CENTRAL BANK HOLDS FIRM ON FISCAL POLICY
Haroutiun Khachatrian
EurasiaNet, NY
Aug. 31, 2006
Armenia’s Central Bank is holding firm on its fiscal policy in the
face of criticism about the strength of the country’s currency, which
has gained about 40 percent in value against the US dollar in recent
years. In defending itself against its critics, Central Bank officials
are pointing to recently released data concerning the impact of cash
remittances on the country’s economy.
It had long been believed that money sent home by Armenians abroad
plays an important role in the Armenian economy, but the survey,
prepared by the Armenian Central Bank with support from the World Bank,
contained some surprising results. The total amount of remittances
in 2005 was pegged at $940 million, a figure that exceeded earlier
estimates, and which was higher than the state budget of $912 million.
The other surprise is that the bulk of remittances goes to middle-class
families in Armenia, contradicting the widely held perception that
money from abroad went mainly to the poor and played a vital role in
keeping poverty in check. Overall, only 37 percent of Armenian families
benefited from remittances, according to the data, which was compiled
between February and April of this year. Central Bank officials have
relied on these findings to fend off calls for devaluation, insisting
that the poor have not been severely impacted by the strong dram. They
add that taking action to reverse the dram’s rise could spur inflation,
which would hurt all Armenians.
The dram’s value has been a hot topic in August. It was trading at
around 396 to the US dollar on August 31. In late 2003, the dram
traded at about 570 to the dollar. Opposition politicians have long
suspected authorities of keeping the dram artificially strong in order
to divert dollars into pet projects that primarily benefit members of
the governing elite. [For background see the Eurasia Insight archive].
“A group of people gains millions of dollars when ordinary citizens
incur serious financial losses,” the Noyan Tapan quoted opposition
politician Artur Baghdasarian as saying August 12. Baghdasarian,
who formerly served as parliament speaker, split with President
Robert Kocharian’s administration earlier this year and is now seen
as a potential challenger to the incumbent in the next presidential
election. [For background see the Eurasia Insight archive].
Meanwhile, some economists, including Eduard Agajanov, say the strong
dram is damaging Armenia’s export capabilities. According to the
Regnum news agency, Armenia’s deficit during the first six months of
2006 approached a half-billion US dollars.
The average per capita income in households receiving remittances
is $78 per month, well above the poverty line, which officially is
at $42.3 a month. However, an August 11 commentary in the Iravunk
newspaper suggested that the Central Bank’s characterization of such
households as middle-class might be misleading, given that without the
remittances a large share of the beneficiaries might tumble into the
“poor” category.
Almost three-quarters of the remittances were sent from Russia. The
United States was also an important source of funds, accounting for
14.3 percent of remittances. Germany, Greece and Ukraine rounded
out the top five source countries, collectively accounting for 5.2
percent of remittances.
Out of the total of all cash remittances, roughly 76 percent was spent
on daily necessities, including food and clothing, according to the
Central Bank’s data. Another 6.1 percent was earmarked for education
expenses. The remainder was allocated in a variety of ways, including
1.2 percent spent on real estate investments, 2.0 on investments in
small businesses, and 1.1 percent held in savings.
The Central Bank intends to carry out additional research on remittance
patterns, according to Karin Karapetian, a representative of the
Central Bank Statistical Department. The new survey will be conducted
from September-November and will focus on remittances designed to
pay for luxury goods, or to fund investments in real estate and/or
businesses.
The August 9 data indicates that remittances will continue to be
a significant factor in the Armenian economy for the foreseeable
future. Almost 85 percent of respondents expressed the belief that
they will continue to receive remittances in the coming year. Less
that 10 percent said they expected to receive no money down the road.
The situation was the same on the sending end well, with 91 percent
of Moscow respondents saying that they intended to keep sending money
home. The Central Bank projected the overall total of remittances
for this year would be about 17 percent higher than the 2005 figure.
Editor’s Note: Haroutiun Khachatrian is a Yerevan-based writer
specializing in economic and political affairs.

