WORRIES LOOM FOR SARGSYAN AT HOME
By Simon Saradzhyan
The Moscow Times
April 9 2008
Russia
Armenian soldiers shaving in front of a mirror on an armored vehicle
in Yerevan. The landlocked country has few options but to rely on
Russia militarily.
Serzh Sargsyan, the handpicked successor of outgoing Armenian President
Robert Kocharyan, is to be sworn in Wednesday as the next president
of the South Caucasus republic.
Like his predecessor, Sargsyan is likely to anchor Armenia to
Russia while cooperating with alternative players in the region,
such as the EU and NATO, and promoting a peaceful resolution of the
Nagorno-Karabakh conflict, his supporters and experts said.
But while Sargsyan plans no major changes in Armenia’s foreign policy,
he must act immediately to address several looming challenges on the
domestic front that threaten to seriously undermine his presidency,
according to experts.
"The biggest challenge is establishing society’s trust in the new
government by initiating real and immediate reforms," said Tevan
Poghosyan, head of the International Center for Human Development,
a leading Armenian NGO.
Sargsyan must also stabilize the republic of 3 million after the
turmoil following his February election, as well as tackle longer-term
issues, such as public discontent over the predominance of politically
connected oligarchs in the economy and the often arbitrary rule of
regional leaders, experts and insiders said.
"Economic development will crumble if the economy stays in the hands
of few oligarchs," said Arthur Martirosyan, senior program manager
at the Mercy Corps’ renowned Conflict Management Group. "Armenia’s
very existence will depend on how Sargsyan tackles this issue."
Public anger over poor governance and a lack of economic opportunities
boiled over after Sargsyan’s first-round victory in the Feb. 19
presidential election, with thousands of protesters taking to the
streets. Official results gave Sargsyan nearly 53 percent of the vote,
while runner-up Levon Ter-Petrosyan — Armenia’s first president —
captured only 21 percent. OSCE observers gave the election an overall
positive assessment.
Numerous protesters came out to support Ter-Petrosyan’s claim that
the election was rigged. But many joined the protests to vent their
frustration with poor economic prospects and abuse of power by regional
authorities, one local businessman said.
"I spoke to quite a few, and almost everyone, especially the young
guys, said they came out not because they didn’t like how the elections
went, but because they saw no opportunities for themselves in this
economy," the businessman said on condition of anonymity, citing
concerns that commenting on politics could affect his business. "Others
said they were unhappy with local administration bosses, who acted
as if they were gods and tsars in their districts and whose security
details roamed the streets, beating whomever they didn’t like."
A majority of the protesters, however, were led by supporters of
Ter-Petrosyan, whose bid was partially financed by business moguls
who sensed that they might lose the advantages they gained as part
of a tacit agreement between Ter-Petrosyan and Kocharyan during the
transfer of power in 1998, the businessman and Martirosyan said.
"The tycoons saw a threat to their positions on the Armenian market
with the redistribution of political power and subsequent introduction
of new players, possibly — but not necessarily — from Sargsyan’s
entourage," Martirosyan said.
Levon Zurabyan, a campaign official for Ter-Petrosyan, dismissed the
claims as "delirium."
The standoff between Ter-Petrosyan’s supporters and authorities
culminated in violence in Yerevan on March 1-2 that left several
protesters and a senior police officer dead. Ter-Petrosyan and his
key supporters were placed under arrest while Kocharyan — under whom
Sargsyan served as prime minister — introduced a state of emergency,
banning all rallies for several weeks.
In an interview, Zurabyan said the "outrageous falsification of
the vote" and the violent crackdown on protesters had brought into
Ter-Petrosyan’s camp many who did not even vote for the former
president.
The opposition is planning protests during Wednesday’s inauguration,
and the "popular struggle against banditocracy" will continue, Zurabyan
said. "[Sargsyan’s] biggest challenge will be his own people who do
not perceive him as a legitimate leader," Zurabyan said.
Planned Reforms
Sargsyan is planning major reshuffles in regional administrations to
get rid of controversial officials, said the businessman interviewed
for this report.
He is also planning measures to end the predominance of oligarchs in
the economy — including many who rose to commanding heights thanks
to Ter-Petrosyan — and facilitate fair economic competition, said
the businessman, who has close connections to the ruling elite.
Asked if Sargsyan plans to break the hold local administration
bosses have on certain parts of the economy, a key member of the
president-elect’s Republican Party of Armenia answered broadly.
"I am confident that big reforms will take place in all spheres,
related not only to economic, but also to political domains," senior
party official Artak Zakaryan said. "It will have to be a persistent,
goal-oriented policy, and Mr. Sargsyan will be able to achieve this."
Sargsyan has no choice but to break up "the patron-client paradigm"
that Ter-Petrosyan established and Kocharyan failed to dismantle,
said Martirosyan of the Mercy Corps’ Conflict Management Group.
Liberalization of the economy, with a focus on developing the service
sector and small and medium-sized businesses, is particularly vital
for land-locked Armenia, given embargoes maintained by two of its
neighbors and the scarcity of key natural resources, including fossil
fuels, in the republic, experts said.
Small and medium businesses accounted for 40 percent of the country’s
GDP as of 2006, according to Karen Chshmarityan, the republic’s
minister of trade and economic development at the time. Armenia, which
has a GDP of less than $10 billion, also fares well in the Index of
Economic Freedom, compiled annually by the Heritage Foundation think
tank. The 2008 index put Armenia at No. 28 out of the 157 countries
surveyed — the top ranking among CIS countries, including neighboring
Georgia and Azerbaijan.
But Armenia also suffers from "unnatural monopolies" in some sectors,
including certain food imports, the businessman with connections to
top Armenian officials said.
