As international sanctions pile up against Russia, Armenia, a country literally powered by the Russian economy, expects to get hit, too.
Armenian officials and economy-wonks are not certain about the size and scope of the impact, but they are positive there is going to be one. Russia is Armenia’s single largest investor, export-outlet and energy supplier, so the lateral effects of the sanctions could be potentially felt in all those directions. “At this stage it is hard to make expert conclusions. Even the Russian experts do not yet have precise calculations,” Economy Minister Karen Chshmatirian was quoted as saying by Regnum news agency.
The latest round of US sanctions targeted, among others, Russia’s VTB Bank, which happens to be the largest private lender in Armenia. “The measures taken by the US Government to restrict VTB’s access to the capital market do not impact the bank’s operational performance and creditworthiness,” asserted VTB, which is majority-owned by the Russian government. Bloomberg, however, reported that major international lenders to the VTB Group already have put on hold a $1.5-billion loan to the bank.
Another target of the sanctions, Gazprombank, also has a presence in Armenia. It is owned by Russia’s state energy giant Gazprom, which essentially is the sole supplier of natural gas to Armenia.
Taking its Eurasian-Union dreams into the Western Hemisphere, Armenia has offered itself to Argentina as a conduit for trade with the Russia-led economic club, even though Yerevan is still knocking on the Union’s door for entry.
At a July 7 lunch-reception in Buenos Aires, Armenian President Serzh Sargsyan raised a glass to the Argentine city, “the world capital of tango, [a city] filled with the melody and spirit of that dance,” and thanked Argentina, home to one of the world’s largest Armenian Diasporas, for supporting the pan-Armenian cause of international recognition of Ottoman Turkey’s World-War-I-era massacre of ethnic Armenians as genocide. A day later, he attended the opening of an Armenian Genocide Museum in Buenos Aires.
Sargsyan, though, had more than 1915 and tangos on his mind. In a pointed nod to Argentina’s status as Armenia’s fifth-largest foreign direct investor, Armenia encouraged this “football superpower” to pass some trade via Armenia into the Eurasian-Union-market of Russia, Belarus and Kazakhstan. Argentina’s official response could not be found.
But President Sargsyan could be getting ahead of himself here. Armenia’s own entrance into the Eurasian Union has been repeatedly delayed, with the latest prospective join-date now “by the end of the year,” according to Prime Minister Hovik Abrahamian.
If Armenians want to feel safe, they have got to speak Russian, Moscow’s propagandist-in-chief, Russian media-personality Dmitry Kiselyov, has instructed Russia’s somewhat reluctant Caucasus ally, Armenia.
While the line may sound like an ignorant tourist's throwaway complaint, the comments, in the context of Russian-Armenian relations, chafed a sensitive nerve. Many Armenians think that their country already has compromised much of its sovereignty by becoming increasingly dependent on Russian money, energy and defense. Criticism delivered in the style of a colonial master does nothing to correct that view.
By July 1 (after a few delays), Armenia is expected to enter the Eurasian Union, essentially Moscow’s response to the European Union. It already is part of the Collective Security Treaty Organization (CSTO), the Moscow-led counterweight to NATO. The country has effectively surrendered much of its energy supply system to Russian energy monolith Gazprom and much of its income generation depends on what migrants send home from Russia.
Armenia may now sign on to the Moscow-led Eurasian Union by the end of April, roughly a month before neighboring Georgia is slated to enter a free-trade and political pact with the European Union. The signings of both agreements have been expedited as the competition for the South Caucasus picks up speed between Russia and Europe.
Armenian President Serzh Sargsyan is scheduled to travel to Belarus on April 29 for a meeting of the council of the Eurasian Union, an economic bloc roughly modeled by Moscow after (and against) the European Union. Armenian officials say that Sargsyan will sign an agreement in Minsk on Armenia’s joining the Customs Union, the flagship project of the Eurasian Union meant to create a shared economic space for Russia, Belarus, Kazakhstan and, Moscow hopes, more ex-Soviet states.
