REPORT: NO BIG GAINS TO ARMENIA IF TURKEY LIFTS BLOCKADE
Haroutiun Khachatrian 8/09/05
August 9, 2005
Eurasianet
A controversial report by an Armenian research and consulting group
claims that reopening the Armenian-Turkish border would have a much
smaller impact on Armenias economy than commonly believed.
The report was presented July 13 by the Armenian-European Political
Legal Advice Center (AEPLAC), a prominent think tank sponsored by the
European Union. It contended that Armenia would see its economy expand
by only $20-23 million annually, or just 0.67 percent of its current
Gross Domestic Product, if Turkey decided to lift its 12-year blockade
of the Armenian border. Over the next five years, Armenias GDP would
see an additional 2.7 percent increase over the countrys level in
2004.
The gain, the report maintained, would be almost exclusively the
result of lower cargo transportation costs associated with the
reopening of the Kars-Gyumri railroad that connects the two
countries. Currently, Armenian goods can only reach trade partners via
Georgia, which charges relatively high cargo tariffs. Transportation
costs account for some 25-30 percent of Armenias trade costs,
according to the report.
The reports findings caught many Armenian academics and journalists by
surprise. A widely cited 2000 World Bank study predicted that Armenia
would see a 30-percent increase in GDP if both Turkey and Azerbaijan
lifted their economic embargos. Since then, the Armenian economy has
experienced impressive growth. [For background see the Eurasia Insight
archive]. Many observers and economists believed that lifting the
blockade would boost those numbers still higher.
Turkey closed its border with Armenia in 1993 in an act of solidarity
with Azerbaijan. At the time, Armenian and Azerbaijani forces were
battling for control of the Nagorno-Karabakh enclave. [For background
see the Eurasia Insight archive]. The blockade cause substantial
economic hardship in Armenia for much of the 1990s. In early 2004,
Turkey reportedly considered re-opening the border, but eventually
decided against it. [For background see the Eurasia Insight archive].
Turkish goods — worth an estimated $40 million per year, according to
the National Statistical Service of Armenia — manage to enter Armenia
via third countries. A general belief exists that if the border were
re-opened, Armenia would be able to export a comparable amount of
goods and services, namely electricity to its western neighbor.
Many economists have challenged the reports findings. They note that
the analysis contained in the report, which was written by a
seven-member team, largely concurs with recent statements made by
various government officials, who have downplayed the need for an open
Turkish-Armenian border. The daily Azg, for instance, commented on
July 7 that the reports argument provided strong support for Foreign
Minister Vartan Oskanians position that Armenia will not make any
political concessions to Turkey in return for the lifting of the
border blockade. “If the economic impact of lifting the blockade is
negligible, then there is no reason to open the border,” said a recent
editorial published by the Russian-language Delovoi Ekspress. “And
this is pure politics.”
Others take issue with the reports statistical analysis. Economist
Eduard Agajanov, who served as minister of statistics under former
President Levon Ter-Petrosian (1991-1998), charged that the report
underestimated the economic impact of reopening the Turkish-Armenian
border in order to provide political support for President Robert
Kocharians administration. “Its purpose is to preserve the current
oligarchic economic system in Armenia, which cannot survive if the
borders are opened and competition with Turkish goods becomes
tougher,” Agajanov said. If Armenia regains access to markets of the
Middle East via Turkey, Agajanov argued, it would stimulate a whole
range of industries that were active during the Soviet era, when the
Middle East and India were major markets.
The AEPLAC authors said they took various factors into account,
including the 2000 World Bank study and the potential re-entry of
Armenian companies into Middle Eastern markets. Ultimately, however,
they decided that Armenian producers do not presently have the
resources to meet demand in Turkey and the Middle East for goods, such
as electricity and cement. At the same time, the report suggested that
reopening the Turkish-Armenian border might stimulate economic growth
in eastern regions of Turkey, where GDP per capita is even lower than
in Armenia.
Although the authors of the AEPLAC report state that it was
commissioned by the Armenian government, Trade and Economic
Development Minister Karen Chshmaritian has denied that the government
had anything to do with the preparation of the document.
At a July 27 press conference, Chshmairtian criticized the AEPLAC
estimates as too conservative. “They have not taken into account the
effect of mutual penetration of capital from the two countries. Turkey
obviously hinders its businessmen from investing in Armenia, and when
this ban is eliminated, growth may be highly accelerated,” he
stated. To prove the point, Chshmaritian told reporters, the
government is conducting its own research into the economic impact of
Turkey lifting its border blockade. A report is due out later this
year, he said.
Editors Note: Haroutiun Khachatrian is a Yerevan-based writer
specializing in economic and political affairs.
Posted August 9, 2005 © Eurasianet