The last interview of Russian Deputy Prime Minister Alexei Overchuk is a clear assessment of the foreign policy of the current government of Armenia.

Overchuk is articulating publicly what usually remains the realm of closed diplomatic negotiations: The agreements with Armenia do not correspond to the actual actions of Yerevan. In other words, it is about a clear crisis of confidence.

It is noteworthy that Nikol Pashinyan has repeatedly stated that he has discussed railway management and infrastructure issues with the Russian leadership, trying to show that there is an agreed policy. However, the reaction of a high-ranking Russian official proves the opposite. In Moscow, Armenia’s actions are perceived as changing, inconsistent and often contradictory.

This is a characteristic of political behavior.
The problem is not that the state is revising its positions. It is a natural process in international relations. The problem is that these changes do not have a clear strategic basis and are not presented to partners as a calculated policy. As a result, a dangerous perception is formed: Armenia acts with situational logic, not with a predictable strategy.

The policy of the Armenian government has been really inconsistent in recent years, especially after 2020. On the one hand, announcements to stay in EAEU and CSTO, on the other hand, active rapprochement with the USA and EU, review of Russian concessions, steps to withdraw from CSTO. This creates the impression of a “multi-vector” policy, but without a clear strategic direction and without the willingness to pay the open “price” to the partners.

Such an approach can produce short-term results by maneuvering between different power centers. However, in the long run, it leads to one inevitable consequence: loss of trust.

Trust in international relations is one of the most important resources of the state. It does not recover quickly and is not replaced by other tools. And for a country in a complex security environment like Armenia, the reputation of being a reliable partner is vital.

The context of Overchuk’s statement is also telling. Russia clearly signals that it considers its involvement in regional transport projects as a long-term and systemic factor. On the part of Armenia, the change of positions is perceived not only as an economic risk, but also as a political risk. This raises a key question. Does Armenia have a clearly formulated foreign policy strategy or is it moving in different directions without a unified logic?

If such public assessments are already made at the level of high-ranking officials and publicly, it means that there is a deep mistrust of the Armenian government.

And this is where the main danger lies. When the state loses trust in one center, but does not strengthen it in others, it appears in a military-political vacuum.
In this sense, Overchuk’s statement is a political verdict aimed at politics that is built on volatility, contradictions and short-term calculations.

And the price of that judgment can be paid by the state.

Political scientist Suren Surenyants

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Meetings in the villages of Nor Kharberd, Arevabur, Noramarg and Ranchpar were really expected. Gagik Tsarukyan wrote about this.

“Warm reception, honest conversation and raising of real problems.

People talked about their daily difficulties, suggestions and expectations.

We listened to each other, discussed and tried to understand together what can be changed and how.

Such meetings are the most important for me. here I see the real picture, listen to people’s voices and try to offer practical solutions, not just words.

I am sure that there are no unsolvable problems if there is a will, the right approach and unity.

These days, I often hear the popular saying from our compatriots, with which I completely agree. the impossible becomes possible when everyone is united,” he wrote.

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On April 11, at 5:00 p.m., Samvel Karapetyan’s “Strong Armenia” party is inviting a nationwide rally in Freedom Square.

The slogan: Change only with Samvel Karapetyan.

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The military-political crisis created around Iran, the disruption of the normal course of cargo transportation and the growth of uncertainty in foreign markets create serious challenges for the economy of Armenia. What to expect in terms of commodity prices and general inflation, how threatened is the balance of the Armenian energy system, and what alternative ways does Armenia have to mitigate possible economic shocks? Around these key issues, emerging risks and likely scenarios VERELQtalked to an economist Suren Parsyan with.

 

Suren Parsyan is in the photo, the source is 168.am

VERELQ: Mr. Parsya, as we know, the military operations against Iran with the participation of the USA and Israel have been going on for about the fourth-fifth week. Considering that Iran is one of the two open land borders of Armenia (the other is Georgia), is it possible to present certain numbers or estimates as to what kind of impact this war has had on Armenia’s economy?

Suren Parsyan. It is too early to make a complete economic assessment at this time, because in the case of individual products, we had certain reserves and are currently using them. The situation will be clearer if these hostilities continue for another two or three months and our local supplies are exhausted. In that case, we will have to find new alternatives to imports from other countries and spend additional financial resources. At this moment, we can already record that there are problems with cargo transportation, food, vegetables and certain types of fruit. for example, some fruits have already increased in price. In the domestic market, it concerns, for example, pomelo and, in general, fruits and products of non-Armenian origin.

