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