Armenia: Inflation Choking Off Shuttle Trade with Turkey

They may not recognize each other’s borders, but, for all the official enmity between them, Armenians and Turks have always had one thing in common -- trade. But now, with a looming 100-percent increase in cargo prices charged by Armenian freight haulers, even that tie may soon be broken, Armenian traders say.

Freight haulers oversee transportation of goods from Turkey to Armenia via Georgia using Turkish-owned trucks. It’s a corridor that exists despite Turkey’s official trade embargo against Armenia and the lack of diplomatic relations between the two states. Initially, increased fees for clearing Armenian customs were cited as the cause of the planned price increase from $4 per kilogram to $8 per kilogram. But the State Customs Committee disputed that the hike and placed the blame for the hikes on the Armenian cargo companies themselves.

The head of the largest freight hauler involved in the Turkey-Armenia shuttle trade, Karlen Cargo, told EurasiaNet.org, that prices have not yet doubled. “Thanks to negotiations with the Turkish side, we are importing goods for about $6 [per kilogram],” said Karlen Cargo President Karlen Mkrtchian. “Raising [our] prices depends on high fuel prices and cargo services in Turkey.”

Many Yerevan businesses and traders who depend on the shuttle trade with Turkey say that they do not know how they will survive any significant price hike. “If the situation develops like this, I don’t know how I will manage it, and whether we will be able to continue our trade or not,” said 34-year-old storeowner Lusine Harutiunian, whose Yerevan-based family business imports clothes from Turkey.

If cargo prices do rise, Harutinian added that her family would be inclined to emigrate. “This is very offensive,” she fumed. “We’ve been working hard for many years, we’ve paid our taxes, and now we are facing a situation where our job [security] is challenged.”

If existing levels of trade do not change, the drastic price hike would enable some Armenian cargo companies to increase their revenues substantially. “The turnover [of trade] is increasing,” said Narine Musheghian, head of the statistical information and marketing department of the National Statistical Service of Armenia. “And the statistics go to prove it.”

Imports from Turkey – mostly jeans and other textiles -- drive the trend. Between January and December 2010, Armenia imported roughly $210.9 million worth of Turkish-made goods; a nearly 19-percent increase over 2009. By comparison, Armenia exported just $1.23 million worth of goods to Turkey in 2010.

Merchants at Yerevan’s Malatia and Hrazdan bazaars, two centers for the Turkish shuttle trade, say that just the expectation of a cargo price hike has put pressure on them. “People already live in poor conditions -- everything has become so expensive. If the cargo prices for imports double, nobody will ever buy anything. What shall we do then?” asked one jeans trader at the Malatia bazaar. “I don’t understand whether this is a political game or something else.”

In late January, shuttle traders organized protests outside parliament and the prime minister’s office in an attempt to get officials involved. In another move designed to get the government’s attention, disgruntled traders also marched to the headquarters of the opposition Armenian National Congress. The government is reportedly monitoring the situation.

Near-double-digit inflation – 9.5 percent is projected for the first half of 2011, according to the Central Bank of Armenia. A 17-percent increase in the cost of gas and high unemployment are adding to the stress. A decision this month by Yerevan Mayor Karen Karapetian to ban all street trade has further fueled the sense of discontent, prompting one independent political analyst to compare the current mood in Armenia to “a spring pulled taut; it may snap back at any moment.”

National Assembly Speaker Hovik Abrahamian, though, says that he sees no signs of discontent. “I believe there is no social tension. It’s just the global social-economic crisis, and our government, the National Assembly, and our coalition political forces headed by the republic’s president are doing their best to alleviate its consequences,” Abrahamian stated on February 7, news agencies reported.

Meanwhile, traders assert that business is drying up; those who import products from Turkey “at high prices,” now cannot “sell their stuff at high prices,” noted one trader.

“Our level of trade has already shrunk twice,” said Lernik Yesaian, who imports clothes from Turkey. “I’ve been postponing my trip to Turkey for already a month now because I’m not sure it’s worth going there at all.”

A February 1 article by Turkey’s Hurriyet Daily News reported one Turkish driver as saying that Istanbul’s Aksaray cargo terminal has become “a ghost town” since Armenians, scared away by the prospect of the cargo price hike, are staying home. “More than 50 trucks carry 17 tons of cargo to Armenia from Istanbul via Georgia each week,” the newspaper reported. “Some 20 Turkish bus firms may go bankrupt if the transport dispute continues much longer.”

Yerevan trader Gayane Gevorgian says she fears a similar fate for her own business. “Either we have to import goods at high prices, and we won’t be able to sell them, or we have to stop working. What have they [officials] done to the people?”