To #Maidan or not to #Maidan

To #Maidan or not to #Maidan: This is the question that the #ElectricYerevan activists are being unwillingly forced to answer.

Over the last 2 weeks, public discontent over a shady decision to yet-again raise the price of electricity, this time by a whopping 20% upon the request of the Kremlin-owned company, Inter RAO, has culminated into 6 days of round-the-clock popular protests attracting as many as 20 000 people, including a sit in on Baghramyan St, one of the city’s main arteries.

The protesters, identified by the trending Twitter hasthag #ElectricYerevan, were angry over the increasingly obvious lack of sovereignty over the country’s energy distribution networks, the majority of which have overwhelmingly been sold to state-run companies in Russia. The claim that the price increase was to cover a $50million deficit supposedly caused by the depreciated Dram further raised eyebrows, as people asked how it was possible for an energy distribution monopoly to run a deficit.

Though this protest is largely understood in Armenia to be the result of a deep-rooted anger at the State for failing to produce the right socio-economic circumstances for growth, while doing little to tackle corruption, the fact that the protesters have accused both their own government as well as Russian involvement by association (electricity distribution being in the hands of a Russian state-owned firm) has lead to a swift condemnation of the movement by the Russian Duma, which wasted no time in branding it an “Armenian Maidan” which needed to be suppressed at all costs.

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“How to make Armenia look Fascist”

This call was further echoed by Russian state-owned media that was present on the scene, who stipulated that US, or western NGOs are responsible for the unrest; implying that the protesters formed a sort of 5th column in a new front of a revived cold-war existing only in the minds of Kremlin strategists. The association with Ukraine’s Maidan Revolution was also debated by Ukrainian and Western news outlets.

As the protesters woke up to hear Russian media accusing them of “orchestrating another Maidan”, they were naturally incensed, producing an even greater backlash against Russian news outlets for portraying their struggle against corruption in the energy sector as part of a western-sponsored anti-Russian conspiracy. This anger, of course, was seen as a validation by the same Russian Press which had made the initial accusation.

In this video; a protester explains to the Russian Journalist why they are truly protesting, and why their coverage is misleading. She was reportedly fired after this video aired.

Over the past 3 days, as the protest’s growing momentum has continued to attract international media attention, the Armenian people’s struggle is increasingly being debated far way from the country’s borders. The protesters themselves are finding their struggle for accountability in energy distribution unwillingly dragged into a wider geopolitical conflict; which many of them care little about. Already, #ElectricYerevan has been joined by hashtags such as #ArmenianMaidan and #ElectroMaidan on social media sites; despite the fact that neither of the two are ever used by the activists themselves.

Russian Journalist being schooled on journalism ethics

Russian Journalist being schooled on journalism ethics

This fear of being swallowed into a larger conflict is understandable. With the recent events in Ukraine still looming over everyone’s heads, the protesters have gone through great lengths to convince the Kremlin that this isn’t a Maidan, that this is protest’s goals are unique.

Obvious similarities:

One point voiced by the protesters on Baghramyan Street was that, unlike the Ukrainian Maidan Revolution, which was fought over the country’s geopolitical direction, and resulted in hundreds of deaths; this protest, by contrast, was apolitical, non-violent, aimed at fighting rampant corruption and the lack of accountability in the country; but with one demand: to stop the electricity price hike.

Incidentally, most of the protesters interviewed on Kyiv’s Maidan Square, stated the exact same reasons for their own struggle: a dissatisfaction with the rampant corruption of the Yanukovych regime, Illegitimacy, and the lack of rule of law. Just like in Yerevan, the Maidan protesters had initially peacefully assembled, and, just like #electricyerevan, had only 1 demand: resume economic talks with the EU. It’s only when the world woke up in the morning to the shocking news that the government had sent in the Berkut to violently clear out the protestors, that people of all political convictions, regardless of views on the West or Russia joined in to protest government repression. Successive violent attempts against the protestors and well documented Kremlin  involvement helped turn public opinion against the government, and Russia’s foreign policy, and only then, were the first calls for revolution being made.

President Sargsyan was well aware of this the morning when public outcry over his brutal dispersion of the Baghramyan protestors reached his ears, and is hopefully doing everything in his power to ensure that, like in Ukraine, government overreaction doesn’t lead to a Maidan repeat. The Maidan protesters, and the #ElectricYerevan protesters have both created unique countercultures which should be observed in their own right. The common denominator, however, has been the Kremlin’s reaction. Thus, one could argue that Armenia’s and Ukraine’s struggles are similar insofar as any nation’s struggle against corruption would invariably develop along similar lines.

