armenianow – 02/06/2009

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February 6, 2009,

1. Weathering the Storm: In November authorities say "no
problem"; in January "Help!"

2. Weathering the Storm: Unemployment grows, plants close –
Armenia "catches up" to the rest of the world

3. Weathering the Storm: Unemployment, professional stagnation as
global crisis bites Armenia

4. Weathering the Storm: Armenia takes steps to survive economic hits

5. Weathering the Storm: A commentary on Armenia and the Global
Economic Crisis

6. Cash Conflict: Anger over cash machines turns PMs attention to
working conditions

7. Trade reform: Small-business merchants say cash machine law
will destroy them

8. NKR Domestic Shakeup: Changes in government, disagreements in Parliament

9. Spring of Discontent: Fate of Bjni affects hundreds in
Charentsavan and nearby

10. Thirsting for a Mate: Tradition and faith meet on St. Sarkis Day

********************************************* *******************************

Gayane Abrahamyan
ArmeniaNow reporter

Armenian authorities, who approved the State’s largest-ever budget of
$3 billion and as recently as November vowed that Armenia was immune
from the world economic crisis are now desperately seeking

Russian Minister of Finance Alexei Kudrin, on February 5 announced
that Russia will allot $500 million to Armenia (out of the $1 billion
Armenia expected to get), while a few days before he announced in
front of his country’s Government that "the incomes of the Russian
State Budget will be reduced by 40 percent due to the current economic

Despite its own economic down turn, Russia sees the value in propping
up Armenia. Many here consider the loan a political step, believing
that Armenia will have to make serious concessions later (just as
previous loans to Armenia by Russia have been paid off by Russia now
owning almost all Armenian resources).

On January 22 RA Prime Minister Tigran Sargsyan, in order to dispel
doubts, assured that "receiving the ‘stabilization loan’ is just an
economic issue, and it does not have a political context."

In Armenia’s economic circles rumors contend that Russia demanded that
Armenia enter a "Ruble zone" (meaning that the dram would stop
circulation and Armenia would use Russian ruble currency) for
assigning the loan, and that only Russian companies were to be engaged
in transactions resulting from the loan.

Gagik Minasyan, Chairman of the Permanent Commission on Financial-loan
and Budget Issues at the National Assembly, says the following about
the prospective of the elimination of the Armenian Dram which
celebrated its 15-th anniversary last year, and a statue was erected
for it:

"It is not something new; this issue has been under discussions yet in
1990’s. But never say never."

Former NA deputy, doctor of economics Tatul Manaseryan, analyzing the
current international economic development, foresees that sooner or
later it is possible.

"Sooner or later all regions must worry about the problem of creating
stable economic development in their territory. It presupposes
creation of a joint currency, which is the guarantee for stable
economy," says Manaseryan.

Economists are not as concerned about entering a Ruble zone, but
rather about the optimal usage of the loans.

It is mainly mentioned that authorities plan to use loans for covering
the budget deficit, as well as for completing the reserve funds of the
country and preventing a fall in the Armenian dram.

"It was clear from the very beginning that the new budget, which is
about $700 million more as compared with the budget of last year, will
not give be sufficient for fighting the crisis, but rather it is
already crisis-created. And they attacked the business sphere, which
is hardly surviving, in order to complete the budget," Head of
‘PolitEconomy’ Economic Analysis Center, economist Andranik Tevanyan
told ArmeniaNow.

The valuation of the Armenian dram is more dangerous for the economy
of the country. Experts believe that currently the Armenian dram keeps
its position artificially, that is to say, the previous ‘floating
rate’ policy of the Central Bank currently became a ‘fixed rate.’

"Currently the rate is kept at 305 drams to the dollar as an ‘idea
fix,’ whereas, due to the market situation, it was supposed to be at
least 400-420 to the dollar. There is even information that the
exchange points are forced not to change the rate in any case," says
Tevanyan adding that "the implementation of correct currency policy
would enable business to help itself."

According to the economist, the imported transfers to Armenia were
reduced by 40 % in 2008 (one bank official says 30 percent – see
"Armenia takes steps to survive economic hits"), and the maintenance
of the Armenian dram exchange rate is done at the expense of reserve
funds funds, which ‘is a dangerous and risky policy.’

"Due to my information, $140 million from Armenia’s foreign currency
reserve funds was thrown into the market, meaning that Armenia is
putting at stake all the money it posses. This is the reason why now
they are asking for a loan — to complete that reserve funds; and if
the loan is not assigned, there will be an abrupt fall of the Armenian
dram," says Tevanyan.

Deputy Gagik Minasyan holds a different opinion, saying that the
policy of dram valuation allows the government to control inflation.

This week the radical oppositional ‘Armenian National Congress’ also
touched upon the issue of the world economic crisis, stating that "the
planned continuation of the Armenian dram valuation policy, which is
carried out by rude interference into the activity of trade banks,
even by making pressure on exchange points with the help of policemen,
may become even a more dangerous precondition for the economy’s

The statement made by the Congress says that "only last year 20
percent from Armenia’s foreign currency reserves were thrown into the
market. Consequently the international reserve funds of Armenia
decreased up to the non-favourable level, after which the solvency of
the country is put at stake. The same policy, yet with wider volumes,
continues this year; only during the first twenty days of January an
additional $100 million is sold from the same reserve funds."

Experts say the dram-dollar war will probably end when the business of
importing is liberalized, and a process is created due to the demands
of the market.

"It is not excluded that the authorities carry out the dram valuation
policy, being forced to do so. Probably they are compelled by
oligarchs who control the import market, because the import of
products is double beneficial if the dollar is less expensive," says
Bagrat Asatryan, who was the president of the Central Bank in
1994-1998. He stresses that it is because of the monopolies that, in
spite of the world market tendencies, currently no price falls are
noticed in Armenia.

