even have to go abroad to do so, given that the enclave
is part of its territory under international law.
Azerbaijan is using revenue from record-high oil prices to fund a massive
increase in military spending, President Aliyev said on June 25th, warning that
the army would be prepared to recapture the region of Nagorno Karabakh, reports
Agence France-Presse from Baku.
Azerbaijan will spend US$300m (248m euros) on its armed forces in 2005, a 70 per
cent increase over last year, the Azeri leader said at a ceremony in a military
academy. "The adversary must know that the Azerbaijani army can mobilize at
any moment and liberate the occupied territories," Aliyev said.
"Spending on the country's defence force will grow continuously."
This is of course a very dangerous game. The Russians will always play the
Armenian card against Azerbaijan, just as they will the Abkhaz one against the
Georgians. Meddling in the Caucasus is second nature to them. This will provoke
Turkey, a NATO member.
The Armenians are very good fighters, as they showed in the preceding conflict,
which they after all won. But Yerevan, as well as Baku, would be advised to make
jaw-jaw, not war-war, at this juncture.
Azerbaijan demands Armenia's exclusion from Council of Europe
Azerbaijan has sent a letter to the Council of Europe demanding that Armenia be
expelled from this organization. "The document that contains the demand to
exclude Armenia from the Council of Europe has already received the status of an
official PACE document. It will be distributed among PACE countries'
representatives on Tuesday and will be discussed at a session of the Council of
Europe ministers' cabinet in the near future," a representatives of
Azerbaijan's delegation at the Strasbourg PACE session, Rafael Guseinov, told
Interfax.
"This demand is motivated by the fact that Armenia has repeatedly violated
the basic principles of the Council of Europe. Namely, Armenia continues the
occupation of 20% of Azerbaijan's territory, Azerbaijan being another Council of
Europe country," Guseinov said.
The UN Security Council has repeatedly condemned the occupation of Azerbaijani
territory and demanded that Armenian military units be withdrawn from it. The
OSCE Minsk Group, which includes representatives of Russia, France, and the
United States, is mediating the conflict.
Gazprom's involvement in Iran-Armenia pipeline to be discussed
The Armenians are in effect in the pocket of the Russians so long as the dispute
continues, their only real supporters on the issue. Cut off from Turkish and, a
fortiori, Azeri ecenomic relations by the blockade maintained by both countrries
with them, Russia is the vital partner, the source of arms and energy.
The Russian-Armenian interparliamentary commission on economic cooperation for
example was planning to discuss the involvement of Russia's Gazprom in the
construction of the gas pipeline connecting Iran and Armenia in mid-October, a
source in the Armenian government told Interfax. Gazprom intends to offer its
cooperation on the construction of the 41 km long Armenian section of the
pipeline connecting the town of Megri (located on the Iranian border) to the
town of Kadzharan (320 km southeast of Yerevan) and also on the reconstruction
of the pipeline connecting Kadzharan and Yerevan (which has a pipe diameter of
500 to 700 mm).
The cost of building the Armenian section of the pipeline exceeds the $30
million loan provided for this purpose by the Export Development Bank of Iran,
which increases Gazprom's chances of participating in the project.
In May 2004, Armenia and Iran signed an agreement on the construction of a gas
consortium to supply Iranian gas to Armenia. Under that agreement, Iran took on
the obligation to supply 36 billion cubic meters of natural gas to Armenia over
a period of 20 years, with the possibility of extending the contract by five
years and the total gas supplies to 47 billion cubic meters.
The construction of the Iranian section of the pipeline, which is 100 km long,
began in mid-July, 2004 and the construction of the Armenian section was due to
begin before the end of October last year. It will not be completed until the
end of next year.
The total cost of building the Iran-Armenia pipeline and renovating the pipeline
currently connecting Kadzharan and Yerevan is estimated at $210-220 million. The
supply of Iranian gas will likely begin no later than January 2007.
Armenia and EU talk better business relations
The Armenians are at least improving their relations with the EU. The sixth
sitting of the EU-Armenia cooperation committee started in Yerevan on June 20th.
