ARMENIA SELLING MORE INFRASTRUCTURE, INDUSTRY TO RUSSIA

Publication: Eurasia Daily Monitor Volume: 3 Issue: 206

In his November 6 news conference, Armenia’s de facto strongman and presidential aspirant Serge Sarkisian welcomed the just-consummated purchase of the Armentel telecommunications company by the Russian giant Vympelcom. Sarkisian is defense minister as well as secretary of the national security council (supervising the security agencies), and concurrently the head of the Armenian side in the Armenia-Russia Economic Cooperation Commission, thus also in charge of Armenia’s economic relations with Russia. “I don’t see any risk at all in the growth of Russian capital in our country,” Sarkisian averred (Interfax, November 6).

Indeed he has, along with his long-time political ally President Robert Kocharian, overseen the process of transferring Armenia’s infrastructure and industrial assets to Russian interests. On October 31-November 1 in Moscow, Kocharian finalized the handover of the Iran-Armenia gas pipeline and the Hrazdan electricity generating plant’s fifth power bloc, the leading unit in the country, to Gazprom in return for temporary price relief on Russian gas (see EDM, November 3). Low-priced gas is only a recent rationale for selling infrastructure assets to Russia. In 2002-2005, the rationale was debt relief. Kocharian and Sarkisian oversaw the transfer of state-owned industries to Russia in debt-for-assets swaps.

Vympelcom announced on November 3 in Moscow the purchase of a 90% stake in Armentel from the Greek owner, Hellenic Telecommunications (OTE). Vympelcom is paying $ 434 million in cash and assumes an additional $ 52 million in OTE debt. OTE had bought Armentel from the Armenian government in 1997 for $142.5 million and invested a reported $300 million in it since then. Armentel currently has a 40% to 50% share of Armenia’s mobile telephone market and operates the country’s fixed-line telephony network. The Armenian government retains a 10% stake in Armentel. According to government data (Arminfo, November 3), Armentel has until now been Armenia’s second-largest taxpayer.

During Kocharian’s Moscow visit last week, Russia’s Comstar Telesystems announced the acquisition of Armenia’s telecommunications company CallNet and its subsidiary, the Internet service provider Cornet. The fast-growing Callnet and Cornet comprise the second-largest telecommunications group in Armenia. The Russian Comstar is acquiring a 75% stake in that group for an as yet undisclosed price, with an option to purchase the remaining 25%.

Also during Kocharian’s visit, Russia’s state-owned Foreign Trade Bank (Vneshtorgbank) announced its intention to acquire the remaining 30% of shares in what used to be Armenia’s Savings Bank. The Vneshtorgbank had in 2004 acquired 70% of the shares in that bank, which became Vneshtorgbank Armenia. The tycoon Mikhail Bagdasarov owns the remaining 30% and is negotiating the sale to the Russian Vneshtorgbank (Kommersant, SKRIN Market and Corporate News, October 30-31).

On the eve of Kocharian’s Moscow visit, Sarkisian presided over the ceremony marking the completion of the ArmenAl plant’s overhaul by Russian Aluminum (RusAl). The Yerevan-based ArmenAl, a major producer of aluminum foil, idled in the 1990s, was acquired in 2002 by RusAl, which two years later subcontracted the overhaul to Germany’s Achenbach firm for $80 million (RFE/RL Armenia Report, Armenpress, October 26).

In September of this year, the Russian state-owned Inter-RAO UES (a subsidiary of Russia’s Unified Energy Systems state monopoly) completed the acquisition of the Electricity Networks of Armenia in full ownership from the British-based Midland Holdings. Apart from the transmission networks, Russia’s UES owns and operates some 80% percent of Armenia’s electricity generation capacities and is the financial manager of Armenia’s Nuclear Power Plant.

During his meeting with Kocharian in the Kremlin on October 31, Russian President Vladimir Putin professed to feel that the level of Russian investment in Armenia is too low, “strangely and shamefully” so. Widely cited in Armenia, this remark seems disingenuous on several counts. Russia is by far the largest investor overall in post-Soviet Armenia. Putin’s estimation apparently did not include the transactions-in-progress that are being finalized now. Unlike Western investors, Russian ones are focusing on Armenia’s strategic assets and infrastructure as the economic basis for political influence and control. Putin’s remark seems designed to goad official Yerevan into selling more assets to Russian interests, in which case Yerevan would have to start scraping the bottom of the assets barrel.

(Noyan Tapan, Mediamax, PanArmenianNet, Armenpress, November 1-6)