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World Markets Research Centre
Global Insight
October 24, 2008

Armenian Trade Deficit Remains Deep Through September as Exports
Contract

by Venla Sipila

Armenia’s deep external imbalances continue to cause
concern. According to the latest, preliminary data from the country’s
Statistical Service reported by ARKA News, exports in the
January-September period amounted to $813US.8 million, falling by 1.8%
in annual comparison. In a sharp contrast, imports increased by 38.3%
year-on-year (y/y), reaching $3US.0 billion. Thus, the trade deficit
for the first three quarters of the year measured some $2US.2
billion. In September alone, however, exports surged by over 70% from
August, while imports gained nearly 30% month-on-month (m/m).

Significance:The Armenian trade deficit for the January-September
period this year already exceeds last year’s annual total, when the
shortfall amounted to around $2US.1 billion, or 23% of GDP. The trade
imbalance has soared as domestic demand has persistently maintained
very high growth rates, fuelling imports, at the same time as export
potential remains weak. Economic growth should finally start to ease
from double-digit rates, and this will have a moderating impact on
imports. On the other hand, import value will rise as the price of gas
charged by the Russian energy giant Gazprom, the monopoly gas importer
in Armenia, will increase to $154US per 1,000 cubic metres (cm) from
the beginning of April 2009, up from $110US per 1,000 cm this
year. Likely due to price developments in international markets, the
price for next year is lower than earlier sought by Gazprom, but the
increase will nevertheless have a clear upward impact on Armenia’s
import value.

Armenia has previously agreed with Gazprom to bring Armenian gas
prices up to market level by 2011, with a rise to $200US per 1,000 cm
planned for 2010. The trade deficit further continues to put pressure
on the overall current account position, which leaves Armenia
vulnerable to external shocks, as financing of the deficit is
dependent on investment and transfer inflows. Given the current
increased international risks related to availability of financing in
particular, it is important for Armenia to stay firmly on its
well-started reform course, in order to strengthen its export-earnings
capacity and thus, its potential to bring its external balances onto a
more sustainable path.

RUSSIAN POLITICAL SCIENTIST: EXPERT GROUP REQUIRED FOR ADJUSTMENT OF ARMENIA-RUSSIA RELATIONS

ARKA
Oct 24, 2008

YEREVAN, October 24. /ARKA/. A bilateral expert group needs to be
set up for adjustment of Armenia-Russia relations, said Professor
Vladimir Zakharov, Deputy Director of Caucasus Studies Center, the
Moscow State Institute of International Relations.

This group should start working over a wide range of issues –
political, economic and Karabakh problem – straightway, the expert
said at the video-bridge on results of Russian President Medvedev’s
visit to Armenia in "Novosti" International Press Center in Yerevan.

Zakharov pointed out the necessity of preparation of documents
for top-level meetings. "The work of the expert group is necessary
for bringing the unbiased picture and situation to notice of our
leadership," the political scientist said.

In talking about Karabakh problem, Zakharov stressed the necessity
of Karabakh’s involvement in the negotiation process.

SIRVARD KARAMANUK PASSED AWAY

Noyan Tapan
Oct 20, 2008

ISTANBUL, OCTOBER 20, ARMENIANS TODAY – NOYAN TAPAN. On October 20
Costantinople-based world-famous composer and benefactor Sirvard
Karamanuk passed away. As Noyan Tapan was informed by Ara Kochunian,
editor of Istanbul’s Zhamanak (Time) newspaper, the 96-year-old artist
passed away in national St. Saviour Hospital, were she spent her last
days for treatment purposes.

MORE PEOPLE TAKEN TO VANADZOR INFECTION HOSPITAL

Panorama.am
16:20 24/10/2008

At 12:00 the public relations department of the Ministry of Healthcare
informed Panorama.am that currently 55 sick people are being cured with
the same intestinal infection symptoms in Vanadzor hospital. This is
the third day people suffer from the current sickness, anyway the
chief epidemiologist of the state Ara Asoyan refuses to make any
previsions insisting that they are "in the preliminary stage".

