Svoboda
ukrainian nationalist political party
official website

December 27 2013 Chimera of Eurasian Integration. Armenia and the Customs Union

Against the background of the developments in Ukraine and around it, as the undisputed success of Russia in achieving its goals to restore control over the former Soviet Union, looks Armenia's refusal to sign the Association Agreement with the EU and Armenian side's decision to join the Customs Union.

In order to consolidate the victory, on December 2, Russian President V. Putin visited Armenia and confirmed Russia's readiness to give economic preferences to Yerevan in response to its support to Moscow's Eurasian initiatives. Yes, Russia did agree to drop the duty on Russian gas, which allowed to reduce its price from 270 to 189 US dollars per 1 thousand cubic meters; it did commit (within signing a relevant contract) to supply Armenia with 2.5 billion cubic meters of gas per year in 2014-2018; did write off the debts of the close corporation "ArmRosGazprom"; did abolish the export duty on rough diamonds, giving Armenia a strong incentive for the development of its traditional diamond-manufacturing industry.

Besides, were reached agreements to establish a joint venture by the Russian company "Rosneft" and Armenian CJSC "Oil Techno" (intended to ensure stable supplying the Armenian side with up to 400 thousand tons of oil per year), as well as implementing a number of other joint projects, including for the reconstruction of the Armenian energy system and rail network ones.

According to Russian and Armenian experts of pro-government orientation, all in all the economic effect of Armenia 's joining the Customs Union will be adding not less than 4.5 % of the country's annual GDP growth. In view of the above-mentioned, the Government of Armenia (with the assistance of the Russian side) in the accelerated procedure has developed the "road map" of the country's joining the CU, which must be approved by the governing bodies of the organization in the nearest future. At this, those experts point out that Russia is ready to go the loss of more than 1 billion US dollars (including due to cancelling import and export duties) to ensure Armenia's rapid and complete integration into the Customs Union.

However, independent Armenian experts provide very different estimates of expected effects of Armenia's joining Russian integration initiatives. First of all, in this respect, the following aspects draw special attention:

Firstly - Russia's reduction of the gas price for Armenia was made in exchange for the transfer by Yerevan to the Russian "Gazprom" of 100 % of the company "ArmRosGazprom", due to which deal the Armenian side has completely lost an opportunity for leading an independent energy policy. In particular, this has forced Armenia to give up Iran's offer to supply natural gas at prices lower than "Gazprom"'s ones, without onerous demands that have been put forward by the Russian Federation.

Besides, the preferences which Armenia received from Russia in the gas sector, are absolutely illusory, as reducing gas prices to 189 US dollars per 1 thousand cubic meters concerns only selling it by "Gazprom" to its own company "ArmRosGazprom", which in its turn supplies it to Armenian consumers at 391 US dollars per 1 thousand cubic meters (i.e., more than they had been paying until now). Thus, instead of real assistance to Armenia, "Gazprom" (Russian oligarchs with V. Putin at head, to be exact), will be profiteering 202 US dollars per 1 thousand cubic meters of gas.

Secondly - the initialing of the Association Agreement between Armenia and the EU was one of the prerequisites for holding a Conference of Armenia's international financial donors, which had to take place under the auspices of the European Union. Following the results of the Conference, Armenia would have got 6-7 billion US dollars, which sum would have been quite a significant support to its economy. However, Armenia not just has not received these funds, but it has lost confidence of foreign creditors and investors.

In its turn, Russia agreed to provide loans to Armenia only for realization of its own projects at the Armenian territory, mainly with participation of Russian businesses. In this case, the return of Yerevan under the Russian Federation's control allows Moscow to block the foreign loans and investments coming to Armenia, including from the Armenian diaspora, which has a very strong presence in the USA and France.

Thirdly - Armenia's joining the Customs Union actually means that the country loses the right to lead an independent foreign policy as well. Yerevan has actually completely locked around it the ring of the transport and trade and economic blockade, which was installed by Azerbaijan and Turkey after Armenia's (supported by Russia) capturing the Azerbaijani Nagorno-Karabakh. Now Armenia will not be able to build its own relations with Iran and Georgia, which had been its only way out to the outside world.

Fourthly - Moscow's increasing the volume of military aid to Yerevan, as well as strengthening the Russian Armed Forces military base at the territory of Armenia does not guarantee a better security of Armenia at all. In fact Armenia's rejection of European integration has led to the loss of its ability to use its future status of the country associated with the EU, as a deterrent against Turkey and Azerbaijan, having announced the convergence or joining the European Union as their priority. In this regard, Armenia has actually preferred the Russian brute force in the political security of the country and settlement of the conflict with Azerbaijan.

At this, Russia, supplying Armenia with arms, simultaneously supplies with it Azerbaijan too. Thus, Russia and Azerbaijan are implementing a large-scale program of military-technical cooperation totaling up to 3 billion US dollars. Under this program, Russia sends to Azerbaijan modern means of armored vehicles and missile-artillery systems, combat helicopters, Air Defense.

Fifthly - Armenia will inevitably face the same negative consequences of its membership in the Customs Union, which Belarus and Kazakhstan have already experienced to the full. First of all this will involve an increase in domestic prices of basic commodities, complete suppression of Armenian business by financial and economic structures of Russia, which will lead to closing of Armenian enterprises, unemployment and, as a consequence, to general aggravation of the socio-economic situation.

In general, taking into consideration the above-mentioned circumstances, joining the Customs Union, in fact, will mean Armenia's losing its independence in both, political and economic and security spheres, at this, without any Russian guarantees for the protection of its interests, as well as without real providing the promised economic preferences.

As for Russia, the money spent by it on the Armenia's giving up the European integration can hardly be considered lost. Thus, just for one billion U. S. dollars Russia:

has made another step towards the realization of its strategic goal to restore the former Russian (Soviet) empire within the framework of building the Eurasian Union. At this, a precedent of changing the vector of external course has been set for other countries of the former USSR;

demonstrated its superiority over the West (including the U. S. and the EU) in terms of influence at the post-Soviet territories, at least, in most of the countries of the region, still dependent on the Russian Federation. Besides, Armenia's refusal to sign an Association Agreement with the EU has hit on both, the European "Eastern Partnership" Program and on the authority of the entire European Union, as an influential and effective international organization;

has strengthened its positions and military presence in the North Caucasus, including having got a great opportunity to counter the influence of the USA, NATO and the EU in the region, as well as to influence Georgia, Azerbaijan and the process of settlement of Karabakh conflict. In its turn, Russia now has the ability to prevent creation of new transport-energy corridors bypassing Russian territory and to solve in its favor the issues of redivision of the Caspian Sea;

has completed the process of establishing its control over the key objects of the Armenian economy. In particular, today, apart from the company "ArmRosGazprom" which passed into Russian ownership after the decision of Armenia to join the Customs Union, in the possession of the Russian side are already Armenian enterprises such as JSC "Armenian Railways", JSC "Electric Networks of Armenia", and others first of all energy objects.

Thus, due to Armenia's obvious political, economic and security losses caused by the country's joining the Customs Union, Russia has implemented its geopolitical interests.

Does the Armenian leadership realize all this? Sure. However, it still gives up its country's interests in favor of the Russian Federation. It is difficult to find out the reason for such actions. However, independent Russian experts explain this by purely personal interests of individual representatives of the Armenian authorities that have access to the distribution of income from the resale of gas by the company "ArmRosGazprom".

Is this true or not - time will tell. But the practice of intimidation and bribery has always been one of the key tools used by the Russians in the relationship with their partners.

Viktor Hvozd, Minister of Foreign Affairs (Government of National Alternative)