ARMENIA, GEORGIA TO BOOST ECONOMIC TIES AFTER SOUTH OSSETIA WAR
By Emil Danielyan

Eurasia Daily Monitor
Tuesday, October 14, 2008
DC

Armenia and Georgia have pledged to strengthen their commercial and
other links in hopes of overcoming the negative economic consequences
facing both South Caucasus states after the recent Russian-Georgian
war. Tbilisi has also officially expressed its overall satisfaction
with Yerevan’s neutrality in the conflict.

Armenia, heavily dependent on Georgian territory for its import and
export operations, has been anxious not to upset its most important
neighbor and number one military ally, Russia. Its leaders remained
conspicuously silent during the week-long heavy fighting in and around
South Ossetia. It was not until August 14 that Armenian President
Serzh Sarkisian called a meeting of his National Security Council to
express his personal concern about the crisis and praise international
efforts to resolve it.

Sarkisian has since repeatedly chided Georgia for its ill-fated August
8 attempt to retake South Ossetia. He reiterated the thinly veiled
criticism during a September 30 visit to Tbilisi. "I believe that it is
impossible to resolve existing problems through military intervention,"
he said at a joint news conference with Georgian President Mikheil
Saakashvili (Regnum news agency, October 1). At the same time,
the Armenian leadership has refused to recognize South Ossetia and
Abkhazia as independent states, despite apparent pressure from Russia.

After their talks Saakashvili publicly thanked Sarkisian for
"expressing support for Georgia’s territorial integrity" and gave
his Armenian counterpart an Order of Honor, a top Georgian state
award. He stressed the importance of Georgian-Armenian economic ties
and said that border crossing procedures for Armenians and Georgians
traveling to each other’s country would soon be simplified. "We must
review our relationship and do everything to improve it again. I am
sure that we will really be useful to each other," Sarkisian said
(Caucasus Press, September 30).

More importantly, the two presidents announced the impending
establishment of a Georgian-Armenian consortium that would seek to
attract foreign funding for a new highway in southern Georgia that
would significantly shorten travel from Armenia to the Georgian Black
Sea coast. Armenian Transport and Communications Minister Gurgen
Sarkisian gave details of the project at a subsequent news conference
in Yerevan, saying that the planned road could be built within two
years. He said it would pass through Georgia’s Armenian-populated
Javakheti region and go all the way west to the Black Sea port city of
Batumi. He added that the new route would cut the distance between the
Georgian-Armenian frontier and Batumi by at least one third (Arminfo,
October 4).

Armenia’s transport connections with Batumi as well as the other major
Georgian port, Poti, have long used Georgia’s main east-west highway
passing through Gori, a strategic town near South Ossetia that was
bombarded and seized by Russian forces during the war. Traffic along
that highway was disrupted as a result, seriously complicating vital
cargo supplies to eastern Georgia and Armenia.

The planned road will be hundreds of miles away from South Ossetia
and Abkhazia and therefore, in the event of renewed fighting, beyond
the striking distance of Russian ground troops stationed in the two
breakaway regions. According to Minister Sarkisian, the Manila-based
Asian Development Bank has already expressed interest in financing
the transport project; but neither the transport minister nor other
Armenian officials have elaborated on the likely cost.

The Yerevan government’s strong interest in the project suggests that
it continues to regard Georgia as landlocked Armenia’s most reliable
conduit to the outside world, even after the Russian-Georgian war and
despite its dramatic rapprochement with Turkey. The Turks keep making
the opening of the border with Armenia contingent on a resolution
of the Karabakh conflict, which may still be a long way off despite
major progress in Armenian-Azerbaijani peace talks.

Interestingly, Russian Foreign Minister Sergei Lavrov welcomed the
latest Armenian-Georgian agreements when he visited Yerevan on October
3. "I hope that these agreements will prevent a repetition of the
situation during the Caucasian crisis that resulted in artificial
obstacles on Georgian territory to the traffic of goods to Armenia,"
Lavrov told journalists (a Jamestown representative was present,
October 3). "I think these agreements will contribute to the economic
development of our ally [Armenia]," he said

The Armenian government estimates the total damage inflicted on
Armenia’s economy by the war at $670 million. That includes the cost
of delays in shipments of fuel, basic foodstuffs, and other goods
through Poti and Batumi. The two ports together handle at least 70
percent of Armenia’s external trade. Armenian officials say the damage
also takes account of a resulting shortfall in import duties and other
taxes as well as projects cancelled by foreign investors frightened
away by the war. In an October 7 interview with the Azerbaijani online
news service , Prime Minister Tigran Sarkisian said that
the losses would have been even greater had Armenia not maintained
"constructive relations" with Georgia.

The economic fallout from the Georgian crisis was reportedly high on
the agenda of the Armenian premier’s talks late last week in Washington
with Vice President Dick Cheney and other senior U.S. officials
(Armenian Public Television, October 11). It was not, however,
immediately clear what concrete U.S. assistance Yerevan seeks in
coping with the problem.

Incidentally, Georgian Prime Minister Lado Gurgenidze was also in
Washington to hold talks with U.S. officials and attend the annual
meetings of the International Monetary Fund and the World Bank. The
Georgian media, citing reports from the Georgian government press
office, said that Gurgenidze would meet his Armenian counterpart there.