DEBATING BIG BROTHER’S PRESENCE: CONCERNS LINGER OF ARMENIA AS “OUTPOST”
- Russia continues to expand its presence in Armenia’s economy, buying up infrastructures of national importance. The increased “Russification” of Armenia gives way to concerns that Speaker of Russia’s State Duma Boris Grizlov in 2004, calling Armenia an “outpost” is coming true.Strategic partner Russia owns 80 percents of energy sources and systems of independent Armenia, which has forced Armenia into the state of an “energy colonization”, economists say.
With the latest deal Russia took possession of the communication sphere. On September 14th the Russian MTS got 80 percent of International Cell Holding Company, the owner of K-Telecom for 310 million euros. 90 percent of Armenia’s leading communications operator ArmenTel were bought by Russian Vimpelcom Company in November 2006 for 382 million euros.
Armenia still owns some infrastructure including the railroad, but the Russian Railroads Company will be the most likely winner in the tender announced on October 15th as it competes with an unknown company from India.
Last year, Andranik Manukyan, Minister of Transport and Communications of the Republic of Armenia stated that the only way to save the Armenian railroad is to hand it over for concession management to Russia, something the RA government is likely to do.
The beginning of the Russian policy of getting economic leverages is symbolically chosen to be the year of 2002, when the ‘Property for Debt’ deal was set into circulation; according to the deal Armenia gave Russia 4 enterprises and the most powerful Hrazdan Thermo-Electric Station as a pay for its debt to Russia of $97 million.
“Russia intruded into its strategic partner’s home like a bailiff and demanded our strategic entities for just $97 million. This took place in case when Russia had forgiven much larger debts to others: say, $40 billion to Turkey, Syria and had even reconstructed Georgia’s debt in $150 million with the right of privilege to repay in 6 years,” economist Eduard Aghajanov says.
In 2001 Putin called the criticism of the deal ‘hysteria over selling the Fatherland’ saying those times have passed and the economy has to go in a different direction.
The ‘hysteria’ of opposition and economists became even fiercer, when none of the enterprises was re-launched within the 5 years since then, gave no production and did not bring any use to the economy of the country.
Andranik Mihranyan, Russia-based political scientist of Armenian descent believes the deals have been made by mutual agreement and Russia has never imposed conditions unacceptable for Armenia.
“Russia simply has very little interest in those plants. It has even appeared that Russia does not need them, because there are numerous similar factories in Russia itself that do not operate.”
A similar opinion was expressed in Yerevan recently by the co-chairman of the Armenian-Russian inter-parliamentary commission Nikolai Rizhkov, saying the plants received particularly by the “Property for Debt” deal were not profitable for them. “Some of our expectations connected with those enterprises did not prove right.”
Economic analyst Aghajanov asks who forced the Russians to purchase the enterprises. And answers that the decision on the purchase has not been economic, but rather political aiming to get as much leverage in the Armenian economy as possible.
The most powerful leverage is the energy system. Russia bought more than 80 percent of the country’s energy sources and system, including the 5th energy bloc of the Hrazdan Thermal-Electric Station, the Sevan Cascade, distribution network, and took the Metsamor Nuclear Power Plant for licensed management because of a set state monopoly in this sphere. With the exception of thermal-electric and several minor hydro-electric stations, the rest are owned by Russian companies.
Besides, no cash money has been given for the majority of these structures.
The first energy infrastructure that became Gazprom’s was the 45 percent of ArmRosGazProm. Russians paid in gas instead of the $148 million over several years.
According to official data the Russian RAO UES paid $25 million for the Sevan-Hrazdan cascade; however, some sources mention the RAO UES took the cascade in exchange for the Armenian debt for nuclear fuel.
The Hrazadan Thermal-Electric Station went into Russian possession as a result of the ‘Property for Debt’ deal. An exception is the Electric Network of Armenia as RAO UES has to pay $70 million in exchange – though not to Armenia but to the owner of the network – the British Midland Resources.
The most controversial deal further empowering the economic leverages of Russia and deepening the disproportion of the Yerevan-Moscow relations was signed in 2006, when the 5th bloc of the Hrazdan Thermo-Electric Station, the last significant energy system, was ceded to Russia (the other four blocs already belonged to the Russian company).
Under Russian pressure the initial length of Iran-Armenia pipeline was also drastically minimized, thus preventing its competitiveness to the Russian energy companies.
This new deal was called ‘Property for Gas’, which, Aram Sargsyan, chairman of the oppositional Republic Party says should in fact be called ‘Everything for the Post.’
The necessity in ‘Property for Gas’ deal appeared after Russia decided to increase the price for the gas for 2.5 times ahead of parlamentary elections in Armenia; and coincided with time when Armenia was making attempts to diversify its energy sphere.
After protracted negotiations, the government of RA gave preference to Iranian Mar and Sanir companies in both tenders for the construction of the Iran-Armenia gas pipeline and the modernization of the Hrazdan Thermal-Electric Station the same year.
“Russia realized quite well that this cooperation with Iran is a serious alternative and blackmailed Armenia by increasing the price for gas,” former Prime Minister, and presidential candidate Vazgen Manukyan says insisting the latest deal is a new leverage in the hands of Russia to be used for political purposes.
“In the presidential election in 2008 Russia may say: ‘If my proxy does not come to power I will make the price for the gas $250, if he does – it will remain at $110’,” Manukyan told Armenianow.
The 5th bloc of Hrazdan station was given to Russia for $60 million in cash, while the remaining nearly $189 million will be paid to the ArmRosGazProm as subsidy.
For three years the citizens of Armenia will be getting relatively cheap gas; however, another highly important energy entity of the republic will go into Russia’s possession. According to the agreement the prices may go up beginning 2009.
Radical opposition political analyst Suren Surenyants is confident the authorities agreed to the economically unprofitable gas deal to prolong their stay in power and to fulfill all the ‘directives’ of the Kremlin.
Vahan Hovhannisyan, deputy speaker of the National Assembly, member of the Armenian Revolutionary Federation insists Armenia-Russia relations are a strategic partnership in nature and include mutual obligations of the sides: “We may frequently dislike those obligations, but they are unavoidable.”
“After the Soviet years it’s natural that the relations with Russia are viewed as colonial. However, the situation has changed and I don’t see a threat that Russia may use its economic leverages for political purposes,” a co-chairman of the Armenia-Russia Inter-Parliamentary Commission Vahan Hovhannisyan said.
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