Author: Jagharian Tania

YEREVAN, September 18. /ARKA/. The  Warsaw Stock Exchange (GPW) Management Board and the Central Bank of Armenia (CBA) signed today  a term sheet concerning negotiations to purchase 65% majority interest in the Armenia Securities Exchange (AMX) by GPW, the regulator reported.

It said the agreement is not binding. The final terms of the acquisition will depend among others on results of due diligence and necessary corporate approvals.

“The relations established between GPW and the Central Bank of Armenia spell good news for both parties of the agreement. Many sectors of Armenia’s economy are looking for quality investments so the country has a huge growth potential. Investments are a driver of economic growth, especially in the emerging markets. In my opinion, GPW’s acquisition of AMX would put the Armenian capital market on fast track to growth while the Warsaw Stock Exchange could make satisfying returns on the investment. It is relevant, as well, that Poland is promoting emerging markets. This is a good direction,” said Jacek Sasin, Poland’s Deputy Prime Minister and Minister of State Assets.

The term sheet signed by GPW and CBA defines the framework conditions of further negotiations aiming at a potential investment agreement. In the next step, GPW will carry out a due diligence, draft a five-year development plan for the Armenia Securities Exchange in partnership with CBA and AMX, and define the final terms of the investment agreement, which may be different from the framework conditions.

“GPW is a stable and steadily growing company at the heart of Poland’s capital market and the leader of the CEE stock exchange industry. I am certain that the extensive experience and competences gained by the Warsaw Stock Exchange in the last 30 years will ensure a close and fruitful relationship with Armenia’s financial market,” said Dominik Kaczmarski, Head of Analysis and Reporting Department at Poland’s Ministry of State Assets, President of the Warsaw Stock Exchange Supervisory Board.

As a part of its analyses preceding the execution of the term sheet, GPW has defined a list of more than a dozen potential strategic projects geared at long-term development of the Armenia Securities Exchange. The key areas of development include the implementation of innovative solutions based on state-of-the-art technology, the organisation of trade in commodities, support for dual listing of GPW and AMX issuers, and the provision of a modern trading platform.

“We can see many areas where we could advance the development of Armenia’s capital market. The primary areas include digitisation and process automation, which are now the key pillars of stock exchanges in developed economies. Potential acquisition of AMX would help us expand our services and step up the implementation of the strategy #GPW2022. On the other hand, it would open the GPW Group’s know-how to the Armenia Securities Exchange,” pointed out Marek Dietl, President of the GPW Management Board.

The AMX Group’s consolidated revenue stood at PLN 6.4 million (USD 1.71 million), EBITDA at PLN 2.0 million (USD 0.53 million), and net profit at PLN 1.3 million (USD 0.35 million) in 2019. The AMX Group’s total assets stood at PLN 6.5 million (USD 1.73 million) as at 31 December 2019. The preliminary non-binding estimated valuation of 100% of AMX equity is equal to the company’s book value as at 30 June 2020, i.e., approx. PLN 5.8 million (USD 1.6 million). The potential purchase price of interest in AMX to be paid by GPW will be confirmed after the completion of the due diligence.

“We are glad to have reached an agreement on the base framework of our future cooperation with the Warsaw Stock Exchange. This mutually beneficial deal is of a long-term strategic importance to both sides and we are also glad to state that we see the WSE as the partner sharing our vision for future development of capital markets. WSE leadership in this venture provides an opportunity for bringing their experience and know-how and transform AMX into a robust, innovative and convenient platform, serving as gateway for investors to new markets. This will also lead to fulfilling our joint aspirations for regional expansion,” said Martin Galstyan, the Chairman of the Central Bank of Armenia.

The core business of the AMX Group is to organise trade in financial instruments and to operate a clearing house and a settlement institution for transactions in financial instruments in Armenia. The company has its seat in the Armenian capital city Yerevan. The Central Bank of Armenia holds 85% of AMX. The remaining 15% are AMX’s treasury shares. Under the memorandum, CBA will raise its stake to 90% and GPW will subsequently buy 65% of AMX from CBA. After the deal, CBA will hold 25% of AMX and the remaining 10% will be acquired by a third party to be named by GPW. -0-

The escalation that began on 12 July claimed the lives of 18 people, including one civilian, making it the most serious since the ‘four-day war’ of April 2016. Although dying way after 5 days, the escalation featured new trends, or the strengthening of pre-existing ones, destabilising the fragile status quo holding the Armenian-Azerbaijani peace.  

Most obviously the violence occurred on the de jure international Armenia-Azerbaijan border, some 200 kilometres away from the heart of contested territory in Nagorny Karabakh itself. Secondly, although not new, Turkey’s support of Azerbaijan was more explicit, intensive and bullish than in April 2016, with a number of meetings between defence officials of the two states taking place in the immediate aftermath. And beyond the South Caucasus, diasporic and migrant communities of Armenians and Azerbaijanis across the world mobilised, and in many cases engaged in scuffles, brawls and the vandalism of property.  

