Vestnik Kavkaza, Russia
Aug 23 2013
Will the influence of Moscow in Yerevan be reduced? Part 1
23 August 2013 – 5:02pm
Susanna Petrosyan, Yerevan, exclusively to VK
Talk about the ruling elite of Armenia’s need to choose between
European integration and accession to the Customs Union has triggered
many debates that have affected, among other things, the possibility
of nationalization of businesses owned by Russia – to reduce Moscow’s
influence in Armenia.
In the period of Armenian independence, mostly under President Robert
Kocharian, Russian companies through various transactions took control
of the two telecom companies, the majority of enterprises in the
energy sphere, including the fifth unit of the Hrazdan TPP under
construction, the Sevan-Hrazdan HPP, 80% of shares of “ArmRusgasprom”
and `Armenian Power Distribution Networks”. CJSC “Armenian Railways”
was transferred to the concession management of the Russian company
“South-Caucasian Railways”, but its owner is the government of
Armenia.
A special place among Armenian-Russian transactions belongs to the
treaty “Property for debt” signed in late 2001, according to which at
the initiative of the Armenian side, for debt of 108 million dollars
for nuclear fuel, five companies were transferred to Russia: four
units of the Hrazdan thermal power plant, the “Mars” plant, the
Institute of Automated Control Systems, PLC “Yerevan Research
Institute of Mathematical Machines” and the Materials Research and
Production Enterprise.
Although experts and opposition politicians exposed the agreements to
sharp criticism, the question of nationalization in the Armenian
political expert and journalist community has never been raised.
Nevertheless, the issue of the need for and adoption of the law “On
nationalization” was discussed so that negligent owners of former
state property were made clearly aware that in case of
economically-inefficient management, the property would revert to the
hands of the state.
Some radical observers who have expressed today the conviction of the
need to nationalize Russian enterprises in Armenia do not understand
many things and confuse nationalization and confiscation. But how can
you take away their property in Armenia from companies representing a
huge country?
It is known that many countries, including developed ones, have made
decisions about the nationalization of some strategic enterprises and
nationalized sometimes entire industries, such as the UK coal industry
being nationalizeds under the Labour Party. But nationalization was
often a harbinger of debt restructuring, introduction of investment,
and then a new stage of privatization of nationalized enterprises.
World experience shows that nationalized enterprises are not always
successfully managed, and in some countries management is accompanied
by corruption.
The main reason for nationalization in most cases is the inefficient
economic activity of certain companies or industries. The bankruptcy
of some large enterprises or industries may leave tens of thousands of
jobless people, which will lead to social riots and political
instability in any state.
Nationalization may be total or partial, but in all cases, if the
government nationalizes the company, it pays for that a huge amount of
money to the owner, based not only on the net asset value, but also on
investment. Speaking of Russian companies in Armenia, we should use a
differentiated approach, as the situation is different for them in
matters of governance and in attracting investment, as well as
generally in terms of the obligations and commitments of the Russian
side.
The most successful aspect is now the work of the communications
sphere, where the Russian company Beeline bought the company
“Armentel”, and the majority owner of the mobile operator “VivaCell”
is the Russian company MTS. Experts estimate the management of the
Russian owner of the assets of the 5th unit of the Hrazdan TPP, which
received sound investment, to be highly effective. Regarding the
activities of “ArmRusgasprom”, 80% owned by the Russian company
“Gazprom”, it should be noted that this company operates at a profit,
considerable investment is invested in it, in particular, the country
is 95% supplied with gas, but the effectiveness of management raises
questions. As for the Sevan-Hrazdan cascade, here the Russian side has
not made any tangible investments.
The activities of the company owned by Russia “Armenian Power
Distribution Networks” (RESA) generally receive restrained assessments
by experts in the Armenian power sector. According to local experts,
the owner of RESA, the Russian company RAO “UES” ,has improved its
work, but it was done through foreign loans and by increasing
electricity tariffs. This could be done by the Armenian side,
especially as RESA at the time of the transfer to Russia was in better
condition than the Russian distribution networks.
Initially, RESA acquired at a very low price a little-known company
“Midland Resources”, registered in an offshore zone. And then RAO
“UES” acquired its power grids. Thus, Russia gained control over RESA
not directly from the Armenian side, but after a few years when RESA
was ruled by a company registered in a British offshore territory.
A similar situation occurred when the Russians bought the company
“ArmenTel” from the Greek “OTE”. The latter initially offered to sell
“ArmenTel” to the Armenian government, and only after a rejection did
it sell it to the Russian side. Most of the transactions were not
transparent and have caused a lot of issues, including in terms of
compliance with the laws of the Government of Armenia. There is no
doubt that the majority of these transactions contained elements of
corruption.
To be continued
http://vestnikkavkaza.net/analysis/politics/44235.html