ARMENIA EYES INCREASE IN MILITARY AND SOCIAL SPENDING
By Ruzanna Khachatrian
Radio Liberty, Czech Rep.
Nov 6 2006
Armenia is set to increase its military spending by almost 39 percent
next year, officials said after closed discussions of the 2007 draft
budget in parliament on Monday.
Defense Minister Serzh Sarkisian said the allocation of some $285
million to the defense sphere could not be compared to neighboring
Azerbaijan’s $1 billion military spending, but “is enough if managed
well and expended purposefully.”
In an RFE/RL interview First Deputy Minister of Economy and Finance
Pavel Safarian called next year’s budget socially oriented despite
the drastic increase in military spending. “It is not the year-to-year
spending increase in a separate sphere that characterizes the nature
of the budget, but the share this sphere has in the overall budget,”
the deputy minister said.
A total of 198 billion drams (around $555 million) in the $1.48 billion
budget are envisaged for all social spheres, including education,
public health and pensions, against 102 billion drams (around $285
million) to be spent for the Armenian military and law-enforcement
agencies.
According to Safarian, a total of some 20 percent increase is planned
in social spending, with the largest share of this increase to fall
on healthcare.
Last week Freedom House urged the U.S. administration to withhold
promised economic assistance to Armenia which it believes has failed
to meet “reasonable standards” for democracy and civil liberties.
The New York-based leading human rights organization charged that
the Armenian government has been “backsliding on promised reforms”.
The Corporation is set to approve the list of nations eligible for
that aid on Wednesday.
Armenia’s Minister of Economy and Finance Vartan Khachatrian, who on
behalf of the Armenian government signed a $235.6 million MCA compact
with the scheme managing Millennium Challenge Corporation last March,
downplays the impact of the Freedom House findings and hopes the
Corporation will not suspend the program.
“I think we don’t have problems. Freedom House studies only two
indexes in one of the three blocks of questions. The decision to be
made will not be based on Freedom House evaluations only, opinions
of other NGOs will be compared and a final decision will be made,”
the minister told RFE/RL.
The promised U.S. aid would be used for upgrading Armenia’s battered
irrigation networks and rural roads. Officials say the vast majority
of approximately one million Armenians dependent on farming would
directly benefit from that.
Khachatrian says at least $12 million of the expected allocations
have been considered in the 2007 budget expenditure pattern.

EU TRIES TO DEFUSE LOOMING CRISIS WITH TURKEY
By Paul Taylor, European Affairs Editor
Reuters, UK
Nov 6 2006
BRUSSELS (Reuters) – The European Union sought on Monday to defuse a
looming crisis with Turkey over Cyprus and lagging reforms, welcoming
a pledge to amend a key law on freedom of expression in line with
EU standards.
Prime Minister Tayyip Erdogan announced the policy shift on Sunday,
three days before a European Commission report expected to sharply
criticise Turkey, saying he was ready to change a law used to prosecute
writers for “insulting Turkishness”.
“The stated intention by Prime Minister (Tayyip) Erdogan to bring
Turkish legislation on freedom of expression into line with European
standards is a welcome initiative,” EU Enlargement Commissioner Olli
Rehn said in a statement.
“It shows that the Turkish prime minister is personally committed to
free speech and EU accession,” Rehn said.
The EU executive is to issue a progress report on Wednesday criticising
a slowdown in reforms in the year since Turkey began EU membership
talks and noting Ankara’s failure to meet a requirement to open its
ports to shipping from Cyprus.
Diplomats say the negative findings could prompt EU leaders to suspend,
at least partially, accession negotiations with Turkey when they hold
a summit on enlargement in mid-December.
But German Foreign Minister Frank-Walter Steinmeier, whose country
takes over the EU’s rotating presidency in January, warned against
any premature move to break off the talks.
“I would strongly urge that in our interests and in the interests of
Turkey, we not be overly hasty in our conclusions. We ought to leave
scope … for a political compromise between Turkish interests and
the interests of the Cypriots,” he told a conference of the Party of
European Socialists in Berlin.
That appeared to contradict Chancellor Angela Merkel, who said in
an interview with Monday’s Sueddeutsche Zeitung daily that Turkey’s
EU accession talks would be in serious trouble unless Ankara lifted
trade restrictions against Cyprus.
“CONCRETE DEEDS” SOUGHT
The Commission has repeatedly urged Turkey to amend article 301 of
the penal code used to prosecute journalists and intellectuals such
as Nobel literature prizewinner Orhan Pamuk over comments on the
killing of Armenians in Ottoman Turkey.
Only last week, Erdogan appeared to rule out any change, with an eye
on nationalist voters ahead of elections next year.
But in a timely move to show goodwill, he said on Sunday: “We are
ready for proposals to make the article 301 more concrete if there
are problems stemming from it being vague.”
“We are studying several options for how we can handle article 301
in harmony with the spirit of the (EU-oriented) reforms,” he said,
without elaborating.
Rehn sounded a note of caution, saying Brussels wanted to see
practical action.
“We expect this stated intention to be followed by concrete deeds
and we are thus waiting for concrete decisions,” he said.
Rehn said pressure for a change in the penal code also reflected
the growing strength of Turkish civil society, which was a welcome
development.
The Commission is also expected to criticise shortcomings in the
rights of religious and ethnic minorities, civilian control over the
military and persistent instances of torture.
It will praise economic reforms, the training of more judges and the
creation of an ombudsman to probe citizens’ complaints.
Mustafa Alper, general secretary of Turkey’s International Investors’
Association, said financial markets were quite relaxed about the
possibility of a crisis with the EU.
“I do not think the (Commission) report will greatly spoil Turkish
morale … Cyprus will come to the agenda again, but I do not think
the report will create a lot of problems or tensions,” he told Reuters
in an interview in Istanbul.
“I see the likelihood of Turkey’s negotiations being suspended as
rather remote,” Alper said.
(Additional reporting by Humeyra Pamuk in Istanbul and Louis
Charbonneau in Berlin)