$3.13 BILLION PLEDGED TO GLOBAL ENVIRONMENT FACILITY
Environmental Finance, UK
Aug. 31, 2006
London, 31 August: Governments from 32 countries have promised to give
$3.13 billion to a fund which tackles environmental degradation in
the developing world, the biggest collective donation it has received
to date.
The Global Environment Facility (GEF) will spend the money on
environmental projects run by governments, NGOs and community groups.
Monique Barbut, GEF chief executive and chairwoman, said: “This strong
show of support from the international donor community is remarkable,
and signals firm commitment to protecting the global environment.”
The 15 year-old funding body receives an injection of cash every four
years. Contributions are worked out using a complex formula, but 20
of the 32 donors have agreed to give an additional amount this year.
China and Korea, but not the US, are among the nations who have
said they will give more, alongside a roll call mainly made up of
European countries.
The GEF declined to break down how much each donor will contribute,
but said that Europe provides “nearly half” of the funding. Although
industrialised countries dominate the list of donors, Nigeria and
Pakistan have also pledged undisclosed amounts.
Barbut said: “We cannot be complacent, and time is not on our side.
The global environment is facing unprecedented threats, and these
funds have to be translated rapidly into projects, programmes and
policies that make a difference in developing countries.”
To date, the GEF has given out $6.2 billion in grant funding,
and generated a further $20 billion in co-funding, for more than
1,800 projects in 140 countries. “For every dollar that we invest,
we leverage an additional $4. We would only finance a project if it
had four more dollars,” said Sarwat Hussain from the GEF.
The GEF has recently provided grants to a $19 million financing
mechanism for renewable energy in Armenia, a $16 million project
to tackle land degradation in Bhutan and an $89 million project to
combat desertification in Cuba.

GHUKASYAN: NKR’S INDEPENDENCE FROM AZERBAIJAN NOT END IN ITSELF
Arka News Agency, Armenia
Aug. 31, 2006
STEPANAKERT, August 31. /ARKA/. Nagorno-Karabakh Republic’s
independence from Azerbaijan is the only way for Karabkhi people
development and prosperity, not an end in itself, Arkady Ghukasyan,
the republic’s president said answering Azat Artsakh newspaper readers’
questions on Thursday.
“We has realized that international recognition of NKR is a long and
thorny way depending on geopolitical developments in the region”,
the president said.
“But everything depends on us, our will, patience, ability to overcome
obstacles, our consolidation and firmness and readiness to build
statehood”, Ghukasyan said.
In his words, Nagorno-Karabakh republic has accomplished a great deal
in building statehood, and many in the world have placed it on record.
Ghukasyan said Karabakh people had managed to recover the republic
after the war and had left Azerbaijan behind in building democracy
and other parameters.

PRESIDENT OF ARMENIA CONGRATULATES TEACHERS AND PUPILS ON DAY OF KNOWLEDGE
Arka News Agency, Armenia
Aug. 31, 2006
YEREVAN, August 31. /ARKA/. President of Armenia Robert Kocharyan
congratulated teachers and pupils on the Day of Knowledge.
“High-quality education have always been priority aim for our nation.
Armenia’s future is multilaterally developed generation, rich with
knowledge”, Kocharyan noted in his congratulating message, provided to
ARKA News agency by the Press Service of the president on Wednesday
The message says, “Today educational reforms are in the center of
special attention of the authorities, and they must be carried out
combined with best traditions and new tendencies”.
Kocharyan finds that educational programs must be aimed at training
qualified specialists for science intensive economy and sphere of
high technologies.
“Special attention must be focused on children, having special
educational needs, since nobody must be left out from the public
educational process”, the Message notes.
Kocharyan wished high school results to pupils and success to teachers
in their gratifying labor.

ARMENIA’S POPULATION SPENDS 13.2% OF ITS INCOME BETWEEN JANUARY AND JULY 2006 FOR BUYING CURRENCIES
Arka News Agency, Armenia
Aug. 31, 2006
YEREVAN, August 31. /ARKA/. Armenia’s population spent 13.2% of its
income between January and July 2006 for buying currencies (11.4%
in Jan-July 2005), National Statistical Service of Armenia said in
its report sent to ARKA News Agency on Thursday that the population
expenses for currency purchase grew 39.1% in Jan-July 2006, compared
with the same period a year earlier, while its aggregate income rose
only 19.4% and expenses 21.2%.
People spent 78.8% of their incomes for buying goods and paying for
services in Jan-July 2006 against 80.7% at the same period of 2005.
These expenses grew 16.5% in Jan-July 2006, compared with the same
period of previous year.
Binding and voluntary payments rose 18.1% under pegged share in total
amount of income.
People’s expenses were 1.2 percentage points less than their incomes
in Jan-July 2006. Incomes exceeded expenses 2.7% in Jan-July 2005.
Population income totaled AMD 846824.9mln in Jan-July 2006 after
growing 19.4%, compared with Jan-July 2005, and expenses totaled AMD
836609.3mln after growing by 21.2%, compared with the mentioned period
in 2005. ($1 – AMD 396.54).