VERELQ: Are we talking about the goods that we imported directly from Iran or brought in transit through the territory of Iran, which is one of the main logistics routes for us to the Middle East and Asia?

Suren Parsyan. Yes, for goods brought directly from Iran or through its territory. Either they have increased in price or they are not on the market at all. As an example, let me also mention the Hungarian so-called “big peppers”. They are certainly not vital in our daily diet, but they provide a necessary variety in our general commodity market. The situation may worsen if we cannot import dairy products from Iran. For now, there are certain stocks. we are talking about milk cream, milk powder and butter, of which we used to import in large quantities, about 5-6 million dollars a year.

VERELQ: If we divide those 6 million dollars over 12 months, it turns out that we imported approximately half a million dollars worth of dairy products from Iran per month.

Suren Parsyan. It is true. At the moment, it has not yet had a significant impact, as local milk production has started to become active, but in the long term, it may have a negative impact on the dairy market. I should also mention that cargo transportation has also become somewhat more expensive. In particular, the companies complaining about the increase in tariffs regarding cargo transportation through Georgian ports. Seeing that Armenia has no alternative due to the problems of the southern (Iranian) direction, the operators of Poti port in Georgia are making some revisions in their price policy.

VERELQ: It is known that about 25% of our foreign trade was carried out through the territory of Iran. Now, have these flows largely moved to Georgia, to the ports of the Black Sea?

Suren Parsyan. Yes, they have partially moved there, and the Georgian side is already making appropriate price revisions. This is an additional problem for us. although it is not clear to what extent and how this will happen, it is obvious that we will have a certain increase in transportation costs. This increase will have a direct impact on the prices of goods imported to Armenia, which may generally lead to inflation. At the same time, the RA Central Bank conducts its policy in this direction and, in fact, does not even try to prevent or limit inflation, leaving the refinancing rate unchanged. At the same time, the government is implementing a very active fiscal policy, which is a vivid example of the significant increase in pensions and additional government spending planned from April 1.

VERELQ: In other words, is the Government pursuing a more expansionary policy, stimulating spending?

Suren Parsyan. Yes, expansive. The following image is obtained. on the one hand, we have an increase in the prices of imported goods due to logistical problems, on the other hand, an increase in pensions and the activity of state programs. Both of these factors will certainly contribute to inflation.

VERELQ: It turns out that in the background of the shortage of goods caused by the disruption of external supplies, we also have inflation fueled by the increase in domestic demand.

Suren Parsyan. Yes, yes. Frankly, I can’t imagine how the government will be able to control this inflation, because our local agriculture volume is not enough to cover the domestic demand. We have a vivid example of this today in the beef market. The price of beef has increased sharply because the volume of local production has decreased in recent years. And it is impossible to restore local beef production in just two or three months. it is not such a fast-reacting field, so now we are facing the fact. I think we can have a similar situation in other product markets, especially dairy products. Under these conditions, it is clear that we will have a significant increase in prices in this market as well.

VERELQ: And in the background of all this, how realistic is the prediction of the RA Central Bank that we can have only 1.5% inflation, or is it just a very conservative approach?

Suren Parsyan. In fact, the Central Bank makes a very optimistic forecast, because if we take into account all the above factors, then, in my opinion, we will have a much higher inflation. I would like to mention only that, according to official statistics, inflation was already 4.2% in January-March of this year. In other words, there is already quite high inflation, and to that are added these new inflationary factors entering the market, which will accelerate the pace even more.

VERELQ: It is clear.

Suren Parsyan. It is not clear how they imagine to stop it now. By the way, inflation is currently somewhat restrained by the continued appreciation of the national currency, the AMD. If the foreign currency money flows (transfers) coming to Armenia decrease, it will lead to dram devaluation, which in turn will cause new inflation. For example, we had large cash flows from the United Arab Emirates and Russia, which had a positive effect on our exchange rate market, strengthening the dram. However, these flows have either stopped or decreased significantly. Therefore, we have emerging risks in this regard as well, which may deepen even more.

VERELQ: Do you mean that the foreign currency may become more valuable in Armenia, that is, the dram may depreciate?