"Those who try to find preliminary previsions are mistaken as it
reminds guessing over coffee cup. We, the doctors, we can not say
for sure what the matter is," said A. Asoyan, and promised to give
information as soon as something is revealed.

ARMENIA SHIFTS TO WINTER TIME ON OCTOBER 26

armradio.am
23.10.2008 16:19

According to Armenian legislation, Armenia will shift to winter time on
October 26. At 3 a.m. the pointers of the clock must be drawn an hour
back all over the republic, Information and Public Relations Department
of the Ministry of Economy of the Republic of Armenia informed.

CONDOLEEZZA RICE PROMISED TO TIGRAN SARGSYAN

Lragir.am
19:03:23 – 22/10/2008

During the Russian-Georgian war in August the Armenian economy
sustained damage of 670 million dollars, including the lost profit,
possible investments, and other, stated Prime Minister Tigran
Sargsyan on October 22 during the question and answer session of
the parliament. He answered the question of Member of Parliament
Victor Dallakyan whether the Armenian government brings up this issue
during international meetings, and whether this particular issue was
discussed with the Americans when the prime minister visited the U.S.,
and the Russians, when the Russian president visited there.

"The stance of the president and the government of the republic
is that the international organizations must discuss this issue
in terms of the region rather than separate countries when the
compensation of territories or financial and technical assistance
is under consideration," Tigran Sargsyan stated. He says for this
reason both he and the foreign minister bring up the issue that
Armenia also sustained losses, and when the financial assistance
for the recovery of the damage is discussed, they must realize that
Armenia also sustained losses, and Armenia must also get assistance.

"We were reassured by our colleagues in the United States that
this issue will be discussed. This issue was discussed not only
in the meeting with Dick Cheney, Condoleezza Rice, but also the
director of the IMF and the leadership of the World Bank with whom
we met. We will get such assistance, first of all it is going to
be technical assistance. And they promised that we will get that
assistance. Condoleezza Rice made this promise, that any technical
assistance that we will get is necessary to us, as well as we have
arrangements with the IMF and the World Bank about financial and
technical assistance," Tigran Sargsyan said.

They discussed the issue with the Russians as well, and discussed more
thoroughly. They discussed sphere by sphere what risks the August
events pose to Armenia. "The problems that we were discussing were
divided into two parts. The first, what action we should take to raise
the reliability of the economic system of Armenia, the ability to face
risks, and second, the undisrupted operation of definite enterprises
because there are over 1000 companies which are run on Russian capital,
some of which have a vital importance to our economic system. And
naturally we have discussed the problem of raising the reliability of
definite businesses, and we have definite arrangements, including on
technical and financial assistance, and we hope that the protocols
which we signed during the activities of the interstate commission,
we will be able to bring them into being together with our Russian
partners," Tigran Sargsyan stated.

483 HAPPY AND UNHAPPY STUDENTS IN YEREVAN STATE UNIVERSITY

Panorama.am
19:53 23/10/2008

This year the Yerevan State University started a new system of
rotation. Currently 483 students of the YSU having full scholarships
to study have passed into chargeable system and another 483 are awarded
full scholarships, said Hrant Zhamharyan from YSU to Panorama.am.

To the question whether the new system is a successful one, he said
"This system is an effective one as feeling real competition encourages
the students to study with perfect marks to be transferred in free of
charge system. And those students who do have full scholarships are
deprived from that opportunity is they don’t study with appropriate
marks."

According to student Liana Grigoryan the current system is a real
success "but still the students of the same group are jealous with
each other. Everybody tries hard to get full scholarship, if once we
helped each other during the exams now we don’t do it."

MEDVEDEV UNDERSCORES PRE-EMINENCE; OF RUSSIAN-ARMENIAN TIES

Interfax News Agency
Oct 21 2008
Russia

Russian President Dmitry Medvedev thinks that Russian-Armenian
relations are exceptional.

Speaking ahead of face to face talks with his Armenian opposite number,
Medvedev said that he plans to discuss "all economic, humanitarian
and current global economic issues" with his counterpart.