**************************************** ************************************

Gayane Abrahamyan
ArmeniaNow reporter
On assignment for Eurasianet ()

Along with Armenia’s lingering political crisis, authorities here also
face the complex issue of overcoming the accelerating economic crisis
and of stopping the growth of unemployment.

The mining industry has been hit first, and hardest. Copper, gold,
molybdenum, zinc and lead are Armenian exports with the strongest ties
to world markets, where prices have tanked in recent months.

Already, some 2,000 jobs have been lost since November in southern
Armenia. Nationwide, that number has climbed as high as 5,000 since
October, said one government source who asked not to be named. Those
cuts will hit a labor market with limited buoyancy; Armenia’s official
2008 unemployment rate was 6.3 percent. But the number is misleading,
as it only represents the number who have applied for unemployment.
Some non-governmental organizations put the number as high as 27

The Canadian Dino Gold Mining Company, the largest job provider in
Kapan, a town with a population of 40,000 some 350 kilometers south of
Yerevan, has been suspended due to the drop in the prices for
nonferrous metals on international markets, for three months now.

The plant and the adjacent production lines provided jobs to 1,526
people with 60 percent of them being sent to forced outage since
November 1 and another 280 dismissed due to the closure of the mine
exploration project.

"The situation is tough if we take into account the 725 people in
forced redundancy who used to provide families of five in average.
This means at least 3,600 people have appeared in hard social
condition in the town," said Ruben Petrosyan, head of the Kapan
regional center of employment.

The employers of the enterprise held a strike for a few days in early
November, when the management of the plant announced the job cuts.

The strike was stopped only after negotiations with the members of the
government, when the ministers of energy and natural resources, labor
and social issues as well as economy arrived in Kapan and the
neighboring industrial towns of Agarak and Qajaran. Agreements were
signed with the companies to postpone the job cuts to February 18, but
send workers to forced outage and pay two thirds of the wages.

"Nobody can predict what will happen after February 18. It depends on
the economic situation in the world," said Dino Gold Mining Company
Director Robert Falleta. "[There] can be job cuts, even the factory
may be closed."

Prime Minister Tigran Sargsyan underlined during the government
session on November 13: "The problem is serious as the province of
Syunik relies on the plants."

"The number of employees in the three largest enterprises is about
6,000, amounting to 10,000 with the satellite enterprises. We will
have a serious problem in the province, because the work of about
10,000 people from the 25,000 registered employees in the region is
tied up with the operation of these three largest enterprises," said
the PM promising to keep the problem ‘within the focus of attention’.

But the mood in the small town of miners do not inspire hope.The town
was 40 percent destroyed during the war over Karabkah in the early

"This economic crisis, it has once again thrown us into despair! We
lived with an expectation of shells to fall on our house then (during
the war), and now we expect job cuts," said Siranush Grigoryan, a
mother of five, whose husband has been out of work for three months.
"We are very scarce of money; we hardly manage to get bread for
children. We took a loan from the bank to buy a TV set and a washing
machine a year ago, but can’t pay it back now and the bank say it’ll
sue us."

The Grigorians are not alone in Kapan; the closure of the plant has
hit both the employees and also middle and small entrepreneurs.

The financial department of the Syunik province administration said
the plant provided the town with about $500,000 annually, and the
majority of the shoppers in the town were employees of the enterprise.

A manager at one of the home appliance stores said sells have dropped
by about 50 percent in three months.

"No plant, no consumers. Since October, when people were laid off, we
almost haven’t had customers and those who have bought things with
loans are unable to pay them back," a shop manager said, adding that
the shop has also been started on a loan and it equally suffers and
faces a perspective of closure as well, if there is no trade.

Job cuts were also made at the copper and molybdenum plant in the town
of Agarak (population 4900) in December, when 450 people lost jobs.

"Today more than the half of the working population in Agarak is
jobless and the government has to be seriously concerned with this,"
Arkadi Sargsyan, the chairman of the Agarak plant trade said,
underlining the further situation is still unclear: "Negotiations are
held with the government; maybe we will get an offer. Nothing is clear

Nerses Yeritsyan, Minister of Economy of Armenia asserted the results
of the negotiations will be satisfactory.

"We have overcome the first wave of the crisis, the government works
according to the ongoing situation; we analyze world markets every
day. I can’t tell anything at the moment, but I am confident the
situation will improve," the minister said.

And while the government searches for ways to improve the situation in
the southern province of Syunik, a wave of job cuts covered the north
of the country. Two plants have closed in Gyumri since December and
800 employees of a chemical plant lost their jobs in Vanadzor. Also in
Vanadzor a welding equipment factory shut down, dismissing all 350

Armenian Copper Program Company running the copper and molybdenum
production for the last five years in Alaverdi, some 190 km north of
Yerevan, used to provide about 70 percent of jobs there.

Andranik Ghambaryan, head of the department for general issues of the
company said 640 of the 1,044 employees have remained in the plant.
The planned suspension of contracts with them due in February has been
postponed till April 1.

"This problem depends neither on the state, nor the management of the
company, but I can say one thing – Alaverdi will not survive without
the plant. We have neither land to go into agriculture, nor means,"
mayor of Alaverdi Artur Nalbandyan says.

******************************************* *********************************

By Karine Ionesyan
Special to ArmeniaNow

Hayk Poghosyan lost his job a month ago. He worked on a construction
site as an engineer. Now, he says joking, his job is to look after
his five year-old and four-year old daughters.

It was a good job; better than most in Armenia, paying 190,000 drams
(about $630) a month. As a result of the economic crisis, the company
he had worked for closed down dismissing 210 workers.

Having worked five years in the field, Poghosyan has no idea now where
to find work. Luckily, his wife makes a good salary too – 160,000
drams (about $530), in her work as archivist at the Ministry of
Defense. The family also has relatives in Russia who they expect to
get help from.

Poghosyan expects colleagues in his field of work to lose their jobs,
too. And, the specific field itself hardly offers "cross over" skills,
as employment agencies mainly offer men vacancies of a barman, waiter,
cook and similar jobs.

