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ARMENIA


  
  



Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
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


Update No: 318 - (27/06/07)

Priorities and economic development after the elections 
The country is facing a delicate moment in its history. Following May 12th's elections democratic rule appears to be in place. The OSCE approved them as fair. The incumbent party in power won easily. But this is not necessarily due to fraud.

Everyone had been shocked by the early death of the premier just before the elections and a large sympathy vote for the new premier was natural. The Central Election Commission said on May 13th that five parties have been elected to parliament. According to election results, the Republican Party of Prime Minister Serzh Sarkisyan received 33.8 percent of the vote, Prosperous Armenia gained 15.1 percent and Dashnaktsutyun received 13.1 percent; opposition parties Orinats Yerkir and Heritage got 7 percent and 6 percent, respectively. 

More than 2 million voters cast their ballots in the May 12th legislative polls, in which 21 parties and one coalition were competing for 131 seats.

However, economic growth is unstable and is far from uniform throughout the country. A point of force could be the energy sector. Future foreign policy will be fundamental to improving the troubled diplomatic situation with neighbouring countries.

Armenia has a huge diaspora, especially in France and the US. The Armenian lobby in both is powerful and organised. The new French president has been courting the Armenians, taking a tough line on Turkey's refusal to recognise the Armenian massacre of 1915. 

MCA-Armenia opens in Yerevan; aid from the US 
The US Armenian lobby has long been very active, even if Turkey has great weight there as a staunch NATO ally. It is able to stimulate new financial disbursements.

The Millennium Challenge Account - Armenia (MCA-Armenia), a state non-commercial organization established by the Armenian government to oversee the implementation of a multimillion U.S. aid package, opened its new office in Yerevan on June 11th. Ambassador John Danilovich, the Chief Executive Officer of the U.S. Government's Millennium Challenge Corporation (MCC) with which the Government of Armenia signed a $236 million Compact in March 2006, and Armenia's Minister of Finance and Economy Vartan Khachatrian performed a ribbon-cutting ceremony that was also attended by MCA-Armenia CEO Ara Hovsepian and Resident Country Director for MCC Armenia Alex Rassin. 

The provision of the multimillion funding had been largely linked with a proper conduct of parliamentary elections in Armenia. Danilovich said in this regard: "We welcomed the Armenian parliamentary elections and congratulate the Armenian people on a more successful poll than previous elections. It appears that this election was an improvement toward international standards, but we continue to closely watch the process of investigating allegations of irregularities." 

He also said that as with all MCA countries, the MCC Board will make a decision on Armenia's continued eligibility at its annual selection meeting in December. 

Danilovich said $6 million out of the funds earmarked for Armenia as part of the five-year economic assistance package have already been disbursed. "The Compact is progressing. We have begun training farmers to improve their profitability with the Water to Market Activity and design of the first phase of the Rural Roads Rehabilitation Project is nearing completion," Danilovich said at the event. "Additionally, the early design phase of the Irrigated Agriculture Project is out for competitive bids, with first construction expected to begin this autumn." 

The Compact, which was signed on March 27, 2006 and entered into force later in September, aims at reducing rural poverty through a sustainable increase in the economic performance of the agricultural sector. Armenia plans to achieve this goal through a five-year program of strategic investments in rural roads, irrigation infrastructure and technical and financial assistance to improve the supply of water and to support farmers and agribusinesses. 

Answering RFE/RL's question, Minister Khachatrian clarified that the sum Armenia has actually received so far is $5.5 million. "But programmes are in progress," he added. He called it possible that some of the projects will remain unrealised because of the fluctuations in the dram exchange rate to the dollar. "The Corporation will not be adding anything," Khachatrian said, but added that the government will take over and carry on where the Corporation projects stop, including with "assistance from foreign partners." 

"Our 'Lifeline Road Network' is some 2,500 kilometres, of which only some 900 are due to be rehabilitated under the Compact. It is clear that we will do the rest," he emphasized. 

