ARMENIA AND THE EU: WHEN ECONOMICS TRUMP POLITICS
By Haroutiun Khachatrian In Yerevan
Caucaz.com, Georgia
Oct 30 2007
During the month of October, Armenian President Robert Kocharian has
successively preserved his country’s European orientation and good
strategic relations with Russia. While these two "orientations" are
usually seen as mutually exclusive in the post-Soviet space, Armenia’s
attendance at the Dushanbe CIS summit and Kocharian’s working visit
to Brussels show Yerevan’s determination to prove the theory wrong.
>From October 5-7 Armenian President Kocharian attended the Dushanbe
summit of the Commonwealth of Independent States (CIS), where the
gathering of former Soviet republics approved the organisation’s new
development concept. Following the CIS summit, Kocharian attended a
related summit of the CIS Collective Security Treaty Organization
(CSTO), where Russian President Vladimir Putin declared that CSTO
member countries will be able to purchase Russian arms at the same
reduced prices available within Russia. A long-time active member in
both post-Soviet organisations, Kocharian confirmed once again that
Armenia remains a political and military ally of Russia.
Almost immediately following the Dushanbe summits, however, Kocharian
left for Brussels for a four-day working visit with top European
Union officials including Jose Manuel Barroso and Xavier Solana.
European media has given the talks a positive assessment and Armenia
was praised for the successful implementation of its commitments
under the European Neighbourhood Policy (ENP) Action Plan.
What are these orientations about?
Armenia has never officially declared its intention to join the
European Union (EU). However, "Eurointegration" remains one of the
country’s official priorities. Armenia’s EU orientation is a priori
an economic imperative, rather than a political claim of an Armenian
European identity. As a small country with few natural resources,
Armenia has no other option for successful economic development than a
liberal foreign trade regime. As a member of the CSTO, Armenia cannot
use NATO as a sort of "gateway" to closer ties with the European
Union the way some other CIS members, such as the Ukraine and Georgia,
are attempting.
Thus, economic reforms are perhaps the only way for Armenia to achieve
"Eurointegration". And the EU has supported Yerevan’s efforts, first
within the Partnership and Co-operation Agreement (PCA) signed in 1999,
then under the ENP Action Plan signed at the end of 2006. Both the EU
and other Western donors in Armenia have always linked their support
to Armenia to the success of its reforms, based on the premise that
economic reforms go hand in hand with political ones and a free market
economy will open the way for the country’s democratisation.
Unlike the EU, the CIS does not create any political or economic
pre-conditions for its members. According to the Development Concept
adopted at the Dushanbe summit, the CIS will focus mainly on the
former Soviet countries’ common problems, particularly migration. In
addition, Armenia has never been a member of the Eurasian Economy
Commonwealth (EurAsEC), the group of CIS members led and promoted by
Russia with the goal of creating a Customs Union. The Eurasian Economy
Commonwealth also held a summit in Dushanbe, and Armenia attended as
an observer. Thus Armenia appears unwilling to commit to any economic
obligations which are not compatible with EU requirements.
As a CSTO member, however, Armenia does co-operate with NATO, in the
framework of an Individual Partnership Action Plan, which includes
actions such as joint war games and efforts to ensure civilian control
over the military. Russia co-operates with NATO in the same way,
and maintains close military ties with Greece, Romania and others in
an effort to reduce the chance of conflicts between the two military
blocs.
The European path
Armenia’s economy has improved since the mid-1990s, and now sends
approximately 60 percent of its exports to the EU and other Western
countries. Under pressure from the EU and the Council of Europe,
the country has implemented a number of political reforms, including
changes to the constitution in 2005 which marked a move towards
restricting presidential powers and increasing the judiciary’s
independence. The actual implementation of the adopted legislation,
however, remains problematic. President Kocharian, who has been in
office since 1998, and the ruling Republican Party have often used
authoritarian methods of rule, raising concerns both domestically and
internationally. Armenia has continuously underperformed in decreasing
corruption and securing freedom of speech and judicial independence.
Armenia’s ENP Action Plan calls for the further elimination of trade
barriers and Yerevan has declared its intention to reach a free trade
agreement with the EU by 2010. Any such agreement is subject however to
ENP conditions that Armenia implement European standards of production,
a process which has been under way since the early 2000s.
The ENP Action Plan also names the consolidation of judicial power
and progress in fighting corruption as means for further improving
the country’s investment climate.
Kocharian’s recent official visit to Brussels and the EU-Armenia
Co-operation Council’s eighth meeting the following week in Luxembourg
showed both partners’ satisfaction with the progress thus far. In
addition, during a visit to Yerevan on October 18, Steffen Reiche, head
of the German Bundestag’s German-South Caucasus parliamentary group
delegation, declared that among the three South Caucasus countries,
Armenia has taken the lead in implementing its ENP Action Plan.
Trade: a remedy to diverging geopolitical orientations in the South
Caucasus?
Armenia’s East-West orientation could be a factor in preventing
possible tensions in the South Caucasus between Russia and
the CIS and the EU, NATO and the CSTO. Recent developments in
Armenian-Georgian relations also illustrate the importance of the
trade factor in the region and the role it can play in appeasing
geopolitical tensions. During his visit to Armenia on October 15-16,
Georgian Prime Minister Zurab Nogaideli suggested creating a "joint
investment space" in the two countries, and both governments have
reportedly begun working on the project.
If the joint investment space were to become a reality, Armenia and
Georgia would take the original step of jointly applying to foreign
donors such as the World Bank to provide funding for joint projects.
More importantly, the "common" or "joint" investment space is expected
to attract investors interested in the larger market the project would
form. The immediate direct outcome would be an increase in bilateral
trade between Armenia and Georgia, which would benefit from projects
in Armenia, particularly from Russian investors, who are scant in
Georgia due to poor relations between Tbilisi and Moscow.
Georgia may also benefit from the growing Armenian Stock Exchange,
which will be taken over by Stockholm-based OMX later this year
with the aim of creating a regional capital market. The takeover is
OMX’s first investment in the CIS, although it operates the stock
exchanges in Stockholm, Copenhagen, Helsinki, Reykjavik, Riga and
Vilnius. Of course, Armenia will also benefit from investments in
Georgia, whose reform-minded government has earned a great deal of
praise and investment from the West.
Georgia, with its stated intention to join NATO and the EU, and with
its relationship with Russia currently at a low point, can see some
benefits in good relations with Armenia. The prospect of strengthened
economic relations between Georgia and Armenia may spark hopes that
the trade factor could help blur the geopolitical line that has begun
to define the two countries’ relations with the East and West.
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