Suren Parsyan. Yes, the dram may depreciate, as a direct result of which imported goods will become more expensive for us. And if we look at the issue from the point of view of exports, the real sector of the economy, then we should study the structure of our exports. According to last year’s data, we had about 3 billion dollars of exports to Russia and about 2 billion dollars of exports to the UAE. During the last month, the export direction to the Emirates has stopped, and the Russian direction may also be limited due to the purely political situation.

VERELQ: Yes, which was discussed recently, especially considering that Armenia sells the main part of its agricultural products and alcoholic beverages on the Russian market (within EAEU).

Suren Parsyan. Turning to Europe is problematic at the moment, because we do not export a significant volume of products to the European market. From the point of view of the loss of Russia, reorientation towards Europe is a complex process. Our other important export market is China. we export 52% of our mineral production, or 70% of copper alone, to China itself. This export is carried out through the Georgian port of Poti. Now, fortunately, the prices of copper in the world market are quite high, reaching up to 12,000 dollars (for one ton). For comparison, I should note that last year they ranged from 6,000 to 7,000 dollars. This sharp rise in prices is helping to make our mining industry quite profitable this year. This sector can partially compensate for other losses, ensuring the inflow of dollars into the economy of Armenia. We can predict that this year only individual large mining enterprises will have a turnover of more than 1 billion dollars.

VERELQ: Especially considering that this year the Amulsar gold mine, which was closed for many years due to environmental problems, was also restarted. Will this also increase dollar flows?

Suren Parsyan. Yes, yes, without a doubt. Despite the problems, this year we have activation of several sectors providing foreign exchange.

VERELQ: However, if the Iranian market is closed or there are serious problems in the logistics direction, does it not lead to an increase in our dependence on other markets, for example, Russia?

Suren Parsyan. Of course, and now we are in that situation. We used to import liquefied gas and diesel fuel from Iran, but now we can’t, or if we do, it’s in very small quantities and with great difficulty. Problems arise everywhere: bank transfers, technical, organizational issues, even the physical movement of trucks. That’s why right now we have to import energy carriers from Russia.

VERELQ: And against this background, when there are certain political disagreements and tensions between Armenia and Russia, which are already being raised at the highest level, how do they affect our work in the same Russian market, and especially the import of energy carriers?

Suren Parsyan. I must state that it definitely has a negative effect. It has already been officially announced that Russia limits the export of gasoline and fuel.

VERELQ: Is it probably done to satisfy their internal demand?

Suren Parsyan. Yes, and it is also due to the fact that the Ukrainian side regularly attacks Russian oil refineries. In other words, there are also objective reasons. This is a serious risk for us, and how the Armenian side should manage or reduce these risks is not yet known. We have to turn to other countries and other suppliers, be it Turkmenistan, Kazakhstan or another state that will be able to provide these volumes. Azerbaijan, of course, cannot supply us with gasoline for political reasons, besides, it itself imports gasoline from Russia and the UAE. Regarding diesel, there may be alternatives, but in the matter of liquid gas, due to the Iranian crisis, we are completely dependent on Russia.

Moreover, if the war continues and the American side also attacks Iran’s energy infrastructure, we may have serious problems with the “Gas for Electricity” barter program. This transaction constitutes a significant part of the trade turnover between us and Iran. Armenian-Iranian trade amounts to approximately 700 million dollars, of which half or a little less than half falls on this energy exchange.

VERELQ: Do you mean the “Gas for Electricity” interstate program, through which Armenia receives electricity from Iranian gas, thereby meeting a part of the domestic demand, and returning the rest to Iran as electricity?

Suren Parsyan. That’s right. If Iran’s power system is attacked, we will lose the ability to supply Iran with electricity and get gas instead. This will be a direct blow to our internal energy balance. The point is that the Yerevan Thermal Power Station produces electricity with that gas. From 1 cubic meter of gas, it produces about 4.6 kWh of electricity, of which 3 kWh is exported to Iran, and 1.6 kWh remains in Armenia. This has an extremely important balancing role in our energy system, both in terms of pricing and sustainable supply. In addition, our power transmission line connecting with Iran is also of balancing importance. when we have a surplus of electricity, we send it to Iran, and when we have a shortage (for example, during accidents), we take electricity from there. In other words, Iran is not only an export market for us, but also an important hub that ensures the security and balance of our entire energy system.

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