Russia-Georgia Tensions Harm Armenia

The Armenian economy, already reeling from the global financial crisis, has suffered a new blow from Georgia’s refusal to re-open a frontier crossing with Russia – Armenia’s only link with its major ally.



The Upper Lars border post, where the road between Tbilisi and Vladikavkaz crosses the central Caucasus, was closed unexpectedly by Russia in 2006, a major setback to Armenian exporters.



Now, Russia has re-opened its side of the frontier but Georgia has declined to allow goods to pass through. Georgia, which fought a brief war with Russia last year, says it wants Swiss mediation before it will trust its northern neighbour.



That leaves Armenia, which currently has to use a lengthy export route via Bulgaria to reach Russia, cut off from its most important market.



“We are desperately keen that this road should operate. Russia has assured us that on its side all work has been completed. They gave a high priority to Upper Lars functioning, especially since they have provided the customs points with all modern facilities,” said Armenian prime minister Tigran Sarksian.



The complex geopolitics of the South Caucasus leave Armenia uniquely dependent on this crossing point. The rest of the Georgian border with Russia is closed, either being too mountainous, or controlled by Abkhazia or South Ossetia, which have had their independence recognised by Russia but not by Georgia.



Armenia and Azerbaijan meanwhile, have not signed a formal treaty to end their war over the breakaway region of Karabakh, leaving the other half of Russia’s southern border closed to Armenian exporters. At the same time, Armenia lacks diplomatic ties with its other main neighbour Turkey, although relations are thawing and may prove a way out of the impasse.



“Now the question is one of a political decision, and the problem is Russian-Georgian relations. I hope that soon relations between Georgia and Russian normalise and thaw, which will be good for all countries in the region,” said Armenian transport and communications minister Gurgen Sarksian.



The Russians blame the Georgians for the crossing point being closed, but the Georgians say they cannot trust the Russians to behave honourably.



“All negotiations in connection with the opening of the crossing point must take place in the presence of the Swiss, in as far as we cannot rule out provocations from the Russians,” said Georgian foreign minister Grigol Vashadze.



That position, and the inevitable delays that will accompany it, is not likely to please Armenia, which has already seen its economy slump disastrously this year and has had to call on funding from the International Monetary Fund. The country’s central bank has predicted the economy will contract by 5.8 per cent this year, following a 6.1 per cent decline in the first quarter.



The mining sector has been particularly hard-hit, and several companies have been forced to shed labourers.



The stand-off has reminded Armenians that their country’s economy is too dependent on Georgia for its own good. Only in August last year, when the war interrupted Armenia’s export trade, the country lost 600-700 million US dollars.



At the moment, 70-80 per cent of Armenian exports travel to Russia, leaving the Georgian port of Poti for Bulgaria, then shipped to Novorossiisk on Russia’s southern coast. The whole journey can take eight or ten days, whereas the road through the mountains and Upper Lars is relatively quick.



“If for a long time our goods go only via ship from Poti, then it will create financial problems, increase the cost of our exports, and if you add the economic crisis to this, then you create a situation that is disadvantageous to Armenia,” said Vardan Aivazian, head of the economic committee of the Armenian parliament.



The stand-off has also added impetus to talks to open the Armenian border with Turkey. The two countries lack diplomatic relations, and have major differences over whether the Ottoman Empire’s slaughter of Armenians in the First World War constituted genocide, but the two sides agreed a so-called road map last month which could kick-start a normalisation of relations.



Turkish-Armenian unofficial trade via Georgia almost doubled in 2008 to 270 million dollars, although almost all of this consisted of Turkish textiles, building materials and domestic goods. If the border was opened, these goods could travel directly into Armenia.



“The opening of the border would legalise the trade, which currently goes on between the two countries via Georgia, and would reduce the high transit fees. Currently, Turkish goods are widely used in Armenia, including foodstuffs and products of light industry,” said Aivazian.



However, the idea of opening the border between Armenia and Turkey has serious opponents, particularly the nationalist Armenian party Dashnaktsutiun, which fears Turkey could dump its products in Armenia and swamp domestic producers.



“We have studied the economic policies of Turkey and Armenia, and the protectionist policies which Turkey conducts in defence of its own producers clearly bear witness to the fact that we, with our liberal policy, will not benefit from this,” said Ara Nranian, a member of parliament from the party.



Naira Melkumian is a freelance journalist. Sopho Bukia in Tbilisi also contributed to this report.