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RUSSIA SET TO EXPAND ECONOMIC PRESENCE IN ARMENIA
By Emil Danielyan
Eurasia Daily Monitor, DC
Feb 6 2007
Russia looks set to enhance its already strong economic presence in
Armenia by capitalizing on Armenian President Robert Kocharian's
apparent desire to secure his political future with the Kremlin's
backing. The two governments have indicated that Russian companies
will soon get hold of more chunks of the Armenian economy involving
transportation and mining. They are also considering building a big
Russian-owned oil refinery on Armenia's border with Iran.
The developments result from Kocharian's latest talks with President
Vladimir Putin, which took place in the southern Russian city of
Sochi on January 24. Putin was visibly satisfied with the outcome
during an ensuing joint news conference, praising a major increase
in Russian-Armenian trade in 2006 and the absence of "unresolved
problems or difficult issues in our relationship."
Kocharian, for his part, recalled Putin's earlier public complaint
that Russia is only Armenia's third-largest foreign investor. "I have
a sense that Russia will definitely hold the honorable first place
by next March," he said. He noted in particular that he and Putin
had discussed Russian involvement in the Armenian mining industry,
which is currently dominated by non-Russian foreign investors.
Kocharian's press secretary, Victor Soghomonian, told reporters in
Yerevan on January 29 that Russia would specifically like to help
Armenia develop its uranium deposits, which were first discovered
in Soviet times. Last year a U.S. mining company began exploratory
work in a northeastern Armenian region that geologists say is rich
in the radioactive metal. It is not clear if the Russians have set
their sights on the same area.
Citing unnamed government sources, the Armenian newspaper 168 Zham
said on February 1 that Yerevan has also decided to place Armenia's
largest gold mines under Russian control. The paper claimed that an
Indian company that operates those mines along with a gold-recovery
plant is being forced out of the country. The Armenian authorities
recently accused the company, Vedanta Resources, of large-scale tax
evasion, and it is currently under investigation.
Kocharian also referred to Russian-Armenian cooperation in the area of
transport, widely understood to be a confirmation of earlier reports
that Russia's state-run railway company will run Armenia's moribund
rail network. The takeover is expected to take the form of a long-term
management contract.
In addition, it emerged after the Sochi talks that the oil division
of the Gazprom monopoly is in talks with the Armenian government
to explore the possibility of building a refinery in southeastern
Armenia that would process oil from neighboring Iran. The ambitious
project envisages shipping Iranian crude to the Armenian border town
of Meghri through a 200-kilometer pipeline and transporting refined
oil products back to Iran by rail. According to Kocharian's spokesman
Soghomonian, Armenian, Iranian, and Russian officials will meet soon
to discuss the project in greater detail.
Despite its vast oil reserves, Iran lacks refining facilities and has
to import gasoline to meet domestic demand. Nonetheless, some Russian
experts question the economic wisdom of building such a facility in
the most remote and least accessible part of Armenia, saying that
it would cost a staggering $1.7 billion. Soghomonian dismissed the
estimate as "grossly exaggerated" and insisted that the project
"makes economic sense to all three parties."
The latest Russian-Armenian talks come on the heels of highly
controversial deals that gave Moscow near total control over the
Armenian energy sector. The most recent of those deals, finalized in
April 2006, enabled Armenia to avoid a hike in the price of Russian
natural gas until January 2009 in exchange for ceding more energy
assets to Gazprom. Those included an incomplete but modern thermal
power plant and a considerably higher stake in the South Caucasus
state's gas distribution network. The Russian giant will also likely
get a controlling share in a gas pipeline from Iran that is due to
come on stream this spring. In addition, Kocharian's late October
visit to Moscow was followed by the $500 million sale of ArmenTel,
the Greek-owned national telecommunication company, to Russia's
VimpelCom mobile phone operator.
Many commentators in Yerevan view Kocharian's willingness to place
more Armenian industries under Russian control as being part of
his strategy to retain a key role in the country's government after
completing his second and final term in office in March 2008.
Throughout his nine-year rule the Armenian leader has sought the
Kremlin's backing to neutralize political opponents challenging his
legitimacy. Significantly, Kocharian was received by Putin in Sochi
just one week after paying a confidential visit to Moscow. Armenia's
upcoming parliamentary elections were reportedly high on the agenda
of that trip. The outcome of the vote, slated for May 12, will be
vital for his political future.
Whatever Kocharian's real motives, there are mounting concerns about
the implications of the ruling regime's economic dealings with Moscow
-- arguably the least transparent area of governance in Armenia --
that are not overseen by parliament or even the cabinet of ministers.
"Many economists consider Russia's presence in the Armenian economy
to be dangerous," commented 168 Zham. Another paper critical of the
government, Haykakan Zhamanak, accused Kocharian of "playing with our
country's sovereignty." "The problem is that Russian companies are
acquiring not just Armenian enterprises but whole infrastructures,"
it wrote on January 26. "And that is a matter of national sovereignty."
