Luke Rodeheffer
The European Union’s Eastern Partnership was dealt a major blow as
Armenia’s President Serzh Sargsyan made a surprise announcement that his
republic will join Russia’s Customs Union during a visit to Moscow in
early September. E.U. leaders expressed shock and dismay at the surprise
about-face, while members of the Armenian opposition protested the
decision outside the presidential palace in Yerevan.
The announcement was all the more surprising given that Armenia’s
leadership had appeared genuinely cold to Moscow only a few months
prior. President Sargsyan had snubbed the most recent meeting of the
Russia-led Collective Security Treaty Organization in Kyrgyzstan in late
May, as well as the subsequent Eurasian Economic Community conference
in Kazakhstan. Proponents of European integration had been delighted
with the news when it was announced at the beginning of the summer that
Armenia had completed the sixth round of negotiations on a Deep and
Comprehensive Trade Agreement with the European Union.
Yet Moscow played its cards well in the poker game between the
European Union and Russia for the former Soviet states of Eastern Europe
and the South Caucasus. Following the announcement of the trade
negotiation results, Russia threatened to raise Armenia’s gas prices by
60%. Armenia was forced enter into negotiations on a 18% raise in
exchange for allowing Gazprom to take the remaining shares of
ArmRusGazprom that belong to the Armenian government. Détente between
Moscow and Baku, manifested in the $1 billion worth of Russian weapons
sold to Azerbaijan since July and Putin’s visit to Baku in August,
served as further warnings to Yerevan about the consequences of its
disobedience.
The energy crisis provoked by Russia’s threats is a sign of how
deeply dependent Armenia has become on Moscow. Although the European
Union was Armenia’s number one trade partner in 2012, much of Armenia’s
economy has been sold off to Russian business interests since the end of
the Soviet Union. In addition to dominating the nation’s gas market,
Russian companies own almost all of Armenia’s power plants and many of
its mining operations. The Russian state also plays a heavy hand in the
Armenian economy, investing hundreds of millions into Armenia’s national
railways. This fact was alluded to by Putin’s announcement of another $
450 million into the network during his meeting with President
Sargsyan.
Furthermore, Armenia’s economy remains in very weak shape following
the global economic crisis. In 2011, Forbes granted Armenia the ignoble
title of the world’s second-worst economy as a result of its GDP
plunging by 15% during the global economic crisis. Russia further
increased control over Armenia by granting the South Caucasus republic a
$500 million loan in the wake of the crisis. With such a fragile and
Russia-dominated economy, Armenia is in no position to leave Moscow’s
Collective Security Treaty Organization or demand the end to Russia’s
military base in Gyumri, Armenia’s second largest city.
Despite Russia’s already heavy hand in the state and economy of
Armenia, even Russian experts admit that joining the Customs Union will
likely not provide the post-Soviet state with any real benefits.
Alexander Knyazev, an expert at the Russian Academy of Sciences,
recently noted that Armenia does not even share common borders with
Russia, Belarus, or Kazakhstan, the current Customs Union member states.
The Customs Union is built around the idea of a common economic space
with no customs controls at the border, but trade between Armenia and
the other member states must first move through Georgia. The only
benefit that Armenia stands to gain from entering the Russia-dominated
trade zone, according to Knyazev, is the simplification of the migration
process, making migration out of Armenia and into Russia easier.
It is ironic that the major benefit for Armenia will be access to
Russia’s labor market, as the Sargsyan’s government has previously
viewed emigration of Armenians into the Russian Federation with deep
concern. Yet beyond lodging complaints, there is little that the
Armenian state can do, as remittances from Armenian guest workers in
Russia constitute a sizable portion of the Armenian GDP.
But what can Armenia’s post-Soviet generation hope to get out of the
Customs Union, beyond an easier path from their homeland into Russia?
Sargysan’s government has stated that corruption remains Armenia’s
number one obstacle to reform, but choosing to join a Customs Union
dominated by highly corrupt post-Soviet states, as opposed to continuing
on a path to European integration that encourages transparency and
anti-corruption efforts, is certainly no way to make inroads against the
problem. Russia’s increasingly stagnant economy, with low levels of
human capital, a terrible climate for small business, capital outflows
of $350 billion since the onset of the crisis, and a heavy dependence on
raw materials exports is certainly no model to emulate and closer
economic integration with Russia will only hinder the modernization that
Armenia and other former Soviet economies so desperately need.
Armenia’s choice will bring a few short-term benefits but will do little
to improve the country’s standing in the long term. With the failure of
European integration efforts in Armenia, the pressure on other former
Soviet states, particularly Ukraine, to choose between Brussels and
Moscow is higher than ever before.
"EurasiaReview," September 6, 2013
It could have been different.
ReplyDeleteIf in 1920 the Allies who now constitute the leading countries in the EU (plus the U.S.)had gone through on their promises to establish, via the Treaty of Sevres, an indepedent Armenia, Europe might have a reliable friend in Armenia today.
Europe remains clueless about this, and Armenia won't say anything.
Granted, this is water under the bridge, but there is a lesson in all this.
Nice post
ReplyDelete