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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: 302 - (27/02/06)
How valuable is the alliance with Russia
There is a big debate going on in the Caucasus about current events. Demands
from energy giant Gazprom for a gas price hike have prompted an unprecedented
debate in Armenia about the value of the country's strategic partnership with
Russia.
On January 22nd, the day that explosions severed gas pipelines linking Russia
with Armenia via Georgia, Armenian President, Robert Kocharian, and Russian
President, Vladimir Putin, met in the Kremlin to reaffirm their commitment to a
military and political alliance.
Plans by the Russian state-owned Gazprom company to increase gas prices from
US$56 per 1000 cubic meters to US$110 per 1000 cubic meters had foreshadowed the
meeting.
Armenian officials had taken umbrage at the fact that Gazprom's December 2005
decision was announced after Armenia's 2006 state budget had already been
approved; this was tactless in the extreme.
The two countries' long-term alliance prompted many to expect that the price
change would not apply to Armenia - or that at least the country would be
forewarned well in advance. Armenia receives all of its gas from Russia, which
also controls an estimated 70 per cent of the country's energy network.
But though the gas price dispute was reportedly discussed during the meeting, it
was not featured in either leader's official statements.
For now, gas prices have been frozen at their current levels until April 2006,
and negotiations between Armenia and Gazprom are ongoing. But officials say that
the best they expect is a price lower than that paid by neighbouring Georgia. A
final agreement is expected by mid-March.
Meanwhile, the squabble has put Armenia and Russia's long-term alliance up for
debate. Speaking to Kentron TV on January 13th, Prime Minister, Andrani
Margarian, said that Gazprom's plans to nearly double prices meant that Yerevan
needs "to clarify with Russia what is meant under 'strategic partnership.'
Which spheres does it concern? Is Armenia treated the same way as Georgia, from
which Russian bases are being withdrawn?"
A presidential spokesperson later rejected a Russian Kommersant Daily report
that Armenia's desire for lower gas prices had prompted Kocharian during the
meeting to offer Putin a 45 per cent stake in a planned gas pipeline with Iran.
Scrutiny has also been brought to bear on Russia's military base at Gyumri, 75
miles from Yerevan, and the destination for armaments from Russia's two recently
closed bases in neighbouring Georgia. A December 2005 agreement signed between
Armenia and Russia provides for expansion of the base, which Russia uses
rent-free.
At a January 20th public discussion Tigran Karapetian, leader of the Popular
Party and the owner of a popular television channel, ALM, charged that the
Russian troops in Armenia "do not protect our border [with Turkey]. Just
they need to have a military base here, and they do have it.'
Several politicians, including Parliament Speaker, Artur Bagdasarian, have
argued that Armenia should charge Russia rent for the base in exchange for
higher gas prices. Defence Minister, Serzh Sarkisyan, however, rejected such
proposals. "Under the conditions of our current agreement, we get more
[from Russia] than we give to it," he said at a January 26th press
conference in Yerevan with visiting Russian Defence Minister, Sergei Ivanov. The
Armenian knows what he is talking about. Armenia is doing pretty well out of
Russia right now.
The January 22nd destruction of pipelines feeding Georgia and Armenia with gas
gave a new impetus to the debate. The position taken by Georgian President
Mikhail Saakashvili that the explosions were intended to engineer stronger
support for Russia's interests in the South Caucasus has gained currency among
some media. The Haykakan Zhamanak newspaper wrote that the coincidence between
the date of the blasts and Kocharian's flight to Moscow to attend the opening of
the Year of Armenia in Russia might not be coincidental.
Armenia was forced to rely on reserve stores of gas during the crisis. On
January 30th, gas began to flow again through the pipeline that connects Russia
with Armenia via Georgia.
A January 16th statement by Gazprom spokesperson, Denis Ignatiev, to Radio Free
Europe/Radio Liberty that Armenia would have been offered a lower price if it
had agreed to one of the preconditions set forth by Russia has only reinforced
the belief that Moscow intended to reap advantages from the damaged pipeline.
The conditions, as described by Ignatiev, included either granting Russia a
stake in the Iran-Armenia gas pipeline, or providing for Russian ownership of
the unfinished fifth unit of the Hrazdan Thermal Power Plant (TPP) or taking a
loan from Russia under commercial interest rates.
One senior Armenian government official responded with outrage to the statement.
"I think Gazprom's decision damages the strategic partnership between
Armenia and Russia," presidential national security adviser, Garnik
Isagulian, told the daily newspaper Hayost Ashkharh on January 18th. The daily
reported Isagulain as saying that Russia's position on gas prices could reorient
Armenia toward the West, and away from Moscow.