Not exactly the same though:

This isn’t to say, however, that #ElectricYerevan doesn’t genuinely have its differences. To begin with, the very idea of lumping all forms of public discontent together (be it as a CIA conspiracy, or as a seemingly trending call for liberal-democracy), is very dangerous because it tends to gloss over the very real domestic tensions and concerns that motivate the protesters in favor of citing regional trends which may or may not be there, as well removing from the unique character of both protests. #ElectricYerevan, unlike the Maidan, hasn’t seen a rise in leadership of any particular individual, or political party; extremist parties have been denied centre stage, and unlike in Kyiv, the protest lacks a clear geopolitical direction (with some EU-flag weaving members of the “Honourable Fatherland” faction having been shoved out) 

Armenians’ desire to distance themselves from the Maidan movement brings to mind an important question: should the Armenian protesters really reject the Maidan association?  By going too far in distancing themselves from the Maidan protests, the #ElectricYerevan activists risk banalising their own movement for 4 reasons:

1- Implicitly endorsing the Kremlin view on the events of 2014-15 in Ukraine as a violent, Russophobic coup-d’etat:

The only reason why #ElectricMaidan activists feel the necessity for distancing themselves from any association with the #Maidan Revolution of 2014 is because of a decade-long Kremlin-supported witch hunt for “Colour Revolutions”. In the wake of the Ukrainian Revolution, the Kremlin’s propagandists have done such a thorough job of of permeating the notion of the Maidan as a bloody fascist coup to its television audience, that even one of the older protesters on Baghramyan street was suspicious about a rumoured Prague-based “Maidan exporting cell”, which she claimed was planning to hijack the #ElectricYerevan movement. By negating any association, protesters essentially accept the Kremlin-towed line that this view is a correct one. 

2- Implying that the protesters somehow have to justify themselves to the Kremlin:

In trying to convince the Kremlin’s media apparatus that what is happening on the streets of Armenia’s major cities is not another Maidan, the protesters are essentially trying to appease potentially vengeful Russian authorities. Seeing as how these protests are happening in the sovereign, and independent Republic of Armenia; it is idiotic to have to give any explanation to the leaders of a foreign country, for what is essentially a domestic struggle.

3- the more they deny resemblance, the more it is forced upon them:

Ukrainian Maidan participants found themselves assaulted with accusations, speculations and insinuations by the Kremlin’s propaganda machine that they are, or at the very least were motivated by fascist ideals. This in turn helped shift the focus from the real issues on the ground, to debates nebulous fascist influences. Similarly, the more Armenian protesters try to deny any resemblance with the Maidan revolution; the attention is drawn to this view. Furthermore, depending on how local authorities, or the Kremlin react, any counter reaction by the demonstrators will inevitably resonate with Maidan-watchers. 

4- It sets a predetermined path and fate for this movement

Accepting or rejecting similarities with the Maidan essentially sets the 2014 Maidan revolution as the standard for any form of civil unrest in any post-soviet country. Protesters now have to choose between two camps pre-determined camps; which limits the creativity, and demands of their respective movements. Protests, revolutions, or any other sort of civil-society movements need to be analyzed individually.

The short answer to the question “Is #ElectricYerevan another #Maidan?” is NO: #ElectricYerevan is a completely homegrown Armenian popular movement, born out of a real feeling of disenfranchisement, and with a specific set of demands unique to Armenia’s situation. This, however, doesn’t mean that there aren’t any similarities between the two movements (and indeed most movements). The long answer, however, depends on how the Armenian authorities, and how the Kremlin react to these protesters. Ultimately, the real answer is: It doesn’t matter.  Armenians do not, and should not, owe any explanation for their protest movement to the Kremlin, or any outside parties.

Religious leaders support Ukrainian authorities in the struggle against terrorism in Donbas

The Armenian Apostolic Church apparently supports the post-maidan government.

Euromaidan PR

KYIV – The hierarchs of Ukrainian Сhurches have issued a declaration on the importance of protecting Ukraine’s territorial integrity, maintaining its borders, and counteracting the evil and diversions being carried out by terrorists in the eastern regions of Ukraine.