According to the minister, the conditions for Armenia's continued eligibility for the assistance programme remain the same. "We have four categories, 16 indices, which are under constant monitoring," Khachatrian said. "We've always had "green" evaluations of three of the four categories, which deal with economy and social issues. The only 'red' was with one index of the first category, called "Fair Governance", where at least three out of six must be evaluated 'red' for the program to be put at risk." 

In November 2006, the New York-based Freedom House urged the George Bush administration to withhold promised economic assistance to Armenia which it believed had failed to meet "reasonable standards" for democracy and civil liberties. It charged the Armenian government had been "backsliding on promised reforms" since signing the MCA compact and accused it of ignoring U.S. calls to investigate serious fraud reported during the nationwide referendum on constitutional amendments held the previous year. 

However, the Armenian minister believes that the latest legislative elections in Armenia leave no room for "problems with the country's democracy and electoral processes." 

"Our elections have been evaluated as good, free and fair from all aspects," Khachatrian concluded.

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Looming over everything in Armenia is the fraught relationship with Azerbaijan and Turkey. Here is an informed view of how a breakthrough could come, albeit not likely before the departure of the hard-line president, Robert Kocharian, himself after all a former president of the vital enclave in contention, Nagorno-Karabakh, which is occupying 20% of Azeri territory in addition to the disputed enclave itself. 

Coming elections affect Nagorno-Karabakh
Armenia is to have presidential elections in the enclave in July that are occasioning a change of leadership in the ever-vital Nagorno-Karabakh. The Karabakh parliament set the election date on April 4 after Arkady Ghukasian, in power since 1997, reaffirmed his decision not seek a third term in office. 

Ghukasian has effectively lent support to plans by the chief of his security service to succeed him as president of the unrecognized Nagorno-Karabakh Republic (NKR), it emerged on April 20th. A senior member of Ghukasian's Democratic Artsakh Movement (ZhAM) party said the governing party has decided to back Bako Sahakian, chief of the NKR's National Security Service, during a presidential election scheduled for July 19. "The Democratic Party of Artsakh has approved the idea of supporting Bako Sahakian's candidacy," Vahram Atanesian told RFE/RL by phone. 

Other officials in Stepanakert said Sahakian has already filed for registration as an election candidate. Masis Mayilian, the Armenian-controlled territory's deputy foreign minister, is widely expected to be his main challenger. 

According to Atanesian, the ZhAM is now trying to get the three other parties represented in the Karabakh parliament to also endorse Sahakian. One of those parties, Azat Hayrenik, is a junior partner in Ghukasian's coalition cabinet. The two others, the Karabakh branch of the Armenian Revolutionary Federation (Dashnaktsutyun) and the Movement-88 party, are in opposition. 

A local Dashnaktsutyun leader, Artur Mosiyan, confirmed that his party is holding talks with the ZhAM on the issue but would not say whether it is prepared to support the Ghukasian-backed candidate. Dashnaktsutyun issued a statement earlier in April harshly criticizing the Karabakh government's policies. 

Armenia will try to establish economic relations with Azerbaijan and Turkey in exchange for withdrawal from occupied regions. Chief of the Caucasus department of the Eurasian strategic research centre (ASAM) Kamil Aghacan said, "there is a constructive uncertain situation in the current settlement process on the Nagorno Karabakh conflict. Everyone comments on the situation in his favour." He added that "Armenia will try to establish economic relations with Azerbaijan and Turkey in exchange for withdrawal from occupied regions."

He said the Armenian and Azerbaijani Presidents and the OSCE Co-chairs know the most precise situation in the conflict. "The first question that rises is - will Azerbaijan let Armenia hold a referendum in Nagorno Karabakh in exchange for return of seven regions by Armenia? I do not suppose Azerbaijan would take such a step. Then will Armenia withdraw from seven regions? I partly believe that Armenia will withdraw its Armed Forces, but it will be done in exchange for serious concessions?