Politicians, many of them known as pro-Russian, have responded in kind. Former
Prime Minister, Vazgen Manukian, leader of the National Democratic Party,
described the price stance as hitting "below the belt," the Russian
news agency Regnum reported, while Rafik Petrosian, a member of the Popular
Deputy parliamentary faction predicted that "Armenia will be forced to find
other friends," according to the January 19th edition of the daily Hayots
Ashkharh.
Khosrov Harouitunian leader of the Christian-Democratic Party, has pushed for
the government to exclude strategic energy assets from ownership by a foreign
government. The appeal, made on January 26th, would affect such properties as
the four units of the Hrazdan TPP, which was given to Russia under a
2002-debt-for-equity deal.
Government ministers, however, do not appear to share the views that Armenia
must abandon its political and military cooperation with Russia if gas prices
increase. "Our relations with Russia are of a strategic nature,"
Foreign Minister Vartan Oskanian told reporters on January 16. "There is no
need to change our relations due to gas prices, especially what concerns the
sphere of security."
But contrary to Russian assertions, few Armenians seem to believe that a price
hike can be explained by economic necessity. More than 75 per cent of 1,000
respondents in five different Armenian cities reported that they would think
negatively of Russia if Gazprom raised gas prices for Armenia, according to a
poll performed in mid-January by the Yelk Social Reforms Centre and quoted
widely in the Armenian media. The vast majority of those surveyed - nearly 80
per cent - said that they did not believe Russia would ultimately decide to
double gas prices for Armenia, however.
Karabak talks: for Armenia, more questions than answers
Despite international community optimism, many Armenian politicians and
pundits are sceptical that a breakthrough in the Nagorno-Karabak peace process
is imminent.
Hopes for a Karabak settlement have been rising in recent months. Even so, no
definite framework on how to end the 18-year conflict yet exists. A January
18th-19th meeting between Armenian Foreign Minister, Vartan Oskanian, and
Azerbaijani Foreign Minister, Elmar Mammadyarov in London, resulted only in a
short preliminary document that outlines the principles for future actions. The
meeting was intended to prepare for a summit between Armenian President, Robert
Kocharian, and Azerbaijani President, Ilham Aliyev, to be held in February in
Paris. The summit's date has not yet been specified.
Much of the currently available information on the peace talks has come from
foreign and unofficial sources. In December, for example, the Economist
Intelligence Unit reported that the settlement process would include the
withdrawal of Armenian troops from five out of the seven occupied territories
outside of Karabak; the return of Azerbaijani refugees and/or displaced persons
to those territories and to Karabak; the opening of communication routes blocked
by Azerbaijan; and the holding of a referendum in Karabak on the region's
status.
Observers note that both Armenia and Azerbaijan have made recent efforts to
break a long-standing stalemate in negotiations. In particular, Yerevan has
abandoned an earlier demand for a "package" solution, under which the
withdrawal of the occupied territories would be made only after Karabak's status
was determined. Meanwhile, Armenian media have cited initial reports published
by Jane's Information Group stating that Azerbaijan has supposedly agreed to a
referendum on Karabak's future status. At the same time, Aliyev administration
representatives say the issue is not the subject of present talks.
Given the lack of specifics, Armenian observers remain wary. Both political
analysts and politicians state that it is too early to share the optimism
expressed by many foreign observers, as too much will depend on the details of
potential future agreements. On January 21st commentary in the daily newspaper
Hayots Ashkharh, for instance, suggested that Azerbaijan would try to find a way
to avoid fulfilling its referendum commitment once it regained control over the
occupied territories. In a report distributed by the Regnum new agency,
Democratic Party leader, Aram Sargsian, said the expected deployment of
international peacekeeping forces could create geopolitical tension, noting that
Iran would likely view the possible appearance of NATO troops near its border as
a threat to Tehran's security.
Prime Minister, Andranik Margarian, has stated that Armenia's preconditions for
a deal have not changed. In a report published January 14th in the Hayastani
Hanrapetutiun newspaper, Margarian said that Yerevan continues to exclude the
possibility of a top-down relationship between Baku and Stepanakert. Armenia
also will not budge on its demand for a land link between Armenia and Karabak,
as well as security guarantees for the territory.
Margarian, who is also the leader of the Republican Party, went on to state that
the Republicans wanted an interim status established for Karabak, governing the
time between Armenia's withdrawal from the occupied territories and the
referendum, a period that could last as long as 10-15 years. "Nagorno-Karabak
should be given a status different from what it has now. Otherwise, all the
talks are useless," Margarian said. He explained that this interim status
must enable Karabak to establish direct ties with international organizations
and foreign governments in order to facilitate the territory's development
efforts. "This is one of our preconditions. At least, this is the position
of the prime minister and the Republican Party," Margarian said.
