The most notable event in the domestic politics of this year in Armenia was the resignation of the Prime Minister Tigran Sarkisyan on 3 March. The reason for the resignation and its implications were debated in the Armenia’s political domain and media for several months. In recent months the following problems of Armenia domestic politics are being discussed:
– Economic stagnation;
– Holding of referendum on constitutional reforms;
– Armenia’s membership in the Eurasian Union;
– Energy problem.
Economic stagnation and energy issues are the ”ossified” problems that were failed to be alleviated by successive governments in the twenty years time. Organization of a referendum on constitutional changes is more of a domestic issue and is a subject of discourse between the government and the opposition. Armenia’s membership in the Eurasian Union is formidable topic in terms of the country’s future and contains strategic interests to define Armenia’s economic and political fate.
Ever since gaining independence Armenia has failed to deal with its economic problems and continues to boast little prospects of tackling those issues in the foreseeable future. Such problems as social grievances, unemployment, dwindling foreign investment, outflow of already limited capital and export constraints due to incompatibility of manufactured goods with the European standards are among top persistent issues. Armenia’s production is concentrated on mining and chemical industry and both areas are effectively controlled by Russia and Iran.
Upon his appointment as country’s new Prime Minister, Ovik Abramyan prepared a government program to address the existing problems. Combating ”shadow economy” rests in the core of the program.(1) The same method was employed in 1999 by then the Prime Minister Vazgen Sarkisyan to no avail. And experts this time around are pretty unanimous in their skepticism regarding Abramyan’s success. It is explained by the fact that the ”shadow economy” is overseen by the oligarchs that would hate to strip themselves of additional revenue.
Armenia’s Finance Minister Gagik Khachatryan also referred to the ”shadow economy” as an impediment, ebbing Armenia’s appeal as foreign investment destination.(2) According to the report by the National Statistics Service of Armenia, consumer price index stood at 103.8 in comparison with the 2013. Prices for consumer goods rose by 1.9 %, food by 1.1 %, alcohol and tobacco products by 7.9 % and non-food products by 8.6 % respectively.(3) These are some soaring indicators for Armenia that is experiencing economic problems.
Another challenge for Armenia’s economy is sanctions imposed on Russia by the U.S. and the European Union. Speaking to journalists on 11 March, Economy Minister Vahram Avanesyan admitted that, ”Any weakening of Russia’s economy would have its implications for Armenia”.(4) The most affected area would be the chemicals industry as Russia was key consumer of products manufactured by the Armenia in this field.
Holding of Referendum on Constitutional Reforms
It has been for several years now that Armenia is having a debate on holding of a referendum on transition to the parliamentarian form of governance. Accordingly, the referendum would introduce changes where President was elected not through the popular vote but appointed by the parliament for a 7-year term without a right to seek reappointment. President’s mandate would include control over the implementation of the constitution, preserving authority and balance and mediating and refereeing the problems to emerge within the government.(5)
The text of the constitutional reform was made publicly available on 10 April 2014 and offered for discussions. However, President Serzh Sargsyan later stressed that the outcome of deliberations would be disclosed in October, given the need for further elaborations on the text and expansion of the scope of discussions.
The referendum on constitutional changes is scheduled for the fall of 2016. Albeit major opposition political party – the Prosperous Armenia – is not approving the referendum on the constitutional changes, the government is trying to secure political support of other parties.
The key argument of the opponents of referendum is the chance for Serzh Sargsyan to seek third, a new 7 year term in office. The text of the referendum does not clarify whether the legal outcome of the referendum would be binding with respect to the incumbent President. The opposition demands that new parliamentary and presidential elections be held in the country upon holding of the referendum. Moreover, on 2 June the Prosperous Armenia, Dashnaktsusyun, Armenian National Congress and Legacy parties insisted that prior to going forward with the referendum the authorities must accept their twelve demands on the resolution of social-economic and political problems.(6)
Armenia’s membership in the Eurasian Union
President of Armenia paid an official to Russia on 3 September 2013. In the course of the visit Sargsyan brought clarity to the issue on which his country had been hesitant for several years, and under Russian pressure, issued a statement, announcing his country’s membership to the Customs Union, as of 24 October 2013.
