AAA: Armenia This Week – 04/30/2004

Friday, April 30, 2004

The United States and Armenian militaries this week took another step in an
expanding partnership by signing an Acquisition and Cross-Servicing
Agreement (ACSA). Deputy Commander of the U.S. forces in Europe General
Charles Wald was in Armenia for a second visit in recent months to sign the
agreement with the Chief of Staff of the Armenian Armed Forces, General
Mikael Harutiunian. ACSA will facilitate logistics and purchases between the
two militaries during joint deployments, such as the one Armenia is
currently planning in Iraq. Earlier this year, U.S. and Armenia signed a
reciprocal Article 98 agreement to prevent their troops from prosecution at
the International Criminal Court, eliminating a potential hindrance to U.S.
military assistance to Armenia.

Harutiunian said that the agreement is part of the legal framework needed
for the establishment of “allied partnership” between the two countries.
Wald said that the agreement is evidence that “we are increasing and
cementing our relationship and that Armenia is a participant of the war on
terrorism.” In his annual April 24 message released earlier this week,
President George W. Bush noted that the United States “is grateful for
Armenia’s continuing cooperation in the war on terror.” Bush also reaffirmed
U.S. commitment to assist Armenia in expanding “strategic relations” with
the West. According to a report last week, the Bush Administration is
planning to commit about $660 million in the next five years to train and
equip foreign forces to be used in peace operations around the world.

While in Armenia, Wald again denied persistent media reports that the U.S.
is planning to station forces at bases in either Armenia or Azerbaijan.
Armenia’s Ambassador Arman Kirakossian suggested last week that the U.S.
would instead focus on upgrading military installations in the region for
possible future deployments. Commenting on the Administration’s request for
higher military assistance to Azerbaijan than to Armenia, Kirakossian
stressed that the U.S. policy of parity should continue so as not to alter
the regional balance of forces.

Meanwhile, Wald noted that Azeri President Ilham Aliyev has made a
commitment to the U.S. not to hinder Armenia’s participation in the upcoming
NATO exercises in Azerbaijan. Last January, Armenian officers were not
allowed to attend a planning conference for the exercises. Azeri reaction to
the brutal murder of an Armenian officer by an Azeri serviceman at a NATO
course in February further strained bilateral tensions. This week, Azeri
officials pledged to provide security to Armenian participants. (Sources:
Arm. This Week 4-2; Mediamax 4-16; Washington Post 4-19; The White House
4-24; AP 4-26; RFE/RL Arm. Report 4-26)

The Parliamentary Assembly of the Council of Europe (PACE) this week adopted
a resolution on the political standoff in Armenia calling for dialogue
between the Armenian government and the opposition. While noting that last
year’s electoral irregularities were not substantial enough to affect the
outcome of the vote, in which President Robert Kocharian was reelected, the
PACE resolution criticized the Armenian government for its heavy-handed
response to protests by the Armenian opposition, which is calling for
Kocharian’s resignation.

PACE also refused to endorse the Armenian opposition delegates’ calls for
the so-called “referendum of confidence” in Kocharian. The resolution
further called on the Armenian government to guarantee opposition supporters
the freedom of assembly and movement, to investigate alleged violations of
human rights during recent meetings and to reform the Code of Administrative
Violations that allows it to detain opposition supporters during
unsanctioned rallies. The Armenian government is expected to issue a
preliminary report to PACE by June, and complete the necessary reforms by
September. (Source: PACE resolution 4-28)

Armenia’s Gross Domestic Product (GDP) grew by 7.5 percent in the first
three months of 2004, compared to the first quarter of last year, the
National Statistics Agency reported this week. As anticipated earlier,
following completion of major construction projects funded by the U.S.-based
Lincy Foundation, the growth was slower than the double-digit increases
registered between 2001-2003. The industrial growth was under 3 percent, due
largely to lower output in the diamond-processing sector and stoppage of a
major aluminum plant for modernization. Previously struggling chemical and
light industry sectors reported the strongest rebounds and electricity
generation grew by 7 percent. Agricultural output grew by 6 percent.

The first quarter exports were up by 14 percent to $152 million. Major
export destinations included Belgium (19 percent of all exports), United
States (12), Russia (11), Israel (11), Germany (9), Italy (7) and
Switzerland (4). Imports were up 9.5 percent to $281 million, with Russia
(23), Belgium (11), Israel (10), the United States (8), United Arab Emirates
(6) and Iran (5) as major sources of Armenia-bound goods.

The government’s internal and custom revenue agencies reported first quarter
growth in incomes above budget targets. Customs Director Armen Avetisian
suggested that political tensions resulting from the opposition’s drive for
power have so far had no major impact on business activity in Armenia. The
agencies brought in $51 and $45 million in tax and tariff duties,
respectively, and are on track to meet the annual plan of $460 million in
state revenues. Major businesses paid more profit taxes following the
introduction of stiffer penalties for non-payment last year.

According to Tigran Jrbashian, director of the Sed Marsed consulting firm,
higher state revenues have also contributed to strengthening Armenia’s
national currency. This week, the Dram traded at under 550 to $1, its
highest exchange rate since October 2000. (Sources: Armenia This Week 2-6;
Arminfo 4-20, 21; Noyan Tapan 4-20, 21; RFE/RL Armenia Report 4-20, 28)

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