Earthtimes, UK
Feb 15 2008

Armenia: A Russian outpost in the Caucasus? – Feature
Posted : Fri, 15 Feb 2008 13:08:04 GMT
Author : DPA

Moscow/Yerevan, Armenia – Just as Russia has aggressively increased
its economic presence in Armenia, impending presidential elections
that have aggravated relations with its neighbouring states have seen
the political leadership leaning toward the West. Armenia is perched
high in the Caucasus Mountains flanked on one side by Georgia,
internationally important for security reasons, and by crucial
players in the energy game, Iran and Azerbaijan, along its southern
border.

Armenia’s unique situation – with over one-fifth of its nationals
living abroad – has significant economic influence on the smallest
post-Soviet state, though the diaspora is stripped of voting power.

According to data from the European Bank for Reconstruction and
Development, remittances from the 8-million-strong Armenian diaspora
pushes the country’s GDP per capita higher than that of its
neighbour, rising economic power Georgia.

Formerly known as the Soviet Union’s manufacturing hub, Armenia has
remained firmly within Russia’s radius since its industry fell apart
with the 1991 collapse of the communist regime.

Compounding its military presence in the country, Russia has ramped
up its economic presence in recent years, now owning near total
control over Armenia’s energy and transportation sectors.

A vital pipeline project to diversify energy dependency away from
Russia by carrying gas from Iran has also come under Russian gas
monopoly Gazprom’s control in 2006.

Russian ties are in part to offset political embargoes along two of
its borders due to unresolved territorial disputes with Azerbaijan
and a failure to achieve reconciliation over the 1915 Armenian
genocide by the Ottoman Empire.

But amid election campaign opposition accusations that Russia’s
growing economic presence poses a threat to Yerevan’s sovereignty,
the current administration has been more circumspect about its
alliances.

The special relationship showed fault lines over Russia’s warming
relations with Armenia’s longtime foe Azerbaijan and its economic
blockade of Georgia, which has a spill-over effect on Armenian
business.

In response, Yerevan has turned towards the West, where a large
Armenian diaspora is actively lobbying the small state’s interest.

"Yerevan is finding it increasingly important to balance Russia
against a dialogue with NATO and interesting the European Union,"
said Thomas Gomart, head of the Russian/CIS programme at Paris-based
Institut Francais des Relations Internationales.

But whatever the inter-state relations, Armenia’s ties to Russia
through the diaspora there are the most important, said Gegam
Khalatyan, the president of the Association of Armenians in Russia.

The Armenian diaspora in Russia counts about 2 million, and – unlike
other diasporas – has grown exponentially in the past five years with
over two thirds of immigrants making Russia their home.

Remittances sent home from Russia amount to 1 million dollars – the
total Russian investment in the country last year.

Russian Prime Minister Viktor Zubkov tacitly displayed Russia’s
interest and support for the incumbent presidential candidate by
paying his counterpart a visit two weeks before Armenia’s elections.

The meeting reinforced Russia’s economic domination with crucial
bilateral deals signed that handed Russia’s state railway company the
management of Armenia’s network for the next 30 years.

The joint construction of Armenia’s first power plant and smoothing
out the last wrinkles in dividing almost total control of the
country’s energy sector between Russian state-monopolies Gazprom and
Unified Energy Systems was also agreed upon.

But, surprisingly, the latest Russian takeovers in the region – where
it is fast loosing influence to the West – seemed to reinforce the
leadership’s move for closer ties to other governments.

Though none of the nine Armenian candidates competing for the
executive office are indifferent to Russia, opposition leaders and
local analysts have grown increasingly suspicious of Russia’s
economic power during the election campaign.