TOBACCO TYCOON THREATENS TO CLOSE SHOP IN ARMENIA
By Atom Markarian

Radio Liberty, Czech Rep.
June 15 2006

Hrant Vartanian, a wealthy businessman who owns Armenia’s two main
tobacco companies, warned on Thursday that he will close down his
factories and move them abroad if the Armenian dram continues to
appreciate against the dollar.

"We are now making plans to move some of our manufacturing operations
to Georgia and Russia in order to produce things there and import
them to Armenia," he told RFE/RL. "If the dollar continues to fall
at this pace, we will resort to that step in the next four or five
months in order to save our business."

The dram has gained more than 30 percent in value against the dollar
in the last two and a half years, significantly raising production
costs of local firms dependent on exports. Vartanian’s Grand Tobacco
and International Masis Tobacco firms not only account for much
of cigarette sales in Armenia but also sell a large part of their
products, notably fermented tobacco leafs, abroad. They employ more
than a thousand people and but raw tobacco from hundreds of Armenian
farmers.

Vartanian, who already co-owns a cigarette plant in Georgia, agreed
with the widely held belief that the dram’s strengthening has benefited
a handful of large-scale importers of fuel and foodstuffs that have
close ties with Armenia’s leadership. "For local manufactures the
effects [of the dram appreciation] will be very negative, while for
importers it is a source of huge profits," he said.

"Those companies that are mainly involved in exports and generate the
bulk of their revenues in hard currency are experiencing difficulties
and failing to meet their profit targets," agreed Tigran Khachatrian,
commercial director of the ACP copper giant, one of Armenia’s largest
exporters.

Khachatrian complained that ACP is not only unable to raise its
workers’ wages but is increasingly having trouble paying them. "Even
if there are no pay increases, our expenditures on wages are constantly
going up," he said.

The Armenian Central Bank, which sets the dram’s exchange rate, argues
that its main mission is to suppress inflation, rather than protect
local exporters and jobs. It has said all along that the dram’s
appreciation, which resumed last month, is a natural phenomenon
stemming from an increased influx of dollars, most of them cash
remittances from Armenians working abroad.

Opposition leaders and other government critics insist, however,
the Armenian authorities have artificially boosted the national
currency’s value in order to further enrich "oligarchs" involved
in lucrative imports. The Central Bank, backed by the International
Monetary Fund and the World Bank, has repeatedly dismissed such claims.