"I have a car and I’m going to work as a distributor. Besides, I’m
planning to upgrade my skills and I do hope the crisis will end either
in spring or in fall, with the demand rising eventually," says
31-year-old Poghosyan.

Construction companies building elite apartments in Yerevan are among
those falling prey to the economic crisis…

Since November 2008, the demand for business-class apartments has
dropped fourfold, with only one proposal made this year, reported
Karine Zakaryan, real estate agent from Agat Real Estate Agency. Her
colleagues from Cascade Realty and Yerkir Real Estate Agency confirmed
her words. According to Public Register of Legal Entities last year
there were 102 companies compared to 133 in 2007. Construction
specialists who already lost their jobs say companies constructing so
called ‘elite" buildings have reduced by 50 percent.

Though some see a construction "glut" in Armenia, economist Andranik
Tevanyan believes that the business of construction might have
continued in Armenia if the world economic crisis did not happen.

The National Statistical Service data say, 138,445.8 mln drams
($460mln) was spent on construction in September of the past year,
80,810.1mln ($270million) in October and 72,700.5mln ($240mln) in

According to RA State Committee for Real Estate Cadastre, the
country’s real estate business decreased by 23.5% year-on-year in
2008, with the sharpest decline being recorded in Q4 (fourth quarter).
Prices have changed as well, with Q4 average market prices falling
another 1.8% — meaning that real estate prices are 25 percent lower
now than two years ago.

Economist Edgar Aghabekyan, says one of the reasons is that banks
refuse to extend loans due to the unpredictable economic situation.

"The banks extended mortgage loans in the past, whereas now they are
not sure whether they will be able to sell the apartments at a
favorable price. This is the reason why they are raising prepayment
and interest rates," the economist says, adding that mortgage rates
rose from about 14 percent to about 17 percent. "Business loans show
similar trends," Aghabekyan said.

Currently, in the USA, in contrary to Armenia, mortgage loan rates are
decreased, so that people become interested in applying for them
again. Economist Edgar Aghabekyan says that the State buys the stocks
of banks in return for it, insuring them from bankruptcy. "However,
this model is not currently actual for Armenia, since we are not in a
very extreme situation as the big countries are," assures Aghabekyan.

With interest rates of mortgage loans hiking, Armenia posted 51.9%
decline (48.1% in Yerevan) in mortgage lending between the third and
fourth quarters of last year according to RA Committee for Real Estate

Local banks will be in trouble if remittances from abroad to Armenia
decrease, affecting Armenia’s living standards and foreign
investments, according to Aghabekyan.

The economist says these negative effects are already tangible in
Armenia, adding the global tailspin has hit the corporate securities
market hard.

The Armenian Center of Employment shows so far a 1 percent increase of
unemployment in January since last year. The figures, though,
represent only those who have applied for unemployment assistance, and
are far from actual numbers.

The global economic recession has infected also Armenia’s IT market,
which for many years was growing in Armenia providing high-paid jobs
(averaging $1000/month) to some 6,000 specialists. According to Union
of Information Technology Enterprises 10 percent of them are currently
unemployed and further cuts are expected.

Lycos Armenia, the Armenian branch of the German Lycos Europe, is been
closing down and as a result, 200 people will become unemployed.
"I will find another job with the same salary, as I’ve been working in
this field for years," says Grigor Kanayan, head of a LYCOS team. "I
think the less experienced specialists will not remain unemployed as
well, but they will be paid less."

The news about LYCOS making losses spread four years ago. However, the
company’s specialists kept working, hoping to progress some day.
Unfortunately, the global economic crisis has dashed their hopes,
leading to the company’s closedown.

"Feeling the company would close down soon, I started a job search a
couple of months ago, finding one with a great difficulty," says
Tigran Minasyan, a LYCOS specialist, adding he is satisfied with the
new job.

Though professional stagnation is inevitable, Minasyan believes local
IT specialists will be able to develop the sector on their own.

"Before the crisis, around 6 companies were established on the basis
of LYCOS," says President of the Union of Information Technology
Enterprises (UITE) Karen Vardanyan. "People can find a way-out, using
this opportunity and getting benefits from the new market trends," he
added. (Vardanyan’s company offered proposals to the government to
reduce the crisis ompact on IT market to avoid the further jobs cuts.)

It seems as if the employees of government-financed organizations have
suffered the least from the economic recession, with their wages
remaining unchanged unlike those in the foreign-funded organizations.

However, many employees of state-funded organizations are scared for
their work in future as well. The reason is that this year’s state
budget had been drawn up before the financial crisis hit the global

"I am afraid that one day our salaries will not be paid in time," says
Alvard Gevorgyan, a nurse in N20 Children’s Outpatient Clinic. Her
salary is 27,400 drams ($91), so she has a little contribution to her
family budget (which totals about $450).

"They may decide not to pay us for months," she said. "Anyway, I need
this money, as our family budget has considerably reduced. I think it
is a result of the global crisis my husband, who worked in a large
private company, has been unemployed for 15 days," she added.

Gevorgyan has two adult children. Her son is a cook and her daughter
is a student and does not work.

"Sometimes, we afford to buy clothes and food, alongside with paying
communal expenses and my daughter’s annual tuition fee of 300,000
drams ($1,000)," she said.

******************************************* *********************************

Armine Grigoryan
Special to ArmeniaNow

To ease the consequences of the world economic crisis, like other
counties Armenia tries to stabilize its national currency as well as
ease the tremors connected with foreign currency exchange rate.

Currently local producers, investors and exporters, political and
non-political figures are worried about the same issue – what possible
changes in foreign currency are envisaged in the Armenian financial

"Armenia’s economy is currently in a situation where industry is not
running, the rates of export are essentially decreased; and
consequently, there is a small flow of foreign currency; transfers are
one third of the index of the previous years," says Armen Hakobyan,
first deputy chairman of Prometey Bank’s board.

