SOARING TRADE BOOSTS RUSSIAN-ARMENIAN ECONOMIC TIES
By Emil Danielyan
Eurasia Daily Monitor, DC
Oct 30 2007
Armenia’s trade with Russia has increased dramatically this year,
paralleling the growing Russian economic presence in the country,
which has sparked concerns about Armenia’s economic independence
and even national security. The almost 62% year-on-year rise in
Russian-Armenian trade registered in the first eight months of 2007
comes despite Russia’s continuing transport blockade of Georgia,
Armenia’s main commercial conduit to the outside world.
According to the most recent data posted by Armenia’s National
Statistical Service (NSS) on its website, , the volume
of bilateral trade totaled $404 million in January-August 2007, up
from $250 million registered during the same period last year. Much
of the gain resulted from an almost 100% surge in Armenian exports
to Russia, most of them alcoholic beverages and prepared foodstuffs.
Even so, Armenian imports of Russian commodities and goods (notably
natural gas) continued to account for most of the bilateral commercial
exchange, rising by 50% to about $280 million.
Consequently, Russia saw its share in Armenia’s external trade
grow from 13.1% to 15.2%, solidifying its status as the South
Caucasus state’s single largest trading partner. The NSS reported
similarly strong gains in Armenia’s trade with Georgia, Ukraine,
and Kazakhstan. As a result, the share of non-Baltic former Soviet
republics in its trade reached 32.6%, up from 28.4% recorded in
January-August 2006. The European Union, by comparison, accounted
for 38.2% of the January-August 2007 turnover.
Officials in Moscow and Yerevan have welcomed the growing commercial
ties between their countries, which they say will reach a new high of
$700 million in the full year 2007. Speaking after talks in Moscow on
September 25, the Russian and Armenian prime ministers said they would
try to ensure that Russian-Armenian trade hits $1 billion next year
(Armenian Public Television, September 25). Armenian Prime Minister
Serge Sarkisian instructed his ministers to closely work with their
Russian counterparts to meet this target (Statement by the Armenian
government, September 27). Nikolai Ryzhkov, a Russian lawmaker
co-chairing a Russian-Armenian inter-parliamentary commission, came
up with a more conservative estimate during a mid-October visit to
Yerevan, predicting bilateral trade will likely pass $1 billion mark
only in 2009 (Interfax, October 19).
Russia-Armenian trade is growing strongly despite Russia’s decision
in June 2006 to close its main border crossing with Georgia. Moscow
cited the need to conduct repairs on Russian border guard and customs
facilities. The move, whatever its real motives, hit hard Armenian
companies that heavily relied on the Upper Lars crossing in shipping
goods to Russia and other parts of the former Soviet Union. Armenian
government officials and lawmakers have since been lobbying their
Russian counterparts to reopen Upper Lars. According the Armenian
ambassador in Moscow, Armen Smbatian, the Russians have promised to
do that some time in 2008 (RFE/RL Armenia Report, September 28).
Armenian exporters, meanwhile, appear to have quickly adapted to the
new situation through an even greater reliance on a rail-ferry link
between the Georgian Black Sea port of Poti and Ukraine’s Ilyichevsk.
A similar ferry service, designed to primarily cater to Armenia,
was launched in April 2007 between Poti and the Russian port of
Port-Kavkaz. However, the service has yet to become regular and
frequent enough to process substantial amounts of freight. Sarkisian
reportedly raised the issue with his Russian counterpart, Viktor
Zubkov, during their Moscow meeting.
Zubkov told journalists after the talks that Russian companies would
invest $1.5 billion in Armenia "in the near future." He gave no
details, saying only that much of those investments will be channeled
into the construction of an oil refinery in southeastern Armenia
that will process crude from neighboring Iran. The ambitious project
featured prominently during Iranian President Mahmoud Ahmadinejad’s
October 22 visit to Armenia. Speaking at a joint news conference
with Ahmadinejad, Armenian President Robert Kocharian said Yerevan
and Tehran agreed to press ahead with the project’s implementation.
Another top Russian official, Transport Minister Igor Levitin, said
in Yerevan on September 14 that Russian investments in the Armenian
economy will reach a record-high level of $500 million in 2007 (Azg,
September 15). He did not specify whether the figure includes $430
million that the Russian telecommunications operator MTS paid to
purchase Armenia’s largest mobile phone network, VivaCell, from a
Lebanese-owned firm. The deal, officially announced in Yerevan on
September 14, came almost a year after the $500 million acquisition
of Armenia’s national telephone company and its wireless network by
another Russian telecom operator, Vimpelcom.
The Armenian government is believed to have played a key role in both
takeovers that left another sector of Armenia’s economy under Russian
ownership. It has also been instrumental in Russian control of the
Armenian energy sector. That control has become near total since the
signing of a controversial April 2006 agreement that enabled Armenia
to avoid a doubling of the price of Russian gas until January 2009
in return for handing over more energy assets to Russia. It was
officially confirmed on September 12 that those assets include the
entire Armenian section of an under-construction gas pipeline from
Iran (Haykakan Zhamanak, September 13). It will now be owned by the
Armenian national gas company in which Russia’s Gazprom conglomerate
has a controlling stake.
The tightening of Russia’s economic grip on Armenia is widely
attributed to Kocharian’s and his preferred successor Sarkisian’s
obvious desire to ensure the Kremlin’s continued support for their
regime. The two men, who single-handedly make all key decisions
affecting the nation, are poised to cede more industries to Russian
companies ahead of next spring’s Armenian presidential election.
Those include Armenia’s rail network and largest gold mining company.