This issue was discussed during a meeting by the head of the Ukrainian Parliament, Acting President of Ukraine Oleksandr Turchynov, with members of the Ukrainian Council of Churches and Religious Organizations, held May 22, 2014 in the conference hall of the Parliament, the Institute for Religious Freedom reported.

“We want peace, but just, so that the aggressor cannot walk on our land. A just peace must be defended. The Church blesses our military, who are defending our land. We do not need someone else’s land, but want protect our own,” Patriarch Filaret (Denysenko), Primate of the Ukrainian Orthodox Church of the Kyivan Patriarchate, noted in his speech.

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Kremlin-paid internet commenters caught red-handed

In case it wasn’t obvious to everyone already!

Euromaidan PR

Confirmation that the command operates a network of paid pro-Kremlin commenters appeared on May 31, 2014. Anonymous International exposed the activities of the Russian Internet Research Agency, which feeds itself from Russia’s state budget. The goal of this organization is to create, through comments on the internet, the illusion of support for the Kremlin regime.

Interestingly, the owner of the agency, Eugene Prigozhin, is the founder of the holding company Concord, known as ‘Putin’s chef.’  The company’s direct management includes Maria Kuprashevich, who is known for having taken a job in the liberal media to commit espionage.

It was found that there is a staff of people working with strict accountability to the curators. These staff writers are paid for writing pro-government comments on the internet.

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Pension Wars

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Armenia has been experiencing a rise in political activity in the last few years. The most recent of which has been the wide scale public outcry over the government’s new pension reform plan, embodied by the ‘dem em’ (we oppose) movement. Over the past several months, thousands of Armenians, mostly young professionals, some of whom are from the IT sector, have been staging routine mass protests against the USAID-backed reforms which went into effect on the 1st of January 2014 as part of legislation enacted in 2010. Under this new pension reform law, all employed persons born after 1973 would be required to pay an extra five to ten percent of their salaries to a government-approved selection of private fund management firms. The government argues that this is a necessary measure due to the need to reduce government expenditures as the country struggles with the impending budgetary burden of population aging amongst other constraints. With the impending economic slowdown over the next two years, the government has understood the necessity of being careful with budgetary funds and the previous entirely public pension system would be too costly.  The opposition to this reform may seem perplexing to outside observers, as pension privatisation has been hailed as a successful policy for dealing with similar budgetary problems that governments have in the developed world. The blog, “the Armenian Economist” notes that countries with similar pension packages include Australia, Chile, Denmark, Estonia, Finland, Hungary, Iceland, Israel, Mexico, Netherlands, Norway, Poland, Slovakia, Sweden, and Switzerland.

Despite enjoying the backing for the reform of a number of economists, and the overt support of the US ambassador John Heffern, opponents, discontent over the mandatory element of the reform, have been suspicious of the package. They argue that the unconstitutional measure would be seen as an extra form of taxation on a labour force which is already underpaid, and over taxed, and would ultimately lead to an increase in emigration particularly within the IT sector, which is dominated by highly paid (by armenian standards), highly skilled young professionals who would be tempted to pursue careers elsewhere.

Since the reforms have been hailed as both necessary and competent, why have they generated so much controversy? There are a few things that are worth noting:

It’s about being overtaxed:

Currently, roughly 26% of an Armenian worker’s salary goes to paying various taxes, including their public pension funds. In a country where the average income is less than 250 EUR a month, this means that workers are left with just over 180 EUR to cover monthly expenses. Removing another 5 to 10% of their salaries would leave them with just 170 EUR per month. This in a city where the recommended minimum monthly expenses for one person is roughly 400 EUR.

Its about freedom of choice:

One of the biggest issues of contention here is that the new pension plans are mandatory, and citizens are unable to choose how it is managed. The government has responded to concerns by pointing out that they cannot expect the population to manage their own pensions as they would be left with nothing after retirement, and tried to comfort opponents by mentioning that the  private pension funds will be managed by French “Amundi” and German “Talanx” companies. The Constitutional Court, however, has sided with the protesters on the matter.  It should be noted, however, that even in pension systems which are said to not be mandatory, the actual amount of choice is quite trivial anyway.

