A Year in Review: Armenia Seeks Closer Cooperation With the West While Avoiding Angering Russia

The year 2017 could be considered a tranquil one for Armenia’s domestic and international political life. It passed without a repeat of anything as violent or dramatic as, for instance, the “four-day war”—the outbreak of clashes along the line of contact in Karabakh, between April 2 and April 5, 2016, which was the most dangerous incident since the 1994 ceasefire agreement between Armenia and Azerbaijan, resulting in 102 casualties on the Armenian side (see EDM, April 14, 2016). Nor was there a repeat last year of anything comparable to the July 2016 capture of a police compound in Yerevan for two weeks by a group of 31 armed men calling for a rebellion; three police officers were killed during the attempt (Azatutyun.am, July 31, 2016). Probably, the most significant outcome of 2017 was the Armenian authorities’ moves to widen the country’s cooperation with its Western partners (and to receive additional funding from the European Union) while not provoking a hostile reaction from Russia.

In February, an Armenian army unit participated in a joint exercise at the North Atlantic Treaty Organization (NATO) Partnership for Peace (PfP) Training and Education Center in Georgia, alongside both Georgian and Alliance forces (see EDM, February 7, 2017). That was followed by participation in the two-week-long US-led Noble Partner 2017 exercise in July and August, along with Georgian, Ukrainian and NATO units. Involvement in another PfP exercise, Agile Spirit, in September was canceled at the last moment, however. And Armenian officials offered a series of inconsistent statements as to why Yerevan had pulled out: that participation had not been planned at all; that it had been planned but the plans later revised; that “Armenia could not participate in exercises aimed ‘against our ally’ [Russia]”; and so forth (see EDM, September 8, 2017). During Armenian President Serzh Sargsyan’s two-day visit to Georgia in December, Georgian Minister of Defense Levan Izoria expressed hope that Armenian units would participate in the forthcoming Noble Partner and Agile Spirit exercises in 2018 (Lragir.am, December 27, 2017).

On November 24, Armenia and the European Union signed the Comprehensive and Enhanced Partnership Agreement (CEPA), which may potentially open the way for additional EU support for implementing structural reforms (see EDM, December 4, 2017). Estonia became the first state to ratify the agreement (which will come into force once all EU member states and Armenia ratify it) on January 12 (Armenpress.am, January 12). Armenia is expected to ratify the CEPA by the end of March (Azatutyun.am, January 10).

Meanwhile, the government in Yerevan once again ceded state property to a Russian entity. In December, it was reported that Armenia was relinquishing, without any compensation, the natural gas distribution network in the southern towns Meghri and Agarak to Gazprom-Armenia, fully owned by Russia’s state-controlled Gazprom. The Meghri and Agarak gas distribution network is valued at 1.2 billion Armenian drams (about $2.5 million); it is connected only to the Iran-Armenia pipeline, and was not interconnected with the remaining Armenian gas networks that had already been owned by Gazprom-Armenia for years (Armtimes.com, December 12, 2017). Before the deal was finalized, the media had reported that a draft of the government’s decision included such wording as “taking into account the interest of Gazprom-Armenia for the preservation of a stable economic situation” (Panorama.am, November 29, 2017).

The Armenian economy continued to suffer economic stagnation in 2017, which became exacerbated by some of the evolving consequences of membership in the Russia-led Eurasian Economic Union (EEU). In particular, the prices of meat and dairy products grew sharply in September and October, in anticipation of the planned elimination of EEU tariff exemptions (Azatutyun.am, October 3, 2017). Last year, the opposition bloc Way Out submitted a petition to end Armenia’s membership in the EEU, which was predictably rejected by the parliamentary majority; Way Out holds only 9 of the 105 seats in the National Assembly (Azatutyun.am, November 27, 2017). Also as expected, the cost of motor fuel has been growing since January 1, 2018, in turn pushing up prices of various other goods and bolstering local pressure to increase public transit fees in order to prevent service disruptions. Yet, at a recent meeting with some members of the government, President Sargsyan instructed officials to prevent any growth in prices (1in.am, January 10, 2018). It is not quite clear how that can be done considering the EEU’s high custom tariffs and in the absence of planned economy mechanisms. Probably, the oligarchs controlling most of the Armenian economy will be asked to subsidize the prices of some goods and services for a few months, until the transition to a parliamentary system is finished. Such a palliative solution could ultimately result in an even more painful price shock later on. However, in the short term, it may help to solve the main current issue for President Sargsyan and the Republican Party of Armenia (RPA)—avoiding mass protests that could disrupt the process of changing the political system and the likely appointment of Sargsyan as the next prime minister. At the same time, it is difficult to predict how the Armenian economy will be affected by the new personalized US sanctions against some Russian oligarchs and officials, which may come into force within a few weeks. Nor is it clear how Armenia might weather the possible economic decline and devaluation of the ruble in Russia (see EDM, January 8, 2018).

Another rather significant event in late 2017 was a student strike against the planned revocation of the legal provision allowing male students of state-owned and some state-recognized higher education institutions to obtain a temporary exemption from compulsory military service until after graduation. The proposed legal amendment is part of the government’s campaign promoting the “nation-army” concept, introduced by the Ministry of Defense in 2016 (see EDM, October 31, 2016). However, as noted by Mikayel Zolyan, an analyst of the Yerevan-based Regional Studies Center, the number of conscripts would not grow significantly. The main effect of the new legislation would rather be a transfer of some corruption revenues from the universities to the defense ministry structures and medical institutions capable of exempting the conscripts from service on medical grounds. At the same time, it would cause some damage to the education system and scientific research. Most importantly, as Zolyan argues, the “nation-army” is aimed at a militarization of society and promotion of the idea of unification around a “supreme commander” in order to make the society more controllable (Lragir.am, December 27, 2017).

While there is little doubt that, this year, President Sargsyan and the RPA will finalize the transition to a parliamentary system as planned, new economic challenges seem unavoidable. The continuing reliance on the oligarchic system and allegiance to Russia as regards the energy sphere and the economy in general make it more difficult to attract foreign investments. It seems likely that the government will continue maneuvering between the West and Russia as well as attempting to prevent large-scale protest activities, all while doing little to develop the economy and social sphere.