AS OF JUNE 30, 2006 TOTAL PUBLIC DEBT OF ARMENIA MAKES AMD 540,329 MLN
Arka News Agency, Armenia
Aug. 31, 2006
YEREVAN, August 31. /ARKA/. As of June 30, 2006, total public debt
of Armenia made AMD 540329 million. The RA National Statistic Service
(NSS) informed ARKA Agency that according to the preliminary data of
the RA Ministry of Finance and Economy, the internal debt amounted
to AMD 55220 million, and the foreign debt – AMD 485109 million,
or $1158,4 million.
The analysis of dynamics of Armenia’s public debt showed that, as of
January-June 2006, the amount of the debt in AMD equivalent reduced
by 1,1% (or by AMD 5,9 billion). ($1 – AMD 396,54).

PUTIN WISHES HAPPY BIRTHDAY TO KOCHARYAN
Arka News Agency, Armenia
Aug. 31, 2006
YEREVAN, August 31. /Novosti-Armenia/. President of the Russian
Federation Vladimir Putin congratulated President of Armenia Robert
Kocharyan on his birthday. Today Kocharyan is 52 years of age.
“It is gratifying that many-sided Russian-Armenian cooperation
progressively develops, based on traditional filling of mutual respect
and friendship, liaising our people.We highly appreciate your personal
contribution to strengthening of allied strategic partnership between
Russia and Armenia”, the congratulation says.
Putin also expressed gratefulness to Kocharyan for his efforts “aimed
at further deepening of mutually beneficial relations both in bilateral
format and within the scope of the Commonwealth of Independent States,
Collective Security Treaty Organization.
From: Emil Lazarian | Ararat NewsPress

IMF DELEGATION ARRIVES IN ARMENIA FOR TWO-WEEK VISIT
Arka News Agency, Armenia
Aug. 31, 2006
YEREVAN, August 31. /ARKA/. An IMF delegation led by Hasan Al-Atrash,
head of the Middle East and Central Asian department, arrived Thursday
in Armenia for two-week visit. IMF Yerevan office reports that the
delegation came to Armenia for monitoring the process of Poverty
Reduction and Growth Facility program implementation by Armenia.
The delegation will also discuss the IMF’s Annual Article IV
consultation.
Global Insight Daily Analysis says IMF sees progress in the process
of putting the program into reality in Armenia.
According to the document, World Bank’s International Development
Association and International Monetary Fund point out that economic
growth and double-digit GDP in Armenia as result of agriculture and
construction development. They also point out low inflation rate and
improving situation with foreign debt.
National Statistical Service of Armenia says economic growth was
recorded at 11.5% in Jan-July 2006, compared with the same period
a year earlier. GDP grew 16.9% in June 2006, compared with the same
month in 2005.
International Monetary Fund has approved Poverty Reduction and Growth
Facility, a tree-year credit program worth 23mln SDR (about $34.2mln),
for Armenia.
IMF-provided assistance to Armenia totals $350 million.