Currently there are five million jobless people in Russia. There are
many Armenians among them who left the homeland intending to find a
job there. It is not excluded that many of them will return, which
will intensify the jobless problem here.

There is already tension among businesspeople who would be the first
to feel the impact of a weakened currency.

"There is no single index, justified by economic calculations, which
may say what will be the foreign currency exchange rate during the
upcoming years, so that businessmen can rely on them, accept the basic
exchange rate as a basis and start exporting or importing products,"
says Hakobyan.

Professor Lukashen Badanyan from the Armenian State Economics
University believes that Armenia has the opportunity to self-regulate
some issues, since it is not integrated into the world financial
market as it should have. That is why Armenia implemented a policy
that has kept the dram stable since it leveled out at the current rate
about a year ago.

"During the last two years it was intended to use the Central Bank’s
policy for regulating the inflation; besides, the policy of the
Armenian Dram valuation was held. Of course, as a result, a local
producer suffered from it, an importer benefited; and the ‘two edges
of the scissors are moved away from each other’," says Badanyan.

Several projects are currently being developed at the Government in
order to bring the "edges of the scissors". The issues of promoting
local producers, as well as of helping the development of small and
middle business are in the agenda.

The Armenian Government turned to the World Bank (WB), Asian
Development Bank, and European Bank of Reconstruction and Development
in order to possibly protect the country from and ease the
consequences of the world economic crisis, as well as increase their
financial and technical support.

The WB and International Bank of Reconstruction and development will
jointly support Armenia. They will assign $500 million for the
implementation of development programs for middle and small businesses
— as announced by Shigeo Katsu, Deputy Chairman of WB’s European and
Central Asian regions in a press conference in Yerevan last month.

(The Armenian Government also turned to the Russian Government asking
for a $1 billion stabilization loan. The negotiations over this
request are not over yet. See "In November authorities say "no
problem"; in January "Help!")

Recently President of the Central Bank Arthur Javadyan announced that
the Bank is loyal to its policy on exchange rate. "It will remain to
be ‘floating’ as it was before," he says, meaning that the dram rate
adjusts according to major currency.

But as the Armenian dram "floats", it has remained curiously stable in
recent months as the dollar has risen in other currencies of the
world. 1 USD was equal to 24 Russian rubles 24, now its 36, in August
2008 $1 was equal to 2 British pounds, now its1.46. Euro has gone
from1.40 per 1 US dollar to 1.27 per dollar. GIVE EXAMPLES. On the
one hand Armenia has a "floating" exchange rate, on the other hand – a
stable exchange rate. Moreover, analysts state that no essential
changes in the exchange rate will be registered during the upcoming
two years.

According to Hakobyan, if Russia provides Armenia with the above
mentioned loan without a condition, the exchange rate for $1 will
‘float’ up to 310 AMD (from its current rate of about 305) and remain
there for two-three months.

Doctor of economics Tatul Manaseryan assures that the Central Bank and
the Government will reconsider the monetary-loan policy, because,
according to him, all the economic calculations prove that the real
exchange rate for one dollar is 400 drams (a rate Armenia hasn’t seen
since 2006.

"The Central Bank applies for interferences, since the provision of
financial stability is a priority," informs President of the Central
Bank Javadyan.

Deputy of the National Assembly Vardan Bostanjyan considers the
artificial restraint of dollar exchange rate to be unjustified.
According to him, the economy does not like artificial approaches,
because they can emerge any time.

"The fluctuations will possibly be eased by the Central Bank until the
financial flows to Armenia are increased. However, I think that the
Central Bank and the Government will not be able to keep the exchange
rate the same for a long time," says Badanyan.

According to him, the possible shaking of foreign currency exchange
rate will be about 20-30 %, and the exchange rate for one dollar may
become AMD 350-400 by summer.

Hakobyan’s estimates are more conservative as he estimates that in
four or five months the dram-dollar rate will be 330-340 –
approximately where it was end of 2007 (on October $1=330.8 AMD).

According to the economist’s predictions, in May-June of this year
foreign currency fluctuation is inevitable, and the time will show how
the Central Bank will manage to ease the dram inflation.

Professor Badanyan is optimistic. He believes it is not excluded that
the opposite may happen in Armenia if the Central Bank puts its
resources into turnover as cautiously, with specified purposes as
possible. – implying that Armenia could actually gain from the crisis.

Minister of Economy Yeritsyan said that Armenia might profit from the
crisis, for example, by importing equipment which cost less now than
before the crisis.

Maybe this time also the fact of Armenia’s not being integrated into
the world financial system will help the country; and the events will
produce a ‘unique’ development this time too? Although according to
the foresights of the Central Banks’ analysts, dram inflation will be
4 % in 2009 if nothing else happens in the international market.

***************************************** ***********************************

With much of the world now locked in a global financial and economic
crisis, each country is struggling to face the challenges of a sharp
and sudden decline in trade, a lack of credit and capital and even
gloomier forecasts of falling economic growth.

As recently as January 28, the International Monetary Fund (IMF)
warned that the global economy will "come to a virtual halt," as world
economic growth is expected to fall to its lowest level in 60 years.
The sharp fall in economic growth is now affecting everyone, from the
advanced economies of the West to previously "emerging economies" of
China and Russia, in a downward spiral that the IMF calls a "global

For a small landlocked country like Armenia, the economic situation
remains bleak.

For more than a decade, the joint Turkish-Azerbaijani blockade of
Armenia has limited the country’s ties to larger globalized markets,
making Armenia fairly isolated but also relatively insulated from the
volatility of global economics. But the Armenian economy is far from
being an island and is already dangerously dependent on external
remittances – the flow of money from Armenians abroad.

And with many Armenian families depending on money from relatives
working in Russia and the United States in order to meet basic living
expenses, the economic downturn in those countries has already led to
a severe decline in the flow of remittances back to Armenia.