The role of Karabak authorities themselves in the settlement process represents
another potential sticking point. Although the territory's leaders have
maintained that they are interested in establishing peace with Azerbaijan, there
are indications that Stepanakert and Yerevan differ in their approaches on the
settlement process.
In apparent contradiction to the Armenian government's position, Seyran Ohanian,
the unrecognised republic's defence minister, told journalists on January 18th,
that "there should be no word about the return of refugees unless the issue
of the status of Karabak is solved," the 168 Zham weekly reported. In his
turn, Samvel Babayan, Ohanian's predecessor, now the leader of Armenia's Dashink
Party, told the Chorrord Ishkhanutiun newspaper that he has information that
indicates serious disagreements exist between Yerevan and Stepanakert over which
occupied territories should be freed, the positions to be held by any
international peacekeeping forces and on the timing of the referendum on the
territory's status.
Domestic political factors could potentially hamper the Armenian government's
negotiating flexibility. Political parties are already preparing for
parliamentary elections to be held in May 2007. A presidential vote will follow
in 2008. The looming elections could leave Armenian politicians less likely to
take political risks.
Public opinion in Armenia tends to be wary about peace prospects, as surveys
show that a majority of Armenians do not believe that Azerbaijan is sincerely
interested in peace. Recent reports about Azerbaijani soldiers' alleged
destruction of Armenian khachkars, or cross-stones, near the town of Julfa in
the Azerbaijani exclave of Nakhchivan, have exacerbated such feelings of
scepticism. According to a survey by the Caucasus Institute for Democracy
development fund, made public on December 21, only 19.2 percent of the
population in Armenia would agree to cede the occupied territories if Azerbaijan
agrees to recognize Karabak as an independent state.
Armenia/Azerbaijan: will presidents' meeting yield progress toward Karabak
peace deal?
Recent talks between Armenia's and Azerbaijan's foreign ministers failed to
shed much light on the likelihood of a major breakthrough in the Karabak peace
process.
The discussions, held in London on January 18-19 under the aegis of the OSCE
Minsk Group, were being watched closely for any indication that a February
meeting between Armenian President Robert Kocharian and Azerbaijani President
Ilham Aliyev might result in a compromise.
Uncertainty Of Principles
Armenian Foreign Minister Vartan Oskanian did confirm the day after the
London talks that the two sides are seeking to reach agreement on a half-page
document that enumerates general principles that could then form the basis for a
more detailed peace plan. But Oskanian said that while the two sides' positions
vis-a-vis some of those principles have drawn closer, on others their positions
are still far apart, RFE/RL's Armenian Service reported.
Day.az on January 26 similarly quoted Mammadyarov as telling journalists in Baku
that the two sides are still trying to reach agreement on the "general
principles." It therefore remains unclear whether the two countries'
presidents will indeed succeed in reaching a compromise on the contested points,
let alone publicly endorse those basic principles, during their upcoming summit
near Paris.
The basic principles have formed the focus of what has become known as the
Prague process talks between Oskanian and Mammadyarov (so-called because the
first few meetings took place in Prague in the summer of 2004 and January 2005).
On June 7 2005, Mammadyarov told journalists in Baku that the two sides were
discussing between seven and nine issues related to a peace settlement, and that
those issues had to be addressed in a specific order, with each made secure
before the following is added, "like pearls knotted on a silk thread."
The Blueprints
Mammadyarov said Azerbaijan insists on the liberation of the seven
Azerbaijani districts bordering on Karabak that are currently occupied by
Armenian forces. He also claimed the two sides were discussing which countries
or organizations could provide peacekeeping forces to be deployed on those
territories after their liberation, according to day.az. Echo-az.com quoted
Mammadyarov as saying that the two sides were discussing both "phased"
and "package" approaches to resolving the conflict. But a senior
Armenian Foreign Ministry official told RFE/RL on June 8 on condition of
anonymity that the final agreement will be a package one, although its various
provisions may be implemented one after the other, rather than simultaneously.
Then, in early July 2005, a senior Armenian official told RFE/RL's Armenian
Service that under the anticipated peace deal, Armenia would return to
Azerbaijani control five of the seven Azerbaijani districts adjacent to Karabak
currently occupied by Karabak Armenian forces, not including the strategic Lacin
corridor. An international peacekeeping force would be deployed in the conflict
zone under the aegis of the OSCE. Then, at some unspecified future date the
population of the unrecognised Nagorno-Karabak Republic would be required to
vote in a referendum on the region's future status.
