Armenia: Does Gas Explain Decision To Join Customs Union?

Sept 11 2013

September 11, 2013 – 10:27am, by Gayane Abrahamyan

Some Armenian officials would have you believe that Yerevan’s surprise
decision to join the Russia-led Customs Union all came down to economic
moxie. And, in a way, perhaps it did. But in gaseous form.

Armenian Energy and Natural Resources Minister Armen Movsisian told
parliament on September 11 that the question of how to grapple with
the higher prices Russia’s state-owned Gazprom is now charging for
natural gas would be decided within the framework of the Customs Union.

“The decision already has been found, and soon [everything] will be
resolved,” Movsisian said, expressing his support for the trade deal, reported.

Announced this summer, the 18-percent price hike by Gazprom, Armenia’s
chief provider of natural gas, had fueled not only further worries
for the country’s hard-pressed economy, but, also, predictions of
widespread opposition to the government.

President Serzh Sargsyan had made no mention of gas when announcing on
September 3 the plan to form a trade pact with Russia, Kazakhstan and
Belarus — an unexpected decision that has ruined (at least for now)
Armenia’s chances of an Association Agreement with the European Union.

Officials since have scrambled to make it seem that the Customs Union
was the only choice going.

“The decision is exclusively in our best interests,” National
Security Council Secretary Artur Baghdasarian asserted at a recent
press conference. “We took a long time to research and finally
concluded that Armenia’s economy is not compatible with that of the EU
countries. The major part of our exports are to the CU member-countries
[Belarus, Kazakhstan, Russia — ed] and we couldn’t have shut a
300-million-person market.”

But the official data tells a different story. In 2012, Armenian
exports to the European Union ($560.3 million) were nearly double the
value of exports to Russia, Kazakhstan and Belarus ($290.7 million).

Trade in the first six months of 2013 shows a similar pattern,
according to the National Statistical Service — $250.6 million
worth of goods went to the EU versus $149.6 million to the Customs
Union troika.

Russia, whose companies hold critical stakes in Armenia’s
telecommunications, transportation, mining and energy sectors, edged
out the European Union for direct investment in 2012, but just barely
— $393.8 million versus $334.9 million.

Economist Bagrat Asatrian, a former president of the Central Bank
of Armenia, predicted that the state budget will suffer a 15-20
percent loss in revenue from the customs duties on imports from
CU member-countries that Armenia now will forgo. At the same time,
goods from the EU, which outnumber the in-take from Russia, will have
higher duties imposed, leading to price increases.

To many Armenians, the speed with which the decision was made had
suggested strong pressure from Moscow.”The biggest levers were
national security and the Karabakh issues,” believed political
analyst Sergei Minasian, deputy director of the Caucasus Institute,
a Yerevan think-tank.

“We couldn’t have expected anything else under the circumstances,”
he said. “Here it was about political concerns, rather than economic

Politics and gas, though, are intrinsically linked for Armenia. Having
tangoed with protesters already this year over transportation fares
and the presidential election, the government has no desire for the
protest momentum to keep on going.

The decision to join the CU was unexpected, though, even for some
high-ranking officials and powerful politicians.

Hours before President Serzh Sargsyan’s September 3 announcement,
Galust Sahakian, head of the ruling Republican Party of Armenia’s
parliamentary faction, excluded any decision on the Customs Union,
telling RFE/RL in an interview that “discussions are not at a stage to
allow us stating our position, especially that Armenia has no common
customs border with Russia.”

Thirteen days earlier, in an interview with ArmNews TV, Deputy Foreign
Minister Shavarsh Kocharian had gone still further, stating that
joining the CU would mean “losing [Armenian] sovereignty.”

Amidst a recent surge in anti-Russian sentiments, popular opposition
to the CU decision continues along.

At latest count, 4,000 supporters had signed on to the Facebook
group “Against the Customs Union with Russia,” which has been staging
protests outside of the presidential residence, the RPA headquarters,
and the European Union’s mission office.

“By a decision made in four days, Armenia has lost four years of
achievements” in establishing closer ties with the European Union,
and a reputation with its largest trading partner for reliability,
commented Richard Giragosian, head of Yerevan’s Regional Studies
Center. “This is a loss that Armenia has to try to restore.”

From: A. Papazian

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