The new sign-on date is not a huge difference from the earlier deadline of May, but, apparently, as East-West ties deteriorate over Ukraine, someone feels the need to pick up the pace.
Wary of Ukraine-style pressure from Russia, the EU chiefs have been trying to fast-forward their plans with Georgia and Moldova. José Manuel Borroso, the president of the European Commission, the executive body of the EU, is expected in Tbilisi in June to sign an association agreement, which includes a free trade deal, with Georgia.
With Ukraine now a lost cause for the Customs Union, Russia’s Vladimir Putin has checked in with Armenian Prime Minister Tigran Sarkisian to see how Armenia's plans to join the Customs Union are coming along.
For Russia, Armenia is a poor substitute for Ukraine, but still a victory in Moscow's efforts to assert its broader economic clout through the trade bloc.
Prime Minister Sarkisian seems to have seized on that status to lodge a request with Moscow to keep the investments coming and to underwrite some of the legal and institutional changes that Armenia needs to meet the upcoming trade club’s membership rules by 2015. Yerevan also needs resources to keep selling Armenians on the idea of pushing the country into what many claim will be an economic throwback to the USSR.
How far Kocharian could go with this is unclear. Memories of the 2008 bloodshed under his administration do not endear him uniformly to Armenian voters. But his choice of topic could add at least some fuel to the fire.
The Russia-led Customs Union has never hid its protectionist mandate. It’s been called Vladimir Putin’s Soviet Union-lite for a reason: Formerly Soviet states that don’t sign up will be isolated or pushed around until they do. Just look at Ukraine.
Now, new regulations on car imports that came into effect last month will protect the car manufacturing industries in all three members – Belarus, Kazakhstan and Russia. But they will specifically hurt one of Uzbekistan’s few successful joint ventures, a GM plant in the Fergana Valley that has thrived off exports to Russia and Kazakhstan.
Uzbekistan has previously expressed only the most tepid interest in the Customs Union. For Tashkent, the new rules show that staying out can hurt.
Kazakhstan's Kolesa.kz online car-sales platform reported on February 20 that Customs Union technical regulations have banned imports of some of the bestselling cars in Kazakhstan, including the Uzbek-made Chevrolet Nexia and Matiz.
The regulations, which came into force on January 5, require imported cars to have at least one air bag, an anti-lock braking system, specific attachment points for child-safety seats, and daytime headlights, among other things. GM Uzbekistan’s Nexia and Matiz have none of these features, Kolesa.kz said.
Cars produced by Customs Union members are exempt from the regulations until 2015.
"We are now selling leftovers in warehouses,” Kolesa.kz quoted an unnamed Kazakh dealer of Uzbek cars as saying. “The [Uzbek] plant will hardly be able to reequip these models [to meet] these technical requirements."
The Kremlin wheeled out its soft power machine this week to make the pitch for Kyrgyzstan to join its Customs Union trade bloc. But if a recent talk by Kremlin evangelists at the American University of Central Asia in Bishkek was anything to go by, the machine could use some grease.
The main speaker at the February 19 event was Semyon Uralov, editor of a website close to United Russia, Vladimir Putin’s political party. While Putin has tried to assure potential members that the Customs Union – Belarus, Kazakhstan and Russia – is not a Soviet Union redux, Uralov seemed to do the opposite. Quoting Engels, Marx and Lenin during a forthright speech in which he extolled the virtues of state-sponsored industry, Uralov responded to a complaint about his tone: “I don’t hide it. I am an imperialist.”
And like Customs Union officials, he did little to address economic questions.