WESTERN WATCHDOG FINDS NO CHANGE IN ARMENIA’S CORRUPTION LEVEL
By Astghik Bedevian
Radio Liberty, Czech Rep.
Nov 6 2006
An international anti-corruption watchdog has ranked Armenia 93rd
among 163 nations by its level of corruption, which is neither progress
nor regress against last year’s study results.
In the rankings released on Monday Transparency International cited
its annual Corruption Perceptions Index study in which Armenia has
the index score of 2.9 along with Argentina, Bosnia & Herzegovina,
Eritrea, Syria and Tanzania.
The index score relates to perceptions of the degree of corruption as
seen by business people and country analysts and ranges between zero,
which is highly corrupt, and 10, which is very clean.
Amalia Kostanian, head of the Armenian branch of Transparency
International, says the findings reflect only the opinions of
entrepreneurs and experts.
“Our studies evaluating public opinion depict a grimmer picture. We
have received much more negative data and will publish it soon,”
she told RFE/RL.
Kostanian describes the work of the anti-corruption commission in 2006
as ineffective and says that it met only once in the last ten months.
“Even though Armenia passed several related laws, acceded to different
conventions and has several anti-corruption structures, the fight
against corruption still remains an imitation and bears a formal
nature in the country,” Kostanian charged.
“Not a single senior official has been punished for corruption
practices and, more importantly, authorities do not bear any
responsibility for their failure in the anti-corruption struggle
before elections.”
Transparency International has found that corruption looms large among
political parties and registered an early start of election campaigns,
some six months ahead of its official kickoff.
About a dozen countries, including the United States, have registered
a decline according to their corruption index.
Armenia’s neighbor Turkey, for example, registered an improvement,
like Latvia and Turkmenistan from among former Soviet republics.
Only Moldova is ahead of Armenia among CIS countries. All other CIS
countries, according to the study, have a higher level of corruption,
with Uzbekistan having the worst record (151st).
According to Transparency International, the highest level of
corruption is in Haiti (index score 1.8) and the lowest is in Finland,
Iceland and New Zealand (9.6).

