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Will the influence of Moscow in Yerevan be reduced? Part 1

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  • Will the influence of Moscow in Yerevan be reduced? Part 1

    Vestnik Kavkaza, Russia
    Aug 23 2013


    Will the influence of Moscow in Yerevan be reduced? Part 1

    23 August 2013 - 5:02pm

    Susanna Petrosyan, Yerevan, exclusively to VK

    Talk about the ruling elite of Armenia's need to choose between
    European integration and accession to the Customs Union has triggered
    many debates that have affected, among other things, the possibility
    of nationalization of businesses owned by Russia - to reduce Moscow's
    influence in Armenia.

    In the period of Armenian independence, mostly under President Robert
    Kocharian, Russian companies through various transactions took control
    of the two telecom companies, the majority of enterprises in the
    energy sphere, including the fifth unit of the Hrazdan TPP under
    construction, the Sevan-Hrazdan HPP, 80% of shares of "ArmRusgasprom"
    and `Armenian Power Distribution Networks". CJSC "Armenian Railways"
    was transferred to the concession management of the Russian company
    "South-Caucasian Railways", but its owner is the government of
    Armenia.

    A special place among Armenian-Russian transactions belongs to the
    treaty "Property for debt" signed in late 2001, according to which at
    the initiative of the Armenian side, for debt of 108 million dollars
    for nuclear fuel, five companies were transferred to Russia: four
    units of the Hrazdan thermal power plant, the "Mars" plant, the
    Institute of Automated Control Systems, PLC "Yerevan Research
    Institute of Mathematical Machines" and the Materials Research and
    Production Enterprise.

    Although experts and opposition politicians exposed the agreements to
    sharp criticism, the question of nationalization in the Armenian
    political expert and journalist community has never been raised.
    Nevertheless, the issue of the need for and adoption of the law "On
    nationalization" was discussed so that negligent owners of former
    state property were made clearly aware that in case of
    economically-inefficient management, the property would revert to the
    hands of the state.

    Some radical observers who have expressed today the conviction of the
    need to nationalize Russian enterprises in Armenia do not understand
    many things and confuse nationalization and confiscation. But how can
    you take away their property in Armenia from companies representing a
    huge country?

    It is known that many countries, including developed ones, have made
    decisions about the nationalization of some strategic enterprises and
    nationalized sometimes entire industries, such as the UK coal industry
    being nationalizeds under the Labour Party. But nationalization was
    often a harbinger of debt restructuring, introduction of investment,
    and then a new stage of privatization of nationalized enterprises.
    World experience shows that nationalized enterprises are not always
    successfully managed, and in some countries management is accompanied
    by corruption.

    The main reason for nationalization in most cases is the inefficient
    economic activity of certain companies or industries. The bankruptcy
    of some large enterprises or industries may leave tens of thousands of
    jobless people, which will lead to social riots and political
    instability in any state.

    Nationalization may be total or partial, but in all cases, if the
    government nationalizes the company, it pays for that a huge amount of
    money to the owner, based not only on the net asset value, but also on
    investment. Speaking of Russian companies in Armenia, we should use a
    differentiated approach, as the situation is different for them in
    matters of governance and in attracting investment, as well as
    generally in terms of the obligations and commitments of the Russian
    side.


    The most successful aspect is now the work of the communications
    sphere, where the Russian company Beeline bought the company
    "Armentel", and the majority owner of the mobile operator "VivaCell"
    is the Russian company MTS. Experts estimate the management of the
    Russian owner of the assets of the 5th unit of the Hrazdan TPP, which
    received sound investment, to be highly effective. Regarding the
    activities of "ArmRusgasprom", 80% owned by the Russian company
    "Gazprom", it should be noted that this company operates at a profit,
    considerable investment is invested in it, in particular, the country
    is 95% supplied with gas, but the effectiveness of management raises
    questions. As for the Sevan-Hrazdan cascade, here the Russian side has
    not made any tangible investments.

    The activities of the company owned by Russia "Armenian Power
    Distribution Networks" (RESA) generally receive restrained assessments
    by experts in the Armenian power sector. According to local experts,
    the owner of RESA, the Russian company RAO "UES" ,has improved its
    work, but it was done through foreign loans and by increasing
    electricity tariffs. This could be done by the Armenian side,
    especially as RESA at the time of the transfer to Russia was in better
    condition than the Russian distribution networks.

    Initially, RESA acquired at a very low price a little-known company
    "Midland Resources", registered in an offshore zone. And then RAO
    "UES" acquired its power grids. Thus, Russia gained control over RESA
    not directly from the Armenian side, but after a few years when RESA
    was ruled by a company registered in a British offshore territory.

    A similar situation occurred when the Russians bought the company
    "ArmenTel" from the Greek "OTE". The latter initially offered to sell
    "ArmenTel" to the Armenian government, and only after a rejection did
    it sell it to the Russian side. Most of the transactions were not
    transparent and have caused a lot of issues, including in terms of
    compliance with the laws of the Government of Armenia. There is no
    doubt that the majority of these transactions contained elements of
    corruption.


    To be continued

    http://vestnikkavkaza.net/analysis/politics/44235.html

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