It’s about mistrust for the State:

Many Armenians can still recall how much of the life savings which they had collected over many years vanished overnight with the collapse of the USSR, and again a few years later, when the government illegally dipped into the nation’s pension funds to finance new projects. Furthermore, armenians have grown increasingly cynical of incessant government promesses with seemingly more sinister intentions, such as the recent speeding cameras, bus fare increases, city centre parking system, etc. The government, in response has done very little to show genuine will to help foster better dialogue with civil society over such issues, conducting closed-door meetings, and so on.

It’s a vote of non-confidence in the Government:

One aspect of this movement which could puzzle outside observers is the lack of actual criticism of the reform itself. A recent study conducted by masters students at the American University of Armenia’s School of Humanities revealed that many of those frustrated were ready to accept the reform’s implementation if it had been proposed by any government other than the present one. In this sense, the current protests are part of a wider wave of protest against the Republican government by an increasingly vocal, and competent opposition movement.

As Initial discontent has since grown into a fully fledged movement, it has noticably attracted and united all four non-governmental parties: the opposition the Heritage party, Armenian National Congress, ARF- Dashnaksutyun and the non-ruling Prosperous Armenia Party towards the cause. Initially unorganised and chaotic discontent eventually transformed into a clear list of demands. The protesters claimed that they would not back down until the reform package was submitted to the constitutional court for evaluation, repeal said laws, and for the prime minister, Tigran Sargsyan to resign.

Amid the backdrop of almost daily protests (which include a rap song)  the Constitutional Court declared, on April 2nd, that certain elements of the reform package were indeed anti-constitutional, and ordered the parliament to reconsider it. Despite this, mandatory inputs into the new pension plans, which had automatically started on January 1st continued, prompting a continuation of public protests.

Since then, the Prime Minister Tigran Sargsyan has resigned, replaced by notorious oligarch Hovik Abrahamyan (known colloquially as ‘mook’), who has declared his intention to work with the professionals to reform the package. At the time of writing, the National Assembly has approved a new bill on pension reform, after the Court gave them until the end of september to bring it into conformity with the constitution. The new prime minister, Hovik Abrahamyan, has publicly stated that the changes to the reform will make it optional to subscribers. In the meantime, employers are still asked to continue taking 5% of worker’s salaries. Meanwhile, the protests are growing in size and frequency…

Silicon Valley of the Caucasus: Tablet odysseys

The unedited version of this article was published for the Germany-based Armenian current affairs journal “die Armenisch-Deutsche Korrespondenz” in March 2014

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Nayiri computers, manufactured in Soviet Armenia

While still a soviet republic, Armenia had garnered a reputation as the USSR’s answer to Silicon Valley. the Republic was a centre for mainframe and industrial computing, electronics, semiconductors, software development and others research and development, as well as production. Indeed, roughly 40% of the Soviet Union’s high tech and military research took place in Yerevan’s top of the line facilities, such as the Mergelian Institute and Microprocessor Institute. In fact, the USSR’s vast array of SAM missiles and ICBM relied on guidance systems designed, developed and manufactured in soviet Armenia in hopes of hitting their intended NATO targets.

Armenia also produced technological innovations for civilian and research use as well. The famous Nairi family of computers was developed at the Yerevan Computer Research and Development Institute in 1964. Other innovations were made in the production of transistors, microcomputers and so on.

The collapse of the Soviet Empire, in tandem with the Shirak Earthquake and the Karbakh War (1989-1994) shook the newly independent republic’s previously highly industrialised economy to its core. Now cut off from its former export markets within the Eastern Block as well as with difficult access to the sea; Armenian firms having appreciated the high value of human resources, turned their attention to software development. The major specialisations include embedded software and semiconductor design, custom software development and outsourcing, financial applications, multimedia design, Internet applications, web development, MIS and system integration. Armenia’s best achievements were in the fields of  semiconductor design software and IP solutions.

Since then, the Information and Communications Technology sector has been one of the fastest growing in the Armenian economy. A unique start-up scene has developed over recent years, which is growing to rival its more famous counterparts in New York, Berlin and the Baltic. Grassroots conventions such as the famed Barcamp IT conventions have already spread to cities outside the capital such as Gyumri and Stepanagert. A number of educational institutions also help secure the next generation of IT specialists. The TUMO Centre for Creative Technologies in Yerevan, for example, with a branch in Dilijan was founded to help teenagers develop their skills in programming, design, robotics and so on. Yerevan is also home to a small number of trendy coworking spaces such as the SaryanTumanyan space catering to a growing number of tech start-ups. The city also hosts a chapter of TEDx.

