Are Armenia’s oligarchs using their financial and political power to block the world’s second-largest retail empire, the French-owned Carrefour Group, from entering the country’s largely monopolized foodstuffs sector? For Armenian consumers beset by high food prices and low incomes, the question has become a matter of principle.
For roughly the past six months, billboards at one of Yerevan’s luxury shopping centers, the Dalma Garden Mall, owned by Russia-based billionaire Samvel Karapetian, have announced the arrival of a 10,000-square-meter Carrefour hypermarket, a facility combining a large supermarket with departments selling electronics, household items, clothes, toys and more.
The discount retail giant, second in size only to Wal-Mart, has already taken a first step into the South Caucasus; in 2012, along with its United-Arab-Emirates-based partner, Majid Al Futtaim, it opened a Carrefour hypermarket outside of Tbilisi, the capital of Armenia’s northern neighbor, Georgia.
The Armenian government, still struggling to boost foreign investment after the 2009 financial crisis, has made its interest plain in Carrefour, Europe’s biggest retailer, but, still, the facility has not opened. Reasons for the delay remain unclear.
But some Armenian observers believe the reason is entirely human – namely, 44-year-old Samvel Alexanian, the alleged owner of the country’s largest supermarket chain, Yerevan City, and of the country’s largest food importer, Alex Grig, which ranks as one of Armenia’s biggest taxpayers (in 2012, roughly 17.43 billion drams, or $42.4 million).
Compared with Carrefour, which owns 14,000 hypermarkets and posted a 2012 profit of $1.6 billion, Alexanian, a member of parliament for the ruling Republican Party of Armenia, might not appear a formidable opponent. But within this country of just over 3 million people, his assumed influence – most directly reflected in the prices of flour and sugar – is legendary.
Yet one senior Republican Party of Armenia member argues that Alexanian has no bearing on Carrefour’s decision to enter Armenia or not. As a member of parliament, Alexanian is banned from directly owning any businesses. (The MP claims that his wife, Shoghine Alexanian, owns Alex Grig, and has described himself as a poor man with seven children.)
“You know, the word ‘oligarch’ is a matter of perspective… depending on what we imply by saying ‘oligarch,’” cautioned RPA parliamentary faction leader Galust Sahakian. “The emergence of economic pillars in Armenia cannot be considered an oligarchy.”
Critics counter, though, that Alexanian, commonly known as “Lfik Samo” (“Lfik” taken from the Russian word “lifchik” for bra; a reference to a lingerie company popularly linked to the Alexanians – ed), is more than just an “economic pillar.”
Not known for his legislative activity – no record exists of his work on draft laws – Alexanian nonetheless does his part for the government in exchange for being allowed wide play with food imports, they allege. Local election observers and media charge that Alexanian paid for buses to transport voters to take part in carousel voting for the RPA during Armenia’s February 18 presidential election. His representatives said that Alexanian only “helped” voters get to the polls.
So long as powerful businesspeople like Alexanian work with the RPA, the “link” between the government and Armenia’s oligarchs “will be maintained like a vicious circle,” fumed human rights activist Arthur Sakunts, chairperson of the Helsinki Assembly’s Vanadzor office. “There seems to be no end to this at the moment.”
A 2012 Investment Climate Statement from the US Department of State noted that “well-connected businessmen … enjoy government-protected market dominance [which] raises barriers to new entrants, limits consumer choice, and discourages investments by multinational firms that insist on partnering with politically independent businesses.”
The list of such businessmen is as motley as it is short on exact details. Arguably, the best known figure is 55-year-old entrepreneur Gagik Tsarukian, the flamboyant head of the Prosperous Armenia Party, a former government ally, and chairperson of Armenia’s Olympic Committee, who holds interests in multiple companies, ranging from beer to furniture.
Other such businesspersons range from Mikhail Bagdasarov, an oil and gasoline tycoon who owns the national airline Armavia, to the former boss of HayRusGazArd, Karen Karapetian, a onetime Yerevan mayor.
Popular anger against the “permissiveness” granted Armenia’s oligarchs on everything from tax breaks to accountability before the law surfaced most visibly last summer, when Yerevan residents took to the streets to protest the death of army doctor Vahe Avetian at the hands of security guards employed by businessman Ruben Hayrapetian, chairperson of the Armenian Football Federation. Hayrapetian later resigned from parliament over the scandal.
Even before that outcry, opposition members, civil society representatives and the Diaspora have urged the government to diversify the economy and push back against the oligarchs’ influence, but, as yet, no tangible progress has been made.
Arguably, though, reasons apart from Alexanian could explain any reluctance by Carrefour to charge full-steam into Armenia. More than a third of its population lives in poverty, according to official data. Although the World Bank has ranked Armenia second in the region (after Georgia) for ease of doing business, the country has high import costs (thanks in part to its blockaded borders with Turkey and Azerbaijan) and a reputation for corruption, including within customs.
In a February 20 comment to reporters, though, State Revenue Committee Chairperson Gagik Khachatrian asserted that the reasons why Carrefour has not yet entered Armenia “are not related to the customs service.”
In late December 2012, Vache Arsen, the project’s Armenia-based representative, stressed to the newspaper Zhogovurd that the Carrefour hypermarket would open, but did not elaborate. Representatives of Majid Al Futtaim did not respond to requests for comment from EurasiaNet.org about their plans in Armenia.
To many observers, that brings the blame right back onto Alexanian, given his presumed control of food imports, and other Armenian oligarchs.
“These people will vanish from the system if rules of the game are changed,” argued Stepan Safarian, a senior member of former presidential candidate Raffi Hovhannisian’s opposition Heritage Party, who lost his seat in parliament to Hayrapetian in 2008.
Marianna Grigoryan is a freelance reporter based in Yerevan and editor of MediaLab.am.