(168 Zham, February 1; Azg, January 30; Kommersant, January 26;
Haykakan Zhamanak, January 26; RFE/RL Armenia Report, January 24,
January 17)
By Emil Danielyan
Eurasia Daily Monitor, DC
Feb 6 2007
Russia looks set to enhance its already strong economic presence in
Armenia by capitalizing on Armenian President Robert Kocharian's
apparent desire to secure his political future with the Kremlin's
backing. The two governments have indicated that Russian companies
will soon get hold of more chunks of the Armenian economy involving
transportation and mining. They are also considering building a big
Russian-owned oil refinery on Armenia's border with Iran.
The developments result from Kocharian's latest talks with President
Vladimir Putin, which took place in the southern Russian city of
Sochi on January 24. Putin was visibly satisfied with the outcome
during an ensuing joint news conference, praising a major increase
in Russian-Armenian trade in 2006 and the absence of "unresolved
problems or difficult issues in our relationship."
Kocharian, for his part, recalled Putin's earlier public complaint
that Russia is only Armenia's third-largest foreign investor. "I have
a sense that Russia will definitely hold the honorable first place
by next March," he said. He noted in particular that he and Putin
had discussed Russian involvement in the Armenian mining industry,
which is currently dominated by non-Russian foreign investors.
Kocharian's press secretary, Victor Soghomonian, told reporters in
Yerevan on January 29 that Russia would specifically like to help
Armenia develop its uranium deposits, which were first discovered
in Soviet times. Last year a U.S. mining company began exploratory
work in a northeastern Armenian region that geologists say is rich
in the radioactive metal. It is not clear if the Russians have set
their sights on the same area.
Citing unnamed government sources, the Armenian newspaper 168 Zham
said on February 1 that Yerevan has also decided to place Armenia's
largest gold mines under Russian control. The paper claimed that an
Indian company that operates those mines along with a gold-recovery
plant is being forced out of the country. The Armenian authorities
recently accused the company, Vedanta Resources, of large-scale tax
evasion, and it is currently under investigation.
Kocharian also referred to Russian-Armenian cooperation in the area of
transport, widely understood to be a confirmation of earlier reports
that Russia's state-run railway company will run Armenia's moribund
rail network. The takeover is expected to take the form of a long-term
management contract.
In addition, it emerged after the Sochi talks that the oil division
of the Gazprom monopoly is in talks with the Armenian government
to explore the possibility of building a refinery in southeastern
Armenia that would process oil from neighboring Iran. The ambitious
project envisages shipping Iranian crude to the Armenian border town
of Meghri through a 200-kilometer pipeline and transporting refined
oil products back to Iran by rail. According to Kocharian's spokesman
Soghomonian, Armenian, Iranian, and Russian officials will meet soon
to discuss the project in greater detail.
Despite its vast oil reserves, Iran lacks refining facilities and has
to import gasoline to meet domestic demand. Nonetheless, some Russian
experts question the economic wisdom of building such a facility in
the most remote and least accessible part of Armenia, saying that
it would cost a staggering $1.7 billion. Soghomonian dismissed the
estimate as "grossly exaggerated" and insisted that the project
"makes economic sense to all three parties."
The latest Russian-Armenian talks come on the heels of highly
controversial deals that gave Moscow near total control over the
Armenian energy sector. The most recent of those deals, finalized in
April 2006, enabled Armenia to avoid a hike in the price of Russian
natural gas until January 2009 in exchange for ceding more energy
assets to Gazprom. Those included an incomplete but modern thermal
power plant and a considerably higher stake in the South Caucasus
state's gas distribution network. The Russian giant will also likely
get a controlling share in a gas pipeline from Iran that is due to
come on stream this spring. In addition, Kocharian's late October
visit to Moscow was followed by the $500 million sale of ArmenTel,
the Greek-owned national telecommunication company, to Russia's
VimpelCom mobile phone operator.
Many commentators in Yerevan view Kocharian's willingness to place
more Armenian industries under Russian control as being part of
his strategy to retain a key role in the country's government after
completing his second and final term in office in March 2008.
Throughout his nine-year rule the Armenian leader has sought the
Kremlin's backing to neutralize political opponents challenging his
legitimacy. Significantly, Kocharian was received by Putin in Sochi
just one week after paying a confidential visit to Moscow. Armenia's
upcoming parliamentary elections were reportedly high on the agenda
of that trip. The outcome of the vote, slated for May 12, will be
vital for his political future.
Whatever Kocharian's real motives, there are mounting concerns about
the implications of the ruling regime's economic dealings with Moscow
-- arguably the least transparent area of governance in Armenia --
that are not overseen by parliament or even the cabinet of ministers.
"Many economists consider Russia's presence in the Armenian economy
to be dangerous," commented 168 Zham. Another paper critical of the
government, Haykakan Zhamanak, accused Kocharian of "playing with our
country's sovereignty." "The problem is that Russian companies are
acquiring not just Armenian enterprises but whole infrastructures,"
it wrote on January 26. "And that is a matter of national sovereignty."
(168 Zham, February 1; Azg, January 30; Kommersant, January 26;
Haykakan Zhamanak, January 26; RFE/RL Armenia Report, January 24,
January 17)