"We will discuss all questions that are linked to our exceptional
relations," he said.

The opening of the Square of Russia in Yerevan, which preceded the
talks, is a symbolic event, "which proves our friendship, partnership
and allied relations."

RUSSIAN PRESIDENT HAILS TIES WITH ARMENIA

Public Television of Armenia
Oct 21 2008

Excerpt from a speech by Russian President Dmitriy Medvedev at a
ceremony to mark the opening of Russia Square in Yerevan, broadcast
by state-owned Armenian Public TV on 21 October. Medvedev is paying a
two-day official visit (20-21 October) to Armenia for the first time
as Russian president.

Dear [President] Serzh Azatovich [Sargsyan], dear friends!

I am truly happy to visit Armenia one more time and open a new square,
Russia Square, in Yerevan today together with you. This event is not
just a happy one for all of us, it is truly momentous and it confirms
the sincerity and genuine nature of our brotherly feelings. It speaks
of the openness and depth of the relations between our countries. We
are now in a square named in honour of our country. With great
gratitude we perceive this as a sign of respect for contemporary
democratic Russia and its people. This is also a sign of respect for
our common history, recognition of the immense value and experience
of the centuries-long friendship. Russian citizens carry the same
attitude of full trust towards Armenia in their hearts. We value
this open neighbourliness and will do our best to ensure that
our strategic partnership gets stronger and develops so that the
traditions of mutual cultural enrichment increase both through new
projects and through closer, direct human links. Comprehensive and
multidimensional cooperation and also an understanding of the obvious
advantages in search of joint responses to the various threats in the
contemporary world serve to strengthen further the ties between Russia
and Armenia. I am sure that coordinated actions in the international
arena are a serious factor in security and strengthening our positions,
both in the Caucasus region and in the world. Dear friends, good and
kind neighbours are always happy about each other’s successes and
we can see how Armenia’s achievements have been increasing. This has
been especially noticeable in recent years. Speaking frankly, we are
directly interested in the Armenian people living in a strong and
prosperous state, in a stable state. We are sure that Armenia also
wishes Russia peace, strength and good things. Our successes are a
necessary condition for our partnership. The important thing is that we
both have the political will and, what is perhaps most important – the
striving of people, their being interested in developing joint business
and also joint humanitarian projects, and simply in communicating
the way the very closest people, people that help each other, do.

CONSENSUS OVER KARABAKH ISSUE SEEMS ATTAINABLE – AZERI THINK-TANK GROUP

Turan News Agency
Oct 9 2008
Azerbaijan

Problems in the Southern Caucasus are again in the spotlight of the
interested sides and international organizations, a piece from the
analytical service of Azerbaijani independent agency has written. The
latest events in Georgia served a lesson for superpowers and they
do not want a repeat of similar events in the Armenian-Azerbaijani
conflict over the Karabakh problem, the report said. In a comment
on optimistic statements from the USA and Russia about the need for
resolving the conflict within the framework of Azerbaijan’s territorial
integrity and international laws, the Azerbaijani official described
them as positive signs. The report also concludes that the Turkish
initiative on a new stability platform in the Caucasus seems getting
positive reactions from the regional countries. The following is the
text of Turan’s analytical service report by private Azerbaijani news
agency Turan on 9 October headlined "Intensification of the Karabakh
problem"; subheadings have been inserted editorially:

The latest known events in Georgia have been conducive to a sharp
concentration of attention and the intensification of the diplomatic
activities of all the interested powers and international organizations
to problems and the future of the South Caucasus region. The
highest accumulation of interest has become apparent in the extreme
intensification of the Nagornyy Karabakh (the Armenian-Azerbaijani)
conflict settlement.

Protracted Karabakh problem again comes under the spotlight

The preservation of this conflict in a frozen and indefinite ("up in
the air") state for a long time seemed suited everyone: both the OSCE
Minsk Group and the mediating countries (the USA, Russia and France)
and even the conflicting countries (official Yerevan and Baku), who
did not show an excessive zeal for the resolution of the problem. For
this reason, the negotiations process proceeded in a tedious and
drooped regime with a periodical imitation of brief intensification
and without any serious breakthrough enabling the sides to count on
quick achievement of positive results.