That blueprint is very similar to those proposed in December 2004 by former
Spanish Foreign Minister Ana Palacio and NATO Parliamentary Assembly President
Pierre Lellouche; and by the International Crisis Group in a document released
on October 11th 2005, although the ICG plan envisages the withdrawal of Armenian
forces from all seven occupied Azerbaijani districts including Lacin.
Haik Kotandjian, an adviser to Armenian Defence Minister Serzh Sarkisian,
outlined an alternative "road map" for resolving the conflict in a
November 22nd interview with regnum.ru. That three-stage plan comprised the same
elements, but in reverse order: it envisaged a referendum on the status of the
NKR, followed by the deployment of international peacekeepers and the
simultaneous withdrawal of Armenian forces from five of the occupied districts
(not including Lacin and Kalbacar); the third stage comprised the rehabilitation
of the conflict zone.
Near Successes
In early July 2005, Armenian officials told RFE/RL's Armenian Service that
Armenia and Azerbaijan had reached agreement on the key points of a formal peace
accord ending the Karabak conflict, and that agreement could be signed by the
end of this year. The two ministers, and the two presidents, subsequently met in
late August in Kazan on the sidelines of a CIS summit, but failed to announce
any major progress toward a settlement. Then, on December 4th, Oskanian told RFE/RL
that he and Mammadyarov failed during talks in Ljubljana on the sidelines of the
OSCE foreign ministers' annual meeting to agree on a date for the next meeting
between the two presidents -- a meeting that Oskanian hinted could prove a
pivotal moment in the search for a settlement.
But despite that failure to schedule a meeting between the two presidents,
preparations were launched for one aspect of a peace settlement: provision was
made for a high-level OSCE planning group to visit the Karabak conflict zone to
assess the requirements for deploying an international peacekeeping force in the
event of the withdrawal of the Armenian forces from the Azerbaijani territory
contiguous to the unrecognized Nagorno-Karabak Republic that they currently
occupy. Noyan Tapan reported on January 22nd the arrival of that delegation in
Stepanakert.
In a January 19th interview with APA news agency that was posted the following
day on day.az, Azerbaijani presidential administration official Mammadov said
that Azerbaijan's overriding priorities are for Armenia to agree to a settlement
of the conflict that would preserve Azerbaijan's territorial integrity, and the
withdrawal of Armenian forces from occupied Azerbaijani territory. Mammadov
dismissed as "unimportant" the issue of including representatives of
the NKR in the peace process, which the ICG plan advocates. He said that
peacekeeping forces should be deployed along the entire length of the
Armenian-Azerbaijani border and "between Armenian- and
Azerbaijani-populated villages." He said it was premature to discuss the
possibility of a referendum, which would, he estimated, be held only in 15-20
years' time.
Deputy Foreign Minister Araz Azimov, President Aliyev's special representative
for the Karabak talks, was more categorical, telling journalists in Baku on
January 23rd that talk of a referendum is no more than "rumours,"
day.az reported.
Reality Check
Neither Mammadov nor Azimov appears to have made the crucial point, noted on
January 19 by the online daily zerkalo.az, that Article 3 of the Azerbaijani
Constitution explicitly bars the possibility of changes to the country's borders
being submitted to a nationwide referendum. For such a referendum to take place,
a preliminary referendum would first have to be held to amend those articles of
the constitution, and few Azerbaijani voters are likely to endorse any
amendments that would facilitate the loss of Azerbaijani jurisdiction over
Karabak.
Even if the two presidents succeed during the coming year in finalizing a set of
"general principles" intended to serve as the blueprint for a more
detailed peace plan, there is still no guarantee that one side or the other will
not find it expedient to renege on them at some future date. The so-called
"Paris Principles" agreed on in the spring of 2001 were elaborated on
in further talks in Florida in April 2001 and during subsequent meetings between
Kocharian and Ilham Aliyev's father and predecessor, Heydar Aliyev. US diplomat
Rudolf Perina, who served as the US Minsk Group co-chairman during those talks,
later revealed that in 2002 the two sides came "incredibly close" to
hammering out a peace agreement. But Armenian officials say Baku reneged on that
deal shortly before a planned summit between Kocharian and Heydar Aliyev in June
2002 that was cancelled at the last minute.