Innovative home grown projects such as Armenia’s answer to Instagram: Picsart, or other projects such as the virtual whiteboard Voiceboard, the Yerevan-based serviced apartment group ginosi.com or teambuilding app Teamable  have also attained worldwide recognition. The country has also managed to attract international ITC giants, including Microsoft, Synopsis, and Macademia,

ICT has grown at an average of 27% per year. In theory, at least, the Armenian government has made efforts to support this sector by conducting grant competitions for start-ups and R&D efforts in collaboration with the World Bank, the US government funded Enterprise Development and Market Competitiveness project, as well as the Enterprise Incubator Foundation. The Armenian and Indian governments have also collaborated to found the Armenian-Indian Centre for Excellence in ITC. The government has already designated three Tax-Free Zones for IT development in the country: The Mergelyan institute, the Gyumri Technopark and the Vanadzor technopark.

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FRM Prime-Minister Tigran Sargsyan and Gyumri Mayor Samvel Balasanyan visit the new Technopark in Gyumri (source: oratert.com)

The first ever, fully-indigenous developed tablet computer, unimaginitively named the ‘ArmTab’ was recently presented to Armenia’s Medvedev-esque Yuppie prime minister Tigran Sargsyan. This new tablet, along with its north-american counterpart, Minno is supposed to have been entirely designed locally, including the software design, operating system, applications and overall tablet design. Though it was speculated that it would be manufactured in China, Vahan Sahakian, the director of Technology and Science Dynamics/Armtab Technologies insists that they will be assembled in Armenia. Critics doubt the need for a new tablet in an already crowded market, and argue that it is just another soviet-style publicity stunt designed to showcase the country’s technological might; but Sahakian insists that the tablet will target the regional markets of Armenia Georgia and Ukraine first, and then get into a world Market. Though the tablet’s technological specifications are not yet available, its 165 EUR asking price should give it a competitive edge on its competition.

Despite overt endorsement of ITC sector development in Armenia, the Government’s actual support remains uneven. High corporate and income taxes, (update: as of April 2014, the Armenian government offers tax breaks to IT start ups)  as well as spotty rule of law hamper the proper growth of the industry. Furthermore, a recent government pension reform is poised to remove an extra 5% of the already squeezed-for-Tax incomes of these skilled professionals; with many of them now considering emigration over what they perceive as being more state ‘punishment’ for their success. (update: As of April 2014, the constitutional court has put this reform on hold, with results pending) Another issue that needs to be addressed is brain-drain amongst Armenia’s IT specialists. Many companies are not having difficulty finding senior IT positions despite high salaries and benifits, because the people necessary to fill these seats are not in the country. This issue should be addressed.

In conclusion; Armenia’s ITC industry shows a lot of promise, and can indeed turn into Armenia’s strategic economic strength if the government learns to nurture its growth instead of hampering it.

Armenia’s economic choice: Customs Union vs. DCFTA?

This article was originally commissionned and written as part of a Series for the Germany-based newspaper “Deutsch Armenische Korrespondenz” in December 2013

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On the third of September, Armenian president Serj Sargsyan’s announcement that Armenia will join the Russian-led Customs Union sent shockwaves across Yerevan, Brussels and Moscow. Up to that point, Armenian diplomats had been hard at work negotiating a Deep and Comprehensive Free Trade Agreement (DCFTA) and Association Agreement (AA) with the European Union, alongside fellow European Eastern Partnership (EaP) member-states: Moldova, Ukraine and Georgia. (Though Azerbaijan and Belarus are nominally EaP members as well, their autocratic systems barred them from further European integration). This statement has had and still has a number of political, social and economic impacts; though it should be enough to focus solely on the economic aspects.

Though the main reason forwarded by Yerevan was security (despite, ironically, denying any pressure from Moscow), a number of Armenian officials circumspectly mentioned a number of economic benefits to joining the Customs Union over the DCFTA; while others have criticised it as an economically backward system designed to protect the inefficient and increasingly uncompetitive Russian market, while offering little incentives for trading partners.