The sitting was co-chaired by RA Minister of Trade and Economic Development
Karen Chshmaritian and Hugues Mingarelli, European Commission director for
Eastern Europe, the Caucasus and Central Asia, Interfax reported.
A number of economic issues were on the agenda. Armenian Deputy Minister of
Trade and Economic Development Tigran Davtyan said discussions focused on
Armenia's participation in wider Europe: New Neighbours EU programme. He noted,
"Armenia was included in the programme two months ago. Presently we should
hold negotiations in bilateral format, work out a political line till end of the
year, and start its implementation next year."
Besides the Neighbourhood Policy the agenda contained issues referring to
trade-economic cooperation, creation of a good business atmosphere, energy
problems, investment cooperation as well as the political situation in Armenia,
struggle against corruption and cooperation with international organisations.
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ENERGY
Russians purchase Armenian power grid
Russia's state power utility RAO Unified Energy Systems (UES) announced that its
offshore registered subsidiary Interenergo BV had acquired Armenia's energy
distribution network Armenian Electricity Network (AEN). In a financial report,
UES announced that Interenergo BV paid 73m Euro to purchase AEN from a Canadian
investor who privatised it three years ago. AEN has undergone substantial reform
and renovation over the past decade, Interfax News Agency reported.
The takeover of AEN would lead to Russia's complete control of AEN. However,
western donors and the World Bank have condemned this takeover. The Russians had
expressed an interest in the Armenian power grid for quite some time. Meanwhile,
the Armenian media had speculated for months that UES was about to own the
network. The issue was also reportedly high on the agenda of Russian President
Vladimir Putin's visit to Yerevan last spring.
Margarit Grigorian, a spokeswoman of AEN, has strongly denied claims that AEN
has given the Russians the right to own the increasingly profitable network
adding that Russia has only management rights over AEN. She said, "We have
already demanded that RAO UES refute that information because Midland Resources
Holding has not sold its shares to anyone."
The AEN was sold to the British-registered company Midland Resources Holding for
37 million Euro in September 2002. Under the terms of the deal, the new owner
could not resell it to another investor without the Armenian government's
approval. The Russian giant may have found a loophole to get around this hurdle.
Meanwhile the Armenian Energy Ministry refused to confirm or deny the UES
claims. "We have received no government statements confirming the reports
as yet," the spokesman for the World Bank office in Yerevan, Vigen Sargsian,
said. Energy Minister Armen Movsisian in early March publicly opposed AEN's
takeover by UES arguing that the latter already controls 80 per cent of
Armenia's power generating capacities and should not be allowed to monopolise
the energy sector.
Government sources told Interfax that Midland Resources, which is mainly owned
by a Russian-born Canadian businessman, was recently split into two companies.
One of them is engaged in the steel trade, Midland's core activity, while the
other operates only as AEN's parent company that was actually bought by UES.
Meanwhile, Russian media reported that Interenergo's ownership is also quite
complex. This company was established and registered in Netherlands in April
2004 by a group of Russian investors.
The largest of them was identified as Inter RAO UES, a joint venture of UES and
another state-run energy corporation, Rosenergoatom. The UES statement said
Inter RAO UES owns only 42.3 percent of Interenergo. However there is no
information as to who else owns a stake in AEN's reported new owner and whether
it comprise of any Armenians.
It was reported that UES' Deputy CEO Andrey Rapoport was in Yerevan recently to
participate in the annual meeting of the governing board of the Metsamor nuclear
power station.
Last year UES got financial control of Metsamor in return for repaying 40
million Euro debts to Russian suppliers of nuclear fuel. It also owns Armenia's
largest thermal power plant and several hydro-electric stations.
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TELECOMMUNICATIONS
Lebanon's VivaCell gains foothold on Armenian market
Lebanese mobile communication operator VivaCell (K-Telecom Company trademark)
was due to enter the Armenian market on July 1 to reduce prohibitive tariffs and
increase the number of mobile phone users in the country, Interfax News Agency
quoted Hussein Rifai, member of K-Telecom board, as saying recently.