AZERBAIJAN’S JEWISH ENCLAVE
By Sabuhi Mamedli in Krasnaya Sloboda
Institute for War and Peace Reporting, UK
Aug. 31, 2006
“Mountain Jews” live harmoniously with their Muslim neighbours in
the north of the country.
“Krasnaya Sloboda is the safest place for Jews at the moment,” said
Nisim Nisimov, head of the municipal administration in the village of
Krasnaya Sloboda – which means “Red Settlement”. “We are not hostile
towards Muslims. We live on perfect good neighbourly terms with them.”
Krasnaya Sloboda, the last surviving compact community of “Mountain
Jews” in the Caucasus, is situated in the mountainous Quba district
of northern Azerbaijan.
This small community has managed to stay immune to both the Jewish
exodus from the region following the end of the Soviet Union and
fallout from the Jewish-Muslim conflict in the Middle East.
During the recent conflict between Israel and Hezbollah, the media
in Azerbaijan came out with conflicting reports, with some saying
that Jewish families had fled from Israel to Krasnaya Sloboda, while
others said that residents had gone in the opposition direction to
enrol as volunteers in the Israeli Defence Forces.
Semyon Ihilov, head of the Jewish community of Azerbaijan, told IWPR
the reports were not true and a visit to Krasnaya Sloboda suggested
a much more quiet and harmonious picture – despite it being an island
of Jews surrounded by Muslims.
According to Jewish community leaders, a little over 16,000 Jews live
in Azerbaijan today, of whom 11,000 are Mountain Jews with about
3,600 of them in Krasnaya Sloboda. They speak a dialect of the Tat
language, which is related to Persian, and have lived in the Caucasus
for generations.
Krasnaya Sloboda is a prosperous place, which stands in sharp contrast
to the surrounding area. The roads are in a good state and there are
plenty of expensive foreign cars. Seen from high ground, the village
has a reddish tint, due to the red tiling of the roofs – which may
be the explanation for its name. Frequent signs in Hebrew and the
wearing of skullcaps are the main clues to the different cultural
identity of the place.
“The village has two secondary schools, a college, synagogue, a house
of culture, where we observe all our religious holidays and historical
dates,” said Nisimov.
Local residents are mostly well off, but few of them have jobs.
Municipal official Pisah Isakov, said, “There used to be a canning
factory here, which employed at least a thousand people. Nowadays the
plant is running at half capacity, and unemployment has grown. There
are no lands to cultivate in the village either.”
Explaining the secret of the village’s prosperity, Isakov said it
was supported by benefactors, all wealthy natives of the village now
living elsewhere He said these included three men Zahar Iliev, Telman
Ismailov, Sergei Kokunov, who have fortunes estimated at between 350
and 540 million dollars and all of whom feature in Forbes Magazine’s
list of the 100 richest people in Russia.
Isakov said Kokunov had donated money for repair work on the schools
in Krasnaya Sloboda, which should be completed by the beginning of
the new school year.
Relations are generally friendly between Krasnaya Sloboda and other
villages and there are cases of inter-ethnic marriages.
“Three years ago my son married the daughter of my neighbour Abraham,”
said Gasym Aliev. “They live in Israel today. Of course we are worried
about them because of the war. But from a financial point of view,
they live very well and send money to us every month too.”
However, some neighbouring Muslims – Azerbaijanis, Lezgins and Tats –
are envious of the Jews’ prosperity.
“I have a great respect for Jews,” said Abdullayev. “But why have
they been able to make their village look like a small European town,
whereas we cannot do this with ours? You must have seen how terrible
the state of Quba’s bus station is. And that’s the centre of the
district… I’m not even mentioning the villages.”
Nisim Nisimov said that the village’s population used to be 19,000 but,
beginning in the 1970s, many Jews began to emigrate to Israel.
In the last few years the outflow has stopped. Several Azerbaijani
and Lezgin families now live alongside their Jewish neighbours.
Nisimov wants to encourage Jews to move back to the village. “It
would be a justified step for our compatriots to move from warring
Israel back to our peaceful village,” said Nisimov. “During the many
years we’ve lived in the village surrounded by Muslim communities,
there have never been any ethnic or religious differences. We’ve
lived in peace and harmony for many years.
“Krasnaya Sloboda is in fact the safest place in the world for Jews
to live. But despite the safety of our village, not a single Jewish
family has come from Israel to live here. Even those who left the
village have never come back.”
School headmaster Yaushva Silanduyev said they get many visits from
former residents, especially on August 3 which is their annual day
of mourning for the dead.
“Lots of people came from America, France, Israel and Russia this
year,” he said. “Probably, this year’s mass arrival of Jews in
Azerbaijan was misinterpreted because of the war between Israel
and Lebanon.”
The villagers are keen to stress that they are good Azerbaijani
citizens and their first loyalty is to Azerbaijan. “We consider
ourselves to be part of the Azerbaijani people,” said Nisimov. “A big
part of the repertoire of the Gubba musical ensemble, which I direct,
consists of Azeri folk songs and mugams (traditional songs).”
Abdulla Abdullayev, from the nearby Azerbaijani village of Nugadi,
said the Gubba group from Krasnaya Sloboda was frequently invited
to Azerbaijani weddings, “They sing our songs well, even better than
many Azerbaijani musicians.”
In Krasnaya Sloboda, they also mention the fact that their most famous
son Albert Agaronov, a tank-driver, was made a hero of Azerbaijan
after he was killed defending the town of Shusha in 1992 in the war
over Nagorny Karabakh. Lazar, aged 73, said, “All Mountain Jews are
proud of him. If a new war to free Karabakh begins tomorrow, I’m sure
all the young men from Krasnaya Sloboda will stand up and fight.”
However, Lazar adds that no one in the village has displayed any
willingness to go and defend Israel and he doubted that would happen,
“Yes, we are Jews, and when blood is being spilled in Israel, we
feel pain for our brothers. But we are citizens of Azerbaijan, and
our homeland is here. We should defend our homeland, Azerbaijan.”
Sabuhi Mamedli is a freelance journalist based in Baku.