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FOREIGN INVESTMENT
IFC invested 9.1m Euro in Armenia
International Finance Corporation (IFC) in collaboration with strategic
investors explores the investment opportunities in Armenia's financial and real
sectors. It was reported that on January 1st, IFC invested 9.1 million Euro in
three projects which are Hotel Armenia, ACBA Leasing, and Armeconombank and it
plans to invest more this year, Interfax News Agency reported.
Armenia is a shareholder and member of IFC. In addition to the investment
programme, IFC has been providing technical assistance on corporate governance
and advisory services for improvement of the investment climate and small and
medium enterprise development. IFC is the biggest international financing source
for developing countries. Besides, the Corporation fulfils the function of
laboratory for innovative market solutions on poverty reduction and
environmental and social problems solution.
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FOREIGN LOANS
World Bank approves 20m Euro loan to Armenia
The World Bank approved a second Poverty Reduction Support Credit (PRSC) for
Armenia worth 20 million Euro citing the country's "exemplary macroeconomic
performance" and its government's efforts to reduce widespread poverty,
Vigen Sarkisian, PR director at the World Bank's Yerevan office, said at a
meeting on January 20th, Interfax News Agency reported.
The bank said that by financing part of the 2006 budget deficit it will assist
in the implementation of the Armenian government's poverty reduction drive. The
money, which will be channelled into the Armenian state budget, is the second
instalment of a three-year lending programme that was launched by the World Bank
in November 2004. Sarkisian said the International Development Association, part
of the World Bank Group, would provide the re-sources on discount terms for 40
years at 0.75 per cent with a ten-year grace period.
AEB sign 3m Euro co-finance deal with EBRD
The European Bank for Reconstruction and Development is providing a three
million Euro co-financing facility to Armenian Economy Development Bank,
Armeconombank (AEB), Armenia's fifth largest bank by assets in a sector
encompassing 21 privately owned banks, New Europe reported.
The facility consists of 1.5 million Euro loan to Armeconombank, which will be
used for on-lending to the bank's clients and another 1.5 million Euro
participation facility under which the EBRD will take on the client's direct
risk. This will facilitate the financing of Armenian medium sized enterprises
with good credit history and proven track records. Besides sub-loans worth one
million Euro will be provided to finance companies' capital expenditure and
working capital needs. The funds come via the EBRD's Medium Sized Co-Financing
Facility, which is designed to share with local banks the risk of lending to
potential borrowers. The EBRD owned a 25 per cent stake plus one share in
Armeconombank in December 2004, its first equity participation in a locally
owned Armenian bank. The Bank and the Sukiasyans jointly hold more than 75 per
cent of shares in Armeconombank. The EBRD has a seat on the bank's supervisory
board.
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MINERALS & METALS
Global gold to process, export Armenian uranium
The US Global Gold Corporation (GGC) intends to expand its sphere of business in
Armenia and process and export uranium, GGC said, New Europe reported.
The company said it recently acquired a large tenement in the Gegharkunik region
in northern Armenia which geologists believe to be rich in gold and uranium. The
company is understood to be primarily interested in local deposits of the
radioactive metal used as nuclear fuel. GGC has bought 80 per cent of the shares
in the Armenian-registered Athelea Investments, set up by a group of US and
Australian citizens and which holds the exclusive right to explore a 27-square
kilometre area close to the River Ghetik. Geologists who studied the area in
1970 said it could contain radioactive elements, including uranium. "These
studies concluded that the region is prospective for radioactive elements,
including uranium," GGC said in a statement. "A suite of radioactive
minerals were reported in the samples, including uraninite (uranium
oxide)," it added. GGC sources in Yerevan said that the US company will
spend three years to ascertain the local uranium and gold reserves before
starting to mine. They said the uranium ore will likely be processed in Armenia
and smelted in Europe or the United States. Global Gold in July 2005 signed a
deal to buy 100 per cent of Armenian metallurgical company Mega-Gold and with it
the right to study and develop the Tukhmanuk polymetallic ore field.
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TRANSPORT
Armenia to participate in 2 TRACECA led projects
In the 2005 report published on January 11th, the Armenian ministry of foreign
affairs said that Armenia would participate in two Transport Corridor Europe
Caucasus Asia (TRACECA) led projects worth 7.5 million Euro in 2006-2007,
Interfax News Agency reported.
The projects are focused on creation of cargo shipment network worth 5.5 million
Euro and in TRACECA participant countries territories and civil aviation
administrative and technical personnel training worth two million Euro. The
report said Armenia attached great importance to TRACECA intergovernmental
commission's work. The Armenian delegation also participated in the 2006 TRACECA
activity programme preparation and adoption. Under this programme, European
Commission allocates 13.5 million Euro for TRACECA projects funding.
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