Moral and social degradation was a key theme in Uralov’s presentation. He described seeing people bribe a customs official at Bishkek’s airport for the privilege of flouting the building’s non-smoking policy. “Now tell me,” Uralov asked, “would it be possible to reach that kind of an agreement with a Belarusian customs official? A Russian customs official?” The assembled students murmured that it probably would be. “Well, clearly not for 20-30 soms [40 to 60 cents],” Uralov retorted. (Curiously, Belarus, with its highly inefficient command economy centered on manufacturing stood as something of a role model for the Russia-born, Ukraine-educated Uralov. In Transparency International’s latest Corruption Perceptions Index, Belarus ranks 123th, Russia 127th and Kyrgyzstan 150th out of 177 countries.)
Three women arrested for wearing panties on their heads were among nearly three dozen protesters hauled through the courts in Almaty this weekend, as last week’s devaluation of the tenge brought demonstrators out onto the streets of Kazakhstan’s commercial capital.
Zhanna Baytelova, Yevgeniya Plakhina, and Valeriya Ibrayeva were arrested at an anti-devaluation protest on February 16 after putting lace panties on their heads and trying to place them on a monument to Kazakhstan’s independence.
They were immediately tried on hooliganism charges and fined around $100 each. Their quirky protest was inspired by obscure regulations, due to come into force in July, that will govern the level of moisture absorption in underwear sold in Customs Union member states Kazakhstan, Russia and Belarus.
The action, Plakhina told EurasiaNet.org “is a symbol of the absurdity which is taking place in our country, including the recent tenge devaluation.”
“In Russian we have a saying, ‘giving one’s last underpants,’ which literally means becoming poor,” she explained. “This was a symbolic action.”
The three women were among five people arrested at the small anti-devaluation rally that drew around 30 people on Republic Square. That followed a larger rally the previous day, which riot police broke up after some 200 protesters marched to Republic Square.
Defending his choice to enter a Moscow-centered Customs Union, Armenian President Serzh Sargsyan commented on February 4 that Armenia joining the European Union was never part of Yerevan's game-plan, Public Radio of Armenia reported.
It has been lovely to work with the EU on democratization and human rights and all, but Armenia never considered committing to a more serious relationship, said Sargsyan, whose pro-Moscow choice last September took Brussels by surprise.
Speaking about another Western club with which Yerevan has had a standing flirtation, the North Atlantic Treaty Organization, Sargsyan expressed dismay that NATO, as he put it, had allowed member Turkey, Armenia’s bête noire, to take certain undefined "actions" that damage NATO's "security system."
That said, Armenia will not shy away from being "just friends" with the EU and NATO. Still, its "steady" remains Russia; namely, Moscow's Customs Union and Collective Security Treaty Organization. One provides duty-free access to the vast and nearby Russian market, while the other keeps hostile neighbor Azerbaijan at bay. (At least in theory. )
Yerevan announced on February 3 that it will complete the road map to membership in the Customs Union by year-end, and set January 1, 2015 as the date for its trade-nuptials with Russia, Kazakhstan and Belarus.
A Gazprom filling station in northern Kyrgyzstan. Kyrgyzstan's parliament has approved the sale of the nation's debt-ridden gas monopoly to the Russian state-run energy giant for $1.
Kyrgyzstan’s parliament voted to pass a controversial deal to sell the national gas company to Russian giant Gazprom for the knockdown price of $1 on December 11, local media reported.
Under the deal Gazprom snaps up the company and its property and gains rent-free use of land any facilities stand on. In exchange it takes on Kyrgyzgaz’s estimated $38 million debt and pledges some $600 million to improve Kyrgyzstan’s crumbling gas grid. That could in the long-term help streamline energy supplies and ease the dire power shortages the country experiences every winter.
Some parliamentarians had opposed the deal, agreed in July, seeing it as tantamount to handing a strategic national asset over to former colonial master Russia for a song, but Kyrgyzgaz CEO Turgunbek Kulmurzayev said there was “no other choice” than to sell to Gazprom, since the company is effectively “bankrupt.”
Kyrgyzstan is in any case doomed to gas dependence: It meets just 2 percent of its gas needs from domestic output and relies on imports from neighbors Kazakhstan and Uzbekistan, leverage that Tashkent sometimes uses to bully Bishkek by cutting off supplies.