At the same time, the country’s massive trade deficit has soared to a
massive $3 billion, its highest point in 2008, an increase of some 29
percent largely driven by a surge in imports and a continued steep
fall in exports.

Meanwhile, as investment in the construction sector falls and the
normally active service sector facing an expected decrease in tourism,
the Armenian government is trying its best to handle this latest
crisis. But if recent events are any guide, Armenia seems
ill-equipped to weather this storm.

The Armenian government’s first response to the crisis was neither to
step up the fight against corruption nor even to tackle the
deeply-rooted problem of low tax collection. Instead, Armenia turned
to outside sources for urgent help. On January 27, the World Bank
announced that it would more than double its loans to Armenia over a
four-year period. That one decision will increase World Bank lending
from $220 million to at least $525 million, offered through
low-interest loans for 2009-2012. In addition, the World Bank also
promised to consider even more aid through its commercial affiliates.

Beyond the World Bank, Armenia has also turned to Russia for help,
asking for an emergency loan. Yesterday (February 5) Russia’s Minister
of Finance Alexei Kudrin said that Russia will extend a $500 million
"stabilization credit" to help Armenia surmount the impact of the
global crisis. While the size of the loan is impressive, the lack of
details raises new concerns over what Russia is demanding from Armenia
in return.

More specifically, Russian financial assistance in the past has always
come with strings attached. For example, when Russia forgave a much
smaller amount of Armenian debt, of only about $100 million, it
acquired outright ownership of several of Armenia’s few strategic
assets. And with this new aid package five times as large, it is only
natural to fear what Moscow may now demand from Armenia this time.

The Russian aid package was also somewhat surprising, especially as
Russia is facing its own economic crisis, compounded by the fall in
world oil prices and the need to withdraw massive amounts of money
from the Russian State Oil Fund simply to stabilize the value of the
ruble, Russia’s currency. But there is a broader Russian strategic
agenda at work here.

This new strategy stems from the fact that Russia can no longer
exercise its energy leverage over other former Soviet states as easily
as before, when oil prices were much higher and prior to Europe’s
recognition of its vulnerability to Russian gas imports. So now,
instead of relying on energy as leverage, Moscow has instead exploited
the global financial crisis by, in effect, becoming the "lender of
last resort," providing financial aid to the former Soviet states that
no other country or institution has been able to provide.

This strategy was recently unveiled during the Moscow summit of the
Eurasian Economic Community (Eurasec), a body of five former Soviet
states in which Armenia holds "observer status." During that summit,
Russian officials unveiled their new $7.5 billion contribution to a
special "rescue fund" for Eurasec states, an amount in addition to the
more than $3 billion that Moscow has already promised to individual

Such external aid is not a cure-all for Armenia’s economic woes. For
one, the funding is to be used to support the Armenian government’s
ambitious plans for infrastructure projects and to offer small- and
medium-sized businesses greater and more favorable access to credit
from Armenian commercial banks. The problem is that even the jobs
that may come from the infrastructure projects will not be available
for at least several months, offering little to people in need of
immediate help. And with Armenian laborers already returning to
Armenia from Russia, the number of unemployed workers competing for
those new temporary jobs will be very high.

Another inherent limitation stems from the plans for business credit,
which because of the limited size and small consumer demand in the
country, suggests that even those firms with new credit will have
little to offer either the domestic or foreign markets.

But most importantly, the real concern is not limited only to the
long-term impact of such mounting trade deficits and greater external
debt. It is the set of deeper structural problems and vulnerabilities
of the Armenian economy that pose the greatest worry.

As long as the Armenian government remains focused on securing outside
support to maintain the closed economic system of oligarchic
monopolies and commodity-based cartels, little can be done to tackle
the more deadly threats form entrenched corruption and corporate tax
evasion. And even with the "rescue packages" offered from the World
Bank or Russia, Armenia is merely delaying, but not facing, the
unresolved problems of distorted economic growth and a deformed
economic structure.

Thus, while the economic reckoning may be deferred for a bit, it seems
clear that the crisis is far from over and by no means resolved, facts
that are sure to keep Armenian officials awake at night.

Analyst Richard Giragosian is based in Yerevan and has worked as a
consultant for various international organizations including the OSCE,
World Bank, and regularly contributes to Jane’s, RFE/RL, and Newsweek
International, among other publications. Giragaosian is a former
professional staff member of the US Congress. "Weathering the Storm"
is a weekly column exclusively for ArmeniaNow.

************************************* ***************************************

By Sara Khojoyan
ArmeniaNow reporter

The owners of shopping malls have become the center of the
government’s attention, aiming at ensuring the obligatory use of cash
machines at such markets and bazaars and at the same time relieving
the vendors’ tax burden that these machines have brought about.

The government is already making explicit statements that the vendors
who, starting from this year, are obliged to use cash machines "are
facing the challenge of paying large amounts of money" and that " it
is easier for them to protest against the state than against the
owners of the shopping mall."

The process of introducing cash machines at the shopping malls in
Armenia began in 2005. Along with that, anti-cash-machine rallies also
began; the traders unanimously claim that they are ready to work
paying a fixed rate, but refuse to use cash machines.

In addition to that the traders complain about all possible things
that have no immediate relation to cash machines: income tax, pension
fund, rent, and labor conditions, and the whole package of the
complaints is addressed directly to the government.

A considerable part of the issues raised by the traders during regular
rallies outside the Government Building has more to do with the owners
of the shopping malls and trading sites than with the State Revenue
Committee and the government.

"We want the rent to be lowered, the cash machines to be removed, we
haven’t sold anything since (the beginning of) January, how are we
going to pay these amounts?", "the machines fail to work at the
temperature of 2-3 degrees below zero" – these and other such
statements were chanted by the protesters in Republic Square.

Mary Harutunyan, Head of the Government Information and Public
Relations Department, told ArmeniaNow that in this way the traders
are protesting indirectly and drawing the government’s attention to
the problem.

