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ANKARA: Armenia Loses Economic Battle, Doomed To Lose Political One

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  • ANKARA: Armenia Loses Economic Battle, Doomed To Lose Political One

    ARMENIA LOSES ECONOMIC BATTLE, DOOMED TO LOSE POLITICAL ONE

    Today's Zaman
    http://www.todayszaman.com/columnist-251390-armenia-loses-economic-battle-doomed-to-lose-political-one.html
    July 22 2011
    Turkey

    Armenia as number two in the ranking of "The World's Worst Economies"
    in US business magazine Forbes should ring alarm bells for this
    landlocked country in the Southern Caucasus.

    It made one thing crystal clear: The continuation of the illegal
    occupation of 20 percent of Azerbaijani lands despite four UN Security
    Council resolutions is no longer a sustainable policy for Armenia as
    it has started to take a heavy toll on the country's economy.

    The lifeline provided to its economy by regional powers Russia and
    Iran, as well as money flowing from the diaspora, is not enough to
    halt the deterioration of the Armenian economy. Armenia desperately
    needs a sustainable long-term economic plan for its people.

    The goodwill or shaky strategic assistance secured temporarily from
    regional powers alone will not help Armenia stay afloat at a time
    when the world is bracing itself for another economic crisis, likely
    to originate from a deepening crisis in the eurozone.

    You may question the methodology used in Forbes magazine's
    calculations, but in the end the analysis used the data provided to
    the International Monetary Fund (IMF) by Armenia itself, compiled over
    the last three years and in which the prospects of next year have been
    factored in. It looked at several factors, like high inflation, lower
    growth, the income per capita and a negative trade balance. Armenian
    Finance Minister Vache Gabrielyan may try to put the blame on the
    2008-2009 world economic crises as an explanation for his country's
    poor development. But the problem is not just limited to whether or
    not the country's economy was impacted by external shocks. The country
    has structural problems and needs to trade more, which looks unlikely
    given the military occupation of Azerbaijani lands.

    At the expense of preserving the current status quo and hopefully
    gaining independence for Nagorno-Karabakh in negotiations with
    Azerbaijan, Armenia is losing its vital assets, most importantly its
    human capital. The number of people who emigrated from Armenia remains
    unclear. Official figures indicate that nearly 80,000 people left
    the country for good in the past three years while nongovernmental
    organizations estimate the actual number during that same period may
    have reached several hundred thousand. It was claimed that 45,000
    people fled the country in just the past four months.

    No matter how you interpret the different numbers, the important
    thing is that there is a clear and identifiable trend pointing to a
    mass exodus in the two decades since the conflict started. People are
    looking for better opportunities in terms of employment and escaping
    from their poor living conditions in Armenia. Most importantly, the
    majority of people who left Armenia were highly qualified people,
    the crème de la crème, so to speak. This loss of human capital,
    which is considered to be part of the national wealth, is not the
    only source of concern for Armenia. It is faced with the outflow of
    financial capital as well, which, as is to be expected, is transferred
    to safe and secure places for investment.

    Because of the occupation of neighboring Azerbaijani territories,
    Armenia cannot trade with the two economic powerhouses in the region
    -- Turkey and Azerbaijan, both of whom have booming economies despite
    the economic crisis brewing in Europe. Turkey, with record economic
    growth in the last quarter, even outpacing China, closed its border
    with Armenia in April 1993 in protest of Armenian aggression. It tied
    the reopening of the border to a solution of the Nagorno-Karabakh
    conflict out of solidarity with Azerbaijan, resisting Western pressure
    to open the borders.

    To be cut off from lucrative trade with Turkey was not the only price
    Armenia had to pay. The Armenian government in Yerevan was also left
    out of important regional projects like the Baku-Tbilisi-Ceyhan (BTC)
    pipeline and the Baku-Tbilisi-Kars railway. The access to Western
    markets via Turkey is a huge loss for the Armenian economy as well.

    We all remember when Haydar Aliyev, the father of Ilham Aliyev,
    proposed constructing the BTC pipeline through Armenia in exchange
    for a return of occupied lands. Both Turkey and Azerbaijan had the
    BTC run through Georgia instead, meaning a significant loss for the
    Armenian economy.

    The same thing happened with the railway. Just to give an example,
    Azerbaijan extended a $200 million loan to Georgia as part of the first
    stage in the construction of this railway with an additional loan
    of $575 million to be allocated for the next stage. This investment
    may have easily gone to Armenia had it ended the occupation and
    established good relations with Azerbaijan. The project is expected
    to be completed by the end of next year and will make both Georgia and
    Azerbaijan transportation hubs in the region. The construction of the
    biggest Caspian trade seaport in Alat will extend the reach of this
    railway to Central Asia, connecting both eastern and western trade
    routes. Armenia stands to lose even more in both strategic terms as
    well as commercially from other energy and transportation projects
    currently being considered in the region.

    Because of the conflict, Armenia has lost contact with the most
    important economic power in the South Caucasus as well. Azerbaijan
    constitutes 75 percent of the South Caucasus economy and gross
    product as well as 90 percent of export potential, thanks mainly to
    the oil-extracting business. The economy has grown threefold in the
    past seven years, while gross domestic product (GDP) has increased 300
    percent. As personal income levels have risen dramatically, poverty was
    reduced fivefold, according to government statistics. Just last year,
    the country received $16 billion in investments. In the first half
    of 2011, investments worth $5.7 billion were made in Azerbaijan's
    economy, with more than 70 percent of these funds being directed
    to the agricultural sector's development as part of diversification
    policies, which gives priority to the development of sectors of the
    economy other than the oil business.

    Given the economic dynamics, time is not on Armenia's side. They have
    vested strategic interest in keeping the process of negotiation alive
    to find a solution for this long-running conflict with Azerbaijan. It
    is a shame that the Kazan talks, held last month between Azerbaijan
    and Armenia under Russian stewardship, did not produce any result, but
    I do not agree with the premise that the status quo benefits Armenia.

    I think having no breakthrough in talks would hurt Armenia more than
    ever as it loses out on huge economic opportunities during a time of
    crisis in the world economy.

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