Armenia Weighs Foreign Economic Partnerships

Armenia is under mounting pressure to choose between two different directions – pursuing closer economic ties with the European Union, or joining a customs union with other former Soviet states. Analysts in the country warn that either choice could pose significant risks.

On June 24, Energy Minister Armen Movsisyan became the first senior Armenian official to say it would make economic sense to join the Customs Union, a grouping that currently consists of Russia, Belarus and Kazakstan. He told the Regnum news agency that membership would allow Armenia to buy natural gas and nuclear fuel at cheaper prices.

Of the other former states, Kyrgyzstan is hoping to join the Customs Union next year and Tajikistan has also expressed an interest in becoming a member. Moscow is hoping that the free-trade bloc will become the basis for the Eurasian Union, a broader project which it plans to launch in 2015. At this point, the Eurasian Union is still a fairly vague concept, which Western officials see as an attempt by the Kremlin to regain some of its lost influence.

Meanwhile, Traijan Hristea, head of the EU delegation in Armenia, told journalists on June 24 that negotiations on a free trade deal were almost completed. He said only a few technical matters needed to be resolved before the agreement could be signed at a summit in Vilnius in November.

However, any decision to move towards the Customs Union could derail hopes of free trade and simplified visa arrangements with the EU.

"The European Union cannot sign a deep and comprehensive free trade agreement with a country that is a member of the Russia-initiated Customs Union,” Elmar Brok, chairman of the European Parliament’s foreign affairs committee, said in an interview with RFE/RL in March. “Not only Armenia, but other member states of the Eastern Partnership project must make the choice."

The Eastern Partnership links the EU with Armenia, Azerbaijan, Georgia, Moldova, Ukraine and current Customs Union member Belarus.

Speaking as US Secretary of State last December, Hillary Clinton, expressed concern about Moscow’s intentions.

"There is a move to re-Sovietise the region," she said at a meeting in Dublin. "It's not going to be called that. It's going to be called Customs Union, it will be called Eurasian Union and all of that. But let's make no mistake about it. We know what the goal is, and we are trying to figure out effective ways to slow down or prevent it."

Kremlin officials deny there is any master plan to restore Russian dominance over the old Soviet Union, but analysts in Armenia say the gas price hike, as well as a recent Russian arms sale to Azerbaijan, are part of a deliberate policy of pushing Armenia to enter the Customs Union.

The Russian-controlled monopoly firm that holds a monopoly over natural gas sales in Armenia is raising its prices by 18 per cent from July, in a move that will drive up electricity prices by an estimated 27 per cent. The steep increase has caused serious concern among ordinary people – especially the third of the population who live in poverty – as well as among businessmen concerned at its wider economic effects. (See Gas Equals Power in Russian-Armenian Relations.)

Armenia has always seen Russia as a close ally, and Moscow maintains a military presence in the country. In June, however, the Moscow business daily revealed that the Russians were supplying tanks, artillery and light armoured vehicles to Azerbaijan, a country that Armenians have viewed as a threat since the Nagorny Karabakh war ended in a fragile truce arrangement in 1994.

Commenting on the arms sales, Ruben Mehrabyan of the Armenian Centre for Political and International Studies said, “It’s no secret that Armenia is practically in a state of war with Azerbaijan, and the Kremlin is doing this to demonstrate the leverage it has, and what it can do in the region.”

Mehrabyan sees closer integration with the Moscow-led economic grouping as a risky unknown.

“For Armenia as for any other country in the post-Soviet space, the Eurasian Union presents a serious threat,” he said. “We can’t discuss integration with this union since we don’t know what values it is going to be based on. It might involve hierarchical obedience to Moscow.”

Other analysts, however, say that if there is a choice to be made, it has to be Russia.

“Relations with Europe and the United States cannot give Armenia what it gets from relations with Russia,” Sergei Markedonov, a Russian political analyst with the Centre for Strategic and International Studies, said in an interview with the 1in.am web site. “It’s only thanks to relations with Russia that Armenia is able to maintain parity in the arms race with Azerbaijan, which possesses oil and gas reserves. Europe and the United States don’t offer Armenia that possibility.”

Aram Sargsyan, the last leader of Soviet Armenia and now head of the small Democratic Party, said national security was by far the most important issue, so that the partnership with Russia would always trump any other.

“Armenia has signed a strategic partnership deal with Russia and joined the Collective Security Treaty Organisation, which includes an obligation to defend our country’s borders. The United States and the European Union have not undertaken such an obligation,” he said. “And that’s the key issue for us, as we border on Azerbaijan on the one side, while on the other there’s Turkey, which has kept its frontier closed for the last 20 years and refuses to recognise the Armenian genocide of 1915.”

Artak Zakaryan, chairman of parliament’s foreign affairs committee and a member of the ruling Republican Party, denied that Moscow was putting any pressure on Armenia to join the Eurasian Union. Instead, he told IWPR, that the government wanted to develop a “multi-vector” foreign policy.

“We are of course closely monitoring the development of the Eurasian Union situation. But it’s too early to draw any firm conclusions or to set ourselves any goal,” Zakaryan told IWPR. “Armenia has not taken a decision to enter the Eurasian Union. Yerevan is only looking into the possibility of joining at the moment.”

Vahe Harutyunyan is a freelance journalist in Armenia.