As Armenia was being coerced into Russia-led Eurasian Economic Union and the Customs Union, it had already agreed on the text of the ”Deep and Comprehensive Free Trade Agreement” (DCFTA) with the European Union on 24 July 2013. Nevertheless, Armenia’s membership in the Customs Union was left out of the Vilnius process. And this country refused to sign the DCFTA during the Eastern Partnership’s Vilnius Summit in November 2013 (7).
After lengthy discussions, Armenia signed the treaty on joining the Eurasian Economic Union during the Summit of the Supreme Eurasian Economic Council, held in Minsk on 10 October. The treaty the signatories of which were the Presidents of Russia, Kazakhstan, Belarus and Armenia would come into force on 1 January 2015 upon ratification by respective national parliaments of the four nations.
Armenia’s membership in the Eurasian Union will only entail Russia’s increased importance in the foreign trade, solidify the former’s position and further exacerbate Armenia’s economic and political dependence on Russia. According to the estimates, Russia stands to gain some $400 billion from the Customs Union, while Belarus and Kazakhstan would get $16 billion each.(8) This forecast implies that Russia’s gains would put to shame those of other nations, while it is completely unclear how stagnating and weak Armenian economy could gain from this endeavor.
The country’s media outlets reacted harshly to the news of Armenia’s upcoming membership in the Customs Union. Local media dubbed it as not the Armenia’s ”surrender” to Russia but the ”occupation”. Armenia’s Eurasian Union membership opens a new chapter, in terms of politics, economy and security. Yet the prospects it offers are unclear, even for the government. This was an inevitable outcome of the foreign policy and the security strategy pursued by the Armenia’s leadership for the past 20 years.
Largest problem that Armenia faces in the field of energy is the price for natural gas supplied by Russia. Instead of global market prices on natural gas, Russia offers discounted prices to some of the former Soviet republics. Nevertheless, once in a while it senses a need to revisit the issue. For the time being, Armenia and Belarus are the recipients of the cheapest gas from Russia.
As of 1 January 2013, ”Gazprom” supplies gas to Armenia at a price of $320 per 1000 cubic meters. Surely, such a price hike negatively affects the social-economic life of ordinary Armenians citizens. The last time the natural gas prices for Armenia had gone up was on April 1, 2010, after which the Armenians had to pay 132 drams per cubic meters, instead of previous 96 drams. The large business with natural gas consumption of more than 10.000 cubic meters per month saw an increase from $215 per 1000 cubic meters, to $243.13.
Russia’s “Gasprom” was the holder of the 80 percent stake at the “ArmRosGazprom” affiliate company, but due to Armenia’s inability to pay its outstanding gas bill, the Russians took over the remaining 20% stake. According to the deal, the “ArmRosGasprom” was eliminated and replaced by the “Gasprom-Armenia”. Thus, the consequences of another natural gas price increase for Armenia are likely to be:
– Significant price increase for goods and services;
– Inflation growth for dram;
– Decreasing industrial production and possible bankruptcy for some businesses;
– Surging social-economic problems coupled with popular resentment and mass protests;
– Increased opposition pressure on the authorities;
– Unemployment, new wave of migration abroad.
Dr. Hatem CABBARLI
- Эксперт: Экономические инициативы нового правительства Армении – начало позитивной динамики. regnum.ru/news/fd-abroad/armenia/1802998.html, 18.05.2014
- Признание Минфина: Армения не привлекательна для инвестиций.www.regnum.ru/news/fd-abroad/armenia/1804024.html, 20.05.2014.
- Годовой рост цен в Армении составил 3,8%. www.regnum.ru/news/fd-abroad/armenia/1786129.html, 02.04.2014.
- Любое ослабление экономики России отрицательно отразится на Армении – Минэкономики. www.regnum.ru/news/fd-abroad/armenia/1776732.html, 11.03.2014.
- В Армении ожидается конституционный референдум.www.regnum.ru/news/polit/1839699.html, 24.08.2014.
- Карабах, накопительные пенсии, Наирит: Непровластные политические силы Армении обнародовали требования к правительству.http://www.panarmenian.net/rus/news/179734/, 10.06.2014.
- ”Серж Саргсян: Решение Армении вступить в ТС-не отказ от диалога с европейскими структурами”. www.regnum.ru/news/fd-abroad/armenia/1702369.html, 03.09.2013.
- ”Армения-РФ: Все упирается в ОДКБ”.http://www.panarmenian.net/rus/details/169530/, 04.09.2013.