Defining the Customs Union:

The Customs Union, which is seen by many as the pet-project of Russian strongman Vladimir Putin’s nostalgic plan for creating a Soviet Union 2.0, came into existence on the first of January 2010. The Union is comprised of countries routinely criticised for their lack of democratic development; Russia, Belarus and Kazakhstan are set to abolish customs fees between them. They have also signed a memorandum to work towards further integration, and the eventual creation of a Eurasian Union, supposedly modeled on the European Union, encompassing most of the former soviet states. The combined economies of the three countries currently signed on to the project makes up roughly 3% of the world’s GDP with 2.1 trillion dollars, compared to the European Union’s share of a quarter of the world’s GDP, with 17 trillion dollars generated. It is also important to understand the founding motivations of the Customs Union vis-à-vis the European Union, and its Eastern Partnership. The Customs Union is largely an instrument of Russian soft-power, The EU, by contrast, was founded primarily as part of cooperation between equal European states, with mutual economic benefit in mind. 

Questions about accession:

During Armenia’s negotiation process, EU diplomats had made it abundantly clear that Armenia could not join two different unions, due to the conflicting customs regulations, yet Armenia hasn’t reneged on its claim that it can join both nevertheless. It is still unclear how Armenia plans to join the Customs Union, despite the president’s memorandum, due to constitutional blocks and the fact that Armenia lack of common borders with the Union wouldn’t allow it to share in the benefits of tariff-free trade.

The stated economic benefits:

Think tanks, such as the Yerevan-based  Integration and Development NGO, headed by Aram Safarian, have loudly claimed that CU accession would bring large and immediate benefits for Armenia. This, it is claimed, will be done through Russian investment in Armenia’s transport and energy sectors. Indeed, Russia has pledged to invest some €350 million dollars to upgrade Armenia’s railway system, as well as a promised €75 million in investments by the Eurasian Development Bank which Safarian says will boost Armenia’s economy by 0.4% as well as investments in Armenian nuclear energy, and a 30% reduction of the price of gas, which, it is claimed, would immediately help Armenia’s economy grow by 1%. 

Furthermore, the “Integration and Development” Think Tank, claims that a fourth factor, labour migration, caused by Russia’s easing of visa regulations for Armenian citizens, would boost Armenia’s GDP by .25%. Safarian goes on to say that Customs Union accession would benefit Armenia with an immediate 4% boost, and a longer-term stable economy growth perspective of some 2.3%. 

Finally, Armenian economists such as Ashot Tavadyan have also made the argument that because Armenia’s products are simply not yet ready to compete on a European Market, the Customs Union would serve as a sort of ‘incubation’ period to help such export industries grow.

 Weighing Pros and Cons of choosing Moscow over Brussels

Though it should be noted that the European Union is currently dealing with its own monetary crisis, as well as a continent-wide recession, its prospects for growth seem much healthier than that of Moscow. As mentioned, above, the European Union still remains the largest single market, with the world’s largest GDP.  as such, the Rotterdam-based think tank and private consultancy firm Ecorys estimates that the impact of the DCFTA on Armenia would have lead to €146 million in national income gains (with €74 million in income gains for the EU).This would be measured as long-term a 2.3% increase in Armenia’s GDP. Armenia’s exports to the EU would have been expected to increase by 15.2% and imports by 82%

Though at first glance, it may seem that the Customs Union would offer more immediate benefits to Armenia, with comparable long-term growth prospects, it is important to consider certain issues before making such a conclusion:

It is important to note that most positive economic predictions for Armenia’s entry into the Customs Union seem to rely entirely on GDP projections, which does not give much insight on true economic or human development within the country; not to mention that economists such as Aram Safarian see labour migration as a positive boost to the economy, instead of seeking the reduction of outward migration as a sign of economic growth.

1-One must assume that the investments promised by Russia would actually come, and if so, be directed through the right channels. This is important because Russia has promised Armenia investment in the past (promising to invest some €165 million in the railway network within 5 years in 2008, for which most of the promised money is still missing).

 2- Virtually all of the economic benefits predicted by pro-Kremlin analysts, or promised by Moscow, lie in energy and infrastructure, sectors already dominated by Russian state-owned corporations, as opposed to private sector investments. Though the EU was prepared to negotiate a financial aid package at a Donors Conference for Armenia scheduled for 2014, the majority of projected circular investment would have been in the private sector. 