The attention paid to the issue by the Prime Minister – accompanied by
several ministers, he visited the gold market owned by "Vagharsh and
Sons" Ltd in Khorenatsi street in Yerevan and familiarized himself
with the problems on the spot – was exceptional, because Tigran
Sargsyan’s visit became an occasion for the traders to voice their

According to Harutyunyan, the traders particularly complained to the
Prime Minister about paying a large amount of money for their general
activity in the market.

"In the stand he visited, the monthly amount was about 70,000 drams
minimum (about $230), out of which only 18,000 (about $60) is paid as
a tax to the state and another 5 thousand (about $16) – to the pension
fund, the rest goes to the market manager as payment for various
services: the rent, accounting, and so on, which, however, as it
turned out during the visit, are not properly provided."

The government information official also points out that people
complained to Tigran Sargsyan about not having any alternative

"They told him that when they talk about the conditions to the owner
of the market, the response they get is "if you don’t want to work in
these conditions, quit the job," and I think that means they are
facing the problem of losing their jobs," Harutyunyan goes on to
present the details of the Prime Minister’s visit.

To combat the situation, the Prime-Minister gave orders to prepare an
analysis of the financial results of the gold market’s activity and
rent and tax obligations, to document violations of labor conditions
in the market, to examine the situation with the technical
requirements, including fire safety, being sure that as a result of
all this favorable conditions will be secured at all shopping malls
and markets in terms of improving both the financial-economic and
labor conditions.

However, some people are skeptical whether anything will change, and
certain ordinary traders will be the ones to suffer.

Vregh Sargsyan, a trader at the gold market, says they have not
complained about the conditions.

"We have been working in these conditions and are pleased. We are not
complaining about our director, we, the 5,000 people working here,
have the opportunity to earn our daily bread and support our families,
but I saw on TV that Tigran Sargsyan did not say a word about cash
machines, whereas it was the cash machines we had complained about."

Angrily stating that he is never going to use a chash machine, Vregh
Sargsyan explains: "everything will stay the same. I will only have to
pay an additional 3 percent."

Vakhtang Siradeghyan, the press-officer for "Transparency
International" anti-corruption center, believes that by raising other
issues with the help of his visit, the Prime Minister has simply
diverted attention from the actual problem.

"In this case the Prime Minister, instead of solving the problem
directly and satisfying the people’s demand not to use cash machines
in their work, has changed the subject, addressing the labor
conditions. By doing this, he does not solve this issue, he relocates
the problem. People were not complaining about the conditions; they
had been working in those conditions for 10 years, and they will carry
on working for yet another 10 years."

"And if the purpose of the government is to have the owners of the
shopping malls provide good conditions and earn small amounts of
money, they could have done this a long time ago. To do that, it would
have sufficed to know that traders pay an "x" amount of money for each
stand, which is common knowledge. They could have multiplied that "x"
amount by the "y" number of the stands and required 20 percent of the
final sum," Siradeghyan added.

****************************************** **********************************

Naira Bulghadaryan
ArmeniaNow reporter

The Armenian Government’s current enforcement of a law regulating
taxes through the use of cash register receipts has raised the
discontent of Armenian merchants, who say that having to pay
legitimate taxes will bankrupt them.

Soon after merchants’ protested in Yerevan, (gathering in front of the
Government Building, demanding to revoke the reform) the merchants of
Vanadzor also began expressing their dissatisfaction with the new
reform. Some Vanadzor clothes traders held protests followed by a
letter to Lori Province Governor Aram Kocharyan asking for assistance
and support.

(Effective January 1, RA Law on Use of Cash Control Machines, is
imperative for small and medium size entrepreneurs, including
individual businessmen.)

"It doesn’t matter to whom they appeal. Neither the Governor nor the
President of the country can satisfy their appeal," says Henrik
Kochinyan, head of Lori Region Tax Service.

For Varazdat Mikayelyan, a Vanadzor merchant, his small area has
become means to earn his living during ten years. The 48 year-old
shoe and bag trader is ready to pay the taxes, but not through the
method of cash register control. He is sure he will become bankrupt.

"My monthly taxes are about 75,000 AMD (about $250) and that is
normal, but with the cash control I would have to pay more," says
Mikayelyan, more or less admitting that his "off the books" sales are
now not being taxed. Most merchants who operate in bazaars or kiosks
or have small markets have typically not recorded all sales
transactions. Only since the January 1 enforcement, have cash receipt
machines appeared in many such places of business.

Karine Arestakesyan, 52, dreading even the mere thought of using CCMs,
says she would not be able to pay back her bank loans. Arestakesyan,
with 9 years experience of working a shopping mall, every year has to
take loans in order to keep her business going, now feels lost.
"I haven’t sold anything for already 2 days. What we earn is hardly
sufficient to buy bread.

"Working with CCM I’d have to pay more and would have to give up my
business," she says.

The merchants refusing to use CCM, at whose stalls the already
installed but yet unused devices, are preoccupied with another issue.
They import their goods either from Turkey or Georgia, or from
wholesale markets in Yerevan and tax inspectors have explained the
principles of CCMs’ work and added that from now on they [merchants]
have to inventory their goods. All such information is registered in
the invoices provided at places of purchase.

Neither foreigners nor traders from Yerevan have ever given them invoices.
"If they give us such a document, we will be able to work by CCM,"
says Hripsime Gharagyozyan, a reseller.

She wonders how she can now give a receipt for an item, when she
wasn’t given such when purchasing the same item and she also wants to
be able to bargain the price with customers.

Kochinyan, head of Vanadazor Tax Service, explains that invoicing has
no connection with CCMs, and according to the law only 2% will be
taxed from the turnover of goods in case of having all invoices, if
not then the tax rate is 10%.

Kochinyan believes that those interested in working without CCMs – in
this case that means a shadow economy- are behind the complaints and
resistance to obey the law.