Apart from dismantling the economy’s oligarchic structure, fair
domestic competition must be established, and the political landscape
must be restructured, Martirosyan and other experts said.
"Politically, Sargsyan needs to allow the emergence of new political
parties representing a loyal opposition, enforce equality before the
law, and nurture confidence in the state and government by implementing
reforms that can produce immediate gains," Martirosyan said.
Sargsyan’s party received 32.82 percent of the vote in the May 2007
parliamentary elections, capturing 64 out of 131 seats. In March, the
party entered into an alliance with the pro-government Prosperous
Armenia Party and two other parties that criticized Sargsyan’s
government during his presidential campaign: the influential Armenian
Revolutionary Federation and the Country of Law party. The alliance
formed a coalition government in an attempt to stabilize the political
situation following the postelection turmoil.
The coalition was established to "form an effective, functioning
authority, depending on democratic reforms and perfecting mechanisms
to improve human rights," Sargsyan said in an interview published
Monday in the Russian daily Noviye Izvestia.
Foreign Policy Future
While expected to reform domestic policies, Sargsyan will likely
make few changes in Armenia’s foreign policy, relying on Russia as
a strategic partner while pushing for a peaceful resolution of the
Nagorno-Karabakh conflict, insiders and experts said. Sargsyan’s
foreign policy foresees cooperation with other important internal and
external players in the South Caucasus, including the United States,
the EU and NATO, they said.
"The character and potential of relations with Russia … are not
limited to the region only," said Zakaryan of the Republican Party of
Armenia. "They have a strategic character because of Russia’s role in
ensuring Armenia’s security, traditional friendly relations between
Armenia and Russia, large-scale economic cooperation, Russia’s role
in solving the Karabakh conflict and the presence of a large Armenian
diaspora in Russia."
In the economic sphere, Russian state-controlled companies have
snapped up several key assets as either owners or operators in Armenia,
including railways, power plants and metals companies.
Russian state gas giant Gazprom is co-owner of Armenia’s national gas
distributor and even acquired control of the gas pipeline from Iran
to Armenia, giving it full control of gas supplies into the republic.
Russian direct investment in Armenia totaled $293 million last
year, making Russia the single largest source of foreign investment,
according to the Armenian government. Trade between the two countries
totaled $800 million last year, according to the Kremlin.
Armenia has actively participated in most Russian-led integration
projects among former Soviet republics, including not only the CIS,
but also the Collective Security Treaty Organization, which Moscow
hopes will evolve into a full-fledged military bloc.
Russian border guards patrol Armenia’s border with Turkey and man the
checkpoint at Armenia’s main airport, while Armenia hosts a large
Russian military base. Russia is also one of the OSCE-empowered
mediators in negotiations between Armenia and Azerbaijan over the
status of Nagorno-Karabakh.
Any attempt to diversify away from security arrangements with Russia
"would be detrimental to Armenian national interests," Martirosyan
said.
"Armenia needs alternatives, but only for a rainy day, i.e. for the
unlikely scenario of Russia reneging on its security commitments or
pulling out of the Caucasus entirely," he said. "But the probability
of that scenario is currently close to zero."
Indeed, landlocked Armenia has few options but to rely on Russia,
despite the fact the two countries share no border.
Armenia has fought a war with neighboring Azerbaijan and has no
diplomatic relations with another neighbor, Turkey. Both Azerbaijan
and Turkey closed off their borders with Armenia over the conflict
in Nagorno-Karabakh, where an ethnic Armenian majority first voted to
secede from Azerbaijan and then fought a war, together with Armenian
forces, to form a self-styled Nagorno-Karabakh republic.
Relations with Turkey are also strained because Ankara refuses to
recognize the World War I-era massive and organized killings of
Armenians by Ottoman Turks as genocide.
Sargsyan will likely continue negotiations over Nagorno-Karabakh with
Azeri president Ilham Aliyev but will not agree to any deals that would
hand control of the self-proclaimed republic, which has enjoyed de
facto independence for more than a decade, to Azerbaijan, experts said.
Short of international recognition, Nagorno-Karabakh "enjoys all the
symbolic and substantive attributes of a nation-state," and Sargsyan
will accept nothing less than that status, Martirosyan said.
"If and when Azerbaijan is ready to accept that reality,
Nagorno-Karabakh and Armenia should be ready to satisfy other Azeri
interests in exchange for a new security system and other necessary
arrangements," Martirosyan said.
Azerbaijan has repeatedly threatened to use force to retake both
Nagorno-Karabakh and surrounding districts controlled by Armenian
forces. Both Kocharyan and Sargsyan are natives of Nagorno-Karabakh.
Meanwhile, Armenia has enjoyed mutually beneficial ties with its
other two neighbors, Georgia and Iran. Cooperation with Iran has been
facilitated by Tehran’s perception of Armenia as a natural ally in
countering Turkey’s influence in the region.
Sargsyan could also seek further cooperation with the EU, NATO and the
United States, which is home to the second-largest Armenian diaspora —
after Russia.
Armenia is not seeking membership in NATO or the EU, but it does
participate in NATO’s Partnership for Peace Program and the EU’s New
Neighborhood programs. Armenia has also contributed troops to the
U.S.-led coalition in Iraq.
Like his predecessor, Sargsyan should avoid keeping all his eggs in
one Russian basket, experts said.
"The Armenia-Russia security alliance has proved its viability,
and there is no reason why this cooperation should be changed," said
Poghosyan of the International Center for Human Development. "This
doesn’t mean, however, that Armenia should refrain from cooperation
with other countries and organizations for strengthening its security."