 3- The nature of trade should also be investigated. For instance, not only is the EU common market the single largest trading partner of Armenia, consisting of 35.5% of Armenia’s exports and 25.5% of Armenia’s imports, (these figures would increase if one includes the other DCFTA signatories: Ukraine, Moldova and Georgia, who account for 6.6% of Armenia’s exports, and some 20% of Armenia’s imports) but it is also very diverse. Armenia exports diamonds, manufactured goods, crude materials, beverages, tobacco, chemicals, financial services and commodities, where as the EU is the source of the bulk of Armenia’s imports of consumer goods, machinery and so on.

On the other hand, the Customs Union countries were the destination for only 16.79% of Armenia’s exports for 2012; mostly trade with Russia (Belarus and Kazakhstan received 0.51% and 0.28% respectively)  account for a mere 28.30% of Armenia’s imports (Belarus and Kazakhstan providing 0.28% and 0.01% of goods, mostly Kazakh chocolate, respectively). And unlike Armenia’s links to the EU, the lion’s share of trade with Customs Union countries consists of oil and gas imports from Russia, as well as some food products, and agricultural machinery from Belarus. Thus, one could surmise that Armenia’s joining the Customs Union would have very little direct benefit to the consumers, who will instead be paying higher premiums for goods imported from outside the Customs Union’s boundaries, leaving them with less money for more important purchases. 

 Armenian exports to Russia are almost entirely within the wine, cognac, dried fruit and mining sectors, virtually all of which have been monopolised by government-connected commodity-based cartels. Thus, in this sense, some sectors of the Armenian economy would benefit from Customs Union entry: those that are entirely usurped by the Oligarchy. 

 4- It is also important to consider the State of Russia’s economy, and its impact on Armenia. Russia has shown negative economic indicators in the first two quarters of this year, implying a recession, which is part of a greater trend of relative economic decline. This can be attributed to Dutch Disease due to a lack of diversification of the Russian economy, largely driven by oil, as well as the country’s underdeveloped, and largely inefficient financial sector. Armenia’s close relationship with Russia means that Yerevan has duplicated a lot of Moscow’s policies, which has resulted in a drastic reduction in Foreign Direct Investment (FDI) in the country over the last two years. In his October 2013 blog, Economist Samson Avetian assessed figures on the state of Russia’s economy, claiming that Russia’s economic problems are quite structural in nature, and that Russia is in dire need of enhanced economic management and reforms. He emphasized the negative impact on Armenia, saying 

“Given that Russia is a key trading partner to Armenia, weakness in the Federation is clearly unfortunate. Especially given that significant part of Transfers/Remittances originate from there. Many of the impediments the country suffers are prevalent in Armenia as well. Unfortunately, and with continued absence of reforms and improved economic management, Armenia is expected to not only be impacted by external economic weakness but is left much exposed to the slowdown abroad.” 

5- One of the more direct benefits that Armenia would receive from joining the Customs Union would be the reduced price of natural gas. Indeed, Moscow has offered Armenia to pay the same internal Russian cost of gas with the addition of transport fees. This would come as immediate relief for many hard-pressed Armenian families, but the effect on economic output, despite what pro-Kremlin analysts have claimed, would be negligible; since goods produced with Russian natural gas would be considered as ‘price dumping’ when exporting to the EU, and would be fined anyway.

 6- Another element that hasn’t been directly considered when ascertaining Armenia’s economic prospects when choosing an economic block, is the change in infrastructure required. The EU demands a certain amount of institutional reform and modernisation from potential member states, which it is prepared to assist in attaining. This includes reduction and streamlining of bureaucracy, reduction of taxes, ease of doing business and so on. This has an unmeasured potential impact on economic growth, since it would encourage FDI as well as pan-european business cooperation. Whereas the Customs Union has no requirements in terms of political, economic and bureaucratic reform.

Conclusions:

Image Though Republican Party of Armenia (RPA) officials are currently scrambling to flaunt the economic advantages of Armenia’s potential Customs Union accession, they are still unable to answer the constitutional, geographical, financial and economic concerns that they themselves had been citing prior to September 3rd as impediments to Customs Union accession. Though it is difficult to predict what will happen, one can also take note of the fact that both Kazakhstan and Belarus have recently expressed disgruntlement and desire to leave the organization. The actual benefits would be shared by a small minority of people in Armenia, while others would see price increases in their daily purchases. The only actual calculable benefit that Armenia would get is avoiding the economic sanctions that a vengeful Russia would impose, by threatening to deport labour migrants, and banning Armenian products, which would devastate Armenia’s already Moscow-dependent economy.