The events in Georgia have unexpectedly and sharply brought up to
date the problem of the Armenian-Azerbaijani conflict and a powerful
impulse to stepping up peacekeeping and mediation efforts (both in
a previous and a new format) in order to secure a quick solution to
the Karabakh problem.

In essence, all the interested countries (the USA, Russia, France and
Turkey) despite the "post-Georgian" tension and the rivalry in the
relations, they suddenly started to demonstrate a surprising solidarity
with regard to the necessity of a quick and peaceful resolution to
the Karabakh problem within the framework of the international laws
and the territorial integrity of Azerbaijan.

The impression is that a certain geopolitical consensus has already
been achieved over the necessity of a quick resolution of "the Karabakh
knot" although models of resolution most likely will differ. Anyway,
the Karabakh problem is again cherishing optimistic expectations.

The plenipotentiary representative of the president of the
Parliamentary Assembly of PACE, Goran Lennmarker, has recently
said that 2009 will be a decisive year for the resolution of the
Armenian-Azerbaijani conflict. Commenting on these remarks, the head
of the department for international relations under the Presidential
Executive Staff, Novruz Mammadov, also seemed optimistic: "The need
for the settlement of the conflict is obvious for everyone for the
neighbouring powers, Armenia, the US administration, the Minsk Group
co-chairmen and members of the Council of Europe. Proceeding from this,
one should expect concrete and substantial steps for the resolution of
this conflict next year. With a delay in the resolution of the problem,
Armenia is losing a lot and in fact, brings its future into question."

Consensus seems possible among key players

A short while earlier the US OSCE Minsk Group co-chair, Matthew Bryza,
said in Baku: "The Georgian events testify to the need for a quick
resolution to the Nagornyy Karabakh conflict." At the same time,
he emphasized that "the resolution of the Karabakh conflict starts
from the principle of the territorial integrity, taking into account
international experience and laws".

They are not only conditional upon the fact that Russia may in this
or that form repeat the Georgian scenario in Azerbaijan but also with
the fact that by always resorting to similar blackmail, Moscow can
noticeably hammer out or correct in a necessary vein geopolitical,
regional and energy plans of the South Caucasus countries (first of
all of Baku). After the Georgian separatist conflicts were temporarily
"removed" from the agenda, the Karabakh problem has turned into a key
risk factor and a leverage of manipulating with the situation in the
South Caucasus which stimulates an interest of the West to resolve
the problem.

However, though strange, Moscow also started to demonstrate a similar
interest. Russian Foreign Minister Sergey Lavrov’s interview with
Rossiyskaya Gazeta was filled with optimistic forecasts in this regard:
"Our feeling, as one of the three mediators, is that the upshot is
completely possible. It goes without saying that it is up to Armenia
and Azerbaijan to resolve [the problem] within the framework of
direct agreements, but the mediators: Russia, the USA and France,
who understand all the subtleties of this process, see a chance of
resolving it."

Speaking about Armenia’s difficulties, which "has a few geographical
and political connections [with outer world]" except for de-blocking
relations with Turkey and Azerbaijan, Lavrov also notes an "absolute
need and urgency for a quick resolution" to the Karabakh problem. True,
without considering it important to note again the need for the
resolution of the problem within the framework of Azerbaijan’s
territorial integrity.

Briefly, all the interested sides (the USA, Russia, Turkey, the
European Union, the OSCE Minsk Group and the sides to the conflict
themselves) are united on the need for a quick resolution of the
conflict and express a certain optimism about the matter. It is
noteworthy that all the sides express full support for the diplomatic
activities and a peaceful initiative of Turkey for the realization
of the Caucasus Peace and Stability Platform, viewing it as a real
way of resolving many problems of the region, in particular, the
Armenian-Azerbaijani conflict.

This circumstance allows us to assume the presence of a certain
preliminary consensus about Turkey’s initiative within the framework
of which a breakthrough is also possible in the Karabakh settlement.