K-Telecom was selected by the Armenian government last November as the second
wireless operator without a transparent and competitive bidding. The Lebanese
firm paid seven million Euro to obtain it. The K-Telecom owners also control the
Karabakh-Telecom company that has run Nagorno-Karabakh's telephone network since
2002. VivaCell is the trademark of "K-Telecom" company. According to
top executives of K-Telecom, VivaCell's wireless unit will be an attractive
alternative to ArmenTel which is the unpopular telecommunications monopoly that
failed to meet local demand in mobile telephony.
However, ArmenTel had more than 200,000 subscribers at the beginning of this
year and expected to attract at least 100,000 more before the launch of the
K-Telecom network. Earlier in June, the company, which is owned by Greek telecom
giant OTE, announced a major reduction in its mobile phone tariffs as part of
the effort. The ArmenTel monopoly is blamed for the fact that Azerbaijan and
Georgia have left Armenia behind in the development of mobile telephony. The
high cost and poor quality of the service led the Armenian government last year
to renegotiate one of the key terms of ArmenTel's 1998 sale to OTE which
resulted in the partial liberalisation of the market.
Meanwhile, Rifai stressed that activities of VivaCell will signify the start of
a new period in the field of telecommunications in Armenia.
Competition in the market will not only mean mobile communication tariff
decrease, but also better quality services. "Quality in the network,
quality in the customer care, quality in every single aspect of our relation
with the customer," Rifai said, adding that the technology should not only
be introduced but also adapted by using the local potential and foreign
experience. "VivaCell will symbolise for the Armenian citizens a new era in
telecommunications," said VivaCell general manager Ralph Yirikian. He
believes that VivaCell will provide the Armenian population with choices which
were lacking previously in the field of mobile communication. Yirikian added
that the new network will initially cover Yerevan and surrounding regions in
southern and central Armenia.
It has been reported that VivaCell will expand its network coverage to reach the
whole territory of the Republic of Armenia, catering to more than 300,000
subscribers in less than three months. He stated that VivaCell will have
different packages that would give the potential subscribers a choice.
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TRANSPORT
Armenia extends help for Abkhazian railway restoration
The head of Russian Railways, Gennadi Fadeev, who participated in the meeting of
the Commonwealth of Independent States Council on rail transport, told Interfax
recently that the route of the rail communication between Russia and Georgia
through the Abkhazian segment is promising.
Fadeev said the expenditure on restoration of the Abkhazian part of the railroad
would cost about €100m.
He added that ifthe Abkhazian part is restored, "all interested parties,
including Armenia and event Azerbaijan to some extent" should take part in
revamping works.
Fadeev expressed readiness to "make every effort toward restructuring of
the Abkhazian part of the railway" especially by sending the best carriages
via the Moscow-Tbilisi route and to arrange daily communication.
For his part, the head of the department of railways of Armenia, Ararat Khrimyan,
stated: "Armenia wants to be involved in the project of restoration of the
Sochi-Tbilisi Railroad communication, if Russia and Georgia take a final
decision on state level of restoration of that part of the railroad."
He added that Armenia is ready to allocate part of the financial sources
required for the restoration of railroad communication through the territory of
Abkhazia.
Georgian Prime Minister Zurab Noghaideli said Tbilisi has a more positive
position in the issue of restoring the Abkhazian part of the railroad. At the
same time, Noghaideli added that one should not hurry, as there are unsolved
issues, particularly the issue of securing the safety of Gali region's
residents.
Nogaideli noted that "the issue is not a simple one and relates to the
solution of many organisational questions - the topic has been discussed by the
Russian and Georgian parties many times, including in the course of the Russian
Prime Minister Mikhail Fradkov's visit to Georgia on June 3rd." Nogaideli
said the question of restoration of rail communication via Abkhazia was not
considered at the meeting of the CIS Council but was discussed with Fadeev.
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