DEFENSE IN BABAJANIAN TRIAL ACCUSES PROSECUTORS OF “MAKING UP CLAIMANT”
By Ruzanna Stepanian
Radio Liberty, Czech Rep.
Aug. 31, 2006
The defense counsel for “Yerevan Zhamanak” newspaper editor Arman
Babajanian on trial for draft evasion and forgery on Thursday
challenged the integrity of the prosecution claiming that the case
against his client was started on the basis of a non-existing person’s
statement.
His remarks followed a statement by presiding judge Mnatsakan
Martirosian who read out a letter of whom investigators presented as
citizen A. Khachatrian, who had allegedly prompted the Prosecutor’s
Office that her neighbor, Arman Babajanian, was evading military
service.
Robert Grigorian, defending, said the letter did not bear a signature
and the prosecutors did not bother to verify its authenticity.
Zhanna Kotikian, prosecuting, objected to the defense’s claims,
saying that the letter had been properly signed, with the first
and last names of the person. “It is your fault that you did not
make sure that all measures were taken to identify the person and
establish where that person lived. The person may have changed the
place of residence by now,” she said.
Lawyer Grigorian later said to RFE/RL that he had checked with
Babajanian’s neighbors and established that the person the prosecutors
allude to in fact does not exist. “We checked that Babajanian didn’t
have a neighbor by this name. Investigators know well this requirement
of the law and they didn’t even try to look for this person. They
are breaking the law deliberately,” he said.
During the previous court sitting the editor of the “Yerevan Zhamanak”
newspaper pleaded guilty to the accusations of draft evasion.
Prosecutors say Babajanian stole and forged in 2002 legal documents
belonging to the family of a former friend living in the United States
to illegally avoid compulsory military service in Armenia.
According to their indictment read out in a Yerevan district court,
the documents included the marriage certificate of Vahe Abovian and his
wife Armine as well as the birth certificates of their two children.
Under Armenian law, young men under the age of 27 who have at least
two children are exempt from the two-year military duty. Babajanian,
30, studied at an Armenian religious seminary and had his service
deferred until 2001 before moving to California in 1998.
But while admitting to the forgery charge, Babajanian insisted that
he did not steal the documents from the Abovians. He claimed that
the latter willingly provided them to him.
On Thursday, Yerevan’s lower court heard the testimony of Armine
Arakelian.
She confirmed that Babajanian had forged the marriage certificate
and birth certificates for two children, but she denied having any
knowledge of how and for what purposes he did that. She confirmed
that she was never married to Babajanian and that her only husband
is Vahe Abovian. She also denied having a daughter named Anzhela
Arakelian as Babajanian’s documents present.
The court also read out witnesses’ testimony. In particular, Yerevan’s
Shengavit military enlistment office worker Tigran Harutiunian and
military commissioner Karen Khachatrian said they trusted Babajanian’s
mother who introduced herself as an employee of the presidential staff.
Khachatrian said in 2004 Babajanian’s mother produced a certificate
according to which her son studied in the United States, was married
to a women in the U.S. and had two children.
The court completed the examination of evidence and will proceed with
pleadings on September 4.