"Beside, the issue of the Lachin corridor will have to be settled separately. Armenia never considered these seven regions as its own. The seven occupied regions were always an economic and diplomatic burden. For one thing, the army controlling occupied territories needs food and equipment. I think Armenia will try to establish economic relations with Azerbaijan and Turkey in exchange for withdrawal from the seven regions. Because, Armenia's economy is on the edge of collapsing."

Kamil Aghacan said that "the deployment of peacekeeping forces in the region will remove from the agenda Azerbaijan's military occupation of the region. Peacekeeping forces will be deployed on the front line of liberated territories, should lessen the distinct possibility of an Azerbaijani military invasion of Nagorno-Karabakh. It means that Nagorno Karbakh would become a frozen problem by the deployment of international peacekeeping forces there. It is to be mentioned that until today Armenia required independence for Nagorno Karabakh in exchange for withdrawal from seven regions, but its bid failed."

He added: "On the other hand, it is not difficult to imagine Armenia's situation if the West imposed sanctions on Iran, which would lead to closure of the borders between Iran and Armenia. Armenia first of all wants to escape from the economic complications of the affair." 

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ENERGY

Russia, Armenia consider building new nuclear plant

Russia and Armenia have set up a working group to discuss the possible construction of a new nuclear power plant in Armenia, Armenian Deputy Energy Minister, Areg Galstian, said at a press conference in Yerevan, Interfax News Agency reported. 
The working group has decided to start developing a plan for conducting a feasibility study, after which a site for the possible construction of a nuclear power plant should be chosen, Galstian said.
"This all involves quite lengthy and meticulous work. After all necessary steps have been taken, it will be clear on what conditions the plant should be built and what its capacity could be," Galstian said. Russian Atomic Energy Agency (Rosatom) chief, Sergei Kiriyenko, said Russia was prepared not only to provide technological assistance to Armenia in building a new nuclear power plant but also be involved in the project financially. The construction of a new 1,000-mWt nuclear power plant in Armenia has been estimated at about two billion Euro. The complete shutdown of the existing Armenian nuclear power plant will cost about 240 million Euro.
The Armenian nuclear power plant's technological conditions make it possible to operate it until 2016, but by signing the European Neighbourhood Policy Action Plan, Armenia committed itself to shutting it down as soon as possible. The Armenian nuclear power plant, consisting of two power units with an aggregated capacity of 815 mWt, produces nearly half of all electricity in Armenia. It was closed down in 1988, but power unit 2, whose capacity is 407.5 mWt, resumed power generation in 1995.
The Armenian nuclear power plant was handed over to trust management of Russia's INTER RAO UES for five years in 2003. Armenia offered Russia to manage the plant to solve the problem of payment arrears. The Russian energy holding, the TVEL company and the Armenian Energy Ministry developed a debt restructuring mechanism to this end. 

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GOLD PRODUCTION

Iberian lowers investment in gold mill

Australia's Iberian Resources now plans to invest 50 million Euro in two years for the construction of a gold recovery plant in southern Armenia, Manvel Bagratian, head of the company's office in Armenia, said at a presentation for the first gold produced by the plant. Iberian said that it would invest around 70 million Euro in the plant, which should produce 10 kilograms of gold per day, Interfax News Agency reported. 
Bagratian said Iberian had produced its first 12 kg of Dore gold with Au content of 85-95 per cent. He said the gold would be exported and that talks were under way with British and Canadian companies. The first 15 per cent-alloy was produced in November 2005 at the Aighezdor recovery plant in Meghri. The gold content improved when the plant was upgraded.
Iberian is licensed to explore and develop the Terterasar gold deposit in southern Armenia and the nearby Lichkvaz-Tei polymetallic ore field. Commercial mining will begin at the latter deposit once additional exploration has been completed, Bagratian said. Soviet geologists estimated that Terteresar contains three tonnes and Lichkvaz-Tei - 17 tonnes of gold. Bagratian said reserves could increase as the result of further exploration. He said Iberian Resources had invested 15 million Euro in Armenia's mining industry since 2005.

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