"Unfortunately, traders pay not only legal fees at markets, but also
make illegal payments (bribes) to different structures," says
Kochinyan, at the same time assuring that the traders will soon see
the advantages of CCMs. "Everyone will be have to pay taxes, be it
small and big businesses," he says.

Economist Karen Sargsyan has a different opinion on the issue. He has
had several meetings with the complaining traders and has come to a
conclusion that the government is consistent in implementing law only
with regards to small and medium enterprises.

Sargsyan believes that traders not having relevant education will not
be able to run their own business in the initial stage and will have
to hire accountants, whose services are expensive.

The Head of the Tax Service has suggested that even in the case of
working with CCMs, traders should seek a marketing manager’s services.

Sargsyan thinks that in the conditions of economic crisis particularly
those who run small and medium businesses should be left alone for a
while, and this will give them enough time to familiarize themselves
with economic reforms.

He fears that in this case many of them will lose their businesses
they have been building for years.

"If they at least gave a year for the economic crisis to pass and
people’s buying ability to increase, we would have the opportunity to
pay taxes," Mikayelyan, a tradesman, reflects. Otherwise he will have
to shut down his small shopping pavilion, turning from a trader into
an unemployed.
************************************** **************************************

Naira Hayrumyan
ArmeniaNow reporter

Seats of parliament have shifted in Karabakh since the New Year as
five deputies of the Democratic Artsakh Party (DAP) announced
intentions to drop out of the ruling faction.

DAP holds 16 seats of the 33 seat parliament. The issue has not yet
been discussed in the NKR National Assembly, but if the deputies do
give withdraw from the faction, it would mean the party would give up
its right to appoint a Speaker of Parliament. That right would instead
go to Azat Hayrenik party (which currently has 12 seats in

Garik Grigoryan, (one of the deputies who applied for leaving the
faction and is Chairman of the NKR’s parliament Standing Committee on
State and Legal Affairs) said that the disagreement with other members
of the faction was clearly expressed at the discussion over the
project of Budget 2009. Some of the DAP’s members insisted on the
anti-crisis budget, whereas the rest of the faction preferred not to
contradict the project submitted by Prime Minister Ara Harutyunyan.
Even though the faction voted for the adoption of the budget, it made
a rather harsh announcement criticizing the inadequacy of the crisis

The Parliament (elected in summer 2005 and consisting of four parties
– entirely supported Bako Sahakyan in the Presidential Elections of
2007. Thus, an absolute one-pole political system was formed in

During the elections there was hope that Sahakyan’s opponent Masis
Mailyan would create an oppositional party, yet it was not fulfilled.
Recently he headed the Council on Foreign Policy and Security Issues.

"Part of our community expected that I would consolidate my solid
electorate creating an oppositional political structure," Mailyan told
ArmeniaNow. "But I do not think that is my task. There are some
divided political parties functioning in Nagorno-Karabakh Republic,
part of them, probably, will start opposing the acting authorities at
the eve of the upcoming parliamentary elections."

People in Karabakh do not think that DAP, being the political platform
of authorities in Karabakh since 2000, may become an opposition. Yet
it may become a platform for former NKR President Arkadi Ghukasyan’s
return to Karabakh politics.

Sources close to authorities confirm that the possibility of
Ghukasyan’s appointment to the position of Prime Minister is being
discussed. However, Ghukasyan is not commenting on it yet.

Generally, cadre changes have been taking place in Karabakh since
Sahakyan was elected president. One third of the Government formed in
October 2007 has since changed.
The New Year brought a new wave of dismissals. Most of the deputy
ministers were dismissed, especially in the sphere of law-enforcement.
The move is seen by many as signaling Sahakyan’s intention to battle
against corruption in NKR. (In its report of 2008, the republic’s
Prosecutor’s Office reported that it did not hear a single case of
corruption charges last year.)

It is also noteworthy, that Edward Atanesyan was dismissed from the
position of Deputy Foreign Minister, and Vardan Barseghyan, who is the
permanent representative of Naghorno-Karabakh Republic in the USA, was
appointed to that position. According to experts, the current Karabakh
authorities are competent with domestic issues, however lacking in
foreign policy experiences. Some see Barseghyan’s appointment as a
remedy against that shortcoming.
************************************* ***************************************

Karine Ionesyan
Special to ArmeniaNow
>From Charentsavan

The traces of cars, dogs, and occasionally people on the snow cover
the road to Bjini mineral water factory in Charentsavan in the Kotayk
province. A thermometer shows a temperature below zero, where the
factory used to hold at 20 degrees Celsius. For four months the
equipment has been growing cold, while the relationship between its
owner and Armenian authorities froze long before.

The factory, belonging to the family of former RA National Assembly
(NA) deputy Khachatur "Grzo" Sukiasyan stopped running October 22,
2008. Sukiasyan has been on the lamb since being wanted for taking
part in the disorders last March 1, and for angering authorities with
his support of oppositionist candidate Levon Ter-Petrosyan.

Authorities claim Bjni owes $13 million in fines over a dispute of
whether a meter was placed in the proper location. Sukiasyan
supporters say it is pure persecution on the part of officials.

The once popular factory is now waiting for its fate as well as its
450 employers which wait for the reopening of the factory and a new
owner. Yet no buyer is found at recurrent announcements about its
auction. The second compulsory electronic auction of property rights
alienation started February 5 and will last until February 16. The
price at the auction was lowered by 10 percent in compliance with
Article 35.4 of the RA Law on Bargaining. The starting price was set
at 4.3 billion drams
($14.8 million).

"The factory was closed after these events, and about 500 employees
lost their positions. Four hundred and fifty of them are from
Charentsavan, a town which has no running factories," says Director of
Bjni Company Laert Harutunyan. (Charentsavan’s population makes 24,900

"When the factory was closed some workers were interrogated by police
and their apartments have been searched. This is a mineral water
production and not the sphere of drug dealing to resort to such
methods," added the director.

