FOREIGN AID DOES NOT CREATE STRONG ARMENIAN ECONOMY
By Fatma Yilmaz
USAK European Union Studies
Journal of Turkish Weekly, Turkey
March 29 2007
Through which way the European Union (EU) and Armenian relations
has recently proceeded is the European Neighborhood Policy (ENP). If
requires to remind, the ENP signifies a newly-established approach
of the EU which differs from the existing foreign relations of the
Union. Instead, including the neighboring countries on the Eastern
and Southern encompassing borders of new expanding the EU, the policy
goes beyond the present relations with the intention of sharing the
benefits of the EU enlargement with the interested neighbors by means
of increase in security, stability and interests. In this sense,
the ENP sets objectives based on commitments to shared values and
effective implementation of political, economic and institutional
reforms. The implementation of the ENP is to be supported with
financial and technical assistance. For the benefited side, the
prospect of this policy seems to create incentives for the promotion
of comprehensive economic and political reforms.
However, the ENP is not just completely new approach of the EU in
terms of financial and technical assistance so as to encourage the
reforms in the neighboring countries. And Armenia is therefore
the country which the EU has made contribution to its economic
and democratic transformation in terms of the Caucasus policy for
a long time. Since the beginning of 1990s, the EU has been trying
to shape the transformation going on within the Caucasus republics
through technical and financial aids. Programs such as TACIS, FEOGA,
ECHO forms the main tools of this policy. TACIS, among them, is the
well-known one due to its big budget. Under TACIS, the EU gave start
to two different programs following the EU’s strategic interests on
the religion. These are TRACECA (Transport Corridor Europe Caucasus
Asia) and INOGATE (Interstate Oil and Gas Transport to Europe)
programs. Including 13 countries, TRCECA is considered a project of
Europe-Caucasus-Asia corridor aiming at regenerating the ancient Silk
Road. The aim of the mentioned corridor, which forms the shortest,
the fastest and the cheapest road route, was actually to break up
Russian monopoly. Whereas on one hand the project is to reinforce
both political and economic independence of the Caucasus republics, on
the other hand it would enable the EU to access the Far East without
being dependent to Russia. Therefore, it is possible for the project
to be seemed as an infrastructure program which could possibly have
contributed to the Armenian development in theory. But what about
the practice?
Having contributed the reconstruction of Armenia, then, what is the
problem with the EU policies towards Armenia?
In fact, firstly what is the problem? Isolation, needless to say… One
of the clear examples of this isolation is the TRACECA project.
Although Armenia is mentioned within the project on the paper,
it could not benefit from the project in practice. This is mainly
because of the Azeri abstention to the project for Armenia. This
therefore made Armenia to remain outside the EU project. Naturally, the
long-lasting Nagorno-Karabakh issue lies behind the Azeri obstacle. In
this sense, Azerbaijan seems to be so decisive not to allow Armenia to
participate in this EU project. The EU has no way to deter Azerbaijan
to take back its objection since it needs the project whether with or
without Armenia for the benefit of its interests. It seems so that
Armenia causes its isolation with its own policies. How the EU has
contributed indirectly to Armenia’s isolation is that the EU does
not make any pressure on Armenia in terms of a possible solution
of the Nagorno-Karabakh issue to be reached a solution. Similarly,
the EU does not also put pressure on Armenia about the so-called
Armenian genocide issue lasting for long years between Turkey and
Armenia as it does about the Cyprus issue towards Turkey. In result,
the inertness of the EU on the Armenian politics in the region
makes this country believe their policies right to be pursued. Then,
such situation encourages Armenia to insist on the present policies
which actually damage the Armenian both economic and political power
in the region. As long as Armenia believes it could stand just with
its own power in the region, it on the contrary contributes its own
isolation gradually whereas the countries around it have steadily
shown considerable increase in economic terms.
Moreover, although Armenia was the most convenient route for the
Baku-Tbilisi-Ceyhan pipeline, Yerevan unfortunately remained outside of
the project. Armenia was not only excluded from the Baku-Tbilisi-Ceyhan
pipeline project but also there are many projects on the way in which
Armenia can not be included. For instance, Azerbaijan-Georgia-Turkey
natural gas pipeline which is about to be completed is one of
them. Additionally, although there is an already-established railway
via Armenia, Kars-Tbilisi-Baku railway line will bypass Armenia once
more. New projects are also on the way, and it seems that Armenia
will be outside in these coming regional co-operation projects.
What is more, the US, thanks to the strong Armenian diaspora lobbies
in the Congress, has given generous aids to Armenia, yet the foreign
aid creates not strong Armenian economy, but artificial growth and
more dependency on foreign sources. Meanwhile, we should note that the
US has been one of the most enthusiastic supporters in the regional
cooperation projects which isolated Armenia.
If also estimated the Armenian domestic issues, as Armenia’s power
relatively decreases, the extremists in the country gain the power
reversely and it is possible to claim that Armenia has gradually lost
its independence. Therefore, there is an Armenia in the region which
is gradually isolated itself without having realized the failure
of its own policies towards the neighboring countries. And there is
also an EU let Armenians to feel sufficient to carry out all problems
themselves unnecessarily. In this circumstance, Armenia should be
aware of its potential with its so small population and territory
and of its small-scale economy. It therefore needs to be active in
the region in collaboration with other actors in the region to survive.
Needless to say that it takes great support of the Armenians in
diaspora but to be an effective actor in the region necessitates its
own power.
In such manner, it actually requires to appreciate the policies
of the EU with the motivation of economic and technical aim to its
neighboring countries including Armenia. There is no doubt that the
EU has made key contributions to the transformation of Armenia. As
mentioned above, the EU aid money is mostly channeled through the
TACIS. Since 1994 Armenia has enjoyed consecutive economic growth,
with a considerable high economic growth rate in 2002-2003 (13.2% and
13.9%), which was preserved in 2004 (10.1%). However, this is partly
dependent on considerable flows of international aid and remittances
from the Diaspora.
Furthermore, the European Union alone, during the period 1991-2002,
has provided Armenia with national grants that amount to 318.36
million Euros and loans totaling 86 million Euros. In addition, EU
Member States’ total contributions during the same period were 282
million Euro, bringing total EU assistance to Armenia to approximately
686,3 million Euro.[1] Nevertheless, this would not prevent Armenia
to play an aggressive role in its external relations which force it
to be isolated. As it does in the US case, the EU aids mostly through
the TACIS program made Armenian growth to be artificial. The foreign
aids to Armenia could not make structural contribution; in contrast,
it makes Armenian economy to be dependent on foreign investments.
In such an environment, what the EU might to do against the gradual
isolation could be to encourage Armenia to pursue more moderate
and collaborationist role in terms of the solution of its problems
with neighbors. The EU might use its conditional aids as a trigger
to persuade Armenia to agree with the parties of the problems as it
does for the benefit of economic and political reforms in the country.
Otherwise, Armenia would be obliged to withdraw its own shell with
the risk of isolation gradually.