ARMENIA’S MILITARY BUDGET SUFFICIENT FOR ENSURING COUNTRY’S DEFENSE
ARKA News Agency, Armenia
Nov 6 2006
YEREVAN, November 6. /ARKA/. Armenia’s military budget is sufficient
for making the country’s armed forces strong, Armenian Defense
Minister Serge Sargsyan told journalists on Monday after presenting
draft state budget for 2007 to lawmakers.
He said that Azerbaijan’s $1-billion military budget can’t be compared
with Armenian $300 million, but this amount will be enough if spent
reasonably.
The minister also said that greater budget spending is planned for
military purposed, just like for other sector’s needs.
In his words, military expenditures will make 3.5% of GDP every year.
“That’s why the faster economic growth is the greater are expenses
for defense”, Sargsyan said.
He said some 48% of the amount will be earmarked for salaries and
similar expenses. Armenian officers’ salaries are planned to reach
AMD 165 thousand (about $435) in 2007.
Sargsyan also said that Armenia intends to acquire new kinds of
armament and ammunition.
The 2007 state budget envisages AMD 100.4 billion (about $263 million)
for defense.

SERGEY SHAKUROV BROUGHT HIS ARMENIAN WIFE TO AZERBAIJAN
Azeri Press Agency, Azerbaijan
Nov 6 2006
After their concert in Heydar Aliyev Palace famous Russian actors
Lyudmila Gurchenko and Sergey Shakurov visited Armenia, APA reports
quoting to Arminfo.
During their press conference in Armenia Shakurov said he loves
Armenians and added that his wife Ekaterina Balova is Armenian. She
is a theater producer. “There was no problem in my wife’s coming
to Azerbaijan, as she has a Russian surname. But as my costumier is
Armenian during our visit to Azerbaijan she was not allowed to come
to Azerbaijan. I don’t understand it,” he said.
Expressing his attitude to the question the concert organizer the head
of the “Teatral” company Azer Guliyev said he does not believe this.
“His wife is not Armenian. I don’t believe that Shakurov said so,”
he said.
Culture and Tourism Ministry Press Service Department expressed no
opinion on the problem.

KAZAKHSTAN, ARMENIA SIGN AGREEMENTS TO DEVELOP RELATIONS
RIA Novosti, Russia
Nov 6 2006
ASTANA, November 6 (RIA Novosti) – Kazakhstan and Armenia have
concluded a number of agreements to develop bilateral relations during
Armenian President Robert Kocharyan’s visit to Astana.
The two countries signed an intergovernmental agreement on citizens’
trips, a convention on avoiding double taxation, an agreement on
investment protection and a cultural cooperation agreement.
Kazakh President Nursultan Nazarbayev said bilateral trade turnover
does not meet the two states’ demands.
According to Kazakhstan’s statistics agency, bilateral trade turnover
in the first eight months of 2006 was $16.4 million, compared to
$45.2 million in the entire 2005.
“The trade level cannot satisfy either side, this low indicator does
not meet our states’ demands,” Nazarbayev told a press conference
Monday.
He partly attributed the situation to an insufficient contractual
base. “Documents signed today create a legal base for closer
cooperation between our companies,” he said.
Nazarbayev called investment protection agreements very important.
“As a result of talks, we confirmed the urge of our states to further
strengthen our relations. Increasing trade and economic ties will
contribute to this, for Kazakhstan’s business and capital not to be
afraid to go to Armenia,” he said.
Robert Kocharyan, in turn, said Armenia hoped for an inflow of
investment from Kazakhstan.
“We want this visit to prompt the arrival of Kazakh investment in
Armenia,” Kocharyan said.

IRAN’S 7TH SOLO EXHIBITION ON CONSTRUCTION MATERIALS OPENS IN YEREVAN
Mehr News Agency, Iran
Nov 6 2006
TEHRAN, Nov. 6 (MNA) – Iran opened its Seventh Solo Exhibition on
Construction Materials in Yerevan, the capital of Armenia, on Monday,
the Iranian Students News Agency (ISNA) reported.
Running for a week, the exhibition is displaying construction materials
and urban development equipment presented by over 20 Iranian firms.
At the inaugural ceremony of the exhibition, Iran ambassador to
Armenia, Alireza Haqiqian said that Tehran and Yerevan have managed
to expand trade ties because of attempts made by economic activists
to identify new investment opportunities in industrial sector.
He added that Iranian and Armenian private sectors and industrial
owners play crucial role in the expansion of bilateral ties, and they
can enjoy the support of their respective governments in this field.
Armen Movsesian, Armenian energy minister also said that both nations’
economic relations have significantly grown during the past year.
Movsesian, who is also the chairman of Iran-Armenia Economic
Cooperation Commission, noted that the commission intends to facilitate
bilateral cooperation of the industrialists and develop trade and
economic ties between Iran and Armenia.

