Armenian Brandy in Crisis

The Armenian brandy industry is bracing itself for a difficult year after an exceptionally cold winter left many vines damaged by frost.

Few of the vineyards in the Ararat Valley, the birthplace of Armenian brandy, will bear fruit this year and the grape harvest is set to fall by 75 per cent - resulting in losses of 25.6 million US dollars.

Artak Khachatrian is one of many farmers debating whether to cut the frostbitten vines and plant a different crop, or to hold out for government assistance. "Either way, I will need to find another source of income for this year," he said.

The Armenian Farmers Union has petitioned the government to exempt the owners of frostbitten vineyards from land tax for two years, and to give them a rebate on irrigation charges as an incentive to continue growing grapes.

However, a farmers' aid programme recently approved by the government does not include these measures, so many are opting to cut down their vines and plant vegetables instead. With no income expected from their damaged vines, they will at least have something to feed their families.

This will be the second time that a number of Armenian vineyards have halted cultivation, reducing the country's capacity to produce brandy. In 1996 and 1997 the Yerevan Cognac Distillery suffered a cash crisis which forced it to pay farmers in brandy.

So, in 1996, around 1,000 hectares of vines were lost in the Armavir region alone as farmers switched to fodder, grain crops and vegetables.

The Yerevan distillery, which produces the famous brandy so beloved by Winston Churchill, is easily the largest consumer of Armenian grapes. Its managers are now seriously concerned that the fall in grape yield could threaten brandy output. This year's harvest is expected to amount to only 20,000 tonnes, a quarter of the original target.

Nor can the distillery import grapes to make up the shortfall. A ban on using imported grapes to make Armenian brandy was introduced in 1998, in response to public concern created by the purchase of the distillery by the French company Pernod Ricard.

The Armenian farmers union is blaming the ministry of agriculture for failing to react to the disaster in time. It estimates that the lost harvest has destroyed up to 70 per cent of vineyards in the Ararat and Armavir regions. "If the farmers had been warned in good time, the consequences could have been considerably mitigated," chairman Hrachya Berberian told IWPR.

However, the Yerevan distillery's management believes that the farmers share some of the blame as they did not take basic precautions to safeguard their grapes. "The best way to protect a grapevine from frostbite - and Armenia's farmers have been doing it for decades - is to bury it in the ground at the end of autumn," said general director Pierre Laretche.

As some farmers uproot plants and switch to other crops, there will be a time lag before newly planted vines can fill the gap, Laretche warned. "The vines damaged by frost could recover as soon as 2004, but when a new vine is planted it does not yield a good harvest for around four years."

Agriculture minister David Zadoyan recently announced an emergency incentive package in which the government will double the price it pays for grapes. The Yerevan Distillery is also considering a price hike, although the resulting rise in the price of brandy could damage exports to Russia, which it had succeeded in expanding in recent years.

In the meantime, the Yerevan Distillery, the Russian Great Valley distillery and other smaller operations are looking for alternative sources of Armenian grapes. Pierre Laretche has said his company may begin sourcing grapes from northern Armenia and - controversially - Nagorny Karabakh.

Any deal involving Karabakh would anger the government in Baku, which demands that commercial firms respect Azerbaijan's claim to sovereignty over the territory. A foretaste to Azerbaijan's likely reaction came in 1999 when Laretche visited Stepanakert to discuss using Karabakh oak to make barrels for ageing brandy. Azerbaijani government officials expressed outrage at the suggestion.

Meanwhile, a barrel of the Yerevan distillery's finest brandy continues to age in the company's cellars. It was laid down when Armenia and Azerbaijan declared a truce in Karabakh in 1994, but it cannot be touched until Armenia and Azerbaijan sign a fully-fledged peace accord.

Ara Tadevosian is director of the Armenian news agency Mediamax in Yerevan.