Bjni (as well as the other brand of the factory -"Noy" table water)
can still be found in the shops today. As Harutyunyan explains state
workers come, transport the products from the store and sell them in
shops, and the amounts received from the sales go to the state budget.
The director says he does not know the amount of bottles in stores.

Bjni had operated since 1977. (Sukiasyan became the owner of Bjni in 1997)

It was the major competitor of Jermuk, Armenia’s leading table water
supplier. In 2007 Bjni was 175th on the list of 300 largest taxpayers
and paid 330 million drams ($1.1 million) in tax. In 2008 it paid 370
million drams ($1.2 million) in tax. The factory made the most profit
in the year it was closed.

Former Bjni employees have little information about the fate of the
company – waiting to see if it will be sold or re-started by some
other means.

Edik Avetisyan, 60, has worked at the factory for 7 years and remains
now as a guard.

‘My wife and I get pensions, so we are fine. The situation of those
who have their only income from here is even worse. There was one
member from a family working at the factory, yet he/she fed many,’ he

Inhabitants of not only Charentsavan but also neighboring villages
used to work at Bjni factory. 70 employees from Alapars, the
neighboring village (of about 2,300).

The Baghdasaryans’s family of 7 faces hardships after the head of the
family lost his job at the plant.

"My husband was a porter; he was earning 40.000 – 60.000 drams ($
133-200) per month. Our monthly house renting fee is AMD 10,000 ($33).
We used to cover it and all the bills by his salary. Besides, we
hardly managed to send our children to school. We used to buy food on
credit from a shop, and the next month when he would get the salary,
we paid for our shopping," says 40-year-old Anahit Baghdasaryan.

Since last month she has worked as a shop janitor, earning 10,000
drams ($33) a month.

Their neighbor Armen Kocharyan, 40, is also unemployed. He was earning
60,000-70,000 drams (about $200-233) per month at the plant

He has two daughters – six and eleven-year olds. His wife – Alina
Movsisyan says that they have no relatives living abroad who may help
them. Currently they live by means of 21,000 drams (US $ 70) hardship
allowance from the state, and they have a lot of debts. "But people
cannot lend us endlessly," the woman says.

The members of the Kayvazyan family, living next to them, are also
living on credit. Samvel Kayvazyan who has three children, was a
driver, earning 100,000 drams (about $333) per month.

"Our family consists of seven members. We used to walk to the factory,
but it was fine, at least we earned money for our family," says
37-year-old Naira Sukiasyan who earned 60,000 drams (about $200) as a
box maker.

Her two sons serve in the army while one daughter-in-law, a student at
Yerevan Medical College, lives with them. They say that they sold her
jewelries for her travel expenses to Yerevan.
The budget of the family is completed by the grandmother’s pension –
20,000 drams (about $73) per month.

>From time to time the members of opposition and representatives of
"Hima" (now) youth movement organize meetings in support of Bjni
factory employees. The main employees say that they do not want to be
involved in politics. Maybe the only struggler is 70-year-old Vladimir
Adalyan, whose family of six lives off his 27,000 drams (about $90)
pension, plus two sacks of flour given by his brother’s grandson.

The old man says he feels sorry for his neighbors and encourages them
to protest against the plant’s closing.

"This nation is very much afraid," Adalyan says. "We sit and decide
to protest, but after making a few steps I turn around and see that
everyone left."
************************************** **************************************

By Lilit Hovhannisyan
Special to ArmeniaNow

Tonight (February 6) young Armenians who follow tradition (or who just
play along), will eat a salty cookie and hope the result will be a
glimpse of their future betrothed.

The Feast of St. Sarkis comes Saturday and with it the tradition that
young people who go to bed after eating a specially-prepared salty
cookie (and no water) given at twilight, will see their future mate in
a dream.

In the holiday calendar of the Armenian Apostolic Church the Feast of
St. Sarkis is classified as a movable feast – it has a moving range of
35 days. It comes with the blessing of His Holiness Karekin II,
Supreme Patriarch and Catholicos of All Armenians, who proclaims the
day for youth.

On that day a mass devoted to the saint will be served in all the
churches named after him. The night devoted to the holiday is
particularly lively. Many young people, among whom a large number are
girls, will go to sleep thirsty and hope their future spouse will give
them water in their dream.

"I am going to eat the salty cookie this year as I did in previous
years and I expect to have a dream with my future spouse," says
Tatevik Mirzoyan, 22, student of Theatrical Institute. "My sister did
so; she ate the cookie and saw a man in her dream who offered water to
her. The same year she got married to the man she saw in her dream."

Many youth are attracted to the tradition year by year and it has
become a lively celebration. (The closest equivalent by secular
standards is Valentine’s Day – a western tradition that has lately
become popular here, too.) In actuality St. Sarkis’ holiday means more
to the Armenian Apostolic Church.

St. Sarkis was a historical personality and there is even evidence
that Mesrop Mashtots brought the saint’s relics to Armenia and kept
them in the village of Ushi of Aragatsotn province. Another relic is
kept in Gougark.

Among Armenians’ most beloved saints, St. Sarkis (4th century) was
believed to be a miracle worker whose army of 40 defeated an enemy of
10,000. The legend says that when all his soldiers were killed because
of a plot, he was rescued with the help of God, there was a big storm
and he was able to escape on horseback).

Other nations also celebrate such kind of holiday, for instance, Kurds
call it "Khdr Nabi," Assyrians call it "Mar Sargis."

In some regions of Armenia the salty cookies are made by widows, but
in the capital young people mostly buy them at churches.

This Saturday festive events will be held in churchyards across
Armenia and will include national games and the participation of
choirs, dance ensembles, and horsemen symbolizing St. Sarkis.
Araratian Patriarchal Diocese and Boghossian Parks have also arranged
a festival at – appropriately – the new Lovers’ Park in Yerevan.