NAGORNO-KARABAKH WINE AND VODKA EXPLORE INTERNATIONAL MARKETS
Regnum, Russia
Nov 6 2006
Wine and vodka production is one of the key directions of
Nagorno-Karabakh’s economy. REGNUM correspondent reports that the
leaders in the sphere are Karabakh Gold and Artsakh Alco.
Artsakh Alco produces wheat vodka, fruit vodkas (mulberry, grape,
apricot) and brandy. Only 15% of the fruit vodkas are sold inside
Nagorno-Karabakh. The rest is exported to Armenia, Russia, Ukraine,
and the US. The company has opened grapes reception offices in some
villages of Martuni district, which has become a good stimulus for
local farmers. The company is also planning to help grape producers
with fertilizers.
Karabakh Gold produces almost 30 types of wines and vodkas. Last year
the company processed 700 tons into wines. 2,000 tons of raw grapes
were sold to Yerevan Brandy Company, while spirit equivalent to 2,300
tons will be used in own brandy production, to be launched next year.
The company’s output is steadily growing – the volume of grape
processing is growing by 500 tons a year. People actively help
grape-growers to purchase necessary fertilizers.

SERGE SARGSIAN HAS NO CONCERN ABOUT TRANSFER OF BIG ARMENIAN ENTERPRISES TO RUSSIAN COMPANIES
Noyan Tapan News Agency, Armenia
Nov 6 2006
YEREVAN, NOVEMBER 6, NOYAN TAPAN. The Armenian government will give
consent for the deal on selling 90% of ArmenTel shares owned by the
Greek company OTE to the Russian company Vympelcom. The RA Defence
Minister Serge Sargsian expressed this opinion during a talk with
reporters on November 6. At the same time he refuted the assumptions
about his relation to the deal.
Responding to NT correspondent’s question, S. Sargsian said that he
has no concern in connection with the transfer of Armenia’s biggest
strategical facilities to Russia. “I do not consider it dangerous,
because I have not yet seen the Russian side use its economic
leverage in Armenia. Can you give an example when the Russian capital
in Armenia has been used to subject us to political pressure?,”
the minister noted. In response to the question about the use of
economic leverage by Russia to put pressure on Georgia, he replied:
“Should I be concerned about Georgia as well?”
According to the minister, no American or European company has
expressed an intention to make investment in the 5th power unit of
Hrazdan Thermal Power Plant or a gas operation enterprise. Reminding
that two Russian companies and an Arab one had participated in the
final stage of the tender for sale of ArmenTel shares, S. Sargsian
noted: “But would it have been more beneficial for Armenia, if the
Arab comapny had acquired ArmenTel?”

SERGE SARGSIAN: I WOULD LIKE ALL BUDGETS OF ARMENIA TO BE PRE-ELECTION
Noyan Tapan News Agency, Armenia
Nov 6 2006
YEREVAN, NOVEMBER 6, NOYAN TAPAN. The amount of allocations envisaged
by the 2007 draft state budget of the RA for the sphere of defence is
sufficient to keep the fighting efficiency of the Armenian army. The
RA Defence Minister Serge Sargsian told this to reporters after the
closed-door discussion of the 2007 state budget allocations for defence
at the joint sitting of the RA National Assembly standing committees
on November 6.
Comparing the military budgets of Azerbaijan and Armenia, the minister
said: “A billion dillars cannot certainly be compared with 300 million
dollars. But if 300 million is spent sparingly and purposefully,
I think it will be sufficient.”
According to him, a growth in financing the RA Defence Ministry is
envisaged in 2007. The minister said that every year the amount of
allocations for the defence sphere makes up 3.5% of the country’s
GDP. In his words, the allocations for defence will be proportional
to the growth of the Armenian economy.
S. Sargsian said that in 2007, 48% of budget allocations for defence
will be aimed at increasing salaries, thanks to which the average
salary of officers will make 165 thousand drams (about 434 USD).
As for the accusation voiced against the government that the 2007
budget is pre-elction rather than social, S. Sargsian noted that even
if this is the case, it does not change anything as a pre-elction
budget should have a social orientation. “I would like all the budgets
of Armenia to be pre-election, that is, aimed at solving the social
problems,” the defence minister stated.