Publication: Monitor Volume: 6 Issue: 182

Armenian President Robert Kocharian seems to have returned almost empty-handed from his September 26-28 official visit to Russia. As Kocharian admitted upon returning to Yerevan, Armenian-Russian “economic relations lag significantly behind political relations.” That observation, while accurate, stops short of acknowledging that the “political relations” are themselves overshadowed by the military ones, as this visit confirmed (see below).

Kocharian’s primary aim in Moscow was to conclude a number of economic agreements. He failed to bring home a contract which would have allowed Armenia’s diamond-polishing industry–currently the number one source of foreign currency for Armenia–to process Russian raw diamonds at preferential import prices and tax rates. A draft agreement has been awaiting Russian approval for the last two years and will probably await a few more.

The sides discussed the repayment of a US$113 million Armenian state debt to Russia and agreed in principle that some Armenian state assets would be turned into Russian-Armenian joint enterprises as a method of debt reimbursement. The unfinished Hrazdan thermal power plant, Armenia’s largest, was identified as a likely candidate for a handover, on the grounds that the project was geared to the Soviet technology of the 1980s.

The Armenians did not manage to get Russian agreement on a list of exemptions from the Russian practice of levying value-added taxes in accordance with the goods’ origin, rather than their destination. This problem burdens the trade of virtually all CIS countries with Russia. Loyal ally Armenia is not receiving any special treatment in this regard.

The defense ministers, Igor Sergeev and Serge Sarkisian, signed three agreements on military cooperation. One concerns advance planning of joint military exercises by Russian and Armenian troops in Armenia. The second, the use of land tracts by Russian military bases and garrisons in Armenia. The third, overflights of Armenian airspace by Russian military aviation and of Russian airspace by Armenian military aviation. The second part of this equation would seem to be essentially symbolic. As regards Russian aviation, it would have to cross Georgian airspace en route on its way to Armenia. This situation has more than once led to violations of Georgia’s airspace (Noyan-Tapan, Snark, Haiastani Hanrapetutiun, Azg, Itar-Tass, September 26-29; see the Monitor, July 1).