Hovhannes Igityan: Only reason why they ‘invited’ Armenia into the
Customs Union was to show Europe who wears the pants in the
post-Soviet area
ArmInfo’s interview with member of the Board of Armenian Pan-National
Movement Hovhannes Igityan
by David Stepanyan
Saturday, February 22, 10:32
The ruling regime’s zeal in adopting more and more unpopular measures
has put Armenia on the verge of a default, with the only solution they
offer being the “accumulative” robbery or some ridiculous fines for no
OMI policy…
It is very hard to speak of economic component of any issues in
Armenia, given that the actions of the authorities contain neither
macroeconomic components nor economic criteria. The bankruptcy of the
authorities emerges in economy when they stake on indirect taxes and
take indirect measures to replenish the budget. Imposing indirect
taxes is the easiest thing today. Look at VAT on the vital foodstuffs,
it is an additional load on consumers. It is interesting that we do
not often notice it. If VAT turns insufficient for the budget
replenishment, the authorities resort to excise tax, additional
customs duties, property taxes, absurd fines for not having
third-party liability insurance policy. After all, this burden lies
heavy on the nation. What we see now in the country means that the
authorities no longer have any natural methods to replenish the
budget. Meanwhile 60%-65% of GDP of Germany is the share of SMEs. In
Japan this indicator reaches nearly 90%. In other developed countries
the major taxes are profit and incomes taxes – direct taxes collected
from the real sector of economy. One needs no deep analysis to make
sure that the Armenian authorities grab hold on the scandalous
mandatory accumulative pension system to replenish the budget. At the
latest meeting of Yerkrapah Union of Volunteers, Serzh Sargsyan made
quite abstract statements, including on the pension reform.
Nevertheless, the president declared quite sincerely that ‘these
money are necessary for our economy,’ Considering that any economy is
developed at the expense of anything but the government funds, the
president probably meant the necessity to cover the budget deficit.
Admitting that the ‘authorities spend their political resource’ being
well aware that 80% of the population opposes the pension reforms, the
president, actually, reaffirmed that the authorities are at the end of
their tether.
For many years Armenia was moving towards Europe, was harmonizing its
laws to European requirements, but all of a sudden, it decided to join
the Customs Union. Let’s talk about this…
Whenever I ask my colleagues who are in power now about the Customs
Union, they whisper to me that the Union is a guarantee of
Nagorno-Karabakh’s security. I don’t like whispering as I think that
in the 21st century politics must be open. My belief is that
Nagorno-Karabakh’s security cannot be based on a five-minute whisper
between Vladimir Putin and Serzh Sargsyan. Security cannot be based on
personalities, it must be fixed on paper. I doubt that the Customs
Union will give Armenia economic benefits. Today almost all experts
say that the growth in customs duties that will follow Armenia’s
joining the Customs Union will result in growing prices inside the
country. And there is no guarantee that the collected duties will be
used for our benefit. Part of it will be given in kickbacks, the rest
will go to those in power. Direct investment of just one billion of
USD would create at least 50,000-60,000 in Armenia and would make
solvent almost 1/4 of the local population. Nobody seems to care
though. They look to be happy enough at having just $3,000 per capita
GDP and $4bln national budget.
Customs Union membership does not seem to imply independent
investments in Armenia – unless they are politically motivated…
The Armenian authorities hope that Russia will grant their request to
exempt from customs duties as many as 600-800 products imported into
Armenia but Russia is aware how corrupt they are. Armenia is a pure
consumer as it produces almost no goods. 30-50% of its population are
poor. So, well aware of this the local authorities have kept import
duties low so as to prevent any big growth in the consumer goods
basket. Russia’s economy is based on oil and gas exports and low-tech
expensive production.
Do you mean that the only way for the Russians to protect their market
is to keep their import duties high?
Yes, I do. Once Armenia joins the Customs Union, it will have to
accept its home consumer-friendly model, so, it will be a road to an
abyss for us. The Customs and Eurasian unions are not systematic
projects. They are based on the personalities of Putin, Nazarbayev,
Lukashenko and Sargsyan. Should at least one of them quit, the whole
project may sink – or at least it will continue without Armenia. With
Europe the Armenian authorities kept feigning commitment to integrate
in hope that they were smarter than the Europeans. With Russia this
will hardly work out as it is the Russians who want to see us as part
of the Customs Union.
What will be the consequences of growing essentials prices?
I think this will result in a new wave of emigration. Once the
consumer goods basket in Armenia grows, the earnings of the several
hundreds of thousands of Armenia working in Russia will drop and they
will no longer be able to transfer money to their families in Armenia
and will prefer taking them to Russia. This may cause a social riot
but they in the Kremlin do not care as the only reason why they
‘invited’ Armenia into the Customs Union was to show Europe who wears
the pants in the post-Soviet area. Armenia was small fish in this
game. Russia’s key target here were Ukraine and the EU’s Eastern
Partnership program.
Will it be good for Armenia if Russia becomes even stronger due to its
Eurasian integration projects?
The problem is that the Armenian authorities do not think
strategically. For example, they are not asking themselves if Russia’s
strengthening in the post-Soviet area will be good for them.
Theoretically, this will not be good for us. Practically, our
authorities are not even thinking about this. We are consistently
moving towards self-isolation from both regional and global processes.
This notwithstanding, we are in a better geo-political situation than
Azerbaijan and Georgia: Azerbaijan has bad relations with the West and
Iran, Georgia is at odds with Russia, while we have good relations
with all the parties. But what our authorities mostly care about is
how to retain their power – this is the key reason why we are in
isolation and why our people are becoming increasingly defiant.
Armenia’s relations with Russia are based on bootlicking. As a result,
we have ceased to be a serious factor for them in the Kremlin. All
they need to do should any problem arise is just to call Serzh
Sargsyan.
http://www.arminfo.am/index.cfm?objectid=7F2AB550-9B93-11E3-9F550EB7C0D21663