In short, July’s clashes furnished evidence of the totalisation of conflict, whereby any issue or space, including those far from Nagorny Karabakh itself, can become arenas for new Armenian-Azerbaijani violence.

July’s violence drew a line under a two-and-a-half-year period associated with the rhetoric of ‘preparing populations for peace’. That phrase came out of a January 2019 meeting between foreign ministers Elmar Mammadyarov (now retired) and Zohrab Mnatsakanyan. Moreover, until July an exceptional calm reigned along the frontlines, potentially enabling a public debate reaching beyond security.

Yet despite a range of proposals put forward by civil society, ‘preparing populations for peace’ remained an empty container devoid of substance. After a single exchange visit by journalists across the divide in November 2019, Armenia and Azerbaijan invested instead into a new season of symbolic offensives.

Armenian and Azerbaijani positions on the core political issues at stake – the status of Nagorny Karabakh, displacement, access and security – have been widely divergent for years. After July’s clashes, meaningful dialogue on the Basic Principles, or on fashioning a viable alternative, appears further away than ever. 

July’s clashes were essentially the result of unregulated interactions in a side-theatre unrelated to Nagorny Karabakh, where neither side had strategic gains to make, nor vital interests to protect through military action.

Renewed Armenian-Azerbaijani crisis coincides, moreover, with a wider crisis in multilateral diplomacy. Just as the shooting had died down, on 18 July the Organization for Security and Co-operation in Europe (OSCE) entered a crisis after member-states failed to agree on extending the mandates of several key leadership posts – including the Secretary General.

While this may not directly affect the Minsk Group, the body mandated to mediate between Armenia and Azerbaijan, it is symptomatic of the decline of the liberal peace and of multilateral diplomacy. Multilateralism’s loss is the gain of entrepreneurs of more authoritarian models of conflict management visible, for example, in Libya and the Middle East today.

Even if they have often expressed frustration with the Minsk Group, that fact remains that Yerevan and Baku have more influence over its consensual decision-making processes than they might over authoritarian models of conflict management practiced in proximate theatres by neighbouring powers. Totalising the conflict risks a loss of control over its dynamics. What, then, can be done?

It is critical to counter the totalisation of the conflict by breaking down the Armenian-Azerbaijani rivalry into more manageable pieces, with some being less contested than others. Both Armenia and Azerbaijan could benefit by introducing measures to regulate those parts of their interactions that do not involve their red lines.    

July’s clashes were essentially the result of unregulated interactions in a side-theatre unrelated to Nagorny Karabakh, where neither side had strategic gains to make, nor vital interests to protect through military action. On the contrary, the concentration of civilian populations on either side of the border, in addition to transport and energy infrastructure clustered nearby, attach prohibitive risks for both parties to major escalations in this area. Both would gain through implementing localised measures to counter misperceptions and facilitate communication. 

A timely report by the International Crisis Group has highlighted several such areas, precisely in the region where July’s escalation took place: cooperation on enabling agriculture, restoring water infrastructure and clearing landmines. Practical initiatives in this area, moreover, have a precedent in pioneering work by the organisation Saferworld in 2010-12 to support a civilian ceasefire monitoring mechanism.

It is consequently crucial to reinstate informal Armenian-Azerbaijani dialogue, as a normal and unremarkable feature of relations between all of the parties to the conflict.

Azerbaijan may be reluctant to introduce ceasefire monitoring infrastructure along the Line of Contact around Nagorny Karabakh, which Baku sees as embedding an unacceptable status quo.  But in the area of the undisputed (if still not demarcated) international border, ceasefire support infrastructure could regulate risk and make relations more predictable in a side-theatre where stability would bring benefits to both sides.

Beyond a pragmatic approach to localised and mutually beneficial problem-solving, international best practice in peacebuilding acknowledges the need for dialogue on wider social and identity issues. These issues are not generally discussed within the framework of OSCE mediation, yet as the burgeoning Armenian-Azerbaijani memory wars and the rippling of violent polarisation across Armenian and Azerbaijani communities worldwide in July shows, they play at least as significant a role in the impasse as disagreement on core conflict drivers. Discourses of nationalism, attitudes towards justice, the past and memory politics, the impacts of militarisation and dehumanisation, and the impacts of political patriarchy are all relevant for the transformation of conflict.

Picking up the pieces in the aftermath of violence is always difficult. In the current stage of Armenian-Azerbaijani relations it is especially challenging, as research in 2019 found that informal dialogue between the parties was at its lowest level since the conflict began in 1988. Under these conditions, public reactions to frontline events, as demonstrations in Baku following the violence in July showed, are all the more difficult to control and channel in the direction of peaceful change.

It is consequently crucial to reinstate informal Armenian-Azerbaijani dialogue, as a normal and unremarkable feature of relations between all of the parties to the conflict. Securitised societies locked within echo-chambers become arenas in which leaders can fall victim to discursive entrapment. As they confront a new impasse of their own making, leaders across the divide should look to civil society actors as ‘critical friends’ and partners, not threats, in the quest to transform their relations.